RELATED PARTY TRANSACTIONS

6 Months Ended

Mar. 31, 2022

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 $350,000 and $340,000 during the three months ended March 31, 2022 and 2021, respectively, and $712,000 and $683,000 during the six months ended March 31, 2022 and 2021, 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 $418,000 and $317,000 at March 31, 2022 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 unsecured 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 interest associated with this note of $31,000 and $32,000, respectively, in the three months ended March 31, 2022 and 2021 and $63,000 and $64,000, respectively, in the six months ended March 31, 2022 and 2021. 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 $100,000 on this note during the six months ended March 31, 2022.

Other 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. (“JustWise”), 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 $441,000 and $154,000 in the three months ended March 31, 2022 and 2021, respectively, and $981,000 and $339,000 in the six months ended March 31, 2022 and 2021, respectively. The Company entered into an agreement with JustWise effective March 1, 2022 under which (i) JustWise will perform design and marketing services related to the Koble products sold by the Company and (ii) the Company was granted a license to sell Koble products. In exchange for such services, the Company will pay JustWise $10,000 per month plus 1% of the cost of Koble products purchased from Forward China. This agreement is effective until August 31, 2022, will be extended thereafter for a mutually agreed upon term and can be terminated thereafter by either party giving three months’ notice. The Company incurred costs of $10,000 under this agreement for the three and six months ended March 31, 2022, which were included in selling and marketing expenses on the condensed consolidated statement of operations.