How to create dynamic sub-menu in ArcMap?

You should follow three process.

1. Create RootMenu with implement BaseMenu and IRootLevelMenu. This class must been visible by Framework, So it need's to register to MxCommands Component Category.

2. Create NestedMenu with implement BaseMenu. And added by RootMenu. This class doesn't need to register to Component Category.

3. Create MultiItem with implement IMultiItem and IMultiItemEx. And added by NestedMenu. This class also doesn't need to register to Component Category.

Here is the sample code of RootMenu

[Guid("4b8018b8-2afb-4bb1-b7d1-1e7ef819b8a3")]
[ClassInterface(ClassInterfaceType.None)]
[ProgId("ArcMapClassLibrary1.TestMenu")]
public sealed class TestMenu : BaseMenu, ESRI.ArcGIS.Framework.IRootLevelMenu {

    #region COM Registration Function(s)
    [ComRegisterFunction()]
    [ComVisible(false)]
    static void RegisterFunction(Type registerType) {
        // Required for ArcGIS Component Category Registrar support
        ArcGISCategoryRegistration(registerType);

        //
        // TODO: Add any COM registration code here
        //
    }

    [ComUnregisterFunction()]
    [ComVisible(false)]
    static void UnregisterFunction(Type registerType) {
        // Required for ArcGIS Component Category Registrar support
        ArcGISCategoryUnregistration(registerType);

        //
        // TODO: Add any COM unregistration code here
        //
    }

    #region ArcGIS Component Category Registrar generated code
    /// <summary>
    /// Required method for ArcGIS Component Category registration -
    /// Do not modify the contents of this method with the code editor.
    /// </summary>
    private static void ArcGISCategoryRegistration(Type registerType) {
        string regKey = string.Format("HKEY_CLASSES_ROOT\\CLSID\\{{{0}}}", registerType.GUID);
        MxCommandBars.Register(regKey);
    }
    /// <summary>
    /// Required method for ArcGIS Component Category unregistration -
    /// Do not modify the contents of this method with the code editor.
    /// </summary>
    private static void ArcGISCategoryUnregistration(Type registerType) {
        string regKey = string.Format("HKEY_CLASSES_ROOT\\CLSID\\{{{0}}}", registerType.GUID);
        MxCommandBars.Unregister(regKey);
    }

    #endregion
    #endregion

    public TestMenu() {

        AddItem("ArcMapClassLibrary1.NestedTestMenu");

    }

    public override string Caption {
        get {
            //TODO: Replace bar caption
            return "Reporting";
        }
    }
    public override string Name {
        get {
            //TODO: Replace bar ID
            return "ReportingMenu";
        }
    }
}

And nested menu.

[Guid("B33F73C4-EA02-4197-91E9-F857FE2FB881")]
[ClassInterface(ClassInterfaceType.None)]
[ProgId("ArcMapClassLibrary1.NestedTestMenu")]
public sealed class NestedTestMenu : BaseMenu {

    public NestedTestMenu() {

        AddItem("HowToCodeSnippets.HowToMultiItem");
    }

    public override string Caption {
        get {
            //TODO: Replace bar caption
            return "Nested Reporting";
        }
    }
    public override string Name {
        get {
            //TODO: Replace bar ID
            return "NestedReportingMenu";
        }
    }
}

And last, MutiItem. I didn't edit anything inside of code from sample. This MultiItem items appears only TOC has at least one layer.

[Guid("4e0f22f3-5619-4b75-b9b0-36ea859db97d")]
[ClassInterface(ClassInterfaceType.None)]
[ProgId("HowToCodeSnippets.HowToMultiItem")]
public class HowToMultiItem : IMultiItem, IMultiItemEx {

    private ESRI.ArcGIS.Controls.IHookHelper m_hookHelper;

    #region "IMultiItem Implementations"

    //Step 2.
    public string Caption {
        get {
            return "Layer Zoom";
        }
    }
    public string Name {
        get {
            return "CSNETSamples_HowToMultiItem";
        }
    }
    public int HelpContextID {
        get {
            return 0;
        }
    }
    public string HelpFile {
        get {
            return "";
        }
    }
    public string Message {
        get {
            return "MultiItem single message";
        }
    }

    //Step 3.
    public int OnPopup(object hook) {
        m_hookHelper = new ESRI.ArcGIS.Controls.HookHelperClass();
        m_hookHelper.Hook = hook;
        return m_hookHelper.FocusMap.LayerCount;
    }

    //Step 4.
    public string get_ItemCaption(int index) {
        ESRI.ArcGIS.Carto.ILayer layer = m_hookHelper.FocusMap.get_Layer(index);
        return "Zoom to " + layer.Name;
    }
    public bool get_ItemEnabled(int index) {
        //Enable zoom in only when the layer is visible.
        ESRI.ArcGIS.Carto.ILayer layer = m_hookHelper.FocusMap.get_Layer(index);
        return layer.Visible;
    }
    public int get_ItemBitmap(int index) {
        return 0; //Not implemented.
    }
    public bool get_ItemChecked(int index) {
        return false;
    }

    //Step 5.
    public void OnItemClick(int index) {
        //Get the layer and its spatial referenced extent.
        ESRI.ArcGIS.Carto.ILayer layer = m_hookHelper.FocusMap.get_Layer(index);
        ESRI.ArcGIS.Geometry.IEnvelope env = layer.AreaOfInterest;
        //Zoom to the extent and refresh the view.
        ESRI.ArcGIS.Carto.IActiveView activeView = m_hookHelper.FocusMap as
            ESRI.ArcGIS.Carto.IActiveView;
        activeView.Extent = env;
        activeView.Refresh();
    }
    #endregion

    //Step 6–Optional interface implementation.
    #region "IMultiItemEx Implementations"
    public string get_ItemMessage(int index) {
        ESRI.ArcGIS.Carto.ILayer layer = m_hookHelper.FocusMap.get_Layer(index);
        return "Zoom to " + layer.Name + "layer.";
    }
    public int get_ItemHelpContextID(int index) {
        return 0;
    }
    public string get_ItemHelpFile(int index) {
        return "";
    }
    #endregion
}

Make sure that you need to change ProgID and GUID. Hope this helps you.