10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

               For the fiscal year ended April 30, 2013

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to ___________

Commission file number 0-10294

INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

California	95-3276269
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2310 Cousteau Court Vista, California (Address of principal executive offices) 92081-8346 (Zip Code)

(760) 598-1655

(Registrant’s telephone number)

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Shares, no par value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasonal issuer, as defined in Rule 405 of the Securities Act. Yes o  No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o  No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company ý

Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, as of October 31, 2012 was approximately $1,747,311 (based on the closing price of $0.47 per share as reported on the OTC Markets on such date). Shares of the registrant's common stock held by each officer and director of the registrant and by each person or entity who is known to own beneficially 5% or more of the registrant's outstanding common stock have been excluded for purposes of the foregoing calculation on the basis that such persons and entities may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares outstanding of the registrant’s Common Stock, no par value, as of July 9, 2013 was 12,962,999.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS
 

PART I
ITEM 1.	Business	5
ITEM 1A.	Risk Factors	11
ITEM 1B.	Unresolved Staff Comments	15
ITEM 2.	Properties	15
ITEM 3.	Legal Proceedings	15
ITEM 4.	Mine Safety Disclosures	15
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
ITEM 6.	Selected Financial Data	16
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	23
ITEM 8.	Financial Statements and Supplementary Data	24
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	40
ITEM 9A.	Controls and Procedures	41
ITEM 9B.	Other Information	41
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	42
ITEM 11.	Executive Compensation	45
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	48
ITEM 14.	Principal Accounting Fees and Services	48
PART IV

ITEM 15. Exhibits and Financial Statement Schedules 49

SIGNATURES

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those set forth under the heading "Risk Factors" and elsewhere in, or incorporated by reference into, this report. In some cases, you can identify forward looking statements by terms such as "may," "intend," "might," "will," "should," "could," "would," "expect," "believe," "anticipate," "estimate," "predict," "potential," or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. The forward-looking statements in this report are based upon management's current expectations and belief, which management believes are reasonable. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including, such factors, among others, as market acceptance and market demand for our products and services, pricing, the changing regulatory environment, the effect of our accounting policies, potential seasonality, industry trends, adequacy of our financial resources to execute our business plan, our ability to attract, retain and motivate key technical, marketing and management personnel, and other risks described from time to time in periodic and current reports we file with the United States Securities and Exchange Commission, or the "SEC." You should consider carefully the statements under "Item 1A. Risk Factors" and other sections of this report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

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PART I

ITEM 1. BUSINESS

The terms “ILTS,” “the Company,” “we,” “our” and “us” refer to International Lottery & Totalizator Systems, Inc. and its consolidated wholly-owned subsidiary, Unisyn Voting Solutions, Inc. (“Unisyn”), unless otherwise specified.

Organizational History

We are a leading supplier of computerized wagering systems for the lottery and pari-mutuel racing industries. In addition, in recent years, our company has developed certified end-to-end optical scan voting systems and a full-featured Election Management System that provides precinct tabulation, ballot review and audio voting capability.  

ILTS was founded in 1978 and completed an initial public offering in 1981. Our subsidiary, Unisyn, was founded in 2003. Our operations and corporate headquarters are located in Vista, California.

Business Overview

We design, develop and provide secure, innovative and dependable gaming and voting processing systems for public and private organizations throughout the world. We provide a complete range of customized and technologically innovative software, hardware, technical support and site management for our customers’ gaming or voting operations. We believe our responsiveness to customer requirements in these mission critical operational areas is efficient, technologically superior, dependable and continuous over time. 

Lottery and Pari-Mutuel Segment

We generate revenue by designing, manufacturing, licensing, managing, supporting, and servicing computerized wagering systems and terminals for the lottery and pari-mutuel racing industries worldwide.

Voting Segment

We generate revenue by developing, manufacturing, licensing and supporting voting systems for governmental and non-governmental election jurisdictions in the United States under the name of Unisyn Voting Solutions, Inc.

Products and Services

Wagering Systems

Our wagering systems include the following components:

·   A central computer installation that is comprised of computer hardware and a commercially available operating system used in conjunction with our proprietary DataTrak application software;

·   The Datamark and Intelimark families of point-of-sale terminals; and

·   The communication network to interface the terminals to the central computer installation.

System features include real-time, secure processing of data received from multiple locations, hardware redundancy and complete communications redundancy in order to provide the highest level of fault tolerant operation.

Our DataTrak gaming system controls the overall lottery operation. Although to date it has been sold only in conjunction with our terminals, DataTrak can also be sold as a stand-alone system that will interface to third-party terminals. Likewise, the terminals can be, and have been, sold separately to interface to a third-party lottery/tote central system.

The point-of-sale, proprietary components of our systems are the Datamark and Intelimark families of ticketing terminals. These terminals are compact, reliable, microprocessor-based units, which scan bet slips or interpret operator-input data in order to produce a ticket receipt to be retained by the customer.

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We sell these terminals separately or as part of a turnkey wagering system, or we modify a terminal's features or configurations and central system software to meet specific customer requirements.

Using commercially available hardware and software, we design the communication network to interface the DataTrak central system with the wagering terminals to best fit each customer’s specific telecommunications environment.

Our technology can also be modified for use in secure transaction-processing applications outside the gaming industry.

Wagering Application Software

The principal component of our wagering system is the suite of applications that make up our DataTrak central system. The central system controls the operation of the entire lottery installation, and it performs the following functions:

·   Maintains communication with each point-of-sale terminal;

·   Ensures complete end-to-end security;

·   Logs all activity and wagers in multiple (redundant) locations;

·   Populates a commercially available database in real time with high level security;

·   Identifies tickets using lottery game draw results;

·   Calculates pari-mutuel prize pool amounts that are used to determine the dividend of a given winning ticket;

·   Allows the use of other third party software products to analyze and compile management data; and

·   Provides mission critical fault tolerance.

Development of this software has been an evolutionary process. We continually strive to incorporate new and improved technologies as they become available in the marketplace. This allows us to take advantage of the latest technology trends to enhance existing features of our system, and also to provide new distribution channels and operational features so that our customers can reach new or expanding markets. Since our software architecture is non-proprietary, it can be interfaced with our customers' choice of third party reporting and analysis software tools. The DataTrak system employs a client-server architecture. This gives customers the advantage of configuring the system economically to meet current requirements, while maintaining the ability to expand or contract the system as their operation demands.

Datamark and Intelimark Terminals

We have supplied in excess of 50,000 terminal products to the wagering industry since our first unit was sold in 1980. We currently have two families of full feature terminals in production: the Datamark and the Intelimark, both of which are:

·   Based on PC architecture and utilize commercially available software operating systems;

·   Small, lightweight, and highly reliable; and

·   Programmed using standard software languages.

We have developed many models of Datamark terminals throughout our company’s history. One of the versions in the Datamark family which we currently offer is the XClaim terminal. Its optical mark reader and thermal printer require little or no adjustments or maintenance. It is economically priced and extremely easy to use with features that increase operator efficiency and reduce transaction time. The XClaim can be programmed to meet the specific operating requirements of each individual customer. A keyboard is provided for operator input and an LCD displays the wagering details.

The Intelimark family was introduced in 1999 and incorporates commercially available hardware and software from strategic partners. The Intelimark FLX terminal is a modular touch screen lottery terminal packaged to offer maximum flexibility for retailer convenience. All components that make up the complete terminal are freestanding modules that can be arranged to meet the unique physical requirements of each retailer location. Driven by the market demand for enhanced ticket reading capability, the Intelimark FLX is equipped with a high-speed contact image scanner that will accept up to A4 size slips and is capable of character recognition and signature capture. Its modular design, open architecture and PC-based technology provide a flexible platform that is intended to quickly and economically respond to the dynamic needs of both players and retailers.

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Additionally, ILTS offers customized terminal solutions based on specific customer requirements. This includes the procurement of components that meet customer functional specifications and packaging of these components into an ILTS terminal design.

Spare Parts

In addition to sales of terminals and central system software and hardware systems, we also realize ongoing revenue from the sale of spare parts for use in the repairs and maintenance of the terminal population.

Software and Technical Support Agreements

We offer software maintenance agreements which feature:

·   Telephone hotline, onsite and e-mail support;

·   Standard upgrades and patches; and

·   Primary technical support for third-party software products purchased through ILTS.

Additionally, we offer software modifications and enhancements to satisfy specific customer requirements.

Voting Systems

In recent years, Unisyn has devoted significant resources in developing certified end-to-end optical scan voting systems and a full-featured Election Management Software (“EMS”) that provides precinct tabulation, ballot review and audio voting capability. In addition to the Inkavote Plus Precinct Ballot Counter (“PBC”) system certified by the National Association of State Election Directors (“NASED”) 2002 Voting System Standards (“VSS”), our company received the 2005 Voluntary Voting System Guidelines (“VVSG”) certification from the Election Assistance Commission (“EAC”) for its OpenElect® digital optical scan election system - a digital scan voting system built with Java on a streamlined and hardened Linux platform. As part of a jurisdiction's procurement process, we provide the OpenElect® products’ source code for independent review.

Our OpenElect® voting systems consist of the following components:

·   OpenElect® Central Suite is a Linux-based suite of software applications including the Ballot Layout Manager, Election Manager, Election Server, Tabulator Client, Tabulator and Tabulator Reports. The applications work together to define and configure an election supporting traditional methods of vote tabulation and including ranked choice voting tabulation;

·   OpenElect® Voting Optical Scan is a comprehensive and secure paper-based digital optical scan voting system that both validates and tabulates ballots at each precinct or vote center, providing integrity, confidence and high levels of physical and software security;

·   OpenElect® Voting Interface is a multi-faceted and robust voting device which has features to accommodate voters with disabilities and facilitate precinct voting, early voting and vote center voting, along with other non-geographical use. This device meets or exceeds all requirements of the Help America Vote Act (“HAVA”); and

·   OpenElect® Voting Central Scan is a high-speed digital scan voting unit designed to tabulate election day, early vote, vote center, absentee, provisional and recounted ballots at a jurisdiction’s central operation center.

The OpenElect® voting systems offer the following features:

·   High level of security and vote encryption to ensure integrity and voter privacy;

·   Electronic and paper audit trails that offer added security and redundancy for recounts;

·   Reduce the cost of ballot printing while offering operational efficiencies;

·   Minimal training required for poll workers to set-up and operate; and

·   Minimal voter re-education required.

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Election Management Software

The EMS, consisting of the Ballot Data Generator and the Vote Tabulator software applications work together to perform the following functions:

·   Define and configure an election;

·   Program the InkaVote Plus PBCs and the OpenElect products;

·   Provide camera ready encrypted ballot pages in PDF format;

·   Compile and tabulate vote results; and

·   Generate required reports.

The EMS is intended to provide complete control of the election process from ballot layout to report generation. It utilizes streamlined menus and prompts to provide maximum flexibility and customization while guiding the user through each step in the process. The system supports numerous languages in both standard and audible ballots. The EMS creates the election specific database from information that can be imported manually and/or from an XML file. The system easily integrates with other systems in use by the customer.

Product Markets

Our revenue from the sale of lottery and totalizator systems is almost exclusively derived from contracts with international customers. We also derive revenue from selling our voting products and services directly to county election jurisdictions and distributors in the United States.

Revenue for software support and onsite technical support services is derived from providing the services to customers in the voting segment and related parties in the gaming segment.

Competitive Business Conditions

Lottery and Pari-Mutuel Segment

We compete primarily in the lottery and totalizator industries by providing high-quality wagering systems and terminals that are reliable, secure and provide high speed transaction processing. In addition, we believe that we offer our customers greater flexibility in design and custom options than our competitors do. The market for lottery system contracts is highly competitive. In general, our competitors have significantly greater resources than we do. Although our sales in the United States have been insignificant, we believe that our company has been a substantial factor in the international marketplace for lottery systems.

Our principal competitors in the market are as follows:

·   GTECH Corporation;

·   Scientific Games Corporation;

·   Intralot, S.A.; and

·   Morpho.

Voting Segment

The market for our OpenElect® voting systems is highly competitive and saturated. However, the early 2005 EAC certification has given us the advantage of securing various state certifications which our competitors have yet to achieve. We were the first manufacturer to receive the 2005 EAC certification for a precinct based digital based optical scan system. Our enhanced security system has the ability to be modified easily for additional features to the current system. This sets our products apart from the older and less flexible products of our competitors. Our competitors are more established and have solid user bases in the market. Although we are operating in a highly competitive environment, we believe we are well positioned to capture a fair share of the sales of optical scan voting systems.

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Our principal competitors in the market are as follows:

·   Election Systems & Software, Inc.;

·   Dominion Voting Systems Corporation; and

·   Hart InterCivic, Inc.

Manufacturing Processes

We produce terminals and voting systems, repair modules, and supply spare parts from our domestic facility located in Vista, California. During recent years, the design of certain high-production units has been streamlined. This cost saving measure allows us to easily outsource the assembly of these units to local manufacturers based on production volume, while maintaining control over the materials and quality. 

Our manufacturing processes were also inspected by the Election Assistance Commission (“EAC”) in November 2010 to verify compliance with the requirements of Section 8.5 of the EAC Test and Certification Manual. Unisyn passed all inspections and is currently recognized as a manufacturer of voting devices by the EAC.

Materials and Suppliers

For terminal and voting system components, including spare parts, we generally have multiple sources, but a limited number of items are available only from a single supplier. Accordingly, those items could from time to time, be in short supply or on allocation due to their limited availability. For the year ended April 30, 2013, five vendors accounted for approximately 73% of the Company’s lottery and voting product purchases (or 18%, 18%, 15%, 12%, and 10% individually). For the year ended April 30, 2012, two vendors accounted for approximately 37% of the Company’s lottery and voting product purchases (or 26% and 11% individually). 

Dependence upon a Few Customers

Our business to date has been dependent on major contracts from a specific pool of lottery operators and limited customer base in the voting segment. Failure to obtain new contracts from existing and new customers would have a materially adverse effect on our financial performance.

	April 30, 2013	April 30, 2012
Revenue:
From unrelated customers	One customer from the gaming segment accounted for 30% of total revenue and one customer from the voting segment accounted for 22% of total revenue.	One customer from the voting segment accounted for 32% of total revenue.
From related customers	Two customers from the gaming segment accounted for 38% of total revenue or 28% and 10% individually.	Two customers from the gaming segment accounted for 49% of total revenue or 32% and 17% individually.

Patents, Trademarks and Licenses

We have three U.S. patents issued on our products. Although our intellectual property rights are important to our business, we believe our technical expertise, trade secrets and the creative skills of our personnel are more important to our company’s success. We typically require customers, employees, licensees, subcontractors, strategic partners, and joint venture partners who have access to proprietary information concerning our products to sign nondisclosure agreements. We rely on such agreements, other security measures, and trade-secret law to protect our proprietary information.

International Lottery & Totalizator Systems, Inc.®, ILTS® and Unisyn Voting Solutions, Inc.® are registered trademarks of our company. We have other products that have been trademarked, such as DataTrak®, Intelimark® and OpenElect®, all mentioned herein.

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Regulations

The countries in which we market our products generally implement regulations to govern lottery or totalizator operations, and the appropriate governing body could restrict or ban operations in these countries. Any such action could have a material adverse effect on our company. Additionally, the purchases of voting systems by governments and municipalities are typically conducted through procurement regulations with which we must comply.

Foreign countries often impose restrictions on corporations seeking to do business within their borders, including foreign exchange controls, and in some jurisdictions, requirements for domestic manufacturing content. In addition, laws and legal procedures in these countries may differ from those generally existing in the United States. Conducting business in these countries may involve additional risks in protecting our business and assets, including proprietary information. Changes in foreign business restrictions or laws could have a significant impact on our operations.

Research and Development

We continue to examine new and emerging technologies based upon current industry developments with the intention to increase our customers’ market share, to stay competitive in our market and to explore new markets where our core competencies can be applied. For example, we have in the past invested resources to expand specific applications to run on the Linux operating system. These Linux based applications are targeted at products used in both wagering and voting markets.

We dedicate our efforts to applying cutting-edge technology and developing innovative and secure voting solutions.

We did not incur any research and development expenses (“R&D”) for the year ended April 30, 2013. For the year ended April 30, 2012, we incurred $31,000, which consisted primarily of labor costs for the development of a new product in the lottery segment. None of the R&D expenses were borne by our customers.

Environment Effects

There were no significant capital expenditures required to comply with laws relating to the protection of the environment.

Employees

As of April 30, 2013, we had 35 employees employed on a full-time equivalent basis. We have no employees that are members of labor unions. We believe our relationship with our employees is satisfactory.

Additional Information

As a public company, we file annual, quarterly and special reports and other information with the Securities and Exchange Commission (“SEC”). Our electronic filings with the SEC (including our Annual Reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports) are available, free of charge, on the SEC’s website at http://www.sec.gov. On the investor relations section of our corporate website, www.ilts.com, we also make available, free of charge, our Annual Reports on Form 10-K, as soon as reasonably practicable, after we electronically file them with the SEC. The contents of and the information on or accessible through our corporate website and our investor relations website is not a part of, and is not incorporated into, this report or any other report or document we file with or furnish to the SEC.

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ITEM 1A. RISK FACTORS

Our business faces risks and uncertainties, including but not limited to, those discussed below and elsewhere in this report. These factors represent risks and uncertainties that could have a material adverse effect on our business, results of operations and financial condition. Additional risks and uncertainties not presently known to us or that we do not presently consider significant may also impair our business or the trading price of our securities.

If we do not execute on our strategic initiatives, there could be a material adverse effect on our results of operations and financial condition.

The future success of our business will depend significantly on our ability to execute effectively and implement the strategic initiatives. These initiatives consist of executing our market strategy including designing products to meet market trends and ensuring that an appropriate infrastructure is in place to meet the needs of customers; continuing to reduce product costs; and further improving the efficiency of operations, including lowering operating costs and enabling higher value services.

Successful execution of these initiatives depends on a number of factors including:

·   The ability to attract and retain sufficient number of key technical employees and senior management personnel;

·   Retaining customers by providing the necessary levels of support and service our products require;

·   Our ability to develop and introduce new products or programs because of the inherent risks and uncertainties associated with product development, particularly in response to government regulations;

·   The identification and introduction of the proper mix or integration of products that will be embraced by the marketplace;

·   Our business may be subject to changes in laws, regulations and certification requirements with respect to our voting products;

·   Due to the political nature of our voting business, there is a risk that election jurisdictions may decertify our voting products that had previously been certified; and

·   The ability of our products and services to differentiate us from our competitors and for us to demonstrate that our products and services result in enhanced product quality, functionality and reduced costs.

Further, our success will depend upon our ability to maintain proper internal control and to enhance the performance of the existing procedures and processes to adequately support our operations, strategies and business objectives.

We are dependent on a few customers, which include customers which are related parties to the Company.

Our business to date has been dependent on major contracts from a few different customers. During the fiscal year ended April 30, 2013, only four customers accounted for 90% of our total revenue. Additionally, during the fiscal year ended April 30, 2013, two customers that accounted for 38% of our total revenue are related parties to our company. The loss of one or more of these customers or failure to replace completed contracts with new contracts from existing customers would have a material adverse effect on our business.

Should we fail to successfully manage our key vendors, our financial results could be burdened.

Our arrangements with key vendors may make our operations vulnerable if those third parties fail to satisfy their obligations to our company due to changes in their own operations, financial condition, or other matters outside of our control.

If we fail to achieve favorable pricing from our vendors, our profitability could be adversely impacted.

Our profitability is affected by our ability to achieve favorable pricing with our vendors. Our inability to establish a cost and product advantage, or determine alternative means to deliver value to our customers, may adversely affect our revenues, and profitability.

We could experience manufacturing interruptions, delays, or inefficiencies if we are unable to procure in a timely and reliable manner components and products from single-source or limited-source suppliers.

We maintain several single-source or limited-source supplier relationships, either because multiple sources are not available or because the relationships are advantageous to us due to performance, quality, support, delivery, capacity, or price considerations. If the supply of a critical single- or limited-source product or component is delayed or curtailed, we may not be able to ship the related product in desired quantities and in a timely manner. Even where multiple sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of revenues, which could harm our operating results.

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Significant supplier capacity constraints, supplier production disruptions, supplier quality issues or price increases could increase our operating costs and adversely impact the competitive positions of our products.

Our reliance on third-party suppliers for parts and components used in our products exposes us to volatility in the availability of these parts and components. A disruption in deliveries from our third-party suppliers, capacity constraints, production disruptions, price increases, or decreased availability of raw materials or commodities, could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs. Quality issues experienced by third-party providers can also adversely affect the quality and effectiveness of our products and services and result in liability and reputational harm.

If we are unable to develop and introduce new and enhanced products that achieve market acceptance in a timely and cost-effective manner, our operating results and competitive position may be harmed.

Our future success will depend on our ability, in a timely and cost-effective manner, to develop and introduce new products and enhancements to our existing products. We must also achieve market acceptance for these products and enhancements. If we do not successfully develop and achieve market acceptance for new and enhanced products, our ability to maintain or increase revenues will suffer. Even if new and enhanced products are introduced to the market, we may not be able to achieve market acceptance of them in a timely manner. The loss of a key customer, a reduction in sales to any key customer or our inability to attract new significant customers could materially and adversely affect our business, financial condition and results of operations.

Our operating results may fluctuate significantly from period to period.

In the highly competitive industries in which we operate, operating results may fluctuate significantly from period to period. Hence, comparative results between periods may not be indicative of trends in revenue. We anticipate that our cash flows from operations, expected contract payments and available cash will be sufficient to enable us to meet our liquidity needs through at least April 30, 2014. Although we are not aware of any particular trends, in the event that we are unable to secure new business, we may experience reduced liquidity or insufficient cash flows.

Interpretations and applications of policies regarding revenue recognition could cause us to defer recognition of revenue or recognize lower revenue and profits.

Revenue associated with the sale and licensing of our company’s voting system products and services will be recognized in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). As our transactions increase in complexity with the sale of multi-element products and services, negotiation of mutually acceptable terms and conditions can extend the sales cycle and, in certain situations, may require us to defer recognition of revenue on such licenses. We believe that we are in compliance with U.S. GAAP; however these future, more complex, multi-product, multi-year license transactions may require additional accounting analysis to account for them accurately could lead to unanticipated changes in our current revenue accounting practices and may contain terms affecting the timing of revenue recognition.

Insurance

We maintain third party insurance coverage against various liability risks and risks of property loss. While we believe these arrangements are an effective way to insure against liability and property damage risks, the potential liabilities associated with those risks or other events could exceed the coverage provided by such arrangements.

The requirements of complying with Section 404 of the Sarbanes-Oxley Act of 2002 may strain our resources and distract management.

Our company is not an accelerated filer as defined under the relevant SEC regulations; thus, we are only required to maintain and periodically certify that we have effective disclosure controls and procedures and internal control over financial reporting.

In order to continuously maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting and comply with Section 404 of the Sarbanes-Oxley Act, significant resources and management oversight may be required as we may need to devote additional time and personnel to legal, financial and accounting activities to ensure ongoing compliance. The costs associated therewith could be significant. In addition, the effort to prepare for these obligations and maintain effective internal controls may divert management’s attention from other business concerns, which could adversely affect our business, financial condition and results of operations.  

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The voting segment of our business is critically dependent on our ability to obtain federal and state certification for our voting system products.

The markets for our voting products and services are affected by changing technology and regulatory industry standards. Our ability to anticipate or respond to such changes and to develop and introduce new and enhanced products that meet all federal and state certifications on a timely basis will be a significant factor in our ability to expand, remain competitive and attract new customers.We can give no assurance that we will achieve the necessary technological advances or have the financial resources needed to introduce new products or services on a timely basis or that we will otherwise have the ability to compete effectively in the markets we serve.

Our cash and cash equivalents could be adversely affected if the financial institution in which we hold our cash and cash equivalents fail.

Our cash and cash equivalents consist of highly liquid investments and certificates of deposits with original maturities of three months or less at the time of purchase. However, our investments in money market funds are not insured. In addition, our cash balances in financial institutions may exceed the Federal Deposit Insurance Corporation (“FDIC”) limitation for coverage of $250,000. We also reduce our exposure to credit risk by maintaining all of our cash balances with highly rated financial institutions. While we strive to monitor our cash and cash equivalent balances regularly, these balances could be impacted if the financial institution in which we deposit fails or is subject to other adverse conditions in the financial or credit markets. To date we have experienced no loss or lack of access to our invested cash or cash equivalents; however, we can provide no assurance that access to our invested cash and cash equivalents will not be impacted by adverse conditions in the financial and credit markets.

We may not receive significant revenues from our research and development efforts for several years, if at all.

Developing new products is costly, and the investment in product development often involves a long payback cycle. We have and expect to continue investing in research and development and related product opportunities. Enhancing our products and pursuing new product developments require high levels of expenditures for research and development that could adversely affect our operating results if not offset by revenue increases. We believe that we must continue to dedicate resources to our research and development efforts to maintain our competitive position. However, we might not expect to receive significant revenues from these investments for several years, if at all.

Our business competes on the basis of the security and integrity of our systems and products.

We believe that our success depends, in part, on providing secure products and systems to our customers. Attempts to penetrate security measures may come from various combinations of customers, retailers, vendors, employees and others. There can be no assurance that our business will not be affected by a security breach or lapse, which could have a material adverse impact on our results of operations, business or prospects.

Problems with product quality or product performance may cause us to incur substantial warranty expenses and may damage our market reputation and prevent us from achieving increased sales and market share.

Consistent with customary practice in our industry, we warrant our products and/or services to be free from defects in material and workmanship under normal use and service. The possibility of future product failures could cause us to incur substantial expenses to repair or replace defective products. Furthermore, widespread product failures may damage our market reputation and reduce our market share and cause sales to decline.

Changes in domestic and foreign business restrictions or laws could have a significant impact on our operations.

The countries in which we market our products generally have regulations governing lottery or totalizator operations, and the appropriate governing body could restrict or ban operations in these countries. Any such action could have a material adverse effect on our company and our customers’ operations. Foreign countries often impose restrictions on corporations seeking to do business within their borders, including foreign exchange controls, and in some jurisdictions, requirements for domestic manufacturing content.  In addition, laws and legal procedures in these countries may differ from those generally existing in the United States. Conducting business in these countries may involve additional risks in protecting our business and assets, including proprietary information. Changes in foreign business restrictions or laws could have a significant impact on our operations.

13

Competitive pressures we face could harm our revenues and profits.

We compete for business opportunities against many domestic and foreign businesses. In many cases, our competition has greater financial resources which may affect the outcome of a bid, regardless of the products and/or services that we have the capability of providing. Also, in order to be competitive, we may price our products and services to a point where it could translate to lower revenues and profitability for our company.

Our business transactions may be subject to foreign currency fluctuation.

Our reporting currency is the U.S. dollar. Sales are denominated almost exclusively in U.S. dollars. Occasionally, sales have been effected in foreign currencies. Fluctuations in exchange rates from reporting period to reporting period between various foreign currencies and the U.S. dollar may have an impact on revenue and expense. Such effect may be material in any individual reporting period.

We could become subject to litigation regarding intellectual property rights, which could seriously harm our business.

Although we have not been the subject of any such actions, third parties may in the future assert against us infringement claims or claims that we have violated a patent or infringed upon a copyright, trademark or other proprietary right belonging to them. Third parties may in the future assert claims against our suppliers that such suppliers have violated a patent or infringed upon a copyright, trademark or other proprietary right belonging to them. If such infringement by our suppliers or us were found to exist, a party could seek an injunction preventing the use of their intellectual property or require us to take a license for the use of their intellectual property, either of which would have an adverse impact on our revenues.

Our voting systems might face adverse publicity including legal and political challenges which may negatively impact our operating results.

Due to the sensitivity of the general public to the reliability and security of voting systems, our company might be vulnerable to adverse publicity posed by certain advocacy groups challenging our products’ integrity and dependability. These actions may negatively affect our financial results and customer relations.

Volatility of stock price

Our common stock is currently quoted on the OTC Markets and has previously been quoted on the OTC Bulletin Board. Stocks quoted on the OTC Markets and OTC Bulletin Board generally have limited trading volume and exhibit a wide spread between the bid/ask quotation. Our stock price is affected by a number of factors, including quarterly variations in financial results, the competitive landscape, general economic and market conditions, and estimates and projections by the investment community.

The current global economic slowdown and credit crunch may adversely affect our business and financial condition in ways that we cannot predict.

The current global economic slowdown may have a negative effect on our business and financial condition. We cannot predict the effect that the economic slowdown will have on us as it also impacts our customers, vendors and business partners. We believe that the global credit crunch may negatively impact our potential and existing customers’ ability to obtain financing for lottery and voting projects which in turn may affect our ability to secure new contracts to generate revenue.   

Our strategic alliances may not result in the materialization of the anticipated benefits.

Part of our corporate strategy is to pursue growth through strategic alliances to gain access to new and tactically important geographies, and business opportunities and to capitalize on existing business relationships. We may not realize the anticipated benefits of these alliances that we may enter into, or may not realize them in the timeframe expected. These arrangements pose significant risks that could have a negative effect on our operations, including the potential failure to realize anticipated synergies, unanticipated costs and other unanticipated events or circumstances; and our possible inability to achieve the intended objectives of the arrangements.

14

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

In order to protect our proprietary technology, we rely in part on confidentiality agreements with our corporate partners, employees, contractors, and consultants. These agreements may not effectively prevent the disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Our common stock is subject to penny stock rules.

Our common stock is subject to Rule 15g-1 through 15g-9 under the Exchange Act, which imposes certain sales practice requirements on broker-dealers who sell our common stock to persons other than established customers and "accredited investors" (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000 (or $300,000 together with their spouse)). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to the sale. This rule adversely affects the ability of broker-dealers to sell our common stock and purchasers of our common stock to sell their shares of such common stock. Additionally, our common stock is subject to the SEC regulations for "penny stock." Penny stock includes any non-NASDAQ equity security that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule set forth by the SEC relating to the penny stock market must be delivered to the purchaser of such penny stock. This disclosure must include the amount of commissions payable to both the broker-dealer and the registered representative and current price quotations for the common stock. The regulations also require that monthly statements be sent to holders of penny stock which disclose recent price information for the penny stock and information of the limited market for penny stocks. These requirements adversely affect the market liquidity of our common stock.

We have never paid dividends on our common stock, and we do not anticipate paying any dividends in the foreseeable future.

We have not paid cash dividends on our common stock to date. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any future debt or credit facility, if any, may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be our stockholders’ sole source of gain for the foreseeable future.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. PROPERTIES

Our headquarter facilities in Vista, California consist of approximately 18,514 square feet of leased office, warehouse and manufacturing space. In April 2012, we executed an amendment agreement to extend the lease for the facility in Vista, California to November 2015.

ITEM 3. LEGAL PROCEEDINGS

The Company is currently not a party to any pending legal proceedings, and no such action by or, to the best of its knowledge, against the Company has been threatened as of the date of this report.

ITEM 4.	MINE SAFETY DISCLOSURES
Not applicable

15

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded under the symbol ITSI on the OTC Markets. As of May 14, 2013, there were 12,962,999 common shares outstanding and approximately 827 shareholders of record. As of May 14, 2013, Berjaya Lottery Management (H.K.) Ltd. (“BLM”) owned 71.3% of the total outstanding shares while ILTS’s management and directors owned approximately 1% of the outstanding shares.

Solely for the purpose of calculating the aggregate market value of the voting stock held by non-affiliates of ILTS, as set forth on the cover of this report, it has been assumed that all executive officers and directors of ILTS and BLM are affiliated persons. All of ILTS’s common shares, the only voting stock outstanding, beneficially owned by each such person (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) have been assumed to be held by that person for this calculation.  

The following table sets forth the quarterly high and low closing sale prices per share of our company’s common stock for fiscal years 2013 and 2012:

	Market Price of ILTS Common Stock
	High		Low
Fiscal Year Ended April 30, 2013
First Quarter	$	0.56	$	0.39
Second Quarter		0.47		0.29
Third Quarter		1.19		0.33
Fourth Quarter		1.23		0.95
Fiscal Year Ended April 30, 2012
First Quarter	$	0.34	$	0.18
Second Quarter		0.29		0.17
Third Quarter		0.70		0.20
Fourth Quarter		0.65		0.31

Dividends

Our company paid no dividends during the last two fiscal years. We currently intend to retain any earnings for use in the business and therefore do not anticipate paying any dividends in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

Presently our company does not maintain any stock option plan.

Sales of Unregistered Securities

Our company had no sales of unregistered securities during the past two fiscal years.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable

16

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

The discussion in this filing contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by forward-looking statements. These risks and uncertainties include dependence on business from foreign customers sometimes in politically unstable regions, political and governmental decisions as to the establishment of lotteries and other wagering industries in which our products are marketed, fluctuations in period-to-period operating results, the absence of significant contract backlog, and other factors described in section 1A. Risk Factors in this Form 10-K.

Critical Accounting Policies

Use of Estimates

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. Accordingly, we are required to make estimates, judgments and assumptions that we believe are reasonable. We base our estimates on historical experience, contract terms, observance of known trends in our company and the industry as a whole, and information available from other outside sources. Estimates affect the reported amounts and related disclosures. Actual results may differ from initial estimates. The areas most sensitive to estimation are revenue recognition, warranty reserves, inventory valuation, the allowance for doubtful accounts and the deferred tax valuation allowance.

Revenue Recognition

Our revenues are derived primarily from the sales of complete wagering systems, lottery terminals, the OpenElect® and PBC voting systems, other software and software support services. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the customer once it has been shipped and the title and risk of loss have been transferred. Service revenues are recognized as the services are rendered, and the related costs of services are recognized on a time and materials basis.

Revenue Recognition for Arrangements with Multiple Deliverables

For multi-element arrangements that include hardware products containing software essential to the hardware product’s functionality, undelivered software elements that relate to the hardware product’s essential software, and undelivered non-software services, we allocate revenue to all deliverables based on their relative selling prices. In such circumstances, we use a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) and (iii) best estimate of the selling price (“ESP”). VSOE generally exists only when we sell the deliverable separately and VSOE is the price actually charged for that deliverable. TPE is determined based on competitor prices for similar deliverables when sold separately. ESPs reflect our best estimates of what the selling prices of elements would be if they were sold regularly on a standalone basis.

For sales of hardware products, we provide various hardware components containing software essential to the hardware product’s functionality, and other components depending on the customers’ needs. We allocate revenue to these deliverables using the relative selling price method. Because we have not established VSOE or TPE for the hardware, with essential software, revenue is allocated based on ESPs. Determining ESPs requires management’s judgment. Revenue is recognized upon shipment of the hardware and the related essential software, provided the other conditions for revenue recognition have been met. We also provide software support and product support services on a standalone basis from the sales of the hardware. Amounts allocated to software support and product support services are based on VSOE using hourly or daily billing rates. Revenue is deferred until the services are performed. For annual software licenses, we use VSOE. Amounts allocated to annual software licenses are deferred and recognized on a straight-line basis over the service period, which is typically one year.

17

We consider multiple factors depending on the unique facts and circumstances related to each deliverable when determining ESPs for deliverables without VSOE or TPE. Key factors considered by the management in developing the ESPs for the hardware include the costs of manufacture and what a customer would reasonably pay based on the features being offered, trends in the market place, size of the territory, and competitive prices. If the facts and circumstances underlying the factors change, including the estimated or actual costs incurred to provide the hardware with the essential software, or should future facts and circumstances lead the management to consider additional factors, our ESP for the hardware with essential software related to future sales could change.

Revenue Recognition for Percentage-of-Completion Method

For our complete wagering and lottery systems, we recognize revenue by using the percentage-of-completion method when the contracts for complete systems fulfill the following criteria:

         1.  Contract performance extends over long periods of time;

         2. The software portion involves significant production, modification or customization;

         3. Reasonably dependable estimates can be made on the progress towards completion, contract revenues and contract costs; and

         4. Each element is essential to the functionality of the other elements of the contracts.

Under the percentage-of-completion method, sales and estimated gross profits are recognized as work progresses. Progress toward completion is measured by the ratio of costs incurred to total estimated costs. Revenue and gross profit may be adjusted prospectively for revisions in estimated total contract costs. If the current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is recorded in the period in which it becomes evident. The total estimated loss includes all costs allocable to the specific contract.

In addition to the software portion of a complete system, we develop software for our customers in accordance with the specifications stipulated in a software supply contract. Generally, these contracts are related to additional features or modules to be added to the application software that we have previously developed for our customers. Each software contract is reviewed individually to determine the appropriate basis of recognizing revenue.

Deferred Revenues and Deferred Cost of Revenues

Deferred revenues of approximately $5.4 million and $687,000 as of April 30, 2013 and 2012, respectively, represent prepayments for products and services related to lottery terminals, use of the OpenElect® and PBC voting systems and other software and technical support services. Deferred cost of revenues of approximately $132,000 and $6,000 as of April 30, 2013 and 2012, respectively, consist of the direct costs associated with lottery terminals, software support and manufacture of voting systems. We will recognize the revenues and related cost of revenues upon fulfillment of the prescribed criteria for revenue recognition.

Allowance for Doubtful Accounts

The estimate for the allowance for doubtful accounts is based primarily upon our company’s historical bad debt experience with individual customers and any known specific issues or disputes that exist as of the balance sheet date.

18

Warranty Reserves

Estimated warranty costs are accrued as revenues are recognized. Warranty reserves are based on historical trends and are adjusted periodically to reflect actual experience. Customers do not have a right to return, except for defective products.The most recent inventory cost is used to determine the value of potential warranty costs. Estimated reserves for warranty obligations are accrued as follows:

1.   Contracts - Contract warranties are specific to the individual contracts. Estimated reserves for warranty obligations are accrued as revenue is recognized. Hardware and software components may be warranted separately:

a.   Hardware – The warranty phase for terminals or terminal kits commences upon shipment and can extend from six months to 12 months depending on the specific contract terms.

b.   Software – The warranty phase typically represents a six to twelve-month period of time after delivery, as defined by the specific contract terms.  

2.   Spares – Terminal replacement parts are warranted to be free from defects for 90 days from the date of shipment. Based on historical experience, warranty costs for spares have been immaterial.

3.   Other – Specific provisions have been made to cover a small number of particular replacement parts for specific customers.

Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts and Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts

Billings on uncompleted long-term contracts may be greater than or less than incurred costs and estimated earnings. Accordingly, these differences are recorded as an asset or liability on the balance sheet. As our revenue recognized on these long-term contracts includes management’s estimates of total anticipated costs, the amounts in costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts also include these estimates.

Inventory Valuation

We periodically review the inventory quantities on hand and record a provision for excess and obsolete inventories based on the following factors:

·   Terminal models still currently in the field;

·   The average life of the models;

·   The requirement for replacement parts on older models; and

·   The future sales projections.

Valuation of Deferred Tax Assets

We regularly evaluate our ability to recover the reported amount of our net deferred tax assets. We consider several factors, including our estimate of the likelihood that we will generate sufficient taxable income in future years in which temporary differences will reverse. 

19

Results of Operations

Revenue Analysis

	Years Ended
(Amounts in thousands)	April 30,
Revenues	2013		2012		Change
Products:
Contracts	$	8,290	$	9,313	$	(1,023	)
Spares		543		1,011		(468	)
Licensing		483		412		71
Total Products		9,316		10,736		(1,420	)
Services:
Software Support		776		787		(11	)
Product Servicing and Support		479		561		(82	)
Total Services		1,255		1,348		(93)
	$	10,571	$	12,084	$	(1,513	)

Significant fluctuations in year-to-year revenue are expected in both gaming and voting industries. Individual contracts are generally of considerable value, and the timing of contracts or sales of spare parts does not occur in a predictable trend. Contracts from the same customer may not recur or generally do not recur in the short-term. Accordingly, comparative results between periods may not be indicative of trends in contract revenue.

The current domestic and global economic slowdown and tightening of the credit markets may adversely affect our business and financial condition in ways that we cannot reasonably predict. For the gaming segment, due to the tightening of the credit markets, our potential and existing customers may not be able to secure financing for lottery projects which may effectively impact our revenue potential. For the voting segment, various government entities and jurisdictions have experienced severe budget constraints which could compel them to delay or cancel their purchasing decisions, and hence, impact our ability to generate revenue.

Contract revenue for the year ended April 30, 2013 was approximately $8.3 million, compared to $9.3 million for fiscal 2012. The decrease is primarily due to lower turnkey lottery system sales and decreased contract activities in the voting segment, compared to those in fiscal 2012. The decrease is partially offset by the increase in hardware component sales related to the totalizator industry and a lottery system contract.

Spares revenue for the year ended April 30, 2013 was $543,000, compared to $1 million for fiscal 2012, reflecting lower customer demand for spare parts in fiscal 2013. We derived spares revenue from various customers for shipments of spare orders during the years ended April 30, 2013 and 2012. Customer demand for spare parts fluctuates from period to period and may not be indicative of trends in spares revenue.

Licensing revenue for the year ended April 30, 2013 was $483,000, compared to $412,000 for fiscal 2012. We derived licensing revenue from executed voting and lottery contracts. Higher licensing revenue was primarily due to additional executed licensing agreements related to the voting segment.

Software support revenue for the year ended April 30, 2013 was $776,000, compared to $787,000 for fiscal 2012. Software support revenue remained relatively flat.

Product servicing and support revenue decreased to $479,000 in 2013 from $561,000 in 2012. The decrease was primarily due to lower demand for support services from customers in the gaming segment, partially offset by slightly higher demand for support services in the voting segment.

Related party revenue of approximately $4.2 million accounted for 40% of total revenue in the year ended April 30, 2013, compared to $6.1 million or 51% of total revenue in fiscal 2012.  

20

Cost of Sales and Gross Profit Analysis

The following table summarizes the cost of sales and gross profit margins as a percentage of total revenues for each of the periods shown:

	Years Ended April 30,
(Amounts in thousands)	2013				2012
Revenues:
Products	$	9,316	88	%	$	10,736	89	%
Services		1,255	12	%		1,348	11	%
Total revenues	$	10,571	100	%	$	12,084	100	%
Cost of sales:
Products	$	6,282	59	%	$	7,792	65	%
Services		413	4	%		511	4	%
Total costs of sales	$	6,695	63	%	$	8,303	69	%
Gross profit:
Products	$	3,034	29	%	$	2,944	24	%
Services		842	8	%		837	7	%
Total gross profit	$	3,876	37	%	$	3,781	31	%

In general, individual contracts are significant in value and are awarded in a highly competitive bidding process. Gross profit margin varies from one contract to another, depending on the size of the contract and the competitiveness of market conditions. Accordingly, comparative results between periods may not be indicative of trends in gross profit margin.

Overall gross profit margin was 37% for fiscal 2013, compared to 31% for fiscal 2012. Higher gross profit margin was primarily due to lower production overhead costs resulting from the allocation of labor resources to contract activities. In addition, an impairment charge of approximately $334,000 associated with kit inventory reflected in cost of sales for fiscal 2012 attributed to the variance in gross profit margin.

Other Operating Expenses Analysis

	Years Ended April 30,
	2013					2012
(Amounts in thousands)			% of Revenue					% of Revenue
Research and Development	$	-		-	%	$	31		-	%
Selling, General and Administrative		2,325		22	%		2,498		21	%
Other Operating Expenses	$	2,325		22	%	$	2,529		21	%

Research and Development Expenses

We did not incur any research and development ("R&D") expenses for the fiscal 2013. For the year ended April 30, 2012, R&D expense was approximately $31,000. R&D expense consisted primarily of labor costs for the development of a new product in the gaming segment. While we continue to enhance our products, we anticipate R&D expenses will be minimal in the coming fiscal year as we dedicate our efforts to the marketing and sale of new voting systems.

Selling, General and Administrative

Selling, general and administrative ("SG&A") expenses for the year ended April 30, 2013 decreased by $173,000 compared to those of prior fiscal 2012, reflecting lower expenses associated with marketing and proposal efforts. We anticipate SG&A expenses will increase moderately in fiscal 2014 as we continue to increase our sales and marketing efforts.

21

Income Tax Benefit

In fiscal 2013, we recorded an income tax benefit of approximately $1.6 million related to a tax benefit for the reduction in the valuation allowance. We reduced the valuation allowance after determining that a portion of the deferred tax assets is more likely than not to be realizable due to expected future income.

Liquidity and Capital Resources

Liquidity

Our net working capital at April 30, 2013 was approximately $7.8 million.

Contract backlog at April 30, 2013 was approximately $18.3 million. Of this amount, approximately $11 million was associated with a gaming contract executed with a related customer. The remaining contract backlog amount of approximately $7.3 million was related to gaming and voting contracts with unrelated customers. As of April 30, 2013, approximately $5.2 million of the contract backlog has been paid by customers.

Additional sources of cash through April 2014 are expected to be derived from spares revenue, software support and election support service revenues. Uses of cash are expected to be for normal operating expenses and costs associated with contract execution.

While we anticipate that we will be successful in obtaining additional product or service contracts to enable us to continue normal operations through April 30, 2014, there can be no assurance we will be able to acquire new contracts.

In the highly competitive industry in which we operate, operating results may fluctuate significantly from period to period. We anticipate our cash flows from operations, expected contract payments and available cash will be sufficient to enable us to meet our liquidity needs through at least April 30, 2014. Although we are not aware of any particular trends, in the event that we are unable to secure new business, we may experience reduced liquidity or insufficient cash flows.

The following table summarizes our cash flow activities:
	Years Ended
	April 30, 2013			April 30, 2012			Increase (Decrease)
(Amounts in thousands)
Cash flow comparative:
Operating activities	$	5,612		$	(1,156	)	$	6,768
Investing activities		(1,136	)		58			(1,194	)
Net increase (decrease) in cash and cash equivalents	$	4,476		$	(1,098	)	$	5,574

Cash Flow Analysis

Significant fluctuations in cash flows from operating, investing and financing activities are expected in the gaming and voting industries because factors such as working capital needs, value of contracts, and timing of contracts and payments do not occur in a predictable trend. Accordingly, comparative results between periods are not indicative of trends in cash flow activities.

Operating Activities

Net cash provided by operating activities was approximately $5.6 million in fiscal 2013, compared to net cash used in operating activities of approximately $1.1 million in fiscal 2012. The primary factors contributing to the change in the reported cash flow amounts related to increased deferred revenues, increased accounts payable for inventory-related purchases, and completion of contract deliverables. These were partially offset by increased accounts receivable due to the timing of contract deliveries and the decrease in inventories.

22

Investing and Financing Activities

Net cash used in investing activities was approximately $1.1 million in fiscal 2013, compared to net cash provided by investing activities of $58,000 in 2012. Net cash used in investing activities for the year ended April 30, 2013 resulted from purchases of certificates of deposit, partially offset by the redemption of a matured certificate of deposit.

Capital expenditures amounted to $141,000 in fiscal 2013, compared to $191,000 in fiscal 2012. Expenditures in fiscal 2013 were primarily related to voting and computer equipment. Capital expenditures in fiscal 2012 were related to computer and manufacturing equipment.

There were no financing activities for the years ended April 30, 2013 and 2012.

Capital Resources

As of April 30, 2013, we did not have outstanding credit facilities.

Foreign Currency Fluctuation

Our reporting currency is the U.S. dollar. Sales are denominated almost exclusively in U.S. dollars. Occasionally, sales have been effected in foreign currencies. Fluctuations in exchange rates from reporting period to reporting period between various foreign currencies and the U.S. dollar may have an impact on our revenue and expense. Such effect may be material in any individual reporting period. No material foreign currency transactions occurred during the years ended April 30, 2013 and 2012.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our balance sheet, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Recent Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") had issued certain other accounting pronouncements as of April 30, 2013 that will become effective in subsequent periods; however, we do not believe any of those pronouncements are relevant to our business or would have significantly affected our financial accounting measurements or disclosures had they been in effect during fiscal 2013.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

23

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Form 10-K
	(Page)
Report of Independent Registered Public Accounting Firm		25
Consolidated Financial Statements:
Balance Sheets as of April 30, 2013 and 2012		26
Statements of Operations for the years ended April 30, 2013 and 2012		27
Statements of Shareholders’ Equity for the years ended April 30, 2013 and 2012		28
Statements of Cash Flows for the years ended April 30, 2013 and 2012		29
Notes to Consolidated Financial Statements		30

24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

International Lottery & Totalizator Systems, Inc.

We have audited the accompanying consolidated balance sheets of International Lottery & Totalizator Systems, Inc. (a 71.3%-owned subsidiary of Berjaya Lottery Management (H.K.) Ltd.) and Subsidiary as of April 30, 2013 and 2012, and the related consolidated statements of operations, shareholders’ equity and cash flows for the years then ended. International Lottery & Totalizator Systems, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of International Lottery & Totalizator Systems, Inc. and Subsidiary as of April 30, 2013 and 2012, and their results of operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ CohnReznick LLP

San Diego, California

July 9, 2013

25

INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
	April 30, 2013			April 30, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	7,259		$	2,783
Certificates of deposit		1,245			250
Accounts receivable, net of allowance for doubtful accounts of $75		2,054			789
Costs and estimated earnings in excess of billings on uncompleted contracts		-			726
Deferred cost of revenue		132			6
Inventories		3,665			2,659
Deferred income taxes		1,555			-
Other current assets		298			238
Total current assets		16,208			7,451
Equipment, furniture and fixtures, net		573			482
Other noncurrent assets		53			49
Total assets	$	16,834		$	7,982
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	2,180		$	1,070
Accrued payroll and related taxes		384			388
Warranty reserves		139			169
Payable to Parent		202			252
Other current liabilities		38			63
Deferred revenues		5,451			687
Total current liabilities		8,394			2,629
Long-term liabilities		-			12
Total liabilities		8,394			2,641
Commitments and contingencies
Shareholders’ equity:
Preferred shares, no par value; 20,000 shares authorized; no shares issued or outstanding		-			-
Common shares, no par value; 50,000 shares authorized; 12,963 shares issued and outstanding		56,370			56,370
Accumulated deficit		(47,930	)		(51,029	)
Total shareholders' equity		8,440			5,341
Total liabilities and shareholders' equity	$	16,834		$	7,982

The accompanying notes are an integral part of these consolidated financial statements.

26

INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
	Years Ended
	April 30,
	2013			2012
Revenues:
Sales of products	$	9,316		$	10,736
Services		1,255			1,348
		10,571			12,084
Cost of sales:
Cost of product sales		6,282			7,792
Cost of services		413			511
		6,695			8,303
Gross profit		3,876			3,781
Research and development expenses		-			31
Selling, general and administrative expenses		2,325			2,498
Income from operations		1,551			1,252
Other income:
Interest and dividend income		1			2
Other		-			4
Income before (benefit) provision for income taxes		1,552			1,258
(Benefit) provision for income taxes		(1,547	)		25
Net income	$	3,099		$	1,233
Net income per share:
Basic	$	0.24		$	0.10
Weighted average shares used in computation of net income per share:
Basic		12,963			12,963

The accompanying notes are an integral part of these consolidated financial statements.

27

INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands)
	Common Stock
	Shares		Amount			Accumulated Deficit				Total
Balance at April 30, 2011		12,963		$	56,370		$	(52,262	)	$	4,108
Net income								1,233			1,233
Balance at April 30, 2012		12,963			56,370			(51,029	)		5,341
Net income								3,099			3,099
Balance at April 30, 2013		12,963		$	56,370		$	(47,930	)	$	8,440

The accompanying notes are an integral part of these consolidated financial statements.

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INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
	Years Ended
	April 30,
	2013			2012
Cash flows from operating activities:
Net income	$	3,099		$	1,233
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization		181			141
Inventory obsolescence reserve		-			334
Deferred income taxes		(1,555	)		-
Warranty reserve expense		153			159
Impairment charge for patent write-off		-			16
Changes in operating assets and liabilities:
Accounts receivable		(1,265	)		(586	)
Costs and estimated earnings in excess of billings on uncompleted contracts		726			(694	)
Deferred cost of revenues		(126	)		107
Inventories		(1,137	)		(2,557	)
Other current assets		(64	)		(106	)
Accounts payable		1,110			918
Billings in excess of costs and estimated earnings on uncompleted contracts		-			(231	)
Accrued payroll and related taxes		(4	)		62
Warranty reserves		(183	)		(21	)
Payable to Parent		(50	)		1
Other liabilities		(37	)		(4	)
Deferred revenues		4,764			72
Net cash provided by (used in) operating activities		5,612			(1,156	)
Cash flows from investing activities:
Purchases of certificates of deposit		(1,245	)		(500	)
Proceeds from redemption of certificates of deposit		250			749
Additions to equipment, furniture and fixtures		(141	)		(191	)
Net cash (used in) provided by investing activities		(1,136	)		58
Net increase (decrease) in cash and cash equivalents		4,476			(1,098	)
Cash and cash equivalents at beginning of year		2,783			3,881
Cash and cash equivalents at end of year	$	7,259		$	2,783
Supplemental cash flow information:
Cash paid for income taxes	$	48		$	-
Non-cash inventory activities:
Inventory transferred to equipment	$	131		$	-

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the Business

International Lottery & Totalizator Systems, Inc. (“ILTS” or the “Company,” together with its subsidiary) designs, manufactures, sells, manages, supports and services computerized wagering systems and terminals for the global lottery and pari-mutuel racing industries. The wagering system features include real-time, secure processing of data received from multiple locations, hardware redundancy and complete communications redundancy in order to provide the highest level of fault tolerant operation. In addition, although the Company is not presently doing so, ILTS has demonstrated capability to provide full facilities management services to customer organizations authorized to conduct lotteries. The Company is largely dependent upon significant contracts for its revenue, which typically include a deposit upon contract signing and up to six months lead time before delivery of hardware begins.

The Company, through its wholly-owned subsidiary Unisyn Voting Solutions, Inc. (“Unisyn”), has devoted significant resources to developing federally certified end-to-end optical scan voting systems and a full-featured Election Management Software that provides precinct tabulation, ballot review and audio voting capability. In addition to the InkaVote Plus Precinct Ballot Counter (“PBC”) system certified to the National Association of State Election Directors (“NASED”) 2002 Voting System Standards (“VSS”), the Company received the 2005 Voluntary Voting System Guidelines (“VVSG”) certification from the United States Election Assistance Commission (“EAC”) for its OpenElect® digital optical scan election system – a digital scan voting system built with Java on a streamlined and hardened Linux platform. As part of a jurisdiction’s procurement process, the Company will provide the OpenElect® products’ source code for independent review.

These efforts leverage the Company’s extensive experience to develop highly secure, mission-critical solutions that meet the NASED 2002 VSS and the EAC 2005 VVSG standards. In addition, the Company’s voting systems offer the following features:

·   High level of security and vote encryption to ensure integrity and voter privacy;

·   Electronic and paper audit trails that offer added security and redundancy for recounts;

·   Reduce the cost of ballot printing while offering operational efficiencies;

·   Minimal training required for poll workers to set-up and operate; and

·   Minimal voter re-education required.

Berjaya Lottery Management (H.K.) Ltd. (“BLM” or the “Parent”) owns 71.3% of the outstanding voting stock of ILTS.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of ILTS and its wholly-owned subsidiary, Unisyn Voting Solutions, Inc. All significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. Actual results could differ from those estimates. Estimates may affect the reported amounts of assets and liabilities and revenues and expenses, and the disclosure of contingent assets and liabilities.

Revenue Recognition

The Company derives its revenues primarily from the sales of complete wagering systems, lottery terminals, the OpenElect® and PBC voting systems, other software and software support services. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the customer once it has been shipped and the title and risk of loss have been transferred. Service revenues are recognized as the services are rendered, and the related costs of services are recognized on a time and materials basis.

30

Revenue Recognition for Arrangements with Multiple Deliverables

For multi-element arrangements that include hardware products containing software essential to the hardware product’s functionality, undelivered software elements that relate to the hardware product’s essential software, and undelivered non-software services, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) and (iii) best estimate of the selling price (“ESP”). VSOE generally exists only when the Company sells the deliverable separately and VSOE is the price actually charged for that deliverable. TPE is determined based on competitor prices for similar deliverables when sold separately. ESPs reflect the Company’s best estimates of what the selling prices of elements would be if they were sold regularly on a standalone basis.

For sales of hardware products, the Company provides various hardware components containing software essential to the hardware product’s functionality, and other components depending on the customers’ needs. The Company allocates revenue to these deliverables using the relative selling price method. Because the Company has not established VSOE or TPE for the hardware, with essential software, revenue is allocated based on ESPs. Revenue is recognized upon shipment of the hardware and the related essential software, provided the other conditions for revenue recognition have been met. The Company also provides software support and product support services on a standalone basis from the sales of the hardware. Amounts allocated to software support and product support services are based on VSOE using hourly or daily billing rates. Revenue is deferred until the services are performed. For annual software licenses, the Company uses VSOE. Amounts allocated to annual software licenses are deferred and recognized on a straight-line basis over the service period, which is typically one year.

The Company considers multiple factors depending on the unique facts and circumstances related to each deliverable when determining ESPs for deliverables without VSOE or TPE. Key factors considered by the Company in developing the ESPs for the hardware include the costs of manufacture and what a customer would reasonably pay based on the features being offered, trends in the market place, size of the territory, and competitive prices. If the facts and circumstances underlying the factors change, including the estimated or actual costs incurred to provide the hardware with the essential software, or should future facts and circumstances lead the management to consider additional factors, the Company’s ESP for the hardware with essential software related to future sales could change.

Revenue Recognition for Percentage-of-Completion Method

For the complete wagering and lottery systems, the Company recognizes revenue by using the percentage-of-completion method when the contracts for complete systems fulfill the following criteria:

1. Contract performance extends over long periods of time;

2. The software portion involves significant production, modification or customization;

3. Reasonably dependable estimates can be made on the progress towards completion, contract revenues and contract costs; and

4. Each element is essential to the functionality of the other elements of the contracts.

Under the percentage-of-completion method, sales and estimated gross profits are recognized as work progresses. Progress toward completion is measured by the ratio of costs incurred to total estimated costs. Revenue and gross profit may be adjusted prospectively for revisions in the estimated total contract costs. If the current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is recorded in the period in which it becomes evident. The total estimated loss includes all costs allocable to the specific contract.

In addition to the software portion of a complete system, the Company develops software for its customers in accordance with the specifications stipulated in a software supply contract. Generally, these contracts are related to additional features or modules to be added to the application software that the Company has previously developed for its customers. Each software contract is reviewed individually to determine the appropriate basis of recognizing revenue.

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Deferred Revenues and Deferred Cost of Revenues

Deferred revenues of approximately $5.4 million and $687,000 as of April 30, 2013 and 2012, respectively, represent prepayments for products and services related to lottery terminals, use of the OpenElect® and PBC voting systems and other software and technical support services. Deferred cost of revenues of approximately $132,000 and $6,000 as of April 30, 2013 and 2012, respectively, consist of direct costs associated with lottery terminals, software support and manufacture of voting systems. The Company will recognize revenues and related cost of revenues upon fulfillment of the prescribed criteria for revenue recognition.

Allowance for Doubtful Accounts

The Company determines its allowance for doubtful accounts by considering a number of factors:

  1. Length of time trade accounts receivable are past due;

  2. The Company’s previous loss history;

  3. The customer’s current ability to pay its obligations;

  4. Known specific issues or disputes which exist as of the balance sheet date; and

  5. The condition of the general economy and the industry as a whole.

Based on its evaluation, the Company determined that no additional allowance was required as of April 30, 2013. The Company maintained an allowance for doubtful accounts of $75,000 as of April 30, 2013 and 2012.  

Warranty Reserves

Estimated warranty costs are accrued as revenues are recognized. Included in the warranty cost accruals are costs for basic warranties on products sold. A summary of product warranty reserve activity for the fiscal years ended April 30, 2013 and 2012 is as follows:

(Amounts in thousands)

Balance at April 30, 2011	$	31
Additional reserves		159
Charges incurred		(21	)
Balance at April 30, 2012		169
Additional reserves		153
Charges incurred		(183	)
Balance at April 30, 2013	$	139

Warranty reserves are based on historical trends and are adjusted periodically to reflect actual experience. Customers do not have a right to return, except for defective products.The most recent inventory cost is used to determine the value of potential warranty costs. Estimated reserves for warranty obligations are accrued as follows:

1.   Contracts - Contract warranties are specific to the individual contracts. Estimated reserves for warranty obligations are accrued as revenue is recognized. Hardware and software components may be warranted separately:

a.   Hardware – The warranty phase for terminals or terminal kits commences upon shipment and can extend from six months to twelve months depending on the specific contract terms.

b.   Software – The warranty phase typically represents a six to twelve-month period of time after delivery, as defined by the specific contract terms.  

2.   Spares – Terminal replacement parts are warranted to be free from defects for 90 days from the date of shipment. Based on historical experience, warranty costs for spares have been immaterial.

3.   Other – Specific provisions have been made to cover a small number of particular replacement parts for specific customers.

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Income Taxes and Valuation Allowance

The Company recognizes tax benefits associated with uncertain tax positions when, in management’s assessment, it is more likely than not that the positions will be sustained upon examination by a taxing authority. For tax positions that meet the more likely than not recognition threshold, the Company measures the tax benefits as the largest amount that the Company evaluates to have a greater than 50% likelihood of being realized upon ultimate settlement. The Company reviewed its tax positions and determined that an adjustment to the tax provision is not considered necessary nor is a reserve for income taxes required.

The Company accounts for income taxes pursuant to the asset and liability method. This requires deferred income tax assets and liabilities to be computed annually for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the temporary differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. 

Foreign Currency Fluctuation

The Company’s reporting currency is the U.S. dollar. Sales are denominated almost exclusively in U.S. dollars. Occasionally, sales have been effected in foreign currencies. Fluctuations in exchange rates from reporting period to reporting period between various foreign currencies and the U.S. dollar may have an impact on revenue and expense. Such effect may be material in any individual reporting period. No material foreign currency transactions occurred during the years ended April 30, 2013 and 2012.

Inventories

Inventories are stated at the lower of cost or the current estimated market values. Cost is determined using the first-in, first-out method. Inventories consisted of the following:  

	April 30,		April 30,
	2013		2012
(Amounts in thousands)
Raw materials and subassemblies	$	2,872	$	1,775
Work-in-process		33		63
Finished goods		760		821
	$	3,665	$	2,659

Equipment, Furniture and Fixtures

Equipment, furniture and fixtures are carried at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets which approximate three to seven years. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the lease term. The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, or when the net book value of such assets exceeds the future undiscounted cash flow attributed to such assets. At April 30, 2013 and 2012, and during the years ended April 30, 2013 and 2012, no indicators of impairment were identified.

Net equipment, furniture and fixtures consisted of the following:

	April 30,			April 30,
	2013			2012
(Amounts in thousands)
Plant and machinery	$	757		$	724
Computer equipment		1,662			1,482
Leasehold improvement		201			190
Furniture, fixtures and equipment		96			91
Construction in progress		25			-
		2,741			2,487
Accumulated depreciation and amortization		(2,168	)		(2,005	)
Net equipment, furniture and fixtures	$	573		$	482

33

Net Income per Share

Basic net income per share was based on the weighted average number of shares outstanding during April 30, 2013 and 2012.  

There were no outstanding options or other dilutive securities at April 30, 2013 and 2012.  

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the purchase date to be cash equivalents.

2. BUSINESS SEGMENTS, GEOGRAPHIC REVENUES, MAJOR CUSTOMERS AND MAJOR VENDORS

Segment Information

The Company reports segment information based on the “management” approach. Under this approach, operating segments are identified in substantially the same manner as they are reported internally and used by the Company’s chief operating decision maker for purposes of evaluating performance and allocating resources.

The Company divides its operations into two operating segments: the gaming business and the voting business. The gaming segment designs and develops computerized wagering systems and terminals for the lottery and pari-mutuel racing industries worldwide. Presently the voting segment generates revenues from the sales of the voting systems and hardware, software licensing, product servicing and software support services.

The Company’s segment information is presented below (in thousands):

	As of and for the Year Ended April 30, 2013
	Gaming Business			Voting Business			Totals
Total revenues		$	7,396		$	3,175		$	10,571
Income from operations			1,502			49			1,551
Depreciation and amortization			112			69			181
Segment assets			14,886			1,948			16,834
	As of and for the Year Ended April 30, 2012
	Gaming Business			Voting Business			Totals
Total revenues		$	7,052		$	5,032		$	12,084
Income from operations			973			279			1,252
Depreciation and amortization			89			52			141
Segment assets			5,160			2,822			7,982

34

Geographic Revenues

Revenues by geographic area are as follows (in thousands):

	Years Ended
	April 30,
Customer Location	2013		2012
Asia	$	4,197	$	6,117
North America		3,178		5,320
Europe		3,196		647
	$	10,571	$	12,084

As of April 30, 2013 and 2012, all of the Company's assets were held in the United States. During the fiscal years ended April 30, 2013 and 2012, a significant portion of the Company’s revenues was derived from exports from the United States to foreign countries.  

Major Customers

	April 30, 2013	April 30, 2012
Revenue:
From unrelated customers	One customer from the gaming segment accounted for 30% of total revenue and one customer from the voting segment accounted for 22% of total revenue.	One customer from the voting segment accounted for 32% of total revenue.
From related customers	Two customers from the gaming segment accounted for 38% of total revenue or 28% and 10% individually.	Two customers from the gaming segment accounted for 49% of total revenue or 32% and 17% individually.

Major Vendors

For the year ended April 30, 2013, five vendors accounted for approximately 73%, or 18%, 18%, 15%, 12%, and 10% individually, of the Company’s product purchases. For the year ended April 30, 2012, two vendors accounted for approximately 37%, or 26% and 11% individually, of the Company’s purchases.  

3. CREDIT RISK

Of the cash and cash equivalents amount of approximately $7.3 million at April 30, 2013, approximately $1.5 million represents highly liquid money market funds which are not Federal Deposit Insurance Corporation (“FDIC”) insured. As of April 30, 2013, such other cash balances exceeded the FDIC limitation for coverage of $250,000 by approximately $5.6 million. The Company maintains its other cash balances primarily in three financial institutions. The Company reduces its exposure to credit risk by maintaining all of its cash balances with highly rated financial institutions.

35

4. INCOME TAXES

The (benefit) provision for income taxes is as follows (in thousands):

	Years Ended April 30,
	2013			2012
Current:
Federal	$	5		$	22
State		3			3
		8			25
Deferred:
Federal		(1,327	)		-
State		(228	)		-
Total	$	(1,547	)	$	25

The following is a reconciliation of the expected income tax benefit or provision at the statutory federal income tax rate for the actual provision or benefit:

	Years Ended April 30,
	2013			2012
(Amounts in thousands)
Expected federal income tax provision	$	528		$	428
State taxes, net of federal benefit		2			2
Permanent differences		11			10
Change in valuation allowance		(2,088	)		(6,218	)
Net operating loss carryover expiration		-			5,804
Other		-			(1	)
	$	(1,547	)	$	25

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for income tax purposes. As of April 30, 2013 and 2012, the Company had net deferred tax assets of $6.8 million and $8.6 million, respectively, primarily attributable to its net operating loss carryforwards as further described below. At April 30, 2013, the Company has provided a valuation allowance against the portion of its deferred tax assets that are more likely than not to be realized. Due to the signed sales contracts, the Company anticipates realizing a portion of its deferred tax assets. As of April 30, 2012, the Company recorded a valuation allowance against the entire balance of its deferred tax assets due to the uncertainty regarding realization at that time. The $1.8 million decrease in the deferred tax assets in 2013 was due to changes in the inventory reserve balance and due to the effects of the utilization of federal net operating loss carryforwards.

36

Significant components of the Company’s deferred tax assets are as follows:

	April 30,			April 30,
(Amounts in thousands)	2013			2012
Deferred tax assets:
Net operating loss, general business credit and AMT carryforwards	$	5,531		$	7,054
Deferred revenue		85			84
Reserves and accruals		1,188			1,445
		6,804			8,583
Deferred tax liabilities:
Other		(52	)		(24	)
Net deferred tax assets before valuation allowance		6,752			8,559
Valuation allowance		(5,197	)		(8,559	)
Net deferred tax asset	$	1,555		$	-

As of April 30, 2013, the Company has approximately $14.5 million in federal net operating loss carryforwards that will begin to expire in 2018, unless previously utilized. Additionally, as of April 30, 2013, the Company has approximately $1.6 million in California net operating loss carryforwards that will begin to expire in 2029, unless previously utilized. In addition, as of April 30, 2013, the Company has approximately $284,000 in federal research and development credit carryforwards that begin to expire in 2020, and $158,000 of California research and development credit carryforwards that can be carried forward indefinitely. The Company also has approximately $137,000 in federal alternative minimum tax credits that can be carried forward indefinitely.

Pursuant to the Tax Reform Act of 1986, Internal Revenue Code Section 382, utilization of the Company’s federal credit and net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within any three-year period.

The Company and its subsidiaries are subject to federal income tax as well as income tax from state jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for years prior to April 30, 2009. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the IRS or state taxing authorities.

The Company recognizes interest and penalties as a component of income tax expense. There were no interest and penalties for the years ended April 30, 2013 and 2012.

5. RELATED PARTY TRANSACTIONS

During the years ended April 30, 2013 and 2012, revenues from all related party agreements for sales of products and services totaled approximately $4.2 million (40% of total revenue) and $6.1 million (51% of total revenue), respectively. Included in accounts receivable at April 30, 2013 and 2012 was $411,000 and $189,000, respectively, from these customers. Descriptions of the transactions with the Company’s related parties in the years ended April 30, 2013 and 2012 are presented below.

37

Berjaya Lottery Management (H.K.) Ltd.

In 1996, the Company entered into an agreement to purchase specific inventory on behalf of Berjaya Lottery Management (H.K.) Ltd. (“BLM”), the owner of 71.3% of ILTS’s outstanding voting stock as of April 30, 2013. 

Over time, the Company has sold or used portions of the BLM inventory in unrelated third-party transactions. The sale or use of the inventory resulted in a liability to BLM for the cost of the items utilized.

The financial activities and balances related to BLM were as follows:

·   There were no related party sales to BLM in the years ended April 30, 2013 and 2012;

·   There were no accounts receivable balances from BLM at April 30, 2013 and 2012;

·   Liabilities to BLM arising from the sale or use of the BLM inventory, recorded as “Payable to Parent,” were $202,000 and $252,000 as of April 30, 2013 and 2012, respectively; and

·   There were no inventory balances held for BLM as of April 30, 2013 and 2012.

Sports Toto Malaysia Sdn. Bhd.

The Company provides lottery products, software development and software support services to Sports Toto Malaysia (“STM”), an affiliate of BLM and a related party.  

In December 2011, the Company signed a contract with STM for a complete DataTrakII lottery system valued at approximately $4.3 million. The contract was completed in fiscal 2013 and the related revenue was recognized accordingly.

In January 2013, the Company received from STM, an order valued at approximately $11 million for lottery products. Shipments of these products are to begin and be completed in fiscal 2014.

The financial activities and balances related to transactions with STM were as follows:

·   Revenue recognized on the performance of contract deliverables and sale of support services totaled approximately $3 million during the year ended April 30, 2013, compared to $2 million in fiscal 2012;

·   There was no net billings in excess of costs and estimated earnings balance as of April 30, 2013. Net cost and estimated earnings in excess of billings related to the abovementioned contract received in 2011 totaled approximately $726,000 as of April 30, 2012;

·   The deferred revenue balance in connection with the lottery product order received in December 2011 and software support services totaled approximately $3.3 million as of April 30, 2013. The deferred revenue balance was $9,000 as of April 30, 2012 related to software support services; and

·   Accounts receivable balance from STM totaled $410,000 as of April 30, 2013. There was no accounts receivable balance as of April 30, 2012.

Philippine Gaming Management Corporation

In December 2011, the Company received from Philippine Gaming Management Corporation (“PGMC”), a related party and a subsidiary of BLM, an order valued at approximately $1.1 million for lottery products. Shipments of these products were completed in fiscal 2013 and the related revenue was recognized accordingly.

In addition, the Company provides PGMC with terminal spare parts on an ongoing basis and support services on an as-needed basis.

The financial activities and balances related to transactions with PGMC were as follows:

·   Revenues recognized on the sale of lottery products and support services totaled approximately $1.1 million during the year ended April 30, 2013. For the year ended April 30, 2012, revenue recognized on the sale of lottery products and software support services totaled approximately $3.8 million; 

·   There was no deferred revenue balance as of April 30, 2013. The deferred revenue balance in connection with the lottery product order received in December 2011 mentioned above totaled approximately $264,000 as of April 30, 2012; and

·   There was no accounts receivable balance as of April 30, 2013. Accounts receivable totaled $189,000 as of April 30, 2012. 

38

Natural Avenue Sdn. Bhd.

The Company provides Natural Avenue Sdn. Bhd. (“Natural Avenue”), an affiliate of BLM and a related party, with lottery and software products, support services and spare parts.  

The financial activities and balances related to transactions with Natural Avenue were as follows:

·   During the year ended April 30, 2013, revenue of $142,000 was recognized on the sale of support services and licensing. Revenue of $243,000 was recognized on the performance of contract deliverables and sale of support services during the year ended April 30, 2012;  

·   There were deferred revenue balances of $4,000 on lottery product licensing as of April 30, 2013 and 2012; and

·   Accounts receivable totaled $1,000 as of April 30, 2013. There was no accounts receivable balance from Natural Avenue as of April 30, 2012.

Sports Toto Computers Sdn. Bhd.

The Company engages Sports Toto Computers Sdn. Bhd. (“STC”), a related party, to provide consulting, programming and other related services to the Company.

During the year ended April 30, 2013, the Company incurred approximately $196,000. The same amount was incurred during the year ended April 30, 2012.

6. CONTRACTS IN PROCESS

The amounts by which total costs exceeded or were less than billings on uncompleted contracts are as follows (in thousands):

	April 30,			April 30,
	2013			2012
Costs incurred and estimated earnings recognized on uncompleted contracts	$	4,295		$	6,340
Billings on uncompleted contracts		(4,295	)		(5,614	)
	$	-		$	726

The amounts shown in the table above are included in the associated balance sheet as follows (in thousands):

	April 30,		April 30,
	2013		2012
Costs and estimated earnings in excess of billings on uncompleted contracts	$	-	$	726
Billings in excess of costs and estimated earnings on uncompleted contracts		-		-
	$	-	$	726

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7. LEASES

On April 12, 2012, the Company entered into an amendment agreement to extend the term of its building lease to November 30, 2015. Effective December 1, 2012, the monthly base rent payment was $13,900 for the first year of the lease and the monthly base rent payments will be $14,400 and $15,000 for years two and three, respectively. The agreement also provides for one month of free rent.

Future minimum lease payments for all operating leases are as follows (in thousands):

For Fiscal Year Ending April 30,	Minimum Lease Payments
2014	$	155
2015		176
2016		105
	$	436

Rent expense for all operating leases for the years ended April 30, 2013 and 2012 was $170,000 and $186,000, respectively.

8. EMPLOYEE 401(k) PLANS

The Company maintains a 401(k) plan (the “Plan”), qualified under the Internal Revenue Code, in which all eligible employees, as defined in the Internal Revenue Code, may elect to participate. Under the Plan, employees may voluntarily make tax-deferred contributions of up to 15% of their compensation to a trust, which provides the participant with various investment alternatives. In addition, for each fiscal year, the Company, at the discretion of the Board of Directors, may contribute an amount of Company stock with a fair market value that does not exceed 5% of the annual compensation of all participants in the Plan. The Company made no contributions during the years ended April 30, 2013 or 2012. The Company also maintains another 401(k) plan in which long-tenured employees maintain accounts; however, the Company and its employees are no longer contributing to this plan.

9. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s material financial instruments consist of its cash and cash equivalents, certificates of deposit, accounts receivable, accounts payable and related party payables. The carrying amounts of the Company’s financial instruments generally approximated their fair values at April 30, 2013 and 2012 due to the short-term maturity of the instruments.

10. RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements

The FASB had issued certain other accounting pronouncements as of April 30, 2013 that will become effective in subsequent periods; however, the Company does not believe any of those pronouncements are relevant to its business or would have significantly affected its financial accounting measurements or disclosures had they been in effect during fiscal 2013.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

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ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act  is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Principal Executive Officer, who is also Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our Principal Executive Officer, who is also our Principal Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in SEC Rule 13a-15(e) and 15d-15 (e)) as of the end of the period covered by this report. Based on the foregoing, our Principal Executive Officer (and Principal Financial Officer) concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and (ii) accumulated and communicated to management, including the Principal Executive Officer (and Principal Financial Officer), as appropriate, to allow timely decisions regarding required disclosure.

MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining an adequate system of internal controls over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”).

Our internal controls over financial reporting include those policies and procedures that:

·   pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;

·   provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our business are being made only in accordance with authorizations of our management and directors; and

·   provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management has conducted, with the involvement of our Principal Executive Officer (and Principal Financial Officer), and our Director of Corporate Affairs, an assessment, including testing of the effectiveness of our internal controls over financial reporting as of April 30, 2013. Management’s assessment of internal controls over financial reporting was based on the framework in  Internal Control over Financial Reporting – Guidance for Smaller Public Companies (2006) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our system of internal controls over financial reporting was effective as of April 30, 2013.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There have not been any changes in the Company’s internal control over financial reporting during the quarter ended April 30, 2013 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors of the Registrant

The Board presently consists of the following six directors: Theodore A. Johnson, Chan Kien Sing, Martin J. O’Meara, Jr., Alain K. Lee, Ooi Lee Meng and Rayvin Yeong Sheik Tan. There is one vacant board seat as of the date of this report. The current directors will serve until their respective successors have been duly elected and qualified.

Theodore A. Johnson, 73, has been Chairman of the Board since 1994. He is also Chairman of the Executive Committee, Audit Committee and a member of the Executive Compensation Committee, Nominating Committee and Affiliations Committee. Mr. Johnson served as Director from 1979 to 1993. He has been President and Chief Executive Officer of TJ Ventures, Inc., a venture capital consulting company since 1992. Mr. Johnson also holds directorships in other private corporations, including an applied research organization which is run by the University of Minnesota.

Chan Kien Sing, 57, has been Director since 1993. He is Chairman of the Executive Compensation Committee and Nominating Committee.  In addition, Mr. Chan is a member of the Executive Committee. He also serves as Executive Director of Berjaya Group Berhad, a Malaysian holding company since July 1993. In addition, he is an Executive Director of Berjaya Corporation Berhad and Berjaya Sports Toto Berhad, a Director of Berjaya Lottery Management H.K. Limited (“BLM”) and holds directorships in several other subsidiaries in the Berjaya Corporation group of companies.

Martin J. O’Meara, Jr., 84, has been Director since 1979. He is Chairman of the Affiliations Committee and a member of the Audit Committee. Mr. O’Meara, Jr. is presently a retired businessman. Previously he served as President of The Budget Plan, Inc., a privately owned company engaged in the consumer loan business for over five years. 

Alain K. Lee, 56, has been Director since 1999. He is a member of the Executive Compensation Committee and Audit Committee. Presently, Mr. Lee serves as a business consultant since 2007. He served as Executive Vice President and Director of Roadhouse Grill, Inc. from 1998 to 2007. He has previously served as a member of the Executive Committee of the Company.

Ooi Lee Meng, 52, has been Director since January 2006. He is a member of the Executive Committee and Nominating Committee. Mr. Ooi holds a directorship in Berjaya-ILTS Ltd. He serves as Senior General Manager (Business Development) of Sports Toto Malaysia Sdn Bhd, a related company of ILTS, since October 2005. Previously he served as Executive Vice President of ILTS from September 2002 to April 2005.

Rayvin Yeong Sheik Tan, 33, became Director of the Company on July 15, 2008. He serves as an Executive Director of the Board of Berjaya Corporation Berhad, a diversified business entity based in Kuala Lumpur, Malaysia, since September 2005. Mr. Tan joined the Berjaya Group of Companies in May 2001 as Senior Manager (Corporate Affairs) of Kota Raya Development Sdn Bhd and Noble Circle Management Sdn Bhd.  Mr. Tan also serves as Executive Director of Cosway Corporation Limited, a subsidiary company in the Berjaya Corporation group of companies. In addition, he is Chairman of Berjaya Sanhe Real Estate Development Co. Ltd. and Berjaya (China) Great Mall Co. Ltd. He is also a Director of Berjaya Lottery Management (HK) Limited and served as an Executive Director of Berjaya Sports Toto Berhad.

Director Nomination Process

In evaluating director nominees, our nominating and governance committee considers, among others, the following factors: integrity, independence, diversity of viewpoints and backgrounds, extent of experience, length of service, number of other board and committee memberships, leadership qualities and ability to exercise sound judgment. 

Director Qualifications

In addition to the information above regarding each director’s business experience and service on the boards of directors of other companies, our board of directors considered the following experience, qualifications or skills of each of the directors in concluding that each director is qualified to serve on our board. The information below is not intended to be an exhaustive list of the qualifications that the board of directors considered with respect to the directors.

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Mr. Johnson has a broad background in managing and serving on the boards of directors of small companies. He has served as Chairman and CEO of another public company in the past and has served on the boards of directors of over 20 companies and venture capital funds. In addition, when he ran a venture capital operation, he was involved in the structuring, managing and financing of over 46 companies during a 20-year period. He is currently CEO and President of TJ Ventures, Inc. which provides consulting services to a variety of early stage companies. Presently, he is on the board of directors of one private company and an applied research organization run by the University of Minnesota.

Mr. Chan hassignificant business experience with leadership of strategic business groups as senior executive of various public companies in Malaysia. He also has in-depth knowledge of accounting and financial issues related to public companies due to his previous experience as an auditor of public companies. He brings his specialized knowledge of merchant banking and corporate finance to our board and has outside board experience at several subsidiary companies related to ILTS’s parent company. He also has affiliation with the Risk Management Committee of Berjaya Corporation Berhad, a diversified public corporation based in Kuala Lumpur, Malaysia.

Mr. O’Meara, Jr. brings to our board his profound business experience in serving as President of The Budget Plan and Owner and Director of Connecticut Yankee Greyhound Park and New England Harness Raceway. In addition, he has specialized and extensive knowledge and experience in the consumer loan business and automobile dealerships. During his 50-year career in financing business, Mr. O'Meara, Jr. has dealt extensively with purchase agreements, commercial and residential real estate mortgages, unsecured and secured loans. 

Mr. Lee  has extensive business and leadership experience in an executive and management capacity in both private and public companies including most recently serving as Executive Vice President and Director of Roadhouse Grill, Inc. He is a certified and chartered accountant from the United Kingdom. He brings financial and accounting expertise to our board due to his previous training and experience with big 4 public accounting practices and as a financial executive in both private and public companies.

Mr. Ooi has significant business development and leadership experience in the lottery and related gaming industries in serving as senior executive of ILTS and other related companies. In addition to the in-depth knowledge of finance and accounting due to his educational training and previous experience as an auditor of public companies in the United Kingdom, Mr. Ooi has outside board experience at several subsidiary companies related to ILTS’s parent company.

Mr. Tan has extensive experience in the field of research covering the various sectors of property, commodities, telecommunications and transport. He brings finance and accounting expertise to our board due to his education at the London School of Economics, United Kingdom. In addition to his outside board experience and global business experience in other public and private corporations in Malaysia, Hong Kong, Canada and the U.S., Mr. Tan served as a member of the Risk Management Committee of Berjaya Corporation Berhad, a diversified public corporation based in Kuala Lumpur, Malaysia.

Leadership Structure

The chairman of our board of directors and the president of our company serve different functions. Our board of directors has determined that its leadership structure is appropriate and effective for the size of our company. Our board of directors believes that having the chairman and president serve separate functions provides clear leadership, accountability and promotes strategic development and execution as our company executes our strategy and objectives. Our board of directors and the nominating committee also believe that there is a high degree of transparency among directors and company management. Three of the six members of our board are independent directors and all of those individuals serve on the committees of our board of directors.

Risk Oversight

Our board of directors is responsible for consideration and oversight of the risks facing the Company and its subsidiary. Our board of directors regularly reviews information provided by management in order to ensure that material risks are identified and managed appropriately. Our board considers, as appropriate, risks among other factors in reviewing our strategy, business plan, budgets and major transactions. Our board committees assist the full board of directors’ oversight of our material risks by focusing on risks related to the particular area of concentration of the relevant committee. For example, the compensation committee oversees risks related to our executive compensation plans and arrangements, the audit committee oversees financial reporting and control risks and the nominating committee oversees risks associated with the independence of our board of directors and potential conflicts of interest, the affiliations committee oversees related party activities to ensure fair and equitable pricing strategies. The full board of directors incorporates the insight provided by these reports into its overall risk oversight analysis.

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Board Diversity

Although the nominating committee may consider whether nominees assist in achieving a mix of board members that represents a diversity of background and experience, which is not only limited to race, gender or national origin, we have no formal policy regarding board diversity.

Executive Officer of the Registrant

Jeffrey M. Johnson, 52, was appointed as President effective January 2007 and has been the Acting Chief Financial Officer since October 2011. He served as Director of Technical Operations and held various positions in the Technical Operations capacity at ILTS for over 20 years.

There are no family relationships among members of our executive officers or our Board of Directors.

Audit Committee and Audit Committee Financial Expert

The Board of Directors has an Audit Committee consisting of Messrs. Johnson, O’Meara, Jr. and Lee. The Audit Committee held five meetings during the year.  

The responsibilities of the Audit Committee include the appointment, compensation, retention and oversight of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services. The Committee reviews with such auditors the periodic SEC filings, the scope and result of their audit and the result of the auditors’ evaluation of internal controls. During fiscal years 2013 and 2012, all services were pre-approved by the Audit Committee. The Chairman of the Audit Committee reviews and approves all engagement services provided by the Company’s Independent Registered Public Accounting Firm.

The Board of Directors has determined that the Audit Committee does not have an “audit committee financial expert” as defined under the applicable SEC rules and regulations because none of the current members of the Audit Committee meet the criteria required for an audit committee financial expert.  

Other Committees

The Board of Directors has an Executive Compensation Committee, Executive Committee, Nominating Committee and Affiliations Committee.

Shareholder Communications

The Company has a procedure by which shareholders can communicate with the Board members. Shareholders may communicate with the Board by writing to the Chairman of the Board or individual Board members as follows: International Lottery & Totalizator Systems, Inc., Attention: Corporate Secretary, 2310 Cousteau Court, Vista, CA 92081. The Corporate Secretary will forward any shareholder communications as requested by the shareholder.

Code of Ethics

The Company has adopted an amended and restated Code of Conduct and Ethics that applies to all of its employees, officers, directors and consultants.    

Shareholders may obtain a copy of the Code of Conduct and Ethics by writing to the Company: International Lottery & Totalizator Systems, Inc., Attention: Corporate Secretary, 2310 Cousteau Court, Vista, CA 92081.

44

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership of our equity securities with the SEC. Officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) filings. Based solely on our review of the Section 16(a) filings, we believe that all required Section 16(a) reports were timely filed during our most recent fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth, for the fiscal years ended April 30, 2013 and 2012, the compensation earned by the principal executive officer, the principal financial officer of the Company, and one other individual earning in excess of $100,000 during such years (the “Named Executive Officers”).

Summary Compensation Table

Name And		Salary		Bonus		Stock Wards		Option Awards		None-Equity Incentive Plan Compensaion		Non-Qualified Deferred Compensation Earnings		All Other Compensaion				Total
Principal Position	Year	($)		($)		($)		($)		($)		($)		($)				($)
Jeffrey M. Johnson	2013	$	163,000	$	10,000	$	-	$	-	$	-	$	-	$	8,405	(1	)	$	181,405
President/Acting Chief Financial Officer	2012	$	160,000	$	-	$	-	$	-	$	-	$	-	$	8,405	(1	)	$	168,405
Barry Herron	2013	$	150,000	$	-	$	-	$	-	$	-	$	-	$	35,000	(2	)	$	185,000
Director of Sales	2012	$	150,000	$	-	$	-	$	-	$	-	$	-	$	43,000	(2	)	$	193,000
Christopher Ortiz	2013	$	120,500	$	9,000	$	-	$	-	$	-	$	-	$	-			$	129,500
Manager of Business Development	2012	$	120,000	$	-	$	-	$	-	$	-	$	-	$	-			$	120,000

There were no Company matching contributions to the Named Executive Officers from the 401(k) plan or other Long Term Compensation Awards during the fiscal years 2013 and 2012.

There were no stock options or stock appreciation rights granted to the Named Executive Officers during the fiscal years 2013 and 2012.

(1)   Other compensation of $8,405 represents car allowance perquisites which did not exceed the lesser of $50,000 or 10% of the total annual salary and bonus for any such officer.

(2)   Other compensation of $35,000 and $43,000 represent sales commission.

Options Exercised During Fiscal Year Ended April 30, 2013

	Number of Shares Acquired on Exercise	Value Realized on Exercise	Number of securities underlying unexercised options exercisable	Number of securities underlying unexercised options unexercisable
Name	(#)	($)	(#)	(#)
Jeffrey M. Johnson	-	-	-	-
Barry Herron	-	-	-	-
Christopher Ortiz	-	-	-	-

45

Outstanding Equity Awards as of April 30, 2013

		Options awards					Stock awards
Name	Number of securities underlying unexercised options exercisable		Number of securities underlying unexercised options unexercisable	Equity incentive plan awards: Number of securities underlying unexercised unearned options	Option exercise date	Option expiration date	Number of shares or units of stock that have not vested	Market value of shares or units of stock that have not vested	Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested	Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested
	(#)		(#)	(#)	($)		(#)	($)	(#)	($)
Jeffrey M. Johnson	-		-	-	-	n/a	-	-	-	-
Barry Herron	-		-	-	-	n/a	-	-	-	-
Christopher Ortiz	-		-	-	-	n/a	-	-	-	-

The Company does not have any employment agreements or change in control arrangements with its executive officers.

Compensation of Directors
The following table summarizes the compensation earned by directors for the year ended April 30, 2013.
												Change in
												Pension Value
												and
	Fees								Non-Equity			Nonqualified
	Earned								Incentive			Deferred
	or Paid		Stock			Option			Plan			Compensation			All Other
	in Cash		Awards			Awards			Compensation			Earnings			Compensation
Name	($)		($)			($)			($)			($)			($)
Theodore A. Johnson	$	9,250		$	-		$	-		$	-		$	-		$	-
Chan Kien Sing	$	-		$	-		$	-		$	-		$	-		$	-
Martin J. O'Meara, Jr.	$	8,250		$	-		$	-		$	-		$	-		$	-
Alain K. Lee	$	6,750		$	-		$	-		$	-		$	-		$	-
Ooi Lee Meng	$	-		$	-		$	-		$	-		$	-		$	-
Rayvin Yeong Sheik Tan	$	-		$	-		$	-		$	-		$	-		$	-

During the fiscal year ended April 30, 2013, independent Directors received an annual retainer fee of $4,000 and a fee of $500 for each Board meeting attended. In addition, each committee’s Chairman received an annual retainer of $1,000 for services as Chairman of such committee. Directors who were employees of the affiliates of ILTS’ Parent company, BLM, opted not to receive director remuneration and meeting fees for the year ended April 30, 2013. All Directors are reimbursed for reasonable out-of-pocket expenses incurred for travel and attendance for Board meetings.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the beneficial ownership of the Company’s common shares as of May 14, 2013 by:

i.   each director;

ii.   each executive officer;

iii.   the executive officers and directors of the Company as a group; and

iv.   each person or entity who is a beneficial owner of more than 5% of the Company’s outstanding common shares.

Beneficial ownership of securities is defined in accordance with the rules of the Securities and Exchange Commission and means generally the power to vote or exercise investment discretion with respect to securities, regardless of any economic interests therein. Except as otherwise indicated, the Company believes that the beneficial owners of the securities listed below have sole investment and voting power with respect to such shares, subject to community property laws where applicable.

Title of Class		Name of Directors, Executive Officers and Beneficial Owners	Shares of Common Stock
		Number			Percent of Class
Common Stock		Theodore A. Johnson, Chairman of the Board	18,606			*
	n/a	Chan Kien Sing, Director	-	(a)
Common Stock		Martin J. O’Meara, Jr., Director	112,091			*
	n/a	Alain K. Lee, Director	-
	n/a	Ooi Lee Meng, Director	-	(a)
	n/a	Rayvin Yeong Sheik Tan, Director	-	(a)
Common Stock		Jeffrey M. Johnson, President/Acting Chief Financial Officer	1,650			*
		All directors and executive officers as a group (7 persons)	132,347			1.0	%
		Berjaya Lottery Management H.K. Limited, a subsidiary of Berjaya Sports Toto Berhad.	9,245,317	(a)		71.32	%

(a)   Employees of affiliates of BLM. All three individuals disclaim beneficial ownership of such shares.

BLM’s correspondence address is:

Level 12 (East Wing)

Berjaya Times Square

No.1, Jalan Imbi

55100 Kuala Lumpur, Malaysia.

* Less than one percent of the outstanding common shares.

Securities Authorized for Issuance under Equity Compensation Plans

The Company does not currently have any securities authorized for issuance under an equity compensation plan. See the discussion under the heading “Securities Authorized for Issuance under Equity Compensation Plans” in Item 5 of page 16 of this report which is hereby incorporated by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

During the fiscal years ended April 30, 2013 and 2012, the Company derived revenues from sales of products and services under agreements with four related parties which totaled approximately $4.2 million (40% of total revenue) and $6.1 million (51% of total revenue), respectively. The Company also had outstanding accounts receivable at April 30, 2013 and 2012 of $411,000 and $189,000, respectively, from these related customers. A more detailed description of the transactions with the Company’s related parties in the years ended April 30, 2013 and 2012 are presented in Note 5 entitled “RELATED PARTY TRANSACTIONS” in our Consolidated Financial Statements beginning on page 37 of this report.

Parent Company

As of April 30, 2013, Berjaya Lottery Management (H.K.) Ltd. (“BLM”) owned 71.3% of the total outstanding shares of the Company, and is the Parent company of the Company.

Director Independence

The Board has determined that the following directors are not considered to be independent directors under the NASDAQ listing standards: Chan Kien Sing, Ooi Lee Meng and Rayvin Yeong Sheik Tan. The Board has determined that the following directors are independent directors under the NASDAQ listing standards: Theodore A. Johnson, Martin J. O’Meara, Jr. and Alain K. Lee.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table sets forth the approximate aggregate fees billed for each of the last two fiscal years for professional services rendered by our principal accountant. CohnReznick LLP was the principal accountant for the years ended April 30, 2013 and 2012.

	Years Ended April 30,
	2013		2012
Audit Fees	$	112,000	$	118,500
Audit Related Fees (a)		5,918		7,281
Tax Fees (b)		13,050		9,190
	$	130,968	$	134,971

(a) Audit Related Fees in the amount of $5,918 and $7,281 in fiscal 2013 and 2012, respectively, primarily related to the review of the financial information requested by the Parent company’s principal accountant.

(b) Fees in the amount of $13,050 and $9,190 in fiscal 2013 and 2012, respectively, related to professional services rendered for tax compliance.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

A.         Exhibits

(3) (a) Articles of Incorporation, as amended September 13, 1994, reflecting corporate name change, and as amended January 7, 1998, reflecting authorization for 20 million shares of preferred stock and By-laws (incorporated by reference to Form 10-KSB for the year ended December 31, 1994, File No. 0-10294).

(b) Articles of Incorporation as amended June 2, 1998 (incorporated by reference to Form 10-KSB for the year ended December 31, 1998, File No. 0-10294).

(c) A By-law Amendment effective June 2, 1998, relating to officers and directors indemnification and number of directors (incorporated by reference to Form 10-KSB for the year ended December 31, 1998, File No. 0-10294).

(d) Stock Purchase Agreement dated as of September 8, 1999 between ILTS and BLM which increased Berjaya's stock ownership from 38.5% to 71.3% (incorporated by reference from ILTS's Form 8-K filed on October 18, 1999).

(14) The Company’s Amended and Restated Code of Conduct and Ethics (incorporated by reference to Form 10-KSB for the year ended April 30, 2009, File No. 0-10294).

(21) * Subsidiary of the Registrant

(31) * Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32) * Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed as an exhibit to this report

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.

By:          /s/ Jeffrey M. Johnson

Jeffrey M. Johnson

President (Principal Executive Officer) and Acting Chief Financial   Officer (Principal Financial Officer)

Dated: July 9, 2013

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 

Signature	Title	Date
/s/ Theodore A. Johnson Theodore A. Johnson	Chairman of the Board
/s/ Martin J. O’Meara, Jr. Martin J. O’Meara, Jr.	Director	July 9, 2013
/s/ Chan Kien Sing Chan Kien Sing	Director	July 9, 2013
/s/ Alain K. Lee Alain K. Lee	Director	July 9, 2013
/s/ Ooi Lee Meng Ooi Lee Meng	Director	July 9, 2013
/s/ Rayvin Yeong Sheik Tan Rayvin Yeong Sheik Tan	Director	July 9, 2013

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INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.

EXHIBIT 21

SUBSIDIARY OF ILTS                                                                         JURISDICTION OF INCORPORATION

Unisyn Voting Solutions, Inc.  ..........................................................  California, U.S.                                                                         

2310 Cousteau Court

Vista, CA 92081-8346

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EX-31

EXHIBIT 31

Certification requirements set forth in Section 302 of the Sarbanes-Oxley Act.

 I, Jeffrey M. Johnson, certify that:

1.    I have reviewed this annual report on Form 10-K of International Lottery & Totalizator Systems, Inc. (“ILTS”);

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of ILTS as of, and for, the periods presented in this report;

4.    I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for ILTS and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to ILTS, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of ILTS’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in ILTS's internal control over financial reporting that occurred during ILTS’s most recent fiscal quarter (ILTS's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, ILTS's internal control over financial reporting.

5.    I have disclosed, based on my most recent evaluation of internal control over financial reporting, to ILTS’s auditors and the audit committee of ILTS’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect ILTS’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in ILTS's internal control over financial reporting.

Dated: July 9, 2013 /s/ Jeffrey M. Johnson Jeffrey M. Johnson President (Principal Executive Officer) and Acting Chief Financial Officer (Principal Financial Officer)

EX-32

EXHIBIT 32

Certification Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K for the year ended April 30, 2013 and pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of International Lottery & Totalizator Systems, Inc. (the “Company”) hereby certifies that:

(i)   the Annual Report on Form 10-K of the Company for the year ended April 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 9, 2013 /s/ Jeffrey M. Johnson Jeffrey M. Johnson President (Principal Executive Officer) and Acting Chief Financial Officer (Principal Financial Officer)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Apr. 30, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of ILTS and its wholly-owned subsidiary, Unisyn Voting Solutions, Inc. All significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. Actual results could differ from those estimates. Estimates may affect the reported amounts of assets and liabilities and revenues and expenses, and the disclosure of contingent assets and liabilities.

Revenue Recognition

Revenue Recognition

The Company derives its revenues primarily from the sales of complete wagering systems, lottery terminals, the OpenElect® and PBC voting systems, other software and software support services. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the customer once it has been shipped and the title and risk of loss have been transferred. Service revenues are recognized as the services are rendered, and the related costs of services are recognized on a time and materials basis.

Revenue Recognition for Arrangements with Multiple Deliverables

Revenue Recognition for Arrangements with Multiple Deliverables

For multi-element arrangements that include hardware products containing software essential to the hardware product's functionality, undelivered software elements that relate to the hardware product's essential software, and undelivered non-software services, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value ("VSOE"), (ii) third-party evidence of selling price ("TPE") and (iii) best estimate of the selling price ("ESP"). VSOE generally exists only when the Company sells the deliverable separately and VSOE is the price actually charged for that deliverable. TPE is determined based on competitor prices for similar deliverables when sold separately. ESPs reflect the Company's best estimates of what the selling prices of elements would be if they were sold regularly on a standalone basis.

For sales of hardware products, the Company provides various hardware components containing software essential to the hardware product's functionality, and other components depending on the customers' needs. The Company allocates revenue to these deliverables using the relative selling price method. Because the Company has not established VSOE or TPE for the hardware, with essential software, revenue is allocated based on ESPs. Revenue is recognized upon shipment of the hardware and the related essential software, provided the other conditions for revenue recognition have been met. The Company also provides software support and product support services on a standalone basis from the sales of the hardware. Amounts allocated to software support and product support services are based on VSOE using hourly or daily billing rates. Revenue is deferred until the services are performed. For annual software licenses, the Company uses VSOE. Amounts allocated to annual software licenses are deferred and recognized on a straight-line basis over the service period, which is typically one year.

The Company considers multiple factors depending on the unique facts and circumstances related to each deliverable when determining ESPs for deliverables without VSOE or TPE. Key factors considered by the Company in developing the ESPs for the hardware include the costs of manufacture and what a customer would reasonably pay based on the features being offered, trends in the market place, size of the territory, and competitive prices. If the facts and circumstances underlying the factors change, including the estimated or actual costs incurred to provide the hardware with the essential software, or should future facts and circumstances lead the management to consider additional factors, the Company's ESP for the hardware with essential software related to future sales could change.

Revenue Recognition for Percentage-of-Completion Method

Revenue Recognition for Percentage-of-Completion Method

For the complete wagering and lottery systems, the Company recognizes revenue by using the percentage-of-completion method when the contracts for complete systems fulfill the following criteria:

1. Contract performance extends over long periods of time;

2. The software portion involves significant production, modification or customization;

3. Reasonably dependable estimates can be made on the progress towards completion, contract revenues and contract costs; and

4. Each element is essential to the functionality of the other elements of the contracts.

Under the percentage-of-completion method, sales and estimated gross profits are recognized as work progresses. Progress toward completion is measured by the ratio of costs incurred to total estimated costs. Revenue and gross profit may be adjusted prospectively for revisions in the estimated total contract costs. If the current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is recorded in the period in which it becomes evident. The total estimated loss includes all costs allocable to the specific contract.

In addition to the software portion of a complete system, the Company develops software for its customers in accordance with the specifications stipulated in a software supply contract. Generally, these contracts are related to additional features or modules to be added to the application software that the Company has previously developed for its customers. Each software contract is reviewed individually to determine the appropriate basis of recognizing revenue.

Deferred Revenues and Deferred Cost of Revenues

Deferred Revenues and Deferred Cost of Revenues

Deferred revenues of approximately $5.4 million and $687,000 as of April 30, 2013 and 2012, respectively, represent prepayments for products and services related to lottery terminals, use of the OpenElect® and PBC voting systems and other software and technical support services. Deferred cost of revenues of approximately $132,000 and $6,000 as of April 30, 2013 and 2012, respectively, consist of direct costs associated with lottery terminals, software support and manufacture of voting systems. The Company will recognize revenues and related cost of revenues upon fulfillment of the prescribed criteria for revenue recognition.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The Company determines its allowance for doubtful accounts by considering a number of factors:

1. Length of time trade accounts receivable are past due;

2. The Company's previous loss history;

3. The customer's current ability to pay its obligations;

4. Known specific issues or disputes which exist as of the balance sheet date; and

5. The condition of the general economy and the industry as a whole.

Based on its evaluation, the Company determined that no additional allowance was required as of April 30, 2013. The Company maintained an allowance for doubtful accounts of $75,000 as of April 30, 2013 and 2012.

Warranty Reserves

Warranty Reserves

Estimated warranty costs are accrued as revenues are recognized. Included in the warranty cost accruals are costs for basic warranties on products sold. A summary of product warranty reserve activity for the fiscal years ended April 30, 2013 and 2012 is as follows:

(Amounts in thousands)

Balance at April 30, 2011	$	31
Additional reserves		159
Charges incurred		(21	)
Balance at April 30, 2012		169
Additional reserves		153
Charges incurred		(183	)
Balance at April 30, 2013	$	139

Warranty reserves are based on historical trends and are adjusted periodically to reflect actual experience. Customers do not have a right to return, except for defective products.The most recent inventory cost is used to determine the value of potential warranty costs. Estimated reserves for warranty obligations are accrued as follows:

1. Contracts - Contract warranties are specific to the individual contracts. Estimated reserves for warranty obligations are accrued as revenue is recognized. Hardware and software components may be warranted separately:

a. Hardware – The warranty phase for terminals or terminal kits commences upon shipment and can extend from six months to twelve months depending on the specific contract terms.

b. Software – The warranty phase typically represents a six to twelve-month period of time after delivery, as defined by the specific contract terms.

2. Spares – Terminal replacement parts are warranted to be free from defects for 90 days from the date of shipment. Based on historical experience, warranty costs for spares have been immaterial.

3. Other – Specific provisions have been made to cover a small number of particular replacement parts for specific customers.

Income Taxes and Valuation Allowance

Income Taxes and Valuation Allowance

The Company recognizes tax benefits associated with uncertain tax positions when, in management's assessment, it is more likely than not that the positions will be sustained upon examination by a taxing authority. For tax positions that meet the more likely than not recognition threshold, the Company measures the tax benefits as the largest amount that the Company evaluates to have a greater than 50% likelihood of being realized upon ultimate settlement. The Company reviewed its tax positions and determined that an adjustment to the tax provision is not considered necessary nor is a reserve for income taxes required.

The Company accounts for income taxes pursuant to the asset and liability method. This requires deferred income tax assets and liabilities to be computed annually for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the temporary differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Foreign Currency Fluctuation

Foreign Currency Fluctuation

The Company's reporting currency is the U.S. dollar. Sales are denominated almost exclusively in U.S. dollars. Occasionally, sales have been effected in foreign currencies. Fluctuations in exchange rates from reporting period to reporting period between various foreign currencies and the U.S. dollar may have an impact on revenue and expense. Such effect may be material in any individual reporting period. No material foreign currency transactions occurred during the years ended April 30, 2013 and 2012.

Inventories

Inventories

Inventories are stated at the lower of cost or the current estimated market values. Cost is determined using the first-in, first-out method. Inventories consisted of the following:

	April 30,		April 30,
	2013		2012
(Amounts in thousands)
Raw materials and subassemblies	$	2,872	$	1,775
Work-in-process		33		63
Finished goods		760		821
	$	3,665	$	2,659

Equipment, Furniture and Fixtures

Equipment, Furniture and Fixtures

Equipment, furniture and fixtures are carried at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets which approximate three to seven years. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the lease term. The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, or when the net book value of such assets exceeds the future undiscounted cash flow attributed to such assets. At April 30, 2013 and 2012, and during the years ended April 30, 2013 and 2012, no indicators of impairment were identified.

Net equipment, furniture and fixtures consisted of the following:

	April 30,			April 30,
	2013			2012
(Amounts in thousands)
Plant and machinery	$	757		$	724
Computer equipment		1,662			1,482
Leasehold improvement		201			190
Furniture, fixtures and equipment		96			91
Construction in progress		25			-
		2,741			2,487
Accumulated depreciation and amortization		(2,168	)		(2,005	)
Net equipment, furniture and fixtures	$	573		$	482

Net Income (Loss) per Share

Net Income per Share

Basic net income per share was based on the weighted average number of shares outstanding during April 30, 2013 and 2012.

There were no outstanding options or other dilutive securities at April 30, 2013 and 2012.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the purchase date to be cash equivalents.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Apr. 30, 2013	Apr. 30, 2012
Revenues:
Sales of products	$ 9,316	$ 10,736
Services	1,255	1,348
Total Revenues	10,571	12,084
Cost of sales:
Cost of product sales	6,282	7,792
Cost of services	413	511
Total cost of sales	6,695	8,303
Gross profit	3,876	3,781
Research and development expenses	0	31
Selling, general and administrative expenses	2,325	2,498
Income from operations	1,551	1,252
Other income:
Interest and dividend income	1	2
Other	0	4
Income before (benefit) provision for income taxes	1,552	1,258
(Benefit) provision for income taxes	(1,547)	25
Net income	$ 3,099	$ 1,233
Net income per share:
Basic (in dollars per share)	$ 0.24	$ 0.10
Weighted average shares used in computation of net income per share:
Basic (in shares)	12,963	12,963

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INCOME TAXES

12 Months Ended

Apr. 30, 2013

INCOME TAXES [Abstract]

INCOME TAXES

4. INCOME TAXES

 

The (benefit) provision for income taxes is as follows (in thousands):

	Years Ended April 30,
	2013			2012
Current:
Federal	$	5		$	22
State		3			3
		8			25
Deferred:
Federal		(1,327	)		-
State		(228	)		-
Total	$	(1,547	)	$	25

The following is a reconciliation of the expected income tax benefit or provision at the statutory federal income tax rate for the actual provision or benefit:

	Years Ended April 30,
	2013			2012
(Amounts in thousands)
Expected federal income tax provision	$	528		$	428
State taxes, net of federal benefit		2			2
Permanent differences		11			10
Change in valuation allowance		(2,088	)		(6,218	)
Net operating loss carryover expiration		-			5,804
Other		-			(1	)
	$	(1,547	)	$	25

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for income tax purposes. As of April 30, 2013 and 2012, the Company had net deferred tax assets of $6.8 million and $8.6 million, respectively, primarily attributable to its net operating loss carryforwards as further described below. At April 30, 2013, the Company has provided a valuation allowance against the portion of its deferred tax assets that are more likely than not to be realized. Due to the signed sales contracts, the Company anticipates realizing a portion of its deferred tax assets. As of April 30, 2012, the Company recorded a valuation allowance against the entire balance of its deferred tax assets due to the uncertainty regarding realization at that time. The $1.8 million decrease in the deferred tax assets in 2013 was due to changes in the inventory reserve balance and due to the effects of the utilization of federal net operating loss carryforwards.

Significant components of the Company's deferred tax assets are as follows:

	April 30,			April 30,
(Amounts in thousands)	2013			2012
Deferred tax assets:
Net operating loss, general business credit and AMT carryforwards	$	5,531		$	7,054
Deferred revenue		85			84
Reserves and accruals		1,188			1,445
		6,804			8,583
Deferred tax liabilities:
Other		(52	)		(24	)
Net deferred tax assets before valuation allowance		6,752			8,559
Valuation allowance		(5,197	)		(8,559	)
Net deferred taxes	$	1,555		$	-

 

As of April 30, 2013, the Company has approximately $14.5 million in federal net operating loss carryforwards that will begin to expire in 2018, unless previously utilized. Additionally, as of April 30, 2013, the Company has approximately $1.6 million in California net operating loss carryforwards that will begin to expire in 2029, unless previously utilized. In addition, as of April 30, 2013, the Company has approximately $284,000 in federal research and development credit carryforwards that begin to expire in 2020, and $158,000 of California research and development credit carryforwards that can be carried forward indefinitely. The Company also has approximately $137,000 in federal alternative minimum tax credits that can be carried forward indefinitely.

Pursuant to the Tax Reform Act of 1986, Internal Revenue Code Section 382, utilization of the Company's federal credit and net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within any three-year period.

The Company and its subsidiaries are subject to federal income tax as well as income tax from state jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for years prior to April 30, 2009. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the IRS or state taxing authorities.

The Company recognizes interest and penalties as a component of income tax expense. There were no interest and penalties for the years ended April 30, 2013 and 2012.

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BUSINESS SEGMENTS, GEOGRAPHIC REVENUES, MAJOR CUSTOMERS AND MAJOR VENDORS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Apr. 30, 2013 Segment	Apr. 30, 2012
BUSINESS SEGMENTS, GEOGRAPHIC REVENUES, MAJOR CUSTOMERS AND MAJOR VENDORS [Abstract]
Number of operating segments	2
Segment information [Abstract]
Total revenues	$ 10,571	$ 12,084
Income from operations	1,551	1,252
Depreciation and amortization	181	141
Segment assets	16,834	7,982
Revenues by geographic area [Abstract]
Revenues	10,571	12,084
Supplier Concentration Risk [Member]
Major customers [Abstract]
Number of vendors	5	2
Supplier Concentration Risk [Member] | Vendor [Member]
Major customers [Abstract]
Concentration risk, percentage (in hundredths)	73.00%	37.00%
Supplier Concentration Risk [Member] | Vendor One [Member]
Major customers [Abstract]
Concentration risk, percentage (in hundredths)	18.00%	26.00%
Supplier Concentration Risk [Member] | Vendor Two [Member]
Major customers [Abstract]
Concentration risk, percentage (in hundredths)	18.00%	11.00%
Supplier Concentration Risk [Member] | Vendor Three [Member]
Major customers [Abstract]
Concentration risk, percentage (in hundredths)	15.00%
Supplier Concentration Risk [Member] | Vendor Four [Member]
Major customers [Abstract]
Concentration risk, percentage (in hundredths)	12.00%
Supplier Concentration Risk [Member] | Vendor Five [Member]
Major customers [Abstract]
Concentration risk, percentage (in hundredths)	10.00%
Asia [Member]
Segment information [Abstract]
Total revenues	4,197	6,117
Revenues by geographic area [Abstract]
Revenues	4,197	6,117
North America [Member]
Segment information [Abstract]
Total revenues	3,178	5,320
Revenues by geographic area [Abstract]
Revenues	3,178	5,320
Europe [Member]
Segment information [Abstract]
Total revenues	3,196	647
Revenues by geographic area [Abstract]
Revenues	3,196	647
Gaming Business [Member]
Segment information [Abstract]
Total revenues	7,396	7,052
Income from operations	1,502	973
Depreciation and amortization	112	89
Segment assets	14,886	5,160
Revenues by geographic area [Abstract]
Revenues	7,396	7,052
Gaming Business [Member] | Revenue [Member] | Customer Concentration Risk [Member] | From Unrelated Customers [Member]
Major customers [Abstract]
Number of major customers	1
Concentration risk, percentage (in hundredths)	30.00%
Gaming Business [Member] | Revenue [Member] | Customer Concentration Risk [Member] | From Related Customers [Member]
Major customers [Abstract]
Number of major customers	2	2
Concentration risk, percentage (in hundredths)	38.00%	49.00%
Gaming Business [Member] | Revenue [Member] | Customer Concentration Risk [Member] | Related Customer One [Member]
Major customers [Abstract]
Concentration risk, percentage (in hundredths)	28.00%	32.00%
Gaming Business [Member] | Revenue [Member] | Customer Concentration Risk [Member] | Related Customer Two [Member]
Major customers [Abstract]
Concentration risk, percentage (in hundredths)	10.00%	17.00%
Voting Business [Member]
Segment information [Abstract]
Total revenues	3,175	5,032
Income from operations	49	279
Depreciation and amortization	69	52
Segment assets	1,948	2,822
Revenues by geographic area [Abstract]
Revenues	$ 3,175	$ 5,032
Voting Business [Member] | Revenue [Member] | Customer Concentration Risk [Member] | From Unrelated Customers [Member]
Major customers [Abstract]
Number of major customers	1	1
Concentration risk, percentage (in hundredths)	22.00%	32.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Apr. 30, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Product warranty reserve activity

Estimated warranty costs are accrued as revenues are recognized. Included in the warranty cost accruals are costs for basic warranties on products sold. A summary of product warranty reserve activity for the fiscal years ended April 30, 2013 and 2012 is as follows:

(Amounts in thousands)

Balance at April 30, 2011	$	31
Additional reserves		159
Charges incurred		(21	)
Balance at April 30, 2012		169
Additional reserves		153
Charges incurred		(183	)
Balance at April 30, 2013	$	139

Schedule of inventories

Inventories are stated at the lower of cost or the current estimated market values. Cost is determined using the first-in, first-out method. Inventories consisted of the following:

	April 30,		April 30,
	2013		2012
(Amounts in thousands)
Raw materials and subassemblies	$	2,872	$	1,775
Work-in-process		33		63
Finished goods		760		821
	$	3,665	$	2,659

Net equipment, furniture and fixtures

Net equipment, furniture and fixtures consisted of the following:

	April 30,			April 30,
	2013			2012
(Amounts in thousands)
Plant and machinery	$	757		$	724
Computer equipment		1,662			1,482
Leasehold improvement		201			190
Furniture, fixtures and equipment		96			91
Construction in progress		25			-
		2,741			2,487
Accumulated depreciation and amortization		(2,168	)		(2,005	)
Net equipment, furniture and fixtures	$	573		$	482

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RELATED PARTY TRANSACTIONS (Details) (USD $)	12 Months Ended					12 Months Ended								12 Months Ended						12 Months Ended			12 Months Ended
	Apr. 30, 2013	Apr. 30, 2012	Apr. 30, 2013 PGMC [Member] Lottery Products [Member]	Apr. 30, 2012 PGMC [Member] Lottery Products [Member]	Dec. 20, 2011 PGMC [Member] Lottery Products [Member] Order One [Member]	Apr. 30, 2013 PGMC [Member] Lottery Products and Support Services [Member]	Apr. 30, 2012 PGMC [Member] Lottery and Software Support Services [Member]	Apr. 30, 2013 BLM [Member]	Apr. 30, 2012 BLM [Member]	Apr. 30, 2013 Sports Toto Malaysia Sdn. Bhd. [Member]	Apr. 30, 2012 Sports Toto Malaysia Sdn. Bhd. [Member]	Dec. 31, 2011 Sports Toto Malaysia Sdn. Bhd. [Member]	Jan. 11, 2013 Sports Toto Malaysia Sdn. Bhd. [Member] Lottery Products [Member]	Apr. 30, 2013 Sports Toto Malaysia Sdn. Bhd. [Member] Contract Deliverables and Sale of Support Services [Member]	Apr. 30, 2012 Sports Toto Malaysia Sdn. Bhd. [Member] Contract Deliverables and Sale of Support Services [Member]	Apr. 30, 2013 Sports Toto Malaysia Sdn. Bhd. [Member] Software Support Services [Member]	Apr. 30, 2012 Sports Toto Malaysia Sdn. Bhd. [Member] Software Support Services [Member]	Apr. 30, 2013 Natural Avenue Sdn. Bhd. [Member]	Apr. 30, 2012 Natural Avenue Sdn. Bhd. [Member]	Apr. 30, 2012 Natural Avenue Sdn. Bhd. [Member] Contract Deliverables and Sale of Support Services [Member]	Apr. 30, 2013 Natural Avenue Sdn. Bhd. [Member] Lottery Product Licensing [Member]	Apr. 30, 2012 Natural Avenue Sdn. Bhd. [Member] Lottery Product Licensing [Member]	Apr. 30, 2013 Natural Avenue Sdn. Bhd. [Member] Support Services and Licensing [Member]	Apr. 30, 2013 Sports Toto Computers Sdn. Bhd. [Member]
Related Party Transaction [Line Items]
Revenue from related party	$ 4,200,000	$ 6,100,000				$ 1,100,000	$ 3,800,000	$ 0	$ 0					$ 3,000,000	$ 2,000,000					$ 243,000			$ 142,000
Sales revenue, related party, percentage (in hundredths)	40.00%	51.00%
Accounts receivable from related parties	411,000	189,000	0	189,000				0	0	410,000	0							1,000	0
Outstanding voting stock held by Berjaya Lottery Management (H.K.) Ltd. (in hundredths)	71.30%
Payable to parent	202,000	252,000						202,000	252,000
Inventories	3,665,000	2,659,000						0	0
Deferred revenues	5,451,000	687,000	0	264,000	1,100,000							4,300,000	11,000,000			3,300,000	9,000				4,000	4,000
Net cost and estimated earnings in excess of billings	0	726,000								0	726,000
Services incurred																								$ 196,000

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INCOME TAXES (Details) (USD $)	12 Months Ended
	Apr. 30, 2013	Apr. 30, 2012
Current:
Federal	$ 5,000	$ 22,000
State	3,000	3,000
Current Income Tax Expense (Benefit), Total	8,000	25,000
Deferred:
Federal	(1,327,000)	0
State	(228,000)	0
Total	(1,547,000)	25,000
Reconciliation of the expected income tax provision or benefit at the statutory federal income tax rate to the actual provision or benefit [Abstract]
Expected federal income tax provision (benefit)	528,000	428,000
State taxes, net of federal benefit	2,000	2,000
Permanent differences	11,000	10,000
Change in valuation allowance	(2,088,000)	(6,218,000)
Net operating loss carryover expiration	0	5,804,000
Other	0	(1,000)
Provision for (benefit of) income taxes	(1,547,000)	25,000
Decrease in the deferred tax assets	1,800,000
Deferred tax assets [Abstract]
Net operating loss, general business credit and AMT carryforwards	5,531,000	7,054,000
Deferred revenue	85,000	84,000
Reserves and accruals	1,188,000	1,445,000
Total	6,804,000	8,583,000
Deferred tax liabilities [Abstract]
Other	(52,000)	(24,000)
Net deferred tax assets before valuation allowance	6,752,000	8,559,000
Valuation allowance	(5,197,000)	(8,559,000)
Net deferred taxes	1,555,000	0
Tax Credit Carryforward [Line Items]
Minimum percentage of cumulative change in ownership limits federal credit and net operating loss carryforwards (in hundredths)	50.00%
Period over which cumulative change in ownership limits federal credit and net operating loss carryforwards	3 years
Interest and penalties	0	0
Federal [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	14,500,000
Net operating loss carryforwards, expiration dates	2018
Federal [Member] | Research and Development Credit Carryforwards [Member]
Tax Credit Carryforward [Line Items]
Tax credit carryforwards	284,000
Tax credit carryforwards, expiration date	Dec. 31, 2020
Federal [Member] | Alternative Minimum Tax Credit Carryforward [Member]
Tax Credit Carryforward [Line Items]
Tax credit carryforwards	137,000
California [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards	1,600,000
Net operating loss carryforwards, expiration dates	2029
California [Member] | Research and Development Credit Carryforwards [Member]
Tax Credit Carryforward [Line Items]
Tax credit carryforwards	$ 158,000

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CREDIT RISK (Details) (USD $)	Apr. 30, 2013 FinancialInstitution	Apr. 30, 2012	Apr. 30, 2011
CREDIT RISK [Abstract]
Cash and cash equivalents	$ 7,259,000	$ 2,783,000	$ 3,881,000
Money market funds	1,500,000
FDIC coverage limit	250,000
Other cash balances	$ 5,600,000
Number of financial institutions in which entity maintains its other cash balances	3

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Apr. 30, 2013	Apr. 30, 2012
Cash flows from operating activities:
Net income	$ 3,099	$ 1,233
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	181	141
Inventory obsolescence reserve	0	334
Deferred income taxes	(1,555)	0
Warranty reserve expense	153	159
Impairment charge for patent write-off	0	16
Changes in operating assets and liabilities:
Accounts receivable	(1,265)	(586)
Costs and estimated earnings in excess of billings on uncompleted contracts	726	(694)
Deferred cost of revenues	(126)	107
Inventories	(1,137)	(2,557)
Other current assets	(64)	(106)
Accounts payable	1,110	918
Billings in excess of costs and estimated earnings on uncompleted contracts	0	(231)
Accrued payroll and related taxes	(4)	62
Warranty reserves	(183)	(21)
Payable to Parent	(50)	1
Other liabilities	(37)	(4)
Deferred revenues	4,764	72
Net cash provided by (used in) operating activities	5,612	(1,156)
Cash flows from investing activities:
Purchases of certificates of deposit	(1,245)	(500)
Proceeds from redemption of certificates of deposit	250	749
Additions to equipment, furniture and fixtures	(141)	(191)
Net cash (used in) provided by investing activities	(1,136)	58
Net increase (decrease) in cash and cash equivalents	4,476	(1,098)
Cash and cash equivalents at beginning of year	2,783	3,881
Cash and cash equivalents at end of year	7,259	2,783
Supplemental cash flow information:
Cash paid for income taxes	48	0
Non-cash inventory activities:
Inventory transferred to equipment	$ 131	$ 0

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BUSINESS SEGMENTS, GEOGRAPHIC REVENUES, MAJOR CUSTOMERS AND MAJOR VENDORS

12 Months Ended

Apr. 30, 2013

BUSINESS SEGMENTS, GEOGRAPHIC REVENUES, MAJOR CUSTOMERS AND MAJOR VENDORS [Abstract]

BUSINESS SEGMENTS, GEOGRAPHIC REVENUES, MAJOR CUSTOMERS AND MAJOR VENDORS

2. BUSINESS SEGMENTS, GEOGRAPHIC REVENUES, MAJOR CUSTOMERS AND MAJOR VENDORS

Segment Information

The Company reports segment information based on the "management" approach. Under this approach, operating segments are identified in substantially the same manner as they are reported internally and used by the Company's chief operating decision maker for purposes of evaluating performance and allocating resources.

The Company divides its operations into two operating segments: the gaming business and the voting business. The gaming segment designs and develops computerized wagering systems and terminals for the lottery and pari-mutuel racing industries worldwide. Presently the voting segment generates revenues from the sales of the voting systems and hardware, software licensing, product servicing and software support services.

The Company's segment information is presented below (in thousands):

	As of and for the Year Ended April 30, 2013
	Gaming Business			Voting Business			Totals
Total revenues		$	7,396		$	3,175		$	10,571
Income from operations			1,502			49			1,551
Depreciation and amortization			112			69			181
Segment assets			14,886			1,948			16,834
	As of and for the Year Ended April 30, 2012
	Gaming Business			Voting Business			Totals
Total revenues		$	7,052		$	5,032		$	12,084
Income from operations			973			279			1,252
Depreciation and amortization			89			52			141
Segment assets			5,160			2,822			7,982

Geographic Revenues

Revenues by geographic area are as follows (in thousands):

	Years Ended
	April 30,
Customer Location	2013		2012
Asia	$	4,197	$	6,117
North America		3,178		5,320
Europe		3,196		647
	$	10,571	$	12,084

As of April 30, 2013 and 2012, all of the Company's assets were held in the United States. During the fiscal years ended April 30, 2013 and 2012, a significant portion of the Company's revenues was derived from exports from the United States to foreign countries.

Major Customers

	April 30, 2013	April 30, 2012
Revenue:
From unrelated customers	One customer from the gaming segment accounted for 30% of total revenue and one customer from the voting segment accounted for 22% of total revenue.	One customer from the voting segment accounted for 32% of total revenue.
From related customers	Two customers from the gaming segment accounted for 38% of total revenue or 28% and 10% individually.	Two customers from the gaming segment accounted for 49% of total revenue or 32% and 17% individually.

Major Vendors

For the year ended April 30, 2013, five vendors accounted for approximately 73%, or 18%, 18%, 15%, 12%, and 10% individually, of the Company's product purchases. For the year ended April 30, 2012, two vendors accounted for approximately 37%, or 26% and 11% individually, of the Company's purchases.

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RELATED PARTY TRANSACTIONS

12 Months Ended

Apr. 30, 2013

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

5. RELATED PARTY TRANSACTIONS

During the years ended April 30, 2013 and 2012, revenues from all related party agreements for sales of products and services totaled approximately $4.2 million (40% of total revenue) and $6.1 million (51% of total revenue), respectively. Included in accounts receivable at April 30, 2013 and 2012 was $411,000 and $189,000, respectively, from these customers. Descriptions of the transactions with the Company's related parties in the years ended April 30, 2013 and 2012 are presented below.

Berjaya Lottery Management (H.K.) Ltd.

In 1996, the Company entered into an agreement to purchase specific inventory on behalf of Berjaya Lottery Management (H.K.) Ltd. ("BLM"), the owner of 71.3% of ILTS's outstanding voting stock as of April 30, 2013.

Over time, the Company has sold or used portions of the BLM inventory in unrelated third-party transactions. The sale or use of the inventory resulted in a liability to BLM for the cost of the items utilized.

The financial activities and balances related to BLM were as follows:

· There were no related party sales to BLM in the years ended April 30, 2013 and 2012;

· There were no accounts receivable balances from BLM at April 30, 2013 and 2012;

· Liabilities to BLM arising from the sale or use of the BLM inventory, recorded as "Payable to Parent," were $202,000 and $252,000 as of April 30, 2013 and 2012, respectively; and

· There were no inventory balances held for BLM as of April 30, 2013 and 2012.

Sports Toto Malaysia Sdn. Bhd.

The Company provides lottery products, software development and software support services to Sports Toto Malaysia ("STM"), an affiliate of BLM and a related party.

In December 2011, the Company signed a contract with STM for a complete DataTrakII lottery system valued at approximately $4.3 million. The contract was completed in fiscal 2013 and the related revenue was recognized accordingly.

In January 2013, the Company received from STM, an order valued at approximately $11 million for lottery products. Shipments of these products are to begin and be completed in fiscal 2014.

The financial activities and balances related to transactions with STM were as follows:

· Revenue recognized on the performance of contract deliverables and sale of support services totaled approximately $3 million during the year ended April 30, 2013, compared to $2 million in fiscal 2012;

· There was no net billings in excess of costs and estimated earnings balance as of April 30, 2013. Net cost and estimated earnings in excess of billings related to the abovementioned contract received in 2011 totaled approximately $726,000 as of April 30, 2012;

· The deferred revenue balance in connection with the lottery product order received in December 2011 and software support services totaled approximately $3.3 million as of April 30, 2013. The deferred revenue balance was $9,000 as of April 30, 2012 related to software support services; and

· Accounts receivable balance from STM totaled $410,000 as of April 30, 2013. There was no accounts receivable balance as of April 30, 2012.

Philippine Gaming Management Corporation

In December 2011, the Company received from Philippine Gaming Management Corporation ("PGMC"), a related party and a subsidiary of BLM, an order valued at approximately $1.1 million for lottery products. Shipments of these products were completed in fiscal 2013 and the related revenue was recognized accordingly.

In addition, the Company provides PGMC with terminal spare parts on an ongoing basis and support services on an as-needed basis.

The financial activities and balances related to transactions with PGMC were as follows:

· Revenues recognized on the sale of lottery products and support services totaled approximately $1.1 million during the year ended April 30, 2013. For the year ended April 30, 2012, revenue recognized on the sale of lottery products and software support services totaled approximately $3.8 million;

· There was no deferred revenue balance as of April 30, 2013. The deferred revenue balance in connection with the lottery product order received in December 2011 mentioned above totaled approximately $264,000 as of April 30, 2012; and

· There was no accounts receivable balance as of April 30, 2013. Accounts receivable totaled $189,000 as of April 30, 2012.

Natural Avenue Sdn. Bhd.

The Company provides Natural Avenue Sdn. Bhd. ("Natural Avenue"), an affiliate of BLM and a related party, with lottery and software products, support services and spare parts.

The financial activities and balances related to transactions with Natural Avenue were as follows:

· During the year ended April 30, 2013, revenue of $142,000 was recognized on the sale of support services and licensing. Revenue of $243,000 was recognized on the performance of contract deliverables and sale of support services during the year ended April 30, 2012;

· There were deferred revenue balances of $4,000 on lottery product licensing as of April 30, 2013 and 2012; and

· Accounts receivable totaled $1,000 as of April 30, 2013. There was no accounts receivable balance from Natural Avenue as of April 30, 2012.

Sports Toto Computers Sdn. Bhd.

The Company engages Sports Toto Computers Sdn. Bhd. ("STC"), a related party, to provide consulting, programming and other related services to the Company.

During the year ended April 30, 2013, the Company incurred approximately $196,000. The same amount was incurred during the year ended April 30, 2012.

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CREDIT RISK

12 Months Ended

Apr. 30, 2013

CREDIT RISK [Abstract]

CREDIT RISK

3. CREDIT RISK

Of the cash and cash equivalents amount of approximately $7.3 million at April 30, 2013, approximately $1.5 million represents highly liquid money market funds which are not Federal Deposit Insurance Corporation ("FDIC") insured. As of April 30, 2013, such other cash balances exceeded the FDIC limitation for coverage of $250,000 by approximately $5.6 million. The Company maintains its other cash balances primarily in three financial institutions. The Company reduces its exposure to credit risk by maintaining all of its cash balances with highly rated financial institutions.

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CONTRACTS IN PROCESS (Details) (USD $) In Thousands, unless otherwise specified	Apr. 30, 2013	Apr. 30, 2012
Total costs exceeded or were less than billings [Abstract]
Costs incurred and estimated earnings recognized on uncompleted contracts	$ 4,295	$ 6,340
Billings on uncompleted contracts	(4,295)	(5,614)
Total contracts in process	0	726
Balance sheet location of contracts in process [Abstract]
Costs and estimated earnings in excess of billings on uncompleted contracts	0	726
Billings in excess of costs and estimated earnings on uncompleted contracts	0	0
Total contracts in process	$ 0	$ 726

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Apr. 30, 2013	Apr. 30, 2012
Current assets:
Accounts receivable, allowance for doubtful accounts	$ 75	$ 75
Shareholders' equity:
Preferred shares, par value (in dollars per share)	$ 0	$ 0
Preferred shares, shares authorized (in shares)	20,000	20,000
Preferred shares, shares issued (in shares)	0	0
Preferred shares, shares outstanding (in shares)	0	0
Common shares, par value (in dollars per share)	$ 0	$ 0
Common shares, shares authorized (in shares)	50,000	50,000
Common shares, shares issued (in shares)	12,963	12,963
Common shares, shares outstanding (in shares)	12,963	12,963

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EMPLOYEE 401(k) PLANS

12 Months Ended

Apr. 30, 2013

EMPLOYEE 401(k) PLANS [Abstract]

EMPLOYEE 401(k) PLANS

8. EMPLOYEE 401(k) PLANS

The Company maintains a 401(k) plan (the "Plan"), qualified under the Internal Revenue Code, in which all eligible employees, as defined in the Internal Revenue Code, may elect to participate. Under the Plan, employees may voluntarily make tax-deferred contributions of up to 15% of their compensation to a trust, which provides the participant with various investment alternatives. In addition, for each fiscal year, the Company, at the discretion of the Board of Directors, may contribute an amount of Company stock with a fair market value that does not exceed 5% of the annual compensation of all participants in the Plan. The Company made no contributions during the years ended April 30, 2013 or 2012. The Company also maintains another 401(k) plan in which long-tenured employees maintain accounts; however, the Company and its employees are no longer contributing to this plan.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $) In Thousands	Common Stock [Member]	Accumulated Deficit [Member]	Total
Balance at Apr. 30, 2011	$ 56,370	$ (52,262)	$ 4,108
Balance (in shares) at Apr. 30, 2011	12,963
Net income		1,233	1,233
Balance at Apr. 30, 2012	56,370	(51,029)	5,341
Balance (in shares) at Apr. 30, 2012	12,963		12,963
Net income		3,099	3,099
Balance at Apr. 30, 2013	$ 56,370	$ (47,930)	$ 8,440
Balance (in shares) at Apr. 30, 2013	12,963		12,963

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Apr. 30, 2013	Apr. 30, 2012
Current assets:
Cash and cash equivalents	$ 7,259	$ 2,783
Certificates of deposit	1,245	250
Accounts receivable, net of allowance for doubtful accounts of $75	2,054	789
Costs and estimated earnings in excess of billings on uncompleted contracts	0	726
Deferred cost of revenue	132	6
Inventories	3,665	2,659
Deferred income taxes	1,555	0
Other current assets	298	238
Total current assets	16,208	7,451
Equipment, furniture and fixtures, net	573	482
Other noncurrent assets	53	49
Total assets	16,834	7,982
Current liabilities:
Accounts payable	2,180	1,070
Accrued payroll and related taxes	384	388
Warranty reserves	139	169
Payable to Parent	202	252
Other current liabilities	38	63
Deferred revenues	5,451	687
Total current liabilities	8,394	2,629
Long-term liabilities	0	12
Total liabilities	8,394	2,641
Commitments and contingencies
Shareholders' equity:
Preferred shares, no par value; 20,000 shares authorized; no shares issued or outstanding	0	0
Common shares, no par value; 50,000 shares authorized; 12,963 shares issued and outstanding	56,370	56,370
Accumulated deficit	(47,930)	(51,029)
Total shareholders' equity	8,440	5,341
Total liabilities and shareholders' equity	$ 16,834	$ 7,982

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LEASES (Details) (USD $)	12 Months Ended
	Apr. 30, 2013	Apr. 30, 2012
LEASES [Abstract]
Lease expiration date	Nov. 30, 2015
Monthly base rent payments for year one	$ 13,900
Monthly base rent payments for year two	14,400
Monthly base rent payments for year three	15,000
Period of free rent	1 month
Future minimum lease payments for all operating leases [Abstract]
2014	155,000
2015	176,000
2016	105,000
Total future minimum lease payments	436,000
Rent expense	$ 170,000	$ 186,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	12 Months Ended
	Apr. 30, 2013	Apr. 30, 2012
Description of the Business [Abstract]
Lead time of deposit upon contract signing before delivery of hardware begins, maximum	6 months
Outstanding voting stock held by Berjaya Lottery Management (H.K.) Ltd. (in hundredths)	71.30%
Revenue Recognition for Arrangements with Multiple Deliverables [Abstract]
Period of service of software licenses	1 year
Deferred Revenues and Deferred Cost of Revenues [Abstract]
Deferred revenues	$ 5,451,000	$ 687,000
Deferred cost of revenue	132,000	6,000
Allowance for Doubtful Accounts [Abstract]
Allowance for doubtful accounts	75,000	75,000
Product warranty reserve activity [Roll Forward]
Balance, beginning of period	169,000	31,000
Additional reserves	153,000	159,000
Charges incurred	(183,000)	(21,000)
Balance, end of period	139,000	169,000
Summary of inventories [Abstract]
Raw materials and subassemblies	2,872,000	1,775,000
Work-in-process	33,000	63,000
Finished Goods	760,000	821,000
Total	3,665,000	2,659,000
Net equipment, furniture and fixtures [Abstract]
Gross equipment, furniture and fixtures	2,741,000	2,487,000
Accumulated depreciation and amortization	(2,168,000)	(2,005,000)
Net equipment, furniture and fixtures	573,000	482,000
Plant and Machinery [Member]
Net equipment, furniture and fixtures [Abstract]
Gross equipment, furniture and fixtures	757,000	724,000
Computer Equipment [Member]
Net equipment, furniture and fixtures [Abstract]
Gross equipment, furniture and fixtures	1,662,000	1,482,000
Leasehold Improvement [Member]
Net equipment, furniture and fixtures [Abstract]
Gross equipment, furniture and fixtures	201,000	190,000
Furniture, Fixtures and Equipment [Member]
Net equipment, furniture and fixtures [Abstract]
Gross equipment, furniture and fixtures	96,000	91,000
Construction in Progress [Member]
Net equipment, furniture and fixtures [Abstract]
Gross equipment, furniture and fixtures	$ 25,000	$ 0
Minimum [Member]
Property, Plant and Equipment [Line Items]
Equipment, furniture and fixtures, estimated useful lives	P3Y
Maximum [Member]
Property, Plant and Equipment [Line Items]
Equipment, furniture and fixtures, estimated useful lives	P7Y
Hardware [Member] | Minimum [Member]
Product Information [Line Items]
Product warranty period	6 months
Hardware [Member] | Maximum [Member]
Product Information [Line Items]
Product warranty period	12 months
Software [Member] | Minimum [Member]
Product Information [Line Items]
Product warranty period	6 months
Software [Member] | Maximum [Member]
Product Information [Line Items]
Product warranty period	12 months
Spares [Member]
Product Information [Line Items]
Product warranty period	90 days

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LEASES

12 Months Ended

Apr. 30, 2013

LEASES [Abstract]

LEASES

7. LEASES

On April 12, 2012, the Company entered into an amendment agreement to extend the term of its building lease to November 30, 2015. Effective December 1, 2012, the monthly base rent payment was $13,900 for the first year of the lease and the monthly base rent payments will be $14,400 and $15,000 for years two and three, respectively. The agreement also provides for one month of free rent.

Future minimum lease payments for all operating leases are as follows (in thousands):

For Fiscal Year Ending April 30,	Minimum Lease Payments
2014	$	155
2015		176
2016		105
	$	436

Rent expense for all operating leases for the years ended April 30, 2013 and 2012 was $170,000 and $186,000, respectively.

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EMPLOYEE 401(k) PLANS (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Apr. 30, 2013	Apr. 30, 2012
EMPLOYEE 401(k) PLANS [Abstract]
Maximum voluntarily tax deferred contribution by employee (in hundredths)	15.00%
Maximum annual contribution by employer (in hundredths)	5.00%
Contributions by employer	$ 0	$ 0

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RECENT ACCOUNTING PRONOUNCEMENTS

12 Months Ended

Apr. 30, 2013

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

10. RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements

The FASB had issued certain other accounting pronouncements as of April 30, 2013 that will become effective in subsequent periods; however, the Company does not believe any of those pronouncements are relevant to its business or would have significantly affected its financial accounting measurements or disclosures had they been in effect during fiscal 2013.

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CONTRACTS IN PROCESS

12 Months Ended

Apr. 30, 2013

CONTRACTS IN PROCESS [Abstract]

CONTRACTS IN PROCESS

6. CONTRACTS IN PROCESS

The amounts by which total costs exceeded or were less than billings on uncompleted contracts are as follows (in thousands):

	April 30,			April 30,
	2013			2012
Costs incurred and estimated earnings recognized on uncompleted contracts	$	4,295		$	6,340
Billings on uncompleted contracts		(4,295	)		(5,614	)
	$	-		$	726

The amounts shown in the table above are included in the associated balance sheet as follows (in thousands):

	April 30,		April 30,
	2013		2012
Costs and estimated earnings in excess of billings on uncompleted contracts	$	-	$	726
Billings in excess of costs and estimated earnings on uncompleted contracts		-		-
	$	-	$	726

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Apr. 30, 2013

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the Business

International Lottery & Totalizator Systems, Inc. ("ILTS" or the "Company," together with its subsidiary) designs, manufactures, sells, manages, supports and services computerized wagering systems and terminals for the global lottery and pari-mutuel racing industries. The wagering system features include real-time, secure processing of data received from multiple locations, hardware redundancy and complete communications redundancy in order to provide the highest level of fault tolerant operation. In addition, although the Company is not presently doing so, ILTS has demonstrated capability to provide full facilities management services to customer organizations authorized to conduct lotteries. The Company is largely dependent upon significant contracts for its revenue, which typically include a deposit upon contract signing and up to six months lead time before delivery of hardware begins.

The Company, through its wholly-owned subsidiary Unisyn Voting Solutions, Inc. ("Unisyn"), has devoted significant resources to developing federally certified end-to-end optical scan voting systems and a full-featured Election Management Software that provides precinct tabulation, ballot review and audio voting capability. In addition to the InkaVote Plus Precinct Ballot Counter ("PBC") system certified to the National Association of State Election Directors ("NASED") 2002 Voting System Standards ("VSS"), the Company received the 2005 Voluntary Voting System Guidelines ("VVSG") certification from the United States Election Assistance Commission ("EAC") for its OpenElect® digital optical scan election system – a digital scan voting system built with Java on a streamlined and hardened Linux platform. As part of a jurisdiction's procurement process, the Company will provide the OpenElect® products' source code for independent review.

These efforts leverage the Company's extensive experience to develop highly secure, mission-critical solutions that meet the NASED 2002 VSS and the EAC 2005 VVSG standards. In addition, the Company's voting systems offer the following features:

· High level of security and vote encryption to ensure integrity and voter privacy;

· Electronic and paper audit trails that offer added security and redundancy for recounts;

· Reduce the cost of ballot printing while offering operational efficiencies;

· Minimal training required for poll workers to set-up and operate; and

· Minimal voter re-education required.

Berjaya Lottery Management (H.K.) Ltd. ("BLM" or the "Parent") owns 71.3% of the outstanding voting stock of ILTS.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of ILTS and its wholly-owned subsidiary, Unisyn Voting Solutions, Inc. All significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. Actual results could differ from those estimates. Estimates may affect the reported amounts of assets and liabilities and revenues and expenses, and the disclosure of contingent assets and liabilities.

Revenue Recognition

The Company derives its revenues primarily from the sales of complete wagering systems, lottery terminals, the OpenElect® and PBC voting systems, other software and software support services. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the customer once it has been shipped and the title and risk of loss have been transferred. Service revenues are recognized as the services are rendered, and the related costs of services are recognized on a time and materials basis.

Revenue Recognition for Arrangements with Multiple Deliverables

For multi-element arrangements that include hardware products containing software essential to the hardware product's functionality, undelivered software elements that relate to the hardware product's essential software, and undelivered non-software services, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value ("VSOE"), (ii) third-party evidence of selling price ("TPE") and (iii) best estimate of the selling price ("ESP"). VSOE generally exists only when the Company sells the deliverable separately and VSOE is the price actually charged for that deliverable. TPE is determined based on competitor prices for similar deliverables when sold separately. ESPs reflect the Company's best estimates of what the selling prices of elements would be if they were sold regularly on a standalone basis.

For sales of hardware products, the Company provides various hardware components containing software essential to the hardware product's functionality, and other components depending on the customers' needs. The Company allocates revenue to these deliverables using the relative selling price method. Because the Company has not established VSOE or TPE for the hardware, with essential software, revenue is allocated based on ESPs. Revenue is recognized upon shipment of the hardware and the related essential software, provided the other conditions for revenue recognition have been met. The Company also provides software support and product support services on a standalone basis from the sales of the hardware. Amounts allocated to software support and product support services are based on VSOE using hourly or daily billing rates. Revenue is deferred until the services are performed. For annual software licenses, the Company uses VSOE. Amounts allocated to annual software licenses are deferred and recognized on a straight-line basis over the service period, which is typically one year.

The Company considers multiple factors depending on the unique facts and circumstances related to each deliverable when determining ESPs for deliverables without VSOE or TPE. Key factors considered by the Company in developing the ESPs for the hardware include the costs of manufacture and what a customer would reasonably pay based on the features being offered, trends in the market place, size of the territory, and competitive prices. If the facts and circumstances underlying the factors change, including the estimated or actual costs incurred to provide the hardware with the essential software, or should future facts and circumstances lead the management to consider additional factors, the Company's ESP for the hardware with essential software related to future sales could change.

Revenue Recognition for Percentage-of-Completion Method

For the complete wagering and lottery systems, the Company recognizes revenue by using the percentage-of-completion method when the contracts for complete systems fulfill the following criteria:

1. Contract performance extends over long periods of time;

2. The software portion involves significant production, modification or customization;

3. Reasonably dependable estimates can be made on the progress towards completion, contract revenues and contract costs; and

4. Each element is essential to the functionality of the other elements of the contracts.

Under the percentage-of-completion method, sales and estimated gross profits are recognized as work progresses. Progress toward completion is measured by the ratio of costs incurred to total estimated costs. Revenue and gross profit may be adjusted prospectively for revisions in the estimated total contract costs. If the current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is recorded in the period in which it becomes evident. The total estimated loss includes all costs allocable to the specific contract.

In addition to the software portion of a complete system, the Company develops software for its customers in accordance with the specifications stipulated in a software supply contract. Generally, these contracts are related to additional features or modules to be added to the application software that the Company has previously developed for its customers. Each software contract is reviewed individually to determine the appropriate basis of recognizing revenue.

Deferred Revenues and Deferred Cost of Revenues

Deferred revenues of approximately $5.4 million and $687,000 as of April 30, 2013 and 2012, respectively, represent prepayments for products and services related to lottery terminals, use of the OpenElect® and PBC voting systems and other software and technical support services. Deferred cost of revenues of approximately $132,000 and $6,000 as of April 30, 2013 and 2012, respectively, consist of direct costs associated with lottery terminals, software support and manufacture of voting systems. The Company will recognize revenues and related cost of revenues upon fulfillment of the prescribed criteria for revenue recognition.

Allowance for Doubtful Accounts

The Company determines its allowance for doubtful accounts by considering a number of factors:

1. Length of time trade accounts receivable are past due;

2. The Company's previous loss history;

3. The customer's current ability to pay its obligations;

4. Known specific issues or disputes which exist as of the balance sheet date; and

5. The condition of the general economy and the industry as a whole.

Based on its evaluation, the Company determined that no additional allowance was required as of April 30, 2013. The Company maintained an allowance for doubtful accounts of $75,000 as of April 30, 2013 and 2012.

Warranty Reserves

Estimated warranty costs are accrued as revenues are recognized. Included in the warranty cost accruals are costs for basic warranties on products sold. A summary of product warranty reserve activity for the fiscal years ended April 30, 2013 and 2012 is as follows:

(Amounts in thousands)

Balance at April 30, 2011	$	31
Additional reserves		159
Charges incurred		(21	)
Balance at April 30, 2012		169
Additional reserves		153
Charges incurred		(183	)
Balance at April 30, 2013	$	139

Warranty reserves are based on historical trends and are adjusted periodically to reflect actual experience. Customers do not have a right to return, except for defective products.The most recent inventory cost is used to determine the value of potential warranty costs. Estimated reserves for warranty obligations are accrued as follows:

1. Contracts - Contract warranties are specific to the individual contracts. Estimated reserves for warranty obligations are accrued as revenue is recognized. Hardware and software components may be warranted separately:

a. Hardware – The warranty phase for terminals or terminal kits commences upon shipment and can extend from six months to twelve months depending on the specific contract terms.

b. Software – The warranty phase typically represents a six to twelve-month period of time after delivery, as defined by the specific contract terms.

2. Spares – Terminal replacement parts are warranted to be free from defects for 90 days from the date of shipment. Based on historical experience, warranty costs for spares have been immaterial.

3. Other – Specific provisions have been made to cover a small number of particular replacement parts for specific customers.

Income Taxes and Valuation Allowance

The Company recognizes tax benefits associated with uncertain tax positions when, in management's assessment, it is more likely than not that the positions will be sustained upon examination by a taxing authority. For tax positions that meet the more likely than not recognition threshold, the Company measures the tax benefits as the largest amount that the Company evaluates to have a greater than 50% likelihood of being realized upon ultimate settlement. The Company reviewed its tax positions and determined that an adjustment to the tax provision is not considered necessary nor is a reserve for income taxes required.

The Company accounts for income taxes pursuant to the asset and liability method. This requires deferred income tax assets and liabilities to be computed annually for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the temporary differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Foreign Currency Fluctuation

The Company's reporting currency is the U.S. dollar. Sales are denominated almost exclusively in U.S. dollars. Occasionally, sales have been effected in foreign currencies. Fluctuations in exchange rates from reporting period to reporting period between various foreign currencies and the U.S. dollar may have an impact on revenue and expense. Such effect may be material in any individual reporting period. No material foreign currency transactions occurred during the years ended April 30, 2013 and 2012.

Inventories

Inventories are stated at the lower of cost or the current estimated market values. Cost is determined using the first-in, first-out method. Inventories consisted of the following:

	April 30,		April 30,
	2013		2012
(Amounts in thousands)
Raw materials and subassemblies	$	2,872	$	1,775
Work-in-process		33		63
Finished goods		760		821
	$	3,665	$	2,659

Equipment, Furniture and Fixtures

Equipment, furniture and fixtures are carried at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets which approximate three to seven years. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the lease term. The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, or when the net book value of such assets exceeds the future undiscounted cash flow attributed to such assets. At April 30, 2013 and 2012, and during the years ended April 30, 2013 and 2012, no indicators of impairment were identified.

Net equipment, furniture and fixtures consisted of the following:

	April 30,			April 30,
	2013			2012
(Amounts in thousands)
Plant and machinery	$	757		$	724
Computer equipment		1,662			1,482
Leasehold improvement		201			190
Furniture, fixtures and equipment		96			91
Construction in progress		25			-
		2,741			2,487
Accumulated depreciation and amortization		(2,168	)		(2,005	)
Net equipment, furniture and fixtures	$	573		$	482

Net Income per Share

Basic net income per share was based on the weighted average number of shares outstanding during April 30, 2013 and 2012.

There were no outstanding options or other dilutive securities at April 30, 2013 and 2012.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the purchase date to be cash equivalents.

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BUSINESS SEGMENTS, GEOGRAPHIC REVENUES, MAJOR CUSTOMERS AND MAJOR VENDORS (Tables)

12 Months Ended

Apr. 30, 2013

BUSINESS SEGMENTS, GEOGRAPHIC REVENUES, MAJOR CUSTOMERS AND MAJOR VENDORS [Abstract]

Segment information

The Company's segment information is presented below (in thousands):

	As of and for the Year Ended April 30, 2013
	Gaming Business			Voting Business			Totals
Total revenues		$	7,396		$	3,175		$	10,571
Income from operations			1,502			49			1,551
Depreciation and amortization			112			69			181
Segment assets			14,886			1,948			16,834
	As of and for the Year Ended April 30, 2012
	Gaming Business			Voting Business			Totals
Total revenues		$	7,052		$	5,032		$	12,084
Income from operations			973			279			1,252
Depreciation and amortization			89			52			141
Segment assets			5,160			2,822			7,982

Revenues by geographic area

Revenues by geographic area are as follows (in thousands):

	Years Ended
	April 30,
Customer Location	2013		2012
Asia	$	4,197	$	6,117
North America		3,178		5,320
Europe		3,196		647
	$	10,571	$	12,084

Major customers

Major Customers

	April 30, 2013	April 30, 2012
Revenue:
From unrelated customers	One customer from the gaming segment accounted for 30% of total revenue and one customer from the voting segment accounted for 22% of total revenue.	One customer from the voting segment accounted for 32% of total revenue.
From related customers	Two customers from the gaming segment accounted for 38% of total revenue or 28% and 10% individually.	Two customers from the gaming segment accounted for 49% of total revenue or 32% and 17% individually.

Major Vendors

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FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Apr. 30, 2013

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

9. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's material financial instruments consist of its cash and cash equivalents, certificates of deposit, accounts receivable, accounts payable and related party payables. The carrying amounts of the Company's financial instruments generally approximated their fair values at April 30, 2013 and 2012 due to the short-term maturity of the instruments.

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LEASES (Tables)

12 Months Ended

Apr. 30, 2013

LEASES [Abstract]

Future minimum lease payments for all operating leases

Future minimum lease payments for all operating leases are as follows (in thousands):

For Fiscal Year Ending April 30,	Minimum Lease Payments
2014	$	155
2015		176
2016		105
	$	436

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INCOME TAXES (Tables)

12 Months Ended

Apr. 30, 2013

INCOME TAXES [Abstract]

Provision of income taxes

The (benefit) provision for income taxes is as follows (in thousands):

	Years Ended April 30,
	2013			2012
Current:
Federal	$	5		$	22
State		3			3
		8			25
Deferred:
Federal		(1,327	)		-
State		(228	)		-
Total	$	(1,547	)	$	25

Reconciliation of the expected income tax provision or benefit at the statutory federal income tax rate to the actual provision or benefit

The following is a reconciliation of the expected income tax benefit or provision at the statutory federal income tax rate for the actual provision or benefit:

	Years Ended April 30,
	2013			2012
(Amounts in thousands)
Expected federal income tax provision	$	528		$	428
State taxes, net of federal benefit		2			2
Permanent differences		11			10
Change in valuation allowance		(2,088	)		(6,218	)
Net operating loss carryover expiration		-			5,804
Other		-			(1	)
	$	(1,547	)	$	25

Significant components of deferred tax assets

Significant components of the Company's deferred tax assets are as follows:

	April 30,			April 30,
(Amounts in thousands)	2013			2012
Deferred tax assets:
Net operating loss, general business credit and AMT carryforwards	$	5,531		$	7,054
Deferred revenue		85			84
Reserves and accruals		1,188			1,445
		6,804			8,583
Deferred tax liabilities:
Other		(52	)		(24	)
Net deferred tax assets before valuation allowance		6,752			8,559
Valuation allowance		(5,197	)		(8,559	)
Net deferred taxes	$	1,555		$	-

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Document and Entity Information (USD $)	12 Months Ended
	Apr. 30, 2013	Jul. 09, 2013	Oct. 31, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS INC
Entity Central Index Key	0000354813
Current Fiscal Year End Date	--04-30
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 1,747,311
Entity Common Stock, Shares Outstanding		12,962,999
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Apr. 30, 2013

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CONTRACTS IN PROCESS (Tables)

12 Months Ended

Apr. 30, 2013

CONTRACTS IN PROCESS [Abstract]

Total costs exceeded or were less than billings

The amounts by which total costs exceeded or were less than billings on uncompleted contracts are as follows (in thousands):

	April 30,			April 30,
	2013			2012
Costs incurred and estimated earnings recognized on uncompleted contracts	$	4,295		$	6,340
Billings on uncompleted contracts		(4,295	)		(5,614	)
	$	-		$	726

Balance sheet location of contracts in process

The amounts shown in the table above are included in the associated balance sheet as follows (in thousands):

	April 30,		April 30,
	2013		2012
Costs and estimated earnings in excess of billings on uncompleted contracts	$	-	$	726
Billings in excess of costs and estimated earnings on uncompleted contracts		-		-
	$	-	$	726