** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-KSB/A**

** **

**ý****   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934**

 

**Forthe fiscal year ended December 31, 2003**

** **

**o****   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934**

** **

**Forthe transition period from               to               **

** **

**Commissionfile number     000-25855**

** **

**VendingData Corporation**

(Name of small businessissuer in its charter)

 
| **Nevada**                                                      |   | **91-1696010**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                            |   |                                  |
| **6830  Spencer Street, Las Vegas, Nevada**                     |   | **89119**                             |
| (Address of principal  executive offices)                       |   | (Zip Code)                            |

 

| Issuer’s telephone number:                  **(702) 733-7195** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                |
| Securities registered under Section 12(b) of the  Exchange Act:                                                                                     |

 
| Title of each class |   | Name of each exchange on which registered |
|---------------------|--------|-------------------------------------------|
|                |   |                                      |

 

| Securities  registered under Section 12(g) of the Exchange Act: |
|-----------------------------------------------------------------|
|                                                            |
| **Common  Stock, $.001 par value**                              |
| (Title of each class)                                           |
|                                                            |
| (Title of each class)                                           |

 

Check whether the issuer (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes ý  No o

 

Check if there is no disclosure of delinquent filersin response to Item 405 of Regulation S-B is not contained in this form, and nodisclosure will be contained, to the best of the registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in PartIII of this Form 10-KSB or any amendment to this Form 10-KSB.  o

 
| State issuer’s revenues  for its most recent fiscal year: |   | $6,710,919 |
|----------------------------------------------------------------|--------|------------|

 

** **

State the aggregate market value of voting stock heldby non-affiliates computed by reference to the average bid and asked price ofsuch common equity, as of a specified date within the past 60 days.  $35,481,219 ($3.83 per share as ofMarch 26, 2004).  

 

State the number of shares outstanding of each of the issuer’s classesof common stock, as of the latest practicable date.

 
| Common Stock, $.001 par value |   | 17,187,799 shares as of March 31, 2004 |
|-------------------------------|--------|----------------------------------------|

 

**DOCUMENTSINCORPORATED BY REFERENCE**

Not applicable.

 

Transitional Small Business Disclosure Format (check one):  Yes oNo ý

** **

** **

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**EXPLANATORY NOTE:**  VendingData Corporation, aNevada corporation, is amending its Annual Report on Form 10-KSB, as originallyfiled with the Securities and Exchange Commission on March 30, 2004, forthe purposes of providing the information required by Part III of Form 10-KSB,as such information will not be incorporated by reference to a proxy statementfor the company’s 2004 Annual Meeting of Stockholders filed with the Securitiesand Exchange Commission within 120 days after December 31, 2003.  This amendment does not include items fromthe original Form 10-KSB that are not being hereby amended.

 

**TABLE OF CONTENTS**

 
| **PART III**      |     |                                                                                                             |
|-------------------|----------|------------------------------------------------------------------------------------------------------------------|
|              |     |                                                                                                             |
|              | Item 9.  | Directors, Executive Officers, Promoters and  Control Persons; Compliance with Section 16(a) of the Exchange Act |   |
|              | Item 10. | Executive Compensation                                                                                           |   |
|              | Item 11. | Security Ownership of Certain Beneficial Owners  and Management and Related Stockholder Matters                  |   |
|              | Item 12. | Certain Relationships and Related Transactions                                                                   |   |
|              | Item 13. | Exhibits and Reports on Form 8-K                                                                                 |   |
|              | Item 14. | Principal Accountant Fees and Services                                                                           |   |
|              |     |
| **EXHIBIT INDEX** |     |

** **

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# **PART III**

# ** **

## **ITEM9**.                             DIRECTORS, EXECUTIVEOFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THEEXCHANGE ACT

## ** **

The following information is furnished with respect to each member ofour board of directors, including our chief executive officer who is also adirector.  There are no familyrelationships between or among any of our directors.

 

**Directors**

 
| **Name**        |   | **Age** |   | **Director  Since** |   | **Position**                                    |
|-----------------|--------|---------|--------|---------------------|--------|-------------------------------------------------|
| Steven J. Blad  |   | 52      |   | 1998                |   | Chief Executive Officer, President and Director |
| James E. Crabbe |   | 58      |   | 2000                |   | Chairman of the Board of Directors              |
| Ronald O. Keil  |   | 71      |   | 1998                |   | Director                                        |
| Bob L. Smith    |   | 66      |   | 1998                |   | Vice-Chairman of the Board of Directors         |

 

***Steven J. Blad***joined us in October 1996 and served asVice President of Sales and Marketing until April 1997, when he became ourpresident.  Mr. Blad served in thatposition until May 1998, when he became our Chief Executive Officer, Presidentand director.  Mr. Blad received abachelor’s degree in 1973 from Carson Newman. Prior to joining us in 1996, Mr. Blad was both employed and acted as aconsultant in and outside the gaming industry. Mr. Blad’s gaming experience includes acting as a consultant forSpintek Gaming Technologies, Inc. from October 1994 through September 1996,serving as the Chief Executive Officer of Flagship Games International locatedin Port Everglades, Florida from July 1987 to July 1991 and serving as theGeneral Manager of Seminole Tribe Bingo Hall on the Big Cypress Reservation inBig Cypress, Florida from April 1984 to May 1986.  He obtained a Masters of Education degree in 1975 from SouthernBaptist Graduate School.  From 1975 to1976, Mr. Blad pursued additional graduate studies at the University ofAlabama.

 

***James E. Crabbe***became a member and Vice-Chairman of ourboard in May 2000 and was elected Chairman of our board in August 2001.  Mr. Crabbe is currently engaged in theactive management of his personal investment portfolio.  He spent 34 years in the money managementbusiness.  In 1980, he co-founded theCrabbe-Huson Group, an investment management company, of which he served aspresident, portfolio manager and analyst until his retirement from the businessin 2000.  Mr. Crabbe earned hisbachelor’s degree from the University of Oregon in 1967.  He serves on the board of directors ofViewpoint Corporation, a publicly traded software company.

 

***Ronald O. Keil***has been a member of our board sinceApril 1999.  Since March 1995,Mr. Keil has served as Managing Partner of RJL Properties, Inc., whichowned and operated four hotels and a mini-storage facility all of which weresold between 1995 and 1997.  Inaddition, from October 1993 to January 1998, Mr. Keil owned a 142-roomHoliday Inn in Idaho Falls and since 1999 has owned and operated Keil’s, Inc.,a chain of supermarkets in California. Mr. Keil is a founder and director of the Bank of Clark County,Oregon.  He earned a bachelor’s degreein Business Administration from Lewis and Clark College and has completedgraduate work towards a Master of Business Administration from the Universityof Oregon.

 

***Bob L. Smith***joined our board in May 1998 and servedas Chairman of our board from April 1999 until August 2001, when he becameVice-Chairman of our board. Mr. Smith also serves as Chairman of the Board and Chief ExecutiveOfficer of VIP’s Industries, Inc., a company co-founded by Mr. Smith in1968 that oversees restaurant, hotel and real estate development in fiveWestern states.  Mr. Smith serveson the Boards of Directors of Flying J., Inc., an integrated oil company, andRegency of Oregon (formerly Blue Cross and Blue Shield of Oregon), and previouslyserved on the Boards of

 

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Directors of theCrabbe-Huson Funds, Inc., an investment management company, and Centennial Bank(now Umpqua Bank).  Mr. Smithreceived a bachelor’s degree in Business Administration from the University ofOregon in 1962.

 

**Executive Officers**

** **

***H. Michael Jahnke*** has been our Chief Operating Officer since February 2004.  Mr. Jahnke has spent the past 15 years in senioroperating positions of technology companies. From October 2002 to February 2004, Mr. Jahnke served as vice presidentof operations, corporate secretary and (acting) CFO for WireCACHE, Inc.  From November 2001 to October 2002,, Mr.Jahnke served as vice president of sales and marketing for Fios, Inc.  Most notably, from July 1989 to September1999, Mr. Jahnke served as vice president of worldwide sales operations forSequent Computer Systems, Inc., a global supplier of Intel-based servers forhigh-volume, transaction-oriented data center applications with 38 worldwidesales offices.  At Sequent, after it wasacquired by IBM Corporation, Mr. Jahnke was responsible for the integration ofthe merger, which resulted in the subsequent formation of IBM’s web serverdivision.

 

***John R. Spina*** has been our Chief Financial Officersince February 2003 and our Treasurer since April 2003.  Mr. Spina has held senior levelpositions for over 20 years with major gaming operators such as Harrah’sEntertainment, Inc., Resorts International, Inc., Ameristar Casino, Inc. andPinnacle Entertainment, Inc.  Thesepositions included Chief Operating Officer, Executive Vice President, VicePresident of Information Technology and Senior Vice President of Finance.  Mr. Spina held the position ofExecutive Vice President of Operations for Ameristar Casinos from 1995 to July1998.  From August 1998 to October 1999,Mr. Spina held the position of Vice President and General Manager ofHyatt’s Grand Victoria Casino.  FromNovember 1999 to July 2001, Mr. Spina held the position of Vice Presidentand General Manager of Pinnacle Entertainment’s Belterra Casino and he held theposition of Chief Operating Officer at Gamecraft Inc. from October 1, 2002through January 2003.  Mr. Spinaearned his bachelor of science and Master of Business Administration degreesfrom Drexel University.  He is acertified public accountant in the State of New Jersey.

 

***Stacie L. Brown***joined us in July 1999, as our CorporateCounsel and serves as our Secretary. From 1995 to 1999, she was in private practice with Dickerson, Dickerson,Consul & Pocker in Las Vegas, Nevada, where she assisted in therepresentation of the Las Vegas Convention and Visitors Authority.  Ms. Brown has been admitted to the State Barof Nevada and the District of Columbia Bar and is admitted to practice beforethe U.S. District Court, District of Nevada, the U.S. Courts of Appeal for theNinth and District of Columbia Circuits and the United States SupremeCourt.  Ms. Brown earned her JurisDoctor from the University of Michigan Law School in 1995 and received abachelor’s degree from Ball State University in 1992 majoring in French,Political Science and Telecommunications.

 

**Significant Employees**

** **

***Robert G. Pietrosanto*** joined us in January 1999 and iscurrently our Senior Vice President of Sales. Previously, Mr. Pietrosanto served as a sales executive for ShuffleMaster, Inc. from 1992 to 1999.  Inaddition, Mr. Pietrosanto held key management positions at severalcasinos, including Binion’s Horseshoe Casino and Hotel in Las Vegas, Nevada andthe Sands Hotel and Casino in Las Vegas, Nevada.  Mr. Pietrosanto studied business administration at AlfredUniversity in Alfred, New York from 1980 to 1983.

 

***D. Dean Barnett*** joined us in August 1988 and iscurrently Vice President of Sales. Previously, Mr. Barnett served as the National Sales Manager for ShuffleMaster, Inc. from 1992 to 1999.  Inaddition, from 1984 to 1992, Mr. Barnett worked for Bally’s Las Vegas, as partof a special management team focused on fraudulent player practices, such ascard counting and shuffle tracking. Mr. Barnett studied business management at the University ofNevada, Las Vegas from 1978 to 1980.

 

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***Kenneth R. Dickinson***joined us in1998 and is currently our Senior Vice President of Product Development.  Mr. Dickinson is primarily responsible forthe development and implementation of our SecureDropTM System.  From 1989 to 1998, Mr. Dickinson served asEngineering Manager at Bally Gaming, where he was responsible for the designand development of Bally’s first touchscreen lottery game and the GameMaker,the first of its kind with a multi-game touch screen gaming device.  Mr. Dickinson received a bachelor’sdegree in electrical engineering from Michigan Technical University in 1977.

 

***William B. Roquemore***joined us in January 1999, and serves asVice President of Manufacturing.  Beforejoining us, Mr. Roquemore worked for Softbank Corp. as Site Manager from 1997to 1999, and served 20 years in the production and service areas of computerelectronics manufacturing.  Mr.Roquemore earned a degree in Applied Electronics from the United ElectronicsInstitute in Dallas, Texas in 1978 and also studied manufacturing and qualitycontrol at Richland College in Dallas, Texas in 1980.

 

***Jessica N. Neville***joined us in September 2001, and servesas Vice President of Marketing and Public Relations.  From October 2000 to September 2001, Mrs. Neville worked in theMarketing and Special Events department at the Four Queens Casino.  Prior to relocating to Las Vegas, Mrs.Neville worked as an Associate Producer at North By Northwest productions inBoise, Idaho from June 1998 to July 2000. Mrs. Neville earned a bachelor’s degree in Mass Communication andJournalism from Boise State University.

 

***Joseph D. Corradino***joined us in November 2000 as Director ofSales/Table Games.  Mr. Corradino hasover 26 years of casino experience and has held positions in international anddomestic casino management.  Prior tojoining us, Mr. Corradino served as Vice President of Casino Operations for theSanta Fe Hotel and Casino from 1992 to 2000. Before his employment with the Santa Fe Hotel and Casino, he heldnumerous positions in the gaming industry, including Casino Manager at theHacienda Hotel from 1989 to 1993, Shift Manager at the Sahara Hotel &Casino from 1985 to 1989, and Casino and Assistant Casino Manager at theFlamingo Beach Casino in the Netherlands Antilles from 1983 to 1984.  Mr. Corradino earned a bachelor’s degree in Transportation,Tourism and Travel from Niagara University in 1971.

 

**AuditCommittee**

 

The audit committee is comprised of Messrs. Keil and Smith.  Our audit committee generally meetsquarterly, and in 2003, our audit committee held six meetings.  As stated in the audit committee charter,amended as of September 6, 2000, among other things, our audit committee hasthe responsibility of selecting the firm that will serve as our independentpublic accountants, approving and reviewing the scope and results of the auditand any nonaudit services provided by the independent public accountants andmeeting with our financial staff to review internal control, procedures andpolicies.

 

Although we have not identified a member of our audit committee as theaudit committee financial expert, we are currently reviewing whether one of ourmembers qualifies as an audit committee financial expert pursuant to Item401(b)(2) of Regulation S-B.  Inaddition, we are currently searching for a third member to our audit committeewho will also qualify as the audit committee financial expert.

 

**NominatingCommittee**

 

In January 2004, our board of directors created a nominating committeeand appointed Messrs. Keil and Smith to serve on the nominatingcommittee.  The nominating committee isresponsible for assisting our board of directors with respect to theappropriate size and composition of our board and monitoring and makingrecommendations regarding the performance of our board.  In April 2004, through written consent, ournominating committee recommended Steven J. Blad, James E. Crabbe, Ronald O.Keil and Bob L. Smith as nominees for election to our board of directors at our2004 Annual Meeting of Stockholders to be held later this year.

 

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**Section 16(a) Beneficial Ownership Reporting Compliance**

 

Rules adopted by the SEC under Section 16(a) of the Exchange Actrequire our officers and directors, and persons who own more than 10% of theissued and outstanding shares of our equity securities, to file reports oftheir ownership, and changes in ownership, of such securities with theSecurities and Exchange Commission on Forms 3, 4 or 5, as appropriate.  Such persons are required by the regulationsof the Securities and Exchange Commission to furnish us with copies of allforms they file pursuant to Section 16(a).

 

Based solely upon a review of Forms 3, 4 and 5 and amendments theretofurnished to us during our most recent fiscal year, and any writtenrepresentations provided to us, we believe that all of the officers, directors,and owners of more than ten percent of the outstanding shares of our commonstock are in compliance with Section 16(a) of the Exchange Act for the yearended December 31, 2003 with the exception of the late filing of a Form 4 forJames E. Crabbe for a transaction occurring on August 26, 2003.

 

**Code of Ethics**

 

We have adopted a Code of Ethics that applies to our board ofdirectors, chief executive officer, chief financial officer, controller and anyother individual serving in similar capacities.  The Code of Ethics is designed to serve as the foundation of ourstandards of behavior and to promote honest and ethical conduct, properdisclosure of financial information in our periodic reports, and compliancewith applicable laws, rules, and regulations by our directors and seniorofficers who have operating and financial responsibilities.

 

## **ITEM10**.                      EXECUTIVECOMPENSATION

## ** **

**SummaryCompensation Table**

 

The following table sets forth the compensation awarded to, earned byor paid to, our Chief Executive Officer and our other executive officersearning in excess of $100,000 for services rendered in all capacities duringfiscal years ended December 31, 2003, 2002, and 2001.  We provide certain perquisites and other personal benefits to someor all of our executives.  The unreimbursedincremental cost to us of providing perquisites and other personal benefits didnot exceed, as to any of the executives for any year, the lesser of $50,000 or10% of the total salary and bonus paid to such executive for such year.

 
|                             |   | **Annual  Compensation** |       |       |   | **Long -Term  Compensation** |       |                                     |   |
|----------------------------------|--------|--------------------------|------------|------------|--------|------------------------------|------------|------------------------------------------|--------|
| **Name and Principal  Position** |   | **Year**                 | ** ** | **Salary** |   | **Bonus**                    | ** ** | **Securities  Underlying  Options/SARs** |   | **All  Other  Compensation**** ** |   |
|                             |   |                     |       | **($)**    |   | **($)**                      |       | **(#)**                                  |   | **($)** |   |
| Steven J. Blad                   |   | 2003                     |       | 282,000    |   | 7,800                        |       | 500,000                                  |   | — |   |
| Chief Executive  Officer,        |   | 2002                     |       | 282,000    |   | —                       |       | 133,000                                  |   | — |   |
| President and  Director          |   | 2001                     |       | 282,000    |   | —                       |       | 219,000                                  |   | — |   |
|                             |   |                     |       |       |   |                         |       |                                     |   |   |   |
| John R. Spina                    |   | 2003                     |       | 149,603    |   | —                       |       | 75,000                                   |   | — |   |
| Chief Financial  Officer         |   | 2002                     |       | —     |   | —                       |       | —                                   |   | — |   |
|                             |   | 2001                     |       | —     |   | —                       |       | —                                   |   | — |   |
|                             |   |                     |       |       |   |                         |       |                                     |   |   |   |
| Stacie L. Brown                  |   | 2003                     |       | 118,940    |   | —                       |       | 25,000                                   |   | — |   |
| Corporate  Counsel and           |   | 2002                     |       | 114,918    |   | —                       |       | 7,400                                    |   | — |   |
| Secretary                        |   | 2001                     |       | 101,547    |   | —                       |       | 14,200                                   |   | — |   |

 

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**Option Grants In Last Fiscal Year**

** **

The following table sets forth information regarding grants of stockoptions during the fiscal year ended December 31, 2003 made to the namedexecutive officers.  Material itemsgoverning option grants under our Amended and Restated 1999 Stock Option Planare discussed below under “Stock Option Plans.”  During the fiscal year ended December 31, 2003, we issued toemployees options to purchase an aggregate of 1,096,850 shares of our commonstock and cancelled options to purchase an aggregate of 66,490 shares of ourcommon stock.

 
| **Name**        |   | **Number of  Securities  Underlying  Options  Granted** |   | **%****of Total  Options  Granted to  Employees in  Fiscal Year** |   | **Exercise  or Base  Price  ($/Share)** |   | **Expiration  Date** |              |
|-----------------|--------|---------------------------------------------------------|--------|-------------------------------------------------------------------|--------|-----------------------------------------|--------|----------------------|-------------------|
| Steven J. Blad  |   | 100,000                                                 |   | 9.1                                                               | %      | $                                       | 2.50   |                 | June 18, 2008     |   |
| Steven J. Blad  |   | 80,000                                                  |   | 7.3                                                               | %      | $                                       | 2.50   |                 | December 31, 2010 |   |
| Steven J. Blad  |   | 80,000                                                  |   | 7.3                                                               | %      | $                                       | 2.50   |                 | December 31, 2011 |   |
| Steven J. Blad  |   | 80,000                                                  |   | 7.3                                                               | %      | $                                       | 2.50   |                 | December 31, 2012 |   |
| Steven J. Blad  |   | 80,000                                                  |   | 7.3                                                               | %      | $                                       | 2.50   |                 | December 31, 2013 |   |
| Steven J. Blad  |   | 80,000                                                  |   | 7.3                                                               | %      | $                                       | 2.50   |                 | December 31, 2014 |   |
|            |   | **500,000**                                             |   | **45.6**                                                          | %      |                                    |   |                 |              |
| John R. Spina   |   | 16,000                                                  |   | 1.5                                                               | %      | $                                       | 3.00   |                 | February 24, 2008 |   |
| John R. Spina   |   | 17,000                                                  |   | 1.5                                                               | %      | $                                       | 3.00   |                 | February 24, 2009 |   |
| John R. Spina   |   | 17,000                                                  |   | 1.5                                                               | %      | $                                       | 3.00   |                 | February 24, 2010 |   |
| John R. Spina   |   | 25,000                                                  |   | 2.3                                                               | %      | $                                       | 2.50   |                 | February 24, 2010 |   |
|            |   | **75,000**                                              |   | **6.8**                                                           | %      |                                    |   |                 |              |
| Stacie L. Brown |   | 9,000                                                   |   | 0.8                                                               | %      | $                                       | 2.50   |                 | July 19, 2009     |   |
| Stacie L. Brown |   | 8,000                                                   |   | 0.7                                                               | %      | $                                       | 2.50   |                 | July 19, 2010     |   |
| Stacie L. Brown |   | 8,000                                                   |   | 0.7                                                               | %      | $                                       | 2.50   |                 | July 19, 2011     |   |
|            |   | **25,000**                                              |   | **2.3**                                                           | %      |                                    |   |                 |              |

 

**Aggregated Option/SARExercises In Last Fiscal Year and FY-End Option/SAR Values**

** **

The following table sets forth information regarding exercises of stockoptions and stock appreciation rights, or SARs, during the fiscal year endedDecember 31, 2003 made to the named executive officers.

 
| **Name**        |   | **Shares  Acquired  on  Exercise** |            | **Value  Realized** |                 | **Number of  Securities  Underlying Unexercised  Options/SARs as of  December 31, 2003 (#)** |            | **Value of  Unexercised In-  the-Money Options as of  December 31, 2003 ($)** |                 |
|-----------------|--------|------------------------------------|-----------------|---------------------|----------------------|----------------------------------------------------------------------------------------------|-----------------|-------------------------------------------------------------------------------|----------------------|
|            |   |                               | **Exercisable** |                | **Unexer  -cisable** | ** **                                                                                   | **Exercisable** | ** **                                                                    | **Unexer-  cisable** | ** ** |
|            |   | **(#)**                            |            | **($)**             |                 |                                                                                         |            |                                                                          |                 |   |   |   |   |
| Steven J. Blad  |   | —                             |            | —              |                 | 645,000                                                                                      |            | 400,000                                                                       |                 | $ | 2,025,000 |   | $ | 1,380,000 |   |
| John R. Spina   |   | —                             |            | —              |                 | 33,000                                                                                       |            | 42,000                                                                        |                 | $ | 97,300 |   | $ | 136,400 |   |
| Stacie L. Brown |   | —                             |            | —              |                 | 33,000                                                                                       |            | 25,000                                                                        |                 | $ | 92,400 |   | $ | 86,250 |   |

 

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The values for “in-the-money” options held as of December 31, 2003represent the positive spread between the respective exercise/base prices ofoutstanding options and the estimated fair market value of $5.95 as ofDecember 31, 2003.

 

**Employment Agreements**

** **

In August 1999, we entered into an agreement with Steven J. Bladwith an effective date of January 1, 2000 and a term of three years,replacing a prior agreement.  Pursuantto the employment agreement, Mr. Blad shall receive a monthly base salaryof $23,500 and 80,000 stock options with an exercise price of $12.50.  With respect to the vesting of the options,20,000 stock options vested as of the effective date of his employment agreementwith the balance vesting over a three-year period thereafter as long asMr. Blad remains employed as our President and Chief Executive Officer andsatisfies certain performance goals to be established by our board.  As with the prior employment agreement withMr. Blad, the present employment agreement contains provisions withrespect to confidentiality and non-competition.  We recorded compensation expense of $10,000 in 2000 related tothe options granted as a result of the excess in the fair value of theunderlying common stock at the grant date, *i.e.*, $13.00 per share, over the exerciseprice of $12.50 per share of the options granted.

 

In November 2001, we entered into a first amendment to Mr. Blad’semployment agreement, which extended the term of his employment agreementthrough December 31, 2004.  Thefirst amendment provides that 400,000 options, exercisable at a price of $1.75per share, be granted upon the effective date of the first amendment, November 20,2001.  Of the 400,000 options, 134,000options were vested as of the effective date of the first amendment, 133,000options will vest on the first anniversary of the first amendment, and another133,000 options will vest on the second anniversary of the first amendment.  With Mr. Blad’s consent, these options weremade subject to the terms and conditions of the Amended and Restated 1999 StockOption Plan.

 

In June 2003, we entered into a second amendment to Mr. Blad’semployment agreement, in which we extended the term of Mr. Blad’s employmentthrough December 31, 2009, granted to Mr. Blad stock options topurchase 500,000 shares of our common stock at $2.50 per share, and agreed thatMr. Blad’s base salary shall continue at $282,000 per year.

 

In July 2001, we entered into an employment agreement withStacie L. Brown with an effective date of July 20, 2001 and a term oftwo years.  Pursuant to the employmentagreement, Ms. Brown received an annual base salary of not less than$115,000 and 29,000 stock options with an exercise price ranging from $1.75 to$13.00 per share.  With respect to thevesting of the options, 14,200 stock options vested as of the effective date ofher employment agreement with the balance vesting over a two-year periodthereafter as long as Ms. Brown remained employed as our CorporateCounsel.  The employment agreementprovides that if her employment is terminated for cause (as defined in theemployment agreement), death, or termination of our business, she will receiveno severance of any kind.  In the eventthat the employment agreement is terminated for any reason other than forcause, death, or termination of our business, she will receive a severancepayment equal to seven months base salary. Her employment agreement also contains provisions with respect toconfidentiality and non-competition.

 

In June 2003, we entered into a first amendment to employment agreementof Ms. Brown, in which we extended the term of Ms. Brown’s employmentthrough July 19, 2006, granted to Ms. Brown stock options to purchase25,000 shares of our common stock at $2.50 per share, accelerated the vestingdate of certain existing options, and agreed that Ms. Brown’s base salarywill be $125,000 per year.

 

In February 2003, we entered into an employment agreement withJohn R. Spina with an effective date of February 24, 2003 and a termof two years.  Pursuant to theemployment agreement, Mr. Spina will receive an annual base salary of$175,000 and 50,000 stock options with an exercise price of $3.00 pershare.  With respect to the vesting ofthe options, 16,000 stock options vested as of the

 

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effective date ofhis employment agreement with the balance vesting over a two-year periodthereafter as long as Mr. Spina remains employed as our Chief FinancialOfficer.  The employment agreementprovides that if his employment is terminated for cause (as defined in theemployment agreement), death, or termination of our business, he will receiveno severance of any kind.  In the eventthat the employment agreement is terminated for any reason other than forcause, death, or termination of our business, he will receive a severancepayment equal to seven months base salary. His employment agreement also contains provisions with respect toconfidentiality and non-competition.

 

In July 2003, we entered into an amendment to the employment agreementof John R. Spina, Chief Financial Officer.  Pursuant to this amendment, we awarded Mr. Spina an optionto purchase 25,000 shares of our common stock, at an exercise price of $2.50per share and accelerated the vesting date of certain existing options.

 

In June and July 2003, we entered into amended employment agreementswith certain significant and other employees under which the terms of theiremployment agreements were extended three years.  In addition, we increased the number of stock options granted tothese employees and accelerated the date of vesting of certain existing stockoptions.  The certain significant andother employees included D. Dean Barnett, Vice President of Sales;Tyson K. Adams, Senior Development Engineer; Lynn C. Hessing,Director of Engineering; Robert G. Pietrosanto, Senior Vice President ofSales; William B. Roquemore, Vice President of Manufacturing; andKenneth R. Dickinson, Senior Vice President of Product Development.

 

**Stock Option Plans**

** **

We have two stock options plans, the Amended and Restated 1999 StockOption Plan and the Amended and Restated 1999 Directors’ Stock Option Plan,which were originally authorized to issue options to purchase an aggregate of100,000 shares and 20,000 shares, respectively.  Our board approved an increase in the number of shares authorizedfor issuance under the Amended and Restated 1999 Stock Option Plan to 2,000,000shares, which our stockholders approved on May 29, 2003.  In July 2003, our board, subject tostockholder approval, approved an increase in the number of shares authorizedfor issuance under our 1999 Directors’ Stock Option Plan to 300,000.  Pursuant to our stock options plans, as ofDecember 31, 2003, there were options outstanding to purchase 2,107,130shares of our common stock with a weighted average exercise price per share of$3.51 and options remaining to purchase 192,870 shares of our common stock.

 

As of December 31, 2003, we have issued 1,951,930 options to purchaseour common stock pursuant to our Amended and Restated 1999 Stock Option Planand 155,200 options pursuant to our Amended and Restated 1999 Directors’ StockOption Plan.  We cannot make any grantsunder our stock option plans of options to purchase common stock at an exerciseprice of less than 100% of the fair market value of our common stock on thedate of grant.  With the optionee’sconsent, certain options were made subject to the terms and conditions of theAmended and Restated 1999 Stock Option Plan.

 

***Amended andRestated 1999 Stock Option Plan***

 

Under our Amended and Restated 1999 Stock Option Plan, our executivecommittee has the authority to determine the persons to whom awards will begranted, the nature of the awards, the number of shares to be covered by eachgrant, the terms of the grant and with respect to options, whether the optionsgranted are intended to be incentive stock options, the duration and rate ofexercise of each option, the option price per share, the manner of exercise andthe time, manner and form of payment upon exercise of an option.

 

Stock options may be exercised in whole or in part at any time duringthe option period by giving written notice to us specifying the number ofshares to be purchased.  Such noticeshall be accompanied

 

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by payment in fullof the exercise price, either by cash or by certified or cashier’s check, orsuch other instrument as the Committee (as defined in the Amended and Restated1999 Stock Option Plan) may accept and by payment of all amounts that we arerequired to withhold by law for tax obligations.

 

Upon termination of an optionee’s employment for cause, such employee’sstock options will terminate.  Upontermination of an option holder’s employment for any reason other than death orpermanent disability, such employee’s stock options will terminate 90 days fromthe date on which such relationship terminates.  Except as the Committee may expressly determine otherwise at anytime with respect to any particular non-qualified option granted, if anoptionee shall die or cease to have a relationship by reason of permanentdisability, any option granted to him shall terminate one year after the dateof his death or termination of relationship due to permanent disability unlessby its terms it shall expire before such date, and shall only be exercisable tothe extent that it would have been exercisable on the date of his death or histermination of relationship due to permanent disability.  In the case of death, the option may beexercised by the person or persons to whom the optionee’s rights under theoption shall pass by will or by the laws of descent and distribution.

 

In the event of a Change of Control (as defined in the Amended andRestated 1999 Stock Option Plan), all outstanding options not then exercisableand vested shall become fully vested and exercisable as of thechange-of-control date.

 

Our board of directors may at any time suspend, amend, revise orterminate our Amended and Restated 1999 Stock Option Plan, except thatstockholder approval is required by a majority of the shares present and votingat either an annual or special meeting called for such purpose to:

 

•                                          Materially increase the benefits accruingto participants under our Amended and Restated 1999 Stock Option Plan;

 

•                                          Increase the number of shares of commonstock that may be issued under our plan; or

 

•                                          Materially modify the requirements as toeligibility for participation in our plan.

 

The Committee, subject to board ratification, may amend the terms ofany stock option that has already been granted, but no such amendment shallimpair the rights of a holder without that holder’s consent.

 

***Amended andRestated 1999 Directors’ Stock Option Plan***

 

In July 2003, our board voted to amend the 1999 Directors’ Stock OptionPlan to increase the initial option grant to our board members to 10,000 sharesand to increase the annual option grant to 10,000 shares.  Our board of directors also approvedone-time grants of stock options to purchase 50,000 shares of our common stockat an exercise price of $2.50 per share to each of our three non-employeedirectors in consideration for past services in lieu of other directorcompensation.  Pursuant to our Amendedand Restated 1999 Directors’ Stock Option Plan, the exercise price of $2.50 pershare was determined by our board of directors to be the fair market value pershare at the time of grant.  Theamendment and restatement of our 1999 Directors’ Stock Option Plan is subject tostockholder approval at our next annual meeting.

 

Under our Amended and Restated 1999 Directors’ Stock Option Plan, stockoptions may be exercised in whole or in part at any time during the optionperiod by giving written notice to us specifying the number of shares to bepurchased.  Such notice shall beaccompanied by payment in full of the exercise price, either by cash or itsequivalent in property acceptable to the company, and in the discretion of theCommittee (as defined in the Amended and Restated 1999 Directors’ Stock OptionPlan)

 

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assignment anddelivery of shares of our common stock may be used as payment.  If an optionee exercises a non-qualifiedstock option, the optionee may:

 

•                                          Direct us to withhold from the shares ofour common stock to be issued to the optionee the number of shares necessary tosatisfy our obligation to withhold federal taxes, based on the shares’ fairmarket value on the date of exercise;

 

•                                          Deliver to us sufficient shares of ourcommon stock to satisfy our withholding obligations; or

 

•                                          Deliver sufficient cash to us to satisfyour federal tax withholding obligations.

 

If an optionee ceases, other than by reason of death or retirementafter attaining the age of 72 years, to be elected to serve on our board, alloptions granted and exercisable on the date of termination of directorshipshall expire on the later of:

 

•                                          The tenth anniversary after the date ofgrant;

 

•                                          90 days after the day the optionee’s termends; or

 

•                                          As otherwise extended by our board in itssole discretion.

 

If an optionee dies, the option may be exercised, to the extent of thenumber of shares that the optionee could have exercised on the date of hisdeath, if any, by the optionee’s estate, personal representative or beneficiarywho acquires the option by will or by the laws of descent.  The exercise may be made at any time beforethe earlier of the tenth anniversary after the date of grant or the thirdanniversary of the optionee’s death.

 

In the event of a Change of Control (as defined in the Amended andRestated 1999 Directors’ Stock Option Plan), all outstanding options not thenexercisable and vested shall become fully vested and exercisable as of thechange-of-control date.

 

Our board of directors may at any time suspend, amend, revise orterminate our Amended and Restated 1999 Directors’ Stock Option Plan, exceptthat stockholder approval is required by a majority of the shares of ouroutstanding common stock to:

 

•                                          Increase the total number of shares thatmay be sold, issued or transferred under the Amended and Restated 1999Directors’ Stock Option Plan;

 

•                                          Modify the provisions regardingeligibility;

 

•                                          Reduce the purchase price at which sharesmay be offered pursuant to options; and

 

•                                          Extend the expiration date of the Amendedand Restated 1999 Directors’ Stock Option Plan.

 

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## **ITEM11**.                      SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

## ** **

**Equity Compensation Plan Information**

** **

The followingtable sets forth certain information as of December 31, 2003 about ourequity compensation plans under which our equity securities are authorized forissuance.

 
| **Plan Category**                                           |   | **(a)  Number of  securities to be   issued upon  exercise of  outstanding  options, warrants  and rights** |   | **(b)  Weighed  average exercise  price of  outstanding  options,  warrants and  rights** |   | **(c)  Number of securities   remaining available for   future issuance under   equity compensation  plans (excluding   securities reflected in   column (a))** |    |
|-------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
| Equity  compensation plans approved by security holders     |   | 1,971,930                                                                                                   |   | $                                                                                         | 3.58   |                                                                                                                                                            | 48,070  |   |
| Equity  compensation plans not approved by security holders |   | 135,200                                                                                                     |   | 2.50                                                                                      |   | 144,800                                                                                                                                                         |    |
| **Total**                                                   |   | 2,107,130                                                                                                   |   | $                                                                                         | 3.51   |                                                                                                                                                            | 192,870 |   |

 

The first column reflects outstanding stockoptions to purchase 1,951,930 shares and 20,000 shares of common stock pursuantto our Amended and Restated 1999 Stock Option Plan and our Amended and Restated1999 Directors’ Stock Option Plan, respectively, that have been approved by ourstockholders and outstanding stock options to purchase 135,200 shares of commonstock pursuant to our Amended and Restated 1999 Directors’ Stock Option Planthat have not yet been approved by our stockholders.

 

The third column reflects 48,070 sharesremaining for issuance under our Amended and Restated 1999 Stock Option Planthat have been approved by our stockholders and 144,800 shares remaining forissuance under our Amended and Restated 1999 Directors’ Stock Option Plan thathave not yet been approved by our stockholders.

 

**BeneficialOwnership**

 

The following table sets forth the beneficial ownership of our commonstock, as of March 31, 2004, by:

 

•                  All of our directors andexecutive officers, individually;

 

•                  All of our directors and executiveofficers, as a group; and

 

•                  All persons who beneficiallyowned more than 5% of our outstanding common stock.

 

The beneficial ownership of each person was calculated based on17,187,799 shares of our common stock outstanding as of March 31, 2004, according to the record ownership listings as ofthat date and the verifications we solicited and received from each directorand executive officer.  The SEC hasdefined “beneficial ownership” to mean more than ownership in the usualsense.  For example, a person hasbeneficial ownership of a share not only if he owns it in the usual sense, butalso if he has the

 

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power to vote,sell or otherwise dispose of the share. Beneficial ownership also includes the number of shares that a personhas the right to acquire within 60 days of March 31, 2004 pursuant to the exercise of options or warrants orthe conversion of notes, debentures or other indebtedness, but excludes stockappreciation rights.  Two or more personsmight count as beneficial owners of the same share.  Unless otherwise noted, the address of the following personslisted below is c/o VendingData Corporation, 6830 Spencer Street, Las Vegas,Nevada 89119.

 
| **Name of Director or Executive Officer**                         |   | **Number of  Shares(1)** |   | **Percentage** |    |
|-------------------------------------------------------------------|--------|--------------------------|--------|----------------|---------|
| James E. Crabbe                                                   |   | 7,620,398                | (2)    | 44.20          | %       |
| Steven J. Blad                                                    |   | 680,264                  | (3)    | 3.81           | %       |
| Bob L. Smith                                                      |   | 525,962                  | (4)    | 3.05           | %       |
| Ronald O. Keil                                                    |   | 239,320                  | (5)    | 1.39           | %       |
| Stacie L. Brown                                                   |   | 33,000                   | (6)    |           | *  |
| John R. Spina                                                     |   | 33,000                   | (7)    |           | *  |
| All directors  and executive officers as a group (6 persons) |   | 9,131,944                | (8)    | 50.52          | %       |

 
| **Name of 5% Holder**              |   |      | ** ** |   | ** ** |
|------------------------------------|--------|-----------|------------|--------|------------|
| Bricoleur  Capital Management, LLC |   | 1,098,800 | (9)        | 6.39   | %          |

 

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*                      Denotesless than 1%.

(1)               Unlessotherwise noted, the persons identified in this table have sole voting and soleinvestment power with regard to the shares beneficially owned by them.

(2)               Includes4,574,066 shares held directly by Mr. Crabbe, 50,600 shares issuable uponthe exercise of stock options, 2,460,407 shares held by Mr. Crabbe, as Trusteeof the James E. Crabbe Revocable Trust, 205,875 shares held by PhileoFoundation, a charitable foundation of which Mr. Crabbe is a trustee andpresident, and 329,450 shares held by Yvonne M. Huson, or her relatedtrusts, for which Mr. Crabbe holds voting power pursuant to durable powersof attorney dated November 12, 1999, and October 9, 2000.

(3)               Includes35,020 shares held directly by Mr. Blad, 244 shares held byMr. Blad’s spouse and 645,000 shares issuable upon the exercise of stockoptions, and excludes 400,000 shares underlying unvested stock options.

(4)               Includes164,012 shares held directly by Mr. Smith, 230,162 shares held by VIP’sIndustries, Inc., 62,288 shares held by I.C.D., 7,500 shares issuable upon theexercise of warrants, and 62,000 shares issuable upon the exercise of stockoptions.

(5)               Includes177,654 shares held directly by Mr. Keil, 5,666 shares held byMr. Keil’s spouse, 51,000 shares issuable upon the exercise of stockoptions, and 5,000 shares issuable upon the exercise of warrants.

(6)               Includes33,000 shares issuable upon the exercise of stock options, and excludes 25,000shares underlying unvested stock options.

(7)               Includes33,000 shares issuable upon the exercise of stock options, and excludes 42,000shares underlying unvested stock options.

(8)               Includes8,244,844 shares issued directly, 834,600 shares issuable upon the exercise ofstock options and 12,500 shares issuable upon the exercise of warrants.

(9)               Basedon Schedule 13G filed on February 10, 2004 in which Bricoleur Capital Management,LLC stated that it is an investment manager for certain accounts in which ourcommon stock is held and has been granted the authority to dispose of and votethe shares of our common stock held by such accounts.

 

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## **ITEM12**.                      CERTAIN RELATIONSHIPSAND RELATED TRANSACTIONS

## ** **

**Transaction Review**

** **

We have adopted a policy that any transactions with directors, officersor entities of which they are also officers or directors or in which they havea financial interest, will only be on terms consistent with industry standardsand approved by a majority of the disinterested directors of our board.  Our bylaws provide that no such transactionsby us shall be either void or voidable solely because of such relationship orinterest of directors or officers or solely because such directors are presentat the meeting of our board or a committee thereof which approves suchtransactions, or solely because their votes are counted for such purpose if:

 

•                                          The fact ofsuch common directorship or financial interest is disclosed or known by ourboard or committee and noted in the minutes, and our board or committeeauthorizes, approves or ratifies the contract or transaction in good faith by avote for that purpose without counting the vote or votes of such interesteddirectors; or

 

•                                          The fact ofsuch common directorship or financial interest is disclosed to or known by thestockholders entitled to vote, and they approve or ratify the contract ortransaction in good faith by a majority vote or written consent of stockholdersholding a majority of the shares of common stock entitled to vote (the votes ofthe interested directors or officers shall be counted in any such vote ofstockholders); or

 

•                                          The contract ortransaction is fair and reasonable to us at the time it is authorized orapproved.

 

In addition, interested directors may be counted in determining thepresence of a quorum at a meeting of our board or a committee thereof thatapproves such transactions.  If thereare no disinterested directors, we shall obtain a majority vote of thestockholders approving the transaction.

 

**2001 Rights Offering**

** **

On June 14, 2001, our board of directors declared a distributionof rights to purchase shares of common stock to stockholders of record as ofJune 15, 2001, or the record date, and holders of vested options andwarrants and convertible notes that possess anti-dilution rights as of therecord date at a price per unit of $1.75. Through this rights offering, we offered an aggregate of 5,373,954shares of common stock upon the exercise of these rights by rightsholderspursuant to a Registration Statement on Form S-3 (File No. 333-64012), asdeclared effective by the SEC on July 13, 2001.  James E. Crabbe, a director and our controlling stockholder,agreed to act as a standby purchaser in the event less than all of the rightswere exercised by rightsholders.

 

As of September 24, 2001, rightsholders had purchased a total of1,713,317 shares of common stock. Rightsholders applied a total of approximately$1,892,000 in amounts payable under short-term notes or bridge loans toward thepurchase price of the rights shares, and we received a total of approximately$1,107,000 in cash proceeds from the exercise of the rights.  With respect to the unexercised rights,Mr. Crabbe purchased 3,660,637 shares, representing all of the remainingshares, in exchange for the application of $850,000 in short-term notes and$2,504,000 in bridge loans toward the purchase of these shares and the paymentof approximately $3,052,000 in cash.

 

**2002 Private Placement ofConvertible Notes**

** **

On February 21, 2002, our board authorized a private placement of$4,999,995 of convertible notes.  Theconvertible notes accrue interest at 9.5% per annum, mature one year from thedate of

 

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issuance (wherethe holder has the discretion to extend maturity date for up to four one-yearperiods) and are convertible into shares of our common stock one year afterissuance at a rate of $1.75 per share. In addition, for each convertible note of $49,999.95, we issued awarrant to purchase 2,500 shares of our common stock with an exercise price of$1.75.  Through this private placement,a total of $4,799,995.20 principal amount of convertible notes were issued for$650,000 in cash with the remaining $4,149,995.95 representing a rollover ofprincipal and interest.  We also issuedwarrants to purchase 240,000 shares of our common stock.  The convertible notes are convertible into2,742,863 shares of our common stock. We used the proceeds from this private placement for general corporatepurposes and working capital.  Wediscontinued this private placement of convertible debentures as ofJanuary 14, 2003.

 

With the approval of the board, certain members of the board, orentities controlled by these board members, participated in our privateplacement of convertible notes.  Thefollowing table summarizes the purchases of convertiblenotes by members of the board or related entities.

 
| **Name**                             |   | **Amount** |             | **Warrants** |        |
|--------------------------------------|--------|------------|------------------|--------------|-------------|
| The James E.  Crabbe Revocable Trust |   | $          | 3,949,996.05     |         | 197,500     |   |
| VIP’s  Industries, Inc.         |   | 49,999.95  |             | 2,500        |        |
| I.C.D., Inc.                         |   | 99,999.90  |             | 5,000        |        |
| Ronald O. Keil                       |   | 99,999.90  |             | 5,000        |        |
| **Total**                            |   | **$**      | **4,199,995.80** | ** **   | **210,000** | ** ** |

 

The $3,949,996.05 convertible note andwarrants to purchase 197,500 shares of our common stock purchased by theJames E. Crabbe Revocable Trust, a trust for which James E. Crabbe, ourChairman, serves as trustee, were in exchange for the cancellation of priorindebtedness in the amount of $3,949,996.05. On December 18, 2003, upon the consummation of our public offering, weconverted the outstanding principal and interest owed to theJames E. Crabbe Revocable Trust into 2,460,407 shares of common stock.

 

Of the $99,999.90 investment made by Ronald O. Keil, a portion of theinvestment included the cancellation of a prior promissory note datedNovember 7, 2002, in the original principal amount of $49,999.95. On December 18, 2003, upon the consummation of our public offering, weconverted the outstanding principal and interest owed to Mr. Keil into 64,096shares of common stock.

 

The $49,999.95 convertible note and warrant to purchase 2,500 sharesof our common stock purchased by VIP’s Industries, Inc., an entity controlledby our Vice-Chairman, Bob Smith, were in exchange for the cancellation of priorindebtedness in the amount of $49,999.95. On December 18, 2003, upon the consummation of our public offering, weconverted the outstanding principal and interest owed to VIP’s Industries, Inc.into 31,144 shares of common stock.

 

A portion of the $99,999.90 convertible note and warrant to purchase 5,000 sharesof our common stock purchased by I.C.D., Inc., an entity controlled by ourVice-Chairman, Bob Smith, was in exchange for the cancellation of priorindebtedness in the original principal amount of $75,000.  The remaining  $25,000 was paid in cash. On December 18, 2003, upon the consummation of our public offering, weconverted the outstanding principal and interest owed to I.C.D., Inc. into62,288 shares of common stock.

 

**Travel and Other Advances**

** **

Prior to the effective date of the Sarbanes-Oxley Act on July 30,2002, we routinely advanced funds to management personnel for travel and othercorporate expenses related to our business. In addition, Mr. Blad, our President and Chief Executive Officer,from time to time used his personal funds

 

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and personalcredit cards to advance costs on behalf of our employees and businessneeds.  As a result of our recentinternal review, we have determined that after netting advances toMr. Blad against amounts advanced by Mr. Blad personally on ourbehalf, a receivable from Mr. Blad remains due to us arising out ofpre-July 30, 2002 advances in the amount of $31,116.  Mr. Blad believes that certain creditsdue to him were not fully reflected. Our audit committee has directed an internal audit and accounting ofthese matters so that an amount receivable can be confirmed, and Mr. Bladwill be required to repay such receivable in a period of not less than twelvemonths.  We also determined that a netamount of approximately $5,039 was advanced to Mr. Blad afterJuly 30, 2002 that was not limited to business purposes.  Through the issuance of a bonus to Mr. Blad,Mr. Blad repaid $5,039 to VendingData.

 

**Phileo Foundation**

** **

In 2002, the Phileo Foundation, a charitable foundation of whichMr. Crabbe, the chairman of our board, and his two sons, Michael Crabbeand James Crabbe, Jr., are the trustees, made a series of short-term loansin the aggregate principal amount of $400,000 at a 9.5% interest rate tous.  In December 2002, Mr. Crabbeinformed our board that the Phileo Foundation had desired for the loans to beconverted into shares of our common stock at $1.75 per share pursuant to our2002 convertible debt program.  Becausean insufficient number of shares reserved for conversion remained at the timethe Phileo Foundation made its intent known to us, the loans in the amount of$400,000 were not converted into shares of our common stock at that time.  In July 2003, the board members, other thanMr. Crabbe who recused himself, voted to grant the Phileo Foundation theright to convert the loans in the amount of $400,000 and all accrued interestinto shares of our common stock at $2.25 per share, which is the most recentprice at which we had granted to other investors for the conversion of debt orexercise of warrants.  On December 18,2003, upon the consummation of our public offering, we converted the outstandingprincipal and interest owed to the Phileo Founding into 205,875 shares ofcommon stock.

 

**Securities and ExchangeCommission Position on Certain Indemnification**

** **

Our articles of incorporation obligate us to indemnify our directorsand officers to the fullest extent permitted under Nevada law.  Chapter 78 of the Nevada Revised Statutes,or NRS, provides for indemnification by a corporation of costs incurred bydirectors, employees, and agents in connection with an action, suit, orproceeding brought by reason of their position as a director, employee, oragent.  The person being indemnifiedmust have acted in good faith and in a manner he reasonably believed to be inor not opposed to the best interests of the corporation.

 

Insofar as indemnification for liabilities arising under the SecuritiesAct of 1933, or the Securities Act, may be permitted to our directors, officersor persons controlling us pursuant to the provisions contained in our amendedand restated articles of incorporation, our amended and restated bylaws, Nevadalaw or otherwise, we have been informed that, in the opinion of the SEC, suchindemnification is against public policy as expressed in the Securities Act of1933 and is therefore unenforceable.  Ifa claim for indemnification against such liabilities, other than the payment byus of expenses incurred or paid by one of our directors, officers orcontrolling persons in the successful defense of any action, suit, orproceeding, is asserted by such director, officer or controlling person, wewill, unless in the opinion of our counsel the matter has been settled bycontrolling precedent, submit to a court of appropriate jurisdiction thequestion whether such indemnification by us is against public policy asexpressed in the Securities Act of 1933 and will be governed by the finaladjudication of this issue.

 

**IndemnificationAgreements**

** **

In June 2003, July 2003 and April 2004, we entered into indemnificationagreements with members of our board of directors and certain of our executiveofficers and significant and other employees in which we agreed to holdharmless and indemnify such directors, officers and employees to the fullestextent authorized under Nevada law, and to pay any and all related expensesreasonably 

 

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incurred by theindemnitee.  The four members of ourboard, and the following executive officers, significant and other employeeseach entered into an indemnification agreement:   H. Michael Jahnke, Chief Operating Officer; John R. Spina,Chief Financial Officer; Stacie L. Brown, Corporate Counsel and Secretary;D. Dean Barnett, Vice President of Sales; Kenneth R. Dickinson,Senior Vice President of Product Development; Tyson K. Adams, SeniorDevelopment Engineer; Lynn C. Hessing, Director of Engineering;Robert G. Pietrosanto, Senior Vice President of Sales; William B.Roquemore, Vice President of Manufacturing; Joseph D. Corradino, Directorof Sales/Table Games; and Jessica N. Neville, Vice President of Marketingand Public Relations.

 

## **ITEM13**.                      EXHIBITS AND REPORTSON FORM 8-K

## ** **

(a)                                  Exhibits.

 

See exhibits listed on the Exhibit Index following the signature pageof this Annual Report on Form 10-KSB/A, which is incorporated herein byreference.

 

(b)           Reports on Form8-K.

 

During the three months ended December 31, 2003, the followingCurrent Reports on Form 8-K were filed:

 

•                                          Current Report of Form 8-K filedDecember 18, 2003 announcing completion of public offering of 5,500,000shares of common stock;

 

•                                          Current Report on Form 8-K filedNovember 7, 2003 announcing receipt of bridge financing; and

 

•                                          Current Report on Form 8-K filedOctober 27, 2003 announcing bridge financing.

 

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## **ITEM14**.                      PRINCIPAL ACCOUNTANTFEES AND SERVICES

## ** **

Our audit committee selected Piercy Bowler Taylor & Kern, CertifiedPublic Accountants, Las Vegas, Nevada, or PBTK, as our independent publicaccountants and auditors for fiscal year ended December 31, 2003.  James E. Scheifley, Certified PublicAccountant, Dillon, Colorado, served as our independent public accountant andauditor for the fiscal year ended December 31, 2002.

 

Our board is responsible for pre-approving all audit and permissiblenon-audit services provided by our independent auditor, PBTK, with certainlimited exceptions.  Our board ofdirectors has concluded that the non-audit services provided by PBTK arecompatible with maintaining auditor independence.  In 2003, no fees were paid to PBTK pursuant to the “de minimus”exception to the pre-approval policy permitted under the Securities ExchangeAct of 1934, as amended.

 

For the fiscal years ended December 31, 2003 and 2002, the fees forservices billed by PBTK and James E. Scheifley were as follows: 

 
|                |   | **PBTK** |    | **James E.  Scheifley** |   |
|---------------------|--------|----------|---------|-------------------------|--------|
|                |   | **2003** |    | **2002**                |   | **2003** |   | **2002** |   |
| Audit fees          |   | $        | 112,058 |                    | $      | 0 |   | $ | 0 |   | $ | 15,275 |   |
| Audit-related  fees |   | 0        |    | 0                       |   | 0 |   | 0 |   |
| Tax fees            |   | 0        |    | 0                       |   | 2,250 |   | 1,500 |   |
| All other fees      |   | 53,197   |    | 0                       |   | 0 |   | 0 |   |
|                |   | $        | 165,255 |                    | $      | 0 |   | $ | 2,250 |   | $ | 15,800 |   |

 

Audit fees generally included fees related to the audit of our annualfinancial statements included in our Form 10-KSB’s, the review of our interimfinancial statements included in our Form 10-QSB’s and the consents andassistance in connection with other filings and public offering documents filedwith the Securities and Exchange Commission.

 

Audit related fees generally included fees for assurance and relatedservices that are reasonably related to the performance of the audit or reviewof our financial statements, such as accounting consultations concerningfinancial accounting and reporting standards, internal control reviews andother non-statutory attestation services.

 

Tax fees generally included fees for professional services renderedwith respect to tax compliance, tax advice and tax planning, such as thepreparation of tax returns, claims for refunds, payment planning and tax lawinterpretation.

 

All other fees generally include fees related to miscellaneous,non-recurring engagements, where the other fees billed by PBTK in 2003represented consulting fees for the review of our Registration Statement onForm SB-2 (File No. 333-109115) that contained audited financial statementsprepared by James E. Scheifley.  Otherthan as disclosed above, there were no other fees billed in each of the lasttwo fiscal years for products and services provided by PBTK or James E.Scheifley.

 

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**SIGNATURES**

** **

In accordance with Section 13 or 15(d) of the Exchange Act, theregistrant has duly caused this report to be signed on our behalf by theundersigned, thereunto duly authorized.

 
|                       |   | **VENDINGDATA CORPORATION** |
|----------------------------|--------|-----------------------------|
|                       |   |                        |
|                       |   |                        |
| Date:  April 28, 2004 |   | By:                         | /s/  Steven J. Blad |
|                       |   |                        | Steven  J. Blad, Chief Executive Officer,  President and Director |

 

In accordance with the Exchange Act, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.

 
| **Signature**       |   | **Title**                                     |   | **Date**       |
|---------------------|--------|-----------------------------------------------|--------|----------------|
|                |   |                                          |   |           |
| /s/ Steven J. Blad  |   | Chief Executive  Officer, President and       |   | April 28, 2004 |
| Steven J. Blad      |   | Director (Principal  Executive Officer)       |   |           |
|                |   |                                          |   |           |
| /s/ John R. Spina   |   | Chief Financial Officer  and Treasurer        |   | April 28, 2004 |
| John R. Spina       |   | (Principal Financial  and Accounting Officer) |   |           |
|                |   |                                          |   |           |
|                |   |                                          |   |           |
| /s/ James E. Crabbe |   | Chairman of the Board  of Directors           |   | April 28, 2004 |
| James E. Crabbe     |   |                                          |   |           |
|                |   |                                          |   |           |
| /s/ Ronald O. Keil  |   | Director                                      |   | April 28, 2004 |
| Ronald O. Keil      |   |                                          |   |           |
|                |   |                                          |   |           |
|                |   | Director                                      |   |           |
| Bob L. Smith        |   |                                          |   |           |

 

19

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# **EXHIBITINDEX**

 
| **Exhibit  Number** |   | **Exhibit  Description**                                                                                                                                                                                                                                                          |   | **Page** |
|---------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
| 2.1                 |   | Agreement and Plan of  Merger dated as of March 6, 1999, by and between the registrant and  Casinovations Nevada Incorporated, incorporated by reference from the  registrant’s Annual Report on Form 10-KSB filed on March 26, 1999.                                        |   | —   |
| 3.1                 |   | Amended and Restated  Articles of Incorporation dated July 24, 2000, incorporated by reference from  the registrant’s Current Report on Form 8-K filed on July 28, 2000.                                                                                                     |   | —   |
| 3.2                 |   | Amended and Restated  Bylaws of the registrant dated November 13, 2002, incorporated by reference  from the registrant’s Current Report on Form 8-K filed on January 8, 2003.                                                                                                |   | —   |
| 3.3                 |   | Certificate of Change  in Number of Authorized Shares filed on December 23, 2002 and effective  January 3, 2003, incorporated by reference from the registrant’s Current Report  on Form 8-K filed on January 8, 2003.                                                       |   | —   |
| 4.1                 |   | Specimen certificate  for Common Stock, incorporated by reference from the registrant’s  Registration Statement on Form SB-2 filed on July 16, 1997.                                                                                                                         |   | —   |
| 10.1                |   | Shareholder Agreement  dated December 14, 1998, by and between VendingData Corporation and Richard  Huson, Bob Smith and Ron Keil, incorporated by reference from the  registrant’s Annual Report on Form 10-KSB filed on March 26, 1999.                                    |   | —   |
| 10.2                |   | Form of Warrant  Associated with 9.5% Convertible Note Due 2004, incorporated by reference  from the registrant’s Quarterly Report on Form 10-QSB filed on May 17, 1999.                                                                                                     |   | —   |
| 10.3                |   | First Security Bank of  Nevada Master Equipment Lease Agreement, incorporated by reference from the  registrant’s Quarterly Report on Form 10-QSB filed on August 13, 1999.                                                                                                  |   | —   |
| 10.4                |   | Lease Agreement dated  August 19, 1999, by and between the registrant and Spencer Airport Center,  LLC for 6830 Spencer incorporated by reference from the registrant’s  Quarterly Report on Form 10-QSB filed on November 15, 1999.                                         |   | —   |
| 10.5                |   | Durable Power of  Attorney Granting Voting Rights of the registrant’s Common Stock,  incorporated by reference from the registrant’s Quarterly Report on Form  10-QSB filed on November 15, 1999.                                                                       |   | —   |
| 10.6                |   | Employment Agreement of  Steven J. Blad dated August 10, 1999, incorporated by reference from the  registrant’s Quarterly Report on Form 10-QSB filed on August 13, 1999.                                                                                                    |   | —   |
| 10.7                |   | Form of Warrant,  attached as an exhibit to the Stand-By Credit Agreement by and between the  registrant and Josephthal & Co. Inc. dated as of February 6, 2001,  incorporated by reference from the registrant’s Annual Report on Form 10-KSB  filed on March 30, 2001. |   | —   |
| 10.8                |   | Agreement of Purchase  and Sale by and between the registrant and Malcolm C. Davenport V dated March  15, 2001, incorporated by reference from the registrant’s Quarterly Report on  Form 10-QSB filed on May 14, 2001.                                                      |   | —   |
| 10.9                |   | Standby Purchase  Agreement by and between the registrant and James E. Crabbe entered into June  15, 2001, incorporated by reference from the registrant’s Registration  Statement on Form S-3 filed on June 28, 2001.                                                       |   | —   |
| 10.10               |   | Form of Employment  Agreement, incorporated by reference from the registrant’s Quarterly Report  on Form 10-QSB filed on August 14, 2001.                                                                                                                                    |   | —   |

 

20

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| **Exhibit  Number** |   | **Exhibit  Description**                                                                                                                                                                                                                                                                                           |   | **Page** |
|---------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
| 10.11               |   | First Amendment to  Employment Agreement by and between the registrant and Steven J. Blad entered  into on November 20, 2001, incorporated by reference from the registrant’s  Annual Report on Form 10-KSB filed on April 1, 2002.                                                                           |   | —   |
| 10.12               |   | Agreement of Purchase  and Sale by and among the registrant, Georgina Louise Sangster, William  Purton, Dolphin Advanced Technologies Pty Ltd. and Dolphin Products Pty Ltd.  dated December 23, 2002, incorporated by reference from the registrant’s  Annual Report on Form 10-KSB filed on March 31, 2003. |   | —   |
| 10.13               |   | Form of Warrant to  Purchase 6,000 Shares of Common Stock, issued in conjunction with the  Registrant’s 10% Note Due December 2005, incorporated by reference from the  registrant’s Annual Report on Form 10-KSB filed on March 31, 2003.                                                               |   | —   |
| 10.14               |   | Form of Indemnification  Agreement, incorporated by reference from the registrant’s quarterly report  on 10-QSB/A filed on August 19, 2003.                                                                                                                                                                   |   | —   |
| 10.15               |   | Amended and Restated  1999 Stock Option Plan, incorporated by reference from the registrant’s  quarterly report on 10-QSB/A filed on August 19, 2003.                                                                                                                                                         |   | —   |
| 10.16               |   | Form of First Amendment  to Employment Agreement, incorporated by reference from the registrant’s  quarterly report on 10-QSB/A filed on August 19, 2003.                                                                                                                                                     |   | —   |
| 10.17               |   | Second Amendment to  Employment Agreement of Steven J. Blad, incorporated by reference from the  registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.                                                                                                                                          |   | —   |
| 10.18               |   | Philadelphia Brokerage  Corporation Warrant to Purchase 25,000 Shares of Common Stock, incorporated  by reference from the registrant’s quarterly report on 10-QSB/A filed on  August 19, 2003.                                                                                                               |   | —   |
| 10.19               |   | Financial Advisor  Agreement dated March 1, 2003, incorporated by reference from the  registrant’s registration statement on Form SB-2 filed on September 25, 2003.                                                                                                                                           |   | —   |
| 10.20               |   | Triage Capital  Management LP Warrant to Purchase 50,000 Shares of Common Stock, incorporated  by reference from the registrant’s quarterly report on 10-QSB/A filed on  August 19, 2003.                                                                                                                     |   | —   |
| 10.21               |   | Mellon HBV SBV, LLC  Warrant to Purchase Shares of Common Stock, incorporated by reference from  the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.                                                                                                                                      |   | —   |
| 10.22               |   | Letter Agreement with  Industrial Research Limited, incorporated by reference from the registrant’s  registration statement on Form SB-2/A filed on December 10, 2003.                                                                                                                                        |   | —   |
| 10.23               |   | Amended and Restated  1999 Directors’ Stock Option Plan, incorporated by reference from the  registrant’s registration statement on Form S-8 filed on September 10, 2003.                                                                                                                                |   | —   |
| 10.24               |   | Form of Registration  Rights Agreement by and between the registrant and Philadelphia Brokerage  Corporation, incorporated by reference from the registrant’s registration  statement on Form SB-2 filed on September 25, 2003.                                                                               |   | —   |
| 10.25               |   | Form of Amended Escrow  Agreement by and between the registrant and Wells Fargo Bank, incorporated by  reference from the registrant’s registration statement on Form SB-2/A filed  on December 10, 2003.                                                                                                     |   | —   |
| 10.26               |   | Form of Lock-up, incorporated  by reference from the registrant’s registration statement on Form SB-2 filed  on September 25, 2003.                                                                                                                                                                           |   | —   |

 

21

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| **Exhibit  Number** |   | **Exhibit  Description**                                                                                                                                                                                                            |   | **Page** |
|---------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
| 10.27               |   | Acquisition Agreement  dated June 26, 2001, by and between the registrant and Technology Development  Center, LLC, incorporated by reference from the registrant’s current report  on Form 8-K filed on June 29, 2001.         |   | —   |
| 10.28               |   | Form of Subscription  Agreement, incorporated by reference from the registrant’s registration  statement on Form SB-2/A filed on December 10, 2003.                                                                            |   | —   |
| 10.29               |   | Consulting Agreement  dated December 31, 2002, by and between the registrant and John J. Gerard,  incorporated by reference from the registrant’s registration statement on  Form SB-2 filed on September 25, 2003.            |   | —   |
| 10.30               |   | First Amendment to  Consulting Agreement dated March 31, 2003 by and between registrant and John  J. Gerard, incorporated by reference from the registrant’s registration  statement on Form SB-2 filed on September 25, 2003. |   | —   |
| 10.31               |   | Employment Agreement of  Stacie L. Brown, incorporated by reference from the registrant’s registration  statement on Form SB-2 filed on September 25, 2003.                                                                    |   | —   |
| 10.32               |   | First Amendment to  Employment Agreement of Stacie L. Brown, incorporated by reference from the  registrant’s registration statement on Form SB-2 filed on September 25, 2003.                                                 |   | —   |
| 10.33               |   | Employment Agreement of  John R. Spina, incorporated by reference from the registrant’s registration  statement on Form SB-2 filed on September 25, 2003.                                                                      |   | —   |
| 10.34               |   | First Amendment to  Employment Agreement of John R. Spina, incorporated by reference from the  registrant’s registration statement on Form SB-2 filed on September 25, 2003.                                                   |   | —   |
| 10.35               |   | Philadelphia Brokerage  Corporation Warrant to Purchase 75,000 Shares of Common Stock, incorporated  by reference from the registrant’s registration statement on Form SB-2 filed  on September 25, 2003.                      |   | —   |
| 10.36               |   | Distribution Agreement  by and between the registrant and TCS Aces Pty Limited, incorporated by  reference from the registrant’s registration statement on Form SB-2/A filed  on December 10, 2003.                       |   | —   |
| 10.37               |   | Professional Services  Agreement by and between the registrant and Industrial Research Limited.                                                                                                                                     |   | *        |
| 14.1                |   | Code of Ethics,  incorporated by reference from the registrant’s Annual Report on Form 10-KSB  filed on March 30, 2004.                                                                                                        |   | —   |
| 21.1                |   | Subsidiaries of  Registrant, incorporated by reference from the registrant’s Annual Report on  Form 10-KSB/A filed on April 28, 2003.                                                                                     |   | —   |
| 31.1                |   | Certification of Steven  J. Blad under Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                               |   | *        |
| 31.2                |   | Certification of John  R. Spina under Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                |   | *        |
| 32.1                |   | Certifications Pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.                                                                                                                                  |   | *        |

 

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*     Filed herewith.

 

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