Related Party Transactions

6 Months Ended

Oct. 31, 2011

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

During the three months ended October 31, 2011 and 2010, revenues from all related party agreements for sales of products and services totaled approximately $1.3 million (66% of the total revenue) and $1.2 million (61% of the total revenue), respectively.  Related party revenues for the six months ended October 31, 2011 and 2010 were approximately $1.5 million (59% of the total revenue) and $2.6 million (70% of the total revenue), respectively. Included in accounts receivable on October 31, 2011 was approximately $397,000 from these customers. Descriptions of the transactions with the Company's related parties in the three and six months ended October 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 October 31, 2011.  

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 six months ended October 31, 2011 and 2010;

•   There were no accounts receivable balances from BLM as of October 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 October 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 were completed in the second quarter of fiscal 2012, and the related revenue was recognized.

On August 12, 2011, the Company received from PGMC, an order valued at approximately $1.4 million for lottery products. Shipments of these products are expected to begin and be completed in the third quarter of fiscal 2012.

On September 9, 2011, the Company received from PGMC, an order valued at approximately $705,000 for lottery products. Shipments of these products are expected to begin and be completed in the fourth 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 services during the three and six months ended October 31, 2011 totaled approximately $1.2 million and $1.3 million, respectively. Revenues recognized on the sale of lottery products and software support services during the three and six months ended October 31, 2010 totaled approximately $965,000 and $1.9 million, respectively; 

•   There was no billings in excess of costs and estimated earnings balance as of October 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 orders dated September 9, 2011 and August 12, 2011 mentioned above, there were deferred revenues of approximately $529,000 as of October 31, 2011. There was no deferred revenue balance as of April 30, 2011; and    

•   Accounts receivable from the sale of lottery products totaled $385,000 as of October 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 $77,000 and $155,000 were recognized on the sale of support services during the three and six months ended October 31, 2011, respectively. Revenues of $78,000 and $155,000 were recognized on the sale of support services during the three and six months ended October 31, 2010, respectively;

•   There were deferred revenues of $10,000 on software support services as of October 31, 2011, compared to $9,000 as of April 30, 2011; and

•   There was no accounts receivable balance from STM as of October 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 $32,000 and $83,000 were recognized on the performance of contract deliverables, sale of support services and licensing during the three and six months ended October 31, 2011, respectively. Revenues of $91,000 and $511,000 were recognized on the performance of contract deliverables and sale of support services during the three and six months ended October 31, 2010, respectively;

•   Net billings in excess of costs and estimated earnings relating to the abovementioned contract dated December 16, 2009 totaled approximately $89,000 as of October 31, 2011, compared to $105,000 as of April 30, 2011;

•   There were deferred revenues of $11,000 for lottery product licensing as of October 31, 2011, compared to $10,000 on software support services as of April 30, 2011; and

•   Accounts receivable totaled approximately $11,000 as of October 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 and six months ended October 31, 2011, the Company incurred services of approximately $50,000 and $101,000, respectively, which are shown as part of cost of sales. During the three and six months ended October 31, 2010, the Company incurred approximately $55,000 and $113,000, respectively, which are shown as part of cost of sales.  

Ascot Sports Sdn. Bhd.

The Company provided Ascot Sports Sdn. Bhd. an affiliate of BLM and a related party, with software products.  

•   There was no revenue recognized during the three and six months ended October 31, 2011. Revenue of $66,000 was recognized on the software product development during the three and six months ended October 31, 2010; and

•   There were no account receivable balances as of October 31, 2011 and April 30, 2011.