WEB NEWS Reverse Merger Activity
Item 1.01 Entry into a Material Definitive Agreement.
Effective as of December 30, 2014, International Lottery & Totalizator Systems, Inc., a California corporation (“ILTS California”), merged with and into its wholly owned subsidiary, Delaware International Lottery & Totalizator Systems, Inc., a Delaware corporation (“ILTS Delaware” or the “Company”). The purpose of the merger was to change the state of incorporation of ILTS California from California to Delaware. The merger was effected pursuant to that certain Agreement and Plan of Merger, dated January 8, 2014 (the “Merger Agreement”), which was approved and adopted by Berjaya Lottery Management (H.K.) Limited (“Berjaya”), the holder of 9,245,317 shares of the common stock of ILTS California, representing 71.3% of the outstanding shares, by written consent on January 9, 2014. A certificate of merger was filed with the Secretary of State of the State of Delaware and the Secretary of State of the State of California on December 30, 2014.
Pursuant to the Merger Agreement, ILTS Delaware is the surviving corporation and changed its name to “International Lottery & Totalizator Systems, Inc.” Subsequent to the merger contemplated by the Merger Agreement, the Certificate of Incorporation and Bylaws of ILTS Delaware continued in full force and effect as the Certificate of Incorporation and Bylaws of the surviving corporation and the persons serving as the directors and officers of ILTS California became the directors and officers of the surviving corporation.
On the effective date of the merger, the issued and outstanding shares of common stock, without par value, of ILTS California automatically converted into shares of the common stock, par value $0.01 per share, of ILTS Delaware on a one-for-one basis, and ILTS Delaware succeeded to all the assets, rights, powers, property, debts, liabilities and obligations of ILTS California. The shareholders of ILTS California were not required to surrender their certificates for the common stock of ILTS California, but may, at their option, surrender such certificates and receive certificates of ILTS Delaware common stock.
The merger did not result in any change in the business, management, location of the principal executive offices, assets or liabilities of ILTS California.
Comments & Business Outlook
(Amounts in thousands, except per share amounts)
Three Months Ended
Six Months Ended
October 31,
October 31,
2014
2013
2014
2013
Revenues:
Sales of products
$
740
$
8,715
$
3,297
$
16,025
Services
363
259
679
715
1,103
8,974
3,976
16,740
Cost of sales:
Cost of product sales
812
4,820
2,700
10,746
Cost of services
79
107
182
238
891
4,927
2,882
10,984
Gross profit
212
4,047
1,094
5,756
Research and development expenses
162
-
312
-
Selling, general and administrative expenses
646
836
1,303
1,424
(Loss) income from operations
(596
)
3,211
(521
)
4,332
Other income:
Interest and dividend income
-
-
-
1
Other
-
-
1
-
(Loss) income before (benefit) provision for income taxes
(596
)
3,211
(520
)
4,333
(Benefit) provision for income taxes
(3
)
1,247
3
1,699
Net (loss) income
$
(593
)
$
1,964
$
(523
)
$
2,634
Net (loss) income per share:
Basic
$
(0.05
)
$
0.15
$
(0.04
)
$
0.20
Weighted average shares used in computation of net (loss) income per share:
Basic
12,963
12,963
12,963
12,963
Management Discussion and Analysis
Significant fluctuations in period-to-period contract revenue are expected in both gaming and voting industries since individual contracts are generally considerable in value, and the timing of contracts does not occur in a predictable trend. Contracts from the same customer generally may not recur or generally do not recur in the short-term. Accordingly, comparative results between quarters may not be indicative of trends in contract revenue. The current domestic and global economic slowdown and tightening of the credit markets may adversely affect our business and financial condition in ways that we cannot reasonably predict. For the gaming business, due to the tightening of the credit markets, our potential and existing customers may not be able to secure financing for lottery projects which could effectively impact our revenue potential. For the voting business, various government entities and jurisdictions have experienced severe budget constraints which could compel them to delay or cancel their purchasing decisions, and hence, impact our ability to generate revenue.
Contract revenue for the three months ended October 31, 2014 was $386,000, compared to $8.5 million for the corresponding period in 2013. For the six months ended October 31, 2014, contract revenue was approximately $2.5 million, compared to $15.5 million for the corresponding period in 2013. Significantly lower contract revenues were primarily due to the completion of lottery product and hardware component sales related to the gaming segment in 2013. The decrease was partially offset by increased contract activities for the voting segment.
Spares revenue for the three months ended October 31, 2014 was $135,000, compared to $171,000 for the same period in 2013. The decrease was primarily due to lower demand for spare parts from a customer in the gaming segment. Spares revenue for the six months ended October 31, 2014 was $299,000, compared to $199,000 for the corresponding period in 2013. The increase was primarily due to higher demand for spare parts from customers in the gaming and voting segments. Customers' demand for spare parts fluctuates from period to period.
Licensing revenue for the three months ended October 31, 2014 was $219,000, compared to $94,000 in 2013. For the six months ended October 31, 2014, licensing revenue was $460,000, compared to $278,000 for the corresponding period in 2013. The increase in licensing revenue was primarily due to additional executed licensing agreements related to the voting segment. We derive licensing revenue from both voting and lottery contracts. Software support revenue for the three months ended October 31, 2014 was $285,000, compared to $219,000 for the same period in 2013. For the six months ended October 31, 2014, software support revenue was $570,000, compared to $440,000 in the same period in 2013. The increases were primarily due to higher fees charged to a customer in the gaming segment. Product servicing and support revenue for the three months ended October 31, 2014 was $78,000, compared to $40,000 for the corresponding period in 2013. The increase was primarily due to higher demand of support services from customers in the voting segment. For the six months ended October 31, 2014, product servicing and support revenue was $109,000, compared to $275,000 for the same period in 2013. The decrease was primarily due to lower demand for support services compared to prior fiscal year.
Related party revenue of $288,000 accounted for 26% of total revenue in the three months ended October 31, 2014, compared to $8.6 million or 96% of total revenue in the corresponding period in 2013. For the six months ended October 31, 2014, related party revenue of $549,000 accounted for 14% of total revenue, compared to $8.8 million or 53% of total revenue in the corresponding period in 2013.
Comments & Business Outlook
(Amounts in thousands, except per share amounts)
Three Months Ended
July 31,
2014
2013
Revenues:
Sales of products
$
2,557
$
7,310
Services
316
456
2,873
7,766
Cost of sales:
Cost of product sales
1,888
5,926
Cost of services
103
131
1,991
6,057
Gross profit
882
1,709
Research and development expenses
150
-
Selling, general and administrative expenses
657
588
Income from operations
75
1,121
Other income:
Interest and dividend income
-
1
Other
1
-
Income before provision for income taxes
76
1,122
Provision for income taxes
6
452
Net income
$
70
$
670
Net income per share:
Basic
$
0.01
$
0.05
Weighted average shares used in computation of net income per share:
Basic
12,963
12,963
Management Discussion and Analysis
Contract revenue for the three months ended July 31, 2014 was approximately $2.2 million, compared to $7.1 million for the corresponding period in 2013. Significantly lower contract revenue was primarily due to completion of hardware component sales related to the gaming segment during the first quarter in 2013. The decrease was partially offset by increased sales related to the voting segment.
Spares revenue for the three months ended July 31, 2014 was $164,000, compared to $28,000 for the same period in 2013. The increase was primarily due to higher demand for spare parts. Customers' demand for spare parts fluctuates from period to period.
Licensing revenue for the three months ended July 31, 2014 was $241,000, compared to $184,000 in 2013. The increase in licensing revenue was primarily due to additional executed licensing agreements related to the voting segment. We derive licensing revenue from both gaming and voting contracts. Software support revenue for the three months ended July 31, 2014 was $285,000, compared to $221,000 for the same period in 2013. Higher software support revenue was primarily due to increased fees from the software support in the gaming segment.
Product servicing and support revenue for the three months ended July 31, 2014 was $31,000, compared to $235,000 for the same period in 2013. The decrease was primarily due to lower demand for support services compared to prior fiscal year.
Related party revenue of approximately $262,000 accounted for 9% of total revenue in the three months ended July 31, 2014, compared to $163,000 or 2% of total revenue in the corresponding period in 2013.
Comments & Business Outlook
INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
Years Ended
April 30,
2014
2013
Revenues:
Sales of products
$
21,360
$
9,316
Services
1,338
1,255
22,698
10,571
Cost of sales:
Cost of product sales
14,296
6,282
Cost of services
412
413
14,708
6,695
Gross profit
7,990
3,876
Research and development expenses
139
-
Selling, general and administrative expenses
2,978
2,325
Income from operations
4,873
1,551
Other income:
Interest and dividend income
2
1
Other
3
-
Income before provision (benefit) for income taxes
4,878
1,552
Provision (benefit) for income taxes
1,782
(1,547
)
Net income
$
3,096
$
3,099
Net income per share:
Basic
$
0.24
$
0.24
Weighted average shares used in computation of net income per share:
Basic
12,963
12,963
Management and Discussion
Significant fluctuations in year-to-year revenue are expected in both gaming and voting industries. Individual contracts are generally of considerable value, and the timing of contracts or sales of spare parts does not occur in a predictable trend. Contracts from the same customer may not recur or generally do not recur in the short-term. Accordingly, comparative results between periods may not be indicative of trends in contract revenue. The current domestic and global economic slowdown and tightening of the credit markets may adversely affect our business and financial condition in ways that we cannot reasonably predict. For the gaming segment, due to the tightening of the credit markets, our potential and existing customers may not be able to secure financing for lottery projects which may effectively impact our revenue potential. For the voting segment, various government entities and jurisdictions have experienced severe budget constraints which could compel them to delay or cancel their purchasing decisions, and hence, impact our ability to generate revenue. Contract revenue for the year ended April 30, 2014 was approximately $20.4 million, compared to $8.3 million for fiscal 2013. Significantly higher contract revenue was primarily due to lottery product and hardware component sales related to gaming and totalizator industries. The increase was partially offset by completion of a lottery contract. Spares revenue for the year ended April 30, 2014 was $325,000, compared to $543,000 for fiscal 2013, reflecting lower customer demand for spare parts in fiscal 2014. We derived spares revenue from various customers for shipments of spare orders. Customer demand for spare parts fluctuates from period to period and may not be indicative of trends in spares revenue.
Licensing revenue for the year ended April 30, 2014 was $650,000, compared to $483,000 for fiscal 2013. Higher licensing revenue was primarily due to additional executed licensing agreements related to the voting segment. We derived licensing revenue from executed voting and lottery contracts. Software support revenue for the year ended April 30, 2014 was $973,000, compared to $776,000 for fiscal 2013. Higher software support revenue was mainly due to increased fees to support a customer in the gaming segment. Product servicing and support revenue decreased to $365,000 in 2014 from $479,000 in 2013. The decrease was primarily due to lower demand for support services from a customer in the gaming segment, partially offset by higher demand for support services in the voting segment.
Related party revenue of approximately $11.9 million accounted for 52% of total revenue in the year ended April 30, 2014, compared to $4.2 million or 40% of total revenue in fiscal 2013.
Comments & Business Outlook
Comments & Business Outlook
(Amounts in thousands, except per share amounts)
Three Months Ended
Six Months Ended
October 31,
October 31,
2013
2012
2013
2012
Revenues:
Sales of products
$
8,715
$
2,047
$
16,025
$
5,060
Services
259
350
715
627
8,974
2,397
16,740
5,687
Cost of sales:
Cost of product sales
4,820
1,133
10,746
2,850
Cost of services
107
128
238
203
4,927
1,261
10,984
3,053
Gross profit
4,047
1,136
5,756
2,634
Selling, general and administrative expenses
836
644
1,424
1,223
Income from operations
3,211
492
4,332
1,411
Other income:
Interest and dividend income
-
-
1
-
Income before provision for income taxes
3,211
492
4,333
1,411
Provision for income taxes
1,247
20
1,699
23
Net income
$
1,964
$
472
$
2,634
$
1,388
Net income per share:
Basic
$
0.15
$
0.04
$
0.20
$
0.11
Weighted average shares used in computation of net income per share:
Basic
12,963
12,963
12,963
12,963
Comments & Business Outlook
(Amounts in thousands, except per share amounts)
Years Ended
April 30,
2013
2012
Revenues:
Research and development expenses
Selling, general and administrative expenses
Interest and dividend income
Income before (benefit) provision for income taxes
(Benefit) provision for income taxes
)
Weighted average shares used in computation of net income per share:
Comments & Business Outlook
(Amounts in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
January 31,
January 31,
2012
2011
2012
2011
Revenues:
Sales of products
$
4,034
$
1,146
$
6,048
$
4,390
Services
449
226
988
676
4,483
1,372
7,036
5,066
Cost of sales:
Cost of product sales
2,960
1,023
4,931
3,401
Cost of services
195
26
350
94
3,155
1,049
5,281
3,495
Gross profit
1,328
323
1,755
1,571
Research and development expenses
7
-
31
-
Selling, general and administrative expenses
596
576
1,895
1,803
Income (loss) from operations
725
(253
)
(171
)
(232
)
Other income (expense):
Interest and dividend income
-
2
2
5
Other
-
-
(1
)
12
Income (loss) before income taxes
725
(251
)
(170
)
(215
)
Provision for (benefit of) income taxes
-
(10
)
-
(10
)
Net income (loss)
$
725
$
(241
)
$
(170
)
$
(205
)
Net income (loss) per share:
Basic and diluted
$
0.06
$
(0.02
)
$
(0.01
)
$
(0.02
)
Weighted average shares used in computation of net income (loss) per share:
Basic and diluted
12,963
12,963
12,963
12,963
Contract backlog at January 31, 2012 was approximately $7.8 million. Of this amount, approximately $5.9 million will be derived from gaming orders received from three related customers. Of the $5.9 million amount, approximately $1.5 million has been paid by our related customers as of March 13, 2012. The remaining contract backlog amount of approximately $1.9 million relates to voting and gaming contracts with unrelated customers. Of the $1.9 million amount, approximately $993,000 has been paid by our unrelated customers as of March 13, 2012. Additional sources of cash through January 31, 2013 are expected to be derived from spares, software and technical support and licensing revenues. Uses of cash are expected to be for normal operating expenses and costs associated with contract deliverables.
Significant fluctuations in period-to-period contract revenue are expected in both gaming and voting industries since individual contracts are generally considerable in value, and the timing of contracts does not occur in a predictable trend. Contracts from the same customer generally may not recur or generally do not recur in the short-term. Accordingly, comparative results between quarters and fiscal years may not be indicative of trends in contract revenue.
Research
Some color on recent development regarding ITSI bid for a contract with the Puerto Election Comittee: (retrieved from I-HUB ).
Here's more news from Saturday explaining the "selection" and status of he negotiations....and just so this is clear to all people of all cognitive and reading abilities, NO ONE IS SAYING THIS IS A DONE DEAL YET . Another story from Saturday (translation provided by Google Chrome): http://www.elnuevodia.com/negocianelcostoderealizarelescrutinio-1160361.html January 7, 2012 (Unisyn is a subsidiary of ITSI that is bidding for the contract ). The election commissioners could stop the process According to Aponte, the goal of commissioners is that the contract with Unisyn is for far less money . By Frances Rosario / frosario1@elnuevodia.com The selection of Unisyn Voting Solutions Company to administer the electronic counting process in the next general election is final and binding. His hiring will depend on negotiating a reduction in the price of service as well as the results of the tests that will be submitted by their machines, election commissioners confirmed yesterday Ivan Aponte and Ivan Roberto Caban. In fact, this coming Tuesday the negotiating committee of the State Election Commission (EC), consisting of three commissioners and the president, Hector Conty, will meet to determine how it will begin to negotiate the price Unisyn provides. This is because the company sought $ 26.5 million, the highest cost among the bidders Dominion Voting Systems, Hart Intercivic and Smartmatic . "We must negotiate. Everything in life is negotiable and they said they were willing to negotiate (the price), "said Caban, commissioner of the New Progressive Party (PNP). For its part, the independence Aponte stated that the goal is "to download a reasonable amount of money. " "If no money down, there could also stop the process. Everything is fair game, "said the commissioner of the PIP. However, Aponte said the most important aspect of the hiring company is focused on the laboratory test to be performed between March and April. We will test the machines offered by Unisyn for counting votes with ballots used in the island and for the various forms of voting that has the elector, he explained. On the other hand, statehood and independence commissioners refuted the complaints expressed by the Popular Democratic Party around that Unisyn has no electoral experience and has no economic strength . Also, Caban and Unisyn Aponte agreed that Unisyn was the only one satisfied the resolution adopted by the Legislature, which stipulates that the company selected must be certified FEC 2005, which is granted by the Federal Election Commission. They noted that other companies had been certified by an independent laboratory, which was not sufficient to meet the requirements of the law. On the economic front, the EC officials said they hired an auditing firm, called PKF, who determined that all bidders have the financial strength to take over the process. PPD Election Commissioner, Eder Ortiz, did not respond yesterday to calls from El Nuevo Dia to react on the issue.
CFO Trail
Effective September 30, 2011, Ms. T. Linh Nguyen resigned from the positions of Chief Financial Officer and Corporate Secretary of International Lottery & Totalizator Systems, Inc. (the "Company") to pursue a new opportunity. While the Company begins a search for a new Chief Financial Officer and Corporate Secretary , Mr. Jeffrey M. Johnson, President of the Company, has been appointed as Acting Chief Financial Officer and Acting Corporate Secretary of the Company.
Investor Alert
International Lottery & Totalizator Systems, Inc. (the "Company")
announced today that the Puerto Rico State Election Commission (“CEE”) issued a Resolution, dated January 5, 2012, selecting Unisyn Voting Solutions, Inc. (“Unisyn”), the wholly owned subsidiary of the Company, to begin negotiations for the implementation of the electronic vote counting system for the 2012 General Elections in Puerto Rico.
The Company is aware of erroneous news stories reporting that Unisyn has already been awarded a contract by CEE for the electronic vote counting system for the 2012 General Elections in Puerto Rico. The award of any contract by CEE is subject to further negotiations between Unisyn and the CEE.