RELATED PARTY TRANSACTIONS

12 Months Ended

Apr. 30, 2013

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

5. RELATED PARTY TRANSACTIONS

During the years ended April 30, 2013 and 2012, revenues from all related party agreements for sales of products and services totaled approximately $4.2 million (40% of total revenue) and $6.1 million (51% of total revenue), respectively. Included in accounts receivable at April 30, 2013 and 2012 was $411,000 and $189,000, respectively, from these customers. Descriptions of the transactions with the Company's related parties in the years ended April 30, 2013 and 2012 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 April 30, 2013.

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 years ended April 30, 2013 and 2012;

· There were no accounts receivable balances from BLM at April 30, 2013 and 2012;

· Liabilities to BLM arising from the sale or use of the BLM inventory, recorded as "Payable to Parent," were $202,000 and $252,000 as of April 30, 2013 and 2012, respectively; and

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

In December 2011, the Company signed a contract with STM for a complete DataTrakII lottery system valued at approximately $4.3 million. The contract was completed in fiscal 2013 and the related revenue was recognized accordingly.

In January 2013, the Company received from STM, an order valued at approximately $11 million for lottery products. Shipments of these products are to begin and be completed in fiscal 2014.

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

· Revenue recognized on the performance of contract deliverables and sale of support services totaled approximately $3 million during the year ended April 30, 2013, compared to $2 million in fiscal 2012;

· There was no net billings in excess of costs and estimated earnings balance as of April 30, 2013. Net cost and estimated earnings in excess of billings related to the abovementioned contract received in 2011 totaled approximately $726,000 as of April 30, 2012;

· The deferred revenue balance in connection with the lottery product order received in December 2011 and software support services totaled approximately $3.3 million as of April 30, 2013. The deferred revenue balance was $9,000 as of April 30, 2012 related to software support services; and

· Accounts receivable balance from STM totaled $410,000 as of April 30, 2013. There was no accounts receivable balance as of April 30, 2012.

Philippine Gaming Management Corporation

In December 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 fiscal 2013 and the related revenue was recognized accordingly.

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 totaled approximately $1.1 million during the year ended April 30, 2013. For the year ended April 30, 2012, revenue recognized on the sale of lottery products and software support services totaled approximately $3.8 million;

· There was no deferred revenue balance as of April 30, 2013. The deferred revenue balance in connection with the lottery product order received in December 2011 mentioned above totaled approximately $264,000 as of April 30, 2012; and

· There was no accounts receivable balance as of April 30, 2013. Accounts receivable totaled $189,000 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 and software products, support services and spare parts.

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

· During the year ended April 30, 2013, revenue of $142,000 was recognized on the sale of support services and licensing. Revenue of $243,000 was recognized on the performance of contract deliverables and sale of support services during the year ended April 30, 2012;

· There were deferred revenue balances of $4,000 on lottery product licensing as of April 30, 2013 and 2012; and

· Accounts receivable totaled $1,000 as of April 30, 2013. There was no accounts receivable balance from Natural Avenue as of 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 year ended April 30, 2013, the Company incurred approximately $196,000. The same amount was incurred during the year ended April 30, 2012.