Commitments and Contingencies

9 Months Ended

Jun. 30, 2011

COMMITMENTS AND CONTINGENCIES [Abstract]

Commitments and Contingencies Disclosure [Text Block]

COMMITMENTS AND CONTINGENCIES

Litigation and Regulatory Proceedings

The Company is subject to the possibility of loss contingencies arising in its business and such contingencies are accounted for in accordance with ASC Topic 450, “Contingencies.” In determining loss contingencies, the Company considers the possibility of a loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recorded when it is considered probable that a liability has been incurred and when the amount of loss can be reasonably estimated.

The Company is the subject of various pending and threatened claims in the ordinary course of business. The Company believes that any liability resulting from these various other claims will not have a material adverse effect on its results of operations or financial condition or cash flows. During its ordinary course of business, the Company enters into obligations to defend, indemnify and/or hold harmless various customers, officers, directors, employees and other third parties. These contractual obligations could give rise to additional litigation costs and involvement in court proceedings.

Mexico Income Tax Audits

The Company's Mexican subsidiary, Multimedia Games de Mexico 1, S. de R.L. de C.V., or Multimedia Games de Mexico, has been under audit by the Mexico taxing authorities for the periods ended December 31, 2006 and 2007. On November 19, 2010, the Company filed before the taxing authorities an administrative appeal against the resolutions set forth by the taxing authorities in ruling number 500-74-02-04-03-2010-9403, which assessed an income and value added tax deficiency to Multimedia Games de Mexico for the 2007 tax year in the amount of approximately $15.5 million, resulting from presumed omission of income, disallowed deductions, lack of distribution of dividends, value added tax deficiency, penalties and inflation adjustments, as well as an additional employee's profit sharing in the amount of approximately $670,000. The principal basis for the taxing authorities' assessment for the 2007 tax year is that the Company could not substantiate certain asset acquisitions with original shipping manifests, thus the authorities make the assumption that the assets have been sold, resulting in taxable income. The Company has appealed the assessment and believes that it can provide evidence that it still holds the assets at customer locations or within its warehouse in Mexico City, thus supporting it has not sold such assets. Management continues to believe that the Company has a reasonable defense against this assessment. The ultimate assessment will range from $0 to $15.5 million, and management cannot reasonably estimate the amount at this time.  Additionally, management does not believe that a loss is probable and thus has not recorded a reserve for this matter, although it is possible that an adverse outcome could have an adverse effect upon our financial condition, operating results or cash flow.