2013 10KA

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o
(Do not check if
smaller reporting company)

Smaller reporting company o

0001445305-14-002684.txt : 20140627 0001445305-14-002684.hdr.sgml : 20140627 20140626170859 ACCESSION NUMBER: 0001445305-14-002684 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20131231 FILED AS OF DATE: 20140626 DATE AS OF CHANGE: 20140626 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCIENTIFIC GAMES CORP CENTRAL INDEX KEY: 0000750004 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 810422894 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-13063 FILM NUMBER: 14943355 BUSINESS ADDRESS: STREET 1: 750 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 3027374300 MAIL ADDRESS: STREET 1: 750 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: AUTOTOTE CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TOTE INC DATE OF NAME CHANGE: 19920317 10-K/A 1 a201310ka.htm 10-K/A 2013 10KA

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A




ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2013
Or
o		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: 0-13063

SCIENTIFIC GAMES CORPORATION

(Exact name of registrant as specified in its charter)




Delaware (State or other jurisdiction of incorporation or organization)		81-0422894 (I.R.S. Employer Identification No.)

750 Lexington Avenue, 25th Floor

New York, New York 10022

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (212) 754-2233

Securities registered pursuant to Section 12(b) of the Act:




Title of each class		Name of each exchange on which registered
Class A Common Stock, $.01 par value		Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

As of June 30, 2013, the market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $545,560,256 (1).

Common shares outstanding as of March 10, 2014 were 83,933,250.

DOCUMENTS INCORPORATED BY REFERENCE



Document	Parts in Which Incorporated
Proxy Statement for the Company's 2014 Annual Meeting of Stockholders	Part III

________________________________________________________________________________________________________________________________


(1)	For this purpose only, "non-affiliates" excludes directors and executive officers.

Explanatory Note

Unless the context indicates otherwise, all references to “Scientific Games,” “we,” “our,” and the “Company” refer to Scientific Games Corporation and its consolidated entities.

This Amendment No. 1 on Form 10-K/A (this “Amendment No. 1”) to our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (“SEC”) on March 17, 2014 (the “Annual Report”), is being filed for the purpose of providing the 2011 audit opinion of Beijing CITIC Scientific Games Technology Co., Ltd. (“CSG”) as Exhibit 99.10, the separate financial statements of CSG as Exhibit 99.11 and the separate financial statements and 2011 audit opinion of Beijing Guard Libang Technology Co., Ltd. (“Guard Libang”) as Exhibit 99.12, in each case in Part IV, Item 15, Exhibits, Financial Statement Schedules (“Item 15”), in accordance with Rule 3-09 of Regulation S-X (“Rule 3-09”). As indicated in the Annual Report, CSG and Guard Libang are foreign equity method investees of Scientific Games. In accordance with Rule 3-09(b)(1), the separate financial statements of CSG and Guard Libang, which were not available prior to the filing of the Annual Report, are being filed with this Amendment No. 1 within six months after the end of our fiscal year. Each of the equity method investees is solely responsible for the form and content of the financial statements of such equity method investee provided herewith.

As required by the rules of the SEC, this Amendment No. 1 sets forth an amended Item 15 in its entirety and includes new certifications of our Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1 and 32.2), as well as new consents of independent auditors (Exhibits 23.3 and 23.4).

Except as set forth above, no changes have been made to the Annual Report, and this Amendment No. 1 does not amend, modify or update in any way any of the financial statements of the Company or other information contained in the Annual Report. This Amendment No. 1 does not reflect events that may have occurred subsequent to the filing date of the Annual Report. Accordingly, this Amendment No. 1 should be read in conjunction with the Annual Report and the Company's filings with the SEC subsequent to the filing of the Annual Report.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)

1. Financial Statements:

The following consolidated financial statements and schedules are included in Item 15 of the Annual Report.

Report of Deloitte & Touche, LLP, Independent Registered Public Accounting Firm

Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2013, 2012 and 2011

Consolidated Balance Sheets as of December 31, 2013 and 2012

Consolidated Statements of Stockholders Equity for the years ended December 31, 2013, 2012 and 2011

Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011

Notes to Consolidated Financial Statements

The financial statements of CSG and Guard Libang are included in this filing as Exhibits 99.11 and 99.12, respectively, pursuant to Rule 3-09.

2. Financial Statement Schedule:



Schedule II. Valuation and Qualifying Accounts

All other schedules have been omitted because they are inapplicable, not required, or the information is included elsewhere in the consolidated financial statements or related notes.

3. Exhibits

The Exhibit Index attached to this report is incorporated by reference into this Item 15(a)(3) and is filed as part of this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



June 26, 2014	Scientific Games Corporation


	By:	/s/ Scott D. Schweinfurth
	By:	Scott D. Schweinfurth, Chief Financial Officer

	By:	/s/ Jeffrey B. Johnson
	By:	Jeffrey B. Johnson Chief Accounting Officer

3. Exhibits

EXHIBIT INDEX



Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated as of January 30, 2013, entered into by and among the Company, Scientific Games International, Inc., SG California Merger Sub, Inc. and WMS (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on February 5, 2013).

3.1(a)		Restated Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on March 20, 2003 (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002).

3.1(b)		Certificate of Amendment of the Restated Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on June 7, 2007 (incorporated by reference to Exhibit 3.1(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007).

3.2		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 1, 2010).

4.1		Indenture, dated as of September 22, 2010, among the Company, as issuer, the guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the 8.125% Senior Subordinated Notes due 2018 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on September 23, 2010).

4.2		Registration Rights Agreement, dated September 22, 2010, among the Company, the guarantors party thereto and J.P. Morgan Securities LLC, as representative for the initial purchasers listed therein, relating to the 8.125% Senior Subordinated Notes due 2018 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on September 23, 2010).

4.3		Form of 8.125% Senior Subordinated Notes due 2018 (incorporated by reference to Exhibits 4.3(a) and 4.3(b) to the Company's Registration Statement on Form S-4 (No. 333-172600) filed on March 3, 2011 and included in Exhibit 4.1 above).

4.4		Indenture, dated as of May 21, 2009, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto, and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 27, 2009).

4.5		Registration Rights Agreement, dated as of May 21, 2009, among Scientific Games International, Inc., the Company, the subsidiary guarantors party thereto, and J.P. Morgan Securities Inc., Banc of America Securities LLC, Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co., as representatives for the initial purchasers listed therein, relating to the 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on May 27, 2009).

4.6		Registration Rights Agreement, dated November 5, 2009, among Scientific Games International, Inc., the Company, the subsidiary guarantors party thereto, and J.P. Morgan Securities Inc., Banc of America Securities LLC, Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co., as representatives for the initial purchasers named therein, relating to the 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on November 12, 2009).

4.7		Form of 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibits 4.31(a) and 4.31(b) to the Company's Registration Statement on Form S-4 (No. 333-161268) filed on August 11, 2009 and included in Exhibit 4.4 above).



Exhibit Number		Description
4.8		Registration Rights Agreement, dated June 11, 2008, among Scientific Games International, Inc., the Company, the subsidiary guarantors listed therein, and J.P. Morgan Securities Inc., Banc of America Securities LLC and UBS Securities LLC, as representatives for the initial purchasers listed therein, relating to the 7.875% Senior Subordinated Notes due 2016 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on June 13, 2008).

4.9		Indenture, dated as of August 20, 2012, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on August 21, 2012).

4.10		Registration Rights Agreement, August 20, 2012, among Scientific Games International, Inc., as issuer, the Company, the subsidiary guarantors party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative for the initial purchasers listed therein (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on August 21, 2012).

4.11		Form of 6.250% Senior Subordinated Notes due 2020 (incorporated by reference to Exhibits 4.3(a) and 4.3(b) to the Company's Registration Statement on Form S-4 (No. 333-184835) filed on August 20, 2012 and included in Exhibit 4.12 above).

4.12		Supplemental Indenture, dated as of August 20, 2012, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto, Sciplay Inc. and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the Indenture dated May 21, 2009, by and among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013).

4.13		Supplemental Indenture, dated as of August 20, 2012, among the Company, as issuer, the subsidiary guarantors party thereto, Sciplay Inc. and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the Indenture dated September 22, 2010, by and among the Company, as issuer, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013).

4.14		Supplemental Indenture, dated as of April 16, 2013, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto, SG California Merger Sub, Inc., Scientific Games New Jersey, LLC and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the Indenture dated May, 21 2009, by and among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013).

4.15		Supplemental Indenture, dated as of April 16, 2013, among the Company, as issuer, the subsidiary guarantors party thereto, SG California Merger Sub, Inc., Scientific Games New Jersey, LLC and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the Indenture dated September 22, 2010, by and among the Company, as issuer, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013).

4.16		Supplemental Indenture, dated as of April 16, 2013, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto, SG California Merger Sub, Inc., Scientific Games New Jersey, LLC and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the Indenture dated August 20, 2012, by and among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013).



Exhibit Number		Description
4.17		Supplemental Indenture, dated as of October 18, 2013, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto, WMS, WMS Gaming Inc., WMS International Holdings Inc., Phantom EFX, LLC, Lenc-Smith Inc., a Delaware corporation, Williams Electronics Games, Inc., WMS Finance Inc., Lenc Software Holdings LLC, and Williams Interactive LLC, and Deutsche Bank Trust Company Americas, as trustee, relating to the Indenture dated May, 21 2009, by and among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on October 18, 2013).

4.18		Supplemental Indenture, dated as of October 18, 2013, among the Company, as issuer, the subsidiary guarantors party thereto, WMS, WMS Gaming Inc., WMS International Holdings Inc., Phantom EFX, LLC, Lenc-Smith Inc., a Delaware corporation, Williams Electronics Games, Inc., WMS Finance Inc., Lenc Software Holdings LLC, and Williams Interactive LLC, SG and Deutsche Bank Trust Company Americas, as trustee, relating to the Indenture dated September 22, 2010, by and among the Company, as issuer, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on October 18, 2013).

4.19		Supplemental Indenture, dated as of October 18 2013, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto, WMS, WMS Gaming Inc., WMS International Holdings Inc., Phantom EFX, LLC, Lenc-Smith Inc., a Delaware corporation, Williams Electronics Games, Inc., WMS Finance Inc., Lenc Software Holdings LLC, and Williams Interactive LLC, and Deutsche Bank Trust Company Americas, as trustee, relating to the Indenture dated August 20, 2012, by and among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on October 18, 2013).

10.1		Stockholders' Agreement, dated September 6, 2000, among the Company, MacAndrews & Forbes Holdings Inc. (formerly known as Mafco Holdings Inc.) ("MacAndrews") (as successor-in-interest under the agreement to Cirmatica Gaming S.A.) and Ramius Securities, LLC (incorporated by reference to Exhibit 10.38 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 2000).

10.2		Supplemental Stockholders' Agreement, dated June 26, 2002, among the Company and MacAndrews (as successor-in-interest to Cirmatica Gaming S.A.) (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).

10.3		Letter Agreement, dated as of October 10, 2003, by and between the Company and MacAndrews further supplementing the Stockholders' Agreement (incorporated by reference to Exhibit 3 to the Schedule 13D jointly filed by MacAndrews and SGMS Acquisition Corporation on November 26, 2003).

10.4		Letter Agreement dated February 15, 2007 between the Company and MacAndrews (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 16, 2007).

10.5		2003 Incentive Compensation Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 9, 2011).*

10.6		2002 Employee Stock Purchase Plan, as amended and restated (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2005).*

10.7		Elective Deferred Compensation Plan (Executive Deferred Compensation Plan and Non-Employee Directors Deferred Compensation Plan) (effective January 1, 2005, as amended and restated effective January 1, 2009) (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008).*

10.8		Frozen Supplemental Executive Retirement Plan (as amended and restated effective January 1, 2009) (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008).*



Exhibit Number		Description
10.9		Asia-Pacific Business Incentive Compensation Program (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on December 3, 2010).*

10.10		Employment Agreement dated as of January 1, 2006 by and between the Company and A. Lorne Weil (executed on August 8, 2006) (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006).*

10.11		Letter dated August 2, 2007 between A. Lorne Weil and the Company with respect to payment of Mr. Weil's deferred compensation upon a termination of employment under Mr. Weil's Employment Agreement dated as of January 1, 2006 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007).*

10.12		Amendment to Employment Agreement dated as of May 1, 2008 by and between the Company and A. Lorne Weil (executed on May 12, 2008), which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on May 14, 2008).*

10.13		Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and A. Lorne Weil, which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 and the Amendment dated as of May 1, 2008 (incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008).*

10.14		Third Amendment to Employment Agreement dated as of May 29, 2009 by and between the Company and A. Lorne Weil, which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 and the Amendments dated as of May 1, 2008 and December 30, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 2, 2009).*

10.15		Amendment to Employment Agreement dated as of December 2, 2010 by and between the Company and A. Lorne Weil, which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 and the Amendments dated as of May 1, 2008, December 30, 2008 and May 29, 2009 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 3, 2010).*

10.16		Amendment to Employment Agreement, dated as of August 18, 2011, by and between A. Lorne Weil and the Company, which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 and the Amendments dated as of May 1, 2008, December 30, 2008, May 29, 2009 and December 2, 2010 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 18, 2011).*

10.17		Agreement and General Release dated as of December 30, 2013 by and between A. Lorne Weil and the Company.*(†)

10.18		Employment Agreement dated as of March 2, 2009 (effective April 1, 2009) by and between the Company and Jeff Lipkin (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on April 2, 2009).*

10.19		Employment Agreement dated as of November 29, 2010 by and between the Company and David L. Kennedy (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on December 3, 2010).*

10.20		Employment Inducement Stock Option Grant Agreement dated August 8, 2005 by and between the Company and Steven W. Beason (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).*



Exhibit Number		Description
10.21		Letter Agreement dated as of August 30, 2007 by and between the Company and Steven W. Beason, which amended Mr. Beason's Employment Agreement dated August 8, 2005 (incorporated by reference to Exhibit 10.57 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009).*

10.22		Letter Agreement dated as of June 17, 2008 by and between the Company and Steven W. Beason, which amended Mr. Beason's Employment Agreement dated as of August 8, 2005, as amended by the Letter Agreement dated as of August 30, 2007 (incorporated by reference to Exhibit 10.58 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009).*

10.23		Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Steven W. Beason, which amended Mr. Beason's Employment Agreement dated as of August 8, 2005, as amended by the Letter Agreement dated as of August 30, 2007 and the Letter Agreement dated as of June 17, 2008 (incorporated by reference to Exhibit 10.59 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009).*

10.24		Letter Agreement, dated as of June 29, 2011, by and between the Company and Steven W. Beason, which amended Mr. Beason's Employment Agreement dated as of August 8, 2005, as amended by the Letter Agreement dated as of August 30, 2007, the Letter Agreement dated as of June 17, 2008 and the Amendment dated as of December 30, 2008 (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on October 3, 2011).*

10.25		Employment Agreement dated as of July 1, 2005 by and between the Company and Michael R. Chambrello (executed on June 17, 2005) (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005).*

10.26		Employment Inducement Stock Option Grant Agreement dated July 1, 2005 by and between the Company and Michael R. Chambrello (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005).*

10.27		Letter Agreement dated as of August 2, 2006 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005 (incorporated by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006).*

10.28		Letter Agreement dated as of May 8, 2008 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005, as amended by the Letter Agreement dated as of August 2, 2006 (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on May 14, 2008).*

10.29		Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005, as amended by the Letter Agreement dated as of August 2, 2006 and the Letter Agreement dated as of May 8, 2008 (incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008).*

10.30		Amendment to Employment Agreement dated as of November 29, 2010 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005, as amended by the Letter Agreement dated as of August 2, 2006, the Letter Agreement dated as of May 8, 2008 and the Amendment dated as of December 30, 2008 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on December 3, 2010).*

10.31		Agreement and General Release dated as of January 8, 2014 by and between the Company and Michael R. Chambrello.*(†)



Exhibit Number		Description
10.32		Employment Agreement dated as of December 11, 2006 (effective as of January 1, 2007) by and between Scientific Games International, Inc. and James C. Kennedy (incorporated by reference to Exhibit 10.53 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010).*

10.33		Amendment to Employment Agreement dated as of December 30, 2008 by and between Scientific Games Corporation and James C. Kennedy, which amended Mr. Kennedy's Employment Agreement dated as of January 1, 2007 (incorporated by reference to Exhibit 10.54 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010).*

10.34		Letter Agreement dated as of May 7, 2009 by and between Scientific Games International, Inc. and James C. Kennedy, which amended Mr. Kennedy's Employment Agreement dated as of January 1, 2007, as amended by the Amendment dated as of December 30, 2008 (incorporated by reference to Exhibit 10.55 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010).*

10.35		1995 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 1997).*

10.36		1997 Incentive Compensation Plan, as amended and restated (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).*

10.37		Employment Agreement dated as of December 22, 2010 by and between Scientific Games International, Inc. and William J. Huntley (incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010).*

10.38		Amended and Restated Employment Agreement dated as of April 26, 2012 by and between the Company and Jeffrey S. Lipkin (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 26, 2012).*

10.39		Amendment to Employment Agreement, dated as of December 20, 2012 (but effective as of January 1, 2013), by and between Scientific Games International, Inc. and William J. Huntley (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 26, 2012).*

10.40		Share Purchase Agreement, dated as of April 26, 2011, by and among the Company, Global Draw Limited, IGT-UK Group Limited, Cyberview International, Inc. and International Game Technology (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).

10.41		Credit Agreement, dated as of October 18, 2013, by and among Scientific Games International, Inc., as the borrower, the lenders party thereto from time to time, Bank of America, N.A., as administrative agent, collateral agent, issuing lender and swingline lender, JPMorgan Chase Bank, N.A., as issuing lender, Bank of America, N.A., Credit Suisse Securities (USA) LLC and UBS Securities LLC, as joint lead arrangers, Bank of America, N.A., Credit Suisse Securities (USA) LLC, UBS Securities LLC, J.P. Morgan Securities LLC, RBS Securities Inc., Deutsche Bank Securities Inc., Goldman Sachs Bank USA and HSBC Securities (USA) Inc., as joint bookrunners, Credit Suisse Securities (USA) LLC and UBS Securities LLC, as co-syndication agents, and J.P. Morgan Securities LLC, The Royal Bank of Scotland plc, Deutsche Bank Securities Inc., Goldman Sachs Bank USA and HSBC Securities (USA) Inc., as co-documentation agents. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 18, 2013).

10.42		Guarantee and Collateral Agreement, dated as of October 18, 2013, by and among the Company, Scientific Games International, Inc., the guarantor parties named therein and Bank of America, N.A. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on October 18, 2013).



Exhibit Number		Description
10.43		Employment Agreement dated as of November 22, 2013 by and between the Company and Andrew E. Tomback.* (†)

10.44		Employment Agreement dated as of December 5, 2013 by and between the Company and David L. Kennedy.*(†)

10.45		WMS Industries Inc. Incentive Plan (2012 Restatement) (renamed the Scientific Games Corporation Amended and Restated Incentive Plan (2013 Restatement)) (incorporated by reference to Exhibit 4.4 to the Company's Registration Statement on Form S-8 (No. 333-191817) filed on October 18, 2013).

10.46		IGT/WMS Patent Cross License Agreement dated as of February 14, 2008 between WMS Gaming Inc. and International Game Technology Inc. (incorporated by reference to Exhibit 10.1 to WMS’s Current Report on Form 8-K, filed on February 21, 2008). Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the SEC.

10.47		Game Manufacturer Cashless License Agreement dated as of October 1, 2006, between International Game Technology Inc. and WMS Gaming Inc. (incorporated by reference to Exhibit 10.1 to WMS’s Current Report on Form 8-K, filed on October 3, 2006). Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the SEC.

10.48		Game Manufacturer Cashless License Agreement dated as of November 12, 2012 between the Company and International Game Technology Inc. Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the SEC.(†)

10.49		License and Development Agreement between WMS Gaming Inc. and Sierra Design Group, dated as of April 24, 2002 (incorporated by reference to Exhibit 10.1 to WMS’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2003.) Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the SEC.

10.50		First Amendment to License and Development Agreement between WMS Gaming Inc. and Sierra Design Group, dated June 12, 2003 (incorporated by reference to Exhibit 10.2 to WMS's Quarterly Report on Form 10-Q for the quarter ended December 31, 2003.) Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the SEC.

10.51		Second Amendment to License and Development Agreement between WMS Gaming Inc. and Sierra Design Group, dated July 15, 2003 (incorporated by reference to Exhibit 10.3 to WMS’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2003).

10.52		Third Amendment to License and Development Agreement between WMS Gaming Inc. and Sierra Design Group, dated November 7, 2003 (incorporated by reference to Exhibit 10.4 to WMS’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2003). Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the SEC.

10.53		Letter Amendment to License and Development Agreement between WMS Gaming Inc. and Sierra Design Group, dated February 3, 2004 (incorporated by reference to Exhibit 10.54 to WMS’s Annual Report on Form 10-K for the year ended June 30, 2004). Portions of this exhibit have been omitted under a request for confidential treatment filed separately with the SEC.

12		Computation of Ratio of Earnings to Fixed Charges.(†)

21		List of Subsidiaries.(†)

23.1		Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.(†)



Exhibit Number		Description
23.2		Consent of Reconta Ernst & Young S.p.A., Independent Registered Public Accounting Firm.(†)

23.3		Consent of Ernst & Young Hua Ming LLP, Independent Registered Public Accounting Firm.(††)

23.4		Consent of KPMG Huazhen (Special General Partnership), Independent Auditors.(††)

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.(††)

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.(††)

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(††)

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(††)

99.1		Report of Reconta Ernst & Young S.p.A., Independent Registered Public Accounting Firm.(†)

99.2		Financial Statements of Lotterie Nazionali S.r.l.(†)

99.3		Report of Reconta Ernst & Young S.p.A., Independent Registered Public Accounting Firm.(†)

99.4		Form of Equity Awards Notice-RSUs-Employees under the Scientific Games Corporation 2003 Incentive Compensation Plan (incorporated by reference to Exhibit 99.(d)(2) to the Company's Schedule TO filed on July 19, 2011).*

99.5		Form of Equity Awards Notice-RSUs-Non-Employee Directors under the Scientific Games Corporation 2003 Incentive Compensation Plan (incorporated by reference to Exhibit 99.(d)(3) to the Company's Schedule TO filed on July 19, 2011).*

99.6		Terms and Conditions of Equity Awards to Key Employees under the Scientific Games Corporation 2003 Incentive Compensation Plan (incorporated by reference to Exhibit 99.(d)(4) to the Company's Schedule TO filed on July 19, 2011).*

99.7		Terms and Conditions of Equity Awards to Non-Employee Directors under the Scientific Games Corporation 2003 Incentive Compensation Plan (incorporated by reference to Exhibit 99.(d)(5) to the Company's Schedule TO filed on July 19, 2011).*

99.8		Terms and Conditions of Special Performance-Conditioned Restricted Stock Units under the Scientific Games Corporation 2003 Incentive Compensation Plan (incorporated by reference to Exhibit 99.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012).*

99.9		Gaming Regulations.(†)

99.10		Report of Ernst & Young Hua Ming LLP, Independent Registered Public Accounting Firm.(††)

99.11		Financial Statements of Beijing CITIC Scientific Games Technology Co., Ltd. for the years ended December 31, 2011(audited), 2012(unaudited) and 2013(unaudited)(††)



Exhibit Number		Description
99.12		Report of KPMG Huazhen (Special General Partnership), Independent Auditors, and Financial Statements of Beijing Guard Libang Technology Co., Ltd. for the years ended December 31, 2011(audited), 2012(unaudited) and 2013(unaudited)(††)

101		Financial statements from the Annual Report on Form 10-K of the Company for the year ended December 31, 2013, filed on March 17, 2014, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows and (iv) the Notes to Consolidated Financial Statements tagged as blocks of text.(†)(**)

* Management contracts and compensation plans and arrangements.

(**) Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on

Form 10-K shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act, except as shall be expressly set forth by specific reference in such filing or document.

(†) Previously filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, which

was filed with the Securities and Exchange Commission on March 17, 2014.

(††) Filed herewith.

EX-23.3 2 a233csgconsent2013ka.htm EX-23.3 23.3 CSG Consent 2013 KA

Exhibit 23.3

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement Nos. 33-82612, 333-05811, 333-44983, 333-44979, 333-101725, 333-101729, 333-110141, 333-134043, 333-157638, 333-161232, 333-177148, 333-191817 and 333-192716 of Scientific Games Corporation on Form S-8; Registration Statement Nos. 333-74590, 333-84742, 333-110477, 333-112452, 333-124107, 333-141720 and 333-165743 of Scientific Games Corporation on Form S-3; and Registration Statement No. 333-155346 of Scientific Games International, Inc. on Form S-3; of our report dated June 27, 2012, included in the Amendment No. 1 to the Form 10-K of Scientific Games Corporation for the year ended December 31, 2011, with respect to the financial statements of Beijing CITIC Scientific Games Technology Co., Ltd., which report appears in this Amendment No. 1 to the Form 10-K of Scientific Games Corporation for the year ended December 31, 2013.

/s/ Ernst & Young Hua Ming LLP

Beijing, People's Republic of China

June 26, 2014

EX-23.4 3 a234glbconsent2013ka.htm EX-23.4 23.4 GLB Consent 2013 KA

Exhibit 23.4

Consent of Independent Auditors

We consent to the incorporation by reference in Scientific Games Corporation’s registration statements (Nos. 33-82612, 333-05811, 333-44983, 333-44979, 333-101725, 333-101729, 333-110141, 333-134043, 333-157638, 333-161232, 333-177148, 333-191817 and 333-192716) on Form S-8 and (Nos. 333-84742, 333-74590, 333-110477, 333-112452, 333-124107, 333-141720 and 333-165743) on Form S-3, and Scientific Games International, Inc.’s registration statement No. 333-155346 on Form S-3, of KPMG Huazhen’s report dated June 26, 2012, with respect to the statement of comprehensive income, changes in equity and cash flows of Beijing Guard Libang Technology Co., Ltd. for the year ended December 31, 2011, which report appears in this Amendment No. 1 to the Form 10-K of Scientific Games Corporation for the year ended December 31, 2013.

/s/ KPMG Huazhen (Special General Partnership)

Beijing, People’s Republic of China

June 26, 2014

EX-31.1 4 a311certificationbyceo2013.htm EX-31.1 31.1 Certification by CEO 2013 KA

Exhibit 31.1

Certification by Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, M. Gavin Isaacs, certify that:

1. I have reviewed this Amendment No. 1 on Form 10-K/A of Scientific Games Corporation;

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 the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are 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 the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us 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 our 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 the registrant's disclosure controls and procedures and presented in this report our 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 the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant'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 the registrant'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 the registrant's internal control over financial reporting.

Date: June 26, 2014



/s/ M. Gavin Isaacs
M. Gavin Isaacs President and Chief Executive Officer

EX-31.2 5 a312certificationbycfo2013.htm EX-31.2 31.2 Certification by CFO 2013 KA

Exhibit 31.2

Certification by Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Scott D. Schweinfurth, certify that:

1. I have reviewed this Amendment No. 1 on Form 10-K/A of Scientific Games Corporation;

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

Date: June 26, 2014



/s/ Scott D. Schweinfurth
Scott D. Schweinfurth Executive Vice President & Chief Financial Officer

EX-32.1 6 a321certificationbyceo2013.htm EX-32.1 32.1 Certification by CEO 2013 KA

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Amendment No.1 on Form 10-K/A to the Annual Report on Form 10-K of Scientific Games Corporation (the "Company") for the period ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, M. Gavin Isaacs, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.



		/s/ M. Gavin Isaacs
		M. Gavin Isaacs President and Chief Executive Officer June 26, 2014

EX-32.2 7 a322certificationbycfo2013.htm EX-32.2 32.2 Certification by CFO 2013 KA

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Amendment No.1 on Form 10-K/A to the Annual Report on Form 10-K of Scientific Games Corporation (the "Company") for the period ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott D. Schweinfurth, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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



		/s/ Scott D. Schweinfurth
		Scott D. Schweinfurth Executive Vice President & Chief Financial Officer June 26, 2014

EX-99.10 8 a9910csgauditopinion2011fo.htm EX-99.10 99.10 CSG Audit Opinion 2011 for 2013 10 KA

Exhibit 99.10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

Beijing CITIC Scientific Games Technology Co., Ltd.

We have audited the accompanying balance sheet of Beijing CITIC Scientific Games Technology Co., Ltd. (the “Company”) as of December 31, 2011, and the related statements of operations, shareholders' equity, and cash flows for the year ended December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Beijing CITIC Scientific Games Technology Co., Ltd. at December 31, 2011, and the results of its operations and its cash flows for the year ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.

The 2010 and 2009 financial statements were compiled by us and our report thereon, dated June 27, 2012, stated we did not audit or review those financial statements and, accordingly, express no opinion or other form of assurance on them.

/s/ Ernst & Young Hua Ming

Beijing, People's Republic of China

June 27, 2012

EX-99.11 9 a9911csgfinancialstatement.htm EX-99.11 99.11 CSG Financial Statements 2013 KA

Exhibit 99.11

INDEX TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

CONTENTS PAGES



BALANCE SHEETS AS OF DECEMBER 31, 2012 (UNAUDITED) AND 2013 (UNAUDITED)	2

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 (UNAUDITED) AND 2013 (UNAUDITED)	3

STATEMENTS OF CHANGES IN OWNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 (UNAUDITED) AND 2013 (UNAUDITED)	4

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 (UNAUDITED) AND 2013 (UNAUDITED)	5

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 (UNAUDITED) AND 2013 (UNAUDITED)	6



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

BALANCE SHEETS

(In Renminbi "RMB")



			As of December 31,
		Notes	2012	2013
			(unaudited)	(unaudited)
ASSETS
Current assets
	Cash and cash equivalents		145,694,997	65,670,138
	Accounts receivable, net of allowance for
	doubtful accounts of nil as of December 31, 2012 and 2013		94,403,136	84,908,028
	Inventories	3	26,027,790	29,623,999
	Prepaid expenses		2,728,013	42,187,815
	Other receivables		19,209	300,253

Total current assets			268,873,145	222,690,233

	Property and equipment, net	4	120,469,663	95,525,003
	Rental deposits		1,900,530	1,600,530
	Deferred tax assets	7	12,711,485	3,691,963

TOTAL ASSETS			403,954,823	323,507,729


LIABILITIES AND OWNERS' EQUITY
Current liabilities
	Accounts payable		15,739,152	17,317,025
	Amounts due to related parties	8	214,464	-
	Accrued expenses and other payables	5	53,754,716	33,833,370
	Income tax payable		7,612,548	963,773
	Current portion of long-term debt	6	40,000,000	-
	Dividend payable	8	44,565,000	-

Total current liabilities			161,885,880	52,114,168

Total liabilities			161,885,880	52,114,168

Commitments and contingencies		9

Owners' equity
	Paid-in capital		112,220,000	112,220,000
	Additional paid-in capital		2,831	2,831
	Statutory reserves		30,394,255	38,406,843
	Retained earnings		99,451,857	120,763,887

Total owners' equity			242,068,943	271,393,561


TOTAL LIABILITIES AND OWNERS' EQUITY			403,954,823	323,507,729

The accompanying notes are an integral part of these financial statements.

-2-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME

(In Renminbi "RMB")



		Years ended December 31,
	Notes	2011	2012	2013
			(unaudited)	(unaudited)

Net Revenues		324,226,085	297,590,475	246,830,646
Cost of sales		(160,961,379)	(158,218,979)	(128,650,195)
Gross profit		163,264,706	139,371,496	118,180,451

Operating expenses:
Selling expenses		(10,204,289)	(8,790,848)	(8,203,640)
General and administrative expenses		(10,419,761)	(8,671,105)	(8,807,371)

Total operating expenses		(20,624,050)	(17,461,953)	(17,011,011)

Income from operations		142,640,656	121,909,543	101,169,440

Other income (expense):
Interest income		839,988	1,657,274	557,445
Interest expense	6	(7,249,381)	(5,427,319)	(2,563,555)
Foreign exchange gain		206,632	66,300	164,733
Other income		601,000	950,000	153,332
Total other expense, net		(5,601,761)	(2,753,745)	(1,688,045)

Income before income tax expense		137,038,895	119,155,798	99,481,395
Income tax expense	7	(8,531,016)	(16,055,364)	(20,156,777)

Net income		128,507,879	103,100,434	79,324,618

Other comprehensive income, net of tax		-	-	-

Comprehensive income		128,507,879	103,100,434	79,324,618

The accompanying notes are an integral part of these financial statements.

-3-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

STATEMENTS OF CHANGES IN OWNER'S EQUITY

(In Renminbi "RMB")



	Additional			Total
	Paid-in	paid-in	Statutory	Retained	owner's
	capital	capital	reserves	earnings	equity

Balance as of January 1, 2011 (unaudited)	112,220,000	2,831	6,999,476	114,800,879	234,023,186
Net income	-	-	-	128,507,879	128,507,879
Transfer to statutory reserves	-	-	12,980,594	(12,980,594)	-
Dividend distribution	-	-	-	(73,562,556)	(73,562,556)

Balance as of December 31, 2011	112,220,000	2,831	19,980,070	156,765,608	288,968,509

Balance as of January 1, 2012	112,220,000	2,831	19,980,070	156,765,608	288,968,509
Net income	-	-	-	103,100,434	103,100,434
Transfer to statutory reserves	-	-	10,414,185	(10,414,185)	-
Dividend distribution	-	-	-	(150,000,000)	(150,000,000)

Balance as of December 31, 2012 (unaudited)	112,220,000	2,831	30,394,255	99,451,857	242,068,943

Balance as of January 1, 2013	112,220,000	2,831	30,394,255	99,451,857	242,068,943
Net income	-	-	-	79,324,618	79,324,618
Transfer to statutory reserves	-	-	8,012,588	(8,012,588)	-
Dividend distribution	-	-	-	(50,000,000)	(50,000,000)

Balance as of December 31, 2013 (unaudited)	112,220,000	2,831	38,406,843	120,763,887	271,393,561

The accompanying notes are an integral part of these financial statements.

-4-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

STATEMENTS OF CASH FLOWS

(In Renminbi "RMB")



		Years ended December 31,
	Notes	2011	2012	2013
			(unaudited)	(unaudited)
Cash flows from operating activities:

Net Income		128,507,879	103,100,434	79,324,618
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision of inventories		-	4,718,098	2,001,757
Depreciation of property and equipment	4	21,128,467	19,309,530	30,718,665
Deferred income tax expense/ (benefit)	7	(2,525,275)	(5,013,576)	9,019,521

Changes in operating assets and liabilities:
Accounts receivable		(24,480,000)	50,220,864	9,495,108
Inventories		(16,045,234)	16,170,040	(11,683,895)
Prepaid expenses		(1,121,962)	889,796	1,789,157
Due from related parties		(11,534)	302,140	-
Other receivable		-	(19,209)	(281,044)
Rental deposits		(530)	-	300,000
Accounts payable		8,134,135	(10,412,596)	1,577,873
Due to related parties		(576,390)	(140,303)	(214,464)
Accrued expenses and other payables		14,317,004	(1,911,704)	(13,835,414)
Income tax payable		(4,593,360)	5,724,143	(6,648,775)

Net cash provided by operating activities		122,733,200	182,937,657	101,563,107

Investing activities:
Acquisition of property and equipment		(792,182)	(11,969,298)	(47,022,966)
Proceeds from disposal of property and equipment		23,921	-	-

Net cash used in investing activities		(768,261)	(11,969,298)	(47,022,966)

Financing activities:
Dividend paid		(36,045,687)	(142,951,869)	(94,565,000)
Repayments on long-term debt		(30,000,000)	(40,000,000)	(40,000,000)

Net cash used in financing activities		(66,045,687)	(182,951,869)	(134,565,000)

Net (decrease) / increase in cash and cash equivalents		55,919,252	(11,983,510)	(80,024,859)
Cash and cash equivalents at the beginning of the year		101,759,255	157,678,507	145,694,997

Cash and cash equivalents at the end of the year		157,678,507	145,694,997	65,670,138

Supplemental disclosures of cash flow information:
Cash paid during the year:
Income taxes paid		15,649,649	15,344,797	17,786,031
Interest expense paid		7,249,381	5,544,333	2,647,889
Non-cash activities:
Purchase of property and equipment included in
accounts payable and accrued liabilities		12,527	-	-

The accompanying notes are an integral part of these financial statements.

-5-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


1.	ORGANIZATION AND NATURE OF OPERATIONS

When used in these notes, unless otherwise specified or the context otherwise indicates, all references to the word "Company" refer to Beijing CITIC Scientific Games Technology Co., Ltd. in our financial statements.

Beijing CITIC Scientific Games Technology Co., Ltd. was established by Beijing Kexin Shengcai Investment Co., Ltd. and Scientific Games Worldwide Limited as a Sino-Foreign joint venture in Beijing, the People's Republic of China (the "PRC"), on July 23, 2007.

The Company engages primarily in the manufacturing and sale of lottery tickets and its sole customer is Beijing China Sports Lottery Printing Service Ltd. ("China Sports Lottery").


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates, and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in the financial statements include, but are not limited to, revenue recognition, estimation of sales returns, estimation of allowance for doubtful accounts, lower of cost or market of inventories, valuation allowance of deferred tax assets and useful lives of long-lived assets. Actual results could differ from those estimates.

Foreign currency transactions

The Company's functional and reporting currency is the Renminbi ("RMB").

Transactions denominated in foreign currencies are re-measured into RMB at the exchange rates quoted by the People's Bank of China (the "PBOC") prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-measured into RMB using the applicable exchange rates quoted by the PBOC at the balance sheet dates. Non-monetary items that are measured in terms of historical cost in a foreign currency are re-measured using the exchange rates at the dates of the initial transactions. Foreign exchange gain and losses are included in net income presented in the statements of comprehensive income.

-6-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Fair value measurements of financial instruments

Financial instruments include cash and cash equivalents, accounts receivable, accounts payable, amounts due from/to related parties and long-term debt. The carrying amounts of these financial instruments, other than long-term debt, approximate their fair values due to their short-term maturities.

The carrying value of long-term debt approximates its fair value due to the fact that the related interest rate is based on prevailing market interest rates.

Cash and cash equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with an initial maturity of three months or less.

Accounts receivable and allowance for doubtful accounts

The Company's sole customer is China Sports Lottery. Accounts receivable from China Sports Lottery are recorded at the invoiced amount, do not bear interest and are due within three months of invoice issuance. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in additional allowances in the future. We determine the allowance based on historical experience, current market trends and China Sports Lottery's ability to pay outstanding balances. Account balances are written off against the allowance after all collection efforts have been exhausted and the potential for recovery is considered remote. There were no amounts recorded as allowance for doubtful accounts at December 31, 2012 and 2013, respectively.

Inventories

Inventories consist primarily of raw materials, work-in-progress and finished goods. Inventories are stated at lower of cost or market. Cost is determined using the weighted-average method. Cost of raw materials are based on purchase costs while costs of work-in-progress and finished goods are comprised of direct material and direct labor and an appropriate portion of overhead costs. Inventory provision are recorded to reduce inventory to the lower of cost or market value for obsolete or slow moving inventory based on assumptions about marketability of products, the impact of new product introductions, inventory turns, and specific identification of items, such as product discontinuance.

-7-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Property and equipment

Property and equipment are stated at cost on acquisition date and depreciated using the straight-line method over the estimated useful lives of the assets as follows:



Item		Estimated useful life
Machinery		5-10 years
Office equipment and others		3-5 years
Transportation equipment		4 years
Purchased software		3 years
Leasehold improvements		Over the shorter of the estimated useful lives of the assets or the lease terms

Repair and maintenance costs that do not improve or extend the useful lives of the assets are charged to expense as incurred, whereas the cost of major additions or improvements that extends the useful lives of property and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the cost and accumulated depreciation, with any resulting gain or loss reflected in the statements of comprehensive income.

Income taxes

Income taxes are accounted for under the liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in the statements of comprehensive income in the period that includes the enactment date.

The Company applies Accounting Standards Codification ("ASC") Topic 740-10, Income Taxes: Overall ("ASC 740-10") to account for uncertainty in income taxes. ASC 740-10 requires that an entity recognizes in the financial statements the impact of a tax position, if that position is not more likely than not to be sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than fifty percent likely of being realized on a cumulative probability basis. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the statements of comprehensive income. No unrecognized tax benefits or interest and penalties associated with uncertainty in income taxes were recognized for the years ended December 31, 2011, 2012 and 2013, respectively.

-8-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Impairment of long-lived assets

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of assets, indicates that the carrying amount of an asset may not be recoverable. When these events occur, the Company assesses the recoverability of long-lived assets by comparing the carrying amount of the assets to the expected future undiscounted cash flows resulting from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. No impairment of long-lived assets was recognized for any of the years presented.

Comprehensive Income

Comprehensive income includes net income. The Company presents the components of net income, the components of other comprehensive income and total comprehensive income in a single continuous statement of comprehensive income.

Revenue recognition

Revenue is recognized only when the following four criteria are met (i) persuasive evidence of an arrangement exists, (ii) lottery tickets have been delivered (iii) fees are fixed or determinable, and (iv) collectability is reasonably assured. The Company allows returns of defective and obsolete lottery tickets. Estimates of such sales returns, which reduce net revenues, are based on the Company's historical experience on sales turnover rate, impact of introduction of new products and product discontinuance.

Selling expenses

Selling expenses represent shipping and handling costs which are expensed as incurred.

Leases

The Company enters into operating leases wherein rental payments are expensed on a straight-line basis over their lease terms.

-9-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Government grants

Government grants are recognized where there is reasonable assurance that the grant will be received and all conditions will be complied with. When the grant relates to an expense item, it is recognized over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Government grants are recorded as "other income" in the statements of comprehensive income.

Employee Benefits

The Company's full time employees in the PRC participate in a government-mandated defined contribution plan pursuant to which certain medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Company to accrue for these benefits based on certain percentages of the employee' salaries, subject to a certain limit, depending on the location of employment. The total contributions for such employee benefits, which were expensed as incurred, were RMB6,659,090, RMB7,101,122 and RMB8,923,071 for the years ended December 31, 2011, 2012 and 2013, respectively.

Statutory reserves

In accordance with the Regulations on Enterprises with Foreign Investment of China and its Articles of Association, the Company, being a foreign invested enterprise established in the PRC, is required to provide certain statutory reserves, namely the enterprise expansion fund and a staff welfare and bonus fund, both of which are appropriated from net profit as reported in the enterprise's PRC statutory accounts. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board of directors of the Company for all foreign invested enterprises. The aforementioned reserves can only be used for specific purposes and are not distributable as dividends.

As a result of the PRC laws and regulations that require annual appropriations of after-tax income to be set aside prior to payment of dividends as statutory reserves, the Company is restricted in their ability to transfer a portion of their net assets in the form of dividend payments, loans or advances.

-10-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Concentrations of risks

Concentrations of credit risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. As of December 31, 2012 and 2013, substantially all of the Company's cash and cash equivalents were deposited in financial institutions located in China.

Accounts receivable are unsecured and derived from revenue earned from the Company's sole customer, China Sports Lottery.

Due to the Company's dependence on China Sports Lottery, any negative events or deterioration in our relationship with China Sports Lottery may cause material loss to the Company and have a material adverse effect on the Company's financial condition and results of operations. As of December 31, 2013, there were no past due accounts receivable from China Sports Lottery and no past history of payment default. Therefore, management is of the view that an allowance for doubtful accounts is not necessary for accounts receivable.

Business and economic risks

The Company believes that changes in any of the following areas could have a material adverse effect on the Company's future financial position, results of operations or cash flows: changes in the overall demand for services and products from and its customer relationship with its sole customer, China Sports Lottery; competitive pressures due to new entrants; advances and new trends in new technologies and industry standards; and regulatory considerations.

Foreign currency exchange rate risk

The Company's exposure to foreign currency exchange rate risk primarily relates to cash and cash equivalents and transactions with related parties denominated in U.S. dollars.

-11-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Recently issued accounting standards

In March 2013, the FASB issued an authoritative pronouncement related to parent's accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. When a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.

For an equity method investment that is a foreign entity, the partial sale guidance still applies. As such, a pro rata portion of the cumulative translation adjustment should be released into net income upon a partial sale of such an equity method investment. However, this treatment does not apply to an equity method investment that is not a foreign entity. In those instances, the cumulative translation adjustment is released into net income only if the partial sale represents a complete or substantially complete liquidation of the foreign entity that contains the equity method investment.

Additionally, the amendments in this pronouncement clarify that the sale of an investment in a foreign entity includes both: (1) events that result in the loss of a controlling financial interest in a foreign entity (i.e., irrespective of any retained investment); and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date (sometimes also referred to as a step acquisition). Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events.

The amendments in this pronouncement are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Early adoption is permitted. If an entity elects to early adopt the amendments, it should apply them as of the beginning of the entity's fiscal year of adoption. The Group does not expect the adoption of this guidance will have a material effect on its financial statements.

In July 2013, the FASB issued an Accounting Standard Update ("ASU") which provides guidance on financial statement presentation of an unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The FASB's objective in issuing this ASU is to eliminate diversity in practice resulting from a lack of guidance on this topic in current U.S. GAAP.

-12-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")

The amendments in this ASU state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows.


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Recently issued accounting standards

To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets.

This ASU applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Group does not expect the adoption of this guidance will have a material effect on its financial statements.


3.	INVENTORIES



	December 31,
	2012	2013
	(unaudited)	(unaudited)
Raw materials	6,288,581	13,519,702
Parts and work-in-process	8,775,193	9,271,053
Finished goods	15,682,114	19,639,028

Less: provision for the decline in value of inventories	(4,718,098)	(12,805,784)

	26,027,790	29,623,999

The provision for the decline in value of inventories as of December 31, 2013 includes a batch of obsolete tickets that were sold before 2012 and returned by the customer in 2013. As of December 31, 2013, they had not been destroyed. The related sales were fully reserved in 2012 for anticipated sales return with the assumption that the returned tickets had no value to the Company. Accordingly, the recording of an inventory of RMB8,043,825 with a corresponding inventory provision of RMB8,043,825 upon the receipt of the obsolete tickets in 2013 had no impact on the earnings of 2013.

-13-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


4.	PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:



	December 31,
	2012	2013
	(unaudited)	(unaudited)
Machinery	163,821,703	172,402,579
Office equipment and others	11,137,523	8,320,329
Transportation equipment	504,700	504,700
Purchased software	1,632,692	1,643,015
Leasehold improvements	21,539,755	21,539,755
Property and equipment, at cost	198,636,373	204,410,378
Less: accumulated depreciation	(78,166,710)	(108,885,375)
Property and equipment, net	120,469,663	95,525,003

Certain machines of the Company with an aggregate carrying value of RMB89,134,307 and RMB74,347,834 as of December 31, 2012 and 2013, respectively, were pledged to secure the loan the Company obtained in 2010 and the loan had been repaid on December 20, 2013(Note 6) but the remove process of the pledge is not completed as of December 31, 2013.

Depreciation expense for the years ended December 31, 2011, 2012 and 2013 was RMB21,128,467, RMB19,309,530 and RMB30,718,665, respectively.


5.	ACCRUED EXPENSES AND OTHER PAYABLES



	December 31,
	2012	2013
	(unaudited)	(unaudited)
Accrued sales return (1)	20,605,963	9,293,487
Accrued rental expense (2)	12,568,490	3,388,725
Accrued selling commission to China Sports Lottery	5,613,424	6,903,764
Other taxes	3,711,042	2,889,035
Accrued payroll and employee benefits	4,657,610	4,339,920
Staff welfare and bonus fund	3,039,426	3,840,685
Other liabilities	3,558,761	3,177,754
	53,754,716	33,833,370

(1)Accrued sales return represents the estimated sales return on a gross basis at the end of each of the respective years assuming products returned had no value to the Company. Movements during the respective years are as follows:

-14-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


5.	ACCRUED EXPENSES AND OTHER PAYABLES - continued



	December 31,
	2012	2013
	(unaudited)	(unaudited)
Balance at January 1	21,023,964	20,605,963
Allowance for sales return made in the year	8,179,615	10,586,274
Utilization of accrued sales return	(8,597,616)	(21,898,750)

Balance at December 31	20,605,963	9,293,487

(2)The Company signed lease agreements with China Sports Lottery from October 1, 2008 to December 31, 2022, and the annual rental expense increases by 15% every 3 years. The balance of accrued rental expense includes the accrued rental expense based on the straight line method. In September, 2013, the Company and China Sports Lottery reached a mutual understanding that the leasing agreement is to be early terminated on June 30, 2015, without penalty charge(Note 9). Therefore, such rental expense decreased significantly as of December 31, 2013.


6.	CURRENT PORTION OF LONG-TERM DEBT

On April 7, 2010, the Company obtained an interest bearing loan from the Bank of Communications which has an annual interest rate equal to the People's Bank of China floating borrowing rate and is due on December 20, 2013 and the Company fully repaid the bank loan on the due date. The floating interest rate of the bank loan ranged from 5.76% to 6.90% for the entire loan periods. The bank loan did not contain any financial covenants and was secured by certain machines of the Company (Note 4). Interest expense on the bank loan for the years ended December 31, 2011, 2012 and 2013 was RMB7,249,381, RMB5,427,319 and RMB2,563,555, respectively.

-15-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


7.	INCOME TAX EXPENSE

The PRC enterprise income tax (the "EIT") law applies a uniform 25% EIT rate to both domestic-invested and foreign invested enterprises. However, enterprises that qualify as High and New Technology Enterprise ("HNTE") are entitled to the preferential EIT rate of 15%. In April 2011, the Company obtained the HNTE certificate which was effective retroactively from January 1, 2010, to December 31, 2012. Thus, the Company should be eligible for a preferential EIT rate of 15% retroactive from January 1, 2010 to December 31, 2012. The Company is obligated to complete an annual self-assessment to confirm its continued compliance with the criteria for HNTEs in order to apply the preferential tax rate. The HNTE certificate is valid for three years and the HNTE status is subject to approval and renewal every three years after the initial three-year term. In 2013, the Company has obtained the renewal HNTE which was effective from January 1, 2013 to December 31, 2015. Therefore, the income tax rate used for the current income tax calculation and recognition of deferred income tax expense is 15% in 2013.

Income tax expense consists of:



	December 31,
	2011	2012	2013
		(unaudited)	(unaudited)
Current income tax	11,056,291	21,068,940	11,137,256
Deferred income tax expense(benefit)	(2,525,275)	(5,013,576)	9,019,521
	8,531,016	16,055,364	20,156,777

The tax effects of temporary differences that give rise to the deferred tax asset balances at December 31, 2012 and 2013 are as follows:



	December 31,
	2012	2013
	(unaudited)	(unaudited)
Sales return provision	5,151,491	1,394,023
Accrued rental expense	2,717,002	377,072
Inventory Reserve	1,179,524	1,920,868
Accrued payroll and welfare	945,990	-
Other accrued expense	2,717,478	-
Deferred tax assets, non-current	12,711,485	3,691,963

-16-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


7.	INCOME TAX EXPENSE - continued

The reconciliation of income tax expense computed by applying the statutory income tax rate to pre-tax income is as follows:



	December 31,
	2011	2012	2013
		(unaudited)	(unaudited)
Income tax expense at statutory
income tax rate of 25%	34,259,724	29,788,950	24,870,349
Expenses not deductible for tax	75,641	187,424	149,974
Effect of preferential tax rate	(13,552,609)	(11,915,580)	(9,948,140)
Effect of tax refund
for previous year	(10,709,354)	-	-
Effect of tax rate change on
deferred tax assets	(1,010,110)	(2,005,430)	5,084,594
Others	(532,276)	-	-
Income tax expense	8,531,016	16,055,364	20,156,777


8.	RELATED PARTY TRANSACTIONS

The principal related parties with which the Company had transactions during the years presented are as follows:



Name of related parties		Relationship with the Company

Scientific Games Corporation ("SGC")		Parent company of SGWW
Beijing Kexin Shengcai Investment Co., Ltd.		51% investor of the Company
Scientific Games Worldwide Ltd. ("SGWW")		Wholly-owned subsidiary of SGC and 49% investor of the Company
Scientific Games (China) Co., Ltd.		Wholly-owned subsidiary of SGWW
Scientific Games International		Wholly-owned subsidiary of SGC

-17-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


8.	RELATED PARTY TRANSACTIONS - continued


(a)	Related party transactions

The Company's related party transactions are all incurred in the normal course of conducting its business. A summary of these transactions for the years ended December 31, 2011, 2012 and 2013 is as follows:



	December 31,
	2011	2012	2013
		(unaudited)	(unaudited)
Receiving technology service from:
Scientific Games International	1,418,514	1,407,021	1,130,446

Providing warehouse service to:
Scientific Games (China) Co., Ltd.	10,000	-	-


(b)	Related party balances

The Company had the following related party balances as of December 31, 2012 and 2013:



	December 31,
	2012	2013
	(unaudited)	(unaudited)
Due to related parties:
Scientific Games International	241,464	-
	241,464	-

Dividend payable:
Beijing Kexin Shengcai Investment Co., Ltd.	30,600,000	-
Scientific Games Worldwide Ltd.	13,965,000	-
	44,565,000	-

All balances with related parties are unsecured, interest-free and repayable on demand.

-18-



BEIJING CITIC SCIENTIFIC GAMES TECHNOLOGY CO., LTD.

NOTES TO FINANCIAL STATEMENTS - continued

FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013

(In Renminbi "RMB")


9.	COMMITMENTS AND CONTINGENCIES

i Operating lease as lessee

The Company has entered into leasing arrangements with China Sports Lottery for its manufacturing facility and warehouse and also leases office premises from a third party. Payments made under operating leases are expensed on a straight-line basis over the term of the lease. Rental expenses under operating leases for the years ended December 31, 2011, 2012 and 2013 were RMB13,565,938 , RMB13,235,544 and RMB12,243,156 respectively.

The lease agreements' periods were originally from October 1, 2008 to December 31, 2022. In September 2013, the Company and China Sports Lottery reached a mutual understanding that the leasing agreements is to be early terminated on June 30, 2015, without penalty charge. Future minimum lease payments for non-cancellable operating leases as of December 31, 2013 are as follows:



Year ending	Amount
2014	10,792,796
2015	5,088,829
2016	-
2017	-
2018 and thereafter	-
	15,881,625

ii Purchase obligations

The Company entered into an agreement with printer provider TRESU to purchase printing machine. RMB41,248,959 has been paid in 2013 for the purchase of the machine, which was recorded as prepaid expense as of December 31, 2013. The future minimum purchase obligations payments under non-cancellable purchase agreement as of December 31, 2013 are approximately as follows:



Year ending	Amount
2014	21,291,398
2015	7,097,133
	28,388,531


10.	SUBSEQUENT EVENTS

We have evaluated the events subsequent to December 31, 2013 through April 30, 2014, which represents the date the financial statements were available to be issued, and noted no subsequent events requiring disclosure.

-19-

EX-99.12 10 a9912glbfinancialstatement.htm EX-99.12 99.12 GLB Financial Statements 2013 KA

Exhibit 99.12

Beijing Guard Libang Technology Co., Ltd.

FINANCIAL STATEMENTS

DECEMBER 31, 2013

Independent Auditors’ Report

The Board of Directors

Beijing Guard Libang Technology Co., Ltd.

We have audited the accompanying statements of comprehensive income, changes in equity, and cash flows of Beijing Guard Libang Technology Co., Ltd. for the year ended December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Beijing Guard Libang Technology Co., Ltd. for the year ended December 31, 2011, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ KPMG Huazhen (Special General Partnership)

Beijing, People’s Republic of China

June 26, 2012

Beijing Guard Libang Technology Co., Ltd.

Statement of financial position

(Expressed in Renminbi Yuan)



		December 31,	December 31,
	Note	2013	2012
		(unaudited)	(unaudited)
Assets

Non-current assets
Property, plant and equipment	8	132,464,751	124,586,454
Deferred tax assets	13	4,766,583	4,098,941
Total non-current assets		137,231,334	128,685,395

Current assets
Inventories	9	8,426,418	7,511,866
Advances to suppliers	10	9,040,663	40,138,622
Trade and other receivables	11	48,285,294	54,490,556
Cash and cash equivalents	12	35,057,705	23,573,711
Total current assets		100,810,080	125,714,755

Total assets		238,041,414	254,400,150

Liabilities

Current liabilities
Trade and other payables		12,727,915	13,076,688
Income tax payable		663,591	734,601
Total Current liabilities		13,391,506	13,811,289

Total liabilities		13,391,506	13,811,289


Shareholder’s equity
Paid-in capital	14	89,180,000	89,180,000
Retained earnings		135,469,908	151,408,861
Total equity		224,649,908	240,588,861

Total liabilities and Shareholder’s equity		238,041,414	254,400,150

The notes on pages 5 to 24 form part of these financial statements.

Beijing Guard Libang Technology Co., Ltd.

Statement of comprehensive income

(Expressed in Renminbi Yuan)



		For the year ended December 31,
	Note	2013	2012	2011
		(unaudited)	(unaudited)

Revenue	5	108,738,360	122,846,532	151,609,111
Cost of sales		(56,487,654)	(55,132,326)	(58,865,231)
Gross profit		52,250,706	67,714,206	92,743,880

Other (expenses) / income, net		(1,138,428)	(283,516)	338,155
Selling and marketing expenses		(30,238,255)	(30,419,383)	(35,421,782)
Administrative expenses		(10,764,039)	(12,075,573)	(13,393,189)
Results from operating activities		10,109,984	24,935,734	44,267,064

Finance income		110,337	175,924	200,108
Finance expenses		(6,223)	(8,051)	(11,135)
Net finance income		104,114	167,873	188,973

Profit before income tax		10,214,098	25,103,607	44,456,037

Income tax	7	(1,403,051)	(3,857,110)	(6,382,740)
Profit and total comprehensive
income for the year		8,811,047	21,246,497	38,073,297

The notes on pages 5 to 24 form part of these financial statements.

Beijing Guard Libang Technology Co., Ltd.

Statement of changes in equity

(Expressed in Renminbi Yuan)



	Registered	Retained		Total
	capital	earnings		equity

Balance at January 1, 2011 (unaudited)	89,180,000	92,089,067		181,269,067
Profit and total comprehensive income
for the year	—	38,073,297		38,073,297
Balance at December 31, 2011	89,180,000	130,162,364		219,342,364

Balance at January 1, 2012 (unaudited)	89,180,000	130,162,364		219,342,364
Profit and total comprehensive income
for the year (unaudited)	—	21,246,497		21,246,497
Balance at December 31, 2012 (unaudited)	89,180,000	151,408,861		240,588,861


Balance at January 1, 2013 (unaudited)	89,180,000	151,408,861		240,588,861
Profit and total comprehensive income
for the year (unaudited)	—	8,811,047		8,811,047
Distribution to equity owner
of the Company (unaudited)	—	(24,750,000	)	(24,750,000	)
Balance at December 31, 2013 (unaudited)	89,180,000	135,469,908		224,649,908

The notes on pages 5 to 24 form part of these financial statements.

Beijing Guard Libang Technology Co., Ltd.

Statement of cash flows

(Expressed in Renminbi Yuan)



			For the year ended December 31,
		Note	2,013		2,012		2,011
			(unaudited)		(unaudited)
Cash flows from operating activities:
Profit for the year			8,811,047		21,246,497		38,073,297

Adjustments for:
	Depreciation	8	56,174,085		55,467,717		59,536,507
	Loss on disposal of property, plant and equipment		20,429		12,489		80,577
	Financial income		(110,337	)	(175,924	)	(200,108	)
	Impairment loss on trade receivables	11	942,966		—		—
	Income tax expense	7	1,403,051		3,857,110		6,382,740

Changes in:
	Inventories		(886,802	)	(2,838,997	)	428,376
	Trade and other receivables		5,262,296		(1,252,718	)	(13,480,963	)
	Advances to suppliers		—		(8,471,250	)	(12,793,474	)
	Trade and other payables		(348,773	)	(843,376	)	772,882
Income tax paid			(2,141,703	)	(5,023,935	)	(8,129,876	)
Net cash from operating activities			69,126,259		61,977,613		70,669,958

Cash flows from investing activities:
Interest received			110,337		175,924		200,108
Payments for acquisition of property,
plant and equipment			(33,002,602	)	(76,045,167	)	(63,452,160	)
Net cash used in investing activities			(32,892,265	)	(75,869,243	)	(63,252,052	)

Cash flows from financing activities:
Cash paid for profit distributions			(24,750,000	)	—		—

Net cash used in financing activities			(24,750,000	)	—		—

Net increase / (decrease) in cash and
cash equivalents			11,483,994		(13,891,630	)	7,417,906

Cash and cash equivalents at January 1			23,573,711		37,465,341		30,047,435
Cash and cash equivalents at December 31		12	35,057,705		23,573,711		37,465,341

The notes on pages 5 to 24 form part of these financial statements.

Beijing Guard Libang Technology Co., Ltd.

Notes to the financial statements

(Expressed in Renminbi Yuan)


1	REPORTING ENTITY

Beijing Guard Libang Technology Co., Ltd. (the “Company”) is a limited liability company established in Beijing in the People’s Republic of China (the “PRC”). The address of the Company’s registered office is No.12 Zhongguancun South Avenue, Haidian District, Beijing, the PRC.

The Company is a leading provider of customized computer software, software support, equipment and data communication services to China Welfare Lottery Center (“CWLC”) and its provincial welfare lottery centers. The principal activity of the Company primarily consists of the provision of transaction processing software for the accounting and validation of instant lottery tickets, technical services of communication technology and solution, system integration, installation and testing, ongoing support and maintenance, consulting and training, and the provision of lottery equipment such as point-of-sale terminals and central site computers.


2	BASIS OF PREPARATION


(a)	Statement of compliance

As a Chinese company, the Company currently prepares its financial statements in accordance with the requirements of “Accounting Standards for Business Enterprises – Basic Standard” and 38 Specific Standards issued by the Ministry of Finance (MOF) of the People’s Republic of China (PRC) on 15 February 2006, and application guidance, bulletins and other relevant accounting regulations issued subsequently.

Starting from the year ended December 31, 2011, the Company prepared a separate annual financial statements for the purpose of satisfying a regulatory reporting requirement of its significant investor, Scientific Games Corporation (see note 16(a)). This set of financial statements has been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board. The financial statements for the year ended December 31, 2011 have been audited by KPMG Huazhen with an audit opinion issued on June 26, 2012. The financial statements for the years ended December 31, 2012 and 2013 have not been audited.

The financial statements were authorized for issue by the Board of Directors on June 9, 2014.


2	BASIS OF PREPARATION (CONTINUED)


(b)	Basis of measurement

Unless otherwise stated, the financial statements have been prepared on historical cost basis.


(c)	Functional and presentation currency

These financial statements are presented in Renminbi (“RMB”), which is the Company’s functional currency.


(d)	Use of estimates and judgments

The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:


•	Note 8 – Property, plant and equipment: determination of the estimated useful life of property, plant and equipment


•	Note 13 – Deferred tax assets: the realizability of deferred tax assets


•	Note 15 – Financial instruments: credit risk


3	SIGNIFICANT ACCOUNTING POLICIES

These accounting policies set out below have been applied consistently to all periods presented in these financial statements unless otherwise indicated.


(a)	Financial instruments

The Company initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets and financial liabilities are initially recognised on the trade date at which the Company becomes a party to the contractual provisions of the instrument.


3	SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(a)	Financial instruments (continued)

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

The Company derecognises a financial liabilities when its contractual obligations are discharged or cancelled, or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Company’s non-derivative financial assets include trade and other receivables.

Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, trade and other receivables are measured at amortised cost using the effective interest method, less any allowance for impairment of doubtful debts (see note 3(f)).

Cash and cash equivalents comprise cash balances and demand deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Non - derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.


(b)	Property, plant and equipment


(i)	Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses (see note 3(f)).


3	SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(b)	Property, plant and equipment (continued)


(i)	Recognition and measurement (continued)

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the following:


•	the cost of materials and direct labour;


•	any other costs directly attributable to bringing the assets to a working condition for their intended use;


•	when the Company has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located; and


•	capitalised borrowing costs.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.


(ii)	Subsequent costs

Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. Ongoing repairs and maintenance is expensed as incurred.


(iii)	Depreciation

Items of property, plant and equipment are depreciated on a straight-line basis in statement of comprehensive income over the estimated useful lives of each component.

Items of property, plant and equipment are depreciated from the date that they are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.

The estimated useful life for the Company’s property, plant and equipment are as follows:



Lottery system equipment	1-5 years
Office equipment	5 years
Office furniture	5 years
Motor vehicles	5 years


3	SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(b)	Property, plant and equipment (continued)

The estimated useful life of lottery system equipment is 60 months, however the Company is obliged to transfer the lottery system equipment, free of charges, to the customers at the end of the service contracts, therefore the lottery system equipment is depreciated over the shorter of the useful life and the term of the service contracts.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and are adjusted if appropriate.


(c)	Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses. Other development expenditure is recognised in profit or loss as incurred.

In 2013, the research and development expenditure recognised in statement of comprehensive income is RMB 3,442,387 (2012 (unaudited): RMB 4,236,686, 2011: RMB 8,130,950).


(d)	Leased assets

Assets held under operating leases are not recognised in the Company’s statement of financial position.


3	SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(e)	Inventories

Inventories are carried at the lower of cost and net realizable value. Cost represents purchase cost of spare parts calculated using the specific identification method. Net realizable value is determined by reference to the sales proceeds of items sold or services rendered in the ordinary course of business or to management’s estimates based on prevailing market conditions.

When spare parts are sold or used, the carrying amount of those inventories is recognised as costs of sales and expenses. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. No reversal of any write-down of inventories occurred during the years presented.


(f)	Impairment


(i)	Non-derivative financial assets

A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss events had an impact on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(f)	Impairment (continued)


(i)	Non-derivative financial assets (continued)


•	Financial assets measured at amortised cost

The Company considers evidence of impairment for financial assets measured at amortised cost at a specific asset level. All individual significant assets are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics.

In assessing collective impairment, the Company uses the historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual loss are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against the related financial assets. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.


•	Impairment of doubtful debts

Receivables are assessed for impairment on an individual basis. The provision for bad and doubtful debts is estimated by management based on individual accounts receivable which show signs of un-collectability and an aging analysis. Provision for other receivables is determined based on their specific nature and management’s estimate of their collectability.


(ii)	Non-financial assets

The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or cash generating unit (“CGU”) exceeds its recoverable amount.

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(f)	Impairment (continued)


(ii)	Non-financial assets (continued)

The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.


(g)	Employee benefits


(i)	Short-term employee benefits

Short-term employee benefits are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.


(ii)	Defined contribution plans

Pursuant to the relevant laws and regulations in the PRC, the Company has joined a defined contribution retirement plan for the employees arranged by a governmental organisation. A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. The Company makes contributions to the retirement scheme at the applicable rates based on the employees’ salaries.

Obligations for contribution to defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which related services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(g)	Employee benefits (continued)


(iii)	Termination benefits

Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognises costs for restructuring. If benefits are not expected to be settled wholly within 12 months of the end of the reporting period, then they are discounted.


(h)	Provisions

A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.


(i)	Revenue

Revenue is recognised to the extent that it is probable the economic benefits associated with the transaction will flow to the Company and the amount of revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts and taxes. Specific recognition criteria must also be met before revenue is recognised as discussed below.

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(i)	Revenue (continued)

The Company’s revenue is derived from the lottery system service contracts with CWLC and its provincial welfare lottery centers in the PRC. Under these service contracts, the Company provides transaction processing software for the accounting and validation of instant lottery tickets, technical services of communication technology and solution, system integration, installation and testing, ongoing support and maintenance, consulting and training, and the provision of lottery equipment such as point-of-sale terminals and central site computers. The service contracts provide for a service fee based on a percentage of the retail lottery tickets sales. Since the total service fee from each contract cannot be estimated reliably during the contract term, revenue is recognised based on actual retail lottery ticket sales on a monthly basis. Fees earned under the service contracts are recognised as revenue in the period when all of the following criteria are met:


•	Persuasive evidence of an arrangement exists, which is typically when a customer contract has been signed;


•	Services have been rendered;


•	The fee is deemed to be fixed or determinable and free of contingencies or significant uncertainties; and


•	Collectability is reasonably assured.


(j)	Leases


(i)	Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.


(ii)	Determining whether an arrangement contains a lease

At inception of an arrangement, the Company determines whether such an arrangement is or contains a lease. This will be the case if the following two criteria are met:


•	the fulfillment of the arrangement is dependent on the use of a specific asset or assets; and


•	the arrangement contains a right to use the asset(s).

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(j)	Leases (continued)


(ii)	Determining whether an arrangement contains a lease (continued)

At inception or on reassessment of the arrangement, the Company separates payments and other consideration required by such an arrangement into those for other elements on the basis of their relative fair values. Subsequently the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Company’s incremental borrowing rate.


(k)	Finance income and finance costs

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and contingent consideration.


(l)	Income tax

Income tax expense comprises current and deferred taxes. Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to business combinations, or items recognised directly in equity and other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:


•	Temporary difference on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit of loss;


•	Temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and


•	Taxable temporary differences arsing on the initial recognition of goodwill.

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(l)	Income tax (continued)

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

In determining the amount of current and deferred tax, the Company take into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary difference to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and liabilities are not discounted.


(m)	Related parties


(i)	A person, or a close member of that person’s family, is related to the Company if that person:


•	has control or joint control over the Company;


•	has significant influence over the Company; or


•	is a member of the key management personnel of the Company or the Company’s parent.

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(m)	Related parties (continued)


(ii)	An entity is related to the Company if any of the following conditions applies:


•	The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).


•	One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a Company of which the other entity is a member).


•	Both entities are joint ventures of the same third party.


•	One entity is a joint venture of a third entity and the other entity is an associate of the third entity.


•	The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company.


•	The entity is controlled or jointly controlled by a person identified in (i).


•	A person identified in the first point in (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.


4	NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after January 1, 2014, and have not been applied in preparing these financial statements. None of these is expected to have significant effect on the financial statements of the Company.


5	REVENUE

The principal activity of the Company primarily consists of the provision of transaction processing software for the accounting and validation of instant lottery tickets, technical services of communication technology and solution, system integration, installation and testing, ongoing support and maintenance, consulting and training, and the provision of lottery equipment such as point-of-sale terminals and central site computers.


6	PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging:

(a) Personnel expenses



	2013	2012	2011
	(unaudited)	(unaudited)
Salaries, wages and other benefits	11,911,254	11,785,100	12,074,870
Contribution to defined contribution plans	1,513,209	635,484	552,595
	13,424,463	12,420,584	12,627,465


(c)	Operating lease charges



2013	2012	2011
(unaudited)	(unaudited)
1,753,209	1,576,532	1,353,422


7	INCOME TAX IN THE STATEMENT OF COMPREHENSIVE INCOME

Under the Enterprise Income Tax Law, the PRC statutory income tax rate is 25%. In 2008, the Company was recognised by Chinese government as a “High and New Technology Enterprise” (“HNTE”) under the Enterprise Income Tax Law and its relevant regulations, and was entitled to the preferential income tax rate of 15% from 2008 to 2010. In 2011, the Company renewed its HNTE qualification, which entitled it to the preferential income tax rate of 15% for another 3 years from 2011 to 2013.

(a) Income tax in the statements of comprehensive income represents:



	2013	2012	2011
	(unaudited)	(unaudited)
Current tax expenses
- PRC Enterprise Income Tax	2,415,352	4,142,394	7,648,742
- Tax filling differences	(344,659)	-	-
Deferred tax expenses
- Origination and reversal of temporary differences	(667,642)	(285,284)	(1,266,002)
Total income tax expense	1,403,051	3,857,110	6,382,740


7	INCOME TAX IN THE STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)

(b) Reconciliation of effective tax rate



	2013	2012	2011
	(unaudited)	(unaudited)
Profit before tax	10,214,098	25,103,607	44,456,037

Income tax calculated at
statutory tax rate of 25%	2,553,525	6,275,902	11,114,009
Effect of non-deductible expenses	215,595	91,569	210,193
Effect of tax rate differential and
preferential tax rate	(1,021,410)	(2,510,361)	(4,941,462)
Tax filling differences	(344,659)	-	-
Total tax expense	1,403,051	3,857,110	6,382,740


8	PROPERTY, PLANT AND EQUIPMENT



	Lottery system	Office	Office	Motor
	equipment	equipment	furniture	vehicles	Total
Cost:
As at January 1, 2011 (unaudited)	159,773,836	2,028,518	145,518	2,015,971	163,963,843
Additions	63,244,532	207,628	—	—	63,452,160
Disposals	(35,656,381)	(174,697)	(142,050)	—	(35,973,128)
As at December 31, 2011	187,361,987	2,061,449	3,468	2,015,971	191,442,875

As at January 1, 2012 (unaudited)	187,361,987	2,061,449	3,468	2,015,971	191,442,875
Additions (unaudited)	75,677,090	204,077	164,000	—	76,045,167
Disposals (unaudited)	(42,336,076)	(73,105)	—	—	(42,409,181)
As at December 31, 2012 (unaudited)	220,703,001	2,192,421	167,468	2,015,971	225,078,861

As at January 1, 2013 (unaudited)	220,703,001	2,192,421	167,468	2,015,971	225,078,861
Additions (unaudited)	64,051,879	48,683	—	—	64,100,562
Disposals (unaudited)	(34,298,439)	(219,759)	—	—	(34,518,198)
As at December 31, 2013 (unaudited)	250,456,441	2,021,345	167,468	2,015,971	254,661,225

Depreciation:
As at January 1, 2011 (unaudited)	(61,836,051)	(650,039)	(84,093)	(1,207,242)	(63,777,425)
Charge for the year	(58,770,268)	(358,665)	(25,346)	(382,228)	(59,536,507)
Written back on disposal	35,638,155	148,191	106,205	—	35,892,551
As at December 31, 2011	(84,968,164)	(860,513)	(3,234)	(1,589,470)	(87,421,381)

As at January 1, 2012 (unaudited)	(84,968,164)	(860,513)	(3,234)	(1,589,470)	(87,421,381)
Charge for the year (unaudited)	(54,829,074)	(352,429)	(23,382)	(262,832)	(55,467,717)
Written back on disposal (unaudited)	42,336,076	60,615	—	—	42,396,691
As at December 31, 2012 (unaudited)	(97,461,162)	(1,152,327)	(26,616)	(1,852,302)	(100,492,407)

As at January 1, 2013 (unaudited)	(97,461,162)	(1,152,327)	(26,616)	(1,852,302)	(100,492,407)
Charge for the year (unaudited)	(55,762,595)	(317,410)	(31,209)	(62,871)	(56,174,085)
Written back on disposal (unaudited)	34,270,689	199,329	—	—	34,470,018
As at December 31, 2013 (unaudited)	(118,953,068)	(1,270,408)	(57,825)	(1,915,173)	(122,196,474)

Carrying amounts:
As at December 31, 2013 (unaudited)	131,503,372	750,937	109,643	100,799	132,464,751

As at December 31, 2012 (unaudited)	123,241,839	1,040,094	140,852	163,669	124,586,454

As at December 31, 2011	102,393,823	1,200,936	234	426,501	104,021,494

As at January 1, 2011 (unaudited)	97,937,785	1,378,479	61,425	808,729	100,186,418


9	INVENTORIES



	December 31,	December 31,
	2013	2012
	(unaudited)	(unaudited)

Spare parts	8,426,418	7,511,866

In 2013, the unaudited cost of inventories recognised as costs of sales and expenses amounted to RMB 795,741 (2012 (unaudited): RMB 259,850, 2011: RMB 526,713).


10	ADVANCES TO SUPPLIERS

Advances to suppliers represent prepayments for lottery service equipment, which were purchased but not yet received by the Company as at December 31, 2013 and 2012.

According to the terms of purchase contracts, the Company is normally required to pay 15% of the purchase price in advance. The Company makes the prepayments without any collaterals. As a result, the Company’s claims for such prepayments would rank only as an unsecured claim, which exposes the Company to credit risks of the suppliers.


11	TRADE AND OTHER RECEIVABLES



	December 31,	December 31,
	2013	2012
	(unaudited)	(unaudited)
Trade receivables	47,165,204	52,613,051
Less: provision for bad and doubtful debts	(942,966)	-
	46,222,238	52,613,051
Other receivables	2,063,056	1,877,505
Total	48,285,294	54,490,556

As at December 31, 2013 and 2012, all trade receivables are due from CWLC and its provincial welfare lottery centers.

The Company’s exposure to credit risk and impairment losses related to trade and other receivables is disclosed in note 15.


12	CASH AND CASH EQUIVALENTS



	December 31,	December 31,
	2013	2012
	(unaudited)	(unaudited)
Demand deposits	35,057,705	23,573,590
Cash on hand	-	121
Total	35,057,705	23,573,711


13	DEFERRED TAX ASSETS

Deferred tax assets are attributable to the following:



	December 31,	December 31,
	2013	2012
	(unaudited)	(unaudited)
Depreciation of property, plant and equipment	3,433,731	3,028,753
Accrued expenses	1,332,852	1,070,188
Total	4,766,583	4,098,941


14	PAID-IN CAPITAL

As at December 31, 2013 and 2012, the Company’s registered capital of RMB 89,180,000 (unaudited) was fully paid by its immediate parent company, Shenzhen Leli Technology Development Co., Ltd.


15	FINANCIAL INSTRUMENTS

Exposure to credit, liquidity and interest rate risks arises in the normal course of the Company’s business. The Company’s exposure to these risks and the financial risk management policies and practices used by the Company to manage these risks are described below:


(a)	Credit risk

The Company’s credit risk is primarily attributable to trade and other receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.


15	FINANCIAL INSTRUMENTS (CONTINUED)


(a)	Credit risk (continued)

The Company evaluates customers’ credit status and their ability to guarantee payment primarily through its business evaluation system. The Company generally requires customers to settle progress billings in accordance with contracted terms. Credit terms are granted to customers, based on credit assessment carried out by management on an individual basis.

The Company currently has only one customer, the CWLC and its provincial welfare lottery centers, which gives rise to significant concentration of credit risk.


(b)	Liquidity risk

The Company’s objective in managing liquidity risk is to maintain a balance between continuity of funding and flexibility through the use of cash generated by operating

activities. Management believe that the Company’s ability to generate sufficient cash from operations to reinvest in its business is one of its fundamental financial strengths, and combined with the Company’s business cash generating capacity, management expect to meet the Company’s financial obligations and operating needs in the foreseeable future.

The Company does not have any financial liabilities, or derivatives, with maturity dates that exceed 12 months.

The Company did not enter into any lines of credit or borrowing arrangements with banks.


(c)	Interest rate risk

The Company does not have financing arrangements with banks. Consequently, changes in market interest rates would not have a significant effect on the Company’s net income and net equity.


16	RELATED PARTY RELATIONSHIPS AND TRANSACTIONS


(a)	Parent and controlling parties

The Company is wholly owned by Shenzhen Leli Technology Development Co., Ltd. (“Shenzhen Leli”), which is ultimately 50% owned by Scientific Games China Holdings Limited and 50% owned by Rexcapital Financial Holding Limited. Scientific Games China Holdings is an indirect wholly owned subsidiary of Scientific Games Corporation.

Shenzhen Leli is located in Shenzhen and its principal activities are technical development and consultancy, with a registered capital of RMB 54,606,000.


16	RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONTINUED)


(b)	Key management personnel compensation

Key management personnel are those persons holding positions with authority and responsibility for planning, directing and controlling the activities of the Company.

Key management personnel compensation comprised the following:



	2013	2012	2011
	(unaudited)	(unaudited)
Short-term employee benefits	1,849,688	2,906,088	3,651,950
Post-employment benefits	36,614	39,520	32,406


(c)	The significant related-party transactions and outstanding balances of the Company are summarised as follows:



	2013	2012	2011
	(unaudited)	(unaudited)
Receiving services from Scientific
Games (China) Co., Ltd.	676,520	670,993	576,000

	December 31,	December 31,
	2013	2012
	(unaudited)	(unaudited)
Other payables due to Scientific
Games (China) Co., Ltd.	178,457	320,993

Scientific Games (China) Co., Ltd. is a fellow subsidiary of the Company. The transactions with related parties are priced on an arm’s length basis.


17	OPERATING LEASE COMMITMENTS

As at December 31, the future minimum lease payments under non-cancellable operating leases rentals were as follows:



	2013	2012
	(unaudited)	(unaudited)
Within 1 year	1,013,251	1,546,300
After 1 year but within 2 years	775,620	1,081,521
Total	1,788,871	2,627,821

The Company leases a number of office facilities under operating leases. These operating leases do not contain provision for contingent lease rentals.