Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Jun. 30, 2016 | Aug. 15, 2016 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | SINGING MACHINE CO INC | |
Entity Central Index Key | 923,601 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 38,181,635 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | SMDM |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2016 | Mar. 31, 2016 |
Current Assets | ||
Cash | $ 444,515 | $ 2,116,490 |
Accounts receivable, net of allowances of $74,498 and $51,179, respectively | 3,451,300 | 1,381,789 |
Due from PNC Bank | 861 | 184,392 |
Accounts receivable related parties - other | 4,262 | 7,075 |
Inventories, net | 8,367,957 | 3,690,975 |
Prepaid expenses and other current assets | 148,806 | 115,601 |
Deferred financing costs | 74,077 | 74,077 |
Total Current Assets | 12,839,001 | 7,589,476 |
Property and equipment, net | 452,338 | 430,602 |
Other non-current assets | 11,523 | 11,394 |
Deferred financing costs | 3,087 | 21,606 |
Deferred tax asset | 2,607,119 | 2,408,531 |
Total Assets | 15,913,068 | 10,461,609 |
Current Liabilities | ||
Accounts payable | 6,326,737 | 722,213 |
Accrued expenses | 734,276 | 650,115 |
Current portion of capital lease | 1,078 | |
Obligations to customers for returns and allowances | 22,414 | 121,092 |
Warranty provisions | 193,263 | 292,500 |
Total Current Liabilities | 8,756,413 | 2,883,610 |
Total Liabilities | 10,680,844 | 4,808,041 |
Commitments and Contingencies | ||
Shareholders' Equity | ||
Preferred stock, $1.00 par value; 1,000,000 shares authorized; no shares issued and outstanding | ||
Additional paid-in capital | 19,347,268 | 19,337,939 |
Subscriptions receivable | (6,400) | |
Accumulated deficit | (14,496,860) | (14,059,787) |
Total Shareholders' Equity | 5,232,224 | 5,653,568 |
Total Liabilities and Shareholders' Equity | 15,913,068 | 10,461,609 |
Common Class A [Member] | ||
Shareholders' Equity | ||
Common stock, value | ||
Common Class B [Member] | ||
Shareholders' Equity | ||
Common stock, value | 381,816 | 381,816 |
Cosmo Communications Canada, Inc [Member] | ||
Current Assets | ||
Accounts receivable related party | 154,247 | 19,077 |
Winglight Pacific Ltd [Member] | ||
Current Assets | ||
Accounts receivable related party | 192,976 | |
Ram Light Management, Ltd [Member] | ||
Current Liabilities | ||
Note payable related party | 558,075 | 696,612 |
Due to related party | 201,000 | 400,000 |
Starlight Electronics Co Ltd [Member] | ||
Current Liabilities | ||
Due to related party | 707,819 | |
Merrygain Holding Co Ltd [Member] | ||
Current Liabilities | ||
Due to related party | 12,829 | |
Merrygain Holding Co [Member] | ||
Current Liabilities | ||
Due to related party | ||
Subordinated Debt [Member] | Starlight Marketing Development, Ltd [Member] | ||
Current Liabilities | ||
Subordinated related party debt | $ 1,924,431 | $ 1,924,431 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2016 | Mar. 31, 2016 |
Allowance for doubtful accounts | $ 74,498 | $ 51,179 |
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common Class A [Member] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000 | 100,000 |
Common stock, shares issued | ||
Common stock, shares outstanding | ||
Common Class B [Member] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 38,181,635 | 38,161,635 |
Common stock, shares outstanding | 38,181,635 | 38,161,635 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Income Statement [Abstract] | ||
Net Sales | $ 4,859,392 | $ 3,466,874 |
Cost of Goods Sold | 3,715,709 | 2,608,453 |
Gross Profit | 1,143,683 | 858,421 |
Operating Expenses | ||
Selling expenses | 424,878 | 457,727 |
General and administrative expenses | 1,246,851 | 1,101,981 |
Depreciation | 43,795 | 37,333 |
Total Operating Expenses | 1,715,524 | 1,597,041 |
Loss from Operations | (571,841) | (738,620) |
Other Expenses | ||
Interest expense | (16,027) | (50,112) |
Financing costs | (18,519) | (18,519) |
Total Other Expenses | (34,546) | (68,631) |
Loss Before Income Tax Benefit | (606,387) | (807,251) |
Income Tax Benefit | 169,314 | 312,325 |
Net Loss | $ (437,073) | $ (494,926) |
Loss per Common Share | ||
Basic and Diluted | $ (0.01) | $ (0.01) |
Weighted Average Common and Common Equivalent Shares | ||
Basic and Diluted | 38,181,635 | 38,117,517 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Cash flows from operating activities: | ||
Net Loss | $ (437,073) | $ (494,926) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 43,795 | 37,333 |
Amortization of deferred financing costs | 18,519 | 18,519 |
Change in inventory reserve | 66,000 | (37,560) |
Change in allowance for bad debts | 23,319 | (127,433) |
Stock based compensation | 9,329 | 2,001 |
Change in net deferred tax asset | (198,588) | (312,325) |
(Increase) decrease in: | ||
Accounts receivable | (2,092,830) | (80,027) |
Due from PNC Bank | 183,531 | 137,415 |
Accounts receivable related parties | (325,333) | (94,252) |
Inventories | (4,742,982) | (624,621) |
Prepaid expenses and other current assets | (33,205) | 1,914 |
Other non-current assets | (129) | |
Increase (decrease) in: | ||
Accounts payable | 5,604,524 | 258,092 |
Due to related parties | 521,648 | 35,456 |
Accrued expenses | 84,161 | 182,533 |
Customer deposits | 287,110 | |
Obligations to clients for returns and allowances | (98,678) | (389,058) |
Warranty provisions | (99,237) | (44,799) |
Net cash used in operating activities | (1,473,229) | 1,199,829 |
Cash flows from investing activities: | ||
Purchase of property and equipment | (65,531) | (42,157) |
Net cash used in investing activities | (65,531) | (42,157) |
Cash flows from financing activities: | ||
Net proceeds from revolving line of credit | 1,537,014 | |
Net proceeds from subscription receivable | 6,400 | |
Payment on note payable related party - Ram Light Management, Ltd. | (138,537) | |
Payments on capital lease | (1,078) | (3,105) |
Net cash (used in) provided by financing activities | (133,215) | 1,533,909 |
Net change in cash | (1,671,975) | 291,923 |
Cash at beginning of period | 2,116,490 | 116,286 |
Cash at end of period | 444,515 | 408,209 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 15,027 | 9,665 |
PNC Bank [Member] | ||
(Increase) decrease in: | ||
Due from PNC Bank | 183,531 | 137,415 |
Ram Light Management, Ltd [Member] | ||
Cash flows from financing activities: | ||
Payment on note payable related party - Ram Light Management, Ltd. | $ (138,537) |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | NOTE 1 BASIS OF PRESENTATION OVERVIEW The Singing Machine Company, Inc., a Delaware corporation (the Company, SMC, The Singing Machine) and its three wholly-owned subsidiaries SMC (Comercial Offshore De Macau) Limitada (Macau Subsidiary), SMC Logistics, Inc. (SMC-L) and SMC-Music, Inc.(SMC-M) are primarily engaged in the development, marketing, and sale of consumer karaoke audio systems, accessories, musical instruments and musical recordings. The products are sold by SMC to retailers and distributors for resale to consumers. |
Summary of Accounting Policies
Summary of Accounting Policies | 3 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Policies | NOTE 2 SUMMARY OF ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated in the condensed consolidated financial statements. The accompanying unaudited financial statements for the three months ended June 30, 2016 and 2015 have been prepared in accordance with generally accepted accounting principles applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements. USE OF ESTIMATES The Singing Machine makes estimates and assumptions in the ordinary course of business relating to sales returns and allowances, warranty reserves, inventory reserves and reserves for promotional incentives that affect the reported amounts of assets and liabilities and of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Future events and their effects cannot be determined with absolute certainty; therefore, the determination of estimates requires the exercise of judgment. Historically, past changes to these estimates have not had a material impact on the Companys financial condition. However, circumstances could change which may alter future expectations. FOREIGN CURRENCY TRANSLATION The functional currency of the Macau Subsidiary is the Hong Kong dollar. The financial statements of the subsidiaries are translated to U.S. dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions and translations were not material during the periods presented. Concentration of Credit Risk At times, the Company maintains cash in United States bank accounts that are in excess of the Federal Deposit Insurance Corporation insured amounts. The Company maintains cash balances in foreign financial institutions. The amounts at foreign financial institutions at June 30, 2016 and March 31, 2016 are $133,748 and $21,256, respectively. ACCOUNTS RECEIVABLE The Singing Machines accounts receivable consist of amounts due from customers in the ordinary course of business. Accounts receivable are carried at cost, net of allowances for uncollectible amounts. Provisions for losses are charged to operations in amounts sufficient to maintain an allowance for losses at a level considered adequate to cover probable losses inherent in the Companys accounts receivable. COLLECTIBILITY OF ACCOUNTS RECEIVABLE The Singing Machines allowance for doubtful accounts is based on managements estimates of the creditworthiness of its customers, current economic conditions and historical information, and, in the opinion of management, is believed to be in an amount sufficient to respond to normal business conditions. Management sets 100% reserves for customers in bankruptcy and other reserves based upon historical collection experience. Should business conditions deteriorate or any major customer default on its obligations to the Company, this allowance may need to be significantly increased, which would have a negative impact on operations. INVENTORY Inventories are comprised primarily of electronic karaoke equipment, microphones and accessories, and are stated at the lower of cost or market, as determined using the first in, first out method. The Singing Machine reduces inventory on hand to its net realizable value on an item-by-item basis when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to cost of sales results when the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews the Companys investment in inventories for such declines in value. LONG-LIVED ASSETS The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the undiscounted future cash flows attributable to the related assets are less than the carrying amount, the carrying amounts are reduced to fair value and an impairment loss is recognized in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets. PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to their estimated useful lives using accelerated and straight-line methods. FAIR VALUE OF FINANCIAL INSTRUMENTS We follow FASB ASC 825, Financial Instruments, which requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate that value. For purposes of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amounts of the Companys short-term financial instruments, including accounts receivable, accounts payable, accrued expenses, obligations to clients for returns and allowances, subordinated debt to Starlight Marketing Development, Ltd. (related party) and net due to related parties approximates fair value due to the relatively short period to maturity for these instruments. The carrying amounts on the note payable to Ram Light Management, Ltd. (related party) approximates fair value due the relatively short period to maturity and related interest accrued at a rate similar to market rates. RECLASSIFICATIONS Certain balances presented relating to accounts receivable related parties - other have been reclassified to conform to the financial statement presentation adopted for this period. REVENUE RECOGNITION Revenue from the sale of equipment, accessories, musical recordings and subscriptions and third party logistics services are recognized upon the later of: (a) the time of shipment or (b) when title passes to the customers and all significant contractual obligations and services have been satisfied and collection of the resulting receivable is reasonably assured. Net sales are comprised of gross sales net of actual and estimated future returns, discounts and volume rebates. SHIPPING AND HANDLING COSTS Shipping and handling costs are classified as a component of selling expenses and those billed to customers are recorded as a reduction of expense in the consolidated statements of operations. STOCK BASED COMPENSATION The Company follows the provisions of the FASB ASC 718-20, Compensation Stock Compensation Awards Classified as Equity. ASC 718-20 requires all share-based payments to employees including grants of employee stock options, be measured at fair value and expensed in the condensed consolidated statements of operations over the service period (generally the vesting period). The Company uses the Black-Scholes option valuation model to value stock options. Employee stock option compensation expense for the three months ended June 30, 2016 and 2015 includes the estimated fair value of options granted, amortized on a straight-line basis over the requisite service period for the entire portion of the award. For the three months ended June 30, 2016 and 2015, the stock option expense was $9,329 and $2,001, respectively. ADVERTISING Costs incurred for producing and publishing advertising of the Company are charged to operations the first time the advertising takes place. The Company has entered into cooperative advertising agreements with its major customers that specifically indicated that the customer has to spend the cooperative advertising fund upon the occurrence of mutually agreed events. The percentage of the cooperative advertising allowance ranges from 2% to 10% of the purchase. The customers have to advertise the Companys products in the customers catalog, local newspaper and other advertising media. The customer must submit the proof of the performance (such as a copy of the advertising showing the Companys products) to the Company to request for the allowance. The customer does not have the ability to spend the allowance at their discretion. The Company believes that the identifiable benefit from the cooperative advertising program and the fair value of the advertising benefit is equal or greater than the cooperative advertising expense. Advertising expense for the three months ended June 30, 2016 and 2015 was $205,050 and $279,356, respectively. As of June 30, 2016 and March 31, 2016 there was an accrual for cooperative advertising allowances of $202,985 and $93,222, respectively. These amounts were a component of accrued expenses in the condensed consolidated balance sheets. RESEARCH AND DEVELOPMENT COSTS Research and development costs are charged to results of operations as incurred. These expenses are shown as a component of selling, general and administrative expenses in the condensed consolidated statements of operations. For the three months ended June 30, 2016 and 2015, these amounts totaled $45,636 and $32,120 respectively. INCOME TAXES The Company follows the provisions of FASB ASC 740 Accounting for Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If it is more likely than not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized. The Company analyzes its deferred tax assets and liabilities at the end of each interim period and, based on managements best estimate of its full year effective tax rate, recognizes cumulative adjustments to its deferred tax assets and liabilities. The Companys effective tax rate for the fiscal year ending March 31, 2017 is estimated to be approximately 33%. The effective tax rate for the full year ended March 31, 2016 was approximately 35%. As of June 30, 2016 and March 31, 2016, The Singing Machine had gross deferred tax assets of approximately $2.6 million and $2.4 million respectively. The Company recorded an income tax benefit of approximately $169,000 for the three months ended June 30, 2016. The income tax benefit consisted of $198,000 income tax benefit due to the loss from operations during the three months ended June 30, 2016 offset by an income tax expense of approximately $29,000 for an estimated alternative minimum tax. The Company recognizes a liability for uncertain tax positions. An uncertain tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax return that is not based on clear and unambiguous tax law and which is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company me asures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. As of June 30, 2016, there were no uncertain tax positions that resulted in any adjustment to the Companys provision for income taxes. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. The Company currently has no liabilities recorded for accrued interest or penalties related to uncertain tax provisions. As of June 30, 2016, the Company is subject to U.S. Federal income tax examinations for the tax years ended March 31, 2014 through M COMPUTATION OF LOSS PER COMMON SHARE Loss per common share is computed by dividing the net loss by the weighted average of common shares outstanding during the period. As of June 30, 2016 and 2015 total potential dilutive shares amounted to approximately 1,605,000 and 880,000 shares, respectively, however these shares were not included in the computation of diluted earnings per share for the three months ended June 30, 2016 and June 30, 2015 because their effect was anti-dilutive. RECENT ACCOUNTING PRONOUNCEMENTS In May 2014, the FASB ASC 2014-09 which outlines a single comprehensive model for companies to use when accounting for revenue arising from contracts with customers. The core principle of the revenue recognition model is that an entity recognizes revenue to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In order to achieve this core principle a company must apply the following steps in determining revenue recognition: ● Identify the contract(s) with a customer ● Identify the performance obligations in the contract. ● Determine the transaction price. ● Allocate the transaction price to the performance obligations in the contract. ● Recognize revenue when (or as) the entity satisfies a performance obligation. The amendments in this ASU are now effective for annual reporting periods beginning April 1, 2018 including interim periods within that reporting period with early application allowed beginning with reporting periods beginning April 1, 2017. Management is currently assessing whether the implementation of ASU 2014-09 will have any material effect on the companys consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. In February 2016, the FASB issued ASU 2016-02, Leases. |
Due From PNC Bank
Due From PNC Bank | 3 Months Ended |
Jun. 30, 2016 | |
Due From Pnc Bank | |
Due From PNC Bank | NOTE 3 DUE FROM PNC BANK In connection with the Companys revolving credit facility with PNC Bank, cash collected by PNC Bank on trade accounts receivable may exceed amounts borrowed on the revolving credit facility from time to time (See Note 7 LINE OF CREDIT). As of June 30, 2016 and March 31, 2016, PNC Bank owed the Company $861 and $184,392, respectively, which represented cash received by PNC Bank on accounts receivable in excess of amounts borrowed against the revolving credit facility. |
Inventories, Net
Inventories, Net | 3 Months Ended |
Jun. 30, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories, Net | NOTE 4 INVENTORIES, NET Inventories are comprised of the following components: June 30, 2016 March 31, 2016 Finished Goods $ 7,491,583 $ 4,450,975 Inventory in Transit 1,702,374 - Inventory Reserve (826,000 ) (760,000 ) Inventories, net $ 8,367,957 $ 3,690,975 |
Property and Equipment
Property and Equipment | 3 Months Ended |
Jun. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | NOTE 5 PROPERTY AND EQUIPMENT A summary of property and equipment is as follows: USEFUL LIFE June 30, 2016 March 31, 2016 Computer and office equipment 5 years $ 285,650 $ 285,650 Furniture and fixtures 7 years 4,312 4,312 Warehouse equipment 7 years 238,470 224,106 Molds and tooling 3-5 years 2,544,116 2,492,950 3,072,548 3,007,018 Accumulated depreciation 2,620,210 2,576,416 $ 452,338 $ 430,602 Depreciation expense for the three months ended June 30, 2016 and June 30, 2015 was $43,795 and $37,333, respectively. |
Obligations to Customers for Re
Obligations to Customers for Returns and Allowances | 3 Months Ended |
Jun. 30, 2016 | |
Payables and Accruals [Abstract] | |
Obligations to Clients for Returns and Allowances | NOTE 6 OBLIGATIONS TO CUSTOMERS FOR RETURNS AND ALLOWANCES Due to the seasonality of the business and length of time customers are given to return defective product, it is not uncommon for customers to accumulate credits from the Companys sales and allowance programs that are in excess of unpaid invoices in accounts receivable. All credit balances in customers accounts receivable are reclassified to obligations to customers for returns and allowances in current liabilities on the condensed consolidated balance sheets. Client requests for payment of a credit balance are reclassified from obligations to customers for returns and allowances to accounts payable on the condensed consolidated balance sheets. When new invoices are processed prior to settlement of the credit balance and the client accepts settlement of open credits with new invoices, then the excess of new invoices over credits are netted in accounts receivable. As of June 30, 2016 and March 31, 2016 obligations to customers for returns and allowances reclassified from accounts receivable were $22,414 and $121,092, respectively. |
Line of Credit
Line of Credit | 3 Months Ended |
Jun. 30, 2016 | |
Line of Credit Facility [Abstract] | |
Line of Credit | NOTE 7 LINE OF CREDIT On July 14, 2014, the Company executed a three-year revolving credit facility (the Revolving Credit Facility) with PNC Bank, National Association (PNC) that replaced an existing line of credit agreement. The Revolving Credit Facility has a three year term expiring on July 14, 2017. The outstanding loan balance cannot exceed $15,000,000 during peak selling season between August 1 and December 31 and is reduced to a maximum of $7,500,000 between January 1 and July 31. Usage under the Revolving Credit Facility shall not exceed the sum of the following (the Borrowing Base): ● Up to 85% of the companys eligible domestic and Canadian accounts receivable aged less than 60 days past due (not to exceed 90 days from invoice date, cross aged on the basis of 50% or more past due with certain specific accounts qualifying for up to 120 days from invoice date not to exceed 30 days from the due date; plus. ● Up to the lesser of (a) 50% of the cost of eligible inventory or (b) 75% of net orderly liquidation value percentage of eligible inventory (annual inventory appraisals required); minus. ● An all-time $500,000 block; minus. ● Applicable reserves including a dilution reserve equal to 125% of the Companys advertising and return accrual reserves. Dilution reserve not to exceed availability generated from eligible accounts receivable. The Revolving Credit Facility includes the following sub-limits: ● Letters of Credit to be issued limited to $3,000,000. ● Inventory availability limited to $4,000,000. ● Mandatory pay-down to $1,000,000 (excluding letters of credit) for any 30 consecutive days between February 1 and April 30. The Revolving Credit Facility must comply with the following quarterly financial covenants to avoid default: ● Fixed charge coverage ratio test of 1.1:1 times measured on a rolling four quarter basis, defined as EBITDA less non-financed capital expenditures, cash dividends and distributions paid and cash taxes paid divided by the sum of interest and principal on all indebtedness. ● Capital expenditures limited to $150,000 per year. Interest on the Revolving Line of Credit is accrued at 2% per annum over PNCs announced prime rate with an option for the Company to elect the 1, 2 or 3 month fully absorbed PNC LIBOR Rate plus 3.5% per annum with a default rate of 2% over the applicable rate. There is an unused facility fee equal to .375% per annum on the unused portion of the Revolving Credit Facility which will be calculated on the basis of a 360 day year for the actual number of days elapsed and will be payable quarterly in arrears. During the three months ended June 30, 2016 and 2015 the Company incurred interest expense of $0 and $9,665, respectively, on amounts borrowed against the line of credit. During the three months ended June 30, 2016 and 2015 the Company incurred an unused facility fee of $7,031 and $6,142, respectively, on the unused portion of the Revolving Credit Facility. The Revolving Line of Credit is secured by first priority security interests in all of the named borrowers tangible and intangible assets as well as first priority security interests of 100% of member or ownership interests of any of its domestic existing or newly formed subsidiaries and first priority lien on up to 65% of the borrowers domestic subsidiarys existing or subsequently formed or acquired foreign subsidiaries. The Revolving Credit Facility is also secured by a related-party debt subordination agreement with Starlight Marketing Development, Ltd. in the amount of $2,500,000. Costs associated with securing the Revolving Credit Facility of approximately $222,000 were deferred and are amortized over the term of the agreement. During the three months ended March 31, 2016 and 2015 the Company incurred amortization expense of $18,519 associated with the amortization of deferred financing costs. As a condition of the Revolving Credit Facility, a portion of the Companys related-party debt with Ram Light Management, Ltd. in the amount of $1,100,000 was converted to a note payable with Ram Light Management, Ltd. (Ram Light Note). The Ram Light Note bears interest at 6% per annum with quarterly payments of $150,000 (including principal and interest) payable which commenced on December 31, 2014. The scheduled principal and interest payments of $150,000 are only permitted upon receipt of the Companys quarterly compliance certificate; the Company having met the mandatory pay-down of the Revolving Credit Facility to $1,000,000 and average excess availability for the prior 30 days (after subtraction of third party trade payables 30 days or more past due) of no less than $1,000,000 after giving effect to the payment. While the Company did meet the mandatory pay-down requirement, the Company did not meet the prior 30 day average excess availability requirement permitting the Company to make all scheduled payments on the note, and as a result, the first three scheduled payments due December 31, 2014, March 31, 2015 and June 30, 2015 were not made. As part of the Conditions to Installment Payment in the note, payments not made under this note that cannot be made as a result of the foregoing prohibition shall not be deemed an Event of Default and will not cumulate with the next payment that can be made, but rather will be payable on the maturity date together with any additional interest that has accrued thereon. The Company has made all payments as scheduled since June 30, 2015. During the three months ended June 30, 2016 and 2015 the Company recognized interest expense on the Ram Light Note in the amount of $11,463 and $17,283, respectively. As of June 30, 2016 and March 31, 2016 the company accrued interest expense on the Ram Light Note in the amount of $63,778. These amounts were a component of accrued expenses in the condensed consolidated balance sheets. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 8 COMMITMENTS AND CONTINGENCIES LEGAL MATTERS Management is currently not aware of any legal proceedings. OPERATING LEASES The Company has entered into various operating lease agreements for office and warehouse facilities in Fort Lauderdale, Florida, Ontario, California and Macau, PRC expiring at varying dates. Rent expense for the three months ended June 30, 2016 and 2015 was $164,531 and $155,521 respectively. In addition, the Company maintains various warehouse equipment and computer equipment operating leases. Future minimum lease payments under property and equipment leases with terms exceeding one year as of June 30, 2016 are as follows: Operating Leases For period ending June 30, 2016 $ 535,412 2017 504,183 2018 524,272 2019 524,272 2020 87,379 $ 2,175,518 |
Geographical Information
Geographical Information | 3 Months Ended |
Jun. 30, 2016 | |
Geographical Information | |
Geographical Information | NOTE 9 GEOGRAPHICAL INFORMATION All sales to customers outside of the United States for the three months ended June 30, 2016 and 2015 were made by the Macau Subsidiary. Sales by geographic region for the periods presented are as follows: North America $ 4,541,145 $ 3,073,577 Europe 318,247 237,507 South Africa - 155,790 $ 4,859,392 $ 3,466,874 The geographic area of sales was based primarily on the location where the product is delivered. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Jun. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 10 RELATED PARTY TRANSACTIONS DUE TO/FROM RELATED PARTIES On June 30, 2016 and March 31, 2016, in the aggregate the Company had $351,485 and $26,152, respectively, due from related parties for goods and services sold to these companies. On June 30, 2016 and March 31, 2016 the Company had $201,000 and $400,000 due to Ram Light Management, Ltd. for prior years purchases of karaoke hardware. Effective October 1, 2015 the amount due to Ram Light began bearing interest at 6% per annum. The Company paid $3,500 and $0 in interest expense to Ram Light for the three months ended June 30, 2016 and 2015, respectively. On June 30, 2016 and March 31, 2016 the Company had amounts due to other related party companies in the amounts of $720,648 and $0 for goods, repair services, engineering fees, storage and administrative services provided to the Company by these related parties. NOTE PAYABLE In connection with the Revolving Line of Credit agreement there was a conversion of past due trade payables to a note payable of $1,100,000 to Ram Light Management, Ltd. on July 15, 2014. As of June 30, 2016 and March 31, 2016 the principal amount due on the note was $558,075 and $696,612, respectively. The note bears interest at 6% per annum and the Company recognized interest expense in the amount of $11,463 and $15,842 for the three months ended June 30, 2016 and 2015, respectively. SUBORDINATED DEBT In connection with the Revolving Credit Facility the Company was required to subordinate related party debt to Starlight Marketing Development, Ltd. in the amount of $1,924,431. The debt cannot be repaid until after the expiration of the Revolving Credit Facility, therefore the subordinated related party debt is classified as a long-term liability on the accompanying condensed consolidated balance sheets as of June 30, 2016 and March 31, 2016. TRADE During the three months ended June 30, 2016 and June 30, 2015 the Company sold $0 and $64,903, respectively to Starlight Electronics Company, Ltd (SLE), 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 SLE for the three months ended June 30, 2016 and June 30, 2015 was NA and 14.7%, respectively. The product was drop shipped to Cosmo Communications of Canada (Cosmo), the Companys 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, 2016 and June 30, 2015 the Company sold $192,976 and $0, 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, 2016 and June 30, 2015 was 15.4% and NA, respectively. The product was drop shipped to Cosmo Communications of Canada (Cosmo), the Companys 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, 2016 and June 30, 2015 the Company sold an additional $123,499 and $113,962, 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 services from Starlight R&D, Ltd, (SLRD) a related party. The purchases from SLRD for the three months ended June 30, 2016 and 2015 were $13,846 and $32,857, respectively. These amounts were included as a component of general and administrative expenses in the accompanying condensed consolidated statements of operations. The Company purchased products from SLE. The purchases from SLE for the three month periods ended June 30, 2016 and 2015 were $710,543 and $0, respectively. These amounts 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, 2016 and 2015 were $51,900 and $165,893, respectively. These amounts were included as a component of general and administrative expenses in the accompanying condensed consolidated statements of operations. Effective April 1, 2016, SMC-L renewed the service and logistics agreement with Starlight R&D, Cosmo and SLE, to provide logistics, fulfillment, and warehousing services for Starlight R&D, Cosmo and SLEs domestic sales from April 1, 2016 and expiring on March 31, 2017. For these services, Starlight R&D, 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 June 30, 2016, the Company received $18,671. This amount was included as a component of general and administrative expenses in the accompanying condensed consolidated statement 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 SLEs domestic sales. For these services, Starlight USA, Cosmo and SLE 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 June 30, 2015, the Company received approximately $19,885. This agreement expired on March 31, 2016. This amount was included as a component of general and administrative expenses in the accompanying condensed consolidated statement of operations. |
Warranty Provisions
Warranty Provisions | 3 Months Ended |
Jun. 30, 2016 | |
Product Warranties Disclosures [Abstract] | |
Warranty Provisions | NOTE 11 WARRANTY PROVISIONS A return program for defective goods is negotiated with each of our wholesale customers on a year-to-year basis. Customers are either allowed to return defective goods within a specified period of time after shipment (between 6 and 9 months) or granted a defective allowance consisting of a fixed percentage (between 1% and 5%) off of invoice price in lieu of returning defective products. The Company records liabilities for its return goods programs and defective goods allowance program at the time of sale for the estimated costs that may be incurred. The liability for defective goods is included in warranty provisions on the condensed consolidated balance sheets. Changes in the Companys warranty provision are presented in the following table: Three Months Ended June 30, 2016 June 30, 2015 Estimated warranty provision at beginning of period $ 292,500 $ 197,873 Costs accrued for future estimated returns 109,245 87,235 Returns received (208,482 ) (132,034 ) Estimated warranty provision at end of period $ 193,263 $ 153,074 |
Employee Benefit Plans
Employee Benefit Plans | 3 Months Ended |
Jun. 30, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Employee Benefit Plans | NOTE 12 EMPLOYEE BENEFIT PLANS The Company has a 401(k) plan for its employees to which the Company makes contributions at rates dependent on the level of each employees contributions. Contributions made by the Company are limited to the maximum allowable for federal income tax purposes. The amounts charged to operations for contributions to this plan and administrative costs during the three month periods ended June 30, 2016 and 2015 totaled $9,867 and $9,258, respectively. The amounts are included as a component of general and administrative expense in the accompanying Consolidated Statements of Income. The Company does not provide any post-employment benefits to retirees. |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation and Basis of Presentation | PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated in the condensed consolidated financial statements. The accompanying unaudited financial statements for the three months ended June 30, 2016 and 2015 have been prepared in accordance with generally accepted accounting principles applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements. |
Use of Estimates | USE OF ESTIMATES The Singing Machine makes estimates and assumptions in the ordinary course of business relating to sales returns and allowances, warranty reserves, inventory reserves and reserves for promotional incentives that affect the reported amounts of assets and liabilities and of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Future events and their effects cannot be determined with absolute certainty; therefore, the determination of estimates requires the exercise of judgment. Historically, past changes to these estimates have not had a material impact on the Companys financial condition. However, circumstances could change which may alter future expectations. |
Foreign Currency Translation | FOREIGN CURRENCY TRANSLATION The functional currency of the Macau Subsidiary is the Hong Kong dollar. The financial statements of the subsidiaries are translated to U.S. dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions and translations were not material during the periods presented. |
Concentration of Credit Risk | Concentration of Credit Risk At times, the Company maintains cash in United States bank accounts that are in excess of the Federal Deposit Insurance Corporation insured amounts. The Company maintains cash balances in foreign financial institutions. The amounts at foreign financial institutions at June 30, 2016 and March 31, 2016 are $133,748 and $21,256, respectively. |
Accounts Receivable | ACCOUNTS RECEIVABLE The Singing Machines accounts receivable consist of amounts due from customers in the ordinary course of business. Accounts receivable are carried at cost, net of allowances for uncollectible amounts. Provisions for losses are charged to operations in amounts sufficient to maintain an allowance for losses at a level considered adequate to cover probable losses inherent in the Companys accounts receivable. |
Collectability of Accounts Receivable | COLLECTIBILITY OF ACCOUNTS RECEIVABLE The Singing Machines allowance for doubtful accounts is based on managements estimates of the creditworthiness of its customers, current economic conditions and historical information, and, in the opinion of management, is believed to be in an amount sufficient to respond to normal business conditions. Management sets 100% reserves for customers in bankruptcy and other reserves based upon historical collection experience. Should business conditions deteriorate or any major customer default on its obligations to the Company, this allowance may need to be significantly increased, which would have a negative impact on operations. |
Inventory | INVENTORY Inventories are comprised primarily of electronic karaoke equipment, microphones and accessories, and are stated at the lower of cost or market, as determined using the first in, first out method. The Singing Machine reduces inventory on hand to its net realizable value on an item-by-item basis when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to cost of sales results when the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews the Companys investment in inventories for such declines in value. |
Long-Lived Assets | LONG-LIVED ASSETS The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the undiscounted future cash flows attributable to the related assets are less than the carrying amount, the carrying amounts are reduced to fair value and an impairment loss is recognized in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets. |
Property and Equipment | PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to their estimated useful lives using accelerated and straight-line methods. |
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS We follow FASB ASC 825, Financial Instruments, which requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate that value. For purposes of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amounts of the Companys short-term financial instruments, including accounts receivable, accounts payable, accrued expenses, obligations to clients for returns and allowances, subordinated debt to Starlight Marketing Development, Ltd. (related party) and net due to related parties approximates fair value due to the relatively short period to maturity for these instruments. The carrying amounts on the note payable to Ram Light Management, Ltd. (related party) approximates fair value due the relatively short period to maturity and related interest accrued at a rate similar to market rates. |
Reclassifications | RECLASSIFICATIONS Certain balances presented relating to accounts receivable related parties - other have been reclassified to conform to the financial statement presentation adopted for this period. |
Revenue Recognition | REVENUE RECOGNITION Revenue from the sale of equipment, accessories, musical recordings and subscriptions and third party logistics services are recognized upon the later of: (a) the time of shipment or (b) when title passes to the customers and all significant contractual obligations and services have been satisfied and collection of the resulting receivable is reasonably assured. Net sales are comprised of gross sales net of actual and estimated future returns, discounts and volume rebates. |
Shipping and Handling Costs | SHIPPING AND HANDLING COSTS Shipping and handling costs are classified as a component of selling expenses and those billed to customers are recorded as a reduction of expense in the consolidated statements of operations. |
Stock Based Compensation | STOCK BASED COMPENSATION The Company follows the provisions of the FASB ASC 718-20, Compensation Stock Compensation Awards Classified as Equity. ASC 718-20 requires all share-based payments to employees including grants of employee stock options, be measured at fair value and expensed in the condensed consolidated statements of operations over the service period (generally the vesting period). The Company uses the Black-Scholes option valuation model to value stock options. Employee stock option compensation expense for the three months ended June 30, 2016 and 2015 includes the estimated fair value of options granted, amortized on a straight-line basis over the requisite service period for the entire portion of the award. For the three months ended June 30, 2016 and 2015, the stock option expense was $9,329 and $2,001, respectively. |
Advertising | ADVERTISING Costs incurred for producing and publishing advertising of the Company are charged to operations the first time the advertising takes place. The Company has entered into cooperative advertising agreements with its major customers that specifically indicated that the customer has to spend the cooperative advertising fund upon the occurrence of mutually agreed events. The percentage of the cooperative advertising allowance ranges from 2% to 10% of the purchase. The customers have to advertise the Companys products in the customers catalog, local newspaper and other advertising media. The customer must submit the proof of the performance (such as a copy of the advertising showing the Companys products) to the Company to request for the allowance. The customer does not have the ability to spend the allowance at their discretion. The Company believes that the identifiable benefit from the cooperative advertising program and the fair value of the advertising benefit is equal or greater than the cooperative advertising expense. Advertising expense for the three months ended June 30, 2016 and 2015 was $205,050 and $279,356, respectively. As of June 30, 2016 and March 31, 2016 there was an accrual for cooperative advertising allowances of $202,985 and $93,222, respectively. These amounts were a component of accrued expenses in the condensed consolidated balance sheets. |
Research and Development Costs | RESEARCH AND DEVELOPMENT COSTS Research and development costs are charged to results of operations as incurred. These expenses are shown as a component of selling, general and administrative expenses in the condensed consolidated statements of operations. For the three months ended June 30, 2016 and 2015, these amounts totaled $45,636 and $32,120 respectively. |
Income Taxes | INCOME TAXES The Company follows the provisions of FASB ASC 740 Accounting for Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If it is more likely than not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized. The Company analyzes its deferred tax assets and liabilities at the end of each interim period and, based on managements best estimate of its full year effective tax rate, recognizes cumulative adjustments to its deferred tax assets and liabilities. The Companys effective tax rate for the fiscal year ending March 31, 2017 is estimated to be approximately 33%. The effective tax rate for the full year ended March 31, 2016 was approximately 35%. As of June 30, 2016 and March 31, 2016, The Singing Machine had gross deferred tax assets of approximately $2.6 million and $2.4 million respectively. The Company recorded an income tax benefit of approximately $169,000 for the three months ended June 30, 2016. The income tax benefit consisted of $198,000 income tax benefit due to the loss from operations during the three months ended June 30, 2016 offset by an income tax expense of approximately $29,000 for an estimated alternative minimum tax. The Company recognizes a liability for uncertain tax positions. An uncertain tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax return that is not based on clear and unambiguous tax law and which is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company me asures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. As of June 30, 2016, there were no uncertain tax positions that resulted in any adjustment to the Companys provision for income taxes. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. The Company currently has no liabilities recorded for accrued interest or penalties related to uncertain tax provisions. As of June 30, 2016, the Company is subject to U.S. Federal income tax examinations for the tax years ended March 31, 2014 through M |
Computation of Loss Per Common Share | COMPUTATION OF LOSS PER COMMON SHARE Loss per common share is computed by dividing the net loss by the weighted average of common shares outstanding during the period. As of June 30, 2016 and 2015 total potential dilutive shares amounted to approximately 1,605,000 and 880,000 shares, respectively, however these shares were not included in the computation of diluted earnings per share for the three months ended June 30, 2016 and June 30, 2015 because their effect was anti-dilutive. |
Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS In May 2014, the FASB ASC 2014-09 which outlines a single comprehensive model for companies to use when accounting for revenue arising from contracts with customers. The core principle of the revenue recognition model is that an entity recognizes revenue to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In order to achieve this core principle a company must apply the following steps in determining revenue recognition: ● Identify the contract(s) with a customer ● Identify the performance obligations in the contract. ● Determine the transaction price. ● Allocate the transaction price to the performance obligations in the contract. ● Recognize revenue when (or as) the entity satisfies a performance obligation. The amendments in this ASU are now effective for annual reporting periods beginning April 1, 2018 including interim periods within that reporting period with early application allowed beginning with reporting periods beginning April 1, 2017. Management is currently assessing whether the implementation of ASU 2014-09 will have any material effect on the companys consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. In February 2016, the FASB issued ASU 2016-02, Leases. |
Inventories, Net (Tables)
Inventories, Net (Tables) | 3 Months Ended |
Jun. 30, 2016 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventories are comprised of the following components: June 30, 2016 March 31, 2016 Finished Goods $ 7,491,583 $ 4,450,975 Inventory in Transit 1,702,374 - Inventory Reserve (826,000 ) (760,000 ) Inventories, net $ 8,367,957 $ 3,690,975 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Jun. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Summary of Property and Equipment | A summary of property and equipment is as follows: USEFUL LIFE June 30, 2016 March 31, 2016 Computer and office equipment 5 years $ 285,650 $ 285,650 Furniture and fixtures 7 years 4,312 4,312 Warehouse equipment 7 years 238,470 224,106 Molds and tooling 3-5 years 2,544,116 2,492,950 3,072,548 3,007,018 Accumulated depreciation 2,620,210 2,576,416 $ 452,338 $ 430,602 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum lease payments under property and equipment leases with terms exceeding one year as of June 30, 2016 are as follows: Operating Leases For period ending June 30, 2016 $ 535,412 2017 504,183 2018 524,272 2019 524,272 2020 87,379 $ 2,175,518 |
Geographical Information (Table
Geographical Information (Tables) | 3 Months Ended |
Jun. 30, 2016 | |
Geographical Information | |
Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas | All sales to customers outside of the United States for the three months ended June 30, 2016 and 2015 were made by the Macau Subsidiary. Sales by geographic region for the periods presented are as follows: North America $ 4,541,145 $ 3,073,577 Europe 318,247 237,507 South Africa - 155,790 $ 4,859,392 $ 3,466,874 |
Warranty Provisions (Tables)
Warranty Provisions (Tables) | 3 Months Ended |
Jun. 30, 2016 | |
Product Warranties Disclosures [Abstract] | |
Schedule of Product Warranty Liability | Changes in the Companys warranty provision are presented in the following table: Three Months Ended June 30, 2016 June 30, 2015 Estimated warranty provision at beginning of period $ 292,500 $ 197,873 Costs accrued for future estimated returns 109,245 87,235 Returns received (208,482 ) (132,034 ) Estimated warranty provision at end of period $ 193,263 $ 153,074 |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | Mar. 31, 2016 | |
Accounting Policies [Line Items] | |||
Foreign financial institutions actual deposits | $ 133,748 | $ 21,256 | |
Percentage of reserves for customers | 100.00% | ||
Stock based compensation | $ 9,329 | $ 2,001 | |
Advertising expense | 205,050 | 279,356 | |
Accrual cooperative advertising allowances | 202,985 | $ 93,222 | |
General and administrative expenses | 45,636 | 32,120 | |
Effective tax rate | 35.00% | ||
Deferred tax assets gross | 2,600,000 | $ 2,400,000 | |
Income tax benefit | 169,314 | $ 312,325 | |
Income tax benefit due to loss from operations | 198,000 | ||
Offset by income tax expense | $ 29,000 | ||
Percentage of tax benefits recognized likelihood of being realized | greater than 50% | ||
Potential dilutive shares amounted | 1,605,000 | 880,000 | |
March 31, 2017 [Member] | |||
Accounting Policies [Line Items] | |||
Effective tax rate | 33.00% | ||
Minimum [Member] | |||
Accounting Policies [Line Items] | |||
Cooperative advertising allowance, percentage | 2.00% | ||
Maximum [Member] | |||
Accounting Policies [Line Items] | |||
Cooperative advertising allowance, percentage | 10.00% |
Due From PNC Bank (Details Narr
Due From PNC Bank (Details Narrative) - USD ($) | Jun. 30, 2016 | Mar. 31, 2016 |
Due From Pnc Bank Details Narrative | ||
Due from PNC Bank | $ 861 | $ 184,392 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventory (Details) - USD ($) | Jun. 30, 2016 | Mar. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Finished Goods | $ 7,491,583 | $ 4,450,975 |
Inventory in Transit | 1,702,374 | |
Inventory Reserve | (826,000) | (760,000) |
Inventories, net | $ 8,367,957 | $ 3,690,975 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 43,795 | $ 37,333 |
Property and Equipment - Summar
Property and Equipment - Summary of Property and Equipment (Details) - USD ($) | 3 Months Ended | |
Jun. 30, 2016 | Mar. 31, 2016 | |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 3,072,548 | $ 3,007,018 |
Less: Accumulated depreciation | 2,620,210 | 2,576,416 |
Property and equipment, net | 452,338 | 430,602 |
Computer and Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 285,650 | 285,650 |
Average useful life (in years) | 5 years | |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 4,312 | 4,312 |
Average useful life (in years) | 7 years | |
Warehouse Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 238,470 | 224,106 |
Average useful life (in years) | 7 years | |
Molds and tooling [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 2,544,116 | $ 2,492,950 |
Molds and tooling [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 3 years | |
Molds and tooling [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 5 years |
Obligations to Clients for Retu
Obligations to Clients for Returns and Allowances (Details Narrative) - USD ($) | Jun. 30, 2016 | Mar. 31, 2016 |
Payables and Accruals [Abstract] | ||
Customer obligations for returns and allowances | $ 22,414 | $ 121,092 |
Line of Credit (Details Narrati
Line of Credit (Details Narrative) - USD ($) | 3 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Line of Credit Facility [Line Items] | ||
Incurred interest expense | $ 0 | $ 9,665 |
Unused facility fee | $ 7,031 | 6,142 |
First priority security ownership interest percentage | 100.00% | |
Amortization expense | $ 18,519 | 18,519 |
Ram Light Management, Ltd [Member] | ||
Line of Credit Facility [Line Items] | ||
Line of credit facility, maximum amount outstanding during period | $ 1,000,000 | |
Line of credit facility, interest rate during period | 6.00% | |
Conversion of related party debt | $ 1,100,000 | |
Repayments of lines of credit | $ 150,000 | |
Line of credit payment description | While the Company did meet the mandatory pay-down requirement, the Company did not meet the prior 30 day average excess availability requirement permitting the Company to make all scheduled payments on the note, and as a result, the first three scheduled payments due December 31, 2014, March 31, 2015 and June 30, 2015 were not made. As part of the Conditions to Installment Payment in the note, payments not made under this note that cannot be made as a result of the foregoing prohibition shall not be deemed an Event of Default and will not cumulate with the next payment that can be made, but rather will be payable on the maturity date together with any additional interest that has accrued thereon. | |
Interest expense, related party | $ 11,463 | 15,842 |
Accrued interest | 63,778 | |
Ram Light Note [Member] | ||
Line of Credit Facility [Line Items] | ||
Interest expense, related party | $ 11,463 | $ 17,283 |
Maximum [Member] | ||
Line of Credit Facility [Line Items] | ||
First priority lien percentage | 65.00% | |
Revolving Credit Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Debt instrument, term | 3 years | |
Line of credit facility, expiration date | Jul. 14, 2017 | |
Line of credit facility, description | Usage under the Revolving Credit Facility shall not exceed the sum of the following (the Borrowing Base): 1. Up to 85% of the companys eligible domestic and Canadian accounts receivable aged less than 60 days past due (not to exceed 90 days from invoice date, cross aged on the basis of 50% or more past due with certain specific accounts qualifying for up to 120 days from invoice date not to exceed 30 days from the due date; plus. 2. Up to the lesser of (a) 50% of the cost of eligible inventory or (b) 75% of net orderly liquidation value percentage of eligible inventory (annual inventory appraisals required); minus. 3. An all-time $500,000 block; minus. 4. Applicable reserves including a dilution reserve equal to 125% of the Companys advertising and return accrual reserves. Dilution reserve not to exceed availability generated from eligible accounts receivable. | |
Line of credit facility sub limits description | The Revolving Credit Facility includes the following sub-limits: Letters of Credit to be issued limited to $3,000,000. Inventory availability limited to $4,000,000. Mandatory pay-down to $1,000,000 (excluding letters of credit) for any 30 consecutive days between February 1 and April 30. | |
Line of credit facility, covenant terms | The Revolving Credit Facility must comply with the following quarterly financial covenants to avoid default: Fixed charge coverage ratio test of 1.1:1 times measured on a rolling four quarter basis, defined as EBITDA less non-financed capital expenditures, cash dividends and distributions paid and cash taxes paid divided by the sum of interest and principal on all indebtedness. Capital expenditures limited to $150,000 per year. | |
Line of credit facility, interest rate during period | 2.00% | |
Line of credit facility, LIBOR Rate plus rate | 3.50% | |
Line of credit facility default rate | 2.00% | |
Line of credit facility, unused capacity, commitment fee percentage | 0.375% | |
Line of credit facility, collateral amount | $ 2,500,000 | |
Line of credit facility, collateral fee | 222,000 | |
Revolving Credit Facility [Member] | Peak Selling Season Between August 1 And December 31 [Member] | ||
Line of Credit Facility [Line Items] | ||
Line of credit facility, maximum amount outstanding during period | 15,000,000 | |
Revolving Credit Facility [Member] | Peak Selling Season Between January 1 And July 31 [Member] | ||
Line of Credit Facility [Line Items] | ||
Line of credit facility, maximum amount outstanding during period | $ 7,500,000 |
Commitments and Contingencies31
Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 164,531 | $ 155,521 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Rental Payments for Operating Leases (Details) | Jun. 30, 2016USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,016 | $ 535,412 |
2,017 | 504,183 |
2,018 | 524,272 |
2,019 | 524,272 |
2,020 | 87,379 |
Total | $ 2,175,518 |
Geographical Information - Sche
Geographical Information - Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas (Details) - USD ($) | 3 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Segment Reporting Information [Line Items] | ||
Net Sales | $ 4,859,392 | $ 3,466,874 |
North America [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 4,541,145 | 3,073,577 |
Europe [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 318,247 | 237,507 |
South Africa [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | $ 155,790 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Mar. 31, 2016 | |
Related Party Transaction [Line Items] | |||
Due from related parties, current | $ 351,485 | $ 26,152 | |
Ram Light Management, Ltd [Member] | |||
Related Party Transaction [Line Items] | |||
Due to related parties, current | $ 201,000 | 400,000 | |
Interest rate | 6.00% | ||
Interest Paid | $ 3,500 | $ 0 | |
Due to other related parties | 720,648 | 0 | |
Debt conversion, amount | 1,100,000 | ||
Notes payable, related parties, current | 558,075 | 696,612 | |
Interest expense, related party | 11,463 | 15,842 | |
Starlight Marketing Development, Ltd [Member] | |||
Related Party Transaction [Line Items] | |||
Due to related parties | 1,924,431 | ||
Starlight Electronics Co Ltd [Member] | |||
Related Party Transaction [Line Items] | |||
Due to related parties, current | 707,819 | ||
Revenue from related parties | $ 0 | $ 64,903 | |
Related party gross margin percentage | 1470.00% | ||
Related party purchases of services from related party transaction | $ 710,543 | $ 0 | |
Winglight Pacific Ltd [Member] | |||
Related Party Transaction [Line Items] | |||
Revenue from related parties | $ 192,976 | $ 0 | |
Related party gross margin percentage | 15.40% | ||
Cosmo Communications Usa, Inc [Member] | |||
Related Party Transaction [Line Items] | |||
Revenue from related parties | $ 123,499 | $ 113,962 | |
Starlight R&D, Ltd [Member] | |||
Related Party Transaction [Line Items] | |||
Related party purchases of services from related party transaction | 13,846 | 32,857 | |
Starlight Consumer Electronics USA, Inc [Member] | |||
Related Party Transaction [Line Items] | |||
Related party purchases of services from related party transaction | 51,900 | $ 165,893 | |
Starlight RD, Cosmo and SLE [Member] | |||
Related Party Transaction [Line Items] | |||
Proceeds from fees received | $ 18,671 | ||
Agreement expiration date | Mar. 31, 2017 | ||
Warehouse space per pallet | $ 0.096 | ||
SEC, Cosmo USA and Starlight Electronics USA [Member] | |||
Related Party Transaction [Line Items] | |||
Proceeds from fees received | $ 19,885 | ||
Agreement expiration date | Mar. 31, 2016 | ||
Warehouse space per pallet | $ 0.096 |
Warranty Provisions (Details Na
Warranty Provisions (Details Narrative) | 3 Months Ended |
Jun. 30, 2016 | |
Product Warranties Disclosures [Abstract] | |
Standard product warranty description | Customers are either allowed to return defective goods within a specified period of time after shipment (between 6 and 9 months) or granted a defective allowance consisting of a fixed percentage (between 1% and 5%) off of invoice price in lieu of returning defective products. |
Warranty Provisions - Schedule
Warranty Provisions - Schedule of Product Warranty Liability (Details) - USD ($) | 3 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Product Warranties Disclosures [Abstract] | ||
Estimated warranty provision at beginning of period | $ 292,500 | $ 197,873 |
Costs accrued for future estimated returns | 109,245 | 87,235 |
Returns received | (208,482) | (132,034) |
Estimated warranty provision at end of period | $ 193,263 | $ 153,074 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details Narrative) - USD ($) | 3 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Compensation and Retirement Disclosure [Abstract] | ||
Defined contribution plan, administrative expenses | $ 9,867 | $ 9,258 |