##### 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 June 30, 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
(State or other jurisdiction of 
incorporation or organization)
    
    91-1696010
(I.R.S. Employer
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
    
    
    1Consolidated Balance Sheets
    
    
    1Consolidated Statements of Operations and Deficit
    
    
    2Consolidated Statements of Cash Flows
    
    
    3Notes to Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis or Plan of Operations
    
    
    11Overview
    
    
    13Results of Operations
    
    
    15Liquidity and Capital Resources
    
    
    19Critical Accounting Policies and Estimates
    
    
    20Risk Factors
    
    
    21Item 3.Controls and Procedures
    
    
    25PART II  OTHER INFORMATION
    
    
    27Item 6. Exhibits
    
    
    27EXHIBIT 10.1EXHIBIT 10.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 VENDINGDATA CORPORATION AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 June 30, 2007
    
    
    December 31, 2006(Unaudited)
    
    
    (As restated)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,791,076
    
    
    $
    333,888Current portion of accounts receivable, net of allowance for
uncollectibles of $118,016 and $267,154
    
    
    2,992,435
    
    
    
    1,856,898Other receivables
    
    
    
    
    
    
    138,181Inventories
    
    
    2,820,390
    
    
    
    3,407,361Prepaid expenses and other current assets
    
    
    79,629
    
    
    
    46,4947,683,530
    
    
    
    5,782,822Equipment rented to customers, net of accumulated depreciation of $64,181
and $67,673
    
    
    45,276
    
    
    
    94,777Property and equipment, net of accumulated depreciation of $2,871,926 and
$2,472,897
    
    
    3,786,940
    
    
    
    3,493,817Intangible assets, net of accumulated amortization of $1,258,518 and $819,753
    
    
    8,497,795
    
    
    
    8,936,561Goodwill
    
    
    9,129,199
    
    
    
    9,129,199Accounts receivable, net of current portion, less unamortized discount
    
    
    188,950
    
    
    
    358,841Deferred debt issuance costs
    
    
    3,949,754
    
    
    
    4,489,707Prepaid commission
    
    
    6,010,148
    
    
    
    Other assets
    
    
    328,065
    
    
    
    305,282Total assets
    
    $
    39,619,657
    
    
    $
    32,591,006LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Deferred revenues, current portion
    
    $
    43,702
    
    
    $
    43,599Short-term debt
    
    
    784,249
    
    
    
    3,676,600Capital leases payable, current portion
    
    
    382,508
    
    
    
    440,719Current portion of notes payable
    
    
    1,500,000
    
    
    
    299,494Accounts payable
    
    
    3,124,793
    
    
    
    2,354,163Accrued expenses
    
    
    2,105,780
    
    
    
    3,122,792Customer deposits
    
    
    195,242
    
    
    
    14,2578,136,274
    
    
    
    9,951,624Deferred revenues, net of current portion
    
    
    17,110
    
    
    
    43,199Capital leases payable, net of current portion
    
    
    165,263
    
    
    
    269,272Notes payable, net of current portion
    
    
    10,057,486
    
    
    
    16,793,52418,376,133
    
    
    
    27,057,619Stockholders 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, 36,208,534
shares and 30,015,099 shares issued
    
    
    36,209
    
    
    
    30,016Treasury stock 448,053 common shares at cost
    
    
    
    
    
    
    (846,820
    )Additional paid-in capital
    
    
    125,774,766
    
    
    
    108,170,320Deferred compensation
    
    
    (3,266,219
    )
    
    
    (8,348,483
    )Accumulated other comprehensive loss
    
    
    (36,269
    )
    
    
    Deficit
    
    
    (101,264,963
    )
    
    
    (93,471,646
    )Total stockholders equity
    
    
    21,243,524
    
    
    
    5,533,387Total liabilities and stockholders equity
    
    $
    39,619,657
    
    
    $
    32,591,006
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##### Table of Contents



VENDINGDATA CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Operations and Deficit
 (Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(As restated)
    
    
    (As restated)
    
    
    (As restated)Revenues:Gaming product sales
    
    $
    1,439,016
    
    
    $
    1,503,659
    
    
    $
    3,177,693
    
    
    $
    2,080,866Gaming product rentals
    
    
    52,580
    
    
    
    80,185
    
    
    
    117,143
    
    
    
    191,249Non-gaming product sales
    
    
    1,729,848
    
    
    
    
    
    
    
    3,160,725
    
    
    
    Other
    
    
    280,645
    
    
    
    102,971
    
    
    
    447,301
    
    
    
    127,2013,502,089
    
    
    
    1,686,815
    
    
    
    6,902,862
    
    
    
    2,399,316Operating costs and expenses:Cost of sales  gaming products
    
    
    1,456,253
    
    
    
    1,220,227
    
    
    
    2,943,317
    
    
    
    1,935,030Cost of sales  non-gaming products
    
    
    1,550,655
    
    
    
    
    
    
    
    3,144,851
    
    
    
    Selling, general and administrative
    
    
    4,412,047
    
    
    
    1,796,531
    
    
    
    7,736,700
    
    
    
    3,975,482Research and development
    
    
    147,876
    
    
    
    590,098
    
    
    
    410,634
    
    
    
    812,2377,566,831
    
    
    
    3,606,856
    
    
    
    14,235,502
    
    
    
    6,722,749Loss from operations
    
    
    (4,064,742
    )
    
    
    (1,920,041
    )
    
    
    (7,332,640
    )
    
    
    (4,323,433
    )Other income (expense):Interest expense
    
    
    364,950
    
    
    
    654,204
    
    
    
    951,992
    
    
    
    1,126,811Loss on extinguishment of debt
    
    
    
    
    
    
    1,211,000
    
    
    
    
    
    
    
    1,211,000Other income
    
    
    
    
    
    
    
    
    
    
    (500,000
    )
    
    
    364,950
    
    
    
    1,865,204
    
    
    
    451,992
    
    
    
    2,337,811Net loss
    
    $
    (4,429,692
    )
    
    $
    (3,785,245
    )
    
    $
    (7,784,632
    )
    
    $
    (6,661,244
    )Stock inducement discount
    
    
    
    
    
    
    603,708
    
    
    
    
    
    
    
    603,708Net loss available to common shareholders
    
    $
    (4,429,692
    )
    
    $
    (4,388,953
    )
    
    $
    (7,784,632
    )
    
    $
    (7,264,952
    )Basic and
dilutive loss available to common shareholders per share
    
    $
    (0.13
    )
    
    $
    (0.20
    )
    
    $
    (0.23
    )
    
    $
    (0.36
    )Weighted average shares outstanding
    
    
    35,008,041
    
    
    
    22,220,768
    
    
    
    33,691,311
    
    
    
    20,196,340
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VENDINGDATA CORPORATION AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 Six Months Ended June 30,2007
    
    
    2006(As restated)Cash flows from operating activities:Net loss
    
    $
    (7,784,632
    )
    
    $
    (6,661,244
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization of property and equipment
    
    
    263,942
    
    
    
    124,326Amortization of intangible assets
    
    
    438,766
    
    
    
    102,141Amortization of deferred financing costs
    
    
    343,887
    
    
    
    355,858Stock-based compensation expense
    
    
    1,765,587
    
    
    
    648,352Loss on disposition of assets
    
    
    33,075
    
    
    
    12,071Write down of inventory
    
    
    394,991
    
    
    
    Loss on extinguishment of debt
    
    
    
    
    
    
    1,211,000Increase in operating (assets) liabilities:Accounts receivable
    
    
    (964,378
    )
    
    
    (211,425
    )Inventory
    
    
    272,560
    
    
    
    (89,601
    )Prepaid expenses and other current
    
    
    (33,135
    )
    
    
    75,074Deposits with vendors and other long term assets
    
    
    114,069
    
    
    
    (330,797
    )Accounts payable
    
    
    750,905
    
    
    
    (114,920
    )Accrued expenses, deferred revenues and other current liabilities
    
    
    (1,824,313
    )
    
    
    (374,824
    )Net cash used in operating activities
    
    
    (6,228,676
    )
    
    
    (5,253,989
    )Cash flows from investing activities:Acquisition of intangibles
    
    
    
    
    
    
    (716,500
    )Deposit for business combination
    
    
    
    
    
    
    (750,000
    )Acquisition of property, plant and equipment
    
    
    (358,434
    )
    
    
    Sale of property, plant and equipment
    
    
    80,900
    
    
    
    77,529Net cash used in investing activities
    
    
    (277,534
    )
    
    
    (1,388,971
    )Cash flows from financing activities:Proceeds from sale of stock
    
    
    8,139,683
    
    
    
    399,572Proceeds from capital leases
    
    
    
    
    
    
    300,000Capital lease payments
    
    
    (206,667
    )
    
    
    (338,596
    )Proceeds from notes payable
    
    
    
    
    
    
    14,250,000Repayment of notes payable
    
    
    (2,624,099
    )
    
    
    (11,000,000
    )Treasury stock exercised
    
    
    4,481
    
    
    
    Proceeds from stock subscriptions receivable
    
    
    2,650,000
    
    
    
    Proceeds from issuance of convertible debt
    
    
    
    
    
    
    2,500,000Net cash provided by financing activities
    
    
    7,963,398
    
    
    
    6,110,976Increase (decrease) in cash and cash equivalents
    
    
    1,457,188
    
    
    
    (531,984
    )Cash and cash equivalents at beginning of period
    
    
    333,888
    
    
    
    935,243Cash and cash equivalents at end of period
    
    $
    1,791,076
    
    
    $
    403,259Supplemental cash flow information:Non-cash investing and financing activities:Intangible assets acquired with stock
    
    
    
    
    
    $
    2,520,000Stock issued for business combination deposit
    
    
    
    
    
    $
    2,350,000Notes payable paid off with stock
    
    
    
    
    
    $
    5,654,500Warrants issued to distributor as prepaid commission
    
    $
    6,147,000Loans converted into common stock
    
    $
    6,372,168
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VENDINGDATA CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 1. Basis of presentation.
        As previouslyConsolidated Balance Sheets
    
    reported
    
    As restated
    
    DifferenceDecember 31, 2006Intangible assets, net
    
    
    4,801,945
    
    
    
    8,936,561
    
    
    
    4,134,616Goodwill
    
    
    13,429,199
    
    
    
    9,129,199
    
    
    
    (4,300,000
    )Deferred costs
    
    
    613,974
    
    
    
    4,489,707
    
    
    
    3,875,733Additional paid-in capital
    
    
    104,676,021
    
    
    
    108,170,320
    
    
    
    3,494,299Deferred compensation
    
    
    (15,463,683
    )
    
    
    (8,348,483
    )
    
    
    7,115,200Deficit
    
    
    (85,422,496
    )
    
    
    (93,471,646
    )
    
    
    (8,049,150
    )
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##### Table of Contents



Consolidated Statements of Operations and Deficit
    
    Three Months Ended June 30, 2006Interest expense
    
    
    505,137
    
    
    
    654,204
    
    
    
    149,067Loss on extinguishment of debt
    
    
    
    
    
    
    1,211,000
    
    
    
    1,211,000Net loss
    
    
    2,425,178
    
    
    
    3,788,245
    
    
    
    1,363,076Net loss per share attributable to common shareholders
    
    
    (0.11
    )
    
    
    (0.20
    )
    
    
    (0.09
    )
 Six Months Ended June 30, 2006As previouslyreported
    
    As restated
    
    DifferenceInterest expense
    
    
    856,644
    
    
    
    1,126,811
    
    
    
    270,167Loss on extinguishment of debt
    
    
    
    
    
    
    1,211,000
    
    
    
    1,211,000Net loss
    
    
    5,180,077
    
    
    
    6,661,244
    
    
    
    1,481,167Net loss per share attributable to common shareholders
    
    
    (0.26
    )
    
    
    (0.36
    )
    
    
    (0.10
    )
 Six Months Ended June 30, 2006As previouslyConsolidated Statements of Cash Flows
    
    reported
    
    As restated
    
    DifferenceNet cash used in operating activities
    
    
    (5,392,791
    )
    
    
    (5,253,989
    )
    
    
    138,802Net cash used in investing activities
    
    
    (1,469,651
    )
    
    
    (1,388,971
    )
    
    
    80,680Net cash provided by financing activities
    
    
    6,330,458
    
    
    
    6,110,976
    
    
    
    (219,482
    )
  2. Segments
 TM
 Three Months Ended June 30,
    
    
    Six Months Ended June, 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(As restated)
    
    
    
    
    
    (As restated)RevenuesGaming operations
    
    $
    1,772,241
    
    
    $
    1,686,815
    
    
    $
    3,742,137
    
    
    $
    2,399,316Non-gaming operations
    
    
    1,729,848
    
    
    
    
    
    
    
    3,160,725
    
    
    
    Total Revenues
    
    $
    3,502,089
    
    
    $
    1,686,815
    
    
    $
    6,902,862
    
    
    $
    2,399,316Operating income (loss)Gaming operations
    
    $
    315,987
    
    
    $
    466,588
    
    
    $
    798,820
    
    
    $
    464,286Non-gaming operations
    
    
    179,194
    
    
    
    
    
    
    
    15,874
    
    
    
    Corporate/other
    
    
    (4,559,923
    )
    
    
    (2,386,629
    )
    
    
    (8,147,334
    )
    
    
    (4,787,719
    )Total operating loss
    
    $
    (4,064,742
    )
    
    $
    (1,920,041
    )
    
    $
    (7,332,640
    )
    
    $
    (4,323,433
    )
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Three Months Ended June 30,
    
    
    Six Months Ended June, 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Asia
    
    $
    950,032
    
    
    $
    1,417,270
    
    
    $
    2,635,637
    
    
    $
    1,857,271United States
    
    
    645,075
    
    
    
    269,545
    
    
    
    867,067
    
    
    
    542,045Australia
    
    
    1,793,058
    
    
    
    
    
    
    
    3,223,935
    
    
    
    Europe
    
    
    102,316
    
    
    
    
    
    
    
    143,012
    
    
    
    Other
    
    
    11,608
    
    
    
    
    
    
    
    33,211
    
    
    
    $
    3,502,089
    
    
    $
    1,686,815
    
    
    $
    6,902,862
    
    
    $
    2,399,316
  3. Loss per share
  4. Goodwill and Intangible Assets
 Finite lived intangible assets
  June 30,
    
    
    December 31,2007
    
    
    2006(As restated)Amortizable intangible assets:Patents and gaming related products
    
    $
    4,986,313
    
    
    $
    4,986,314Less: accumulated amortization
    
    
    (888,585
    )
    
    
    (638,702
    )Customer relationships
    
    
    4,220,000
    
    
    
    4,220,000Less: accumulated amortization
    
    
    (327,308
    )
    
    
    (160,154
    )Trademarks
    
    
    550,000
    
    
    
    550,000Less: accumulated amortization
    
    
    (42,625
    )
    
    
    (20,897
    )$
    8,497,795
    
    
    $
    8,936,561
 Goodwill
  5. Stock options
  WeightedAverage
    
    RemainingExercise
    
    ContractualShares
    
    Price
    
    Term(per share)
    
    (years)Balance outstanding as of December 31, 2005
    
    
    3,953,472
    
    
    $
    3.55
    
    
    
    4.61Granted
    
    
    930,000Exercised
    
    
    (168,600
    )Forfeited or expired
    
    
    (308,600
    )Balance outstanding as of June 30, 2006
    
    
    4,406,272
    
    
    $
    2.10
    
    
    
    4.55Balance outstanding as of December 31, 2006
    
    
    4,654,412
    
    
    $
    2.17
    
    
    
    4.52Granted
    
    
    569,000Exercised
    
    
    (965,377
    )Forfeited or expired
    
    
    (26,710
    )Balance outstanding as of June 30, 2007
    
    
    4,231,325
    
    
    $
    2.31
    
    
    
    4.50Exercisable as of June 30, 2007
    
    
    978,651
    
    
    $
    2.26
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6. Inventory
  June 30, 2007
    
    
    December 31, 2006Raw materials
    
    $
    303,708
    
    
    $
    633,185Work in progress
    
    
    176,874
    
    
    
    121,977Finished goods
    
    
    2,339,808
    
    
    
    2,652,199$
    2,820,390
    
    
    $
    3,407,361
 7. Securities Purchase and Product Participation Agreement
   Cumulative
    
    CumulativeGaming Machines
    
    Gaming Machines
    
    Shares Earned
    
    Vesting of WarrantsUnder Contract
    
    in Operation
    
    By Elixir
    
    Earned By Elixir1,000
    
    
    1,000
    
    
    
    25,000,000
    
    
    
    02,000
    
    
    1,000
    
    
    
    15,000,000
    
    
    
    22,000,0003,000
    
    
    2,000
    
    
    
    10,000,000
    
    
    
    22,000,0004,000
    
    
    3,000
    
    
    
    5,000,000
    
    
    
    22,000,0005,000
    
    
    4,000
    
    
    
    0
    
    
    
    22,000,000Total 5,000
    
    
    4,000
    
    
    
    55,000,000
    
    
    
    88,000,000
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##### Table of Contents



Accounting for Equity Instruments that are
Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,
 8. Sale and issuance of stock and warrants
   - 8 -




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##### Table of Contents



Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services.
  9. Acquisition
   Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June, 30, 2006Net Revenue
    
    $
    2,386,788
    
    
    $
    4,600,474Operating expenses
    
    
    5,212,462
    
    
    
    9,465,541Loss from operations
    
    
    (2,825,673
    )
    
    
    (4,865,067
    )Other expenses
    
    
    459,106
    
    
    
    825,395Net loss
    
    $
    (3,284,779
    )
    
    $
    (5,690,462
    )Loss per share
    
    $
    (0.19
    )
    
    $
    (0.32
    )Weighted average number of share
    
    
    17,689,358
    
    
    
    17,689,358
 10. Contingencies
 Legal matters.
 Sales tax audit.
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##### Table of Contents



11. Income taxes
   Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109.
 - 10 -




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##### Table of Contents



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
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##### Table of Contents



As previouslyConsolidated Balance Sheets
    
    reported
    
    As restated
    
    DifferenceDecember 31, 2006Intangible assets, net
    
    
    4,801,945
    
    
    
    8,936,561
    
    
    
    4,134,616Goodwill
    
    
    13,429,199
    
    
    
    9,129,199
    
    
    
    (4,300,000
    )Deferred costs
    
    
    613,974
    
    
    
    4,489,707
    
    
    
    3,875,733Additional paid-in capital
    
    
    104,676,021
    
    
    
    108,170,320
    
    
    
    3,494,299Deferred compensation
    
    
    (15,463,683
    )
    
    
    (8,348,483
    )
    
    
    7,115,200Deficit
    
    
    (85,422,496
    )
    
    
    (93,471,646
    )
    
    
    (8,049,150
    )
 Consolidated Statements of Operations and Deficit
    
    Three Months Ended June 30, 2006Interest expense
    
    
    505,137
    
    
    
    654,204
    
    
    
    149,067Loss on extinguishment of debt
    
    
    
    
    
    
    1,211,000
    
    
    
    1,211,000Net loss
    
    
    2,425,178
    
    
    
    3,788,245
    
    
    
    1,363,076Net loss per share attributable to common shareholders
    
    
    (0.11
    )
    
    
    (0.20
    )
    
    
    (0.09
    )
 Six Months Ended June 30, 2006As previouslyreported
    
    As restated
    
    DifferenceInterest expense
    
    
    856,644
    
    
    
    1,126,811
    
    
    
    270,167Loss on extinguishment of debt
    
    
    
    
    
    
    1,211,000
    
    
    
    1,211,000Net loss
    
    
    5,180,077
    
    
    
    6,661,244
    
    
    
    1,481,167Net loss per share attributable to common shareholders
    
    
    (0.26
    )
    
    
    (0.36
    )
    
    
    (0.10
    )
 Six Months Ended June 30, 2006As previouslyConsolidated Statements of Cash Flows
    
    reported
    
    As restated
    
    DifferenceNet cash used in operating activities
    
    
    (5,392,791
    )
    
    
    (5,253,989
    )
    
    
    138,802Net cash used in investing activities
    
    
    (1,469,651
    )
    
    
    (1,388,971
    )
    
    
    80,680Net cash provided by financing activities
    
    
    6,330,458
    
    
    
    6,110,976
    
    
    
    (219,482
    )
 - 12 -




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##### Table of Contents



Overview
    Elixir Transaction
   - 13 -




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##### Table of Contents



Cumulative
    
    CumulativeGaming Machines
    
    Gaming Machines
    
    Shares Earned
    
    Vesting of WarrantsUnder Contract
    
    in Operation
    
    By Elixir
    
    Earned By Elixir1,000
    
    
    1,000
    
    
    
    25,000,000
    
    
    
    02,000
    
    
    1,000
    
    
    
    15,000,000
    
    
    
    22,000,0003,000
    
    
    2,000
    
    
    
    10,000,000
    
    
    
    22,000,0004,000
    
    
    3,000
    
    
    
    5,000,000
    
    
    
    22,000,0005,000
    
    
    4,000
    
    
    
    0
    
    
    
    22,000,000Total 5,000
    
    
    4,000
    
    
    
    55,000,000
    
    
    
    88,000,000
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##### Table of Contents



Results of Operations
 Comparison of Three Months Ended June 30, 2007 and 2006
  Three months ended June 30,
    
    Six months ended June 30,Percentage
    
    
    
    
    
    
    
    
    
    Percentage2007
    
    2006
    
    change
    
    2007
    
    2006
    
    changeShuffler SalesRevenue
    
    
    208,663
    
    
    
    (14,211
    )
    
    
    (1,568
    %)
    
    
    251,853
    
    
    
    (43,006
    )
    
    
    (686
    %)Gross margin %
    
    
    60
    %
    
    
    1,344
    %
    
    
    (165
    %)
    
    
    60
    %
    
    
    917
    %
    
    
    (138
    %)Shuffler RentalsRevenue
    
    
    31,515
    
    
    
    54,912
    
    
    
    (43
    %)
    
    
    75,303
    
    
    
    127,046
    
    
    
    (41
    %)Gross margin %
    
    
    86
    %
    
    
    81
    %
    
    
    (39
    %)
    
    
    87
    %
    
    
    84
    %
    
    
    (38
    %)DeckChecker SalesRevenue
    
    
    895,873
    
    
    
    320,599
    
    
    
    179
    %
    
    
    1,011,784
    
    
    
    926,602
    
    
    
    9
    %Gross margin %
    
    
    69
    %
    
    
    60
    %
    
    
    225
    %
    
    
    70
    %
    
    
    72
    %
    
    
    7
    %DeckChecker RentalsRevenue
    
    
    21,065
    
    
    
    25,273
    
    
    
    (17
    %)
    
    
    41,840
    
    
    
    64,203
    
    
    
    (35
    %)Gross margin %
    
    
    95
    %
    
    
    80
    %
    
    
    (1
    %)
    
    
    96
    %
    
    
    85
    %
    
    
    (26
    %)Casino ChipsRevenue
    
    
    334,480
    
    
    
    1,197,270
    
    
    
    (72
    %)
    
    
    1,872,057
    
    
    
    1,197,270
    
    
    
    56
    %Gross margin %
    
    
    (19
    %)
    
    
    46
    %
    
    
    (111
    %)
    
    
    19
    %
    
    
    46
    %
    
    
    (36
    %)Non-gaming productsRevenue
    
    
    1,729,848
    
    
    
    
    
    
    
    100
    %
    
    
    3,160,725
    
    
    
    
    
    
    
    100
    %Gross margin %
    
    
    10
    %
    
    
    
    
    
    
    100
    %
    
    
    1
    %
    
    
    
    
    
    
    100
    %OtherRevenue
    
    
    280,645
    
    
    
    102,971
    
    
    
    173
    %
    
    
    447,301
    
    
    
    127,201
    
    
    
    252
    %Gross margin
    
    
    (420,412
    )
    
    
    (144,940
    )
    
    
    154
    %
    
    
    (542,588
    )
    
    
    (513,463
    )
    
    
    (5
    %)
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##### Table of Contents



Shuffler sales.
 Shuffler rentals.
 DeckChecker sales.
 Deck Checker rentals.
 Casino chip sales.
 Non-gaming products sales.
 Other income.
 General and Administrative Expense
  
    
    During the second quarter of 2007, our expenses for share based compensation totaled
$1,390,000 as compared to $115,000 in the corresponding period in the prior year. This
increase of
$1,275,000 in share based compensation was primarily due to the acceleration of vesting on
certain stock options and an increase in the number of options being expensed in the current
period compared to the corresponding period of the prior year. We granted approximately
46,500 options in the three month period ended June 30, 2007 compared to 875,000 options in
the corresponding period in the prior year.
    
    During the second quarter of 2007, accounting and consulting expenses increased $154,000
to $436,000 from $283,000 in the corresponding period in the prior year. This increase is
a result of increased costs associated with our preparation to comply with Section 404 of
the Sarbanes-Oxley Act of 2002 as well as an increase in accounting fees associated with
the Dolphin. We expect these costs to increase over the current fiscal year.
 - 16 -




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##### Table of Contents




    
    During the second quarter of 2007, we incurred an increase in wages and salaries of
$96,000 over the prior year period as a result of the increase in headcount associated with
the acquisition of Dolphin during the third quarter of 2006.
    
    We experienced an increase in legal and regulatory of $444,000 during the second quarter
of 2007 as a result of fees related to the Elixir transaction, and the filing of various
motions in connection with finalizing the patent litigation.
    
    During the second quarter of 2007, we incurred an increase in rent of $210,000 related
to the Dolphin transaction.
    
    Depreciation and amortization expense increased approximately $251,000 to $323,000 in
current year quarter compared to $72,000 in the corresponding period of the prior year.
This increase is primarily attributable to the acquisition of Dolphin in the third quarter
of 2006.
 Research and Development Expense
  Other Income and Expense
  Interest Expense
   Comparison of Six Months Ended June 30, 2007 and 2006
  - 17 -




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##### Table of Contents



Shuffler sales.
 Shuffler rentals.
 DeckChecker sales.
 Deck Checker rentals.
 Casino chip sales.
 Non-gaming product sales.
 Other income.
 General and Administrative Expense
  
    
    During the first half of 2007, our expenses for share based compensation totaled $1.8
million an increase of $1.2 million or 188% compared to the corresponding period of the
prior year. The increase in share based compensation was primarily due to the increase in
stock options expensed in the current period as compared to $612,000 in the corresponding
period in the prior year. We
granted approximately 569,000 options in the six month period ended June 30, 2007 compared
to 930,000 options in the corresponding period in the prior year.
    
    During the first half of 2007, consulting and accounting expenses increased $606,000 to
$973,000 compared to $367,000 or 165% compared to the corresponding period in the prior
year due to consulting expenses incurred in preparation of our compliance with Section 404
of the Sarbanes-Oxley Act of 2002 We expect these costs to increase over the current fiscal
year. Additional increases related to the fees paid to consultants for accounting,
marketing and financial services.
 - 18 -




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##### Table of Contents




    
    During the first half of 2007, we incurred an increase in wages and salaries, including
commissions, of $720,000 over the prior year period as a result of the increase in
headcount associated with the acquisition of Dolphin during the third quarter of 2006.
    
    We experienced an increase in legal and regulatory of $414,000 during the first half of
2007 as a result of fees related to the Elixir transaction, and the filing of various
motions in connection with finalizing the patent litigation.
    
    We experienced an increase in rent of $198,500 during the first half of 2007 as a result
of the increase in rent associated with the acquisition of Dolphin during the third quarter
of 2006.
 Research and Development Expense
  Interest Expense
  
 Liquidity and Capital Resources
    - 19 -




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##### Table of Contents



Critical Accounting Policies and Estimates
  Allowance for Doubtful Accounts.
  Revenue Recognition.
     Revenue Arrangements with Multiple Deliverables
    - 20 -




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##### Table of Contents



Intangible Assets.
  Legal defense costs
  Income taxes
  Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109.
 Recent Accounting Pronouncements
 Fair Value Measurements The Fair Value Option for
Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115
 
 Risk Factors
 We may require additional funding in the future to continue to operate our business.
  - 21 -




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##### Table of Contents




    
    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.
  - 22 -




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##### Table of Contents



If we are able to consummate the Participation Agreement with Elixir, our shareholders will undergo
significant equity dilution pursuant to the transactions contemplated by the Participation
Agreement
 The transactions contemplated by the Participation Agreement will lead to a change in the control
of VendingData
 The accounting treatment of the transactions under the Participation Agreement will negatively
impact our reportable net profit (loss) over the life of the gaming machine lease agreements that
relate to the equity earned by Elixir EITF No. 96-18, Accounting for Equity
Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services
 - 23 -




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##### Table of Contents



The transactions under the Participation Agreement represent a material change in our business
model, and that business model has not been proven by us .
 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.
  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;
 - 24 -




---



##### Table of Contents




    
    resulting in costly litigation; and
    
    disrupting product sales and shipments.
  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
  - 25 -




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##### Table of Contents



Evaluation of Disclosure Controls.
   Changes in Internal Control
 - 26 -




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 6. Exhibits.
 Exhibits
 ExhibitNo.
    
    Description
    
    Method of Filing10.1
    
    Securities Purchase Agreement dated May 3, 2007 between VendingData
Corporation
and the investors named therein
    
    Filed electronically
herewith10.2
    
    Registration Rights Agreement dated May 3, 2007 between VendingData
Corporation
and the investors named therein
    
    Filed electronically
herewith10.3
    
    Securities Purchase and Product Participation Agreement dated June 12,
2007 between VendingData Corporation and Elixir Group Limited
    
    
    (1
    )31.1
    
    Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    Filed electronically
herewith31.2
    
    Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    Filed electronically
herewith32.1
    
    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).
    
    Filed
electronically
herewith
 
 1)
    
    Incorporated by reference from Registrants Current Report on Form 8-K dated June 13, 2007. - 27 -




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##### Table of Contents



SIGNATURE
  VendingData Corporation
(Registrant)Date: August 14, 2007
    
    By:
    
    /s/ Mark R. NewburgMark R. NewburgIts:
    
    President, Chief Executive
Officer and Treasurer
(Principal Executive
Officer)Date: August 14, 2007
    
    By:
    
    /s/ Arnaldo F. GalassiArnaldo F. GalassiIts:
    
    Chief Financial Officer
and Secretary (Principal
Financial Officer)
 - 28 -




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description
    
    Method of Filing10.1
    
    Securities Purchase Agreement dated May 3, 2007 between VendingData
Corporation
and the investors named therein
    
    Filed electronically
herewith10.2
    
    Registration Rights Agreement dated May 3, 2007 between VendingData
Corporation
and the investors named therein
    
    Filed electronically
herewith10.3
    
    Securities Purchase and Product Participation Agreement dated June 12,
2007 between VendingData Corporation and Elixir Group Limited
    
    
    (1
    )31.1
    
    Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    Filed electronically
herewith31.2
    
    Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    Filed electronically
herewith32.1
    
    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).
    
    Filed
electronically
herewith
 
 1)
    
    Incorporated by reference from Registrants Current Report on Form 8-K dated June 13, 2007. - 29 -