10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[x]           QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2014

[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to________________________

Commission File Number:  0-10294

INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

California	95-3276269
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2310 Cousteau Court Vista, California (Address of principal executive offices) 92081-8346 (Zip Code)

(760) 598-1655

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	ý

Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes o No ý

The number of shares outstanding of the registrant’s Common Stock, no par value, as of March 13, 2014 was 12,962,999.

INDEX

PART I	FINANCIAL INFORMATION	PAGE
Item 1.	Financial Statements (Unaudited)		3-12
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		13-18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		19
Item 4.	Controls and Procedures		19
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		19
Item 1A.	Risk Factors		19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 3.	Defaults Upon Senior Securities		19
Item 4.	Mine Safety Disclosures		19
Item 5.	Other Information		19
Item 6.	Exhibits		20
	Signatures

EXHIBIT 31

EXHIBIT 32

2

PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS

INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
	January 31,			April 30,
	2014			2013
	(Unaudited)			(1)
ASSETS
Current assets:
Cash and cash equivalents	$	11,609		$	7,259
Certificates of deposit		249			1,245
Accounts receivable, net of allowance for doubtful accounts of $75		626			2,054
Deferred cost of revenues		1			132
Inventories		1,431			3,665
Deferred income taxes		-			1,555
Other current assets		181			298
Total current assets		14,097			16,208
Equipment, furniture and fixtures, net		541			573
Other noncurrent assets		49			53
Total assets	$	14,687		$	16,834
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	791		$	2,180
Accrued payroll and related taxes		321			384
Warranty reserves		218			139
Payable to Parent		202			202
Other current liabilities		334			38
Deferred revenues		785			5,451
Total current liabilities		2,651			8,394
Long-term liabilities		12			-
Total liabilities		2,663			8,394
Commitments and contingencies
Shareholders’ equity:
Preferred shares, no par value; 20,000 shares authorized; no shares issued or outstanding		-			-
Common shares, no par value; 50,000 shares authorized; 12,963 shares issued and outstanding		56,370			56,370
Accumulated deficit		(44,346	)		(47,930	)
Total shareholders' equity		12,024			8,440
Total liabilities and shareholders' equity	$	14,687		$	16,834

(1) Derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC.

See notes to condensed consolidated financial statements

3

INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in thousands, except per share amounts)

	Three Months Ended					Nine Months Ended
	January 31,					January 31,
	2014		2013			2014		2013
Revenues:
Sales of products	$	3,699	$	1,709		$	19,724	$	6,769
Services		298		297			1,013		924
		3,997		2,006			20,737		7,693
Cost of sales:
Cost of product sales		2,083		1,372			12,829		4,222
Cost of services		76		146			314		349
		2,159		1,518			13,143		4,571
Gross profit		1,838		488			7,594		3,122
Selling, general and administrative expenses		688		580			2,112		1,803
Income (loss) from operations		1,150		(92	)		5,482		1,319
Other income:
Interest and dividend income		-		-			1		-
Income (loss) before provision for income taxes		1,150		(92	)		5,483		1,319
Provision (benefit) for income taxes		200		(3	)		1,899		20
Net income (loss)	$	950	$	(89	)	$	3,584	$	1,299
Net income (loss) per share:
Basic	$	0.07	$	(0.01	)	$	0.27	$	0.10
Weighted average shares used in computation of net income (loss) per share:
Basic		12,963		12,963			12,963		12,963

See notes to condensed consolidated financial statements

4

INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in thousands)

	Nine Months Ended January 31,
	2014			2013
Cash flows from operating activities:
Net income	$	3,584		$	1,299
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		139			133
Warranty reserve expense		170			75
Loss on disposal of equipment		25			-
Deferred income taxes		1,555			-
Changes in operating assets and liabilities:
Accounts receivable		1,428			(116	)
Costs and estimated earnings in excess of billings on uncompleted contracts		-			666
Deferred cost of revenues		131			3
Inventories		2,234			1,089
Other current and noncurrent assets		121			(215	)
Accounts payable		(1,389	)		(845	)
Accrued payroll and related taxes		(63	)		94
Warranty reserves		(91	)		(137	)
Other liabilities		308			(33	)
Deferred revenues		(4,666	)		1,721
Net cash provided by operating activities		3,486			3,734
Cash flows from investing activities:
Proceeds from redemption of certificates of deposit		996			250
Additions to equipment, furniture and fixtures		(132	)		(217	)
Net cash provided by investing activities		864			33
Net increase in cash and cash equivalents		4,350			3,767
Cash and cash equivalents at beginning of period		7,259			2,783
Cash and cash equivalents at end of period	$	11,609		$	6,550
Supplemental cash flow information:
Cash paid for income taxes	$	243		$	43

See notes to condensed consolidated financial statements

5

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Description of the Business

International Lottery & Totalizator Systems, Inc. (“ILTS” or the “Company,” together with its subsidiary) designs, manufactures, sells, manages, supports and services computerized wagering systems and terminals for the global lottery and pari-mutuel racing industries. The wagering system features include real-time, secure processing of data received from multiple locations, hardware redundancy and complete communications redundancy in order to provide the highest level of fault tolerant operation. In addition, although the Company is not presently doing so, ILTS has demonstrated capability to provide full facilities management services to customer organizations authorized to conduct lotteries. The Company is largely dependent upon significant contracts for its revenue, which typically include a deposit upon contract signing and up to six months lead time before delivery of hardware begins.

The Company, through its wholly-owned subsidiary Unisyn Voting Solutions, Inc. (“Unisyn”), has devoted significant resources to developing federally certified end-to-end optical scan voting systems and a full-featured Election Management Software that provides precinct tabulation, ballot review and audio voting capability. In addition to the InkaVote Plus Precinct Ballot Counter (“PBC”) system certified to the National Association of State Election Directors (“NASED”) 2002 Voting System Standards (“VSS”), the Company received the 2005 Voluntary Voting System Guidelines (“VVSG”) certification from the United States Election Assistance Commission (“EAC”) for its OpenElect® digital optical scan election system – a digital scan voting system built with Java on a streamlined and hardened Linux platform. As part of a jurisdiction’s procurement process, the Company will provide the OpenElect® products’ source code for independent review.

These efforts leverage the Company’s extensive experience to develop highly secure, mission-critical solutions that meet the NASED 2002 VSS and the EAC 2005 VVSG standards. In addition, the Company’s voting systems offer the following features:

· High level of security and vote encryption to ensure integrity and voter privacy;

· Electronic and paper audit trails that offer added security and redundancy for recounts;

· Reduce the cost of ballot printing while offering operational efficiencies;

· Minimal training required for poll workers to set-up and operate; and

· Minimal voter re-education required.

Berjaya Lottery Management (H.K.) Ltd. (“BLM” or the “Parent”) owns 71.3% of the outstanding voting stock of ILTS.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of ILTS and its wholly-owned subsidiary, Unisyn. All significant intercompany accounts and transactions are eliminated in consolidation.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the Securities and Exchange Commission’s (“SEC”) instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows have been included.

The results of operations for the interim periods shown in this report are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC on July 9, 2013. The condensed consolidated balance sheet as of April 30, 2013 has been derived from the audited financial statements included in the Form 10-K for that year.

6

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. Actual results could differ from those estimates. Estimates may affect the reported amounts of assets and liabilities and revenues and expenses, and the disclosure of contingent assets and liabilities.

Deferred Revenues

Deferred revenues of approximately $785,000 as of January 31, 2014 represent prepayments for products and services related to the use of the OpenElect® and PBC voting systems, and other software and technical support services. The Company will recognize the revenues upon the fulfillment of the prescribed criteria for revenue recognition.

Warranty Reserves

Estimated warranty costs are accrued as revenues are recognized. Included in the warranty cost accruals are costs for basic warranties on products sold. A summary of product warranty reserve activity for the nine months ended January 31, 2014 is as follows:

(Amounts in thousands)
Balance at May 1, 2013	$	139
Additional reserves		355
Warranty reserve expense adjustments		(185	)
Charges incurred		(91	)
Balance at January 31, 2014	$	218

Income Taxes

The Company uses the asset and liability method for financial reporting of income taxes. Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and the tax basis of assets and liabilities, and are measured by applying enacted rates and laws to taxable years in which such differences are expected to be recovered or settled. Any changes in tax rates or laws are recognized in the period when such changes are enacted. Valuation allowances have been established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company records a valuation allowance to reduce its deferred tax assets when uncertainty exists regarding the realizability of the deferred tax assets.

The provisions for income taxes were approximately $200,000 and $1.9 million for the three and nine months ended January 31, 2014, respectively. The effective rate was 34.73% for 2014, compared to a minimal effective rate for 2013. The increase in the effective rate for 2014 was due to the reversal of a portion of the valuation allowance and recording of a deferred tax asset at April 30, 2013. This deferred tax asset was fully recognized in the nine months ended January 31, 2014.

7

Segment Information

The Company reports segment information based on the “management” approach. Under this approach, operating segments are identified in substantially the same manner as they are reported internally and used by the Company’s chief operating decision maker for purposes of evaluating performance and allocating resources.

The Company divides its operations into two operating segments: the gaming business and the voting business. The gaming segment designs and develops computerized wagering systems and terminals for the lottery and pari-mutuel racing industries worldwide. Presently the voting segment generates revenues from the sales of the voting systems and hardware, software licensing, product servicing and software support services.

The Company’s segment information is presented below (in thousands):

	As of and for the Three Months Ended January 31, 2014
	Gaming Business			Voting Business				Totals
Total revenues		$	2,944		$	1,053			$	3,997
Income from operations			1,092			58				1,150
Depreciation and amortization			23			21				44
Segment assets			12,510			2,177				14,687
	As of and for the Three Months Ended January 31, 2013
	Gaming Business			Voting Business				Totals
Total revenues		$	1,724		$	282			$	2,006
Income (loss) from operations			185			(277	)			(92	)
Depreciation and amortization			27			19				46
Segment assets			8,214			1,942				10,156

	As of and for the Nine Months Ended January 31, 2014
	Gaming Business			Voting Business				Totals
Total revenues		$	18,475		$	2,262			$	20,737
Income (loss) from operations			5,810			(328	)			5,482
Depreciation and amortization			78			61				139
Segment assets			12,510			2,177				14,687
	As of and for the Nine Months Ended January 31, 2013
	Gaming Business			Voting Business				Totals
Total revenues		$	5,356		$	2,337			$	7,693
Income (loss) from operations			1,350			(31	)			1,319
Depreciation and amortization			83			50				133
Segment assets			8,214			1,942				10,156

8

Inventories

Inventories are stated at the lower of cost or the current estimated market values. Cost is determined using the first-in, first-out method.  

Inventories consisted of the following:

	January 31,		April 30,
	2014		2013
(Amounts in thousands)
Raw materials and subassemblies	$	1,211	$	2,872
Work-in-process		5		33
Finished goods		215		760
	$	1,431	$	3,665

Equipment, Furniture and Fixtures

Net equipment, furniture and fixtures consisted of the following:

	January 31,			April 30,
	2014			2013
(Amounts in thousands)
Plant and machinery	$	661		$	757
Computer equipment		1,728			1,662
Leasehold improvement		201			201
Furniture, fixtures and equipment		96			96
Construction in progress		-			25
		2,686			2,741
Accumulated depreciation and amortization		(2,145	)		(2,168	)
Net equipment, furniture and fixtures	$	541		$	573

Net Income (Loss) per Share

Basic net income (loss) per share is based on the weighted average number of shares outstanding during the periods.  

9

Major Customers

The following table summarizes major customers who individually accounted for more than 10% of revenues for the periods presented:

	Three Months Ended January 31,		Nine Months Ended January 31,
	2014	2013	2014	2013
Revenue:
From unrelated customers	One customer from the voting segment accounted for 22% of total revenue	One customer from the gaming segment accounted for 54% of total revenue	One customer from the gaming segment accounted for 33% of total revenue	One customer from the voting segment accounted for 22% of total revenue and one customer from the gaming segment accounted for 21% of total revenue
From related customers	One customer from the gaming segment accounted for 72% of total revenue	One customer from the gaming segment accounted for 30% of total revenue	One customer from the gaming segment accounted for 56% of total revenue	Two customers from the gaming segment accounted for 47% of total revenue

Related Party Transactions

During the three months ended January 31, 2014 and 2013, revenues from all related party transactions for the sales of products and services totaled approximately $2.9 million (73% of total revenue) and $646,000 (32% of total revenue), respectively. Related party revenues for the nine months ended January 31, 2014 and 2013 were approximately $11.7 million (56% of total revenue) and $3.7 million (48% of total revenue), respectively.  Included in accounts receivable at January 31, 2014 was approximately $157,000 from these customers. Descriptions of the transactions with the Company’s related parties in the three and nine months ended January 31, 2014 and 2013 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 January 31, 2014.  

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 nine months ended January 31, 2014 and 2013;

· There were no accounts receivable balances from BLM as of January 31, 2014 and April 30, 2013;

·   Liabilities to BLM arising from the sale or use of the BLM inventory, recorded as “Payable to Parent,” were $202,000 as of both January 31, 2014 and April 30, 2013; and

·   There were no inventory balances held for BLM as of January 31, 2014 and April 30, 2013.

10

Sports Toto Malaysia Sdn. Bhd.

The Company provides lottery products, software development and software support services to Sports Toto Malaysia Sdn. Bhd. (“STM”), an affiliate of BLM and a related party.  

In January 2013, the Company received from STM, an order valued at approximately $11 million for lottery products. Shipments of these products were completed in the third quarter of fiscal 2014, and the related revenue was recognized.

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

·   Revenues of approximately $2.9 million and $11.5 million were recognized on the sale of lottery products and support services during the three and nine months ended January, 31, 2014, respectively. Revenues of $609,000 and $2.5 million were recognized on the performance of contract deliverables and support services during the three and nine months ended January 31, 2013, respectively;

·   There was no cost of deferred revenues as of January 31, 2014. Cost of deferred revenues in connection with the lottery product order received in January 2013 mentioned above totaled $104,000 as of April 30, 2013;

· There was deferred revenue of $7,000 on lottery products and software support services as of January 31, 2014, compared to $3.3 million as of April 30, 2013; and

·   Accounts receivable totaled $146,000 as of January 31, 2014, compared to $410,000 as of April 30, 2013.

Philippine Gaming Management Corporation

The Company provides lottery products and software development to Philippine Gaming Management Corporation (“PGMC”), a related party and a subsidiary of BLM.

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 nine months ended January 31, 2014 totaled $7,000 and $72,000, respectively. Revenues of $2,000 and $1.1 million were recognized on the sale of lottery products during the three and nine months ended January 31, 2013, respectively; 

·   There were no deferred revenue balances as of January 31, 2014 and April 30, 2013; and

· There were no accounts receivable balances as of January 31, 2014 and April 30, 2013.

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 $36,000 and $107,000 were recognized on the sale of support services and licensing during the three and nine months ended January 31, 2014, respectively. Revenues of $35,000 and $105,000 were recognized on the sale of support services and licensing during the three and nine months ended January 31, 2013, respectively;

·   There was deferred revenue of $8,000 as of January 31, 2014. Deferred revenue balance on lottery product licensing totaled $4,000 as of April 30, 2013; and

·   Accounts receivable was $11,000 as of January 31, 2014, compared to $1,000 as of April 30, 2013.

11

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 nine months ended January 31, 2014, the Company incurred services of approximately $51,000 and $152,000, respectively, which are shown as part of cost of sales. During the three and nine months ended January 31, 2013, the Company incurred approximately $65,000 and $145,000, respectively, which are shown as part of cost of sales.

Fair Value of Financial Instruments

The Company’s material financial instruments consist of its cash and cash equivalents, certificates of deposit, accounts receivable, accounts payable and related party payables. The carrying amounts of the Company’s financial instruments generally approximated their fair values as of January 31, 2014 and April 30, 2013 due to the short-term maturity of the instruments.

Subsequent Events

On January 8, 2014, the Company’s board of directors approved (i) the Company’s reincorporation from California to Delaware by means of a merger with and into a wholly-owned Delaware subsidiary (the “Reincorporation”) and (ii) a subsequent amendment to the surviving company’s certificate of incorporation to effect a 9,245,317-for-1 reverse stock split (the “Reverse Stock Split”) on outstanding shares of common stock. On January 8, 2014 (January 9, 2014 Malaysia Time), Berjaya Lottery Management (H.K.) Limited (“BLM”), the holder of 9,245,317 shares of the Company’s common stock, representing 71.3% of the Company’s outstanding shares of common stock as of that date, approved the Reincorporation and Reverse Stock Split by written consent. Each shareholder holding less than one full share of common stock following the Reverse Stock Split, being every shareholder of the Company other than BLM, will receive a cash payment from the Company for their fractional share interests equal to $1.33 in cash, without interest, for each share of common stock held by such shareholder immediately prior to the Reverse Stock Split. The Reincorporation and the Reverse Stock Split will be effected on or about the date 20 calendar days following the date on which the Company’s Information Statement on Schedule 14C relating to the Reincorporation and Reverse Stock Split is mailed to the Company’s shareholders. Following consummation of the transactions, the Company will promptly terminate its registration and reporting obligations under the Securities Exchange Act of 1934, as amended.

12

 ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NOTE REGARDING FORWARD-LOOKING STATEMENTS

SAFE HARBOR STATEMENT PURSUANT TO SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934

This report contains certain forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those set forth under the heading "Risk Factors" and elsewhere in, or incorporated by reference into, this report. In some cases, you can identify forward-looking statements by terms such as "may," "intend," "might," "will," "should," "could," "would," "expect," "believe," "anticipate," "estimate," "predict," "potential," or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. The forward-looking statements in this report are based upon management's current expectations and belief, which management believes are reasonable. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including such factors, among others, as market acceptance and market demand for our products and services, pricing, the changing regulatory environment, the effect of our accounting policies, potential seasonality, industry trends, adequacy of our financial resources to execute our business plan, our ability to attract, retain and motivate key technical, marketing and management personnel, and other risks described from time to time in periodic and current reports we file with the United States Securities and Exchange Commission, or the "SEC." You should consider carefully the statements under "Item 1A. Risk Factors" and other sections of this report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

CRITICAL ACCOUNTING POLICIES

Use of Estimates

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. Accordingly, we are required to make estimates, judgments and assumptions that we believe are reasonable. We base our estimates on historical experience, contract terms, observance of known trends in our company and the industry as a whole, and information available from other outside sources. Estimates affect the reported amounts and related disclosures. Actual results may differ from initial estimates. There have been no material changes to the critical accounting policies outlined in the Company’s annual report on form 10-K for the fiscal year ended April 30, 2013.

13

Revenue Recognition

Our revenues are derived primarily from the sales of complete wagering systems, lottery terminals, the OpenElect® and PBC voting systems, other software and software support services. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the customer once it has been shipped and the title and risk of loss have been transferred.  Service revenues are recognized as the services are rendered, and the related costs of services are recognized on a time and materials basis.

Revenue Recognition for Arrangements with Multiple Deliverables

For multi-element arrangements that include hardware products containing software essential to the hardware product’s functionality, undelivered software elements that relate to the hardware product’s essential software, and undelivered non-software services, we allocate revenue to all deliverables based on their relative selling prices. In such circumstances, we use a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) and (iii) best estimate of the selling price (“ESP”). VSOE generally exists only when we sell the deliverable separately and VSOE is the price actually charged for that deliverable. TPE is determined based on competitor prices for similar deliverables when sold separately. ESPs reflect our best estimates of what the selling prices of elements would be if they were sold regularly on a standalone basis.

For sales of hardware products, we provide various hardware components containing software essential to the hardware product’s functionality, and other components depending on the customers’ needs. We allocate revenue to these deliverables using the relative selling price method. Because we have not established VSOE or TPE for the hardware, with essential software, revenue is allocated based on ESPs. Determining ESPs requires management’s judgment. Revenue is recognized upon shipment of the hardware and the related essential software, provided the other conditions for revenue recognition have been met. We also provide software support and product support services on a standalone basis from the sales of the hardware. Amounts allocated to software support and product support services are based on VSOE using hourly or daily billing rates. Revenue is deferred until the services are performed. For annual software licenses, we use VSOE. Amounts allocated to annual software licenses are deferred and recognized on a straight-line basis over the service period, which is typically one year.

We consider multiple factors depending on the unique facts and circumstances related to each deliverable when determining ESPs for deliverables without VSOE or TPE. Key factors considered by the management in developing the ESPs for the hardware include the costs of manufacture and what a customer would reasonably pay based on the features being offered, trends in the marketplace, size of the territory, and competitive prices. If the facts and circumstances underlying the factors change, including the estimated or actual costs incurred to provide the hardware with the essential software, or should future facts and circumstances lead management to consider additional factors, our ESP for the hardware with essential software related to future sales could change.

Revenue Recognition for Percentage-of-Completion Method

For our complete wagering and lottery systems, we recognize revenue by using the percentage-of-completion method when the contracts for complete systems fulfill the following criteria:

1.	Contract performance extends over long periods of time;
2.	The software portion involves significant production, modification or customization;
3.	Reasonably dependable estimates can be made on the progress towards completion, contract revenues and contract costs; and
4.	Each element is essential to the functionality of the other elements of the contracts.

Under the percentage-of-completion method, sales and estimated gross profits are recognized as work progresses. Progress toward completion is measured by the ratio of costs incurred to total estimated costs. Revenue and gross profit may be adjusted prospectively for revisions in estimated total contract costs. If the current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is recorded in the period in which it becomes evident. The total estimated loss includes all costs allocable to the specific contract.

14

RESULTS OF OPERATIONS

Revenue Analysis	Three Months Ended							Nine Months Ended
(Amounts in thousands)	January 31,							January 31,
Revenues	2014		2013		Change			2014		2013		Change
Products:
Contracts	$	3,547	$	1,567	$	1,980		$	19,095	$	5,924	$	13,171
Spares		49		54		(5	)		248		530		(282	)
Licensing		103		88		15			381		315		66
Total Products		3,699		1,709		1,990			19,724		6,769		12,955
Services:
Software Support		266		195		71			706		594		112
Product Servicing and Support		32		102		(70	)		307		330		(23	)
Total Services		298		297		1			1,013		924		89
	$	3,997	$	2,006	$	1,991		$	20,737	$	7,693	$	13,044

Significant fluctuations in period-to-period contract revenue are expected in both gaming and voting industries since individual contracts are generally considerable in value, and the timing of contracts does not occur in a predictable trend. Contracts from the same customer generally may not recur or generally do not recur in the short-term. Accordingly, comparative results between quarters may not be indicative of trends in contract revenue.

The current domestic and global economic slowdown and tightening of the credit markets may adversely affect our business and financial condition in ways that we cannot reasonably predict. For the gaming business, due to the tightening of the credit markets, our potential and existing customers may not be able to secure financing for lottery projects which could effectively impact our revenue potential. For the voting business, various government entities and jurisdictions have experienced severe budget constraints which could compel them to delay or cancel their purchasing decisions, and hence, impact our ability to generate revenue.

Contract revenue for the three months ended January 31, 2014 was approximately $3.5 million, compared to $1.6 million for the corresponding period in 2013. Higher contract revenue was primarily due to increased sales related to both the gaming and voting segments. For the nine months ended January 31, 2014, contract revenue was approximately $19.1 million, compared to $5.9 million for the corresponding period in 2013. Significantly higher contract revenue was primarily due to lottery product and hardware component sales related to the gaming and totalizator industries. The increase was partially offset by completion of a lottery contract and the absence of turnkey lottery system sales.

Spares revenue for the three months ended January 31, 2014 remained relatively flat at $49,000, compared to $54,000 for the same period in 2013. Spares revenue for the nine months ended January 31, 2014 was $248,000, compared to $530,000 for the corresponding period in 2013. The decrease was primarily due to lower demand for spare parts from an unrelated customer in the gaming segment. Customers' demand for spare parts fluctuates from period to period.  

Licensing revenue for the three months ended January 31, 2014 was $103,000, compared to $88,000 in 2013. For the nine months ended January 31, 2014, licensing revenue was $381,000, compared to $315,000 for the corresponding period in 2013. The increases in licensing revenues were primarily due to additional executed licensing agreements related to the voting segment. We derive licensing revenue from both voting and lottery contracts.

Software support revenue for the three months ended January 31, 2014 was $266,000, compared to $195,000 for the same period in 2013. For the nine months ended January 31, 2014, software support revenue was $706,000, compared to $594,000 in the same period in 2013. Higher software support revenues were primarily due to increased fees to support a customer in the gaming segment.

15

Product servicing and support revenue for the three months ended January 31, 2014 was $32,000, compared to $102,000 for the same period in 2013. For the nine months ended January 31, 2014, product servicing and support revenue was $307,000, compared to $330,000 for the same period in the prior year. The decreases were primarily due to lower demand for support services in the voting segment, partially offset by increased support services from an unrelated customer in the gaming segment.

Related party revenue of approximately $2.9 million accounted for 73% of total revenue in the three months ended January 31, 2014, compared to $646,000 or 32% of total revenue in the corresponding period in 2013. For the nine months ended January 31, 2014, related party revenue of approximately $11.7 million accounted for 56% of total revenue, compared to $3.7 million or 48% of total revenue in the corresponding period in 2013. 

Cost of Sales and Gross Profit Analysis

The following table summarizes the cost of sales and gross profit margins as a percentage of total revenues for each of the periods shown:

	Three Months Ended January 31,								Nine Months Ended January 31,
(Amounts in thousands)	2014				2013				2014				2013
Revenues:
Products	$	3,699	93	%	$	1,709	85	%	$	19,724	95	%	$	6,769	88	%
Services		298	7	%		297	15	%		1,013	5	%		924	12	%
Total revenues	$	3,997	100	%	$	2,006	100	%	$	20,737	100	%	$	7,693	100	%
Cost of sales:
Products	$	2,083	52	%	$	1,372	68	%	$	12,829	62	%	$	4,222	55	%
Services		76	2	%		146	7	%		314	2	%		349	5	%
Total costs of sales	$	2,159	54	%	$	1,518	75	%	$	13,143	64	%	$	4,571	60	%
Gross profit:
Products	$	1,616	40	%	$	337	17	%	$	6,895	33	%	$	2,547	33	%
Services		222	6	%		151	8	%		699	3	%		575	7	%
Total gross profit	$	1,838	46	%	$	488	25	%	$	7,594	36	%	$	3,122	40	%

In general, individual contracts are significant in value and certain contracts are awarded in a highly competitive bidding process. The gross profit margin varies from one contract to another, depending on the size of the contract and the competitiveness of market conditions. Accordingly, comparative results between quarters and fiscal years may not be indicative of trends in gross profit margin.

Overall gross profit margin was 46% for the three months ended January 31, 2014, compared to 25% for the corresponding period in 2013. Significantly higher gross profit margin in the third quarter of 2014 was primarily due to increased contract sales activities and low cost structures. For the nine months ended January 31, 2014, overall gross profit margin was 36% compared to 40% for the corresponding period in 2013. Decreased gross profit in 2014 was primarily due to increased production overhead costs related to the voting segment.

16

Selling, General and Administrative

Selling, general and administrative ("SG&A") expenses for the three months ended January 31, 2014 were $688,000, compared to $580,000 in the same period in 2013. For the nine months ended January 31, 2014, SG&A expenses were $2.1 million, compared to $1.8 million for the corresponding period in 2013. Higher SG&A expenses in 2014 were primarily due to increased legal and professional fees, and higher expenses incurred for marketing activities related to the voting segment, partially offset by lower employee related and trade show expenses.

Income Tax Provision

The provisions for income taxes were approximately $200,000 and $1.9 million for the three and nine months ended January 31, 2014, respectively. The effective rate was 34.73% for 2014, compared to a minimal effective rate for 2013. The increase in the effective rate for 2014 was due to the reversal of a portion of the valuation allowance and recording of a deferred tax asset at April 30, 2013. This deferred tax asset was fully recognized in the nine months ended January 31, 2014.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our net working capital as of January 31, 2014 was approximately $11.4 million.

Contract backlog as of January 31, 2014 was approximately $2.9 million. Contract backlog is primarily related to voting contracts with unrelated customers. As of January 31, 2014, $536,000 of the contract backlog has been paid by customers.

Additional sources of cash through January 31, 2015 are expected to be derived from spares, software and technical support and licensing revenues. Uses of cash are expected to be for normal operating expenses and costs associated with contract deliverables.

While we anticipate that we will be successful in obtaining additional product or service contracts to enable us to continue normal operations through January 31, 2015, there can be no assurance that we will be able to acquire new contracts.

In the highly competitive industries in which we operate, operating results may fluctuate significantly from period to period. We anticipate that our cash flows from operations, expected contract payments and available cash will be sufficient to enable us to meet our liquidity needs through at least January 31, 2015. Although we are not aware of any particular trends, in the event that we are unable to secure new business, we may experience reduced liquidity or insufficient cash flows.

The following table summarizes our cash flow activities:

	Nine Months Ended
	January 31,		January 31,		Increase
	2014		2013		(Decrease)
(Amounts in thousands)
Condensed cash flow comparative:
Operating activities	$	3,486	$	3,734	$	(248	)
Investing activities		864		33		831
Net increase in cash and cash equivalents	$	4,350	$	3,767	$	583

17

Cash Flow Analysis

Net cash provided by operating activities was approximately $3.5 million for the nine months ended January 31, 2014, compared to $3.7 million in 2013. The principal components of the net decrease in cash flow from operations were the decreased deferred revenues and accounts payable. These were partially offset by net income of approximately $3.6 million, a decrease in inventory reflecting shipments, a decrease in deferred income taxes, and a decrease in accounts receivable.

Net cash provided by investing activities was $864,000 for the nine months ended January 31, 2014, compared to $33,000 in 2013. The increase in net cash flow from investments was due to the redemption of the matured certificates of deposit. Lower capital expenditures incurred in 2014 also attributed to the increase in new cash flow from investments.

There were no financing activities during the nine months ended January 31, 2014 or 2013.

Capital Resources

As of January 31, 2014, we did not have outstanding credit facilities.

18

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Principal Executive Officer, who is also our Principal Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in SEC Rule 13a-15(e) and 15d-15 (e)) as of the end of the period covered by this report. Based on the foregoing, our Principal Executive Officer (and Principal Financial Officer) concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and (ii) accumulated and communicated to management, including the Principal Executive Officer (and Principal Financial Officer), as appropriate, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There have not been any changes in the Company’s internal control over financial reporting during the quarter ended January 31, 2014 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS

The Company is currently not a party to any pending legal proceedings, and no such action by or, to the best of its knowledge, against the Company has been threatened as of the date of this report.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors relating to our business as disclosed in our Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC on July 9, 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable  

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

Not applicable

19

ITEM 6. EXHIBITS

A.          Exhibits

Exhibit Number		Document Description
	31	Certification of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	Certification Pursuant to 18 United States Code Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS	XBRL Instance Document
	101.SCH	XBRL Taxonomy Extension Schema Document
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

20

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: March 13, 2014		INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.
	/s/	Jeffrey M. Johnson Jeffrey M. Johnson President (Principal Executive Officer) and Acting Chief Financial Officer (Principal Financial Officer)

EX-31

EXHIBIT 31

Certification requirements set forth in Section 302 of the Sarbanes-Oxley Act.

 I, Jeffrey M. Johnson, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of International Lottery & Totalizator Systems, Inc. (“ILTS”);

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of ILTS as of, and for, the periods presented in this report;

4.    I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for ILTS and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to ILTS, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of ILTS’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in ILTS's internal control over financial reporting that occurred during ILTS’s most recent fiscal quarter (ILTS's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, ILTS's internal control over financial reporting.

5.    I have disclosed, based on my most recent evaluation of internal control over financial reporting, to ILTS’s auditors and the audit committee of ILTS’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect ILTS’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in ILTS's internal control over financial reporting.

Dated: March 13, 2014                              /s/ Jeffrey M. Johnson Jeffrey M. Johnson President (Principal Executive Officer) and Acting Chief Financial Officer (Principal Financial Officer)

EX-32

EXHIBIT 32

Certification Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended January 31, 2014 and pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of International Lottery & Totalizator Systems, Inc. (the “Company”) hereby certifies that:

(i)   the Quarterly Report on Form 10-Q of the Company for the quarter ended January 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 13, 2014                              /s/ Jeffrey M. Johnson Jeffrey M. Johnson President (Principal Executive Officer) and Acting Chief Financial Officer (Principal Financial Officer)

XML

Major Customers (Details)	3 Months Ended		9 Months Ended
	Jan. 31, 2014 Customer	Jan. 31, 2013 Customer	Jan. 31, 2014 Customer	Jan. 31, 2013 Customer
Concentration Risk [Line Items]
Concentration risk, percentage (in hundredths)			10.00%
Revenue [Member] | Customer Concentration Risk [Member] | From Unrelated Customers [Member] | Gaming Business [Member]
Concentration Risk [Line Items]
Number of major customers		1	1	1
Concentration risk, percentage (in hundredths)		54.00%	33.00%	21.00%
Revenue [Member] | Customer Concentration Risk [Member] | From Unrelated Customers [Member] | Voting Business [Member]
Concentration Risk [Line Items]
Number of major customers	1			1
Concentration risk, percentage (in hundredths)	22.00%			22.00%
Revenue [Member] | Customer Concentration Risk [Member] | From Related Customers [Member] | Gaming Business [Member]
Concentration Risk [Line Items]
Number of major customers	1	1	1	2
Concentration risk, percentage (in hundredths)	72.00%	30.00%	56.00%	47.00%

XML

Major Customers (Tables)

9 Months Ended

Jan. 31, 2014

Major Customers [Abstract]

Major Customers

The following table summarizes major customers who individually accounted for more than 10% of revenues for the periods presented:

	Three Months Ended January 31,		Nine Months Ended January 31,
	2014	2013	2014	2013
Revenue:
From unrelated customers	One customer from the voting segment accounted for 22% of total revenue	One customer from the gaming segment accounted for 54% of total revenue	One customer from the gaming segment accounted for 33% of total revenue	One customer from the voting segment accounted for 22% of total revenue and one customer from the gaming segment accounted for 21% of total revenue
From related customers	One customer from the gaming segment accounted for 72% of total revenue	One customer from the gaming segment accounted for 30% of total revenue	One customer from the gaming segment accounted for 56% of total revenue	Two customers from the gaming segment accounted for 47% of total revenue

XML

Use of Estimates

9 Months Ended

Jan. 31, 2014

Use of Estimates [Abstract]

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions. Actual results could differ from those estimates. Estimates may affect the reported amounts of assets and liabilities and revenues and expenses, and the disclosure of contingent assets and liabilities.

XML

Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jan. 31, 2014	Jan. 31, 2013	Jan. 31, 2014	Jan. 31, 2013
Income Taxes [Abstract]
Provision for income taxes	$ 200	$ (3)	$ 1,899	$ 20
Income taxes effective rate (in hundredths)			34.73%

XML

Warranty Reserves (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Jan. 31, 2014
Product warranty reserve activity [Roll Forward]
Balance, beginning of period	$ 139
Additional reserves	355
Warranty reserve expense adjustments	(185)
Charges incurred	(91)
Balance, end of period	$ 218

XML

Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jan. 31, 2014	Jan. 31, 2013	Jan. 31, 2014 Segment	Jan. 31, 2013	Apr. 30, 2013
Segment Information [Abstract]
Number of operating segments			2
Segment Reporting Information [Line Items]
Total revenues	$ 3,997	$ 2,006	$ 20,737	$ 7,693
Income (loss) from operations	1,150	(92)	5,482	1,319
Depreciation and amortization	44	46	139	133
Segment assets	14,687	10,156	14,687	10,156	16,834	[1]
Gaming Business [Member]
Segment Reporting Information [Line Items]
Total revenues	2,944	1,724	18,475	5,356
Income (loss) from operations	1,092	185	5,810	1,350
Depreciation and amortization	23	27	78	83
Segment assets	12,510	8,214	12,510	8,214
Voting Business [Member]
Segment Reporting Information [Line Items]
Total revenues	1,053	282	2,262	2,337
Income (loss) from operations	58	(277)	(328)	(31)
Depreciation and amortization	21	19	61	50
Segment assets	$ 2,177	$ 1,942	$ 2,177	$ 1,942

[1] Derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC.

XML

Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jan. 31, 2014	Apr. 30, 2013
Inventories [Abstract]
Raw materials and subassemblies	$ 1,211	$ 2,872
Work-in-process	5	33
Finished Goods	215	760
Total	$ 1,431	$ 3,665	[1]

[1] Derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC.

XML

Basis of Presentation

9 Months Ended

Jan. 31, 2014

Basis of Presentation [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the Securities and Exchange Commission’s (“SEC”) instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows have been included.

The results of operations for the interim periods shown in this report are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC on July 9, 2013. The condensed consolidated balance sheet as of April 30, 2013 has been derived from the audited financial statements included in the Form 10-K for that year.

XML

Equipment, Furniture and Fixtures (Details) (USD $) In Thousands, unless otherwise specified	Jan. 31, 2014	Apr. 30, 2013
Property, Plant and Equipment [Line Items]
Gross equipment, furniture and fixtures	$ 2,686	$ 2,741
Accumulated depreciation and amortization	(2,145)	(2,168)
Net equipment, furniture and fixtures	541	573	[1]
Plant and Machinery [Member]
Property, Plant and Equipment [Line Items]
Gross equipment, furniture and fixtures	661	757
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Gross equipment, furniture and fixtures	1,728	1,662
Leasehold Improvement [Member]
Property, Plant and Equipment [Line Items]
Gross equipment, furniture and fixtures	201	201
Furniture, Fixtures and Equipment [Member]
Property, Plant and Equipment [Line Items]
Gross equipment, furniture and fixtures	96	96
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Gross equipment, furniture and fixtures	$ 0	$ 25

[1] Derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Jan. 31, 2014	Apr. 30, 2013
Current assets:
Cash and cash equivalents	$ 11,609	$ 7,259	[1]
Certificates of deposit	249	1,245	[1]
Accounts receivable, net of allowance for doubtful accounts of $75	626	2,054	[1]
Deferred cost of revenues	1	132	[1]
Inventories	1,431	3,665	[1]
Deferred income taxes	0	1,555	[1]
Other current assets	181	298	[1]
Total current assets	14,097	16,208	[1]
Equipment, furniture and fixtures, net	541	573	[1]
Other noncurrent assets	49	53	[1]
Total assets	14,687	16,834	[1]
Current liabilities:
Accounts payable	791	2,180	[1]
Accrued payroll and related taxes	321	384	[1]
Warranty reserves	218	139	[1]
Payable to Parent	202	202	[1]
Other current liabilities	334	38	[1]
Deferred revenues	785	5,451	[1]
Total current liabilities	2,651	8,394	[1]
Long-term liabilities	12	0	[1]
Total liabilities	2,663	8,394	[1]
Commitments and contingencies			[1]
Shareholders' equity:
Preferred shares, no par value; 20,000 shares authorized; no shares issued or outstanding	0	0	[1]
Common shares, no par value; 50,000 shares authorized; 12,963 shares issued and outstanding	56,370	56,370	[1]
Accumulated deficit	(44,346)	(47,930)	[1]
Total shareholders' equity	12,024	8,440	[1]
Total liabilities and shareholders' equity	$ 14,687	$ 16,834	[1]

[1] Derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC.

XML

Description of the Business

9 Months Ended

Jan. 31, 2014

Description of the Business [Abstract]

Description of the Business

Description of the Business

International Lottery & Totalizator Systems, Inc. (“ILTS” or the “Company,” together with its subsidiary) designs, manufactures, sells, manages, supports and services computerized wagering systems and terminals for the global lottery and pari-mutuel racing industries. The wagering system features include real-time, secure processing of data received from multiple locations, hardware redundancy and complete communications redundancy in order to provide the highest level of fault tolerant operation. In addition, although the Company is not presently doing so, ILTS has demonstrated capability to provide full facilities management services to customer organizations authorized to conduct lotteries. The Company is largely dependent upon significant contracts for its revenue, which typically include a deposit upon contract signing and up to six months lead time before delivery of hardware begins.

The Company, through its wholly-owned subsidiary Unisyn Voting Solutions, Inc. (“Unisyn”), has devoted significant resources to developing federally certified end-to-end optical scan voting systems and a full-featured Election Management Software that provides precinct tabulation, ballot review and audio voting capability. In addition to the InkaVote Plus Precinct Ballot Counter (“PBC”) system certified to the National Association of State Election Directors (“NASED”) 2002 Voting System Standards (“VSS”), the Company received the 2005 Voluntary Voting System Guidelines (“VVSG”) certification from the United States Election Assistance Commission (“EAC”) for its OpenElect® digital optical scan election system – a digital scan voting system built with Java on a streamlined and hardened Linux platform. As part of a jurisdiction’s procurement process, the Company will provide the OpenElect® products’ source code for independent review.

These efforts leverage the Company’s extensive experience to develop highly secure, mission-critical solutions that meet the NASED 2002 VSS and the EAC 2005 VVSG standards. In addition, the Company’s voting systems offer the following features:

· High level of security and vote encryption to ensure integrity and voter privacy;

· Electronic and paper audit trails that offer added security and redundancy for recounts;

· Reduce the cost of ballot printing while offering operational efficiencies;

· Minimal training required for poll workers to set-up and operate; and

· Minimal voter re-education required.

Berjaya Lottery Management (H.K.) Ltd. (“BLM” or the “Parent”) owns 71.3% of the outstanding voting stock of ILTS.

XML

Subsequent Events (Details) (USD $)					9 Months Ended
	Jan. 31, 2014	Apr. 30, 2013		Jan. 31, 2014 BLM [Member]	Jan. 31, 2014 Subsequent Event [Member]	Jan. 31, 2014 Subsequent Event [Member] BLM [Member]
Subsequent Event [Line Items]
Reverse stock split					9,245,317-for-1
Common shares, shares outstanding (in shares)	12,963,000	12,963,000	[1]			9,245,317
Outstanding voting stock held by Berjaya Lottery Management (H.K.) Ltd. (in hundredths)	71.30%			71.30%		71.30%
Cash paid for fractional share owned (in dollars per share)					$ 1.33
Period after which reincorporation and reverse stock split will be effective					20 days

[1] Derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC.

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Segment Information (Tables)

9 Months Ended

Jan. 31, 2014

Segment Information [Abstract]

Segment information

The Company’s segment information is presented below (in thousands):

	As of and for the Three Months Ended January 31, 2014
	Gaming Business			Voting Business				Totals
Total revenues		$	2,944		$	1,053			$	3,997
Income from operations			1,092			58				1,150
Depreciation and amortization			23			21				44
Segment assets			12,510			2,177				14,687
	As of and for the Three Months Ended January 31, 2013
	Gaming Business			Voting Business				Totals
Total revenues		$	1,724		$	282			$	2,006
Income (loss) from operations			185			(277	)			(92	)
Depreciation and amortization			27			19				46
Segment assets			8,214			1,942				10,156

	As of and for the Nine Months Ended January 31, 2014
	Gaming Business			Voting Business				Totals
Total revenues		$	18,475		$	2,262			$	20,737
Income (loss) from operations			5,810			(328	)			5,482
Depreciation and amortization			78			61				139
Segment assets			12,510			2,177				14,687
	As of and for the Nine Months Ended January 31, 2013
	Gaming Business			Voting Business				Totals
Total revenues		$	5,356		$	2,337			$	7,693
Income (loss) from operations			1,350			(31	)			1,319
Depreciation and amortization			83			50				133
Segment assets			8,214			1,942				10,156

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Equipment, Furniture and Fixtures (Tables)

9 Months Ended

Jan. 31, 2014

Equipment, Furniture and Fixtures [Abstract]

Net equipment, furniture and fixtures

Net equipment, furniture and fixtures consisted of the following:

	January 31,			April 30,
	2014			2013
(Amounts in thousands)
Plant and machinery	$	661		$	757
Computer equipment		1,728			1,662
Leasehold improvement		201			201
Furniture, fixtures and equipment		96			96
Construction in progress		-			25
		2,686			2,741
Accumulated depreciation and amortization		(2,145	)		(2,168	)
Net equipment, furniture and fixtures	$	541		$	573

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Principles of Consolidation

9 Months Ended

Jan. 31, 2014

Principles of Consolidation [Abstract]

Principles of Consolidation

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of ILTS and its wholly-owned subsidiary, Unisyn. All significant intercompany accounts and transactions are eliminated in consolidation.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jan. 31, 2014	Apr. 30, 2013
Current assets:
Accounts receivable, allowance for doubtful accounts	$ 75	$ 75	[1]
Shareholders' equity:
Preferred shares, par value (in dollars per share)	$ 0	$ 0	[1]
Preferred shares, shares authorized (in shares)	20,000	20,000	[1]
Preferred shares, shares issued (in shares)	0	0	[1]
Preferred shares, shares outstanding (in shares)	0	0	[1]
Common shares, par value (in dollars per share)	$ 0	$ 0	[1]
Common shares, shares authorized (in shares)	50,000	50,000	[1]
Common shares, shares issued (in shares)	12,963	12,963	[1]
Common shares, shares outstanding (in shares)	12,963	12,963	[1]

[1] Derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC.

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Major Customers

9 Months Ended

Jan. 31, 2014

Major Customers [Abstract]

Major Customers

Major Customers

The following table summarizes major customers who individually accounted for more than 10% of revenues for the periods presented:

	Three Months Ended January 31,		Nine Months Ended January 31,
	2014	2013	2014	2013
Revenue:
From unrelated customers	One customer from the voting segment accounted for 22% of total revenue	One customer from the gaming segment accounted for 54% of total revenue	One customer from the gaming segment accounted for 33% of total revenue	One customer from the voting segment accounted for 22% of total revenue and one customer from the gaming segment accounted for 21% of total revenue
From related customers	One customer from the gaming segment accounted for 72% of total revenue	One customer from the gaming segment accounted for 30% of total revenue	One customer from the gaming segment accounted for 56% of total revenue	Two customers from the gaming segment accounted for 47% of total revenue

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Document and Entity Information	9 Months Ended
	Jan. 31, 2014	Mar. 13, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS INC
Entity Central Index Key	0000354813
Current Fiscal Year End Date	--04-30
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		12,962,999
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jan. 31, 2014

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Related Party Transactions

9 Months Ended

Jan. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

During the three months ended January 31, 2014 and 2013, revenues from all related party transactions for the sales of products and services totaled approximately $2.9 million (73% of total revenue) and $646,000 (32% of total revenue), respectively. Related party revenues for the nine months ended January 31, 2014 and 2013 were approximately $11.7 million (56% of total revenue) and $3.7 million (48% of total revenue), respectively.  Included in accounts receivable at January 31, 2014 was approximately $157,000 from these customers. Descriptions of the transactions with the Company’s related parties in the three and nine months ended January 31, 2014 and 2013 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 January 31, 2014.  

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 nine months ended January 31, 2014 and 2013;

· There were no accounts receivable balances from BLM as of January 31, 2014 and April 30, 2013;

·   Liabilities to BLM arising from the sale or use of the BLM inventory, recorded as “Payable to Parent,” were $202,000 as of both January 31, 2014 and April 30, 2013; and

·   There were no inventory balances held for BLM as of January 31, 2014 and April 30, 2013.

Sports Toto Malaysia Sdn. Bhd.

The Company provides lottery products, software development and software support services to Sports Toto Malaysia Sdn. Bhd. (“STM”), an affiliate of BLM and a related party.  

In January 2013, the Company received from STM, an order valued at approximately $11 million for lottery products. Shipments of these products were completed in the third quarter of fiscal 2014, and the related revenue was recognized.

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

·   Revenues of approximately $2.9 million and $11.5 million were recognized on the sale of lottery products and support services during the three and nine months ended January, 31, 2014, respectively. Revenues of $609,000 and $2.5 million were recognized on the performance of contract deliverables and support services during the three and nine months ended January 31, 2013, respectively;

·   There was no cost of deferred revenues as of January 31, 2014. Cost of deferred revenues in connection with the lottery product order received in January 2013 mentioned above totaled $104,000 as of April 30, 2013;

· There was deferred revenue of $7,000 on lottery products and software support services as of January 31, 2014, compared to $3.3 million as of April 30, 2013; and

·   Accounts receivable totaled $146,000 as of January 31, 2014, compared to $410,000 as of April 30, 2013.

Philippine Gaming Management Corporation

The Company provides lottery products and software development to Philippine Gaming Management Corporation (“PGMC”), a related party and a subsidiary of BLM.

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 nine months ended January 31, 2014 totaled $7,000 and $72,000, respectively. Revenues of $2,000 and $1.1 million were recognized on the sale of lottery products during the three and nine months ended January 31, 2013, respectively; 

·   There were no deferred revenue balances as of January 31, 2014 and April 30, 2013; and

· There were no accounts receivable balances as of January 31, 2014 and April 30, 2013.

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 $36,000 and $107,000 were recognized on the sale of support services and licensing during the three and nine months ended January 31, 2014, respectively. Revenues of $35,000 and $105,000 were recognized on the sale of support services and licensing during the three and nine months ended January 31, 2013, respectively;

·   There was deferred revenue of $8,000 as of January 31, 2014. Deferred revenue balance on lottery product licensing totaled $4,000 as of April 30, 2013; and

·   Accounts receivable was $11,000 as of January 31, 2014, compared to $1,000 as of April 30, 2013.

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 nine months ended January 31, 2014, the Company incurred services of approximately $51,000 and $152,000, respectively, which are shown as part of cost of sales. During the three and nine months ended January 31, 2013, the Company incurred approximately $65,000 and $145,000, respectively, which are shown as part of cost of sales.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Jan. 31, 2014	Jan. 31, 2013	Jan. 31, 2014	Jan. 31, 2013
Revenues:
Sales of products	$ 3,699	$ 1,709	$ 19,724	$ 6,769
Services	298	297	1,013	924
Total revenues	3,997	2,006	20,737	7,693
Cost of sales:
Cost of product sales	2,083	1,372	12,829	4,222
Cost of services	76	146	314	349
Total cost of sales	2,159	1,518	13,143	4,571
Gross profit	1,838	488	7,594	3,122
Selling, general and administrative expenses	688	580	2,112	1,803
Income (loss) from operations	1,150	(92)	5,482	1,319
Other income:
Interest and dividend income	0	0	1	0
Income (loss) before provision for income taxes	1,150	(92)	5,483	1,319
Provision (benefit) for income taxes	200	(3)	1,899	20
Net income (loss)	$ 950	$ (89)	$ 3,584	$ 1,299
Net income (loss) per share:
Basic (in dollars per share)	$ 0.07	$ (0.01)	$ 0.27	$ 0.10
Weighted average shares used in computation of net income (loss) per share:
Basic (in shares)	12,963	12,963	12,963	12,963

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Income Taxes

9 Months Ended

Jan. 31, 2014

Income Taxes [Abstract]

Income Taxes

Income Taxes

The Company uses the asset and liability method for financial reporting of income taxes. Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and the tax basis of assets and liabilities, and are measured by applying enacted rates and laws to taxable years in which such differences are expected to be recovered or settled. Any changes in tax rates or laws are recognized in the period when such changes are enacted. Valuation allowances have been established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company records a valuation allowance to reduce its deferred tax assets when uncertainty exists regarding the realizability of the deferred tax assets.

The provisions for income taxes were approximately $200,000 and $1.9 million for the three and nine months ended January 31, 2014, respectively. The effective rate was 34.73% for 2014, compared to a minimal effective rate for 2013. The increase in the effective rate for 2014 was due to the reversal of a portion of the valuation allowance and recording of a deferred tax asset at April 30, 2013. This deferred tax asset was fully recognized in the nine months ended January 31, 2014.

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Warranty Reserves

9 Months Ended

Jan. 31, 2014

Warranty Reserves [Abstract]

Warranty Reserves

Warranty Reserves

Estimated warranty costs are accrued as revenues are recognized. Included in the warranty cost accruals are costs for basic warranties on products sold. A summary of product warranty reserve activity for the nine months ended January 31, 2014 is as follows:

(Amounts in thousands)
Balance at May 1, 2013	$	139
Additional reserves		355
Warranty reserve expense adjustments		(185	)
Charges incurred		(91	)
Balance at January 31, 2014	$	218

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Inventories (Tables)

9 Months Ended

Jan. 31, 2014

Inventories [Abstract]

Inventories

Inventories consisted of the following:

	January 31,		April 30,
	2014		2013
(Amounts in thousands)
Raw materials and subassemblies	$	1,211	$	2,872
Work-in-process		5		33
Finished goods		215		760
	$	1,431	$	3,665

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Fair Value of Financial Instruments

9 Months Ended

Jan. 31, 2014

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s material financial instruments consist of its cash and cash equivalents, certificates of deposit, accounts receivable, accounts payable and related party payables. The carrying amounts of the Company’s financial instruments generally approximated their fair values as of January 31, 2014 and April 30, 2013 due to the short-term maturity of the instruments.

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Equipment, Furniture and Fixtures

9 Months Ended

Jan. 31, 2014

Equipment, Furniture and Fixtures [Abstract]

Equipment, Furniture and Fixtures

Equipment, Furniture and Fixtures

Net equipment, furniture and fixtures consisted of the following:

	January 31,			April 30,
	2014			2013
(Amounts in thousands)
Plant and machinery	$	661		$	757
Computer equipment		1,728			1,662
Leasehold improvement		201			201
Furniture, fixtures and equipment		96			96
Construction in progress		-			25
		2,686			2,741
Accumulated depreciation and amortization		(2,145	)		(2,168	)
Net equipment, furniture and fixtures	$	541		$	573

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Segment Information

9 Months Ended

Jan. 31, 2014

Segment Information [Abstract]

Segment Information

Segment Information

The Company reports segment information based on the “management” approach. Under this approach, operating segments are identified in substantially the same manner as they are reported internally and used by the Company’s chief operating decision maker for purposes of evaluating performance and allocating resources.

The Company divides its operations into two operating segments: the gaming business and the voting business. The gaming segment designs and develops computerized wagering systems and terminals for the lottery and pari-mutuel racing industries worldwide. Presently the voting segment generates revenues from the sales of the voting systems and hardware, software licensing, product servicing and software support services.

The Company’s segment information is presented below (in thousands):

	As of and for the Three Months Ended January 31, 2014
	Gaming Business			Voting Business				Totals
Total revenues		$	2,944		$	1,053			$	3,997
Income from operations			1,092			58				1,150
Depreciation and amortization			23			21				44
Segment assets			12,510			2,177				14,687
	As of and for the Three Months Ended January 31, 2013
	Gaming Business			Voting Business				Totals
Total revenues		$	1,724		$	282			$	2,006
Income (loss) from operations			185			(277	)			(92	)
Depreciation and amortization			27			19				46
Segment assets			8,214			1,942				10,156

	As of and for the Nine Months Ended January 31, 2014
	Gaming Business			Voting Business				Totals
Total revenues		$	18,475		$	2,262			$	20,737
Income (loss) from operations			5,810			(328	)			5,482
Depreciation and amortization			78			61				139
Segment assets			12,510			2,177				14,687
	As of and for the Nine Months Ended January 31, 2013
	Gaming Business			Voting Business				Totals
Total revenues		$	5,356		$	2,337			$	7,693
Income (loss) from operations			1,350			(31	)			1,319
Depreciation and amortization			83			50				133
Segment assets			8,214			1,942				10,156

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Inventories

9 Months Ended

Jan. 31, 2014

Inventories [Abstract]

Inventories

Inventories

Inventories are stated at the lower of cost or the current estimated market values. Cost is determined using the first-in, first-out method.  

Inventories consisted of the following:

	January 31,		April 30,
	2014		2013
(Amounts in thousands)
Raw materials and subassemblies	$	1,211	$	2,872
Work-in-process		5		33
Finished goods		215		760
	$	1,431	$	3,665

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Net Income (Loss) per Share

9 Months Ended

Jan. 31, 2014

Net Income (Loss) per Share [Abstract]

Net Income (Loss) per Share

Net Income (Loss) per Share

Basic net income (loss) per share is based on the weighted average number of shares outstanding during the periods.  

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Related Party Transactions (Details) (USD $)	3 Months Ended		9 Months Ended
	Jan. 31, 2014	Jan. 31, 2013	Jan. 31, 2014	Jan. 31, 2013	Apr. 30, 2013
Related Party Transaction [Line Items]
Revenue from related party	$ 2,900,000	$ 646,000	$ 11,700,000	$ 3,700,000
Sales revenue, related party, percentage (in hundredths)	73.00%	32.00%	56.00%	48.00%
Accounts receivable from related parties	157,000		157,000
Outstanding voting stock held by Berjaya Lottery Management (H.K.) Ltd. (in hundredths)	71.30%		71.30%
Payable to parent	202,000		202,000		202,000	[1]
Inventories	1,431,000		1,431,000		3,665,000	[1]
Deferred Costs, Current	1,000		1,000		132,000	[1]
Deferred revenues	785,000		785,000		5,451,000	[1]
BLM [Member]
Related Party Transaction [Line Items]
Revenue from related party	0		0
Accounts receivable from related parties	0		0		0
Outstanding voting stock held by Berjaya Lottery Management (H.K.) Ltd. (in hundredths)	71.30%		71.30%
Payable to parent	202,000		202,000		202,000
Inventories	0		0		0
Sports Toto Malaysia Sdn. Bhd. [Member]
Related Party Transaction [Line Items]
Revenue from related party	11,000,000
Accounts receivable from related parties	146,000		146,000		410,000
Sports Toto Malaysia Sdn. Bhd. [Member] | Lottery Products [Member]
Related Party Transaction [Line Items]
Deferred Costs, Current	0		0		104,000
Sports Toto Malaysia Sdn. Bhd. [Member] | Lottery Products and Support Services [Member]
Related Party Transaction [Line Items]
Revenue from related party	2,900,000		11,500,000
Deferred revenues	7,000		7,000		3,300,000
Sports Toto Malaysia Sdn. Bhd. [Member] | Contract Deliverables and Sale of Support Services [Member]
Related Party Transaction [Line Items]
Revenue from related party		609,000		2,500,000
PGMC [Member] | Lottery Products [Member]
Related Party Transaction [Line Items]
Revenue from related party	7,000	2,000	72,000	1,100,000
Accounts receivable from related parties	0		0		0
Deferred revenues	0		0		0
Natural Avenue Sdn. Bhd. [Member]
Related Party Transaction [Line Items]
Accounts receivable from related parties	11,000		11,000		1,000
Deferred revenues	8,000		8,000
Natural Avenue Sdn. Bhd. [Member] | Lottery Product Licensing [Member]
Related Party Transaction [Line Items]
Deferred revenues					4,000
Natural Avenue Sdn. Bhd. [Member] | Support Services and Licensing [Member]
Related Party Transaction [Line Items]
Revenue from related party	36,000	35,000	107,000	105,000
Sports Toto Computers Sdn. Bhd. [Member]
Related Party Transaction [Line Items]
Services incurred	$ 51,000	$ 65,000	$ 152,000	$ 145,000

[1] Derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC.

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Warranty Reserves (Tables)

9 Months Ended

Jan. 31, 2014

Warranty Reserves [Abstract]

Product warranty reserve activity

A summary of product warranty reserve activity for the nine months ended January 31, 2014 is as follows:

(Amounts in thousands)
Balance at May 1, 2013	$	139
Additional reserves		355
Warranty reserve expense adjustments		(185	)
Charges incurred		(91	)
Balance at January 31, 2014	$	218

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Description of the Business (Details)	9 Months Ended
	Jan. 31, 2014
Description of the Business [Abstract]
Lead time of deposit upon contract signing before delivery of hardware begins, maximum	6 months
Outstanding voting stock held by Berjaya Lottery Management (H.K.) Ltd. (in hundredths)	71.30%

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Jan. 31, 2014		Jan. 31, 2013
Cash flows from operating activities:
Net income	$ 3,584		$ 1,299
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	139		133
Warranty reserve expense	170		75
Loss on disposal of equipment	25		0
Deferred income taxes	1,555		0
Changes in operating assets and liabilities:
Accounts receivable	1,428		(116)
Costs and estimated earnings in excess of billings on uncompleted contracts	0		666
Deferred cost of revenues	131		3
Inventories	2,234		1,089
Other current and noncurrent assets	121		(215)
Accounts payable	(1,389)		(845)
Accrued payroll and related taxes	(63)		94
Warranty reserves	(91)		(137)
Other liabilities	308		(33)
Deferred revenues	(4,666)		1,721
Net cash provided by operating activities	3,486		3,734
Cash flows from investing activities:
Proceeds from redemption of certificates of deposit	996		250
Additions to equipment, furniture and fixtures	(132)		(217)
Net cash provided by investing activities	864		33
Net increase in cash and cash equivalents	4,350		3,767
Cash and cash equivalents at beginning of period	7,259	[1]	2,783
Cash and cash equivalents at end of period	11,609		6,550
Supplemental cash flow information:
Cash paid for income taxes	$ 243		$ 43

[1] Derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC.

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Deferred Revenues

9 Months Ended

Jan. 31, 2014

Deferred Revenues [Abstract]

Deferred Revenues

Deferred Revenues

Deferred revenues of approximately $785,000 as of January 31, 2014 represent prepayments for products and services related to the use of the OpenElect® and PBC voting systems, and other software and technical support services. The Company will recognize the revenues upon the fulfillment of the prescribed criteria for revenue recognition.

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Deferred Revenues (Details) (USD $) In Thousands, unless otherwise specified	Jan. 31, 2014	Apr. 30, 2013
Deferred Revenues [Abstract]
Deferred revenues	$ 785	$ 5,451	[1]

[1] Derived from the consolidated audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2013 filed with the SEC.

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Subsequent Events

9 Months Ended

Jan. 31, 2014

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On January 8, 2014, the Company’s board of directors approved (i) the Company’s reincorporation from California to Delaware by means of a merger with and into a wholly-owned Delaware subsidiary (the “Reincorporation”) and (ii) a subsequent amendment to the surviving company’s certificate of incorporation to effect a 9,245,317-for-1 reverse stock split (the “Reverse Stock Split”) on outstanding shares of common stock. On January 8, 2014 (January 9, 2014 Malaysia Time), Berjaya Lottery Management (H.K.) Limited (“BLM”), the holder of 9,245,317 shares of the Company’s common stock, representing 71.3% of the Company’s outstanding shares of common stock as of that date, approved the Reincorporation and Reverse Stock Split by written consent. Each shareholder holding less than one full share of common stock following the Reverse Stock Split, being every shareholder of the Company other than BLM, will receive a cash payment from the Company for their fractional share interests equal to $1.33 in cash, without interest, for each share of common stock held by such shareholder immediately prior to the Reverse Stock Split. The Reincorporation and the Reverse Stock Split will be effected on or about the date 20 calendar days following the date on which the Company’s Information Statement on Schedule 14C relating to the Reincorporation and Reverse Stock Split is mailed to the Company’s shareholders. Following consummation of the transactions, the Company will promptly terminate its registration and reporting obligations under the Securities Exchange Act of 1934, as amended.