NOTE 14 – RELATED PARTY TRANSACTIONS

During the three months ended September 30, 2015 and September 30, 2014 the Company sold approximately $51,000 and $86,000, respectively to Starlight Electronics Company, Ltd. (“SLE”), a related party. During the six months ended September 30, 2015 and September 30, 2014 the Company sold approximately $116,000 and $403,000, respectively to SLE. 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 SLE for the three months ended September 30, 2015 and September 30, 2014 was 17.7% and 16.5%, respectively. The average gross profit margin on sales to SLE for the six months ended September 30, 2015 and September 30, 2014 was 16.0% and 16.5%, respectively. These products were drop shipped to Cosmo Communications of Canada (“Cosmo”), a related party and the Company’s primary distributor of its products to Canada.

During the three months ended September 30, 2015 and September 30, 2014 the Company sold additional product to Cosmo of approximately $331,000 and $144,000, respectively, from our California warehouse facility. During the six months ended September 30, 2015 and September 30, 2014 the Company sold an additional $445,000 and $245,000, respectively, of product to Cosmo from our California warehouse facility. These amounts were included as a component of net sales in the accompanying condensed consolidated statements of operations.

For the three and six month periods ended September 30, 2015 and 2014 the Company received approximately $0 and $117,000, respectively, in licensing fees from SLE for sales of the Company’s products that were sold directly to Cosmo by SLE. These amounts were included as a component of net sales in the accompanying condensed consolidated statements of operations.

The Company purchased products from SLE. The purchases from SLE for the three and six month periods ended September 30, 2015 and 2014 were approximately $2,810,000 and $0, respectively.

During the three and six months ended September 30, 2015 and September 30, 2014 the Company sold approximately $1,171,000 and $973,000, respectively, to Winglight Pacific, Ltd. (“Winglight”), a related party. 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 and six months ended September 30, 2015 and September 30, 2014 was 21.4% and 16.0%, respectively. These products were drop shipped to Cosmo.

The Company purchased products and services from Starlight Consumer Electronics USA, Inc., (“SCE”) a related party. The purchases from SCE for the three month periods ended September 30, 2015 and 2014 were approximately $73,000 and $222,000, respectively. The purchases from SCE for the six month periods ended September 30, 2015 and 2014 were approximately $155,000 and $1,821,000, respectively. These amounts were included as a component of cost of goods sold in the accompanying condensed consolidated statements of operations.

The Company purchased products and services from Starlight R&D, Ltd, (“SLRD”) a related party. The purchases from SLRD for the three month period ended September 30, 2015 and 2014 were approximately $587,000 and $3,404,000, respectively. The purchases from SLRD for the six month period ended September 30, 2015 and 2014 were $620,000 and $3,429,000, respectively. These amounts were included as a component of cost of goods sold and general and administrative expenses in the accompanying condensed consolidated statements of operations.

Effective April 1 2015, SMC-L entered into a service and logistics agreement with SCE, Cosmo and SLE, to provide logistics, fulfillment, and warehousing services for Shihua affiliated companies SCE, Cosmo and SLE’s domestic sales. For these services, Starlight USA, Cosmo and SLE have agreed to reimburse the Company for actual warehouse space occupied by these companies at $0.096 per cubic foot and for logistics services performed based on an agreed to fee schedule specified in the agreement. For the three months ended September 30, 2015 and 2014, the company received approximately $27,000 and $0, respectively. For the six months ended September 30, 2015 and 2014, the company received approximately $47,000 and $0, respectively. The Company estimates it will receive approximately $100,000 in expense reimbursements for the fiscal year ending March 31, 2016 related to this agreement.

Effective April 1 2014, SMC-L entered into a service and logistics agreement with SCE, Cosmo and SLE, to provide logistics, fulfillment, and warehousing services for Shihua affiliated companies SCE, Cosmo and SLE’s domestic sales. This agreement expired on March 31, 2015. For these services, Starlight USA, Cosmo and SLE 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. For the three months ended September 30, 2015 and 2014 the Company received $0 and $41,923, respectively. For the six months ended September 30, 2015 and 2014 the Company received $0 and $85,208, respectively. These amounts were included as a component of general and administrative expenses in the accompanying consolidated statements of operations.