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7. RELATED PARTY TRANSACTIONS
9 Months Ended
Jun. 30, 2017
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

Buying Agency and Supply Agreement

 

     On March 12, 2012, the Company entered into a Buying Agency and Supply Agreement (the “Supply Agreement”) with Forward Industries Asia-Pacific Corporation, a British Virgin Islands corporation (“Forward China”). The Supply Agreement, as amended, provides that, upon the terms and subject to the conditions set forth therein, Forward China will act as the Company’s exclusive buying agent and supplier of Products (as defined in the Supply Agreement) in the Asia Pacific region. The Company purchases products at Forward China’s cost and also pays to Forward China a monthly service fee equal to the sum of: (i) $100,000; and (ii) 4% of “Adjusted Gross Profit”, which is defined as the selling price less the cost from Forward China. The amended Supply Agreement expires on September 8, 2018, subject to renewal. Terence Bernard Wise, Chief Executive Officer and Chairman of the Company, is a principal of Forward China. In addition, Jenny P. Yu, a Managing Director of Forward China, beneficially owns more than 5% of the Company’s shares of common stock. The Company recognized approximately $300,000 and $362,000 during the three months ended June 30, 2017 and 2016, respectively, and approximately $1,007,000 and $1,101,000 during the nine months ended June 30, 2017 and 2016, respectively, in service fees paid to Forward China, which are included as a component of cost of goods sold in the accompanying condensed consolidated statements of operations and comprehensive income. During the three and nine months ended June 30, 2017, the Company received commissions from Forward China of $0 and $12,904, respectively, which is included in net revenues. As a result of the continued decrease in the Company’s net revenues, Forward China has agreed to forgo its rights to the 4% portion of the service fee under the Supply Agreement beginning with the third fiscal quarter until the end of fiscal year 2017. The Company and Forward China are currently negotiating a revised service fee under the Agreement.