Related Party Transactions

3 Months Ended

Jul. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

During the three months ended July 31, 2013 and 2012, revenues from all related party transactions for the sales of products and services totaled approximately $163,000 (2% of total revenue) and $2.2 million (66% of total revenue), respectively. Included in accounts receivable on July 31, 2013 was approximately $38,000 from these customers. Descriptions of the transactions with the Company’s related parties in the three months ended July 31, 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 July 31, 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 three months ended July 31, 2013 and 2012;

· There were no accounts receivable balances from BLM as of July 31, 2013 and April 30, 2013;

·   Liabilities to BLM arising from the sale or use of the BLM inventory, recorded as “Payable to Parent,” were $202,000 as of both July 31, 2013 and April 30, 2013; and

·   There were no inventory balances held for BLM as of July 31, 2013 and April 30, 2013.

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

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

·   Revenue recognized on the sale of support services during the three months ended July 31, 2013 was approximately $122,000. For the three months ended July 31, 2012, revenues recognized on the performance of contract deliverables and sale of support services totaled approximately $1.1 million;

·   Cost of deferred revenues in connection with the lottery product order received in January 2013 mentioned above totaled $188,000 as of July 31, 2013 and $104,000 as of April 30, 2013;

· There were deferred revenue balances of approximately $3.3 million on lottery products and software support services as of July 31, 2013 and April 30, 2013; and

·   Accounts receivable totaled $27,000 as of July 31, 2013, compared to $410,000 as of April 30, 2013.

Philippine Gaming Management Corporation

The Company provides lottery products and software development to Philippine Gaming Management Corporation (“PGMC”), a related party and a subsidiary of BLM.

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 during the three months ended July 31, 2013 and 2012 totaled approximately $5,000 and $1.1 million, respectively; 

·   There were no deferred revenue balances as of July 31, 2013 and April 30, 2013; and

· There were no accounts receivable balances as of July 31, 2013 and April 30, 2013.

Natural Avenue Sdn. Bhd.

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

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

·   Revenues recognized on the sale of support services and licensing during the three months ended July 31, 2013 and 2012 totaled approximately $36,000 and $35,000, respectively;

·   There was no deferred revenue balance as of July 31, 2013. Deferred revenue balance on lottery product licensing totaled $4,000 as of April 30, 2013; and

·   Accounts receivable was $11,000 as of July 31, 2013, compared to $1,000 as of April 30, 2013.

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 three months ended July 31, 2013 and 2012, the Company incurred service expenses of approximately $51,000 and $40,000, respectively, which are shown as part of cost of sales.