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Related Party Transactions
3 Months Ended
Jun. 30, 2017
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 11 –RELATED PARTY TRANSACTIONS

 

DUE TO/FROM RELATED PARTIES

 

On June 30, 2017 and March 31, 2017, in the aggregate the Company had $557,647 and $0, respectively, due from related parties for goods and services sold to these companies.

 

On June 30, 2017 and March 31, 2017, the Company had amounts due to other related party companies in the amounts of $149,787 and $0 for goods, repair services, engineering fees, storage and administrative services provided to the Company by these related parties.

 

SUBORDINATED DEBT

 

In connection with the Revolving Credit Facility the Company was required to subordinate related party debt to Starlight Marketing Development, Ltd. (“subordinated debt”) in the amount of $1,924,431. The Revolving Credit Facility renewal agreement includes a Term Note in the amount of $1,000,000, the proceeds of which were used to pay down a portion of the subordinated debt. The remaining subordinated debt of $924,431 bears interest at 6% and is scheduled to be paid in quarterly installments of $123,000 which include interest commencing September 30, 2017. With the current renewal agreement expiring on July 15, 2020 the subordinated debt has been classified as a current portion of $446,221 and a long-term portion of $478,210 as of June 30, 2017 on the condensed consolidated balance sheets. Since the original agreement expired on July 14, 2017 the subordinated related party debt was classified as a current liability as of March 31, 2017 on the condensed consolidated balance sheets.

 

TRADE

 

During the three months ended June 30, 2017 and June 30, 2016 the Company sold $310,772 and $192,976, respectively to Winglight Pacific, Ltd. (“Winglight”), a related party, 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 June 30, 2017 and June 30, 2016 was 21.5% and 15.4%, respectively. The product was shipped to Cosmo Communications of Canada (“Cosmo”), another related company and the Company’s primary distributor of its products to Canada. These amounts were included as a component of net sales in the accompanying condensed consolidated statements of operations.

 

During the three months ended June 30, 2017 and June 30, 2016 the Company sold an additional $270,157 and $123,499, respectively of product to Cosmo from its California warehouse facility. These amounts were included as a component of net sales in the accompanying condensed consolidated statements of operations.

 

The Company purchased products from Starlight Electronics Co. Ltd (“SLE”). The purchases from SLE for the three month periods ended June 30, 2017 and 2016 were $32,870 and $710,453 respectively. Product purchases were included as a component of cost of goods sold in the accompanying condensed consolidated statements of operations.

 

The Company purchased services from Starlight Consumer Electronics USA, Inc., (“SCE”) a related party. The purchases from SCE for the three month periods ended June 30, 2017 and 2016 were $79,824 and $51,900, respectively. These amounts were included as a component of general and administrative expenses in the accompanying condensed consolidated statements of operations.

 

The Company purchased services from Merrygain Holding Co. Ltd, (“Merrygain”) a related party. The purchases from Merrygain for the three month periods ended June 30, 2017 and 2016 were $38,487 and $0, respectively. These amounts were included as a component of general and administrative expenses in the accompanying condensed consolidated statements of operations.

 

The Company has annually renewable service and logistics agreements with affiliates of China Sinostar Group Co. Ltd. (“Sinostar”) The affiliates pay the Company for services based on actual warehouse space occupied. For the three month periods ended June 30, 2017 and 2016, the Company received approximately $5,000 and $18,671, respectively, in service fees from affiliates that are included in general and administrative expenses in the accompanying consolidated statements of income.