NOTE 13 – RELATED PARTY TRANSACTIONS

During the three months ended December 31, 2014 and December 31, 2013 the Company sold approximately $0 and $357,000, respectively to Starlight Electronics Company, Ltd. (“SEC”). During the nine months ended December 31, 2014 and December 31, 2013 the Company sold approximately $403,000 and $1,773,000, respectively to SEC. These goods were sold at a discounted price, similar to prices granted to major direct import customers shipped internationally with freight prepaid. The average gross profit margin on sales to SEC for the three months ended December 31, 2014 and December 31, 2013 was 16.5% and 15.1%, respectively. The average gross profit margin on sales to SEC for the nine months ended December 31, 2014 and December 31, 2013 was 16.5% and 14.8%, respectively.

During the three months ended December 31, 2014 and December 31, 2013 the Company sold approximately $276,000 and $0, respectively to Winglight Pacific, Ltd. (“Winglight”). During the nine months ended December 31, 2014 and December 31, 2013 the Company sold approximately $1,249,000 and $0, respectively to Winglight. These goods were sold at a discounted price, similar to prices granted to major direct import customers shipped internationally with freight prepaid. The average gross profit margin on sales to Winglight for the three months ended December 31, 2014 and December 31, 2013 was 17.0% and 0%, respectively. The average gross profit margin on sales to Winglight for the nine months ended December 31, 2014 and December 31, 2013 was 16.3% and 0%, respectively. These products were drop shipped to Cosmo Communications of Canada (“Cosmo”), the Company’s primary distributor of its products to Canada.

During the three months ended December 31, 2014 and December 31, 2013 the Company sold approximately $14,000 and $538,000, respectively to Cosmo from our California warehouse facility. During the nine months ended December 31, 2014 and December 31, 2013 the Company sold approximately $259,000 and $1,318,000, respectively to Cosmo from our California warehouse facility. These amounts were included as a component of cost of goods sold in the accompanying condensed consolidated statements of income.

For the three month periods ended December 31, 2014 and 2013 the Company received approximately $64,000 and $0, respectively in licensing fees from SEC for sales of the Company’s products that were sold directly to Cosmo by SEC. For the nine month periods ended December 31, 2014 and 2013 the Company received approximately $181,000 and $0, respectively in licensing fees from SEC for sales of the Company’s products that were sold directly to Cosmo by SEC. These amounts were included as a component of net sales in the accompanying condensed consolidated statements of income.

The Company purchased products and services from Starlight R&D, Ltd, (“SLRD”) a subsidiary of Starlight International Holding Ltd. The purchases from SLRD for the three month period ended December 31, 2014 and 2013 were approximately $1,275,000 and $329,000, respectively. The purchases from SLRD for the nine month period ended December 31, 2014 and 2013 were approximately $4,704,000 and $535,000, respectively. The Company purchased products from Starfair Electronics Co., Ltd, (“SFE”) a subsidiary of Starlight International Holding Ltd. The purchases from SFE for the three month period ended December 31, 2014 and 2013 were approximately $0 and $243,000 respectively. The purchases from SFE for the nine month period ended December 31, 2014 and 2013 were $0 and $985,000, respectively. The Company purchased products and services from Starlight Consumer Electronics USA, Inc. (“SCE”) a subsidiary of Starlight International Holding Ltd. The purchases from SCE for the three month period ended December 31, 2014 and 2013 were approximately $221,000 and $1,104,000, respectively. The purchases from SCE for the nine month period ended December 31, 2014 and 2013 were approximately $2,042,000 and $8,921,000, respectively. These amounts were included as a component of cost of goods sold in the accompanying condensed consolidated statements of income.

Effective April 1, 2014, SMC-L entered into a service and logistics agreement with SCE, Cosmo USA, Inc. (“Cosmo USA”) and Starlight Electronics USA, Inc. (“Starlight Electronics USA”) to provide logistics, fulfillment, and warehousing services for SCE, Cosmo USA and Starlight Electronic USA’s domestic sales. For these services, SCE, Cosmo USA and Starlight Electronics USA have agreed to reimburse the Company for actual warehouse space occupied by these companies at $8 per pallet and for logistics services performed based on an agreed to fee schedule specified in the agreement. The Company received approximately $29,000 and $0 in service fees from these affiliates during the three month periods ended December 31, 2014 and December 31, 2013, respectively. The Company received approximately $114,000 and $0 in service fees from these affiliates during the nine month periods ended December 31, 2014 and December 31, 2013, respectively. The agreement expires on March 31, 2015 and is estimated to yield approximately $140,000 in reimbursements for the fiscal year ending March 31, 2015.

Effective April 1, 2013, SMC-L entered into a service and logistics agreement with Starlight Consumer Electronics (USA), Inc. (“Starlight USA”), an indirect wholly-owned subsidiary of Starlight International, Cosmo USA, Inc. (“Cosmo USA”) and Starlight Electronics USA, Inc. (“Starlight Electronics USA”) to provide logistics, fulfillment, and warehousing services for Starlight USA, Cosmo USA and Starlight Electronic USA’s domestic sales. For these services, Starlight USA, Cosmo USA and Starlight Electronics USA have agreed to reimburse the Company for actual warehouse space occupied by these companies at $0.50 per square foot and for logistics services performed based on an agreed to fee schedule specified in the agreement. The Company received approximately $0 and $73,000 in service fees from these affiliates during the three month periods ended December 31, 2014 and December 31, 2013, respectively. The Company received $0 and approximately $264,000 in service fees from these affiliates during the nine months ended December 31, 2014 and December 31, 2013, respectively. This agreement expired on March 31, 2014.