Related Party Transactions

3 Months Ended

Jul. 31, 2011

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

During the three months ended July 31, 2011 and 2010, revenues from all related party agreements for sales of products and services totaled approximately $225,000 (37% of total revenue) and $1.4 million (82% of total revenue), respectively.  Included in accounts receivable at July 31, 2011 was approximately $15,000 from these customers.  Descriptions of the transactions with the Company's related parties in the three months ended July 31, 2011 and 2010 are presented below.

Berjaya Lottery Management (H.K.) Ltd. (“BLM”)

In 1996, the Company entered into an agreement to purchase specific inventory on behalf of BLM, the owner of 71.3% of ILTS's outstanding voting stock as of July 31, 2011.  Title to the inventory resides with BLM and is on consignment; therefore, no amounts are reflected in the Company's condensed consolidated balance sheets for inventory purchased on BLM's behalf.

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 results 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, 2011 and 2010;

•   There were no accounts receivable balances from BLM as of July 31, 2011 and April 30, 2011; and

•   Liabilities to BLM arising from the sale or use of the BLM inventory, recorded as “Payable to Parent,” were $252,000 and $251,000 as of July 31, 2011 and April 30, 2011, respectively.

Philippine Gaming Management Corporation

On May 3, 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 are expected to begin in the second quarter of fiscal 2012 and be complete in the third quarter of fiscal 2012.

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 service during the three months ended July 31, 2011 and 2010 totaled approximately $96,000 and $924,000, respectively; 

•   There was no billing in excess of costs and estimated earnings balance as of July 31, 2011. Net cost and estimated earnings in excess of billings relating to support services totaled approximately $32,000 as of April 30, 2011;

•   In connection with the lottery product order dated May 3, 2011 mentioned above, there was a deferred revenue balance of approximately $264,000 as of July 31, 2011. There was no deferred revenue balance as of April 30, 2011; and    

•   Accounts receivable from the sale of lottery products totaled $4,000 as of July 31, 2011, compared to $47,000 as of April 30, 2011.

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.  

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

•   Revenues of $78,000 were recognized on the sale of support services during each of the three months ended July 31, 2011 and 2010;

•   There were deferred revenues of $9,000 on software support services as of July 31, 2011 and April 30, 2011; and

•   There was no accounts receivable balance from STM as of July 31, 2011, compared to $16,000 as of April 30, 2011.

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.  

On December 16, 2009, the Company signed a contract with Natural Avenue for a complete DataTrak lottery system valued at approximately $3.6 million.  The contract is scheduled to be completed by the fourth quarter of fiscal 2012.

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

•   Revenues of $51,000 and $420,000 were recognized on the performance of contract deliverables and sale of support services during the three months ended July 31, 2011 and 2010, respectively;

•   Net billings in excess of costs and estimated earnings relating to the abovementioned contract dated December 16, 2009 totaled approximately $85,000 as of July 31, 2011, compared to $105,000 as of April 30, 2011; and

•   Accounts receivable totaled approximately $11,000 as of July 31, 2011, compared to $16,000 as of April 30, 2011.

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, 2011 and 2010, the Company incurred services of approximately $51,000 and $58,000, respectively.