Related Party Transactions

9 Months Ended

Jan. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

During the three months ended January 31, 2014 and 2013, revenues from all related party transactions for the sales of products and services totaled approximately $2.9 million (73% of total revenue) and $646,000 (32% of total revenue), respectively. Related party revenues for the nine months ended January 31, 2014 and 2013 were approximately $11.7 million (56% of total revenue) and $3.7 million (48% of total revenue), respectively.  Included in accounts receivable at January 31, 2014 was approximately $157,000 from these customers. Descriptions of the transactions with the Company’s related parties in the three and nine months ended January 31, 2014 and 2013 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 January 31, 2014.  

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 and nine months ended January 31, 2014 and 2013;

· There were no accounts receivable balances from BLM as of January 31, 2014 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 January 31, 2014 and April 30, 2013; and

·   There were no inventory balances held for BLM as of January 31, 2014 and April 30, 2013.

Sports Toto Malaysia Sdn. Bhd.

The Company provides lottery products, software development and software support services to Sports Toto Malaysia Sdn. Bhd. (“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 were completed in the third quarter of fiscal 2014, and the related revenue was recognized.

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

·   Revenues of approximately $2.9 million and $11.5 million were recognized on the sale of lottery products and support services during the three and nine months ended January, 31, 2014, respectively. Revenues of $609,000 and $2.5 million were recognized on the performance of contract deliverables and support services during the three and nine months ended January 31, 2013, respectively;

·   There was no cost of deferred revenues as of January 31, 2014. Cost of deferred revenues in connection with the lottery product order received in January 2013 mentioned above totaled $104,000 as of April 30, 2013;

· There was deferred revenue of $7,000 on lottery products and software support services as of January 31, 2014, compared to $3.3 million as of April 30, 2013; and

·   Accounts receivable totaled $146,000 as of January 31, 2014, 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 and nine months ended January 31, 2014 totaled $7,000 and $72,000, respectively. Revenues of $2,000 and $1.1 million were recognized on the sale of lottery products during the three and nine months ended January 31, 2013, respectively; 

·   There were no deferred revenue balances as of January 31, 2014 and April 30, 2013; and

· There were no accounts receivable balances as of January 31, 2014 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 of $36,000 and $107,000 were recognized on the sale of support services and licensing during the three and nine months ended January 31, 2014, respectively. Revenues of $35,000 and $105,000 were recognized on the sale of support services and licensing during the three and nine months ended January 31, 2013, respectively;

·   There was deferred revenue of $8,000 as of January 31, 2014. Deferred revenue balance on lottery product licensing totaled $4,000 as of April 30, 2013; and

·   Accounts receivable was $11,000 as of January 31, 2014, 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 and nine months ended January 31, 2014, the Company incurred services of approximately $51,000 and $152,000, respectively, which are shown as part of cost of sales. During the three and nine months ended January 31, 2013, the Company incurred approximately $65,000 and $145,000, respectively, which are shown as part of cost of sales.