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SHAREHOLDERS’ EQUITY | 9 Months Ended
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Jun. 30, 2025
Equity [Abstract] |
SHAREHOLDERS’ EQUITY |
NOTE 6 | SHAREHOLDERS’ EQUITY
Nasdaq In July 2023, the Company was notified by Nasdaq that it was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”). Thereafter, in February 2024, the Company was notified that it was not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Rule”) (collectively, with the Minimum Bid Price Rule, the “Minimum Requirements”). In April 2024, the Company presented a plan of action to the Nasdaq Hearings Panel to meet compliance with the Minimum Requirements. As a result of the reverse stock split effected in June 2024 and the entrance into the first Accounts Payable Conversion Agreement (described in Note 8), the Company regained compliance with the Minimum Requirements in July 2024 and was formally notified by Nasdaq that the Minimum Requirements were met. Until July 24, 2025, the Company was subject to a Nasdaq “Panel Monitor” which provided that in the event the Company fails to satisfy the Stockholders’ Equity Rule (not the Minimum Bid Price Rule) during the monitoring period, the Company would be required to request a hearing before the Panel in order to maintain its listing rather than taking the interim step of submitting a compliance plan for the Listing Qualifications Staff’s review or receiving any otherwise applicable grace period. On February 21, 2025, the Company was notified by Nasdaq that due to its reported Shareholders’ Equity of $2,279,297 at December 31, 2024, it was not in compliance with the Stockholders’ Equity Rule. Due to the Panel Monitor, the Company was not eligible for any grace period and Nasdaq determined the Company’s common stock would be scheduled for delisting from Nasdaq. On February 27, 2025, the Company requested a hearing on this matter with the Panel, which stayed any trading suspension or delisting of the Company’s common stock until the completion of the hearings process. As a result of the fourth conversion agreement with Forward China (see Note 8), the Company regained compliance with the Stockholders’ Equity Rule in March 2025 and was formally notified by Nasdaq in April that it was in compliance with all applicable continued listing standards and that the scheduled hearing had been canceled. Preferred Stock Series A-1 Convertible Preferred Stock In connection with the Accounts Payable Conversion Agreements with Forward China (see Note 8), the Company filed three Certificates of Amendment to the Certificate of Incorporation (the “COD”) designating 6,700 shares of Series A-1 Convertible Preferred Stock (the “Series A-1”), with a stated value of $1,000 per share (the “Stated Value”). The holders of the Series A-1 have no voting rights and rank senior to all classes or series of the Company’s common stock with respect to the distribution of assets upon liquidation, dissolution, or winding up. Subject to a 19.9% Share Cap (as defined in the COD), the Series A-1 shall be convertible into a number of shares of the Company’s common stock as determined by (i) multiplying the number of shares to be converted by the Stated Value, (ii) adding the result of all accrued and accumulated and unpaid dividends on such shares to be converted, and then (iii) dividing the result by the conversion price of $7.50, subject to adjustment as defined in the COD. The Series A-1 is not redeemable. See Note 12. Series B Convertible Preferred Stock On May 21, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “COD”) designating 1,000,000 shares of Series B Convertible Preferred Stock (the “Series B”), with a par value of $0.01 per share and a stated value of $1.00 per share. The Series B shares: (i) accrue dividends at 10% per annum, payable quarterly in arrears in cash, provided that the Company may elect to pay dividends in common stock or by increasing the stated value if specified equity conditions are met (as defined in the COD), (ii) are convertible into common stock at $4.50 per share, subject to customary anti-dilution and other adjustments as set forth in the COD, (iii) are mandatorily convertible if certain conditions are met, (iv) have liquidation rights equal to the greater of 125% of the conversion amount and the amount the holder would have received if the holder converted the shares into common stock immediately prior to liquidation, (v) are not redeemable, (vi) have such voting rights as required by New York law, including class voting rights on matters affecting the Series B rights and preferences and (vii) have senior rights to all classes of common stock with respect to dividends, distributions, and liquidation preferences. The Series B shares contain certain beneficial ownership limitations and are subject to a maximum number of shares of common stock that may be issued without triggering shareholder approval requirements under the Nasdaq Stock Market rules. See Note 12. Dividends through June 30, 2025 were capitalized by increasing the stated value of each share of the Series B. On May 23, 2025 the Company entered into a Preferred Stock Purchase Agreement (the “PS Agreement”) and related Registration Rights Agreement with two accredited investors whereby the Company granted the investors an aggregate of 1,000,000 shares of the Series B and warrants to purchase an additional 111,111 shares of common stock in exchange for $1,000,000. The PS Agreement contains restrictions on the Company’s ability to incur debt, issue additional preferred shares, enter into a change of control transaction or make restricted payments without prior written consent of the investors. The Company paid third-party fees of $66,500 associated with this agreement, of which $29,000 related to the preferred stock portion of the agreement and has been deducted from the proceeds and recorded as a reduction of additional paid-in capital, and $37,500 related to the warrants and has been recorded as a component of general and administrative expenses on the condensed consolidated financial statements at June 30, 2025. Warrants In connection with the PS Agreement, the Company issued warrants to purchase 111,111 shares of its common stock with an exercise price of $6.50 per share and an expiration date of May 23, 2030. The warrants have been classified as a liability because the nature of certain settlement provisions prevent them from meeting the fixed-for-fixed equity classification criteria in ASC 815, “Derivatives and Hedging.” The fair value of the warrants was measured on the grant date and is remeasured every reporting period with the resulting gain or loss from the change in fair value recorded as a component of other income/expense on the condensed consolidated financial statements. The fair value of the warrants was estimated using a Black-Scholes valuation methodology using the assumptions in the following table, which are categorized within Level 3 of the fair value hierarchy. The expected term represents the remaining contractual term of the warrants. The expected volatility is based on the historical price of the Company’s common stock over the most recent periods commensurate with the expected term of the warrants. The risk-free interest rate is based on the implied yield of U.S. Treasury zero-coupon issues with a remaining term equivalent to the warrants’ expected term. The Company historically has not paid any dividends on its common stock and has no intention to do so in the foreseeable future.
Schedule of warrant assumptions |  | May 23, |  | June 30,
|  | 2025 |  | 2025
Expected term (years) |  |  | 5.0 |  |  |  | 4.9 |
Expected volatility |  |  | 76.75% |  |  |  | 76.94% |
Risk free interest rate |  |  | 4.08% |  |  |  | 3.79% |
Expected dividends |  |  | 0% |  |  |  | 0% |
The change in fair value of the warrants is as follows:
Schedule of change in warrant fair value |  |  |  |
Warrant liability at May 23, 2025 |  |  | 563,111 |
Change in fair value of warrant liability |  |  | (160,223 | )
Warrant liability at June 30, 2025 |  |  | 402,888 |
Equity Line of Credit On May 16, 2025, the Company entered into a Securities Purchase Agreement (the “ELOC”) and related Registration Right Agreement with an accredited investor (the “Purchaser”) pursuant to which the Company has the right, in its sole discretion, to sell, and the Purchaser agrees to purchase, shares of the Company’s common stock having an aggregate value of up to $35 million, subject to certain limitations and conditions set forth in the underlying agreement. See Note 12. The Company will control the timing and amount of any sales of common stock under this agreement. In connection with the execution of the ELOC, the Company issued 25,000 commitment shares to the Purchaser and paid third-party fees of $60,000, which have been recorded as a component of other assets on the condensed consolidated financial statements. Pursuant to the terms of the ELOC, the Company may issue and sell shares to the Purchaser at prices discounted below the then-current market price of the Company’s common stock. As of June 30, 2025, no other shares of common stock were issued in connection with this agreement. On June 10, 2025, the Company filed a registration statement to register shares of common stock issuable under the ELOC. The registration statement was declared effective by the SEC on June 20, 2025. See Note 12. Stock Options On June 1, 2025, the Company granted options to three of its non-employee directors to purchase an aggregate of 36,000 shares of its common stock at an exercise price of $6.37 per share. The options vest one year from the date of grant and expire five years from the date of grant. The options have a grant-date fair value of $3.29 per share and an aggregate grant-date fair value of $120,000, which will be recognized, net of forfeitures, ratably over the vesting period. On February 1, 2025, the Company granted options to one of its non-employee directors to purchase 14,000 shares of its common stock at an exercise price of $6.01 per share. The options vest one year from the date of grant and expire 5 years from the date of grant. The options have a grant-date fair value of $2.90 per share and an aggregate grant-date fair value of $40,000, which will be recognized, net of forfeitures, ratably over the vesting period. On October 1, 2024, the Company granted options to two of its non-employee directors to purchase an aggregate of 48,000 shares of its common stock at an exercise price of $3.73 per share. The options vest one year from the date of grant and expire five years from the date of grant. The options have a grant-date fair value of $1.67 per share and an aggregate grant-date fair value of $80,000, which will be recognized, net of forfeitures, ratably over the vesting period. On October 1, 2023, the Company granted options to three of its non-employee directors to purchase an aggregate of 33,000 shares of its common stock at an exercise price of $7.60 per share. The options vested one year from the date of grant, expire five years from the date of the grant and 11,000 were forfeited prior to vesting. The options have a grant-date fair value of $3.60 per share and an aggregate grant-date fair value of $120,000, which was recognized, net of forfeitures, ratably over the vesting period. On May 31, 2023, the Company granted options to three of its non-employee directors to purchase an aggregate of 12,000 shares of its common stock at an exercise price of $10.30 per share. The options vested six months from the date of grant and expire five years from the date of the grant. The options have a grant-date fair value of $4.80 per share and an aggregate grant-date fair value of $60,000, which was recognized, net of forfeitures, ratably over the vesting period. There were no options exercised during the three or nine months ended June 30, 2025 or 2024. The Company recognized compensation expense for stock option awards of $39,000 and $20,000 during the three months ended June 30, 2025 and 2024, respectively, and $86,000 and $81,000 for the nine months ended June 30, 2025 and 2024, respectively, which was recorded as a component of general and administrative expenses in its condensed consolidated statements of operations. At June 30, 2025 there was $154,000 of total unrecognized compensation cost related to nonvested stock option awards that is expected to be recognized over a weighted average period of 0.8 years. Options outstanding and exercisable at June 30, 2025 had a weighted average exercise price of $8.06 and $12.29, respectively.

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