##### Table of Contents



UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from          to          .
 Commission file number: 001-32161
 VendingData Corporation
  Nevada
    
    91-1696010(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification no.)
 1120 Town Center Dr, Ste 260
Las Vegas, NV 89144
 (702) 733-7195
 þ o
 o þ
  o þ




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VENDINGDATA CORPORATION
 FORM 10-QSB
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Balance Sheets
    
    
    1Statements of Operations and Deficit
    
    
    2Statements of Cash Flows
    
    
    3Notes to Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis or Plan of Operations
    
    
    8Overview
    
    
    8Results of Operations
    
    
    9Liquidity and Capital Resources
    
    
    11Critical Accounting Policies and Estimates
    
    
    12Risk Factors
    
    
    14Item 3. Controls and Procedures
    
    
    16PART II  OTHER INFORMATION
    
    
    18Item 6. Exhibits
    
    
    18Exhibit 10.1Exhibit 10.2Exhibit 31.1Exhibit 31.2Exhibit 32.1
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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 VENDINGDATA CORPORATION AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 March 31, 2007
    
    
December 31, 2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,644,051
    
    
    $
    333,888Current portion of accounts receivable, trade, net of allowance for
uncollectibles of $221,941 and $267,154
    
    
    1,992,369
    
    
    
    1,856,898Due from affiliate
    
    
    180,903
    
    
    
    138,181Other receivables
    
    
    2,355
    
    
    
    2,650,000Inventories
    
    
    3,526,021
    
    
    
    3,407,361Prepaid expenses and other current assets
    
    
    81,893
    
    
    
    46,49410,427,592
    
    
    
    8,432,822Equipment rented to customers, net of accumulated depreciation of $58,803 and
$67,673
    
    
    50,654
    
    
    
    94,777Property and equipment, net of accumulated depreciation of $2,673,302 and
$2,472,897
    
    
    3,527,476
    
    
    
    3,493,817Intangible assets, net of accumulated amortization of $786,344 and $654,369
    
    
    4,669,970
    
    
    
    4,801,945Goodwill
    
    
    13,429,199
    
    
    
    13,429,199Accounts receivable, trade, net of current portion, less unamortized discount
    
    
    246,830
    
    
    
    358,841Deferred
debt issuance costs
    
    
    3,491,410
    
    
    
    4,053,974Prepaid commission
    
    
    6,010,148
    
    
    
    Other assets
    
    
    309,399
    
    
    
    305,282Total assets
    
    $
    42,162,678
    
    
    $
    34,970,657LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Deferred revenues, current portion
    
    $
    668
    
    
    $
    43,599Short-term debt
    
    
    534,614
    
    
    
    676,600Capital leases payable, current portion
    
    
    443,995
    
    
    
    440,719Current portion of notes payable
    
    
    1,300,000
    
    
    
    1,799,494Accounts payable
    
    
    2,153,644
    
    
    
    2,354,163Accrued expenses
    
    
    4,678,164
    
    
    
    3,122,792Customer deposits
    
    
    174,925
    
    
    
    14,2579,286,010
    
    
    
    8,451,624Deferred revenues, net of current portion
    
    
    72,882
    
    
    
    43,199Leases payable, net of current portion
    
    
    166,972
    
    
    
    269,272Notes payable, net of current portion
    
    
    12,749,935
    
    
    
    19,793,52422,275,799
    
    
    
    28,557,619Stockholders equity:Preferred stock, $.001 par value, 10,000,000 shares authorized, no shares
issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value, 70,000,000 shares authorized, 34,296,007
shares and 30,015,099 shares issued
    
    
    34,297
    
    
    
    30,016Treasury stock 448,053 common shares at cost
    
    
    (846,820
    )
    
    
    (846,820
    )Additional paid-in capital
    
    
    116,077,221
    
    
    
    100,836,022Deferred expense
    
    
    (5,816,623
    )
    
    
    (8,183,683
    )Accumulated other comprehensive loss
    
    
    (3,153
    )
    
    
    Deficit
    
    
    (89,558,043
    )
    
    
    (85,422,497
    )Total stockholders equity
    
    
    19,886,879
    
    
    
    6,413,038Total liabilities and stockholders equity
    
    $
    42,162,678
    
    
    $
    34,970,657
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VENDINGDATA CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Operations and Deficit
 (Unaudited)
 Three Months Ended March 31,2007
    
    
    2006Revenues:Sales
    
    $
    1,738,677
    
    
    $
    577,207Rental
    
    
    64,563
    
    
    
    111,064Non-gaming revenue
    
    
    1,430,877
    
    
    
    Other
    
    
    166,656
    
    
    
    24,2293,400,773
    
    
    
    712,500Operating expenses:Cost of sales
    
    
    3,081,260
    
    
    
    714,802Selling, general and administrative
    
    
    4,328,660
    
    
    
    2,178,951Research and development
    
    
    262,758
    
    
    
    222,1387,672,878
    
    
    
    3,115,891Operating loss
    
    
    (4,272,105
    )
    
    
    (2,403,391
    )Other income (expense):Interest expense, including $40,492 to related parties in 2007
    
    
    (363,442
    )
    
    
    (351,507
    )Other income
    
    
    500,000
    
    
    
    Net loss
    
    $
    (4,135,547
    )
    
    $
    (2,754,898
    )Basic and dilutive net loss per share
    
    $
    (0.13
    )
    
    $
    (0.16
    )Weighted average shares outstanding
    
    
    32,359,950
    
    
    
    17,689,358
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VENDINGDATA CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 Three Months Ended March 31,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (4,135,547
    )
    
    $
    (2,754,898
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization of property and equipment
    
    
    144,228
    
    
    
    119,517Amortization of intangible assets
    
    
    131,974
    
    
    
    Amortization of deferred interest
    
    
    14,251
    
    
    
    16,561Amortization of deferred financing costs
    
    
    548,313
    
    
    
    122,644Stock-based compensation expense
    
    
    946,359
    
    
    
    497,755Loss on disposition of assets
    
    
    
    
    
    
    (32,805
    )Write down of inventory
    
    
    
    
    
    
    23,153Increase in operating (assets) liabilities:Trade accounts receivable
    
    
    (68,536
    )
    
    
    260,073Inventory
    
    
    (79,751
    )
    
    
    176,949Prepaid expenses and other current
    
    
    (35,399
    )
    
    
    50,432Deposits with vendors and other long term assets
    
    
    132,735
    
    
    
    311,246Accounts payable
    
    
    (231,627
    )
    
    
    (440,074
    )Accrued expenses, deferred revenues and other current liabilities
    
    
    298,551
    
    
    
    210,666Net cash used in operating activities
    
    
    (2,334,449
    )
    
    
    (1,438,781
    )Cash flows from investing activities:Acquisition of intangibles
    
    
    
    
    
    
    (2,709,653
    )Acquisition of property, plant and equipment
    
    
    (93,259
    )
    
    
    Net cash used in investing activities
    
    
    (93,259
    )
    
    
    (2,709,653
    )Cash flows from financing activities:Repayment of leases payable
    
    
    (99,024
    )
    
    
    (259,057
    )Repayment of notes payable
    
    
    (297,490
    )
    
    
    (429,500
    )Proceeds from sale of stock
    
    
    4,484,385
    
    
    
    3,112,457Proceeds from subscriptions receivable
    
    
    2,650,000Proceeds from convertible debt
    
    
    
    
    
    
    1,000,000Net cash provided by financing activities
    
    
    6,737,871
    
    
    
    3,423,900Increase (decrease) in cash and cash equivalents
    
    
    4,310,163
    
    
    
    (724,534
    )Cash and cash equivalents at beginning of period
    
    
    333,888
    
    
    
    935,243Cash and cash equivalents at end of period
    
    $
    4,644,051
    
    
    $
    210,709Supplemental cash flow information:Non-cash investing and financing activities:Warrants
issued to distributor as prepaid commission
    
    $
    6,147,000Loans converted into common stock, including $4,377,927
to a related party
    
    $
    4,875,481
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VENDINGDATA CORPORATION AND SUBSIDIARIES
 
 NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 1. Basis of presentation.
  Reclassifications
  2. Segments
 TM
 Three Months EndedMarch 31,2007
    
    
    2006RevenuesGaming operations
    
    $
    1,969,896
    
    
    $
    712,500Non-gaming operations
    
    
    1,430,877
    
    
    
    Total Revenue
    
    $
    3,400,773
    
    
    $
    712,500Operating income (loss)Gaming operations
    
    $
    482,833
    
    
    $
    (2,302
    )Non-gaming operations
    
    
    (163,320
    )
    
    
    Corporate/other
    
    
    (4,591,618
    )
    
    
    (2,401,089
    )Total operating loss
    
    $
    (4,272,105
    )
    
    $
    (2,403,391
    )
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Three Months EndedMarch 31,2007
    
    
    2006Asia
    
    $
    1,685,605
    
    
    $
    440,000United States
    
    
    221,992
    
    
    
    272,500Australia
    
    
    1,430,877
    
    
    
    Europe
    
    
    40,696
    
    
    
    Other
    
    
    21,603
    
    
    
    $
    3,400,773
    
    
    $
    712,500
  3. Earnings (loss) per share
  4. Stock options
  WeightedAverage
    
    
    RemainingExercise
    
    
    ContractualShares
    
    
    Price
    
    
    Term(per share)
    
    
    (years)Balance outstanding as of December 31, 2005
    
    
    3,953,472
    
    
    $
    2.55
    
    
    
    4.61Granted
    
    
    55,000Exercised
    
    
    (77,600
    )Forfeited or expired
    
    
    (55,000
    )Balance outstanding as of March 31, 2006 1
    
    
    3,875,872
    
    
    $
    2.06
    
    
    
    4.55Balance outstanding as of December 31, 2006
    
    
    4,654,412
    
    
    $
    2.17
    
    
    
    4.52Granted
    
    
    522,500Exercised
    
    
    (50,100
    )Forfeited or expired
    
    
    (960
    )Balance outstanding as of March 31, 2007 1
    
    
    5,125,852
    
    
    $
    2.20
    
    
    
    4.57Exercisable as of March 31, 2007
    
    
    1,195,716
    
    
    $
    2.09
    
    
    
    3.42
 
 ( )
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5 . Sale and issuance of stock and warrants
  Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services.
  6. Acquisition
   Net Revenue
    
    $
    2,213,687Operating expenses
    
    
    4,253,078Loss from operations
    
    
    (2,038,391
    )Other expenses
    
    
    366,289Net loss
    
    $
    (2,405,680
    )Basic and dilutive loss per share
    
    $
    (0.14
    )Weighted average number of share
    
    
    17,689,358
 7. Contingencies
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Sales tax audit.
 8. Income taxes
  Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB
Statement No. 109
 9. Subsequent event
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Item 2. Managements Discussion and Analysis or Plan of Operations.
 CAUTIONARY STATEMENT
     VendingData Deck Checker Random
Ejection Random Plus PokerOne ChipWasher ShufflePro DeckSetter Dolphin
 
 Overview
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Results of Operations
 Comparison of Three Months Ended March 31, 2007 and 2006
  Three months
    
    
    Three monthsended
    
    
    ended
    
    
    PercentageMarch 31, 2007
    
    
    March 31, 2006
    
    
    changeShuffler SalesRevenue
    
    
    65,651
    
    
    
    259,609
    
    
    
    (75
    %)Gross Margin %
    
    
    73
    %
    
    
    33
    %
    
    
    41
    %Shuffler RentalsRevenue
    
    
    43,788
    
    
    
    72,134
    
    
    
    (39
    %)Gross Margin %
    
    
    88
    %
    
    
    86
    %
    
    
    2
    %DeckChecker SalesRevenue
    
    
    115,911
    
    
    
    606,003
    
    
    
    (81
    %)Gross Margin %
    
    
    75
    %
    
    
    78
    %
    
    
    (3
    %)DeckChecker RentalsRevenue
    
    
    20,775
    
    
    
    38,930
    
    
    
    (47
    %)Gross Margin %
    
    
    96
    %
    
    
    88
    %
    
    
    8
    %Casino ChipsRevenue
    
    
    1,579,577
    
    
    
    
    
    
    
    Gross Margin %
    
    
    27
    %Non-gaming productsRevenue
    
    
    1,430,877
    
    
    
    
    
    
    
    Gross Margin %
    
    
    (11
    %)OtherRevenue
    
    
    144,194
    
    
    
    (264,176
    )
    
    
    154
    %Gross Margin
    
    
    (144,638
    )
    
    
    (656,926
    )
    
    
    76
    %
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Shuffler Sales.
 Shuffler Rentals.
 DeckChecker Sales.
 Deck Checker Rentals.
 Casino Chips.
 Non-Gaming Products.
 Other Income.
 General and Administrative Expense
  
    
    An increase in share based compensation of $449,000 primarily due to the increase in
stock options granted in the current period compared to the corresponding period of the
prior year. We granted approximately 520,000 options in the three month period ended
March 31, 2007 compared to 55,000 options in the corresponding period in the prior year.
    
    An increase in consulting and other professional fees of $453,000 as a result of the
beginning of our implementation of new accounting software and an increase in accounting
fees as we prepare to comply with Section 404A of Sarbanes-Oxley. We expect these costs to
increase over the current fiscal year.
    
    An increase in wages and salaries of $446,000 as a result of the increase in headcount
associated with the acquisition of Dolphin during the third quarter of 2006.
    
    An increase in financing fees of approximately $517,000 related to the amortization of
debt issuance costs of debt acquired in the prior year. This cost relates to the expensing
of warrants issued in connection with the debt financing and is a non-cash expense. Please
see note 1 in the Notes to the Consolidated Financial Statements.
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Research and Development Expense
  Interest Expense
   
 Liquidity and Capital Resources
  §
    
    In January 2007, we completed sale of intellectual property related to the discontinued
SecureDrop product line. The proceeds of the transaction totaled $500,000.§
    
    In January 2007, Elixir purchased, for the aggregate price of $2.65 million, 1,000,000
shares of our common stock and warrants to purchase 16,000,000 shares of our common stock
at exercise prices ranging from $2.65 to $5.50 per share for a period of 36 months
beginning on December 31, 2007.§
    
    On March 28, 2007, we completed a sale of 1,625,000 shares of common stock at $2.65 per
share for total proceeds of $4,306,250.
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Critical Accounting Policies and Estimates
  Allowance for Doubtful Accounts.
  Revenue Recognition.
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Revenue Arrangements with Multiple Deliverables
     Intangible Assets.
  Legal defense costs
  Recent Accounting Pronouncements
 Fair Value Measurements The Fair Value Option for
Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115
 Off-Balance Sheet Arrangements
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Risk Factors
 We may require additional funding in the future to continue to operate our business.
  
    
    the percentage ownership of our existing stockholders will be reduced;
    
    our stockholders may experience additional dilution in net book value per share; or
    
    the new equity securities may have rights, preferences or privileges senior to those
of the holders of our common stock.
 We have a history of significant operating losses and anticipate continued operating losses for at
least the near term.
 Our leased shufflers are more susceptible to replacement by customers.
 We may be unable to adequately protect our intellectual property right
 
    
    contractual arrangements providing for non-disclosure and prohibitions on use;
    
    patents and pending patent applications;
    
    trade secret, copyright and trademark laws; and
    
    certain built-in technical product features.
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It is possible that our future products will be the subject of future patent litigation if the
products are sold and installed in the United States and, if commenced, could subject us to
continuing litigation costs and risks.
   
    
    consuming substantial time and financial resources required to defend against them;
    
    diverting the attention of management from growing our business and managing
operations;
    
    resulting in costly litigation; and
    
    disrupting product sales and shipments.
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We rely on distributors in international markets, and our limited sales experience in foreign
countries could cause us to lose sales.
 Our management holds a controlling interest in our common stock, giving our management significant
power to control matters submitted to our stockholders.
 Our board of directors may issue blank check preferred stock, which may affect the voting rights of
our holders and could deter or delay an attempt to obtain control of us.
 
 Item 3. Controls and Procedures
  Evaluation of Disclosure Controls.
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Changes in Internal Control
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PART II  OTHER INFORMATION
 
 Item 6. Exhibits.
 Exhibits
 10.1
    
    Securities Purchase Agreement10.2
    
    Registration Rights Agreement31.1
    
    Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Principal Executive Officer and Principal
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. Section 1350).
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SIGNATURE
  VendingData Corporation(Registrant)Date: May 15, 2007
    
    By:
    
    /s/ Mark R. Newburg

Mark R. NewburgIts:
    
    President, Chief Executive Officer andTreasurer (Principal Executive Officer)Date: May 15, 2007
    
    By:
    
    /s/ Arnaldo F. Galassi

Arnaldo F. GalassiIts:
    
    Chief Financial Officer and Secretary(Principal Financial Officer)
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EXHIBIT
INDEX
 ExhibitNumber
    
    Description10.1
    
    Securities Purchase Agreement10.2
    
    Registration Rights Agreement31.1
    
    Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Principal Executive Officer and Principal
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. Section 1350).