Related Party Transactions

During the three months ended October 31, 2012 and 2011, revenues from all related party transactions for the sales of products and services totaled approximately $909,000 (38% of total revenue) and $1.3 million (66% of total revenue), respectively. Related party revenues for the six months ended October 31, 2012 and 2011 were approximately $3.1 million (54% of total revenue) and $1.5 million (59% of total revenue), respectively. Included in accounts receivable at October 31, 2012 was approximately $2.6 million from these customers. Descriptions of the transactions with the Company's related parties in the three and six months ended October 31, 2012 and 2011 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 October 31, 2012.

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, 2012 and 2011;
·	There were no accounts receivable balances from BLM as of October 31, 2012 and April 30, 2012;
·	Liabilities to BLM arising from the sale or use of the BLM inventory, recorded as "Payable to Parent," were $252,000 as of October 31, 2012 and April 30, 2012; and
·	There were no inventory balances held for BLM as of October 31, 2012 and April 30, 2012.

Philippine Gaming Management Corporation

On December 20, 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 first quarter of fiscal 2013, and the related revenue was recognized.

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 six months ended October 31, 2012 totaled approximately $3,000 and $1.1 million, respectively. Revenues of $1.2 million and $1.3 million were recognized on the sale of lottery products and support services during the three and six months ended October 2011, respectively;
·	There was no deferred revenue balance as of October 31, 2012. Deferred revenue balance in connection with the lottery product order dated December 20, 2011 mentioned above totaled approximately $264,000 as of April 30, 2012; and
·	The accounts receivable balance from the sale of lottery products totaled $53,000 as of October 31, 2012, compared to $189,000 as of April 30, 2012.

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.

On December 21, 2011, the Company signed a contract with STM for a complete DataTrakII lottery system valued at approximately $4.3 million. This contract is scheduled to be completed by the fourth quarter of fiscal 2013.

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

·	Revenues of $871,000 and $1.9 million were recognized on the performance of contract deliverables and support services during the three and six months ended October, 31, 2012, respectively. 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;
·	Net billings in excess of costs and estimated earnings relating to the abovementioned contract dated December 21, 2011 totaled approximately $453,000 as of October 31, 2012, compared to net costs and estimated earnings in excess of billings of approximately $726,000 as of April 30, 2012;
·	There were deferred revenues of $9,000 on software support services as of October 31, 2012 and April 30, 2012; and
·	Accounts receivable from STM totaled approximately $2.6 million as of October 31, 2012. There was no accounts receivable balance as of April 30, 2012.

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 $35,000 and $70,000 were recognized on the sale of support services and licensing during the three and six months ended October 31, 2012, respectively. 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;
·	There was deferred revenue of $11,000 on lottery product licensing as of October 31, 2012, compared to $4,000 as of April 30, 2012; and
·	There were no accounts receivable balances from Natural Avenue as of October 31, 2012 and April 30, 2012.

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, 2012, the Company incurred services of approximately $40,000 and $80,000, respectively, which are shown as part of cost of sales. During the three and six months ended October 31, 2011, the Company incurred approximately $50,000 and $101,000, respectively, which are shown as part of cost of sales.