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Related Party Transactions
9 Months Ended
Dec. 31, 2017
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 11 – RELATED PARTY TRANSACTIONS

 

DUE TO/FROM RELATED PARTIES

 

On December 31, 2017 and March 31, 2017, in the aggregate the Company had approximately $1,213,000 and $0, respectively, due from related parties for goods and services sold to these companies.

 

On December 31, 2017 and March 31, 2017, the Company had amounts due to other related party companies in the amounts of approximately $286,000 and $0 for 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 approximately $1,924,000. 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 approximately $924,000 bears interest at 6% and is scheduled to be paid in quarterly installments of $123,000 which include interest and commenced September 30, 2017. With the current renewal agreement expiring on July 15, 2020 the subordinated debt has been classified as a current portion of approximately$570,000 and a long-term portion of $245,000 as of December 31, 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. The installment payment of $123,000 due on December 31, 2017 was not made due to the Toys R Us bankruptcy’s unfavorable effect on cash flow. During the three months ended December 31, 2017 and 2016 the Company incurred interest expense of approximately $12,000 and $0, respectively, related to the subordinated debt. During the nine months ended December 31, 2017 and 2016 the Company incurred interest expense of approximately $26,000 and $0, respectively, related to the subordinated debt.

 

TRADE

 

During the three months ended December 31, 2017 and December 31, 2016 the Company sold approximately $0 and $236,000, 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 December 31, 2017 and December 31, 2016 was NA and 20.1%, respectively. During the nine months ended December 31, 2017 and December 31, 2016 the Company sold approximately $1,462,000 and $1,430,000, respectively to Winglight 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 nine months ended December 31, 2017 and December, 2016 was 21.8% and 21.4%, 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 income.

 

During the three months ended December 31, 2017 and December 31, 2016 the Company sold approximately $210,000 and $55,000, respectively of product to Cosmo from its California warehouse facility. During the nine months ended December 31, 2017 and December 31, 2016 the Company sold approximately $533,000 and $373,000, 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 income.

 

The Company incurred expenses for services and royalties from Starlight R&D, Ltd, (“SLRD”) a related party. The purchases from SLRD for the three months ended December 31, 2017 and 2016 were approximately $117,000 and $7,000, respectively. The purchases from SLRD for the nine months ended December 31, 2017 and 2016 were approximately $117,000 and $30,000, respectively. These amounts were included as a component of general and administrative expenses in the accompanying condensed consolidated statements of income.

 

The Company purchased products and services from Starlight Electronics Co. Ltd (“SLE”). The purchases from SLE for the three months ended December 31, 2017 and 2016 were approximately $131,000 and $0, respectively. The purchases from SLE for the nine months ended December 31, 2017 and 2016 were approximately $270,000 and $998,000, respectively. These amounts were included as a component of cost of goods sold in the accompanying condensed consolidated statements of income.

 

The Company purchased services from Starlight Consumer Electronics USA, Inc., (“SCE”) a related party. The purchases from SCE for the three months ended December 31, 2017 and 2016 were approximately $0 and $38,000, respectively. The purchases from SCE for the nine months ended December 31, 2017 and 2016 were approximately $79,000 and $136,000, respectively. These amounts were included as a component of general and administrative expenses in the accompanying condensed consolidated statements of income.

 

The Company purchased services from Merrygain Holding Co. Ltd, (“Merrygain”) a related party. The purchases from Merrygain for both of the three month periods ended December 31, 2017 and 2016 were approximately $39,000. The purchases from Merrygain for both of the nine month periods ended December 31, 2017 and 2016 were approximately $115,000. These amounts were included as a component of general and administrative expenses in the accompanying condensed consolidated statements of income.

 

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 months ended December 31, 2017 and 2016, the Company received approximately $0 and $12,000 respectively, in service fees from affiliates. For the nine months ended December 31, 2017 and 2016, the Company received approximately $18,000 and $53,000, respectively, in service fees from affiliates. These amounts were included as a component of general and administrative expenses in the accompanying condensed consolidated statements of income.