RELATED PARTY TRANSACTIONS

3 Months Ended

Dec. 31, 2021

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 8 RELATED PARTY TRANSACTIONS

Buying Agency and Supply Agreement

The Company has a Buying Agency and Supply Agreement (the “Supply Agreement”) with Forward Industries Asia-Pacific Corporation, (“Forward China”). The Supply Agreement 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 pays 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 Supply Agreement expires October 22, 2023. Terence Wise, Chief Executive Officer and Chairman of the Company, is the owner of Forward China. In addition, Jenny P. Yu, a Managing Director of Forward China, beneficially owns more than 5% of the Company’s common stock. The Company recorded service fees to Forward China of $362,000 and $343,000 during the three months ended December 31, 2021 and 2020, respectively, which are included as a component of cost of sales upon sales of the related products.

The Company made prepayments to Forward China for inventory purchases of $327,000 and $317,000 at December 31, 2021 and September 30, 2021, respectively, which is included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

Promissory Note

On January 18, 2018, the Company issued a $1,600,000 promissory note payable to Forward China to fund the acquisition of IPS. The promissory note bears an interest rate of 8% per annum and had an original maturity date of January 18, 2019. Monthly interest payments commenced on February 18, 2018 with the principal due at maturity. The Company incurred and paid $32,000 in interest expense associated with this note in the three months ended December 31, 2021 and 2020. The maturity date of this note was extended to December 31, 2022. The maturity date of this note has been extended on several occasions to assist the Company with liquidity. The Company made principal payments of $50,000 on this note during the three months ended December 31, 2021.

Related Party Activity

In October 2020, the Company began selling smart-enabled furniture, which is sourced by Forward China and sold in the U.S under the Koble brand name. The Koble brand is owned by The Justwise Group Ltd., a company owned by Terence Wise, Chief Executive Officer and Chairman of the Company. The Company recognized revenues from the sale of Koble products of $540,000 and $186,000 in the three months ended December 31, 2021 and 2020, respectively.