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RELATED PARTY TRANSACTIONS | 9 Months Ended
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Jun. 30, 2025
Related Party Transactions [Abstract] |
RELATED PARTY TRANSACTIONS |
NOTE 8 | RELATED PARTY TRANSACTIONS
Buying Agency and Supply Agreement The Company had a Buying Agency and Supply Agreement (the “Supply Agreement”) with Forward China. The Supply Agreement provided that, upon the terms and subject to the conditions set forth therein, Forward China would 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 purchased products at Forward China’s cost and, from October 2023 through October 2024, paid Forward China a monthly service fee equal to the sum of (i) $65,833, and (ii) 4% of “Adjusted Gross Profit”, which is defined as the selling price less the cost from Forward China. Due to the Retail Exit and decline in the OEM distribution segment business, this sourcing agreement expired October 31, 2024. In November 2024, the Company and Forward China agreed to: (i) extend the sourcing agreement until April 30, 2025, but allow either party to cancel with 30 days’ notice, (ii) reduce the fixed portion of the sourcing fee to $35,000 per month, and (iii) change the payment terms to better align with payments from the Company’s customers. The Sourcing Agreement was extended until May 9, 2025 and was subsequently terminated in connection with the sale of the OEM segment. See Note 3. In connection with the sale of the OEM segment, effective May 16, 2025, the Company and Terence Wise, who served as the Chief Executive Officer of the Company, the Chairman of the Board, and a director, entered into a Separation Agreement pursuant to which, Mr. Wise resigned from all of these positions with the Company. Terence Wise, former Chief Executive Officer and Chairman of the Company, is the owner of Forward China and beneficially owns more than 5% of the Company’s common stock. 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 $39,000 and $221,000 during the three months ended June 30, 2025 and 2024, respectively, and $331,000 and $674,000 for the nine months ended June 30, 2025 and 2024, respectively, which were included as a component of cost of sales upon sales of the related products. Due to the OEM Plan, these costs are now included in income from discontinued operations for the three and nine months ended June 30, 2025 and 2024. The Company had purchases from Forward China of approximately $480,000 and $2,149,000, for the three months ended June 30, 2025 and 2024, respectively, and $4,040,000 and $5,672,000 for the nine months ended June 30, 2025 and 2024, respectively. In order to preserve the Company’s liquidity, in November 2023, the Company and Forward China entered into an agreement whereby Forward China agreed to limit the amount of outstanding payables it would seek to collect from the Company to $500,000 in any 12-month period, which the Company agreed to pay within 30 days of any such request. This agreement pertained only to payables that were outstanding at October 30, 2023 of approximately $7,365,000. Purchases from Forward China made after October 30, 2023 were not covered by this agreement and were expected to be paid according to normal payment terms. In connection with the sale of the OEM segment in May 2025 (see Note 3), this agreement was terminated and all amounts due thereunder extinguished. Accounts Payable Conversion Agreements In order to maintain compliance with Nasdaq’s listing standards, the Company entered into four separate agreements with Forward China (the “Conversion Agreements”) pursuant to which Forward China agreed to convert an aggregate $4,925,000 of amounts due to Forward China into shares of preferred stock. Under the terms of the Conversion Agreements, in the fourth quarter of fiscal 2024 and the second quarter of fiscal 2025, respectively, Forward China agreed to convert $2,200,000 and $2,725,000, respectively, of amounts due to Forward China into 2,200 shares and 2,725 shares, respectively, of the Company’s Series A-1. See Note 6. 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 $12,000 and $14,000 in the three months ended June 30, 2025 and 2024, respectively and $36,000 and $50,000 in the nine months ended June 30, 2025 and 2024, respectively. In connection with the sale of the OEM segment, the maturity date of this note was extended to December 31, 2025. The maturity date of this note has been extended multiple times pursuant to amendments between the parties, with the current maturity date being December 31, 2025. This note has a remaining balance of $600,000 at June 30, 2025. Other Related Party Activity The Company’s retail division sold smart-enabled furniture, which was 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, former Chief Executive Officer and Chairman of the Company. The Company recognized revenues from the sale of Koble products of $4,000 and $380,000 in the three and nine months ended June 30, 2024, respectively. Due to the Retail Exit, these revenues are included in the income from discontinued operations for the three and nine months ended June 30, 2024. The Company had an agreement with Justwise, under which (i) Justwise performed design, marketing and inventory management 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 paid Justwise $10,000 per month plus 1% of the cost of Koble products purchased from Forward China. This agreement expired November 30, 2023. The Company incurred costs under this agreement of $0 and $20,000 for the three months and nine months ended June 30, 2024, respectively. Due to the Retail Exit, these costs are included in the income from discontinued operations for the three and nine months ended June 30, 2024. The Company had no accounts payable to Justwise at June 30, 2025 or September 30, 2024. The Company recorded revenue from a customer whose principal owner is an immediate family member of Jenny P. Yu. The Company recognized revenue from this customer of $108,000 and $122,000 for the three and nine months ended June 30, 2024, respectively. The Company had accounts receivable from this customer of $96,000 at September 30, 2024. There were no revenues from this customer for the three or nine months ended June 30, 2025 or accounts receivable balances at June 30, 2025. Due to the OEM Plan, these revenues are included in income from discontinued operations for the three and nine months ended June 30, 2024 and the accounts receivable balance is included in assets held for sale at September 30, 2024.

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