<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended:                    June 30, 2001
                                                   -----------------------------
                                       OR
[ ]      TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the transition period from:                  to
                                          ---------------     --------------

Commission file number:                             000-25855
                                 -----------------------------------------------

                             VendingData Corporation
--------------------------------------------------------------------------------
                     (Exact name of small business issuer as
                            specified in its charter)

             Nevada                                             91-1696010
---------------------------------                          --------------------
  (State or other jurisdiction                               (I.R.S. Employer
of incorporation or organization)                          Identification No.)

                  6830 Spencer Street, Las Vegas, Nevada 89119
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (702) 733-7195
--------------------------------------------------------------------------------
                           (Issuer's telephone number)


--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

        YES       X     NO
               --------        ------

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

         Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.

        YES             NO
               --------        ------

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:

     11,259,302 shares of common stock, $.001 par value, as of June 30, 2001
--------------------------------------------------------------------------------

         Transitional Small Business Disclosure Format (check one);

        YES             NO       X
               --------        ------

<PAGE>

                                   FORM 10-QSB

                                TABLE OF CONTENTS


                                                                           PAGE
                                                                          NUMBER
                                                                          ------

PART I.  FINANCIAL INFORMATION

     Item 1.      Financial Statements                                       3

                  Balance Sheet                                              3

                  Statement of Operations                                    4

                  Statement of Cash Flows                                    5

                  Notes to Financial Statements                              6

     Item 2.      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                        8

PART II. OTHER INFORMATION

     Item 1.      Legal Proceedings                                         17

     Item 2.      Changes in Securities and Use of Proceeds                 18

     Item 3.      Defaults Upon Senior Securities                           18

     Item 4.      Submission of Matters to a Vote of Security Holders       18

     Item 5.      Other Information                                         18

     Item 6.      Exhibits and Reports on Form 8-K                          19

SIGNATURE                                                                   20

EXHIBIT INDEX                                                               21

                                       2
<PAGE>
<TABLE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                                            VENDINGDATA CORPORATION
                                                 BALANCE SHEET
<CAPTION>

                                                                                    June 30, 2001    December 31, 2000
                                                                                    -------------      -------------
                                       ASSETS                                        (UNAUDITED)
<S>                                                                                 <C>                <C>
Current assets:
   Cash and cash equivalents                                                        $    254,879       $    432,070
   Accounts receivable, trade                                                            671,284            885,338
   Other receivables                                                                     186,428             45,445
   Inventories                                                                         1,983,927          1,539,005
   Prepaid expenses                                                                       14,242             55,142
                                                                                    -------------      -------------
     Total current assets                                                              3,110,759          2,957,000

Property and equipment, including revenue producing equipment, at cost, net of
   accumulated depreciation of  $1,681,739 and $1,312,591, respectively                2,172,192          2,440,508

Intangible assets, at cost, net of
   accumulated amortization of $111,483 and $93,054, respectively                        413,925            239,186
Deferred interest                                                                        591,443            631,672
Deposits                                                                                 646,533            591,266
                                                                                    -------------      -------------
                                                                                    $  6,934,852       $  6,859,632
                                                                                    =============      =============

                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes and credit line payable                                                    $  1,550,000       $  2,275,358
   Current portion of leases payable                                                   2,223,926          1,715,223
   Accounts payable                                                                    1,079,238            952,512
   Accrued expenses                                                                      505,039            405,722
    Stockholder loans                                                                  3,781,194                  -
   Accrued interest                                                                      203,852            310,152
   Customer deposits                                                                     523,636            281,253
                                                                                    -------------      -------------
     Total current liabilities                                                         9,866,885          5,940,220

Leases payable                                                                         2,571,128          3,030,572
Convertible debt                                                                       3,300,000          3,300,000
Stockholder loans                                                                              -            151,836
Deferred charges                                                                         162,787            198,769
                                                                                    -------------      -------------
     Total liabilities                                                                15,900,799         12,621,397

Stockholders' equity:
   Common stock, $.001 par value,
     40,000,000 shares authorized, 11,259,302 shares and
     10,746,144 shares issued and outstanding, respectively                               11,259             10,855
   Additional paid-in capital                                                         17,825,352         17,238,756
   Deficit accumulated during development stage                                      (26,802,558)       (23,011,376)
                                                                                    -------------      -------------
     Total stockholders' equity                                                       (8,965,947)        (5,761,765)
                                                                                    -------------      -------------
                                                                                    $  6,934,852       $  6,859,632
                                                                                    =============      =============

                           See accompanying notes to unaudited financial statements.
</TABLE>

                                                      3
<PAGE>
<TABLE>

                                                VENDINGDATA CORPORATION
                                                STATEMENT OF OPERATIONS
                               THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000

                                                      (UNAUDITED)
<CAPTION>

                                                 Three Months Ended                         Six Months Ended
                                          June 30, 2001       June 30, 2000         June 30, 2001      June 30, 2000
                                      ------------------- -------------------   ------------------- ------------------
<S>                                   <C>                 <C>                   <C>                 <C>
Sales                                 $          205,591  $        1,093,012    $          818,371  $       2,460,973
Rental income                                    322,529             282,452               614,546            600,871
Other income                                           -              33,161                     -             56,615
                                      ------------------- -------------------   ------------------- ------------------
                                                 528,120           1,408,625             1,432,917          3,118,459

Cost of sales                                  1,000,711           1,225,562             2,150,404          2,490,984
                                      ------------------- -------------------   ------------------- ------------------
Gross margin                                    (472,591)            183,063              (717,487)           627,475

General and administrative                       922,428             955,167             1,639,883          1,890,813
Research and development                         314,871             323,568               553,213            704,538
                                      ------------------- -------------------   ------------------- ------------------
(Loss) from operations                        (1,709,890)         (1,095,675)           (2,910,583)        (1,967,876)

Interest expense, net                            289,264             229,608               591,295            401,469
Interest expense - related parties               157,115              49,254               288,864             91,869
                                      ------------------- -------------------   ------------------- ------------------
                                                 446,379             278,862               880,159            493,338
                                      ------------------- -------------------   ------------------- ------------------
(Loss) before income taxes                    (2,156,269)         (1,374,537)           (3,790,742)        (2,461,214)
Provision for income taxes                           427                 508                   441                508
                                      ------------------- -------------------   ------------------- ------------------
Net (loss)                            $       (2,156,696) $       (1,375,045)   $       (3,791,183) $      (2,461,722)
                                      =================== ===================   =================== ==================

Basic (loss) per share                $            (0.19) $            (0.13)   $            (0.35) $           (0.23)
                                      =================== ===================   =================== ==================

Weighted average shares outstanding           11,100,654          10,834,504            10,982,136         10,790,325
                                      =================== ===================   =================== ==================

                           See accompanying notes to unaudited financial statements.
</TABLE>
                                                      4
<PAGE>
<TABLE>

                                       VENDINGDATA CORPORATION
                                       STATEMENT OF CASH FLOWS
                               SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                             (UNAUDITED)
<CAPTION>

                                                                 Six Months Ended
                                                           -------------------------------
                                                           June 30, 2001     June 30, 2000
                                                           ------------      ------------
<S>                                                        <C>               <C>
Net (loss)                                                 $(3,791,183)      $(2,461,722)
   Adjustments to reconcile net income (loss) to net
     cash provided by operating activities:
     Depreciation and amortization                             387,577           400,165
     Amortization of deferred interest                         160,645           150,554
   Changes in assets and liabilities:
     (Increase) decrease in trade accounts receivable          214,054        (1,932,090)
     (Increase) decrease in other receivables                 (140,983)          108,863
     (Increase) decrease in inventory                         (444,922)         (314,515)
     (Increase) decrease in prepaid expenses                    40,900           206,957
     Increase (decrease) in accounts payable                   126,726           571,813
     Increase (decrease) in accrued expenses                    (6,983)          267,484
     Increase (decrease) in customer deposits                  242,383            64,452
     Increase (decrease) in deferred charges                   (35,983)                -
                                                           ------------      ------------
       Total adjustments                                       543,414          (476,317)
                                                           ------------      ------------
Net cash (used in) operating activities                     (3,247,769)       (2,938,039)
                                                           ------------      ------------
Cash flows from investing activities:
   Acquisition of plant and equipment                         (119,261)         (220,689)
   Equipment produced and held for rental                            -                 -
   Increase in patents and trademarks                         (174,739)          (22,455)
   Deposits                                                    (55,267)          (71,494)
                                                           ------------      ------------
Net cash (used in) investing activities                       (349,267)         (314,638)
                                                           ------------      ------------
Cash flows from financing activities:
   Common stock sold for cash                                  587,000           282,502
   Proceeds from (repayment of) stockholder loans            3,629,358           (51,728)
   Proceeds from leases payable                                802,769         1,481,899
   Repayment of leases payable                                (873,926)         (654,431)
   Proceeds from convertible debentures                              -         1,450,000
   Proceeds from (repayment of) notes payable                 (725,358)                -
                                                           ------------      ------------
Net cash provided by financing activities                    3,419,844         2,508,242
                                                           ------------      ------------

(Decrease) in cash                                            (177,192)         (744,435)
Cash and cash equivalents, beginning of period                 432,070         1,169,924
                                                           ------------      ------------
   Cash and cash equivalents, end of period                $   254,878       $   425,489
                                                           ============      ============
</TABLE>
                      See accompanying notes to unaudited financial statements.

                                                 5
<PAGE>

                             VendingData Corporation
                          Notes to Financial Statements
                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION.

The accompanying unaudited financial statements of VendingData Corporation (the
"Company") and its wholly-owned subsidiaries (collectively with the Company, the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
incorporated in Regulation S-B of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments and accruals) considered necessary for a fair presentation have been
included.

The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. The accompanying
financial statements should be read in conjunction with the Company's audited
financial statements for the year ended December 31, 2000, as included in the
Company's Annual Report on Form 10-KSB as filed with the Securities and Exchange
Commission on March 30, 2001.

Certain reclassifications have been made to amounts presented in prior periods
for comparability to the current period presentation.

Basic loss per share was computed using the weighted average number of common
shares outstanding.

NOTE 2 - STATEMENT REGARDING COMPUTATION OF LOSS PER SHARE.

Fully diluted loss per share excludes any dilutive effects of options, warrants
and convertible securities. Fully diluted loss per share is not presented
because the effect would be anti-dilutive.

NOTE 3 - DEBT AND WARRANTS.

Effective June 21, 2001 warrants to purchase 200,000 shares of the Company's
common stock were exercised.

NOTE 4 - RETIREMENT OF COMMON STOCK/TECHNOLOGY ACQUISITION.

On June 26, 2001, the Company purchased from Technology Development Center, LLC
("TDC"), the worldwide right, title and interest to the patents, pending patent
applications, and all patent rights to the Coin Operated Machine Having An
Electronically Identified Coin Collection Box and the Electronically Identified
Coin Collection Box (collectively, the "Patent Rights"). These Patent Rights
relate to the technology utilized in the Company's SecureDrop(TM) product line.
As payment for the Patent Rights, the Company paid $175,000 in cash. As part of
the transaction, the parties cancelled the Exclusive License Agreement pursuant
to which the Company was the exclusive licensee of the Patent Rights, and TDC
surrendered to the Company all of its VendingData Corporation $.001 par value
common stock, totaling 20,500 shares.

NOTE 5 - EQUIPMENT FINANCING.

For the three months ending June 30, 2001, the Company received proceeds of
$416,423 from a third-party leasing company through which the Company has
financed most of its furniture, equipment, and tooling. The leases have a
mandatory buyout and terms ranging from 24 to 39 months.

                                       6
<PAGE>

NOTE 6 - STOCKHOLDER RIGHTS OFFERING.

On June 14, 2001, the Company's board of directors declared a distribution of
rights to purchase the Company's common stock to stockholders of record as of
June 15, 2001, or the record date, and holders of vested options, warrants and
convertible notes that possess anti-dilution rights as of the record date.
Through the Company's Registration Statement on Form S-3 (File No. 333-64012),
as declared effective on July 13, 2001, the Company offered an aggregate of
26,869,770 shares of its common stock upon the exercise of these rights by
rightsholders. The rights issued to California residents may not be exercised by
California residents until the California Department of Corporation issues an
order regarding the effectiveness of the Company's registration of the shares of
its common stock underlying the rights issued to California residents by
coordination pursuant to Section 25111 of the California Corporations Code. All
rights issued to non-California residents expired at 5:00 p.m., Las Vegas,
Nevada time on August 13, 2001.

NOTE 7 - BRIDGE LOANS.

Through the quarter ended June 30, 2001, the Company has obtained short term
loans totaling $2,504,000 from a lender who is a controlling stockholder and a
member of its board of directors. The Company anticipates that each of these
loans will be applied to the stockholder's purchase of shares through the
Company's rights offering in the stockholder's capacity as a stockholder and as
the Company's standby purchaser for any unexercised rights remaining in the
rights offering.

                                       7
<PAGE>

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

STATEMENT ON FORWARD-LOOKING INFORMATION

         Certain information included herein contains statements that may be
considered forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such as
statements relating to plans for future expansion, capital spending, future
operations, sources of liquidity and financing sources. Such statements refer to
events that could occur in the future and may be identified by the use of words
such as "intend," "plan," "believe," correlative words, and other expressions
indicating that future events are contemplated. Such forward-looking information
involves important risks and uncertainties that could significantly affect
anticipated results in the future, and accordingly, such results may differ from
those expressed in any forward-looking statements made herein. These risks and
uncertainties include, but are not limited to, those relating to liquidity
requirements for VendingData Corporation (the "Company"), the continued growth
of the gaming industry, the success of the Company's product-development,
marketing and sales activities, vigorous competition in the gaming industry,
dependence on existing management, gaming regulations (including actions
affecting licensing and product approvals), locating and obtaining sources of
liquidity, completion of the pending rights offering and the standby purchase
agreement in connection therewith, leverage and debt service (including
sensitivity to fluctuations in interest rates), domestic or global economic
conditions, and changes in federal or state tax laws or the administration of
such laws. For a description of additional risk factors and information related
to forward-looking statements, see "Risk Factors and Forward-Looking
Information" below.

OVERVIEW

         The Company's primary business is the development, manufacturing and
marketing of various concepts and products focused primarily on products that
increase security, productivity, and profitability for the gaming industry.

         As of June 30, 2001, the Company had placed 486 of its Random Ejection
Shuffler(TM) ("Shuffler") under rental contracts compared to 455 at December 31,
2000. As of June 30, 2001, the Company had placed 29 units of its Continuous
Random Ejection Shuffler (the "Continuous Shuffler") under rental contract, with
an additional 13 units on trial. The Company maintains parts inventories
required to build additional Shufflers and Continuous Shufflers. During the
period of January 1, 2001 through June 30, 2001 the Company sold and installed
4,988 units of the SecureDrop(TM) 2000 System and 195 units of the
SecureDrop(TM) 3000 System.

         The following discussion summarizes the Company's results of operations
for the three months and six months ended June 30, 2001 and 2000, respectively,
and the Company's liquidity and capital resources.

RESULTS OF OPERATIONS

     THREE MONTHS ENDED JUNE 30, 2001 AND 2000

         REVENUES. For the three months ended June 30, 2001, the Company
generated total revenues of $528,120 compared to $1,408,625 for the three months
ended June 30, 2000. The revenues for the three months ended June 30, 2001,
consisted of Shuffler rentals of $322,529, Shuffler sales of $8,800, and
SecureDrop(TM) sales of $196,791. The decrease of $880,505, or 63%, in revenues
from the three months ended June 30, 2000, to the three months ended June 30,
2001, resulted from a decrease of $524,946 in SecureDrop(TM) sales, a decrease
of $362,475 in Shuffler sales, and a decrease of $33,161 in other sales, offset

                                       8
<PAGE>

by an increase of $40,077 in Shuffler rentals. SecureDrop(TM) sales were delayed
as customers reviewed the acceptance of coinless gaming machines and the benefit
of the hard count system. The decrease in Shuffler sales resulted from the
conversion in 2000 of several rental contracts into purchases. The decrease in
other sales results from the Company's discontinuance of its table games product
line. The increase in Shuffler rentals is a direct result of the addition of
dedicated Shuffler sales representatives. Despite the decrease in revenues, the
Company believes revenue will increase through additional SecureDrop(TM) sales,
as the different SecureDrop(TM) modules gain additional regulatory approvals,
through sales of Shufflers through international distributors and through
continued Shuffler rental.

         COST OF SALES. For the three months ended June 30, 2001, the cost of
sales was $1,000,711 compared to $1,225,562 for the three months ended June 30,
2000. The cost of sales for the three months ended June 30, 2001, consisted of
approximately $212,408 for the Company's SecureDrop(TM) products, $106,150 for
depreciation expense associated with the Shufflers held for rental, $252,927 for
costs related to servicing the Shufflers held for rental, $11,200 for costs
related to sales of the Shuffler, and $418,026 for labor and other manufacturing
costs. The decrease of $224,851, or 18%, in cost of sales from the three months
ended June 30, 2000 to the three months ended June 30, 2001 resulted from a
decrease of $275,284 for the Company's SecureDrop(TM) products and a decrease of
$109,386 related to Shuffler sales, offset by an increase of $7,590 in
depreciation expense associated with the Shufflers held for rental, an increase
of $84,909 for costs related to servicing the Shufflers held for rental, and an
increase of $ 67,320 in other manufacturing costs. The increases in Shuffler
depreciation and service costs result from additional rental placements in 2001
and the addition of service personnel. The increase in other manufacturing costs
resulted from Shuffler modifications required by the Michigan Gaming Control
Board.

         GROSS MARGIN. For the three months ended June 30, 2001, the gross
margin was $(472,591) compared to $183,063 for the three months ended June 30,
2000, a decrease of $655,654. As a result, the gross margin percentage on
revenues for the three months ended June 30, 2001 was (89)% compared to 13% for
the three months ended June 30, 2000. The decrease in gross margin and negative
gross margin percentage resulted primarily from the decrease in revenues and an
increase in service labor and other manufacturing costs associated with Shuffler
modifications.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the three months
ended June 30, 2001, selling, general and administrative expenses decreased
approximately $32,739, or approximately 3%, to $922,428, compared to $955,167
for the three months ended June 30, 2000. For the three months ended June 30,
2001, selling, general and administrative expenses included: salaries and
related costs of $351,365; advertising and marketing services of $106,985;
travel and entertainment costs of $67,880; printing and office expenses of
$26,015; depreciation and amortization of $55,175; office rent and utilities of
$75,543; professional fees of $121,217; bad debt accrual of $30,000; regulatory
expense of $62,712 and $25,536 in miscellaneous expenses. The decrease of
$32,739 resulted from a decrease in salaries of $49,509, a decrease in travel
and entertainment expenses of $45,065, a decrease in depreciation and
amortization of $18,746, a decrease in bad debt accrual of $162, 259 and a
decrease in miscellaneous expenses of $7,790, offset by an increase in
advertising and marketing costs of $96,618, an increase in printing and office
expenses of $10,723, an increase in office rent and utilities of $8,168, an
increase in professional fees of $72,679, and an increase of $62,712 in
regulatory expenses. The Company incurred increased costs for advertising and
marketing, professional and regulatory expenses as it moved to expand into new
market regions; however, these were offset by reductions in salary, travel and
entertainment, and bad debt accrual expense.

         RESEARCH AND DEVELOPMENT. For the three months ended June 30, 2001,
research and development expenses decreased $8,697, or approximately 3%, to
$314,871, compared to $323,568 for the three months ended June 30, 2000.

                                       9
<PAGE>

         INTEREST EXPENSE, NET. For the three months ended June 30, 2001, the
Company incurred interest expenses, net of interest income, of $446,379 compared
to $278,862 for the three months ended June 30, 2000, an increase of $167,517,
or 60%. This increase was attributable to the increased borrowings during the
three month period by the Company.

         NET INCOME (LOSS). For the three months ended June 30, 2001, the
Company had a net loss of $2,156,696 compared to a net loss of $1,375,045 for
the three months ended June 30, 2000, an increase of $781,651. The larger net
loss was primarily due to a decrease in SecureDrop(TM) and Shuffler sales, a
decrease in gross margin and an increase in service, manufacturing and total
interest expense, net. Basic loss per share was $.19, based on 11,100,654
weighted average shares outstanding, for the three months ended June 30, 2001,
compared to $.13, based on 10,834,504 weighted shares outstanding, for the three
months ended June 30, 2000.

     SIX MONTHS ENDED JUNE 30, 2001 AND 2000

         REVENUES. For the six months ended June 30, 2001, the Company generated
total revenues of $1,432,917 compared to $3,118,459 for the six months ended
June 30, 2000. The revenues for the six months ended June 30, 2001, consisted of
Shuffler rentals of $614,546, Shuffler sales of $52,250, and SecureDrop(TM)
sales of $766,121. The decrease of $1,685,542, or 54%, in revenues from the six
months ended June 30, 2000, to the six months ended June 30, 2001, resulted from
a decrease of $1,042,942 in SecureDrop(TM) sales, a decrease of $599,660 in
Shuffler sales, and a decrease of $113,657 in other sales, offset by an increase
of $70,717 in Shuffler rentals. SecureDrop(TM) sales were delayed as customers
reviewed the acceptance of coinless gaming machines and the benefit of the hard
count system. The decrease in Shuffler sales resulted from the conversion in
2000 of several rental contracts into purchases. The decrease in other sales
results from the Company's discontinuance of its table games product line. The
increase in Shuffler rentals is a direct result of the addition of dedicated
Shuffler sales representatives. Despite the decrease in revenues, the Company
believes revenue will increase through additional SecureDrop(TM) sales, as the
different SecureDrop(TM) modules gain additional regulatory approvals, through
sales of Shufflers through international distributors and through continued
Shuffler rental.

         COST OF SALES. For the six months ended June 30, 2001, the cost of
sales was $2,150,404 compared to $2,490,984 for the six months ended June 30,
2000. The cost of sales for the six months ended June 30, 2001, consisted of
approximately $649,960 for the Company's SecureDrop(TM) products, $212,300 for
depreciation expense associated with the Shufflers held for rental, $503,843 for
costs related to servicing the Shufflers held for rental, $27,600 for costs
related to sales of the Shuffler, and $756,701 for labor and other manufacturing
costs. The decrease of $340,580, or 14% in cost of sales from the six months
ended June 30, 2000 to the six months ended June 30, 2001 resulted from a
decrease of $513,875 for the Company's SecureDrop(TM) products and a decrease of
$189,291 related to shuffler sales, offset by an increase of $15,180 in
depreciation expense associated with the Shufflers held for rental, an increase
of $54,487 for costs related to servicing the Shufflers held for rental, and an
increase of $ 292,919 in other manufacturing costs. The increases in Shuffler
depreciation and service costs result from additional rental placements in 2001
and the addition of service personnel. The increase in other manufacturing costs
resulted from Shuffler modifications required by the Michigan Gaming Control
Board, costs related to preparations for the SecureDrop(TM) workshops, and
recognition of royalties for paid SecureDrop(TM) installations.

         GROSS MARGIN. For the six months ended June 30, 2001, the gross margin
was $(717,487) compared to $627,475 for the six months ended June 30, 2000, a
decrease of $1,344,962. As a result, the gross margin percentage on revenues for
the six months ended June 30, 2001 was (50)% compared to 20% for the six months
ended June 30, 2000. The decrease in gross margin and negative gross margin
percentage resulted primarily from the decrease in revenues and an increase in
service labor, SecureDrop(TM) workshops preparation and other manufacturing
costs.

                                       10
<PAGE>

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the six months ended
June 30, 2001, selling, general and administrative expenses decreased
approximately $250,930, or approximately 13%, to $1,639,883, compared to
$1,890,813 for the six months ended June 30, 2000. For the six months ended June
30, 2001, selling, general and administrative expenses included: salaries and
related costs of $688,569; advertising and marketing services of $147,428;
travel and entertainment costs of $121,972; printing and office expenses of
$43,529; depreciation and amortization of $105,165; office rent and utilities of
$167,150; professional fees of $141,835; bad debt accrual of $90,000; regulatory
expense of $62,712 and $71,523 in other miscellaneous expenses. The decrease of
$250,930 resulted from a decrease in salaries of $102,727, a decrease in travel
and entertainment expense of $63,009, a decrease in depreciation and
amortization of $16,662, a decrease in bad debt accrual of $102,259, a decrease
in gaming show expense of $186,809, and a decrease in printing and office
expenses of $35,640, offset by an increase in advertising and marketing costs of
$110,394, an increase in office rent and utilities of $15,359, an increase in
professional fees of $56,369, an increase of $62,712 in regulatory expenses, and
an increase of $11,612 in miscellaneous expenses. The Company incurred increased
costs for advertising and marketing and professional and regulatory expenses as
it moved to expand into new market regions; however, these were offset by
reductions in salary, travel and entertainment, gaming show expenses, printing
and office expenses and bad debt accrual expenses.

         RESEARCH AND DEVELOPMENT. For the six months ended June 30, 2001,
research and development expenses decreased $151,325, or approximately 21%, to
$553,213, compared to $704,538 for the six months ended June 30, 2000. The
decrease is due to reduced spending on basic SecureDrop(TM) research and delay
of work on the Specialty Shuffler model while modifying the Shuffler.

         INTEREST EXPENSE, NET. For the six months ended June 30, 2001, the
Company incurred interest expenses, net of interest income, of $880,159 compared
to $493,338 for the six months ended June 30, 2000, an increase of $386,821, or
78%. This increase was attributable to the increased borrowings during the six
month period by the Company.

         NET INCOME (LOSS). For the six months ended June 30, 2001, the Company
had a net loss of $3,791,183 compared to a net loss of $2,461,722 for the six
months ended June 30, 2000, an increase of $1,329,461. The larger net loss was
primarily due to a decrease in SecureDrop(TM) and Shuffler sales, a decrease in
gross margin and an increase in service, manufacturing and total interest
expense, net. Basic loss per share was $.35, based on 10,982,136 weighted
average shares outstanding, for the six months ended June 30, 2001, compared to
$.23, based on 10,790,325 weighted shares outstanding, for the six months ended
June 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

         OVERVIEW. The Company has generated cash flow deficits from operations,
including cash used in operating activities of $3,247,769 and $2,938,039 in the
six months ended June 30, 2001 and 2000, respectively. To fund development
activities, the Company used cash in investing activities of $349,267 and
$314,638 in the six months ended June 30, 2001 and 2000, respectively.
Consequently, the Company has been substantially dependent on cash from
financing activities to fund development and operating activities, receiving
cash from financing activities of $3,419,844 and $2,508,242 in the six months
ended June 30, 2001 and 2000, respectively. The Company will continue to require
cash from financing activities for both its current operating needs and to fund
its anticipated expansion of present gaming sales and marketing activities and
the Company's intended expansion into non-gaming sales markets. This reliance on
financing activities will continue until operations begin to generate sufficient
cash flow to support such cash requirements.

                                       11
<PAGE>

         CASH AND WORKING CAPITAL. At June 30, 2001, the Company had cash, cash
equivalents and investments of $254,878, compared to $432,070 at December 31,
2000, a decrease of $177,192. At June 30, 2001, the Company's working capital
was $(6,756,126), compared to $(2,983,220) at December 31, 2000. At June 30,
2001, the Company's current ratio, I.E. the ratio of current assets to current
liabilities, was .32 compared to .50 at December 31, 2000. Until the Company
reaches a level of cash flow from operations to sustain its development and
operating activities, the Company will be relying upon existing cash balances,
accounts receivable collections, placements of debt or equity and institutional
sources of debt and equity capital for working capital purposes.

         CASH FLOW. For the six months ended June 30, 2001, net cash used in
operating activities was $3,247,769, compared to $2,938,039 for the six months
ended June 30, 2000. Cash used in operating activities during the six months
ended June 30, 2001, is net of depreciation and amortization of $387,577,
compared to $400,165 for the six months ended June 30, 2000 and amortization of
deferred interest of $160,645 for the six months ended June 30, 2001, compared
to $150,554 for the six months ended June 30, 2000, and reflects a decrease in
accounts receivable of $214,054, compared to an increase of $1,932,090 for the
six months ended June 30, 2000; an increase in inventory of $444,922, compared
to an increase of $314,515 for the six months ended June 30, 2000; a decrease in
prepaid expenses of $40,900, compared to a decrease of $206,957 for the six
months ended June 30, 2000; an increase in other receivables of $140,983,
compared to a decrease of $108,863 for the six months ended June 30, 2000; an
increase in accounts payable of $126,726, compared to an increase of $571,813
for the six months ended June 30, 2000; a decrease in accrued expenses of
$6,983, compared to an increase of $267,484 for the six months ended June 30,
2000; an increase in customer deposits of $242,383, compared to an increase of
$64,452 for the six months ended June 30, 2000; and a decrease in deferred
charges of $35,983, compared to $0 for the six months ended June 30, 2000.

         For the six months ended June 30, 2001, the Company used net cash from
investing activities of $349,267 compared to $314,638 for the six months ended
June 30, 2000. Cash used in investing activities for the six months ended June
30, 2001 was used for the acquisition of equipment and tooling in the amount of
$119,261, the acquisition of patents and trademarks in the amount of $174,739
and deposits of $55,267.

         For the six months ended June 30, 2001, net cash provided by financing
activities was $3,419,844 compared to $2,508,242 for the six months ended June
30, 2000. The increase in cash from financing activities is attributable to the
private placement of several notes with private individuals for working capital.
For the six months ended June 30, 2001, cash from financing activities consisted
of $587,000 from the private placement of common stock and proceeds of $802,769
from leases payable, reduced by the repayment of leases payable of $873,926, and
the funding of stockholder loans in the amount of $2,904,000. The amount of
$725,358 was reclassified from notes payable to stockholder loans.

         DEBT. Through the quarter ended June 30, 2001, the Company has obtained
short term loans totaling $2,504,000 from a lender who is a controlling
stockholder and a member of its board of directors. The Company anticipates that
each of these loans will be applied to the stockholder's purchase of shares
through the Company's stockholder rights offering in the stockholder's capacity
as a stockholder and as the Company's standby purchaser for any unexercised
rights remaining in the rights offering.

         EQUIPMENT FINANCING. For the six months ending June 30, 2001, the
Company received proceeds of $802,769 from a third-party leasing company through
which the Company has financed most of its furniture, equipment, and tooling.
The leases have a mandatory buyout and terms ranging from 24 to 39 months.

                                       12
<PAGE>

         STOCKHOLDER RIGHTS OFFERING. On June 14, 2001, the Company's board of
directors declared a distribution of rights to purchase the Company's common
stock to stockholders of record as of June 15, 2001, or the record date, and
holders of vested options, warrants and convertible notes that possess
anti-dilution rights as of the record date. Through the Company's Registration
Statement on Form S-3 (File No. 333-64012), as declared effective on July 13,
2001, the Company offered an aggregate of 26,869,770 shares of its common stock
upon the exercise of these rights by rightsholders. The rights issued to
California residents may not be exercised by California residents until the
California Department of Corporation issues an order regarding the effectiveness
of the Company's registration of the shares of its common stock underlying the
rights issued to California residents by coordination pursuant to Section 25111
of the California Corporations Code. All rights issued to non-California
residents expired at 5:00 p.m., Las Vegas, Nevada time on August 13, 2001.


OUTLOOK

         Based on presently known commitments and plans, the Company believes
that it will be able to fund its operations and required expenditures for the
remainder of 2001 through cash on hand, cash flow from operations, the receipt
of proceeds from the Company's rights offering and the standby commitment
entered into with the Company's controlling stockholder, and cash from private
placements of debt or equity or from lease financing sources. In the event that
such sources are insufficient or unavailable, the Company will need to seek cash
from public or private placements of debt or equity, institutional or other
lending sources, sell certain assets or change operating plans to accommodate
such liquidity issues. No assurances can be given that the Company will
successfully obtain necessary liquidity sources necessary to fund the Company's
operations in the upcoming year.

                                       13
<PAGE>

RISK FACTORS AND FORWARD-LOOKING INFORMATION

         THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE
ACT. SUCH STATEMENTS REFER TO EVENTS THAT COULD OCCUR IN THE FUTURE AND MAY BE
IDENTIFIED BY THE USE OF WORDS SUCH AS "INTEND," "PLAN," "BELIEVE," CORRELATIVE
WORDS, AND OTHER EXPRESSIONS INDICATING THAT FUTURE EVENTS ARE CONTEMPLATED.
SUCH STATEMENTS ARE SUBJECT TO INHERENT RISKS AND UNCERTAINTIES, AND ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN OF THE RISK FACTORS SET FORTH BELOW AND
ELSEWHERE IN THIS QUARTERLY REPORT.

         ADDITIONAL FINANCING WILL BE REQUIRED. Based on presently known
commitments and plans, the Company believes that it will be able to fund its
operations and required expenditures for the remainder of 2001 through cash on
hand, cash flow from operations, the receipt of proceeds from the Company's
rights offering, including the standby commitment from the Company's controlling
stockholder, and cash from private placements of debt or equity or from lease
financing sources. In the event that such sources are insufficient or
unavailable, the Company will need to seek cash from public placements of debt
or equity, institutional or other lending sources, sell certain assets or change
operating plans to accommodate such liquidity issues. No assurances can be given
that the Company will successfully obtain necessary liquidity sources necessary
to fund the Company's operations in the upcoming year.

         LIMITED OPERATING RESULTS; NO INDEPENDENT MARKET RESEARCH OF POTENTIAL
DEMAND FOR CURRENT OPERATIONS. Until January 2000, the Company was in the
development stage and had limited sales of its products. The Company's
activities had been limited to analyzing the gaming industry, consulting with
persons in the gaming industry, negotiating interim financing arrangements,
developing products, establishing a distribution network for its products,
marketing its products to the gaming industry, manufacturing its products and
commencing product sales. There is no guarantee that the Company will generate
sufficient revenue to sustain its operations. No independent organization has
conducted market research providing management with independent assurance from
which to estimate potential demand for the Company's business operations.

         COINLESS GAMING. Certain gaming operators have tested and employed as
part of their current operations certain gaming devices that have eliminated the
use of coin or tokens, or use a combination of coin and "cashless" vouchers. The
acceptance and expansion of coinless gaming devices may reduce the demand for
the SecureDrop(TM) System and may adversely affect the Company's operations in
the future.

         FOCUS ON NON-GAMING MARKETS. The Company has recently begun to explore
the shift of its focus to the non-gaming application of certain of its products
and technology. The refocus to non-gaming markets will have significant risks
for the Company, including, but not limited to, management's lack of experience
in non-gaming markets, the need to hire sales and technical persons with
expertise in non-gaming markets, additional research, development, distribution
and marketing expenses necessary to proceed into non-gaming application of the
Company's products and technology, significant competitive factors and forces
applicable to non-gaming markets and a variety of other factors. There is no
assurance that the Company will be able to successfully execute the strategy to
refocus a significant portion of its marketing and product technology strategies
to the non-gaming markets.

         REGULATION. The gaming industry is a highly regulated industry and is
subject to numerous statutes, rules and regulations administered by the gaming
commissions or similar regulatory authorities of each jurisdiction. Generally,
the Company and other entities which seek to introduce gaming products or
concepts into such jurisdictions may be required to submit applications relating
to their activities or products (including detailed background information
concerning controlling persons within their organization) which are then
reviewed for approval. The Company may incur significant expenses in seeking to
obtain licenses for its gaming products and concepts, and no assurance can be
given that its products will be approved in any particular jurisdiction. The
failure to obtain such approval in any jurisdiction in which the Company may
seek to introduce its products or concepts could have a material adverse effect
on the Company's business.

                                       14
<PAGE>

         INFLUENCE BY CONTROLLING STOCKHOLDERS. The Company's executive officers
and members of the Company's Board of Directors beneficially own 8,957,010.5
shares of common stock, or approximately 79.5% of the outstanding shares of the
Company's common stock, assuming exercise of options, warrants and convertible
debentures. These stockholders have the power to influence all matters requiring
approval by the Company's stockholders, including the election of directors and
approval of mergers and other significant corporate transactions. This
concentration of ownership also has the effect to delay, prevent or expedite, as
the case may be, a change in control of the Company.

         UNCERTAINTY OF MARKET FOR COMPANY'S PRODUCTS. The Company has completed
development and begun distribution of the Shufflers and the SecureDrop(TM)
System. Although the market appears to be receptive to the Company's products,
there is no guarantee that the market will remain receptive and that the
Company's future products will be received by the market in the same manner.

         CUSTOMER PREFERENCE FOR ONE SHUFFLER VENDOR. There is no guarantee the
Company's development of the specialty shufflers will be successfully completed.
The failure to successfully complete the development and marketing of the
specialty shuffler could negatively impact the Company's ability to distribute
its remaining shuffler products. Since the Company's customers have demonstrated
a strong preference to conduct business with only one provider of automatic
shuffler products, the Company's inability to complete its shuffler product line
may adversely affect the Company.

         CONTINUED CUSTOMER ACCEPTANCE. To the Company's knowledge, although the
Company's shufflers have not proved vulnerable to card counters or expert
players, and although the Company's casino customers have not experienced
financial loss from their use of the shufflers, there is no guaranty that the
shufflers will not become vulnerable to card counters or expert players or that
the use of the Company's shufflers will not result in financial losses for the
Company's customers. The occurrence of such events could have a material adverse
effect on the Company.

         BENEFIT TO MANAGEMENT. The Company may, in the future, compensate the
Company's management with substantial salaries and other benefits. The payment
of future larger salaries, commissions and the costs of these benefits may be a
burden on the Company and may be a factor in limiting or preventing the Company
from achieving profitable operations in the future. However, the Company would
not continue to compensate management with such substantial salaries and other
benefits under circumstances where to do so would have a material negative
effect on the Company's financial condition.

         NO DIVERSIFICATION. To date, the Company has intended to manufacture
and market certain gaming products and concepts. Therefore, the Company's
financial viability has depended almost exclusively on its ability to generate
revenues from its operations, and the Company has not had the benefit of
reducing its financial risks by relying on revenues derived from other
operations.

         ILLIQUID INVESTMENT; RISK OF LOSS. The capital stock of the Company is
at risk of complete loss if the Company's operations are unsuccessful. In
addition, there has been no trading market for the Company's common stock. There
can be no assurance that the Company's stock will ever be quoted, that an active
trading and/or a liquid market will ever develop or, if developed, that it will
be maintained. There are material risks in connection with the Company's common
stock.

                                       15
<PAGE>

         COMPETITION. There is significant competition in the gaming industry.
The Company competes with established companies and other entities (many of
which possess substantially greater resources than the Company). Almost all of
the companies with which the Company competes are substantially larger, have
more substantial histories, backgrounds, experience and records of successful
operations, greater financial, technical, marketing and other resources, more
employees and more extensive facilities than the Company now has, or will have
in the foreseeable future. It is also likely that other competitors will emerge
in the near future. There is no assurance that the Company will continue to
compete successfully with other established gaming product manufacturers. The
Company shall compete on the basis of quality and price. Inability to compete
successfully might result in increased costs, reduced yields and additional
risks to the investors herein.

         RISKS OF PROPRIETARY PRODUCTS AND GAMES. The Company places its
proprietary products, except SecureDrop(TM), in casinos under short-term lease
arrangements, making these products susceptible to replacement due to pressure
from competitors, changes in economic conditions, obsolescence, and declining
popularity. The Company intends to maintain and expand the number of installed
proprietary products through enhancement of existing products, introduction of
new products, and customer service, but there can be no assurance that these
efforts will be successful. Introduction of new proprietary products involves
significant risks, including whether the Company will be able to place its
products with casinos and non-gaming industries, the economic terms on which
these industries will accept the products, and the popularity of the products.
The Company has filed trademark and patent applications to protect its
intellectual property rights in certain of its trademarks and innovations on
certain of its proprietary products, respectively. At this time, however, the
United States Patent and Trademark Office has not acted upon all of these
applications. There can be no assurance that the pending patent or trademark
applications will actually issue as patents or trademark registrations or that
any of these rights will not be infringed by others. Certain of the Company's
products and games do or may have independent protection of the game itself, and
it is possible that competitors could produce a similar product or game without
violating any legal rights of the Company. The Company intends to promote
aggressively its trademarks to build goodwill and customer loyalty. There can be
no assurance, however, that the Company will be successful in these efforts,
that innovations will be subject to legal protection, or that the innovations
will give a competitive advantage to the Company.

         LACK OF DIVIDENDS. There can be no assurance that the operations of the
Company will become profitable. At the present time, the Company intends to use
any earnings which may be generated to finance the growth of the Company's
business.

         DEPENDENCE ON KEY INDIVIDUALS. The future success of the Company is
highly dependent upon the management skills of its key employees and the
Company's ability to attract and retain qualified key employees. The inability
to obtain and employ these individuals would have a serious effect upon the
business of the Company. The Company has entered into employment agreements with
Steven J. Blad and seven additional key employees. There can be no assurance
that the Company will be successful in retaining its key employees or that it
can attract or retain the additional skilled personnel required.

         VULNERABILITY TO FLUCTUATIONS IN THE ECONOMY. The demand for the
Company's products is dependent on, among other things, certain economic and
business factors to which the economy is subject. These factors are beyond the
control of the Company. Such factors include, without limitation: (a) general
economic conditions, such as inflation, business cycle fluctuation, interest
rates, and the availability of financing; (b) the possibility of recession; (c)
increases in operating expenses, taxes, insurance or maintenance costs which
might not be offset by increased revenues from the Company's business; and (d)
international currency fluctuations.

                                       16
<PAGE>

         "PENNY" STOCK REGULATION OF BROKER-DEALER SALES OF COMPANY SECURITIES.
The Company does not presently meet the requirements for a NASDAQ Small Cap
Market listing. The OTC Bulletin Board has no quantitative written standards and
is not connected with the NASD. Until the Company obtains a listing on the
NASDAQ Small Cap Market, if ever, the Company's securities may be covered by
Rule 15g-9 under the Exchange Act which imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and institutional accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse). For transactions covered by the rule, the broker-dealer must
furnish to all investors in penny stocks, a risk disclosure document required by
Rule 15g-9 of the Exchange Act, make a special suitability determination of the
purchaser and have received the purchaser's written agreement to the transaction
prior to the sale. In order to approve a person's account for transactions in
penny stock, the broker or dealer must (i) obtain information concerning the
person's financial situation, investment experience and investment objectives;
(ii) reasonably determine, based on the information required by paragraph (i)
that transactions in penny stock are suitable for the person and that the person
has sufficient knowledge and experience in financial matters that the person
reasonably may be expected to be capable of evaluating the rights of
transactions in penny stock; and (iii) deliver to the person a written statement
setting forth the basis on which the broker or dealer made the determination
required by paragraph (ii) in this section, stating in a highlighted format that
it is unlawful for the broker or dealer to effect a transaction in a designated
security subject to the provisions of paragraph (ii) of this section unless the
broker or dealer has received, prior to the transaction, a written agreement to
the transaction from the person, and stating in a highlighted format immediately
preceding the customer signature line that the broker or dealer is required to
provide the person with the written statement and the person should not sign and
return the written statement to the broker or dealer if it does not accurately
reflect the person's financial situation, investment experience and investment
objectives and obtain from the person a manually signed and dated copy of the
written statement. A penny stock means any equity security other than a security
(i) registered, or approved for registration upon notice of issuance on a
national securities exchange that makes transaction reports available pursuant
to 17 CFR 11Aa3-1; (ii) authorized or approved for authorization upon notice of
issuance, for quotation in the NASDAQ system; (iii) that has a price of five
dollars or more; or (iv) whose issuer has net tangible assets in excess of
$2,000,000 demonstrated by financial statements dated less than fifteen months
previously that the broker or dealer has reviewed and has a reasonable basis to
believe are true and complete in relation to the date of the transaction with
the person. Consequently, the rule may affect the ability of broker-dealers to
sell the Company's securities.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         On November 22, 1999, Moll Industries, Inc. filed a complaint (Case No.
817296) against the Company in the Superior Court of the State of California for
the County of Orange, California. The parties have entered into a settlement
agreement, the fulfillment of which will lead to the dismissal of this
litigation.

         On May 18, 2000, Heath Electronics Manufacturing Corporation filed a
complaint (Case No. CV OC 00-02422D) against the Company in the District Court
of the Fourth Judicial District of the State of Idaho, Ada County. The Company
has answered the Complaint, which requests payment for goods in the amount of
$89,569 plus interest and costs, and has filed a counterclaim alleging claims
for breach of contract, breach of express warranty, breach of the implied
warranty of merchantability, and breach of the implied warranty of fitness for a
particular purpose. Trial has been continued until November 20, 2001.

         On March 21, 2001, RNB Enterprises, Inc. and other plaintiffs filed a
complaint (Case No. A432250) against the Company in the District Court of the
State of Nevada, Clark County. The complaint alleges claims for breach of
contract, breach of the implied covenant of good faith and fair dealing, unjust
enrichment/equitable set-off, intentional interference with contractual
relations/business, and fraud and/or misrepresentation. This matter has been set
for arbitration on September 6, 2001.

                                       17
<PAGE>

         On May 17, 2001, Century Productions, Inc. filed a complaint (Case No.
A434825) against the Company in the District Court of the State of Nevada, Clark
County. The parties have entered into a stipulation, the fulfillment of which
will lead to the dismissal of this litigation.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         ASSET ACQUISITION. On June 26, 2001, the Company purchased from
Technology Development Center, LLC ("TDC"), the worldwide right, title and
interest to the patents, pending patent applications, and all patent rights to
the Coin Operated Machine Having An Electronically Identified Coin Collection
Box and the Electronically Identified Coin Collection Box (collectively, the
"Patent Rights"). These Patent Rights relate to the technology utilized in the
Company's SecureDrop(TM) product line. As payment for the Patent Rights, the
Company paid $175,000 in cash. As part of the transaction, the parties cancelled
the Exclusive License Agreement pursuant to which the Company was the exclusive
licensee of the Patent Rights, and TDC surrendered to the Company all of its
shares of the Company's common stock, totaling 20,500 shares.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.

ITEM 5.  OTHER INFORMATION.

         STOCKHOLDER RIGHTS OFFERING. On June 14, 2001, the Company's board of
directors declared a distribution of rights to purchase the Company's common
stock to stockholders of record as of June 15, 2001, or the record date, and
holders of vested options, warrants and convertible notes that possess
anti-dilution rights as of the record date. Through the Company's Registration
Statement on Form S-3 (File No. 333-64012), as declared effective on July 13,
2001, the Company offered an aggregate of 26,869,770 shares of its common stock
upon the exercise of these rights by rightsholders. The rights issued to
California residents may not be exercised by California residents until the
California Department of Corporation issues an order regarding the effectiveness
of the Company's registration of the shares of its common stock underlying the
rights issued to California residents by coordination pursuant to Section 25111
of the California Corporations Code. All rights issued to non-California
residents expired at 5:00 p.m., Las Vegas, Nevada time on August 13, 2001.

         REGULATORY UPDATE. On July 19, 2001, the Mississippi Gaming Commission
renewed the license of the Company's wholly-owned subsidiary, Casinovations
Sales Incorporated. The current license expires in 2004. The Jackson Rancheria
Tribal Gaming Agency granted the Company a license certificate, effective July
19, 2001. The license certificate is valid through July 19, 2003.

          EMPLOYMENT AGREEMENTS. On July 20, 2001, the Company entered into
employment agreements with seven key employees. Each agreement has a term of two
years and is renewable for successive one year terms. Through the agreements,
the Company granted an aggregate of 1,461,000 stock options and agreed to pay a
minimum of $832,500 per year in aggregate salaries. The agreements contain
confidentiality and non-competition provisions.

                                       18
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         a.       Exhibits.
                  --------

                  10.01    Form of Employment Agreement.

         b.       Reports on Form 8-K.
                  -------------------

         During the three month period ended June 30, 2001, the Company filed
with the Securities and Exchange Commission Current Reports on Forms 8-K dated
as of: (i) June 27, 2001, announcing approval by the Company's Board of
Directors and stockholders an amendment to the Company's Articles of
Incorporation increasing the Company's authorized shares from 40 million shares
of common stock, $.001 par value, and 10 million shares of blank-check preferred
stock, $.001 par value, to 80 million shares of common stock, $.001 par value
and 10 million shares of blank-check preferred stock, $.001 par value, to ensure
a sufficient number of authorized shares for the Rights Offering and to provide
additional flexibility with respect to future financings; reporting the
commitment from James E. Crabbe, a director and controlling stockholder, to
provide a bridge loan in the original principal amount of up to $3,000,000;
announcing the termination of the engagement of Josephthal & Co. Inc. as the
Company's placement agent with respect to the Company's proposed private
placement of convertible debentures; disclaiming the financial projections set
forth in the Company's Current Report on Form 8-K, as filed with the Commission
on April 6, 2001; and announcing the Rights Offering; and (ii) June 29, 2001,
reporting the June 26, 2001, acquisition of the Patent Rights from TDC, the
cancellation of the Company's Exclusive License Agreement with TDC pursuant to
which the Company was the exclusive licensee of the Patent Rights, and the
surrender of 20,500 shares of the Company's common stock by TDC.

                                       19
<PAGE>

                                    SIGNATURE

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                                VendingData Corporation
                                      ------------------------------------------
                                                     (Registrant)


Date:      August 14, 2001       By:  /s/ Steven J. Blad
                                      ------------------------------------------
                                      Steven J. Blad

                                 Its: President, Chief Executive Officer and
                                      Treasurer

                                       20
<PAGE>

                                  EXHIBIT INDEX

Exhibit Number                   Description                         Page Number
--------------                   -----------                         -----------
       10.01          Form of Employment Agreement                       22





                                       21