10KSB

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-KSB

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
o	TRANSITION REPORT UNDER 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

(Name of small business issuer in its charter)

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, Nevada 89144

(Address of principal executive offices, including zip code)

Issuer’s telephone number: (702) 733-7195

Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.001 par value	American Stock Exchange

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $.001 par value

(Title of each class)

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  o

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 þ     No o

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes o     No þ

State issuer’s revenues for its most recent fiscal year: $7,867,657

State the aggregate market value of voting stock held by non-affiliates computed by reference to the average bid and asked price of such common equity, as of a specified date within the past 60 days. $47,586,208 ($2.89 per share as of March 22, 2007).

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 32,511,007 shares as of March 22, 2007.

Transitional Small Business Disclosure Format (check one):  Yes o     No þ

TABLE OF CONTENTS

			Page
PART I				3
	Item 1.	Description of Business		3
	Item 1A.	Risk Factors		15
	Item 2.	Description of Property		18
	Item 3.	Legal Proceedings		19
	Item 4.	Submission of Matters to a Vote of Security Holders		19
PART II				20
	Item 5.	Market for Common Equity and Related Stockholder Matters		20
	Item 6.	Management’s Discussion and Analysis or Plan of Operation		21
	Item 7.	Financial Statements		28
	Item 8.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		46
	Item 8A.	Controls and Procedures		46
	Item 8B.	Other Information		46
PART III				47
	Item 9.	Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act		47
	Item 10.	Executive Compensation		49
	Item 11.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		52
	Item 12.	Certain Relationships and Related Transactions		54
	Item 13.	Exhibits		56
	Item 14.	Principal Accountant Fees and Services		57
EXHIBIT 3.3
EXHIBIT 3.4
EXHIBIT 10.3
EXHIBIT 10.18
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

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PART I

ITEM 1.   DESCRIPTION OF BUSINESS

GENERAL

We develop, manufacture and distribute products and services to the gaming industry that automate the current manual processes supporting the casino table games business. Our gaming product line is intended to improve security, productivity and profitability of casino operations. Our principal gaming products include:

•  The Deck Checker, a card security device that scans decks of playing cards to ensure an accurate count and verify that all of the cards are present.

•  The Random Plus Shuffler, the next generation of shuffling device that is an updated version of our previously offered Random Ejection Shuffler. The Random Plus Shuffler is capable of shuffling up to eight decks of cards at once.

•  The ShufflePro shuffler, a high-speed card-shuffler designed for use with two deck specialty variation games such as poker and baccarat.

•  Casino Chips:

•  The high frequency RFID casino chip, a traditional casino chip imbedded with a RFID tag that allows casinos to identify counterfeit casino chips and assists casinos in tracking table play.

•  Traditional casino chips sold to casinos for table games.

•  The ChipWasher, a product that washes and sanitizes gaming chips. The ergonomically designed product is intended to provide casinos with ease of operation inside the cage, while being cost-effective, high-speed, environmentally friendly and hygienic.

Additionally, with the acquisition of Dolphin Advanced Technologies Pty Ltd (Dolphin^TM) in July 2006, we also have non-gaming product lines of high quality and innovative products for a number of market sectors, including automotive and medical.

Automotive

•  Automotive components manufactured by Dolphin for both internal and external applications as well as safety products. The internal/external classification is split to differentiate purchasing departments and the required testing specifications are different for external parts being exposed to harsh atmospheric conditions when compared to the internal parts. An example of internal part is the inner remote door handle and an external part is the wheel nut caps.

•  Dolphin supplies major automotive companies such as General Motors’ Holden and Toyota.

•  Dolphin also supplies parts to automotive component manufacturers such as, Johnson Controls, Autoliv Australia Pty Ltd, Bridgestone Australia Ltd, and Futuris Automotive.

•  Automotive components consist of inner remote door handles, fuel filler hinge assembly, module brackets, steering wheel spoke covers, speaker grills, fasteners, safety products, and cosmetic components.

Medical

•  Dolphin Medical is a world-class manufacturer of medical devices and is geared to meeting the exacting standards of the global healthcare industry.

•  Medical devices are manufactured, assembled and packaged in a TGA certified US Class 10,000 clean room (Australia class — Grade C).

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•  Dolphin Medical supplies parts to a number of government and commercial research and development organizations. Dolphin’s customers include Vivus and Acrux.

•  Medical devices include: MDTS Applicators (Estradiol and Testosterone products), UDTS applicators, protein separation cartridges, allergy test kits, haemostatic dressing containers and radio frequency identification devices.

We have an active research and development program for our current products as well as a focus on product line expansion.

We are headquartered in Las Vegas, Nevada with research and manufacturing facilities in Guangdong Province, China and Melbourne, Australia. We maintain our principal offices at 1120 Town Center Dr, Suite 260, Las Vegas, Nevada, 89144. Our telephone number and facsimile number are (702) 733-7195 and (702) 733-7197, respectively, and our website is www.vendingdata.com. Information contained in, or accessible through, our website does not constitute part of this report.

We own or have rights to certain trademarks that we use in connection with the sale of our products, including, but not limited to, the following: VendingData^tm, Deck Checker^tm, Random Ejection^tm, Random Plus^tm, PokerOne^tm, ChipWasher^tm, ShufflePro^tm, DeckSetter^® and Dolphin^tm. This report also makes reference to trademarks and trade names of other companies.

RECENT DEVELOPMENTS

During fiscal 2006 through the date of this report, we engaged in the following transactions:

Bricoleur Financing.  In May 2006, we closed on an $18 million financing transaction with four investment funds managed by Bricoleur Capital Management. As more fully disclosed in our current report on Form 8-K dated April 5, 2006 and elsewhere in this report, the $18 million financing consisted of $13 million of 8% senior secured promissory notes and a $5 million equity put agreement that can be exercised from time to time at our option. Concurrent with closing of the Bricoleur financing, the holders of our previously outstanding 10% Senior Notes converted approximately $5.2 million of the principal under those notes to our common shares. We used the proceeds of the financing to retire the balance of the 10% Senior notes and the $5 million 9% line of credit acquired by us in October 2005. We issued to the Bricoleur funds warrants to purchase 2.6 million shares at $2.00 per share, some of which are recallable based on early retirement of $6 million of the debt portion of the transaction. During fiscal 2006, we exercised the put agreement and sold 2,646,541 common shares to the Bricoleur funds for a total of $5 million, at an average price per share of $1.89.

Dolphin Acquisition.  In July 2006, we acquired Dolphin Advanced Technologies Pty Ltd and its wholly-owned subsidiary (collectively, “Dolphin”) pursuant to a share sale agreement dated July 5, 2006 with William Westmore Purton, an individual, and Synwood Pty Ltd, an Australian corporation (and together with Mr. Purton, the “sellers”). As more fully disclosed in our current report on Form 8-K dated July 12, 2006 and elsewhere in this report, we paid to the sellers the following consideration in exchange for all of the issued and outstanding capital shares of Dolphin: (a) a total of $1,350,000, of which $750,000 was paid as a non-refundable deposit in April 2006 upon the execution of the letter of intent between the parties; (b) 2,462,238 shares of our common stock, of which 1,000,000 shares were issued in April 2006 as part of the non-refundable deposit; and (c) our secured convertible promissory notes in the aggregate principal amount of $5,782,168, which were subsequently converted into 1,652,048 of our common shares in December 2006.

Elixir Strategic Alliance.  In October 2006, we entered into an Alliance Agreement, an Amended and Restated Sales Representative Agreement, and a Securities Purchase Agreement with Elixir Group Limited (“Elixir”), a Hong Kong company wholly-owned by Melco International Development Limited (Melco). As more fully disclosed in our current report on Form 8-K dated October 17, 2006, and elsewhere in this report, we have agreed to enter into negotiations with Elixir to establish a manufacturing alliance pursuant to which (i) Elixir will integrate its research and development operations in Macau with our engineering operations in Zhuhai, China, (ii) after a satisfactory testing period, we will manufacture

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all products required by Elixir at our China manufacturing facilities, and (iii) Elixir will make an equity investment in a special purpose entity we will form to hold our China manufacturing facilities. Pursuant to the Sales Agreement, we have appointed Elixir as our exclusive distributor throughout Asia, and to those casinos controlled by certain designated customers, regardless of where they are located, for our chips, plaques, chip washers, shufflers, DeckCheckers, and all new products developed or sold by us that do not directly compete with any product distributed by Elixir. Pursuant to the securities purchase agreement, 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.

Corporate Restructuring.  In February 2007, we announced a company wide restructuring, which when fully implemented, is expected to reduce costs and expenses by a combined $3.5 million annually. The reorganization changes include:

•  transferring of all research and development efforts to our newly created R&D Center located in Zhuhai, China. The relocation of the engineering division to the Zhuahi office is a strategic step in continuing the forward movement and integration of our engineering division in Zhuhai with Elixir’s newly established gaming research and development center in Macau, as contemplated by our October 2006 Alliance Agreement with Elixir.

•  contracting out US sales and service to a third party that has in place extensive sales and technical service teams throughout the US in order to support the anticipated growth of the company’s domestic business from new product line introductions. Discussions are ongoing and are expected to be concluded by the end of the second quarter.

•  effective February 4, 2007, we relocated our US Corporate offices to 1120 Town Center Drive, Suite 260, Las Vegas, Nevada, 89144, pursuant to lease arrangements that will reduce our overall lease expense in the US by approximately $30,000 per month.

•  the recently completed sale of intellectual property related to the discontinued SecureDrop product line for $500,000. This sale was another step of the plan to redeploy our resources to new product line introductions as well as capitalize on the opportunities in Macau and other growing markets.

Further Expansion of Elixir Alliance.  On February 9, 2007, we expanded the distribution element of our alliance with Elixir to allow for Elixir’s exclusive distribution in Asia of our entire product offering and to include Australia and New Zealand in the exclusive territory.

GLG Financing On March 28, 2007, we completed the sale of 1.625 million shares of common stock at $2.65 per share to GLG North American Opportunity Fund (GLG) for approximately $4.3 million. The stock purchase included warrants to purchase an additional 1.625 million shares at $2.65 per share.

BUSINESS STRATEGY

Our strategy is to increase revenue and margins based on three key factors:

•  Development of product lines with limited competition.  We intend to focus on the development or acquisition of new products, such as the high frequency RFID casino chip and the ChipWasher, which have the potential to provide us with product lines with limited or no competition.

•  Expansion into additional domestic and international gaming markets for our products.  The worldwide expansion of gaming should provide new markets for our products, and we intend to target sales opportunities in these new markets in addition to our traditional established gaming markets. To help address these markets we continue to look at various distribution channels both in the US and internationally.

•  Implementation of cost reduction initiatives to increase gross margins.  We intend to pursue the implementation of cost reduction initiatives with the goal increasing the gross margins on our products

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over time. We continuously strive to reduce the cost of production and our component parts through the use of production facilities in China.

TABLE GAME SUPPORT PRODUCTS

Shuffler Product Line

We believe that the motivating factors for casino operators to adopt automatic shufflers on gaming tables include the desire to increase dealer productivity, reduce exposure to fraud and cheating by dealers, players or both and reduce reliance on experienced dealers. The ability to turn more hands, or decisions, per hour and reduce the advantage knowledgeable players have with respect to poor manual shuffles will more likely generate higher “holds,” the percentage of wagers that the casino earns, from automated shufflers than from manual shuffles.

In 2005, we introduced our next generation shuffler, the RandomPlus Shuffler. This shuffler effectively replaced our previous generation shufflers, the Random Ejection Shuffler, and the Continuous Random Ejection Shuffler. In November 2006, we introduced our next generation specialty shuffler, the ShufflePro, which will be available for sale in early 2007.

RandomPlus Shuffler.  The RandomPlus utilizes state of the art electronics for improved reliability and longevity. It has been designed with reliability in mind. The RandomPlus has fewer moving parts than its predecessor and is designed with additional user accessible adjustments to accommodate a wider variety of card types and conditions. It includes additional features, such as the ability to switch from alternating current (AC), to direct current (DC), conversion to an external power supply, redesign of the cabinet, and the addition of an external lever to adjust the shuffler for card thickness.

PokerOne Shuffler.  The PokerOne shuffler is a specialty game shuffler providing shuffles of pre-dealt hands of cards for specialty poker games. Specialty game shufflers are only used in single deck poker variation games such as Caribbean Stud^tm, Let It Ride^tm, Pai Gow Poker and Three Card Poker. The PokerOne shuffler is designed to re-stack the deck and deliver the required number of cards (3, 5 or 7 cards) into packets using a batch system method. We have designed the PokerOne shuffler to:

•  shuffle and prepare the cards into the individual packets required for the specialty poker game;

•  provide sufficient speed to maintain the pace of the game even if just a single player is playing;

•  verify the overall quantity of the cards shuffled and the number of cards in each packet; and

•  verify the actual cards dealt to each player.

ShufflePro To complement our current shufflers, in February 2007, we received approval from Gaming Laboratory International, a worldwide leader in independent game machine testing and certification, for ShufflePro, the Company’s newest specialty shuffler. This single or double deck specialty shuffler will be launched initially in the United States and Europe and marketed through our network of gaming products distributors. ShufflePro is being manufactured in VendingData’s low cost, state-of-the-art facilities in China. ShufflePro is a high-speed card shuffler designed to handle up to two decks of cards, capable of shuffling the smaller “bridge” cards as well as the larger cards typically used for Blackjack. The shuffler can be configured in an embedded table-top version or as a free standing unit. Among its many features, the new ShufflePro shuffles using a patented random selection process:

•  Verifies card count on each shuffle

•  Has indicator lights signaling extra or missing cards

•  Produces shuffles that are unpredictable, and non-trackable

The ShufflePro increases speed and accuracy, and improves dealer productivity. It utilizes enhanced security and integrity technology, and is user-friendly, with easy-to-read message displays. We intend to offer customers both purchase and rental plans through our distributor network, as well as service contracts and customer training programs.

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Shuffler Market.  We estimate that there are over 45,000 gaming tables worldwide with many more coming on line in Macau over the next three years and that the market penetration of installations of automatic shufflers is low. We estimate that of the automatic shufflers installed, most of these installations are on specialty gaming tables. Several companies have introduced automatic shufflers for the general market, but for the most part, these efforts have been unsuccessful.

There are several factors that have resulted in low acceptance of automatic shufflers for the general market, including security issues, reliability/productivity and player confidence. We believe that our technology and ergonomic design will allow our products to overcome these industry concerns:

•  Security.  We believe that our combination of patented computer and mechanical technology safeguards against cheating schemes. The random ejection technology used in all of our shuffler products produces a computer-generated, random and untrackable shuffle, and the continuous random ejection shuffler technology eliminates advantages achieved by knowledgeable players, as each card is available for the next round of play by producing “full” decks of continuously shuffled random cards. This has the added benefit of giving the casino a higher hold from the gaming table since the shuffler preserves the original odds of each game, which favor the casino.

•  Reliability/Productivity.  Given the paper handling demands placed on card shufflers, shufflers are prone to jamming and breakdown. We have designed our shufflers to be easily accessed by dealers so they can hand-deal cards until the unit can be put back in service and prevent a table from shutting down. In addition, the dealer, with little interruption, can easily put the unit back into play in most cases.

•  Player Confidence.  To reduce cheating schemes, many existing shufflers completely cover or shield from players the deck(s) being shuffled, thereby reducing player confidence in a fair game. The design of our shufflers allows players to see the cards being ejected and re-stacked through a frosted cover without compromising security, which we believe will gain better player acceptance.

Shuffler Installations.  As of December 31, 2006, we had installed a net total of 548 units, representing the number of revenue generating shufflers installed at casinos through sale or rental agreements. Of the units installed as of December 31, 2006, 66 units were installed pursuant to rental agreements, and 482 units were sales. In terms of location, as of December 31, 2006, we have installed our shufflers in 58 different gaming properties.

Competition — Shufflers.  Competition in the shuffler market is intense. The shuffler market is divided into two separate segments, traditional table game and specialty table games. Shuffle Master, Inc. is the current market leader in both the traditional table game and specialty table game markets. We believe our other competitors have a small collective market share of the table game market. With respect to the traditional table game market segment, we compete with Shuffle Master which markets multi-deck continuous shufflers, single deck shufflers and multi-deck batch shufflers.

The DeckChecker

The patented DeckChecker is a card security device that specifically scans playing cards to ensure an accurate count and verify that all of the cards in a deck are present. This innovative product confirms the integrity of each card and will reject any non-conforming cards. The DeckChecker has multiple uses and can be used in the back of the house (casino support departments) to reduce labor costs by expediting the verification process of used cards, or it can be used in the front of the house (the casino floor) to ensure that all table games open with complete and accurate decks, reducing the amount of time it takes to open a table game, thereby increasing productivity. The DeckChecker allows the re-use of playing cards by providing a secure and reliable method of putting used cards back into play, reducing card usage and the associated costs. In addition, the DeckChecker can scan up to eight decks at a time, with each deck scanned in less than 15 seconds. The device is programmed for all standard playing cards, accommodates plastic, paper and plastic coated playing cards and is programmed with many standard card games.

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The DeckChecker has an integrated management system and an on-board storage/vault system. The integrated management system gives a report for every transaction — providing an audit trail. Further, the DeckChecker requires limited operator training time, as the machine prompts the user throughout the entire checking process. Since the DeckChecker does not require additional staff, the DeckChecker is designed to increase efficiency and shorten the start-of-the-day and the end-of-the-day procedures.

Market and Distribution of the DeckChecker.  We estimate that the potential market for the DeckChecker to be one machine for every ten table games, or approximately 5,000 machines installed worldwide. As of December 31, 2006, we had 214 units of the DeckChecker installed at 57 casinos, 206 of which were purchased and eight of which were rented. We placed more than 100 DeckCheckers in Macau in 2006.

Competition — DeckChecker.  We believe Shuffle Master’s MD2 product provides limited competition for the DeckChecker.

High Frequency RFID Casino Chip

High frequency 13.56 MHz RFID casino chip is designed to provide real-time data capability, enhanced chip security, player tracking and accounting management benefits for casinos. The high frequency RFID chips enable casinos to read 1,000 chips in a second and have a memory capacity of over 10,000 bits. In comparison to the existing RFID casino chip technology (the 125KHz RFID chip), the 13.56 MHz chip is faster, has much greater memory capacity, is more economic to produce and, being more robust, it is more cost effective and easier to install. As an example, if there are 100 chips in a particular player position — in the same time that it takes the 125 KHz technology to determine that there are 100 chips in the field — the 13.56 MHz has not only determined the number of chips, it has also interrogated 3 or 4 levels of security features within each chip, authenticated the unique identity of each individual chip, determined the value of the bet and calculated the win or loss. The 13.56MHZ technology enables real time monitoring of table games. We believe the high frequency RFID chips provide significant cost advantages over predecessor technology.

High frequency RFID Market.  We estimate that the addressable chip market is at least 100 million casino chips worldwide. Initially the market will emerge from the build-out of new casinos in Macau. From 2006 through 2008, at least 15 new casinos will be built in Macau and it is expected that the new casinos will be migrating to the new chip technology to thwart counterfeiters and to track casino chip movement within the properties. As of December 31, 2006, we had approximately 1,100,000 RFID casino chips installed — including 800,000 at the Galaxy Star World Casino in Macau.

Competition — High frequency RFID Market.  There is limited competition in this market and a high barrier of entry. There is currently one other provider of high frequency RFID casino chips, Gaming Partners International Corporation (GPIC).

ChipWasher

ChipWasher is a product that washes and sanitizes gaming chips. The build-up of oils and residue makes them sticky and difficult for dealers and players to handle, which makes for slower play. Casino surveillance and identification becomes increasingly difficult and players’ gaming experience is considerably lessened. Regular chip washing prevents this, but the traditional method of hand-washing is time-consuming and costly. The ChipWasher is a practical and efficient means toward cleaner and more hygienic casino chips.

Benefits of this product include:

•  Ease of operation inside the cage

•  Cost-effectiveness

•  Labor-savings

•  Greater speed

•  Environmentally friendly

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•  Enables greater surveillance identification

•  Hygienic

•  Ergonomically designed

ChipWasher Market.  We estimate that the addressable chip market is at least 100 million casino chips worldwide. Currently, chips are either washed by hand or placed in commercial clothes washing machines. We estimate that there is a market for an easy to use, high speed chip washer and the development of that market will be furthered with the introduction of high frequency RFID chips that will require better care and handling than traditional chips.

Competition — ChipWasher.  There is no other equipment specifically manufactured for the washing of casino chips in the market today.

Dolphin Automotive

Automotive components (e.g., inner remote door handles, fuel filler hinge assembly, module brackets, steering wheel spoke covers, speaker grills, fasteners, safety products, and cosmetic components) are manufactured by Dolphin for both internal and external automotive applications as well as safety products. Dolphin supplies major automotive companies such as General Motors Holden and Toyota.

Automotive Components Market.  We estimate that the addressable market for our automotive components is $70 million in Australia, although the total Australian plastic component market is approximately $650 million. In addition to Australia, Dolphin is supplying components to several countries around the world such as Argentina, Mexico, Germany, Malaysia, and Thailand. Expansion to the US markets and China is expected in 2007.

Competition — Automotive Components Global sourcing of the major automotive customers remains very competitive, and Dolphin’s main competitors are Illinois Tool works, Hook Plastics and MTM Systems. Nonetheless, Dolphin has been able to target costs for both tooling and component and provide an overall package offering high technical expertise for high precision and complex parts and was recently awarded with four new projects with General Motors’ Holden and four new projects with Autoliv at the start of 2007

Dolphin Medical

Dolphin Medical is a world-class manufacturer of medical devices and is geared to meeting the exacting standards of the global healthcare industry. Medical devices include: MDTS Applicators (Estradiol and Testosterone products), UDTS applicators, protein separation cartridges, allergy test kits, haemostatic dressing containers and radio frequency identification devices. Medical devices are manufactured, assembled and packaged in a TGA certified US Class 10,000 clean room. Dolphin Medical supplies parts to a number of government and commercial research and development organizations. Dolphin’s customers include Vivus and Acrux.

Medical Devices Market.  The market in medical devices is somewhat limited in Australia as it is based around research and development of potential components and results in small volume batch production. Once the component has been supplied in the small batch volumes and all the product validation is completed and approved, the product volume increases and is then transferred to larger market bases such as the European and United States markets for mass production to satisfy the necessary demand.

Competition — Medical Devices The medical market in Australia is limited to not more than three companies, and the business is distributed based on the level of trials and what level of clean room is required by potential customers.

RESEARCH AND DEVELOPMENT

In February 2007, we transferred all research and development efforts to our newly created R&D Center located in Zhuhai, China. The relocation of the engineering division to the Zhuahi office is a strategic step in

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continuing the integration of our engineering division in Zhuhai with Elixir’s newly established gaming research and development center in Macau, as per the Alliance Agreement completed subsequent to our year-end on January 18, 2007. Our current research and development emphasis is to improve our existing product lines, as demonstrated by our development of our new ShufflePro shuffler to be deployed in early 2007. We spent $1,555,882 in 2006 and $1,394,006 in 2005 on research and development activities. We expect our research and development expenses to increase as we develop enhancements to the current shuffler line and develop new products in conjunction with the Elixir product lines.

GAMING REGULATION AND LICENSING

Overview

We are subject to regulation by governmental authorities in most jurisdictions in which our products are sold or used by persons or entities licensed to conduct gaming activities. Gaming regulatory requirements vary from jurisdiction to jurisdiction, and obtaining licenses, findings of suitability, registrations and/or other required approvals with respect to us, our personnel and our products are time-consuming and expensive. Generally, gaming regulatory authorities have broad discretionary powers and may deny applications for or revoke approvals on any basis they deem reasonable.

We have approvals that enable us to conduct our business in numerous jurisdictions, subject in each case to the conditions of the particular approvals. These conditions may include limitations as to the type of product we may sell or lease, as well as limitations on the type of facility (such as riverboats) and the territory within which we may operate (such as tribal nations). Jurisdictions in which we, and specific personnel where required, have authorizations with respect to some or all of our products and activities including Arizona, California, Indiana, Iowa, Kansas, Michigan, Mississippi, Missouri, Nevada, New York, Washington, various Native American tribes, as well as Argentina, Bahamas, Peru, Puerto Rico, Macau, Russia, Sweden and Vietnam.

Certain Indian tribes throughout the United States that have compacts with the states in which their tribal dominions are located operate or propose to operate casinos, and these tribes may require suppliers of gaming and gaming-related equipment to obtain authorizations. We have worked and will continue to work with these tribes to obtain the necessary authorizations.

During 2006, we cooperated with certain state gaming authorities with respect to the required re-licensing of our company in certain jurisdictions, as well as the licensing of our new management team. We do not anticipate that this process will have a material adverse effect on us. We continue to cooperate with all gaming regulatory agencies as necessary and applicable to maintain good standing in all jurisdictions in which we hold a license.

Associated Equipment

In most jurisdictions, our products fall within the general classification of “associated equipment.” “Associated Equipment” is equipment that is not classified as a “gaming device,” but which has an integral relationship to the conduct of licensed gaming. Regulatory authorities in some jurisdictions have discretion to require manufacturers and distributors to meet licensing or suitability requirements prior to or concurrently with the use of associated equipment. In other jurisdictions, the regulatory authorities must approve associated equipment in advance of its use at licensed locations. Except as described below in “Other Jurisdictions,” we have obtained approval for our associated equipment in each jurisdiction that requires such approval and in which our products that are classified as associated equipment are sold or used.

Gaming Devices and Equipment

Certain jurisdictions classify our products as “gaming devices” and/or “gaming equipment”. Although regulations vary among jurisdictions, each jurisdiction requires various licenses, findings of suitability, registrations, approvals or permits to be held by companies and their key personnel in connection with the manufacture and distribution of gaming devices and equipment.

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Regulation of Stockholders

In most jurisdictions, in which we are subject to regulatory oversight, certain beneficial owners of our voting securities or other securities may, at the discretion of the gaming regulatory authorities, be required to file an application for a license, finding of suitability or other approval and in the process subject himself or herself to an investigation by those authorities. We believe gaming regulatory authorities typically do not require such action unless a beneficial owner owns more than 5% of our outstanding voting securities, at which time many jurisdictions require certain reports to be filed.

Regulation and licensing — Nevada

In September 2006, upon request we submitted an application for licensing to the Nevada Gaming Control Board. As part of the licensing process, The Nevada Gaming Control Board may investigate us or any individual who has a material relationship to, or material involvement with, us in order to determine whether such individual is suitable or should be licensed. Besides the company, our officers, directors and certain key employees will be required to file applications and be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause that they deem reasonable. A finding of suitability is comparable to licensing. Both require submission of detailed personal and financial information, which is followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all costs of the investigation.

In the event that the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that individual. In addition, the Nevada Gaming Commission may require us to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

In the event that we are found to have violated the Nevada Gaming Control Act, the licenses and/or approvals we hold could be limited, conditioned, suspended or revoked. In addition, we and the persons involved could be required to pay substantial fines, at the discretion of the Nevada Gaming Control Board, for each separate violation of the Nevada Gaming Control Act. The limitation, conditioning or suspension of any license or approval held by us could and revocation of any license or approval would materially adversely affect our operations.

Any beneficial holder of our voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have the holder’s suitability as a beneficial holder of our voting securities determined if the Nevada Gaming Control Board finds reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Gaming Commission or the Chairman of the Nevada Gaming Control Board may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. In the event that an individual is found to be unsuitable, that individual would be required to transfer or otherwise dispose of all of our stock on such terms as may be required by the applicable Nevada Gaming Authority.

Other Jurisdictions

All other jurisdictions that have legalized gaming require various licenses, registrations, findings of suitability, permits and approvals for manufacturers and distributors of gaming devices and equipment as well as licensure provisions related to changes in control. In general, such requirements involve restrictions similar to those of Nevada. During the past year, certain events in connection with our regulatory approvals have taken place as follows:

Mississippi.  In June 2006, we were approved by the Mississippi Gaming Commission for licensure as a manufacturer and distributor. Until this application was approved we were not able to sell or service

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our shuffler products in Mississippi. The Commission had previously determined that our DeckChecker product is a type of gaming associated equipment that may be sold in Mississippi without our first receiving a license.

New Jersey.  Upon a satisfactory initial background investigation, in December 2005 we obtained a transactional waiver approval from the New Jersey Commission to engage in specific transactions with certain New Jersey casinos pending the outcome of the complete investigation of our license application. The transactional approval process permitted us to continue our business with New Jersey casinos pending the completion of the investigation. Our transactional waiver expired in New Jersey in Deember 2006. We are currently working with regulators there to re-aquire a transactional waiver.

Louisiana.  In 2005, the Louisiana State Police, Gaming Division, in connection with our annual renewal of our supplier/manufacturers licenses investigated us with respect to certain omissions in our gaming application relating to a former officer and two directors. We received a Notice of Hearing Date before the Louisiana Gaming Control Board Administrative Hearing Office for January 24, 2006. A settlement agreement and related motions executed by VendingData and the Louisiana State Police, Gaming Division, and passed affirmatively upon by the Administrative Law Judge retained by the Louisiana Gaming Control Board was approved, by the Louisiana Gaming Control Board at its February 21, 2006, meeting. The settlement allows VendingData to re-apply for a gaming license in 30 months.

Indiana.  During 2006, we underwent a thorough investigation by the Indiana Gaming Control Board as part of the process of renewing our license in Indiana. On November 9, 2006, our license renewal was granted.

Rincon Tribal Gaming Commission, California.  The Rincon Tribal Gaming Commission denied our application in February 2005, primarily due to certain omissions contained in applications filed by a former senior executive officer. Our new management team is evaluating whether to file new applications with this jurisdiction.

United States — Federal

The Federal Gambling Devices Act of 1962 makes it unlawful for a person to manufacture, transport, deliver or receive gaming machines, gaming machine type devices and components thereof across interstate lines unless that person has first registered with the Attorney General of the Department of Justice of the United States. We register annually with the Department of Justice in accordance with the Federal Gambling Devices Act of 1962.

Application of Future or Additional Regulatory Requirements

In the future, we intend to seek the necessary licenses, approvals and findings of suitability for us, our products and our personnel in other jurisdictions throughout the United States and the world where significant sales are anticipated. However, there can be no assurance that such licenses, approvals or findings of suitability will be obtained, and if obtained that they will not be revoked, suspended or conditioned or that we will be able to obtain the necessary approvals in a timely manner, or at all, for our future products as they are developed. If a license, approval or finding of suitability is required by a regulatory authority and we fail to seek or do not receive the necessary license, approval or finding of suitability, we may be prohibited from selling our products for use in the respective jurisdiction or may be required to sell our products through other licensed entities at a reduced profit.

CUSTOMER SERVICE

To date, we have centralized most of our service functions in Las Vegas, Nevada for the purposes of ensuring uniform repair of our products. As such, all major technical maintenance on our products has been conducted by our local technicians. We have also provided our customers with additional back-up products for use until we can return the serviced products to them.

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With respect to routine maintenance, we have in the past employed multiple remote service technicians in various locations in the United States.

In February 2007, we decided to transfer the responsibility for US sales and service to a third party that has existing extensive sales and technical service teams throughout the US in order to support the anticipated growth of the company’s domestic business from new product line introductions. Discussions are ongoing and are expected to be concluded in the second quarter of 2007.

Our standard warranty period is 90 days for our products. If a problem arises during the warranty period, we will arrange for the product to be fixed at no cost to the customer. Certain components that we use to manufacture our products are acquired from third parties, and may contain a longer warranty period. For example, the warranty period on all memory chips is ten years.

MARKETING AND DISTRIBUTION

As the gaming industry becomes increasingly more competitive, our strategy is to develop and deliver cost-effective, customer-focused, niche products and services that increase the security, productivity and profitability for the global gaming industry. As part of our strategy, we offer to lease or sell our products to casinos and other lawful gaming establishments.

Current sales strategies include the performance of live demonstrations of our products to potential customers. These demonstrations occur at both the customer sites and at our Las Vegas showroom. Our marketing department supports the sales effort through direct mail advertising and presentations at domestic and international trade shows. Future marketing plans include more effective sales demonstration tools that take advantage of current computer, web, and video technologies.

We sell and lease our products directly to gaming operators and indirectly through distributors. In general, except as described below, we depend on distributors to sell our products internationally and on our sales team to sell our products domestically. Our distributors receive compensation through our volume discount pricing structure, which allows them to sell the products to their customers at market driven prices. In fiscal year 2006, our direct sales accounted for 87% of our revenue and distributor-based sales accounted for 13%.

We use distributors to gain exposure of our products in certain foreign geographic areas where we believe distributors with a local presence would be more effective than our own sales force. Management believes that utilizing distributors to sell our products internationally has two main advantages:

•  Distributors have the authority to operate in the respective market and are able to address and resolve regulatory compliance issues that may arise in a timely manner; and

•  Distributors have the internal infrastructure and superior contacts necessary to effectively sell and service our products in certain markets.

On February 28, 2006, we entered into a distribution agreement with Elixir. The distribution agreement had an initial three year term, with rollover provisions, and provided exclusive distribution rights for our high frequency RFID casino chip for certain Southeast Asia casino properties and non-exclusive distribution rights elsewhere in Asia. In October 2006 and February 2007, the distribution agreement was expanded to encompass our entire product line including shuffler lines and the DeckChecker product. We also extended Elixir’s exclusive distribution rights to include all of Asia, Australia and New Zealand.

CUSTOMERS

Our customers for gaming products are domestic and international casino and gaming operators. Any adverse changes in the financial condition of our major customers, any loss of our major customers, or any meaningful reduction in the level of sales to any of these customers could have a materially adverse impact on the business. Additionally, 47% of our revenue is related to Dolphin’s non-gaming product lines. Major customers include Holden Motors, Autoliv Australia and Johnson Controls.

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COMPETITION

The gaming industry is extremely competitive. Although we have assembled an experienced management team, which uses its knowledge of the gaming industry to tailor our products and services to the needs of the gaming industry, we compete with many established companies that 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 we now have, or will have in the foreseeable future. The competitive pressures of the gaming industry will require us to invest in additional research and development. The need to update and innovate may result in increased costs for, and reduced margins on, our products and services.

Our non-gaming product lines are sold to long standing customers however; this does not ensure that we will be able to retain our customers. We will need to continue to provide cost effective, quality products in order to maintain our customers and attract new customers in the future.

PRODUCT DEVELOPMENT, MANUFACTURING AND ASSEMBLY

We maintain a state-of-the-art facility for our product development and final assembly divisions in Xiaolan, China. In Zhuhai, China, we have 13 full-time engineers working in research and development of our shufflers, enhancements to our DeckChecker product line, and final development of our ChipWasher line.

We also maintain a state-of-the-art manufacturing facility in Melbourne, Australia, for the production of our casino chips — the high frequency Dolphin RFID chip and traditional casino chips — as well as the non-gaming products including automotive and pharmaceutical product lines.

In addition, we occasionally engage consultants in research and development to complement our skill set in specific areas of engineering activities. We hire contract personnel on a varied basis depending upon production and installation volume.

SUPPLIERS

Most components for the shufflers and our DeckChecker are sourced in China. Shuffler and DeckChecker assembly is being done in China and final units are shipped to Las Vegas for distribution to the North America and European markets. The manufacturing of RFID casino chips is performed at our Dolphin subsidiary in Australia, which specializes in plastic injection molding. Dolphin has licensed certain RFID technology from Magellan Technology Pty Ltd in Sydney, Australia, the owner of the intellectual property for RFID technology. Dolphin is sourcing their RFID tags from Progressive Gaming International Corp (“PGIC”).

INTELLECTUAL PROPERTY

We have secured, and endeavor to secure, to the extent possible, exclusive rights in our products, primarily through federal and foreign intellectual property rights, such as patents, copyrights and trademarks. We have applied for various other patents with respect to other concepts and products, including potential non-gaming application of our technology. We believe that our intellectual property is critical to our future profitability and growth.

With respect to our shufflers, the United States Patent and Trademark Office has issued ten patents, Patent Nos. 5,584,483, 5,676,372, 6,019,368, 6,293,546, 6,299,167, 6,698,756 and 6,719,288, 6,886,829, 6,959,925 and 7,066,464 in addition to two design patents, Patent Nos. D488,193 and D490,481. These patents expire on dates between April 2014 and April 2024. In addition, there are seven patent applications on file with the United States Patent and Trademark Office and nine applications pending in foreign countries. Our shufflers have also been issued two patents in Australia and one patent in Canada. For additional information with respect to the ongoing litigation involving Shuffle Master, Inc., see “Item 3. Legal Proceedings.”

With respect to the ChipWasher and DeckSetter (, we acquired the rights to these pursuant to a patent and trade secret purchase agreement dated October 6, 2005 in which we purchased all of the tangible and intangible assets related to the ChipWasher and DeckSetter from Dolphin. The purchase price was $566,000,

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where $200,000 was payable upon execution of the contract and $366,000 was payable over twelve months after completion of due diligence. The first payment in the amount of $200,000 was completed on November 9, 2005 and the first installment payment was initiated on February 9, 2006. Two additional installment payments were made prior to VendingData acquiring all of Dolphin.

With respect to the RFID chip technology we acquired the rights to the technology pursuant to a patent purchase agreement dated October 1, 2005 in which we purchased the patent rights and all other intellectual property rights relating to the RFID chip from Dolphin. The purchase price was $750,000 plus one million shares of our common stock, where $125,000 was payable upon execution of the contract and second installment of $125,000 was to be paid on the execution of a Licensing and Manufacturing Agreement. The final $500,000 was payable over six months after completion of the agreement. The first payment in the amount of $125,000 was completed on October 12, 2005. We issued one million shares on the execution of the Licensing and Manufacturing Agreement on February 27, 2006. We made a final payment of $625,000 on April 4, 2006.

Included in the patent purchase agreement, we acquired the rights to U.S. Patent No. 6,659,875, which covers a unique process for manufacturing RFID chips and plaques. Patents covering similar processes have also been issued in Australia and the United Kingdom. In addition, on February 13, 2007, an new provisional specification was filed in Australia to protect additional enhancements in the manufacture of RFID chips and plaques. We plan to file applications based on these enhancements for patent protection throughout the world.

There can be no assurance that any of the claims contained in our pending United States or foreign patent or trademark applications will be issued, that any of these rights will not be infringed by others or that already issued patents or trademark registrations will not be invalidated or canceled. Third parties could infringe on our rights or successfully duplicate our products without infringing on our legal rights. Many elements incorporated in our proprietary products are in the public domain or otherwise not amenable to legal protection and the steps taken by us will not, in and of themselves, preclude competition with our proprietary products.

In January 2007, we concluded the sale of a patent portfolio related to the discontinued Secure Drop product line for $500,000.

EMPLOYEES

As of December 31, 2006, we had approximately 40 full-time employees in the United States, 66 full-time employees in China, and 90 full time employees in Australia. None of our US or China employees are represented by a labor union, and we consider our relationships with our employees to be satisfactory. In Australia, a few employees are members of the NUW (National Union of Workers) and we consider our relationships with our employees to be satisfactory. All U.S employees have signed confidentiality agreements, which prohibit them from disclosing any of our confidential information at any time during or after their employment with us. We have also executed confidentiality and non-competition agreements with all key China personnel.

ITEM 1A.   RISK FACTORS

In this report we make, and from time to time we otherwise make, written and oral statements regarding our business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends, and other matters that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements containing the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimates,” “projects,” “believes,” “expects,” “anticipates,” “intends,” “target,” “goal,” “plans,” “objective,” “should” or similar expressions identify forward-looking statements, which may appear in documents, reports, filings with the Securities and Exchange Commission, news releases, written or oral presentations made by officers or other representatives made by us to analysts, stockholders, investors, news organizations and others, and discussions with management and other of our representatives. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties. No assurance can be given that the results reflected in any forward-looking statements will be achieved. Any forward-looking statement speaks only as of the date on which such statement is made. Our forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. Except as required by law, we do not undertake any obligation to update or keep current either (i) any forward-looking statement to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement.

In addition to other matters identified or described by us from time to time in filings with the SEC, there are several important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or results that are reflected from time to time in any forward-looking statement. Some of these important factors, but not necessarily all important factors, include the following:

We may require additional funding in the future to continue to operate our business.  As of December 31, 2006, we had a working capital deficit of ($18,800). In January 2007, we received gross proceeds of $2.65 million as a result of the sale of our equity securities Elixir. After giving effect to the sale of equity securities to Elixir, we had pro forma working capital of approximately $2.32 million as of December 31, 2006. In March 2007, we received an additional $4.3 million of working capital through our sale of equity securities to GLG North American Opportunity Fund. We believe that our cash on hand together with cash to be generated by operations will meet our working capital needs, capital expenditures, and commitments for at the next 12 months. In the event it is not sufficient, we will endeavor to raise additional required funds through various financing sources, including the sale of our equity. If such financing is not available on satisfactory terms, we may be unable to expand or continue our business as desired and operating results may be adversely affected. Any debt financing will increase expenses and must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the following results may occur:

•  the percentage ownership of our existing stockholders may 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, and we may be unable to achieve profitability.  We have a history of significant operating losses and anticipate continued operating losses for the foreseeable future. For the years ended December 31, 2006 and 2005 we have incurred net losses of $13,734,719 and $17,567,230, respectively, and our operations have used $8,177,052 and $14,816,322 of cash, respectively. As of December 31, 2006 and 2005, we had accumulated deficits of $85,422,497, and $71,687,777, respectively. Over the past several years, we have derived only limited revenues, which have been insufficient to sustain our operations. We may not generate sufficient revenue to sustain future operations. No independent organization has conducted market research providing management with independent assurance from which to estimate potential demand for our products. The overall market may not be receptive to our products, and we may not successfully compete in the target market for our products.

Our leased shufflers are more susceptible to replacement by customers.  All of our leased shufflers are placed with customers under short-term lease arrangements, which, unlike long-term leases or permanent sales of our products, can easily be terminated by a customer. The manner in which such short-term leases are structured puts our leased shufflers at greater risk of replacement due to pressure from competitors, changes in economic conditions, obsolescence and declining popularity. Casino operators may terminate the use of our products, and we may not be able to maintain and expand the number of installed shufflers through enhancement of existing shufflers, introduction of new shufflers, customer service or other reasons.

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We may be unable to adequately protect our intellectual property rights.  Our success depends upon maintaining the confidentiality and proprietary nature of our intellectual property rights. Our ability to compete may be damaged, and our revenues may be reduced if we are unable to protect our intellectual property rights adequately. To protect these rights, we rely principally on a combination of:

•  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.

Patent, trade secret, copyright and trademark laws provide limited protection. The protections provided by laws governing intellectual property rights do not prevent our competitors from developing, independently, products similar or superior to our products and technologies. In addition, effective protection of copyrights, trade secrets, trademarks, and other proprietary rights may be unavailable or limited in certain foreign countries. We may be unaware of certain non-publicly available patent applications, which, if issued as patents, could relate to our services and products as currently designed or as we may modify them in the future. Legal or regulatory proceedings to enforce our patents, trademarks or copyrights could be costly, time consuming, and could divert the attention of management and technical personnel.

Adverse results in current litigation could result in substantial monetary damages and adversely impact on the manufacture and sale of certain of our shuffler products.  Shuffle Master, our principal competitor in the shuffler market, has, in prior years, filed two lawsuits against us for patent infringement. The first suit was settled in 2005. Concerning the second lawsuit, we believe our position to be meritorious. On February 28, 2007, the United States District Court for the District of Nevada entered an order that adopted and affirmed the ruling by the Magistrate Judge in favor of VendingData’s claim construction in the case. The order adopting VendingData’s claim construction leaves Shuffle Master exposed to liability on a $3 million bond it posted to secure the preliminary injunction. VendingData intends to vigorously pursue collection of the $3 million bond and other damages from Shuffle Master (see also Part II — Item 1. Legal Proceedings). However, we cannot determine whether we will ultimately prevail in the lawsuit or, if we are successful, whether we will be able to collect any portion of the bond or a meaningful amount of damages.

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.  To the extent that we introduce new products that incorporate the same or similar technology, it is likely that Shuffle Master will bring one or more claims against us seeking damages, injunctive or other equitable relief, or both. We cannot predict the outcome of any present or future litigation that may occur.

If our future products incorporate technology that infringes the proprietary rights of third parties and we do not secure licenses from them, we could be liable for substantial damages that would cause a material reduction in revenues and impair our prospects for achieving growth and profitability.

In furtherance of the development of our services or products, we may need to acquire licenses for intellectual property to avoid infringement of third party rights or claims of infringement. These licenses may not be available on commercially reasonable terms, if at all. Claims for infringement, if made, could damage our business prospects, our results of operations and financial condition, whether or not the claims have merit, by:

•  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.

If any third party prevails in an action against us for infringement of its proprietary rights, we could be required to pay damages and either enter into costly licensing arrangements or redesign our products so as to

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exclude the infringing technology. As a result, we would incur substantial costs and delays in product development, sales and shipments, our revenues may decline substantially and we may not be able to achieve the growth required for us to achieve profitability

We rely on distributors in international markets, and our limited sales experience in foreign countries could cause us to lose sales.  Substantially all sales of our products outside the U.S. are achieved through distributor relationships and by the first quarter of 2007, our U.S. sales will also be achieved through a distributor relationship. We believe the distributors that we have engaged and will engage are experienced and reputable; however, if we are unable to manage these relationships, our ability to generate revenue and profits may be adversely affected. To the extent that we engage in direct sales outside the U.S., we have limited sales experience and history in foreign markets.

Our management holds a controlling interest in our common stock, giving our management the power to significantly influence all matters submitted to our stockholders.  As of March 9, 2006, our executive officers and members of our board beneficially own approximately 10,850,866 shares of common stock, or approximately 33% of the outstanding shares of our common stock. Accordingly, these stockholders have the power to significantly influence all matters requiring approval by our stockholders, including the election of directors and approval of mergers and other significant corporate transactions. This concentration of ownership may make it more difficult for non-management stockholders to effect substantial changes in our company, and also has the effect of delaying, preventing or expediting, as the case may be, a change in control of our company.

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.  Our board of directors is authorized, without stockholder approval, to issue preferred stock in series and to fix and state the voting rights and powers, designation, preferences and relative, participating, optional or other special rights of the shares of each such series and the qualifications, limitations and restrictions thereof. Preferred stock may rank prior to our common stock with respect to dividends rights, liquidation preferences, or both, and may have full or limited voting rights. Accordingly, issuance of shares of preferred stock could adversely affect the voting power of holders of our common stock and could have the effect of deterring or delaying an attempt to obtain control of us.

ITEM 2.   DESCRIPTION OF PROPERTY

In 2006, we leased approximately 58,725 square feet for our headquarters at 6830 Spencer Street, Las Vegas, Nevada 89119, which housed our corporate offices, including sales and engineering departments, and warehouse space. The lease required payments of approximately $58,000 per month and expired in January 2007. As of February 2007, the company moved its headquarters to new offices at 1120 Town Center Drive, Suite 260, Las Vegas, Nevada, 89144, and leases approximately 7,000 square feet. The five year lease requires payments of approximately $17,500 per month and expires in February 2012. Additionally, our warehouse facilities moved to 6151 S. McLeod, Suite A, Las Vegas, Nevada, 89120, and we lease approximately 3,000 square feet. The three year lease requires payments of approximately $2,500 per month and expires in February 2010.

In August 2005, we leased office, manufacturing and warehouse space within Xiaolan Town in Zhongshan City, Guangdong Province, China to accommodate our manufacturing requirements. The facilities consist of over 47,000 square feet. The lease payments are approximately $4,300 per month, and the lease ends in August 2008. In June 2006, we leased office space in Zhuhai, China, to accommodate our research and development team. The facilities consist of approximately 2,100 square feet. The lease payments are approximately $1,500 per month, and the lease expires in August 2008.

In January 2004 and September 2004, Dolphin, our Melbourne based subsidiary, leased office, manufacturing and warehouse space at 590 Waterdale Road, West Heidelberg, 3081, Australia, and renewed its existing lease for 600 Waterdale Road, respectively. The facilities consist of approximately 32,000 square feet each. The lease payments are approximately $21,500 per month each and the leases expire on January 30, 2014, and December 16, 2013, respectively.

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ITEM 3.   LEGAL PROCEEDINGS

On October 5, 2004, Shuffle Master filed a patent infringement action in the United States District Court, District of Nevada (Case No. CV-S-04-1373-JCM-LRL) claiming that the use, importation and offering for sale of our PokerOne shuffler infringed Shuffle Master’s United States Patent No. 6,655,684. We responded by denying Shuffle Master’s claim of patent infringement and requesting that the court enter a declaratory judgment of non-infringement. On November 30, 2004, the District Court granted Shuffle Master’s motion for preliminary injunction, prohibiting us from selling our PokerOne shuffler in the United States pending resolution of the lawsuit. On March 4, 2005, the Federal Circuit Court of Appeals issued an order staying the injunction pending our appeal of the matter. On December 27, 2005, the Federal Circuit held that the District Court erred in failing to properly construe Shuffle Master’s patent claims before preliminarily enjoining us and on this basis vacated the order. As a result, we may seek to recover from Shuffle Master any damages we suffered as a result of the wrongful injunction. With respect to the merits of Shuffle Master’s action, a Magistrate Judge appointed by the District Court to conduct a Markman hearing to determine the proper construction of Shuffle Master’s patent claims recommended on September 26, 2005 that the Court adopt the claim construction urged by us. On February 28, 2007, the United States District Court for the District of Nevada entered an order that adopted and affirmed the ruling by the Magistrate Judge in favor of VendingData and against Shuffle Master. We believe the order adopting our claim construction leaves Shuffle Master exposed to liability on a $3 million bond it posted to secure the preliminary injunction. We intend to vigorously pursue collection of the $3 million bond and other damages from Shuffle Master, however there can be no assurance we will be successful in doing so.

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

Our annual meeting of stockholders was held on December 28, 2006. All of the persons nominated to serve on our board of directors, namely James Crabbe, Mark Newburg, Maj. Gen. Paul Harvey, Vincent DiVito and Robert Miodunski, were elected to our board of directors. In addition, our share holders approved each of the other proposals set forth at the meeting as follows:

Our shareholders approved the issuance of up to 1,652,048 shares of our common stock upon conversion of promissory notes issued in the Dolphin acquisition, with shares voted as follows:

Shares voted for	20,132,714
Shares against	727,725
Shares abstaining	14,100

Our shareholders approved the issuance of up to 793,760 shares of our common stock issuable upon the conversion of promissory notes issued in the Bricoleur financing transaction, with shares voted as follows:

Shares voted for	20,830,934
Shares against	328,505
Shares abstaining	14,100

Our shareholders approved the issuance of 150,000 shares of common stock to certain directors, with shares voted as follows:

Shares voted for	19,334,499
Shares against	1,526,940
Shares abstaining	13,100

Our shareholders approved the issuance of all shares of our common stock issuable in the Elixir transaction, with shares voted as follows:

Shares voted for	20,830,714
Shares against	30,225
Shares abstaining	13,600

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Our shareholders approved an amendment to our articles of incorporation to increase our authorized common stock, with shares voted as follows:

Shares voted for	25,801,596
Shares against	182,083
Shares abstaining	15,282

Our shareholders approved an amendment to our articles of incorporation to change our corporate name, with shares voted as follows:

Shares voted for	25,924,825
Shares against	68,536
Shares abstaining	5,600

Our shareholders approved an amendment to our 1999 stock option plan to increase the number of shares that may be issued, with shares voted as follows:

Shares voted for	19,625,369
Shares against	1,152,370
Shares abstaining	96,800

PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock currently trades on the American Stock Exchange, or AMEX, under the symbol “VNX.”

The following table sets forth the high and low closing sale price of our common stock, as reported by the AMEX for each quarter during the past two fiscal years:

2006	Low		High
Fourth Quarter	$	1.97	$	2.70
Third Quarter	$	1.98	$	2.62
Second Quarter	$	2.00	$	2.96
First Quarter	$	2.20	$	3.80

2005	Low		High
Fourth Quarter	$	2.29	$	3.70
Third Quarter	$	1.34	$	2.25
Second Quarter	$	1.80	$	2.15
First Quarter	$	1.49	$	2.22

Shareholders

As of March 22, 2007, we had outstanding 32,511,007 shares of common stock, held by approximately 260 stockholders of record.

Dividend Policy

We have never declared or paid cash dividends on our common stock. We presently intend to retain earnings to finance the operation and expansion of our business and do not anticipate declaring cash dividends in the foreseeable future. Also, under the terms of the $18 million financing entered in May 2006, we will not,

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without first obtaining the written approval of the lenders, repurchase, redeem, or declare or pay any cash dividend or distribution on, any shares of our capital stock.

Recent Sales of Unregistered Securities

We have previously reported in our filings with the SEC on Forms 8-K and 10-QSB information about unregistered sales of our securities made during the period covered by this report pursuant to applicable exemptions from the registration requirements of the Securities Act of 1933, as amended.

ITEM 6.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Our business strategy is to develop and deliver cost-effective, customer-focused, niche products and services that increase the security, productivity and profitability for the global gaming industry. These products include card shufflers, card verification devices, traditional, high frequency RFID imbedded casino chips, and chip washer as part of our gaming business. Our Australian subsidiary is a plastic injection molding company that manufactures our casino chips and also has non-gaming manufacturing consisting of automotive components as well as some medical related plastic component manufacturing. Our strategy involves marketing certain of our gaming products for sale or lease, depending on the product, the geographic location of the customer and other factors. We rely on our internal sales staff and distributor relationships for the sale and rental of our gaming products.

RESULTS OF OPERATIONS — YEARS ENDED DECEMBER 31, 2006 AND 2005

For 2006, we generated gross revenues of 166% more than the year ended December 31, 2005. Gross revenues were offset by sales returns and allowances of $383,122. Specific product line results for the year ended December 31, 2006 compared to the year ended December 31, 2005 are provided below. Sales increased as a result our acquisition of Dolphin Advanced Technologies Pty Ltd in July 2006, the introduction and sale of the high frequency RFID casino chip to a casino in Macau and the acceptance of the DeckChecker product at new casino openings in Macau. We acquired Dolphin as of July 11, 2006 and our results of operations from that date forward include the operating results of Dolphin. Our newly acquired Dolphin subsidiary accounted for $3,780,430 of revenue during fiscal 2006 from the sale of non-gaming products.

For 2006, our cost of sales was 15% more than 2005. The cost of sales increase can be attributed to the costs associated with deploying the new high frequency RFID casino chips and the negative gross margins associated with the non-gaming products manufactured at our Dolphin subsidiary. These increases are offset by material cost savings realized from the improved relations with vendors in China.

The overall negative gross margin on revenue for 2006, improved over 2005, excluding the impact of an inventory write down of $3,068,846 in 2005, by more than $1.2 million or 55%.

SecureDrop Sales.  As a result of our decision to discontinue new installations for this product line there were no system sales generated in 2006. Our SecureDrop sales in 2005 consisted of supply items for systems already in place.

Shuffler Sales.  The 65% decrease in sales, from $1,311,000 in 2005 to $462,000 in 2006, was due, in part, to the replacement of discontinued products with new products but at lower introductory or replacement pricing. Also affecting sales for PokerOne were the lingering effects of the Shuffle Master suit causing customer uncertainty on the product. The 58% decrease in the cost of shuffler sales in 2006 was due primarily to costs related to the roll out of two new shuffler products in 2005. Our average cost per unit decreased 20% due to production costs in our China facility.

Shuffler Rentals.  The 17% decrease in shuffler rental revenue, from $279,000 to $230,000, reflects the reduced number of shufflers placed on a rental basis as a result of the conversion of rental units to purchased units in 2005 and the failure to place additional shuffler units on a rental basis. The number of rental units

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dropped 27% from the year ending 2005 to 2006. Cost of sales dropped 92% in 2006 and includes shuffler rental depreciation of $36,758 during 2006 compared to $467,983 (includes depreciation as well as significant service costs attributed to the deployment of new product) during the prior year period. The cost of sales decrease can be attributed to the incremental costs in deploying upgraded versions of PokerOne and RandomPlus in 2005.

DeckChecker Sales.  The 60% increase in DeckChecker sales, from $861,000 in 2005 to $1,377,000 in 2006, resulted primarily from sales to casinos in Macau. Our average sales price dropped 38% due to the increased sales to distributors versus direct sales by us. Further, we decreased our DeckChecker costs by approximately 30%.

DeckChecker Rentals.  The 55% decrease in DeckChecker rental revenue, from $241,000 in 2005 to $108,000 in 2006, resulted primarily from increased sales of DeckCheckers as a result of more competitive pricing of the product domestically and internationally. The number of rental units dropped 72% from 2005 to 2006. Cost of sales included rental depreciation of $16,961 during the year ended December 31, 2006 compared to $77,476 during the prior year.

Casino Chips.  RFID casino chips are a new product line introduced during the second quarter of 2006. Revenue continued to grow due to international sales. Total casino chip revenue was $1,800,000 in 2006. As we further automate our production methods, we expect to see improved margins over the next year.

Non-gaming product.  With the acquisition of Dolphin there is additional revenue of $3,780,000 not related to the gaming business. Over 59% of this revenue relates to the automotive line of business. In the fourth quarter of 2006, we experienced higher costs of sales due to our expenditure of approximately $1.8 million for the conversion of our production line for a new long term automotive contract. We expect to see margins improve over the next year.

Other Income.  The 124% increase in other revenues was due to the increase sale of supplies and service agreements and also the reduction of sales returns and allowances. In 2005, the change in smoking laws in the state of Washington impacted that segment of our business as several customers had filed for bankruptcy or closed down, thus we saw increased returns in 2005 resulting in negative revenue for fiscal 2005. The year ended December 31, 2005 included shuffler service costs of $3,014,806 compared to $2,111,902 in shuffler service costs during 2006. Cost of sales declined in 2006 due to reduced material costs of supplies and improved costs controls in our service department. In 2005, there was a one time inventory adjustment of $2,584,290 for discontinued products and an additional inventory adjustment of $484,556. When normalized, cost of sales in 2006 was $826,669 or 27% less than costs of sales in 2005.

Selling, General and Administrative Expense

For the year ended 2006, our selling, general and administrative expense was $9,323,468 or 1% more than 2005. Approximately $607,000 of the increase in general and administrative expenses is attributable to our acquisition of Dolphin which is included in our results of operations from July 11, 2006 forward. Giving effect to the Dolphin impact, US and China expenses decreased by approximately $395,000 from fiscal 2006 to fiscal 2005. The decrease is composed of approximately $1,979,000 decrease in legal and regulatory costs due to defense of the patent lawsuits and legal/regulatory issues pertaining to former senior management. These reductions are offset by an increase of $703,000 in payroll primarily related to the conversion of management from consulting to employees in October 2005, a $621,000 increase in finance fees relating to the Elixir transaction, a $250,000 increase in acquisition costs associated with the Dolphin acquisition, and $88,000 increase for Sarbanes Oxley consulting fees. A $21,500 increase in 2006 rent expense is attributable to the Dolphin acquisition and the related addition of leased office and manufacturing facilities in Australia. Rent reductions in 2007 will include lower cost in Las Vegas under new leases and elimination of the Washington office.

Research and Development Expenses

For 2006, research and development expenses, associated with the development of the ChipWasher and ShufflePro, were $1,555,882, or 12% more than 2005.

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Interest Expense

For 2006, we incurred interest expenses of $1,821,502 or 15% more than 2005. In May 2006, we placed $13 million of 8% senior secured promissory notes to the Bricoleur funds. Concurrent with closing of the 8% senior secured note financing, the holders of our previously outstanding 10% senior notes converted approximately $5.2 million of the principal under those notes to our common shares. We used the proceeds of the May 2006 financing to retire the balance of the 10% senior notes and the $5 million 9% line of credit acquired by us in October 2005. The increase in interest expense in fiscal 2006 was primarily attributable to the debt service related to our 8% senior secured note arrangement, Dolphin’s short term overdraft facilities and, for the first five months of 2006, the 9% senior secured notes, the 10% senior secured convertible notes and the $5 million 9% line of credit. This also includes $81,174 in related party interest for Dolphin.

FINANCIAL CONDITION

As of December 31, 2006, we had a working capital deficit of $(18,801). In January 2007 we received gross proceeds of $2.65 million as a result of the sale of our equity securities Elixir. After giving effect to the note conversions and sale of equity securities to Elixir, we had pro forma working capital of approximately $2.32 million as of December 31, 2006. In March 2007, we received an additional $4.3 million of working capital through our sale of equity securities to GLG North American Opportunity Fund.

Based primarily on recent financing and other developments discussed below under Liquidity and Capital Resources, we believe that our cash on hand as of the date of this report, our reduced infrastructure costs in the US, and our distribution agreement with Elixir will be sufficient to meet our working capital needs, capital expenditures, and commitments for at the next 12 months. In the event we need additional working capital we will endeavor to raise additional required funds through various financing sources, including the sale of our equity and debt securities and the procurement of commercial debt financing. However, as result of our present level of debt and certain restrictions on our ability to incur additional indebtedness under our financing agreement with the Bricoleur funds, it is unlikely we will be able to obtain additional debt-based capital, unless a significant portion of the proceeds are used to retire existing debt. There can be no guarantees that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to expand or continue our business as desired and operating results may be adversely affected.

Liquidity and Capital Resources

Sources of Capital

During 2006, our sources of capital included a placement of our common stock; equipment financing from a third party, short-term notes from stockholders, convertible debentures and other private sources of capital.

We received proceeds of $300,000 and paid $528,253 of lease payments related to 2006 and prior year leases. As of December 31, 2006, we had outstanding equipment financing of $709,991. These equipment leases have terms of 36 to 39 months and were not recorded as sales because each of the leases included a mandatory buy-back provision.

We repaid $4,050,000 in short-term debt, during 2006. As of December 31, 2006, we had outstanding short-term loans in the aggregate amount of $676,600 comprised of equipment related loans and a partially utilized overdraft facility by our Australian subsidiary.

In 2005, to fund our continuing operating cash flow deficits, in addition to using the remaining cash we had on hand at the beginning of the year, we raised additional capital through private placements of $10 million of our 10% senior secured convertible notes in February 2005 (the “February Senior Notes”) and $2 million our 10% senior secured convertible notes in March 2005 (the “March Senior Notes” and together with the February Senior Notes, the “Senior Notes”). On October 6, 2005, we obtained a one year revolving credit facility in the amount of $5 million, As described below, in May 2006, we sold to the Bricoleur funds $13 million of our 8% senior secured promissory notes. We used a portion of the proceeds from that

23

placement to pay off the full $5 million under the credit line in May 2006 and pay off approximately $6 million of our Senior Notes. The $5.6 million balance of our Senior Notes were converted to our common shares according to the terms of conversion in the notes.

On May 2, 2006, we closed on an $18 million financing transaction with four investment funds managed by Bricoleur Capital Management. The $18 million financing consisted of $13 million of 8% senior secured promissory notes and a $5 million equity put agreement exercisable by us from time to time at our option. The senior debt placement included detachable warrants to purchase 3.2 million shares at $2.50 per share. In September 2006, the amount of detachable warrants was reduced to 2.6 million shares at $2.00 per share, some of which are recallable based on early retirement of $6 million of the debt portion of the transaction. Interest at 8% is due semi-annually on June 1, and December 1, each year until repayment. The loan is secured by all the assets of the company. In addition, if we reduce the debt to under $7 million within one year of the transaction, 650,000 of the 2.6 million warrants will be cancelled, within two years 325,000 of the 2.6 million warrants will be cancelled and within three years 162,500 of the 2.6 million warrants will be cancelled.

The foregoing transaction included a $5 million equity put option for our common stock, at a discount of 20% to the market at the date of execution of the put. The purchase price for shares sold pursuant to the securities put agreement was set at 80% of the volume-weighted average price of our common stock on the day we deliver the requisite purchase notice to the funds, but not in excess of $3.50 per share. In connection with our election to exercise our equity put rights in the aggregate amount of $5 million through the year ended December 31, 2006, we sold to the Bricoleur funds 2,646,541 common shares at an average price per share of $1.89.

In addition, on February 6, 2007, we announced a Company-wide restructuring, which when fully implemented, we expect to reduce costs and expenses by a combined $3.5 million annually. The reorganization changes included:

•  Transferring of all research and development efforts to our newly created R&D Center located in Zhuhai, China. The relocation of the engineering division to the Zhuahi office is a strategic step in continuing the forward movement and integration of our engineering division in Zhuhai with Elixir’s newly established gaming research and development center in Macau, as per the Alliance Agreement completed on January 18, 2007.

•  Transferring the responsibility for US sales and service to another party that has in place extensive sales and technical service teams throughout the US in order to support the anticipated growth of the company’s domestic business from new product line introductions. Discussions were ongoing and are expected to be concluded by the end of the first quarter.

•  Relocating the Company’s US Corporate offices to 1120 Town Center Drive, Suite 260, Las Vegas, Nevada, 89144.

•  The recently completed sale of intellectual property related to the discontinued SecureDrop product line. The proceeds of the transaction totaled $500,000. This sale was another step of the plan to redeploy our resources to new product line introductions as well as capitalize on the opportunities in Macau and other growing markets.

On February 9, 2007, we expanded the distribution element of our alliance with Elixir for exclusive distribution in Asia to include our entire product offering. The prior agreement between the two companies included only our casino chips and casino chip-related product lines and did not include Australia and New Zealand in the territory. The expanded agreement provides for distribution of chips and chip related products as well as the exclusive distribution and service by Elixir of our DeckChecker and shuffler lines, including all future product additions, for the entire Asia-Pacific region.

On March 28, 2007, we completed a sale of 1.625 million shares of common stock at $2.65 per share. The stock purchase included warrants to purchase an additional 1.625 million shares at $2.65 per share for total cash proceeds of approximately $4.3 million.

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The Company’s ability to maintain adequate liquidity in the medium-to-long term may be dependent upon the success of management’s plans to address and overcome prior operating losses. Management has developed and refined its 2007 operating plan to increase its sales by the rollout of new shuffler products, sale of its high frequency RFID casino chip product to new casino openings in Macau, and improving its sales efforts domestically and internationally through newly announced distributorship arrangement with Elixir in Asia and TCSJohnHuxley in Europe. Management continues in its efforts to reduce operating costs through the transfer of manufacturing operations to China. Management has focused on financial condition and liquidity improvements through its capital raising efforts in 2006 and earlier, resulting in improved cash and working capital positiona. As a result of expected sales improvements and operating cost initiatives, management believes that the Company will begin to generate positive operating cash flows during 2007.

Contractual Cash Obligations and Off Balance Sheet Arrangements.

Our contractual cash obligations under our debt agreements, capital leases and operating leases for the next five years are as follows as of December 31, 2006:

			Payments due by Period
									After 5
Contractual Obligations	Total		1 Year		2-3 Years		4-5 Years		Years
Debt Agreements	$	22,269,618	$	2,476,093	$	3,392,225	$	3,444,215	$	12,957,085
Capital Leases		709,991		440,719		269,272		0		0
Operating Leases		—		—		—		—		—
TOTAL	$	22,979,609	$	2,916,812	$	3,661,497	$	3,444,215	$	12,957,085

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Following is a summary of what our management believes are the critical accounting policies related to our operations. The application of these policies, in some cases, requires management to make subjective judgments and estimates regarding the effect of matters that are inherently uncertain. See Note 1, “Description of Business and Significant Accounting Policies,” to financial statements included in this annual report for a more detailed discussion of our accounting policies. Except as described below, we do not employ any critical accounting policies selected from among available alternatives or that require the exercise of significant management judgment to apply, and we believe none of our estimates are so highly uncertain or susceptible to change as to present a significant risk of a material impact on our financial condition or operating performance.

Allowance for Doubtful Accounts.

In connection with the preparation of our financial statements, management reviews and evaluates the collectability of our trade receivables and adjusts our allowance for estimated uncollectible accounts as deemed necessary in the circumstances. These estimates have the potential for critically affecting the determination of results of operations for any given period. Factors considered by management in making such estimates and adjustments include any concentrations among customers, changes in our relationships therewith, payment history and the apparent financial condition of our customers.

Revenue Recognition.

We recognize revenue from the sale of our shuffler and Deck Checker products upon shipment against customer contracts or purchase orders. Sales are recognized immediately when shufflers that are rented are converted to purchases depending on the creditworthiness and payment history of the casino company since payment terms are from 20 to 48 months.

We recognize revenue from the sale of our casino chip and RFID casino chip products upon shipment against customer contracts or purchase orders.

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We recognize revenue from our sales to independent distributors upon shipment against distributor contracts or purchase orders of our product.

Revenue from shuffler rentals is recorded at the first of each month in accordance with rental contract terms. All rental contracts are cancelable upon 30-day written notice by the customer. Maintenance expense for rental units is recorded in the period it is incurred.

The extended warranty and maintenance components that are part of long term sales contracts are unbundled and recognized as deferred revenue amortized over the remaining life of the sales agreement after the initial 90-day warranty as required by the Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. We provide currently for estimated warranty repair costs associated with sales contracts. Although there are no extended warranties offered for our products, and our recorded warranty liability is, therefore, not material, we do provide for maintenance contracts that are billed and recognized on a monthly basis.

If the customer does not possess the required creditworthiness or an established payment history with us, we would then book the revenue as an installment sale and recognize it over time as payments are received.

Although sales are not generally made with a right to return, upon occasion, usually associated with the performance warranty, sales returns and allowances are recorded after returned goods are received and inspected.

We also recognize revenue on bill and hold transactions when the product is completed and is ready to be shipped and the risk of loss is transferred to the customer. In a certain case, at the customers’ request, we store the product for a brief period of time. Management evaluates the criteria set forth in SAB 104 related to “bill-and-hold” transactions, precedent to revenue recognition whenever delivery has not occurred.

Intangible Assets.

We currently amortize our intangible assets (patent and technology rights) on a straight-line basis over currently estimated useful lives of 10 years. Management believes that the useful life of patents and technology rights equals the full term of the patent.

Legal defense costs

We do not accrue for future litigation defense costs, if any, to be incurred by us in connection with outstanding litigation and other disputed matters but, instead, record such costs as the related legal and other services are rendered.

Recent Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities is a replacement of FASB Statement No. 125.  SFAS 155 will be effective for all financial instruments issued or acquired after the beginning of our fiscal year 2007. We have not yet evaluated and determined the likely effect of SFAS 155 on our future financial statements.

In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109,” which deals with the accounting for uncertainty in income taxes. FIN 48 will be effective for the quarter ending March 31, 2007. Since as a result of our history of operating losses, we have not recognized any tax provisions or benefits in our financial statements, its effects, if any, will be solely on our income tax-related disclosures and, therefore, we do not expect that it will have a material impact on our financial position, results of operations or cash flows for the foreseeable future.

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In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of SFAS No. 115, which will permit the option of choosing to measure certain eligible items at fair value at specified election dates and report unrealized gains and losses in earnings. SFAS Nos. 157 and 159 will become effective for us for financial statements issued for fiscal year 2008. We are currently evaluating the effects, if any, that SFAS Nos. 157 and 159 will have on our future financial position, results of operations and operating cash flows.

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ITEM 7.   FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENT

Report of Independent Registered Public Accounting Firm	29
Balance Sheets at December 31, 2006 and 2005	31
Statements of Operations for the Years Ended December 31, 2006 and 2005	32
Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2006 and 2005	33
Statements of Cash Flows for the Years Ended December 31, 2006 and 2005	34
Notes to Financial Statements	35

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

VendingData Corporation

We have audited the consolidated balance sheets of VendingData Corporation and subsidiaries (the Company) as of December 31, 2006 and 2005, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Dolphin Advanced Technologies PTY LTD (Dolphin), a wholly-owned subsidiary, which financial statements reflect total assets of $5,002,148 and total revenues of $5,645,527 or 16% and 72% of the respective consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Dolphin, is based solely on the report of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, audits of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above, present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2006 and 2005, and the consolidated results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/  Piercy Bowler Taylor & Kern

Piercy Bowler Taylor & Kern

Certified Public Accountants and Business Advisors

March 23, 2007

Las Vegas, Nevada

29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

VendingData Corporation

We have audited the consolidated balance sheet of Dolphin Advanced Technologies Pty Ltd as of December 31, 2006, and the related consolidated statement of operations, consolidated statement of changes in stockholders equity and consolidated cash flow statement for the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States), Those standards require tat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material aspects, the financial position of Dolphin Advanced Technologies Pty Ltd at December 31, 2006, and the results of its operations and its cash flow for the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America,

Horwath Melbourne

Chartered Accountants

22 March 2007

Melbourne, Australia

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VENDINGDATA CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2006 and 2005

	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	333,888		$	935,243
Current portion of accounts receivable, trade net of allowance for uncollectibles of $267,154 and 276,420		1,856,898			1,550,559
Other receivables		2,650,000			0
Due from employee		138,181			4,098
Prepaid expenses and other receivables		46,494			113,557
Inventories		3,407,361			3,045,334
		8,432,822			5,648,791
Accounts receivable, trade, net of current portion, less unamortized discount		358,841			600,430
Equipment rented to customers, net of accumulated depreciation of $67,673 and $228,032		94,777			146,527
Property and equipment, at cost, net of accumulated depreciation of $2,472,897, and $2,408,234		3,493,817			585,431
Intangible assets, at cost, net of accumulated amortization of $654,369 and $836,281		4,801,945			1,862,268
Goodwill		13,429,199			—
Deferred costs		613,974			748,171
Deposits and other assets		305,282			759,653
	$	31,530,657		$	10,351,271
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
Current liabilities:
Capital leases payable, current portion	$	440,719		$	471,269
Accounts payable		2,354,163			1,836,234
Accrued expenses		3,122,792			794,203
Deferred revenues, current portion		43,599			52,248
Short-term debt		676,600			4,050,000
Current portion of long-term debt		1,799,494			—
Customer deposits		14,257			81,858
		8,451,624			7,285,812
Deferred revenues, net of current portion		43,199			161,335
Notes payable, net of current portion		19,793,524			11,654,500
Capital leases payable, net of current portion		269,272			421,975
		28,557,619			19,523,622
Stockholders’ equity (deficiency):
Common stock, $.001 par value, 70,000,000 shares authorized 30,015,099 and 18,141,950 share issued (or issuable)		30,016			18,142
Additional paid-in capital		104,676,021			66,763,192
Treasury stock, 448,053 shares at cost		(846,820	)		(846,820	)
Deferred expense		(15,463,683	)		(3,419,088	)
Deficit		(85,422,496	)		(71,687,777	)
		2,973,038			(9,172,351	)
	$	31,530,657		$	10,351,271

See accompanying notes to consolidated financial statements.

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VENDINGDATA CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

Years Ended December 31, 2006 and 2005

	2006			2005
Revenues
Sales	$	3,637,753		$	2,302,484
Rental		338,058			519,635
Non-gaming revenue		3,780,430
Service		230,178
Other		264,359			278,619
		8,250,778			3,100,738
Less sales returns and allowances		(383,122	)		(739,263	)
		7,867,656			2,361,475
Operating costs and expenses:
Cost of sales, including an inventory writedown of $3,068,846 in 2005		8,901,524			7,736,066
Selling, general and administrative		9,323,468			9,220,636
Research and development		1,555,882			1,394,006
		19,780,874			18,350,708
Loss from operations		(11,913,218	)		(15,989,233	)
Interest expense, including $15,063 and $31,974 to related parties		1,821,501			1,577,997
Net loss	$	(13,734,719	)	$	(17,567,230	)
Basic loss per share	$	(0.57	)	$	(1.03	)
Weighted average number of shares outstanding		24,270,827			17,050,398

See accompanying notes to consolidated financial statements.

32

VENDINGDATA CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

Years Ended December 31, 2006 and 2005

						Additional
	Common Stock					Paid-In			Treasury			Deferred
	Shares		Dollars			Capital			Stock			Expense			Deficit			Total
Balances, January 1, 2005		17,199,558	$	17,200		$	59,843,273								$	(54,120,547	)	$	5,739,926
Options issued for employee compensation							4,129,903	(1)				$	(3,419,088	)					710,815
Exercise of employee options		70,000		70			130,080												130,150
Stock issued for conversion of debt		209,393		209			345,290												345,499
Exchange of warrants for stock							1,143,570		$	(846,820	)								296,750
Exercise of warrants		162,500		163			418,576												418,739
Stock issued for services		100,000		100			152,900												153,000
Sale of shares		400,000		400	(2)		599,600												600,000
Net loss																(17,567,230	)		(17,567,230	)
Balances, December 31, 2005		18,141,451		18,142			66,763,192			(846,820	)		(3,419,088	)		(71,687,777	)		(9,172,351	)
Options issued for employee compensation							3,454,056						(3,454,056	)
Exercise of employee options		632,164		632			1,504,496												2,774,025
Amortization of deferred compensation expense													1,268,896						1,268,896
Warrants issued for financing							9,865,686						(9,859,435	)					6,250
Stock issued for conversion of debt		5,279,246		5,280			9,149,220												9,154,500
Stock issued for acquisition of Dolphin		2,462,238		2,462			7,815,371												7,817,833
Stock issued to distributor through subscription receivable		1,000,000		1,000			2,649,000												2,650,000
Exercise of warrants		1,500,000		1,500			1,648,500												1,650,000
Stock issued for acquisition of technology		1,000,000		1,000			1,826,500												1,827,500
Net loss																(13,734,719	)		(13,734,719	)
Balances, December 31, 2006		30,015,099	$	30,016		$	104,676,021		$	(846,820	)	$	(15,463,683	)	$	(85,422,496	)	$	2,973,038

(1)	Includes 75,000 stock options at $126,000 that were issued and subsequently cancelled within the year 2005. A total of 1,419,590 stock options were cancelled during 2005.
(2)	Proceeds from the sale of 400,000 shares sold were received in 2005 but shares were issued in 2006.

See accompanying notes to consolidated financial statements.

33

VENDINGDATA CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years Ended December 31, 2006 and 2005

	2006			2005
Cash flows from operating activities:
Net loss	$	(13,734,719	)	$	(17,567,230	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		462,274			1,031,968
Amortization of intangible assets		348,823			154,281
Amortization of deferred financing costs		134,197			188,213
Stock based compensation expense		1,268,896			3,516,852
Increase in operating (assets) liabilities:
Trade accounts receivable		945,405			709,942
Inventory		1,143,122			9,992
Prepaid expenses and other assets		67,063			148,114
Deferred financing costs					(3,855,138	)
Deposits with vendors		454,372			220,563
Accounts payable		(730,349	)		595,558
Accrued expenses		2,026,329			367,004
Deferred revenues		(126,785	)		(224,682	)
Customer deposits		(67,600	)		(111,759	)
Net cash used in operating activities		(7,808,972	)		(14,816,322	)
Cash flows from investing activities:
Cash for business combination, net of cash obtained of $174,139		(1,425,861	)
Acquisition of technology		(104,959	)
Acquisition of plant and equipment		(548,425	)		(1,312,937	)
Acquisition of equipment for rental		(217,524	)		(42,138	)
Proceeds from the disposition of plant and equipment					21,200
Payments received on notes receivable		484,833
Net cash used in investing activities		(1,811,936	)		(1,333,875	)
Cash flows from financing activities:
Proceeds from sale of stock, warrants and options		3,155,129			5,728,545
Repayment of notes payable and leases		(12,998,011	)		(2,317,907	)
Proceeds from notes payable, leases and short term debt		18,862,435			12,750,000
Net cash provided by financing activities		9,019,553			16,160,638
Increase (decrease) in cash and cash equivalents		(601,355	)		10,441
Cash and cash equivalents, beginning of year		935,243			924,802
Cash and cash equivalents, end of year	$	333,888		$	935,243
Supplemental cash flow information:
Cash paid for interest	$	1,681,097		$	664,342
Non-cash investing and financing activities:
Loans converted into common stock (February 2005 and March 2005 convertible notes)		9,154,500			345,500
Acquisition of technology with stock prior to business combination		1,827,500
Stock issued for business combination		7,817,833
Short term note issued in connection business combination		5,782,168
Stock subscribed		2,650,000
Loan refinanced					2,904,500
Stock converted to warrants					846,820

See accompanying notes to consolidated financial statements.

34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.   Description of business and significant accounting policies

The principal business activity of VendingData Corporation and its subsidiaries, VendingData Electric (Zhongshan) Co., Ltd. and Dolphin Products Pty Ltd, (collectively, the Company) is the developing and distributing of products relating to the gaming and automotive industries. These products include electronic card shuffling devices and RFID casino chips. The Company operates in the United States of America and, through its subsidiaries, in Australia and China; however, a portion of its revenues are derived from sales to customers in foreign countries.

The Company manages its credit risk by evaluating the creditworthiness of customers before credit is extended and monitoring it thereafter. The maximum losses that the Company would incur if a customer failed to pay amounts owed would be limited to the recorded receivables after any allowances provided.

Principles of consolidation

These consolidated financial statements include the accounts and transactions of the Company and its wholly-owned subsidiaries, from the date of a business combination (Note 2), after elimination of all inter-company balances and transactions.

Cash equivalents

All highly liquid debt instruments with an original maturity of three months or less are considered cash equivalents.

Estimates

Preparation of financial statements requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes, which estimates may require revision in future financial statements.

Inventory

Inventory is stated at the lower of cost, determined using the first-in, first-out method, or market.

Property and equipment

Property and equipment (Note 4), and equipment rented to customers are carried at cost. Depreciation and amortization are computed using the straight-line method over the useful lives of the assets currently estimated to be 3-5 years, which, in the case of leasehold improvements is limited to the life of the lease and renewal period, so long as renewal is intended.

Intangible assets

Patent and trademark costs (Note 5) are amortized using the straight-line method over an appropriate useful life currently estimated to be 10 years.

Revenue recognition

The Company recognizes revenue from the sale of its products upon shipment against customer contracts or purchase orders. Sales are recognized immediately when shufflers that are rented are converted to purchases depending on the creditworthiness and payment history of the casino company since payment terms are from 20 to 48 months.

The Company recognizes revenue from its sales to independent distributors upon shipment against distributor contracts or purchase orders of our product.

35

VENDINGDATA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue from shuffler rentals is recorded at the first of each month in accordance with rental contract terms. All rental contracts are cancelable upon 30-day written notice by the customer. Maintenance expense for rental units is recorded in the period it is incurred.

The extended warranty and maintenance components that are part of long term sales contracts are unbundled and recognized as deferred revenue amortized over the remaining life of the sales agreement after the initial 90-day warranty as required by the Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. The Company provides currently for estimated warranty repair costs associated with sales contracts. Although there are no extended warranties offered for its products, the Company provides for maintenance contracts that are billed and recognized on a monthly basis.

If the customer does not possess the required creditworthiness or an established payment history with the Company, the revenue is booked as an installment sale and is recognized over time as payments are received.

Although sales are not generally made with a right to return, upon occasion, usually associated with the performance warranty, sales returns and allowances are recorded after returned goods are received and inspected.

The Company also recognizes revenue on bill and hold transactions when the product is completed and is ready to be shipped and the risk of loss is transferred to the customer. In a certain case, at the customers’ request, the Company will store the product for a brief period of time. The Company’s management evaluates the criteria set forth in SAB 104 related to “bill-and-hold” transactions, precedent to revenue recognition whenever delivery has not occurred.

Advertising

Advertising costs are charged to selling, general and administrative expense when incurred and were $113,000 and $61,460 for 2006 and 2005, respectively.

Stock-based compensation

Effective with the first quarter of 2006, the Company was required to adopt Financial Accounting Standards Board (FASB) Statement No. 123R, Share-Based Payment, to account for all its stock-based compensation beginning January 1, 2006, and elected the modified prospective method of transition; accordingly, prior periods have not been restated to reflect the impact adopting Statement No. 123R.

. Previously the Company accounted for all stock-based compensation under FASB Statement No. 123. The impact of the adoption of Statement No. 123R for stock-based compensation was an increase to stock-based compensation expense included in selling, general and administrative expenses of approximately $1,204,100 for the twelve-month period ended December 31, 2006.

The fair value of options at the date of grant is estimated using the Black-Scholes option pricing model; assumptions used for 2006 and 2005 were as follows:

	2006	2005
Market value	$1.34 - $3.03	$1.34 - $3.01
Expected life in years	3 to 6	3 to 6
Interest rate	4.76%	1.95%
Volatility	10% - 70%	10% - 70%
Dividend yield	0.00%	0.00%

36

VENDINGDATA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Legal defense costs

The Company does not accrue for estimated future litigation defense costs to be incurred by the Company in connection with outstanding litigation and other disputed matters.

Loss per share

Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. No diluted loss per share is presented since the assumed exercise of common stock equivalents would have an anti-dilutive effect due to losses.

Warranties

As part of the normal sale of its products, the Company has provided its customers with product warranties. Management determines the warranty accrual on each sale based on known product failure rates of key components, historical experience, service staff costs and other variables that affect the liability.

The following table summarizes changes in accrued product warrant costs included as accrued expenses in the accompanying balance sheets at December 31, 2006 and 2005.

	Year Ended December 31,
	2006			2005
Opening balance	$	5,867		$	8,792
Accruals		17,650			2,600
Charges		(23,517	)		(5,525	)
Balance at end of year	$	0		$	5,867

Rental payment commitments

Future minimum rental payment commitments, including scheduled escalation provisions are expensed on a straight line basis.

Translation of foreign currencies

Assets and liabilities are translated at the exchange rate as of the balance sheet date. All revenue and expense accounts are translated at average exchange rates in effect during the year.

Note 2. Dolphin acquisition

The Company acquired Dolphin Advanced Technologies Pty Ltd (Dolphin), a manufacturer of plastic injection molded products, on July 12, 2006. Dolphin manufactures traditional and high frequency RFID casino chips as well as non-gaming products including automotive components and medical components.

The Company acquired Dolphin to enhance the Company’s product line of table game products and to diversify its product lines. Management believes the goodwill associated with the acquisition was justified based on expected future growth of the casino chip market in Macau and in southeast Asia and the interest in RFID casino chips.

The Company’s consolidated financial statements include the transactions of Dolphin during the period since acquisition, July 12, through December 31, 2006.

37

VENDINGDATA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company acquired Dolphin pursuant to a share sale agreement the sellers. The Company paid to the sellers the following consideration in exchange for all of the issued and outstanding capital shares of Dolphin:

Cash(a)	$	1,350,000
2,462,238 shares of the Company’s common stock at $3.50 per share(b)		7,817,833
Secured convertible promissory notes(c)		5,782,168
Purchase price		14,950,001
Acquisition costs		250,000
Adjusted purchase	$	15,200,001

(a)	Includes $750,000 paid as a non-refundable deposit in April 2006,
(b)	Includes 1,000,000 shares issued as part of the non-refundable deposit; and
(c)	Subsequently converted in December 2006 into 1,652,048 shares of common stock.

The aggregate adjusted purchase price was allocated based on the estimated fair value of the net assets acquired as follows:

Cash	$	174,139
Receivables		1,010,155
Shareholder receivable		618,916
Inventories		1,262,451
Property, plant, equipment		2,567,090
Intangible assets and other		1,584,610
Accounts payable		(1,248,278	)
Accrued expenses		(302,260	)
Provision for dividends payable		(1,995,088	)
Contingent purchase price liability		(233,846	)
Debt and capital lease obligation — current		(749,245	)
Capital lease obligation — noncurrent		(917,843	)
		1,770,801
Less adjusted purchase price		15,200,001
Goodwill	$	13,429,199

As of December 31, 2006, the Company had a convertible note of $5,782,168 outstanding for the balance of the Dolphin acquisition. The note was converted to shares in January 2007 at $2.13 per share; however, the Company remains contingently liable for up to $2,263,306, until July 12, 2008, if the holder sells such shares at market for less than the guaranteed price of $3.50 per share.

No research and development was acquired in the purchase.

38

VENDINGDATA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Following are unaudited, condensed pro forma, consolidated statements of operations for 2006 and 2005 as if the Dolphin acquisition had take place as of January 1, 2005:

	2006			2005
Net revenue	$	10,068,815		$	7,924,534
Operating expenses		22,642,274			23,781,902
Loss from operations		(12,573,459	)		(15,857,368	)
Interest expense		1,761,970			1,794,916
Income taxes		(58,992	)		(25,516	)
Net loss		(14,276,437	)		(17,626,768	)
Basic and weighted loss per share	($	0.59	)	($	0.90	)
Weighted average number of shares		24,270,827			17,050,398

Note 3   Fair value of financial instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts and loans receivable, accounts payable, short and long-term notes payable and accruals. Management believes the carrying amounts of these financial instruments approximate fair value or have interest yields that approximate market rates for similar instruments with similar risks.

Note 4.   Segments

The segments identified for geographic region-based enterprise-wide data are as follows:

	Year Ended				Year Ended
	December 31, 2006				December 31, 2005
			Long-lived				Long-lived
	Revenue		Assets		Revenue		Assets
Gaming:
North America	$	1,074,116	$	20,288,176	$	2,590,904	$	2,236,355
Asia		3,473,950		1,531,561		—		357,871
Europe		—				501,584		—
South America						8,250		—
Non gaming:
Asia		3,702,713
Total Revenue	$	8,250,779	$	21,819,737	$	3,100,738	$	2,594,226

The Company’s revenues distributed by product are as follows:

Year Ended								Year Ended
December 31, 2006								December 31, 2005
		Casino		Deck						Deck
Shufflers		Chips		Checkers		Non-gaming		Shufflers		Checkers		SecureDrop
$	921,935	$	1,876,598	$	1,485,174	$	3,702,713	$	1,589,932	$	1,101,852	$	130,335

For 2006, one customer represented 18.1% of total Company sales and another customer represented 13.5%, in the gaming and non-gaming sectors, respectively.

Note 5.   Inventory

Inventory consisted of the following at December 31, 2006 and 2005.

39

VENDINGDATA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	December 31,		December 31,
	2006		2005
Raw materials	$	633,185	$	824,759
Work in progress		121,977		66,024
Finished goods		2,652,199		2,154,551
	$	3,407,361	$	3,045,334

Note 6.   Property and equipment

Property and equipment, excluding equipment rented to customers, consists of the following at December 31, 2006 and 2005:

	December 31,		December 31,
	2006		2005
Equipment and vehicles, furniture and fixtures	$	2,837,925	$	1,924,475
Tooling		2,632,687		665,411
Leasehold improvements		496,101		500,093
		5,966,713		3,089,979
Less accumulated depreciation and amortization		2,472,897		2,504,548
	$	3,493,817	$	585,431

A substantial portion of the Company’s furniture and equipment are held under capital leases (Note 9).

Note 7.   Intangible assets

Estimated aggregate amortization of acquired patent rights and other amortizable intangible asset costs are $501,090 for the next five years.

Note 8.   Short-term credit

Our Australian subsidiary maintains a US$545,000 overdraft line of credit with a bank of which $7,000 is unused at December 31, 2006. The interest rate on this overdraft facility when drawn upon is 12.85%.

40

VENDINGDATA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 9.   Convertible debt with warrants and capital leases payable

As of December 31, 2006 and 2005, our long-term obligations consist of convertible notes and capital lease obligations as follows:

	December 31,			December 31,
	2006			2005
10% notes, secured by trade receivables and inventory. The notes are convertible at $1.65 per share of common stock for 50% of the note principal amount				$	11,654,500
8% senior secured promissory notes included detachable warrants to purchase 3.2 million shares at $2.50 per share, some of which are recallable based on early retirement of $6 million of the debt portion of the transaction. In September 2006, the amount of detachable warrants were reduced to 2.6 million shares at $2.00 per share, some of which are recallable based on early retirement of $6 million of the debt portion of the transaction. Interest at 8% is due semi-annually on July 1, and December 1, each year until repayment	$	13,000,000
Short-term convertible notes classifies as long-term (Note 13)		7,282,168
Note payable to an Australian bank at various interest rates collateralized by equipment		1,310,853
		21,593,020			11,654,500
Capitalized lease obligations for furniture, tooling and equipment*		709,991			893,244
		22,303,011			12,547,744
Less current portion		(2,240,215	)		(471,269	)
Long-term portion	$	20,062,797		$	12,076,475

* In a prior year, the Company entered into certain sale-leaseback transactions primarily for assets rented to, or intended to be rented to, customers, under operating leases. Since the leases contained effective mandatory buyback provisions resulting in the Company retaining rights to use these assets in its business for their remaining useful lives, no gain or loss was recognized on the sale-leaseback transactions pursuant to paragraph 17 of Statement of Financial Accounting Standards (SFAS) No. 28 Accounting for Sales with Leasebacks. The amortization of the assets recorded as capital leases is included with depreciation. The effective annual interest rates implicit in the capital leases range from 25% to 28%. The leases expire between March 2007 and April 2009.

41

VENDINGDATA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Scheduled maturities of the debt obligations as of December 31, 2006, are summarized as follows:

	Capital
	Leases			Other Debt			Total
2007	$	816,798		$	2,476,093		$	3,292,891
2008		197,820			1,696,113			1,893,933
2009		85,440			1,696,112			1,781,552
2010		—			1,722,108			1,722,108
2011		—			1,722,107			1,722,107
Beyond 2011 or converted to equity (Note 13)		—			12,957,084			12,957,084
Minimum future lease payments		1,100,058			22,269,618			23,369,676
Less interest component		(13,988	)					(13,988	)
		1,086,070			22,269,618			23,355,688
Current portion		(816,798	)		(2,476,093	)		(3,292,891	)
Long-term portion	$	269,272		$	19,793,524			20,062,797

Note 10.   Stockholders’ equity

Stock options.

The Company has two stock options plans, the Amended and Restated 1999 Stock Option Plan and the Amended and Restated 1999 Directors’ Stock Option Plan, through which 6,000,000 shares and 300,000 shares are authorized, respectively. As of December 31, 2006, there were 4,654,412 options for shares of common stock issued under the two plans, out of a total 6,300,000 approved pool of shares.

Information with respect to activity under the stock option plans is summarized below:

Following is a summary of the Company’s stock options:

						Weighted Average
						Remaining Contractual
	Number of					Life of Shares				Weighted
Range of Exercise	Options			Weighted Average		Outstanding		Number		Average
Price	Outstanding			Exercisable Price		(Years)		Exercisable		Exercisable
$1.34 - $ 1.50		525,000	(1)	$	1.43		6.7		108,400	$	1.48
$1.51 - $ 1.75		249,952			1.67		2.5		113,552		1.69
$1.75 - $ 2.00		969,733			1.85		3.1		389,098		1.85
$2.00 - $13.00		1,859,727			2.62		4.9		354,727		2.92
		3,604,412

(1) 1,050,000 options are exercisable at $1.34 in the event of a change of control.

42

VENDINGDATA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Following is a summary of transactions involving stock options:

			Range of
	Shares		Exercise Prices	Average Price
Balance, January 1, 2005		2,188,426	$1.69 - $15.00	$	4.97
Granted		3,279,686	$1.34 - $3.01	$	1.89
Cancelled		1,444,640	$1.66 - $15.00	$	5.73
Exercised		70,000	$1.75 - $2.50	$	2.13
Balance, December 31, 2005		3,953,472	$1.34 - $15.00	$	3.55
Granted		1,605,000	$1.34 - $3.03	$	2.53
Cancelled		499,060	$1.69 - $13.00	$	7.83
Exercised		405,000	$1.75 - $2.50	$	2.00
Balance, December 31, 2006		4,654,412	$1.34 - $13.00	$	1.99

The weighted average fair value at the date of grant for options granted during 2006 and 2005 as described above were $2.43 per share in 2006 and $1.24 per share in 2005.

Warrants.  As of December 31, 2006, there were warrants outstanding to purchase a total of 6,588,053* shares of the Company’s common stock with a weighted average exercise price of $1.68 per share. These include:

Warrants		Exercise Price		Expiration Date
	1,500,000	$	1.25		October 2011
	840,000		1.50		December 2007
	50,000		2.55		April 2011
	375,000		2.25		December 2007
	75,000		2.25		June 2008
	275,000		2.25		July 2008
	75,000		2.25		September 2008
	200,000		2.25		November 2008
	2,600,000		2.00		November 2011
	448,053		0.01		April 2010

* excluding warrants issuable described in Note 13

Note 11. Income taxes

At December 31, 2006, the Company had net operating loss carryforwards for U.S. federal income tax purposes of approximately $71,591,000, that may be available to offset against future taxable income. These operating loss carryforwards expire in the years 2010 through 2025. With respect to the U.S, no tax benefit has been reported in the financial statements, and the potential tax benefits of the net operating loss carryforwards are effectively offset by a 100% valuation allowance, as a result of significant uncertainties as to ability to realize them in the future. In addition, the Company may be limited in its ability to fully utilize these net operating loss carryforwards and realize any benefit therefrom in the event of certain ownership changes described in U.S. Internal Revenue Code Section 382.

43

VENDINGDATA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The reconciliation of the effective tax rate to the statutory rates is as follows:

	2006						2005
	Tax			%			Tax			%
Income tax benefit at U.S. statutory rate	$	4,684,467			34	%	$	5,972,858			34	%
Australian tax benefit		6,097			0	%
Effect of permanent differences		(22,029	)		0	%		(24,254	)
Valuation allowance		(4,668,535	)		34	%		(5,948,604	)		34	%
Actual	$	0					$	—

Deferred tax assets (liabilities) are composed of the following:

	December 31,
	2006			2005
Net operating loss carryforwards, including $73,000 Australian	$	28,303,000		$	24,328,000
Accrued vacation		38,000			26,000
Deferred rent		1,000			12,000
Allowance for uncollectibles		91,000			99,000
Depreciation					(312,000	)
Less valuation allowance		(28,433,000	)		(24,153,000	)
	$	—		$	—

Note 12.   Commitments and contingencies

Leases.  The Company is obligated under non-cancelable leases for office and warehouse facilities expiring in 2011 and 2009, respectively. The Company also leases office space in other locations including China, Australia and certain office equipment under non-cancelable operating leases with remaining terms in excess of one year.

Future minimum rental payment commitiments, including scheduled escalation provisions as of December 31, 2006, under the leases are as follows:

2007	$	825,600
2008		858,624
2009		581,468
2010		604,726
2011		628,915

Rent expense was on all operating leases $891,989 and $597,404 for 2006 and 2005, respectively.

Legal matters.  The Company is a defendant in a patent infringement action against it. The complaint alleges, among other things, claims for patent infringement and requests treble damages, and an injunction prohibiting the Company from infringing on the plaintiff’s patents. On February 28, 2007, the court entered an order in favor of the Company. Nevertheless, the ultimate outcome of this matter cannot be estimated at this time and, accordingly, no provision has been made in the accompanying financial statements for any losses the Company might incur in its connection.

Sales tax audit.  In February 2004, the State of Nevada initiated a sales/use tax audit of the Company’s, equipment lessors. As of this filing the State of Nevada has not made a determination if there has been a shortfall in the payment of the sales/use tax. The Company sold and leased back shufflers and Deck Checkers in prior years. The auditor for the State of Nevada is trying to determine at what level a sales/use tax needs to

44

VENDINGDATA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

be collected. The Company now collects from our customers in Nevada and remits payments to the State of Nevada. If the State of Nevada determines that the sales of the products to the leasing companies is the level at which sales/use tax should have been collected, liability of the leasing companies would be passed to the Company. The amount of the potential liability could range from a refund of $144,000 to the payment of sales/use tax with interest and penalties of up to $500,000. Accordingly, no provision has been made for any possible losses in connection with this matter. A hearing with the State of Nevada Department of Taxation originally scheduled for the fourth quarter 2006 has been postponed due to a change in the Department’s leadership. The Company intends to vigorously defend its position in this matter.

Note 13 . Subsequent events

On January 18, 2007, the Company received payment against an effective stock subscription for 1,000,000 shares of its common stock at $2.65 per share, plus warrants for 16 million shares exercisable as per the table below, entered into by agreement and approved by, the shareholders in 2006. Accordingly, a $2,650,000 subscription receivable is carried as an asset because the Company received payment of this amount in January, and the shares issuable are included in the number of shares outstanding since December 28, 2006. The 16 million warrants vest on December 31, 2007 and expire December 31, 2010. The warrants are exercisable as follows:

Warrants	Price
6,000,000	$	2.65
4,000,000	$	3.00
2,000,000	$	3.50
1,000,000	$	4.00
1,000,000	$	4.50
1,000,000	$	5.00
1,000,000	$	5.50

In January, $7,282,168, in short-term convertible notes payable were converted into 2,445,808 shares the Company’s common stock during the first week of January 2007. Accordingly, pursuant to SFAS No. 6, Classification of Short-Term Obligations Expected to Be Refinanced, these notes were excluded from current liabilities and classified as long-term as of December 31, 2006.

Also in January 2007, the Company completed a sale of intellectual property related to its discontinued SecureDrop product line for $500,000 in cash.

On March 28, 2007, the Company completed a sale of 1.625 million shares of common stock at $2.65 per share and warrants to purchase an additional 1.625 million shares also at $2.65 per share expiring March 2012 for total cash proceeds of approximately $4.3 million.

45

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 8A.  CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls.  Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2006. Based on that evaluation, our management, including our chief executive officer and chief financial officer, has concluded that in certain areas our disclosure controls and procedures were not effective as of December 31, 2006, to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. In connection with the completion of its audit of, and the issuance of its report on, our financial statements for the year ended December 31, 2006, our independent registered public accounting firm, Piercy Bowler Taylor & Kern, identified a significant deficiency and two material weaknesses in our internal controls. The significant deficiency concerns authorization of payment of vendor invoices. The material weaknesses include: 1) our inability to properly control financial records and analyses which was evident in connection with our acquisition of Dolphin, to assure the proper allocation of purchase price to the net assets acquired, and 2) the collective experience of our personnel responsible for financial reporting.

For the past several months, we have been seeking to engage additional employees and consultants with the necessary qualifications to supplement our accounting and financial reporting staff. Subsequent to our identification of the above noted significant deficiency and material weaknesses, we have accelerated our efforts to strengthen our accounting and financial reporting staff, including additional professional staffing and intermediate and advanced level accounting training seminars, as appropriate. We have also taken steps to standardize procedures with respect to the approval and payment of vendor invoices, and we plan to develop clear documentation of procedures to be followed in accounting for unusual or complex accounting transactions, including complex business combinations.

(b) Changes in internal control over financial reporting.  No change in our internal control over financial reporting occurred during the fourth quarter of the fiscal 2006 that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.

ITEM 8B.  OTHER INFORMATION

Not applicable.

46

PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The following information is furnished with respect to each of our executive officers and member of our board of directors. Each member of our board of directors serves a one year term until his successor is duly elected and appointed at our next annual meeting of stockholders. There are no family relationships between or among any of our directors.

Executive Officers and Directors

Name	Age		Position
Mark R. Newburg		52	President, Chief Executive Officer and Director
Arnaldo F. Galassi		50	Vice President and Chief Financial Officer
Peter Zee		60	Vice President of Engineering and Manufacturing
Walter B. Stowe, Jr.		58	Vice President of Legal & Compliance, General Counsel
James E. Crabbe		61	Chairman of the Board of Directors
Maj. Gen. Paul A. Harvey		69	Director
Vincent L. DiVito		47	Director
Robert L. Miodunski		56	Director

Mark R. Newburg joined our board of directors as Executive Director in March 2005, was appointed Treasurer in April, 2005, and has served as our president and chief executive officer since October 2005. Mr. Newburg previously served as the president and chief executive officer and as a member of the board of directors of VirtGame Corp., a developer of software and networking applications for the gaming industry, from August 2004 to October 2005. From March 2004 to November 2004, Mr. Newburg served as chief operating officer to Left Right Marketing Technologies, an internet retailing start-up in Las Vegas. From March 2003 to March 2004, Mr. Newburg was president and chief executive officer of C2Consulting Inc., a firm specializing in areas such as strategic planning, change management, organizational integration, international operations, and organizational alignment. From July 2001 to March 2003, Mr. Newburg served as president of Aristocrat Technologies Inc, an Australia based designer, builder and marketer of proprietary software and hardware to the international gaming market. Previously, Mr. Newburg had a 20 year career at NCR Corporation, a $5.9 billion provider of store automation, self-service, payment, and data-warehousing solutions. Mr. Newburg earned his MBA from the University of Dayton in June 1985, and dual undergraduate majors with a BS in both Accounting & Business Administration from the University of Findlay in June 1976.

Arnaldo F. Galassi has served as our vice president and chief financial officer since October 2005. Mr. Galassi had previously served as a management consultant to our company since March 2005. From August 2004 to October 2005, Mr. Galassi served as chief financial officer of VirtGame Corp. From March 2004 to November 2004, Mr. Galassi served as chief financial officer to Left Right Marketing Technologies, an internet retailing start-up in Las Vegas. From June 1997 to October 2003, Mr. Galassi was a treasury director for NCR Corporation. Mr. Galassi earned his MBA from the Rutgers University in December 1980, and a BS in history from Ursinus College in June 1979.

Peter Zee has served as our vice president of engineering and manufacturing since October 2005. Mr. Zee had previously served as a management consultant to our company since March 2005. Mr. Zee served a chief executive officer of Tech Elite Group, a Hong Kong technology company, from March 2004 to September 2005. Prior to March 2004, Mr. Zee was employed by NCR for 34 years, most recently as its vice president, Retail Solutions Division, Asia Pacific. As of January 2007, Mr Zee was appointed as a non-executive director of Fintronics, a Hong Kong listed company in the business of acquiring, installing and servicing of automated teller machines for banks, and as of March 2007 was appointed as a director for Natrol Corporation’s

47

(NASDAQ listed health supplement manufacturing company) Hong Kong subsidiary (Natrol Hong Kong Limited).

Walter B. Stowe, Jr, has served as our vice president of legal and compliance and general counsel since May 2006. From June 2002 to November 2005, Mr. Stowe most recently served as the vice president of legal and compliance for Aristocrat Technologies Inc. in Las Vegas. From August 2001 to June 2002, Mr. Stowe served as the director of compliance and associate corporate counsel for Konami Gaming, Inc., a slot machine manufacturer. Prior to that, Mr. Stowe had 26 year career with the FBI. Mr Stowe received hs law degree from the Marshall-Wythe School of Law at William and Mary College in 1974 and he received his A.B. in history from William and Mary College in 1971.

James E. Crabbe has served on our board of directors since May 2000 and was elected chairman of our board in August 2001. Mr. Crabbe is currently engaged in the active management of his personal investment portfolio. He spent 34 years in the money management business. In 1980, he co-founded the Crabbe-Huson Group, Inc., an investment management company, of which he served as president, portfolio manager and analyst until his retirement in 2000. Mr. Crabbe earned his bachelor’s degree from the University of Oregon in 1967.

Major General Paul A. Harvey has served on our board of directors since October 2005 and he chairs the compliance committee of the board. General Harvey has served as a consultant to the gaming, hotel and resort industry for the past five years. General Harvey spent 32 years on active duty in the United States Air Force where he held numerous command positions throughout the United States, Europe, Africa and the Middle East. Following retirement, he was the executive director of the Mississippi Gaming Commission from 1993 through 1998. General Harvey served on the board of directors of the National Center for Responsible Gaming from 1996 to 2004 (and is on the advisory board to the current chairman), Riviera Holdings Corporation, the owner and operator of Riviera Hotel & Casino in Las Vegas, Nevada, and Progressive Gaming International Corporation, a Las Vegas, Nevada based developer of table and slot game content and software products for the gaming industry.

Vincent L. DiVito has served on our board of directors since October 2005 and he chairs the audit committee of the board. Mr. DiVito has served as vice president, chief financial officer and treasurer of Lonza, a Swiss-based life sciences chemical company headquartered in Allendale, New Jersey, since 2000. Previously, Mr. DiVito was the vice president and chief financial officer of Algroup Wheaton, a global pharmaceutical and cosmetics packaging company. Mr. DiVito spent two years on the audit team of Ernst & Whinney (now Ernst & Young). Mr. DiVito is a certified public accountant and certified management accountant. He is also a member of the board of directors of Riviera Holdings Corporation.

Robert L. Miodunski has served on our board of directors since October 2005 and he chairs the compensation committee of the board. Mr. Miodunski served as president and chief executive officer of Alliance Gaming Corporation from 1999 through 2004. Since 2004, Mr. Miodunski serves as a consultant to Alliance Gaming’s board of directors and chief executive officer. From 1994 until 2002, Mr. Miodunski served as president of United Coin Machine Company, a subsidiary of Alliance Gaming.

Audit Committee

Our board of directors has established an audit committee, currently comprised of Vincent DiVito, Robert Miodunski, and Major General Paul Harvey. Mr. DiVito serves as the audit committee chair and has been identified as the audit committee financial expert.

The members of our audit committee are independent, as independence for audit committee members is defined in Section 121A of the American Stock Exchange Company Guide.

Section 16(a) Beneficial Ownership Reporting Compliance

Rules adopted by the SEC under Section 16(a) of the Securities Exchange Act of 1934, or the Exchange Act, require our officers and directors, and persons who own more than 10% of the issued and outstanding shares of our equity securities, to file reports of their ownership, and changes in ownership, of such securities

48

with the Securities and Exchange Commission on Forms 3, 4 or 5, as appropriate. Such persons are required by the regulations of the Securities and Exchange Commission to furnish us with copies of all forms they file pursuant to Section 16(a).

Based solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished to us during our most recent fiscal year, and any written representations provided to us, we believe that all of the officers, directors, and owners of more than ten percent of the outstanding shares of our common stock complied with Section 16(a) of the Exchange Act for the year ended December 31, 2006.

Code of Ethics

We have adopted a Code of Ethics that applies to all our directors, officers and employees. The Code of Ethics is designed to serve as the foundation of our standards of behavior and to promote honest and ethical conduct, proper disclosure of financial information in our periodic reports, and compliance with applicable laws, rules, and regulations by our all directors, officers and employees, including our directors and senior officers who have operating and financial responsibilities. Our Code of Ethics is posted on the “Investors” section of our Internet web site at http://www.vendingdata.com/investors/ethics.

ITEM 10.   EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation awarded to, earned by or paid to, our chief executive officer and our other two highest paid executive officers earning in excess of $100,000 for services rendered in all capacities during fiscal years ended December 31, 2006.

										Non-Equity	Nonqualified
										Incentive	Deferred
							Stock	Option		Plan	Compensation
			Salary		Bonus		Awards	Awards		Compensation	Earnings	All Other
Name and Principal Position	Year		($)		($)		($)	($)		($)	($)	Compensation		Total
(a)	(b)		(c)		(d)		(e)	(f)		(g)	(h)	(i)		(j)
Mark Newburg, CEO		2006		286,538		150,000			282,976				33,571		753,085
Arnaldo Galassi, CFO		2006		186,539		50,000			90,354				12,634		339,527
Peter Zee, VP Engineering		2006		193,269		60,000			90,354				16,725		360,348

The dollar amounts in column (f) reflect the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006, in accordance with FAS 123(R). Assumptions used in the calculation of this amount are included in footnote (1) to our audited financial statement for the fiscal year ended December 31, 2006 included elsewhere in this report.

Narrative disclosure to Summary Compensation Table

Mark Newburg on September 29, 2005 we entered into a two year employment agreement with Mr. Newburg. Terms of the agreement provided for:

•  an annual salary of $250,000,

•  a signing bonus of $75,000 split in two equal payments to be made on the signing of the employment agreement and on December 15, 2005,

•  750,000 stock options priced at $1.34 which shall vest and first become exercisable upon a change of control*,

•  in the event of a change of control, a payment equal to 12 months base salary in effect on the date of the change of control and an amount equal to 50% of his annual base pay, and,

•  annual bonuses of up to 50% of his salary provided certain performance milestones are met.

In April 2006, Mr. Newburg’s annual salary was increased to $300,000 and Mr. Newburg was granted an additional option to purchase 300,000 shares of our common stock at an exercise price of $2.48 per share. In

49

March 2007, Mr. Newburg’s annual salary was increased to $325,000. Additionally, he received a $150,000 bonus and was granted an additional option to purchase 200,000 shares of our common stock at an exercise price of $2.40 per share.

Perquisites

Mr. Newburg is also entitled to certain perquisites:

•  ability to participate in, at the Company’s expense, whatever employee benefit plans (medical, dental, vision) the Company maintains. Additionally, the Company reimburses Mr. Newburg for all out-of-pocket medical, dental and vision expenses not paid under the benefit plans. In 2006, these health benefits amounted to $15,304 and are included in Column I above.

Arnaldo Galassi on September 29, 2005 we entered into a two year employment agreement with Mr. Galassi. Terms of the agreement provided for:

•  an annual salary of $150,000,

•  150,000 stock options priced at $1.34 which shall vest and first become exercisable upon a change of control*,

•  in the event of a change of control, a payment equal to 12 months base salary in effect on the date of the change of control and an amount equal to 50% of his annual base pay, and,

•  annual bonuses of up to 50% of his salary provided certain performance milestones are met.

In April 2006, Mr. Galassi’s annual salary was increased to $200,000 and Mr. Galassi was granted an additional option to purchase 100,000 shares of our common stock at an exercise price of $2.48 per share. In March 2007, Mr. Galassi’s annual salary was increased to $230,000. Additionally, he received a $50,000 bonus and was granted an additional option to purchase 50,000 shares of our common stock at an exercise price of $2.40 per share.

Perquisites

Mr. Galassi is also entitled to certain perquisites:

•  ability to participate in, at the Company’s expense, whatever employee benefit plans (medical, dental, vision) the Company maintains. In 2006, these health benefits amounted to $13,892 and are included in Column I above.

Peter Zee on October 1, 2005 we entered into a two year employment agreement with Mr. Zee. Terms of the agreement provided for:

•  an annual salary of $175,000.

•  150,000 stock options priced at $1.34 which shall vest and first become exercisable upon a change of control*,

•  in the event of a change of control, a payment equal to 12 months base salary in effect on the date of the change of control and an amount equal to 50% of his annual base pay, and,

•  annual bonuses of up to 50% of his salary provided certain performance milestones are met.

In April 2006, Mr. Zee’s annual salary was increased to $200,000 and Mr. Zee was granted an additional option to purchase 100,000 shares of our common stock at an exercise price of $2.48 per share. In March 2007, Mr. Zee’s annual salary was increased to $230,000. Additionally, he received a $100,000 bonus and was

*  Change of control is defined as the acquisition, directly or indirectly, in a single transaction or a series of related transactions by any person resulting in the beneficial ownership of 50% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote.

50

granted an additional option to purchase 60,000 shares of our common stock at an exercise price of $2.40 per share.

Perquisites

Mr. Zee is also entitled to certain perquisites:

•  ability to participate in, at the Company’s expense, whatever employee benefit plans (medical, dental, vision) the Company maintains. In 2006, these health benefits amounted to $12,634 and are included in Column I above.

Outstanding Equity Awards at Fiscal Year-End Table

Stock Awards

Equity

Option Awards

Equity

Incentive

Market

Incentive

Plan

Equity

Value of

Plan

Awards:

Incentive

Shares

Awards:

Market or

Plan

Number of

or

Number of

Payout Vale

Awards:

Shares or

Units of

Unearned

of Unearned

Number of

Number of

Number of

Units of

Stock

Shares,

Shares Units

Securities

Securities

Securities

Stock

That

Units or

or Other

Underlying

Underlying

Underlying

Option

That

Have

Other

Rights That

Unexercised

Unexercised

Unexercised

Exercise

Option

Have

Not

Rights That

Have Not

Options (#)

Options (#)

Unearned

Price

Expiration

Not

Vested

Have Not

Vested

Name

Exercisable

Unexercisable

Option (#)

($)

Date

Vested (#)

($)

Vested (#)

($)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

Mark Newburg

191,666(1

)

108,334

(1)

$

1.49

1/31/15

67,000(2

)

1.85

4/28/08

67,000

(2)

1.85

4/28/09

66,000

(2)

1.85

4/28/10

750,000

(3)

1.34

(3)

200,000

(4)

2.48

4/7/12

200,000

(5)

2.40

3/7/13

Arnaldo Galassi

34,000(6

)

1.92

3/1/08

33,000

(6)

1.92

3/1/09

33,000

(6)

1.92

3/1/10

150,000

(3)

1.34

(3)

100,000

(4)

2.48

4/7/12

50,000

(5)

2.40

3/7/13

Peter Zee

34,000(6

)

1.92

3/1/08

33,000

(6)

1.92

3/1/09

33,000

(6)

1.92

3/1/10

150,000

(3)

1.34

(3)

100,000

(4)

2.48

4/7/12

60,000

(5)

2.40

3/7/13

(1)	300,000 options granted as consultant on 1/31/05. Options vest monthly over three years starting on 1/31/06.
(2)	200,000 options granted on 4/28/05. One third of options vest every year.
(3)	Options vest and first become exercisable upon a change of control of the Company.
(4)	Options granted on 4/7/06. One third of options vest every year.
(5)	Options granted on 3/7/07. One third of options vest every year
(6)	Options granted as consultant on 3/1/05. Options vest annually over three years starting on 3/1/06

51

Director Compensation Table

						Change in
						Pension
						Value and
						Nonqualified
	Fees Earned				Non-Equity	Deferred
	or Paid	Stock	Option		Incentive Plan	Compensation	All Other
	in Cash	Awards	Awards		Compensation	Earnings	Compensation		Total
Name	($)	($)	($)		($)	($)	($)		($)
(a)	(b)	(c)	(d)(1)		(e)	(f)	(g)		(h)
James Crabbe				8,000				8,000
Vincent DiVito
Paul Harvey
Robert Miodunski
William Purton
Ron Keil				21,152				21,152
Robert Smith				21,152				21,152

The dollar amount in column (d) reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006, in accordance with FAS 123(R). Assumptions used in the calculation of this amount are included in footnote (1) to our audited financial statement for the fiscal year ended December 31, 2006 included elsewhere in this report.

Our non-employee members of our board of directors receive an initial grant of 100,000 options and effective as March 2007, an annual grant of 15,000 options on the date of the annual or special meeting of stockholders at which directors are elected. The exercise price is the then-current market price of our common stock. Our directors are reimbursed for their out-of-pocket expenses related to their services as directors or meeting attendance. Commencing April 2007, members of our board of directors that are not employees receive a quarterly fee of $7,500, and in addition the chairman of our audit committee receives an additional $7,500 per quarter. In addition, upon joining the board, Directors DiVito, Harvey and Miodunski each received options to purchase 100,000 shares of common stock at $1.34 per share over a 3-year term pursuant to our 1999 Stock Option and Grant Plan; and each will receive a grant of 50,000 shares of common stock which accrued in increments of 10,000 shares over the five fiscal quarters beginning in September, 2005 and will be issued during 2007 pursuant to the approval received from our stockholders at the 2006 annual stockholders meeting.

Messrs Keil and Smith resigned from the board on June 26, 2006. Mr. Purton resigned from the board on December 31, 2006.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership of Certain Beneficial Owners and Management

The table below sets forth the beneficial ownership of our common stock, as of March 9, 2007, by:

•  All of our directors and executive officers, individually;

•  All of our directors and executive officers, as a group; and

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

The beneficial ownership of each person was calculated based on 32,511,007 shares of our common stock outstanding as of March 9, 2007, according to the record ownership listings as of that date and the verifications we solicited and received from each director and executive officer. The SEC has defined “beneficial ownership” to mean more than ownership in the usual sense. For example, a person has beneficial ownership of a share not only if he owns it in the usual sense, but also if he has the power to vote, sell or otherwise dispose of the share. Beneficial ownership also includes the number of shares that a person has the right to acquire within 60 days of March 9, 2007, pursuant to the exercise of options or warrants or the

52

conversion of notes, debentures or other indebtedness, but excludes stock appreciation rights. Two or more persons might count as beneficial owners of the same share. Unless otherwise noted, the address of the following persons listed below is c/o VendingData Corporation, 1120 Town Center Ste. 260, Las Vegas, Nevada 89144.

Name of Director or Executive Officer	Shares(1)			Percentage
James E. Crabbe		7,115,073	(2)		21.89	%
Paul A. Harvey		84,000	(3)		0.26	%
Vincent L. DiVito		84,000	(3)		0.26	%
Robert L. Miodunski		84,000	(3)		0.26	%
Mark R. Newburg		3,250,460	(4)		10.0	%
Arnaldo F. Galassi		100,000	(5)		0.31	%
Peter Zee		100,000	(6)		0.31	%
Walter B. Stowe, Jr.		33,333	(7)		0.10	%
All directors and executive officers as a group (8 persons)		10,850,866	(8)		33.38	%
Name and Address of 5% Holder
William W. Purton		3,114,286	(9)		9.58	%
99 Hotham Street
East Melbourne, Victoria 3002
Australia
LC Capital Master Fund LP		2,844,848	(10)		8.75	%
c/o Lampe Conway & Co., LLC
680 5th Avenue, Suite 1201
New York, NY 10019
Leonid Frenkel		2,824,794	(11)		8.69	%
c/o Triage Capital LF Group, LLC
401 City Ave, Suite 800
Bala Cynwyd, PA 19004
Bricoleur Capital Management LLC		5,194,325	(12)		15.98	%
12230 El Camino Real #100
San Diego, CA 92130

(1)	Unless otherwise noted, the persons identified in this table have sole voting and sole investment power with regard to the shares beneficially owned by them.
(2)	Includes 4,574,066 shares held directly by Mr. Crabbe, 80,600 shares issuable upon the exercise of stock options and 2,460,407 shares held by Mr. Crabbe, as Trustee of the James E. Crabbe Revocable Trust. Mr. Crabbe disclaims any ownership of any shares of common stock beneficially owned by Phileo Foundation, a charitable foundation of which Mr. Crabbe is a trustee and president, or by Yvonne M. Huson, or her related trusts, for which Mr. Crabbe formerly held voting power.
(3)	Includes 50,000 shares held directly and 34,000 shares issuable upon the exercise of stock options.
(4)	Includes 425,666 shares issuable upon the exercise of stock options and 2,824,794 shares over which Mr. Newburg exercises sole voting control pursuant to a Voting Trust Agreement dated August 28, 2006, by and among Mr. Newburg and the Triage entities.
(5)	Includes 1,000 shares held directly by Mr. Galassi and 100,000 shares issuable upon the exercise of stock options.
(6)	Includes 100,000 shares issuable upon the exercise of stock options.
(7)	Includes 33,333 shares issuable upon the exercise of stock options.
(8)	Includes 9,013,059 shares issued directly, 841,599 shares issuable upon the exercise of stock options.
(9)	Includes 1,807,143 shares held directly by Mr. Purton and 1,307,143 shares held directly by Synwood Trust which is controlled by Mr. Purton.

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(10)	Includes 2,484,848 shares held by LC Capital Master Fund, Ltd.: and share beneficially owned by LC Capital Master Fund, Ltd. upon the exercise of 360,000 warrant shares.
(11)	Includes 550,984 shares held by Triage Capital Management LP; 175,757 shares held by Periscope Partners LP; shares beneficially owned by Triage Capital Management LP upon the conversion of 1,277,865 warrant shares; shares beneficially owned by Triage Capital Management B LP upon the conversion of 784,688 warrant shares; shares beneficially owned by Periscope Partners LP upon conversion of 10,000 warrant shares; and shares beneficially owned by Leonid Frenkel upon the conversion of 25,500 warrant shares. Mr. Newburg exercises sole voting control pursuant to a Voting Trust Agreement dated August 28, 2006, by and among Mr. Newburg and the Triage entities.
(12)	Includes 104,432 shares held by Bric 6 LP; 553,204 shares held by Bricoleur Enhanced LP; 742,468 shares held by Bricoleur Offshore Ltd.; 1,194,221 shares held by Bricoleur Partners LP; shares beneficially owned by Bricoleur Enhanced LP issuable upon the exercise of 1,200,000 common stock purchase warrants; and shares beneficially owned by Bricoleur Offshore Ltd issuable upon the exercise of 1,400,000 common stock purchase warrants.

Equity Compensation Plan Information

We have two stock options plans, the Amended and Restated 1999 Stock Option Plan and the Amended and Restated 1999 Directors’ Stock Option Plan, through which 6,000,000 shares and 300,000 shares are authorized, respectively. Pursuant to our stock options plans, as of December 31, 2006, there were options outstanding to purchase 4,804,412 shares of our common stock with a weighted average exercise price per share of $2.17 and options remaining to purchase 1,495,588 shares of our common stock.

The following table sets forth certain information as of December 31, 2006 about our equity compensation plans under which our equity securities are authorized for issuance.

	(a)		(b)		(c)
	Number of Securities		Weighed-Average		Number of Securities
	to be Issued Upon		Exercise Price of		Remaining Available for
	Exercise of		Outstanding		Future Issuance Under
	Outstanding		Options,		Equity Compensation Plans
	Options, Warrants		Warrants and		(Excluding Securities
Plan Category	and Rights		Notes Rights		Reflected In Column (A))
Equity compensation plans approved by security holders		11,192,465	$	1.79		1,495,588
Equity compensation plans not approved by security holders		—		—		—
Total		11,192,465	$	1.79		1,495,588

The first column reflects outstanding stock options to purchase 4,719,612 shares, outstanding warrants to purchase 6,388,053 warrants, and 84,800 shares of common stock pursuant to our Amended and Restated 1999 Stock Option Plan and our Amended and Restated 1999 Directors’ Stock Option Plan, respectively, which have been approved by our stockholders.

The third column reflects 1,280,388 shares remaining for issuance under our Amended and Restated 1999 Stock Option Plan and 215,200 shares available under our Amended and Restated 1999 Directors’ Stock Option Plan.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transaction Review

We have adopted a policy that any transactions with directors, officers or entities of which they are also officers or directors or in which they have a financial interest, will only be on terms consistent with industry standards and approved by a majority of the disinterested directors of our board. Our bylaws provide that no such transactions by us shall be either void or voidable solely because of such relationship or interest of

54

directors or officers or solely because such directors are present at the meeting of our board or a committee thereof which approves such transactions, or solely because their votes are counted for such purpose if:

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

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

•  The contract or transaction is fair and reasonable to us at the time it is authorized or approved.

In addition, interested directors may be counted in determining the presence of a quorum at a meeting of our board or a committee thereof that approves such transactions. If there are no disinterested directors, we shall obtain a majority vote of the stockholders approving the transaction.

As of December 31, 2006, William Purton, the owner of Dolphin prior to our acquisition of the company, owed Dolphin $514,260 for funds Dolphin had advanced to Mr. Purton. It is anticipated that Mr. Purton will repay this outstanding before the end of fiscal 2007.

Securities and Exchange Commission Position on Certain Indemnification

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

Insofar as indemnification for liabilities arising under the Securities Act of 1933, or the Securities Act, may be permitted to our directors, officers or persons controlling us pursuant to the provisions contained in our amended and restated articles of incorporation, our amended and restated bylaws, Nevada law or otherwise, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable. If a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers or controlling persons in the successful defense of any action, suit, or proceeding, is asserted by such director, officer or controlling person, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of this issue.

Indemnification Agreements

We have entered into indemnification agreements with members of our board of directors and certain of executive officers and other employees in which we agreed to hold harmless and indemnify such directors, officers and employees to the fullest extent authorized under Nevada law, and to pay any and all related expenses reasonably incurred by the indemnitee. The relevant members of our board of directors are James E. Crabbe, Mark R. Newburg, Vincent L. DiVito, Paul A. Harvey, Robert L. Miodunski and former directors Ronald O. Keil and Bob L. Smith. The relevant officers and other employees include: Arnaldo F. Galassi, chief financial officer, and; Peter Zee, senior vice president of engineering and production.

55

ITEM 13.  EXHIBITS

The exhibits to this Annual Report on Form 10-KSB are set forth below. The exhibit index indicates each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-KSB. Exhibit

Number			Exhibit Description
	3	.1	Amended and Restated Articles of Incorporation dated June 7, 2003 (Incorporated by reference from the Registrant’s Form 8-K, filed on June 18, 2003).
	3	.2	Amended and Restated Bylaws of the registrant dated November 13, 2002, incorporated by reference from the registrant’s Current Report on Form 8-K filed on January 8, 2003.
	3	.3	Certificate of Amendment to Articles of Incorporation dated August 23, 2005.
	3	.4	Certificate of Amendment to Articles of Incorporation dated January 9, 2007.
	10	.1	Shareholder Agreement dated December 14, 1998, by and between VendingData Corporation and Richard Huson, Bob Smith and Ron Keil, incorporated by reference from the registrant’s Annual Report on Form 10-KSB filed on March 26, 1999.
	10	.2	Form of Warrant Associated with 9.5% Convertible Note Due 2004, incorporated by reference from the registrant’s Quarterly Report on Form 10-QSB filed on May 17, 1999.
	10	.3	Lease Agreement dated December 29, 2006, by and between the registrant and Howard Hughes Properties, Limited Partnership, for 1120 Town Center Dr. Suite 260.
	10	.4	Form of Indemnification Agreement, incorporated by reference from the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.
	10	.5	Amended and Restated 1999 Stock Option Plan, incorporated by reference from the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.*
	10	.6	Philadelphia Brokerage Corporation Warrant to Purchase 25,000 Shares of Common Stock, incorporated by reference from the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.
	10	.7	Triage Capital Management LP Warrant to Purchase 50,000 Shares of Common Stock, incorporated by reference from the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.
	10	.8	Mellon HBV SBV, LLC Warrant to Purchase Shares of Common Stock, incorporated by reference from the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.
	10	.9	Amended and Restated 1999 Directors’ Stock Option Plan, incorporated by reference from the registrant’s registration statement on Form S-8 filed on September 10, 2003.*
	10	.10	Philadelphia Brokerage Corporation warrant to Purchase 75,000 Shares of Common Stock, incorporated by reference from the registrant’s registration statement on Form SB-2 filed on September 25, 2003.
	10	.11	Distribution Agreement by and between the registrant and TCS Aces Pty Limited, incorporated by reference from the registrant’s registration statement on Form SB-2/A filed on December 10, 2003.
	10	.12	Distribution Agreement by and between the registrant and Technical Casino Supplies Ltd, incorporated by reference from the registrant’s Current Report on Form 8-K filed on February 15, 2005.
	10	.13	License and Manufacturing Agreement dated February 27, 2006, between VendingData Corporation and Dolphin Products Pty Limited (incorporated by reference to Exhibit 10.26 to the registrant’s Annual Report on form 10-K filed on March 31, 2006).
	10	.14	Patent Purchase Agreement dated October 1, 2005 among VendingData Corporation, William Westmore Purton, Dolphin Products Pty Ltd. and Dolphin Advanced Technologies Pty Ltd. (incorporated by reference to Exhibit 10.27 to the registrant’s Annual Report on Form 10-K filed on March 31, 2006).
	10	.15	Form of Warrant (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2005).
	10	.16	Employment Agreement dated September 29, 2005 between VendingData Corporation and Mark Newburg (incorporated by reference to Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2005).*
	10	.17	Employment Agreement dated September 29, 2005 between VendingData Corporation and Arnaldo Galassi (incorporated by reference to Exhibit 10.5 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2005).*

56

Number			Exhibit Description
	10	.18	Employment Agreement dated October 3, 2005 between VendingData Corporation and Peter Zee.*
	10	.19	Senior Secured Note Purchase Agreement dated May 2, 2006 among VendingData Corporation and the Bricoleur Funds (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated May 2, 2006)
	10	.20	Securities Put Agreement dated May 2, 2006 among VendingData Corporation and the Bricoleur Funds (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated May 2, 2006)
	10	.21	Security Agreement dated May 2, 2006 among VendingData Corporation and the Bricoleur Funds (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K dated May 2, 2006)
	10	.22	Registration Rights Agreement dated May 2, 2006 among VendingData Corporation and the Bricoleur Funds (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K dated May 2, 2006)
	10	.23	Share Sale Agreement dated July 5, 2006 among VendingData Corporation and William Westmore Purton, and Synwood Pty Ltd (incorporated by reference to Exhibit 10.8 to the registrant’s Quarterly Report on Form 10-QSB filed on August 14, 2006)
	10	.24	Registration Rights Agreement dated July 11, 2006 among VendingData Corporation and William Westmore Purton, and Synwood Pty Ltd. (incorporated by reference to Exhibit 10.8 to the registrant’s Quarterly Report on Form 10-QSB filed on August 14, 2006)
	10	.25	Alliance Agreement dated October 11, 2006 between VendingData Corporation and Elixir Group Limited (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2006)
	10	.26	Amended and Restated Sales Representative Agreement dated October 11, 2006 between VendingData Corporation and Elixir Group Limited (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2006)
	10	.27	Securities Purchase Agreement dated October 11, 2006 between VendingData Corporation and Elixir Group Limited (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2006)
	10	.29	Securities Purchase Agreement dated March 27, 2007, incorporated by reference from the registrant’s Current Report on Form 8-K filed on March 30, 2007
	10	.30	Registration Rights Agreement dated March 28, 2007, incorporated by reference from the registrant’s Current Report on Form 8-K filed on March 30, 2007
	10	.31	Warrant dated March 28, 2007, incorporated by reference from the registrant’s Current Report on Form 8-K filed on March 30, 2007
	14	.1	Code of Ethics, incorporated by reference from the registrant’s annual report on 10-KSB filed March 30, 2004.
	23	.1	Consent of Piercy Bowler Taylor and Kern
	23	.2	Consent of BDO Kendalls Audit & Assurance (vic) (formerly Horwath Melbourne)
	31	.1	Certification under Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification under Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

* Management contract or compensatory plan or arrangement

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

Piercy Bowler Taylor & Kern, Certified Public Accountants, Las Vegas, Nevada, (PBTK), served as our principal independent registered public accounting firm and auditors for fiscal years ended December 31, 2006 and 2005.

Our board’s audit committee is responsible for pre-approving all audit and permissible non-audit services provided by our independent auditor, PBTK, with certain limited exceptions. The audit committee has concluded that the non-audit services provided by PBTK are compatible with maintaining auditor

57

independence. In 2006 and 2005, no fees were paid to PBTK pursuant to the “de minimus” exception to the pre-approval policy permitted under the Securities Exchange Act of 1934, as amended.

For the fiscal years ended December 31, 2006 and 2005, the fees for services billed by PBTK were as follows:

	2006		2005
Audit fees	$	218,600	$	140,387
Audit-related fees		4,708		5,280
Tax fees		20,000		13,970
	$	243,308	$	159,637

Audit fees generally included fees related to the audit of our annual financial statements included in our Form 10-KSB’s, the review of our interim financial statements included in our Form 10-QSB’s and the consents and assistance in connection with other filings and public offering documents filed with the Securities and Exchange Commission.

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

Tax fees generally included fees for professional services rendered with respect to tax compliance, tax advice and tax planning, such as the preparation of tax returns, claims for refunds, payment planning and tax law interpretation.

58

SIGNATURES

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

VENDINGDATA CORPORATION

By:  /s/  Mark R. Newburg,

Mark R. Newburg,
Chief Executive Officer, Principal Executive Officer

Date: April 12, 2007

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

Signature	Title	Date
/s/  Mark R. Newburg Mark R. Newburg	Executive Director (Chief Executive Officer)	April 12, 2007
/s/  Arnaldo F. Galassi Arnaldo F. Galassi	Chief Financial Officer (Principal Financial and Accounting Officer)	April 12, 2007
/s/  James E. Crabbe James E. Crabbe	Chairman of the Board	April 12, 2007
/s/  Paul Havey Paul Harvey	Director	April 12, 2007
/s/  Vincent DiVito Vincent DiVito	Director	April 12, 2007
/s/  Robert Miodunski Robert Miodunski	Director	April 12, 2007

59

EXHIBIT INDEX

Number			Exhibit Description
	3	.1	Amended and Restated Articles of Incorporation dated June 7, 2003 (Incorporated by reference from the Registrant’s Form 8-K, filed on June 18, 2003).
	3	.2	Amended and Restated Bylaws of the registrant dated November 13, 2002, incorporated by reference from the registrant’s Current Report on Form 8-K filed on January 8, 2003.
	3	.3	Certificate of Amendment to Articles of Incorporation dated August 23, 2005
	3	.4	Certificate of Amendment to Articles of Incorporation dated January 9, 2007
	10	.1	Shareholder Agreement dated December 14, 1998, by and between VendingData Corporation and Richard Huson, Bob Smith and Ron Keil, incorporated by reference from the registrant’s Annual Report on Form 10-KSB filed on March 26, 1999.
	10	.2	Form of Warrant Associated with 9.5% Convertible Note Due 2004, incorporated by reference from the registrant’s Quarterly Report on Form 10-QSB filed on May 17, 1999.
	10	.3	Lease Agreement dated December 29, 2006, by and between the registrant and Howard Hughes Properties, Limited Partnership, for 1120 Town Center Dr. Suite 260.
	10	.4	Form of Indemnification Agreement, incorporated by reference from the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.
	10	.5	Amended and Restated 1999 Stock Option Plan, incorporated by reference from the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.*
	10	.6	Philadelphia Brokerage Corporation Warrant to Purchase 25,000 Shares of Common Stock, incorporated by reference from the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.
	10	.7	Triage Capital Management LP Warrant to Purchase 50,000 Shares of Common Stock, incorporated by reference from the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.
	10	.8	Mellon HBV SBV, LLC Warrant to Purchase Shares of Common Stock, incorporated by reference from the registrant’s quarterly report on 10-QSB/A filed on August 19, 2003.
	10	.9	Amended and Restated 1999 Directors’ Stock Option Plan, incorporated by reference from the registrant’s registration statement on Form S-8 filed on September 10, 2003.*
	10	.10	Philadelphia Brokerage Corporation warrant to Purchase 75,000 Shares of Common Stock, incorporated by reference from the registrant’s registration statement on Form SB-2 filed on September 25, 2003.
	10	.11	Distribution Agreement by and between the registrant and TCS Aces Pty Limited, incorporated by reference from the registrant’s registration statement on Form SB-2/A filed on December 10, 2003.
	10	.12	Distribution Agreement by and between the registrant and Technical Casino Supplies Ltd, incorporated by reference from the registrant’s Current Report on Form 8-K filed on February 15, 2005.
	10	.13	License and Manufacturing Agreement dated February 27, 2006, between VendingData Corporation and Dolphin Products Pty Limited (incorporated by reference to Exhibit 10.26 to the registrant’s Annual Report of Form 10-K filed on March 31, 2006).
	10	.14	Patent Purchase Agreement dated October 1, 2005 among VendingData Corporation, William Westmore Purton, Dolphin Products Pty Ltd. and Dolphin Advanced Technologies Pty Ltd. (incorporated by reference to Exhibit 10.27 to the registrant’s Annual Report on Form 10-K filed on March 31, 2006).
	10	.15	Form of Warrant (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2005).
	10	.16	Employment Agreement dated September 29, 2005 between VendingData Corporation and Mark Newburg (incorporated by reference to Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2005).*
	10	.17	Employment Agreement dated September 29, 2005 between VendingData Corporation and Arnaldo Galassi (incorporated by reference to Exhibit 10.5 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2005).*
	10	.18	Employment Agreement dated September 29, 2005 between VendingData Corporation and Peter Zee
	10	.19	Senior Secured Note Purchase Agreement dated May 2, 2006 among VendingData Corporation and the Bricoleur Funds (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K dated May 2, 2006)

Number			Exhibit Description
	10	.20	Securities Put Agreement dated May 2, 2006 among VendingData Corporation and the Bricoleur Funds (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K dated May 2, 2006)
	10	.21	Security Agreement dated May 2, 2006 among VendingData Corporation and the Bricoleur Funds (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K dated May 2, 2006)
	10	.22	Registration Rights Agreement dated May 2, 2006 among VendingData Corporation and the Bricoleur Funds (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K dated May 2, 2006)
	10	.23	Share Sale Agreement dated July 5, 2006 among VendingData Corporation and William Westmore Purton, and Synwood Pty Ltd (incorporated by reference to Exhibit 10.8 to the registrant’s Quarterly Report on Form 10-QSB filed on August 14, 2006)
	10	.24	Registration Rights Agreement dated July 11, 2006 among VendingData Corporation and William Westmore Purton, and Synwood Pty Ltd. (incorporated by reference to Exhibit 10.8 to the registrant’s Quarterly Report on Form 10-QSB filed on August 14, 2006)
	10	.25	Alliance Agreement dated October 11, 2006 between VendingData Corporation and Elixir Group Limited (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2006)
	10	.26	Amended and Restated Sales Representative Agreement dated October 11, 2006 between VendingData Corporation and Elixir Group Limited (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2006)
	10	.27	Securities Purchase Agreement dated October 11, 2006 between VendingData Corporation and Elixir Group Limited (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-QSB filed on November 14, 2006)
	10	.29	Securities Purchase Agreement dated March 27, 2007, incorporated by reference from the registrant’s Current Report on Form 8-K filed on March 30, 2007
	10	.30	Registration Rights Agreement dated March 28, 2007, incorporated by reference from the registrant’s Current Report on Form 8-K filed on March 30, 2007
	10	.31	Warrant dated March 28, 2007, incorporated by reference from the registrant’s Current Report on Form 8-K filed on March 30, 2007
	14	.1	Code of Ethics, incorporated by reference from the registrant’s annual report on 10-KSB filed March 30, 2004.
	23	.1	Consent of Piercy Bowler Taylor and Kern
	23	.2	Consent of BDO Kendalls Audit & Assurance (vic) (formerly Horwath Melbourne)
	31	.1	Certification under Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification under Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

* Management contract or compensatory plan or arrangement.

EX-3.3

Exhibit 3.3

DEAN HELLER
Secretary of State
204 North Carson Street. Suite 1
Carson City, Nevada 89701-4299
(775) 684 5708
Website: secretaryofstate.biz

Entity #
C5282–1999
Document Number:
20050340190–14
Date Filed:
8/23/2005 1:36:35 PM
In the office of

Certificate of Amendment
(PURSUANT TO NRS 78.385 and 78.390)

/s/ Dean Heller
Dean Heller
Secretary of State

Important Read attached instructions before completing form. ABOVE SPACE & FOR OFFICE USE ONLY

Certificate of Amendment to Articles of Incorporation
For Nevada Profit Corporations

(Pursuant to NRS 78.385 and 78.390 — After Issuance of Stock)

1. Name of corporation:
Vending Data Corporation

2. The articles have been amended as follows (provide article numbers, if available):

Section 4.1 of Article IV of the Second Amended and Restated Articles of Incorporation of VendingData Corporation is hereby deleted and replaced in its entirety with a new Section 4.1 of Article IV to read in full as follows:

ARTICLE IV
SHARES OF STOCK

SECTION 4.1. CAPITAL STOCK

The Corporation is authorized to issue fifty million (50,000,000) shares of common stock $.001 par value (“Common Stock”), and ten million (10,000,000) shares of preferred stock $.001 par value (“Preferred Stock”). Common Stock and Preferred Stock may be issued from time to time without action by the stockholders. Common Stock and Preferred Stock may be issued for such consideration as may be fixed from time to time by the Board of Directors.

3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the* articles of incorporation have voted in favor of the amendment is: Majority of voting power required.

4. Effective date of filing (optional):

	(must not be later then 90 days after the certificate is filed)
5. Officer Signature (required):

* If any proposed amendment would after or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless of limitations or restrictions on the voting power thereof.

IMPORTANT: Failure to include any of the above information and submit the proper fees may cause this filing to be rejected.

This form must be accompanied by appropriate fees. See attached for schedule.	Nevada Security of State AM 78.385 Amend 2003
	Revised on: [ILLEGIBLE]

EX-3.4

Exhibit 3.4

STATE OF NEVADA

ROSS MILLER
Secretary of State

SCOTT W. ANDERSON
Deputy Secretary
for Commercial Recordings

OFFICE OF THE
SECRETARY OF STATE

Certified Copy

January 9, 2007

Job Number:	C20070109-0711
Reference Number:	00001153972-98
Expedite: Through Date:

The undersigned filing officer hereby certifies that the attached copies are true and exact copies of all requested statements and related subsequent documentation filed with the Secretary of State’s Office, Commercial Recordings Division listed on the attached report.

Document Number(s)	Description	Number of Pages
20070014313-31	Amendment	1 Pages/1 Copies

	Respectfully,
	/s/ Ross Miller
	ROSS MILLER
	Secretary of State
By	/s/ [ILLEGIBLE]
	Certification Clerk

Commercial Recording Division
202 N. Carson Street
Carson City, Nevada 89701-4069
Telephone (775) 684-5708
Fax (775) 684-7138

DEAN HELLER
Secretary of State
204 North Carson Street, Suite 1
Carson City, Nevada 89701-4299
(775) 684 5708
Website: secretaryofstate.biz

Certificate of Amendment
(PURSUANT TO NRS 78.385 and 78.390)

Filed in the office of	Document Number
	20070014313-31
/s/ Ross Miller	Filing Date and Time
Ross Miller	01/09/2007 9:34 AM
Secretary of State	Entity Number
State of Nevada	C5282-1999

ABOVE SPACE IS FOR OFFICE USE ONLY

Certificate of Amendment to Articles of Incorporation
For Nevada Profit Corporations
(Pursuant to NRS 78.385 and 78.390 — After Issuance of Stock)

1. Name of corporation:
VendingData Corporation

2. The articles have been amended as follows (provide article numbers, if available):

ARTICLE IV

Section 4.1 CAPITAL STOCK

     This Corporation shall have the authority to issue an aggregate of Seventy Million (70,000,000) shares of common stock, par value $0.001 (hereinafter, “Common Stock”), and Ten Million (10,000,000) shares of preferred stock, par value $0.001 (hereinafter, “Preferred Stock”). Common Stock and Preferred Stock may be issued from time to time without action by the stockholders. Common Stock and Preferred Stock may be issued for such consideration as may be fixed from time to time by the Board of Directors.

3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the * articles of incorporation have voted in favor of the amendment is: 25, 801, 496

4. Effective date of filing (optional):       Upon filing.

	(must not be later than 90 days after the certificate is filed)
5. Officer Signature (required):	/s/ Mark R. Newburg
	Mark R. Newburg, President

* If any proposed amendment would after or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless of limitations or restrictions on the voting power thereof.

IMPORTANT: Failure to include any of the above information and submit the proper fees may cause this filing to be rejected.

This form must be accompanied by appropriate fees.	Nevada Secretary of State AM 78.385 Amend 2003
	Revised on: 09/29/05

EX-10.3

Exhibit 10.3

CANYONS CENTER

SUMMERLIN

LAS VEGAS, NEVADA

LEASE AGREEMENT

between

HOWARD HUGHES PROPERTIES,
LIMITED PARTNERSHIP

and

VENDING DATA CORPORATION

Dated December 29, 2006

Page 1

LEASE AGREEMENT

TABLE OF CONTENTS

	PAGE
ARTICLE 1 DEFINITIONS		3
ARTICLE 2 LEASE GRANT		3
ARTICLE 3 LEASE TERM		3
3.1 Delivery of Possession		3
3.2 Substantial Completion of Premises		3
3.3 Landlord Delays		3
ARTICLE 4 USE OF PREMISES AND COMMON AREAS		3
4.1 Premises		3
4.2 Common Areas of Building		3
4.3 Landlord’s Rights in Common Areas		3
ARTICLE 5 BASE RENT AND ADDITIONAL RENT		3
5.1 Base Rent		3
5.2 Intentionally Omitted		3
5.3 Additional Rent		3
5.4 Interest on Late Payments		3
ARTICLE 6 BASE RENT ADJUSTMENT		3
ARTICLE 7 SERVICES TO BE FURNISHED BY LANDLORD		3
ARTICLE 8 IMPROVEMENTS TO BE MADE BY LANDLORD		3
ARTICLE 9 MAINTENANCE AND REPAIR OF PREMISES BY LANDLORD		3
ARTICLE 10 GRAPHICS		3
ARTICLE 11 CARE OF THE PREMISES BY TENANT		3
ARTICLE 12 REPAIRS AND ALTERATIONS BY TENANT		3
ARTICLE 13 USE OF ELECTRICAL SERVICES BY TENANT		3
ARTICLE 14 LAWS AND REGULATIONS		3
14.1 General		3
14.2 Hazardous Materials		3
14.3 Certain Insurance Risks		3
ARTICLE 15 BUILDING RULES		3
ARTICLE 16 ENTRY BY LANDLORD		3
ARTICLE 17 ASSIGNMENT AND SUBLETTING		3
ARTICLE 18 LIENS		3
ARTICLE 19 INSURANCE		3
19.1 Property Insurance		3
19.2 Liability Insurance		3
19.3 Requirements for Insurance Policies		3
19.4 Waiver of Subrogation Rights		3
ARTICLE 20 INDEMNITY		3
ARTICLE 21 PROPERTY DAMAGE		3
ARTICLE 22 CONDEMNATION		3
ARTICLE 23 DAMAGES FROM CERTAIN CAUSES		3
ARTICLE 24 EVENTS OF DEFAULT		3

Page 2

	PAGE
ARTICLE 25 LANDLORD’S REMEDIES		3
ARTICLE 26 LANDLORD’S DEFAULT		3
ARTICLE 27 PEACEFUL ENJOYMENT		3
ARTICLE 28 HOLDING OVER		3
ARTICLE 29 SUBORDINATION TO MORTGAGE		3
ARTICLE 30 LANDLORD’S LIEN		3
ARTICLE 31 ATTORNEYS’ FEES		3
ARTICLE 32 NO IMPLIED WAIVER		3
ARTICLE 33 PERSONAL LIABILITY		3
ARTICLE 34 SECURITY DEPOSIT/LETTER OF CREDIT		3
ARTICLE 35 NOTICE		3
ARTICLE 36 SEVERABILITY		3
ARTICLE 37 RECORDATION		3
ARTICLE 38 GOVERNING LAW		3
ARTICLE 39 FORCE MAJEURE		3
ARTICLE 40 TIME OF PERFORMANCE		3
ARTICLE 41 TRANSFERS BY LANDLORD		3
ARTICLE 42 COMMISSIONS		3
ARTICLE 43 EFFECT OF DELIVERY OF THIS LEASE		3
ARTICLE 44 CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY		3
ARTICLE 45 JOINT AND SEVERAL LIABILITY		3
ARTICLE 46 INTERPRETATION		3
ARTICLE 47 INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS		3
ARTICLE 48 WAIVER OF JURY TRIAL		3
ARTICLE 49 NO MERGER		3
ARTICLE 50 COUNTERPARTS		3
ARTICLE 51 EXHIBITS		3

Page 3

LIST OF EXHIBITS

		Principal Reference
Exhibit	Description	“In Section/Article”
“A”	Legal Description		1.4
“B”	Floor Plan of the Premises		1.15
“C”	Parking Agreement		4.2(ii)
“D”	Work Letter		8
“E”	Rules and Regulations		15
“F”	Commencement Memorandum		1.22

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CANYONS CENTER

LEASE AGREEMENT

     THIS LEASE AGREEMENT (the “Lease”), is made and entered into as of the 29th day of December, 2006, between HOWARD HUGHES PROPERTIES, LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”), and VENDING DATA CORPORATION, a Nevada corporation (“Tenant”).

W I T N E S S E T H:

ARTICLE 1
DEFINITIONS

     1.1 Intentionally omitted.

     1.2 “Allowance” shall mean an amount equal to Seven and 00/100 Dollars ($7.00) per square foot of Usable Area in the Premises. The Premises are stipulated for all purposes to contain six thousand one hundred thirty-five (6,135) square feet of Usable Area.

     1.3 “Base Rent” shall be determined as follows:

     (i) During months one (1) through twelve (12) of the Lease Term, the Base Rent shall be Thirty and 00/100 Dollars ($30.00) per year for each square foot of Rentable Area of the Premises which is equal to Two Hundred Eleven Thousand One Hundred Ten and 00/100 Dollars ($211,110.00) per annum.

     (ii) During months thirteen (13) through twenty-four (24) of the Lease Term, the Base Rent shall be Thirty-One and 20/100 Dollars ($31.20) per year for each square foot of Rentable Area of the Premises which is equal to Two Hundred Nineteen Thousand Five Hundred Fifty-Four and 40/100 Dollars ($219,554.40) per annum.

     (iii) During months twenty-five (25) through thirty-six (36) of the Lease Term, the Base Rent shall be Thirty-Two and 44/100 Dollars ($32.44) per year for each square foot of Rentable Area of the Premises which is equal to Two Hundred Twenty-Eight Thousand Two Hundred Eighty and 28/100 Dollars ($228,280.28) per annum.

     (iv) During months thirty-seven (37) through forty-eight (48) of the Lease Term, the Base Rent shall be Thirty-Three and 74/100 Dollars ($33.74) per year for each square foot of Rentable Area of the Premises which is equal to Two Hundred Thirty-Seven Thousand Four Hundred Twenty-Eight and 38/100 Dollars ($237,428.38) per annum.

     (v) During months forty-nine (49) through sixty (60) of the Lease Term, the Base Rent shall be Thirty-Five and 09/100 Dollars ($35.09) per year for each square foot of Rentable Area of the Premises which is equal to Two Hundred Forty-Six Thousand Nine Hundred Twenty-Eight and 33/100 Dollars ($246,928.33) per annum.

     The Base Rent due for the first full calendar month during the Lease Term has been paid to Landlord by Tenant contemporaneously with Tenant’s execution hereof.

     1.4 “Building” shall mean (a) the parcel of real property described in Exhibit “A” attached hereto and incorporated herein, (b) the office building and parking structure built or to be built on such parcel of real property, and (c) any and all other improvements thereon and appurtenances thereto. The street address of the Building is 1120 Town Center Drive, Las Vegas, Nevada 89144; such street address may be modified by Landlord from time to time during the Lease Term.

     1.5 “Building Core” shall mean the area within the outermost finish face of that portion of the Building that incorporates those areas that provide service to the tenants of that floor and to the Building. These areas of service include: restroom facilities for men and women along with the vestibule and access, electrical, mechanical, and telephone rooms, janitor closets, elevators and service elevators along with lobby and stairs, vestibules, and all vertical floor penetrations for mechanical/electrical/plumbing for the Building.

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     1.6 “Building Shell” shall mean the condition of the Building completed with the following improvements: (a) outside walls (not including drywall), core walls, and elevator lobby areas completed to building standard condition for public areas; (b) unfinished concrete floors throughout the Premises, broom clean; (c) building standard 110 volt 220 amp. power supplied to the Building Core along with 277/480 volt fluorescent lighting power supplied to the Building Core; (d) men’s and ladies’ restroom facilities with building standard finished located on each floor on which the Premises are located; (e) building standard voice communication speakers and smoke detectors in accordance with applicable building codes and provided only at the core; and (f) mechanical, electrical, plumbing, life safety, heating, air conditioning and ventilation in Building Core area as required to connect to and service the Premises.

     1.7 “Commencement Date” shall mean the earlier of (i) the date that Tenant actually commences any business operations from the Premises, (ii) the date Tenant Improvements (as defined in Section 1.2 of Exhibit “D” — The Canyons Center Work Letter) have been substantially completed (as defined in Section 3.3 of the Lease), or (iii) February 1, 2007, except as the same may be delayed pursuant to Section 3.3 hereof. Notwithstanding the foregoing, Tenant is permitted entry to the Premises one (1) week prior to the Commencement Date for the purpose of installing fixtures or any other purpose permitted by Landlord. The early entry will be at Tenant’s sole risk and subject to all the terms and provisions of this Lease as though the Commencement Date had occurred, except for the payment of Rent, which will commence on the Commencement Date. Tenant, its agents, or employees will not interfere with or delay Landlord’s completion of construction of the Tenant Improvements. All rights of Tenant under this subsection 1.7 will be subject to the requirements of all applicable building codes, zoning requirements, and federal, state, and local laws, rules, and regulations, so as not to interfere with Landlord’s compliance with all laws.

     1.8 “Expense Stop” shall mean the amount (per square foot of Rentable Area of the Premises) Landlord herewith agrees to expend as its share of Operating Expense (which shall be a credit for Tenant to apply to offset Operating Expenses charged to the Premises), not to exceed the total amount of Operating Expenses for calendar year 2007 (the “Base Year”) (per square foot of Rentable Area in the Building); provided, however, that if occupancy of the Building during the Base Year is less than ninety-five percent (95%), Operating Expenses for the Base Year shall be “grossed up” to that amount of Operating Expenses that, using reasonable projections, would normally be expected to be incurred if the Building were ninety-five percent (95%) occupied during the Base Year. With respect to Real Property Taxes included in Operating Expenses for the Base Year, such amount shall be determined under the assumption that the Building is fully assessed as a completed and occupied unit.

     1.9 “Index” shall mean the Consumer Price Index, Urban Wage Earners and Clerical Workers for Los Angeles, Anaheim and Riverside Area, all items (1982-1984=100), as published by the Bureau of Labor Statistics of the United States Department of Labor. In the event that the Index is discontinued or is revised to substantially alter the calculations under Section 5.2, Landlord shall select such other government index which provides substantially the same result as would have been obtained if the Index had not been so discontinued or revised.

     1.10 “Laws” shall mean all applicable statutes, regulations, ordinances, requirements and orders promulgated by any federal, state, local or regional governmental authority now in force or in force after the Commencement Date.

     1.11 “Lease Interest Rate” shall mean the lesser of (a) that fluctuating rate of interest equal to two percentage points (2%) over the rate of interest announced from time to time by the Bank of America National Trust and Savings Association as its prime or reference commercial lending rate (or in the event such bank ceases to announce such rate, then by such other federally regulated banking institution as Landlord shall determine), or (b) the maximum interest rate permitted by law.

     1.12 “Lease Term” shall mean the term commencing on the Commencement Date and continuing until sixty (60) months after the first day of the first full calendar month following the Commencement Date.

     1.13 “Mortgagee” shall mean the mortgagee under a mortgage or beneficiary under a deed of trust holding a lien encumbering the Building or any holder of a ground leasehold interest in the Building or any part thereof.

     1.14 “Operating Expenses” shall mean all costs of any kind paid or incurred by Landlord in owning, operating, cleaning, equipping, protecting, lighting, repairing, replacing, heating, air-conditioning and maintaining the Building as a first class office project, and a proration of Operating Expenses for all common areas within Canyons Center as provided in the REA or as otherwise determined by Landlord, including by way of illustration but not limitation, all of the following: (a) all amounts charged to the Building pursuant to the REA; (b) Real Property Taxes; (c) all costs, charges and surcharges for utilities, water, sewage, janitorial, waste disposal and refuse removal and all other utilities and services provided to the Building; (d) insurance costs for which Landlord is responsible under this Lease or which Landlord or

Page 6

any Mortgagee deems necessary or prudent; (e) any costs levied, assessed or imposed pursuant to any applicable Laws; (f) the cost (amortized over such period as Landlord reasonably determines together with interest at the Lease Interest Rate on the unamortized balance) of any capital improvements to the Building or equipment replacements made by Landlord after the Commencement Date that are intended to reduce other Operating Expenses or are required by any Laws or are necessary in order to operate the Building at the same quality level as prior to such replacement; (g) costs and expenses of operation, repair and maintenance of all structural and mechanical portions and components of the Building including, without limitation, plumbing, communication, heating, ventilating and air-conditioning (“HVAC”), elevator, and electrical and other common Building systems; (h) a pro rata portion of the costs of the rental payments for the management office that is servicing the Canyons Center; (i) all costs incurred in the management and operation of the Building including, without limitation, gardening and landscaping, maintenance of all parking areas, structures and garages, maintenance of signs, resurfacing and repaving, painting, lighting, cleaning, and provision of Building security; (j) all personal property taxes levied on or attributable to personal property used in connection with the Building; (k) depreciation on personal property owned by Landlord which is consumed in the operation or maintenance of the Building; (l) rental or lease payments paid by Landlord for rented or leased personal property used in the operation or maintenance of the Building; (m) management fees, wages, salaries and other labor costs incurred in the management and operation of the Building; (n) fees for required licenses and permits; (o) reasonable legal, accounting and other professional fees; (p) reasonable and appropriate reserves for repair and replacement; and (q) a reasonable allowance to Landlord for supervision of all of the foregoing not to exceed five percent (5%) of the total of all other Operating Expenses. If the Building is not 95% occupied during any portion of the Lease Term, Landlord shall make an appropriate adjustment to Operating Expenses for such period employing sound accounting and management principles, to determine the amount of Operating Expenses that would have been incurred had the Building been 95% occupied during such period (collectively referred to as “Grossed-Up”). Operating Expenses shall not include depreciation of the Building or equipment therein, commissions of real estate brokers and leasing agents, nor any amounts expended for tenant improvements. Increases in controllable Operating Expenses shall not exceed four percent (4%) annually. Controllable Operating Expenses shall include any Operating Expenses other than Real Property Taxes, insurance and utility charges.

     1.15 “Premises” shall mean that space outlined on the floor plan attached to this Lease as Exhibit “B” and incorporated herein. The Premises are stipulated for all purposes to contain seven thousand thirty-seven (7,037) square feet of Rentable Area.

     1.16 “REA” shall mean that certain Canyons Center’s Conditions and Restrictions recorded with the Clark County Recorder on December 11, 1996 in Book 961211 and Instrument No. 00521 as such document may be further amended or supplemented from time to time; provided, however, that no such further amendment or supplement shall in any event decrease Tenant’s rights, materially increase Tenant’s financial obligations, or increase Tenant’s non-financial obligations under this Lease.

     1.17 “Real Property Taxes” shall mean and include any form of tax, assessment, license fee, license tax, business license fee, commercial rental tax, levy, charge, penalty, tax or similar imposition, imposed by any authority having the direct power to tax, including any city, county, state or federal government, or any school, lighting, drainage, transportation, air pollution, environmental or other improvement or special assessment district thereof, as against any legal or equitable interest of Landlord in the Building and/or the Premises, including, but not limited to, the following: (a) any tax on Landlord’s “right” to rent or “right” to other income from the Premises or as against Landlord’s business of leasing the Premises; (b) any assessment, tax, fee, levy or charge in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of Real Property Taxes (it is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies and charges be included within the definition of “Real Property Taxes” for the purposes of this Lease); (c) any assessment, tax, fee, levy or charge allocable to or measured by the area of the Premises or the rent payable hereunder, including, without limitation, any gross income tax or excise tax levied by the state, county, city or federal government, or any political subdivision thereof, with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy of the Building, or any portion thereof; (d) any assessment, tax, fee, levy or charge upon this transaction creating or transferring an interest or an estate in the Premises; (e) any assessment, tax, fee, levy or charge based upon the number of people employed, working at, or using the Premises or the Building, or utilizing public or private transportation to commute to the Premises or the Building; and (f) reasonable legal and other professional fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Real Property Taxes.

     Real Property Taxes shall not include federal or state income, franchise, inheritance or estate taxes of Landlord or any of the parties which comprise Landlord.

     1.18 “Rentable Area” of the Premises shall mean the total of the following measurements to be determined by Landlord: (a) the entire area included within the Premises, being the area bounded by the inside surface of any exterior glass walls (or the inside surface of the permanent exterior wall where there

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is no glass) of the Building bounding the Premises, the exterior of all walls separating the Premises from any public corridors or other public areas, and the centerline of all walls separating the Premises from other areas leased or to be leased to other tenants, (b) a pro rata portion based on the space occupied on the floor or floors on which the Premises is located (the “Floor(s)”) of the areas covered by the elevator lobbies, corridors, restrooms, and by mechanical rooms, electrical rooms and telephone closets situated on the Floor(s) (such pro rata portion shall be the same percentage that the amount of Rentable Area in the Premises bears to the Rentable Area on the Floor(s) on which the Premises is located), other than those servicing the entire Building, and (c) a pro rata portion of the lobby area on the ground floor of the Building and of the area of the Building containing the electrical/emergency equipment, fire pump equipment, electrical switching gear, telephone equipment, mail delivery room and other facilities serving the Building (such pro rata portion shall be the same percentage that the amount of Rentable Area of the Premises bears to the total Rentable Area in the entire Building). The Building is stipulated for all purposes to contain one hundred three thousand eight hundred forty-nine (103,849) square feet of Rentable Area.

     1.19 “Security Deposit” shall mean the sum of One Hundred Thousand and 00/100 Dollars ($100,000.00), to be secured by a letter of credit (“Letter of Credit”), as further defined in Article 34.

     1.20 “Tenant’s Share” shall be a fraction of which the numerator is the Rentable Area of the Premises as set forth in Section 1.15 and the denominator is the Rentable Area in the Building as set forth in Section 1.18.

     1.21 “Usable Area” for the Premises shall mean the Rentable Area for the Premises, minus the following reductions as determined by Landlord: (a) the Premises pro rata portion of the lobby area on the ground floor and electrical/emergency equipment, fire pump equipment, electrical switching gear, telephone equipment, mail delivery facilities, elevator penthouse, security rooms, trash rooms and other areas which service the entire Building as specified in the definition of Rentable Area, and (b) the Premises’ pro rata portion of the space occupied on the Floor(s) of the Premises covered by the elevator lobbies, corridors, restrooms, mechanical rooms, electrical rooms and telephone closets situated on such Floors as specified in the definition of Rentable Area.

     1.22 “Commencement Memorandum” shall mean a document similar to Exhibit “F” attached hereto. The Commencement Memorandum, among other things, shall contain a reference to the Rentable Area of the Premises and Usable Area of the Premises. Tenant agrees that the Rentable Area and Usable Area of the Premises stated in the Commencement Memorandum shall be binding throughout the Lease Term.

     1.23 “Intellectual Property” shall mean that certain trademarks, service marks, trade names and logos, including without limitation “Summerlin”, “The Hills”, “The Pueblo”, “The Trails”, “The Crossings”, “The Canyons”, “The Arbors”, and “The Willows” (collectively, “Intellectual Property”). Tenant expressly acknowledges that Landlord is the owner of the Intellectual Property and, therefore, Tenant shall not, without the express written permission of Landlord, utilize any of the Intellectual Property as part or all of its business names, trade names, product names, trademarks, service marks, or any other identifying devices associated with its business, products or services. Furthermore, Tenant shall not challenge or attack the validity or enforceability of any of the Intellectual Property at any time during the term of the Lease and for a period of two (2) years thereafter. Tenant shall indemnify and hold Landlord harmless for any and all loss, cost or damage suffered by Landlord as a result of Tenant’s breach of this Section 1.23. This Section 1.23 shall survive the expiration or termination of this Lease.

ARTICLE 2
LEASE GRANT

     Subject to and upon the terms and conditions herein set forth, Landlord leases to Tenant and Tenant leases from Landlord the Premises.

ARTICLE 3
LEASE TERM

     3.1 Delivery of Possession.

     Landlord will be deemed to have delivered possession of the Premises to Tenant on the Commencement Date, as it may be adjusted pursuant to Section 3.3 and the Work Letter. Landlord will construct or install in the Premises the Improvements (hereinafter defined) to be constructed or installed by Landlord according to the Work Letter. Tenant acknowledges that neither Landlord nor its agents or employees have made any representations or warranties as to the suitability or fitness of the Premises for the conduct of Tenant’s business or for any other purpose, nor has Landlord or its agents or employees agreed to undertake any alterations or construct any tenant improvements to the Premises except as expressly provided in this Lease and the Work Letter. If for any reason Landlord cannot deliver

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possession of the Premises to Tenant on or before the fixed date component of the Commencement Date, this Lease will not be void or voidable, and Landlord will not be liable to Tenant for any resultant loss or damage.

     3.2 Substantial Completion of Premises.

     If, by the fixed date specified in Section 1.7, the Premises have not been substantially completed pursuant to the Work Letter due to any cause other than Landlord’s default, Landlord shall have no liability therefor, and the Lease Term (including without limitation, Tenant’s obligation to pay Rent) shall nonetheless commence as of said fixed date.

     3.3 Landlord Delays.

     If the Premises are not substantially completed by the fixed date specified in Section 1.7 due to default on the part of Landlord (as determined in accordance with Article 26 below), then as Tenant’s sole remedy for the delay in Tenant’s occupancy of the Premises, the fixed date component of the definition of the Commencement Date shall be delayed for the period of delay in substantial completion of the Premises resulting from Landlord’s default. The Premises shall be deemed “substantially completed” when (i) Landlord has provided reasonable access to the Premises to Tenant, (ii) Landlord has completed the work covered by the Work Letter other than details of construction which do not materially interfere with Tenant’s use of the Premises, and (iii) Landlord has obtained a permanent or temporary certificate of occupancy for the Premises (or its equivalent).

ARTICLE 4
USE OF PREMISES AND COMMON AREAS

     4.1 Premises.

     The Premises shall be used for general office purposes and for no other purposes. Tenant will use the Premises in a careful, safe, and proper manner. Tenant agrees not to use or permit the use of the Premises for any purpose which is illegal or prohibited by any applicable Laws, or which, in Landlord’s opinion, creates a nuisance or would increase the cost of insurance coverage with respect to the Building. Tenant shall not use or occupy the Premises in violation of such rules and regulations described in Article 15 below nor in violation of the REA or any other recorded covenants, conditions or restrictions affecting the Building. Tenant shall not place a load upon the Premises exceeding the average pounds live load per square foot of floor area specified for the Building by Landlord’s architect, with the partitions to be considered part of the live load. Landlord reserves the right to prescribe the weight and position of all safes, files and heavy equipment which Tenant desires to place in the Premises so as to distribute properly the weight thereof.

     4.2 Common Areas of Building.

     Tenant shall have the nonexclusive right to use in common with other tenants in the Building, and subject to the rules of the Building referred to in Article 15 below, the following areas (“Common Areas”) appurtenant to the Premises:

     (i) The common entrances, lobbies, restrooms, elevators, stairways and accessways, loading docks, ramps, drives and platforms and any passageways and serviceways thereto, and the common pipes, conduits, wires and appurtenant equipment serving the Premises;

     (ii) Parking areas (subject to the provisions of the Parking Agreement attached hereto as Exhibit “C”), loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped areas appurtenant to the Building.

     4.3 Landlord’s Rights in Common Areas.

     Landlord reserves the right from time to time without unreasonable interference with Tenant’s use:

     (i) To install, use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant meters and equipment for service to other parts of the Building above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas, and to relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment included in the Premises which are located in the Premises or located elsewhere outside the Premises, and to expand the Building;

     (ii) To make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, loading and unloading areas,

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ingress, egress, direction of traffic, landscaped areas and walkways and, subject to the Parking Agreement, parking spaces and parking areas;

     (iii) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available;

     (iv) To use the Common Areas while engaged in making additional improvements, repairs or alterations to the Building, or any portion thereof; and

     (v) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Building as Landlord may, in the exercise of sound business judgment, deem to be appropriate.

ARTICLE 5
BASE RENT AND ADDITIONAL RENT

     5.1 Base Rent.

     Tenant agrees to pay to Landlord during the Lease Term, without any setoff or deduction whatsoever the Base Rent, and all such other sums of money as shall become due hereunder as Additional Rent. Should Tenant fail to pay any Additional Rent in a timely manner, Landlord shall be entitled to exercise all such rights and remedies as are herein provided in the case of the nonpayment of Base Rent. The annual Base Rent for each calendar year or portion thereof during the Lease Term, together with estimated Additional Rent pursuant to Article 6 hereof then in effect, shall be due and payable in advance, in lawful money of the United States of America which shall be legal tender at the time of payment, in twelve (12) equal installments on the first day of each calendar month during the initial term of this Lease and any extensions or renewals thereof, and Tenant hereby agrees to pay such Base Rent and Additional Rent to Landlord at Landlord’s address provided herein (or such other address as may be designated by Landlord in writing from time to time) monthly, in advance, and without demand. If the Lease Term commences on a day other than the first day of a month or terminates on a day other than the last day of a month, then the installments of Base Rent and Additional Rent for such month or months shall be prorated, based on the number of days in such month.

     5.2 Intentionally Omitted.

     5.3 Additional Rent.

     All charges payable by Tenant hereunder other than Base Rent (including, without limitation, Operating Expenses payable pursuant to Article 6 below) are called “Additional Rent.” Unless this Lease provides otherwise, all Additional Rent shall be paid with the next monthly installment of Base Rent. Base Rent and Additional Rent are sometimes referred to collectively as “Rent.”

     5.4 Interest on Late Payments.

     All installments of Rent not paid when due and payable shall bear interest at the Lease Interest Rate from the date due until paid. In addition, if any installment of Rent is not received by Landlord within five (5) days after notice that said amount is past due from Landlord to Tenant, Tenant shall pay to Landlord, as Additional Rent, five percent (5%) of the overdue amount as a late charge. Landlord’s acceptance of any late charge or interest shall not constitute a waiver of Tenant’s default with respect to the overdue amount nor prevent Landlord from exercising any of the other rights and remedies available to Landlord under this Lease or any law now or hereafter in effect.

ARTICLE 6
BASE RENT ADJUSTMENT

     The Base Rent payable hereunder shall be adjusted upward from time to time in accordance with the following provisions:

     (a) Tenant shall pay to Landlord as an adjustment to Rent, an amount equal to the excess (the “Excess”) from time to time of total annual Operating Expenses per square foot of Rentable Area of the Premises, as Grossed-Up, over and above the Expense Stop. The Excess shall be obtained by multiplying (i) the difference between the annual Operating Expense per square foot of Rentable Area in the Premises and the Expense Stop, by (ii) the total Rentable Area of the Premises as set forth in Section 1.15. Such amount shall be paid in advance in monthly installments on the same dates as Base Rent is due and payable hereunder based on Landlord’s notice delivered to Tenant from time to time setting forth Landlord’s good faith estimate of the Operating Expenses for

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the current calendar year. Landlord shall have the right to adjust such amount no more than once a year to reflect any changes in Landlord’s estimate of Operating Expenses.

     (b) By April 1 of each calendar year during the Lease Term, or as soon thereafter as practicable, Landlord shall furnish to Tenant a statement (“Actual Statement”) of Landlord’s annual Operating Expenses, as Grossed-Up, for the previous calendar year. If for any calendar year the amounts collected from Tenant for the prior year, as a result of Landlord’s estimate of Operating Expenses, exceeds the amount of the Excess actually due during such prior year, then Landlord shall refund to Tenant any overpayment (or at Landlord’s option, apply such amount against Rent due or to become due hereunder). Likewise, Tenant shall pay to Landlord, on demand, any underpayment with respect to the prior year.

     (c) In the event of any good faith dispute as to the amount of the Excess as set forth in the statement of actual Operating Expenses, Tenant shall have the right, no more frequently than once per calendar year, after reasonable notice to Landlord and at reasonable times, to inspect and photocopy Landlord’s Operating Expenses records at Landlord’s offices. If, after such inspection and photocopy, Tenant continues, in good faith, to dispute the amount of the Excess as set forth in said statement, Tenant shall be entitled not later than one (1) year following Tenant’s receipt of an Actual Statement to retain a national, independent, certified public accountant who is not contracted on a contingency fee basis and is mutually acceptable to Landlord and Tenant to audit Landlord’s Operating Expenses records with respect to the calendar year covered by Actual Statement to determine the proper amount of the Excess. Landlord shall be entitled to review the results of such audit promptly after completion of same. If such audit proves that Landlord has overcharged Tenant, then within fifteen (15) days after the results of the audit are made available to Landlord, Landlord shall credit Tenant the amount of such overcharge toward the payments of Base Rent and Additional Rent next coming due under this Lease. If the results of such audit prove that Landlord has undercharged Tenant, then within fifteen (15) days after the results of the audit are made available to Tenant, Tenant shall pay to Landlord the amount of any such undercharge. Tenant agrees to pay the cost of such audit, provided that Landlord shall reimburse Tenant the amount of such cost if the results of such audit prove that Landlord’s determination of the Excess (as set forth in the Actual Statement) was in error by more than six percent (6%). If Tenant does not request an audit in accordance with the provisions of this Section 6(c) within one (1) year after Tenant’s receipt of an Actual Statement, such Actual Statement shall be conclusively binding upon Tenant. Landlord shall be required to maintain records of all Operating Expenses for three (3) years following the issuance of the Operating Expense statement for such Operating Expenses. The payment by Tenant of any amounts pursuant to this Article shall not preclude Tenant from questioning the correctness of any such statement.

ARTICLE 7
SERVICES TO BE FURNISHED BY LANDLORD

     Landlord agrees to furnish Tenant the following services as an Operating Expense for the Building (except as specifically provided below):

     (a) Hot and cold water at those points of supply provided for general use of other tenants in the Building, central heat and air conditioning in season, at such temperatures and in such amounts as are considered by Landlord to be standard or as required by governmental authority; provided, however, heating and air conditioning service at times other than “Normal Business Hours” for the Building (which are 8:00 a.m. to 6:00 p.m. on Mondays through Fridays and 8:00 a.m. to 1:00 p.m. on Saturdays, exclusive of federally recognized holidays), shall be furnished upon receipt of a phone request by Tenant utilizing Landlord’s computer which permits Tenant to make phone requests for such heating and air conditioning services. Tenant shall bear the entire cost of such additional service as such costs are determined by Landlord from time to time.

     (b) Routine maintenance and electric lighting service for all Common Areas and service areas of the Building in the manner and to the extent deemed by Landlord to be standard.

     (c) Janitorial service, five (5) days a week, exclusive of federally recognized holidays; provided, however, if Tenant’s floor covering or other improvements require special treatment, Tenant shall pay the additional cleaning cost attributable thereto as Additional Rent upon presentation of a statement therefor by Landlord.

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     (d) Subject to the provisions of Article 13, facilities to provide all electrical current required by a typical office user, as determined by Landlord, in its use and occupancy of the Premises.

     (e) All Building Standard fluorescent bulb replacement in the Premises and fluorescent and incandescent bulb replacement in the Common Areas of the Building.

     (f) Security in the form of limited access to the Building during other than Normal Business Hours shall be provided in such form as Landlord deems appropriate. Landlord may charge a fee for card keys or other security devices. Landlord, however, shall have no liability to Tenant, its employees, agents, invitees or licensees for losses due to theft or burglary, or for damages resulting from the actions of unauthorized persons on the Premises or in the Building and Landlord shall not be required to insure against any such losses. Tenant shall cooperate fully in Landlord’s efforts to maintain security in the Building and shall follow all regulations promulgated by Landlord which respect thereto.

     The failure by Landlord to any extent to furnish, or the interruption or termination of these defined services in whole or part, resulting from causes beyond the reasonable control of Landlord shall not render Landlord liable in any respect nor be construed as an eviction of Tenant, nor work an abatement of Rent, nor relieve Tenant from the obligation to fulfill any covenant or agreement hereof. Should any of the equipment or machinery used in the provision of such services for any cause cease to function properly, Tenant shall have no claim for offset or abatement or rent or damages on account of an interruption in service resulting therefrom.

ARTICLE 8
IMPROVEMENTS TO BE MADE BY LANDLORD

     Except as otherwise provided in the Work Letter attached hereto as Exhibit “D,” all installations and improvements now or hereafter placed on the Premises shall be for Tenant’s account and at Tenant’s cost (and Tenant shall pay ad valorem taxes and the cost of any increased insurance premiums thereon or attributable thereto), which cost shall be payable by Tenant to Landlord upon demand as Additional Rent.

ARTICLE 9
MAINTENANCE AND REPAIR OF PREMISES BY LANDLORD

     Except as otherwise expressly provided herein, Landlord shall not be required to perform any maintenance or to make any repairs to the Premises.

ARTICLE 10
GRAPHICS

     Landlord shall provide and install, at Tenant’s cost, all letters or numerals on doors in the Premises; all such letters and numerals shall be in the standard graphics for the Building and no others shall be used or permitted on the Premises without Landlord’s prior written consent. Tenant shall have the right to designate one (1) name on the directory board in the lobby of the Building. Landlord shall have the option to maintain, in place of the directory board in the lobby of the Building, a computerized directory with display screen which has the capacity to accommodate Tenant’s name designation.

ARTICLE 11
CARE OF THE PREMISES BY TENANT

     Tenant agrees not to commit or allow any waste to be committed on any portion of the Premises, and at the termination of this Lease agrees to deliver up the Premises to Landlord in as good condition as at the Commencement Date of this Lease, ordinary wear and tear excepted.

ARTICLE 12
REPAIRS AND ALTERATIONS BY TENANT

     Tenant covenants and agrees that Tenant shall be responsible, at Tenant’s own cost and expense, for costs incurred by Landlord to repair or replace any damage done to the Building, or any part thereof, caused by Tenant or Tenant’s agents, employees, invitees, or visitors, to as good a condition as it was in prior to such damage. Tenant shall, when and if needed or whenever requested by Landlord to do so, at Tenant’s sole cost and expense, maintain and make all repairs to the Premises and the improvements therein, to keep, maintain and preserve the Premises in first-class condition, excepting ordinary wear and tear. Any such maintenance and repairs shall be performed by a contractor approved by Landlord. If Tenant fails to make such repairs or replacements promptly, Landlord may, at its option, make repairs or replacements, and Tenant shall pay the cost thereof to Landlord on demand as Additional Rent. Tenant

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agrees with Landlord not to make or allow to be made any alterations to the Premises, install any vending machines on the Premises, or place signs on the Premises which are visible from outside the Premises, without first obtaining the written consent of Landlord in each such instance, which consent may be given on such conditions as Landlord may elect. Tenant shall deliver to Landlord, for Landlord’s approval prior to the construction of any alterations, a complete set of plans and specifications for the proposed alterations, additions or improvements, copies of contracts with general contractors, evidence of contractor’s insurance and bonds, and all necessary permits for such construction. Landlord may require Tenant to provide demolition and/or lien and completion bonds in form and amount satisfactory to Landlord. All alterations, additions, and improvements will be accomplished in a good and workmanlike manner, in conformity with all applicable laws, and by a contractor approved by Landlord. Landlord’s approval of the plans, specifications and working drawings for Tenant’s alterations shall create no responsibility or liability on the part of Landlord for their completeness, design, sufficiency, or compliance with all laws, rules and regulations of governmental agencies or authorities. Upon completion of any such work, Tenant shall provide Landlord with “as built” plans, copies of all construction contracts, and proof of payment for all labor and materials. Any and all alterations to the Premises shall become the property of Landlord upon termination of this Lease (except for movable equipment or furniture owned by Tenant). Landlord may, nonetheless, require Tenant to remove any and all fixtures, equipment and other improvements installed on the Premises. In the event that Landlord so elects, and Tenant fails to remove such improvements, Landlord may remove such improvements at Tenant’s cost, and Tenant shall pay Landlord on demand the cost of restoring the Premises to the condition that existed immediately prior to the construction of such improvements.

ARTICLE 13
USE OF ELECTRICAL SERVICES BY TENANT

     Tenant’s use of electrical services furnished by Landlord shall be subject to the following:

     (a) Landlord agrees to furnish to the Premises five (5) watts of electric current, connected load, per square foot of Usable Area during Normal Business Hours within the Premises on an annualized basis for normal lighting, normal fractional horsepower office machines, and HVAC as required in Landlord’s judgment for the use and occupation of the Premises.

     (b) In the event that Tenant requires or uses more electric power than specified in Section 13(a) above, Landlord may, at Landlord’s option, require Tenant to pay the cost as reasonably determined by Landlord of such extraordinary usage as Additional Rent. In addition, Landlord may install checkmeters in or for the Premises, at Tenant’s sole cost and expense, and Tenant shall thereafter pay all charges of the utility company providing electric service and Landlord shall make an appropriate adjustment to Tenant’s obligation to pay a proportionate share of the Operating Expenses to account for the fact that Tenant is directly paying such metered charges.

ARTICLE 14
LAWS AND REGULATIONS

     14.1 General.

     At its sole cost and expense, Tenant will promptly comply with all Laws, statutes, ordinances, and governmental rules, regulations, or requirements now in force or in force after the Commencement Date, with the requirements of any board of fire underwriters or other similar body constituted now or after the date, with any direction or occupancy certificate issued pursuant to any law by any public officer or officers, as well as with the provisions of all recorded documents affecting the Premises, insofar as they relate to the condition, use, or occupancy of the Premises.

     14.2 Hazardous Materials.

     (a) For purposes of this Lease, “Hazardous Materials” means any explosives, radioactive materials, hazardous wastes, or hazardous substances, including without limitation substances defined as “hazardous substances” in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ## 9601-9657; the Hazardous Materials Transportation Act of 1975, 49 U.S.C. ## 1801-1812; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. ## 6901-6987; or any other federal, state, or local statute, law, ordinance, code, rule, regulation, order, or decree regulating, relating to, or imposing liability or standards of conduct concerning hazardous materials, waste, or substances now or at any time hereafter in effect (collectively, “Hazardous Materials Laws”).

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     (b) Tenant will not cause or permit the storage, use, generation, or disposition of any Hazardous Materials in, on, or about the Premises or the project by Tenant, its agents, employees, or contractors. Tenant will not permit the Premises to be used or operated in a manner that may cause the Premises or the project to be contaminated by any Hazardous Materials in violation of any Hazardous Materials Laws. Tenant will immediately advise Landlord in writing of (1) any and all enforcement, cleanup, remedial, removal, or other governmental or regulatory actions instituted, completed, or threatened pursuant to any Hazardous Materials Laws relating to any Hazardous Materials affecting the Premises; and (2) all claims made or threatened by any third party against Tenant, Landlord, or the Premises relating to damage, contribution, cost recovery, compensation, loss, or injury resulting from any Hazardous Materials on or about the Premises. Without Landlord’s prior written consent, Tenant will not take any remedial action or enter into any agreements or settlements in response to the presence of any Hazardous Materials in, on, or about the Premises.

     (c) Tenant will be solely responsible for and will defend, indemnify and hold Landlord, its agents, and employees harmless from and against all claims, costs, and liabilities, including attorneys’ fees and costs, arising out of or in connection with Tenant’s breach of its obligations in this Article 14. Tenant will be solely responsible for and will defend, indemnify, and hold Landlord, its agents, and employees harmless from and against any and all claims, costs, and liabilities, including attorneys’ fees and costs, arising out of or in connection with the removal, cleanup, and restoration work and materials necessary to return the Premises and any other property of whatever nature located in, on, or about the Building, to their condition existing prior to the introduction of Hazardous Materials by Tenant, its agents, employees or contractors. Tenant’s obligations under this Article 14 will survive the expiration or other termination of this Lease.

     14.3 Certain Insurance Risks.

     Tenant will not do or permit to be done any act or thing upon the Premises or the Building which would (i) jeopardize or be in conflict with fire insurance policies covering the Building or covering any fixtures and property in the Building; (ii) increase the rate of fire insurance applicable to the Building to an amount higher than it otherwise would be for general office use of the Building; or (iii) subject Landlord to any liability or responsibility for injury to any person or persons or to property by reason of any business or operation being carried on upon the Premises.

ARTICLE 15
BUILDING RULES

     Tenant will comply with the rules of the Building which are attached hereto as Exhibit “E” and incorporated herein by this reference, as such rules are reasonably adopted and altered by Landlord from time to time and will cause all of its agents, employees, invitees and visitors to do so; all changes to such rules will be sent by Landlord to Tenant in writing.

ARTICLE 16
ENTRY BY LANDLORD

     Tenant agrees to permit Landlord or its agents or representatives to enter into and upon any part of the Premises at all reasonable hours (and in emergencies at all times) to inspect the same, or to show the Premises to prospective purchasers, Mortgagees, tenants or insurers, to clean or make repairs, alterations or additions thereto, and Tenant shall not be entitled to any abatement or reduction of rent by reason thereof.

ARTICLE 17
ASSIGNMENT AND SUBLETTING

     17.1 Tenant shall not assign, sublease, transfer or encumber this Lease or any interest therein. Any attempted assignment or sublease by Tenant in violation of the terms and covenants of this Article 17 shall be void.

     17.2 If Tenant requests Landlord’s consent to an assignment of this Lease or subletting of all or part of the Premises, Landlord shall have the option (without limiting Landlord’s other rights hereunder) of terminating this Lease upon thirty (30) days notice. Landlord may then, at Landlord’s option, lease space to the prospective assignee or subtenant. If Landlord should fail to notify Tenant in writing of its decision within a thirty (30) day period after Landlord is notified in writing of the proposed assignment or sublease, Landlord shall be deemed to have refused to consent to such proposed assignment or sublease, and to have elected to keep this Lease in full force and effect.

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     17.3 All cash or other proceeds of any assignment, sale or sublease of Tenant’s interest in this Lease, whether consented to by Landlord or not, shall be paid to Landlord notwithstanding the fact that such proceeds exceed the Rent called for hereunder, unless Landlord agrees to the contrary in writing, and Tenant hereby assigns all rights it might have or ever acquire in any such proceeds to Landlord. This covenant and assignment shall run with the land and shall bind Tenant and Tenant’s heirs, executors, administrators, personal representatives, successors and assigns. Any assignee, sublessee or purchaser of Tenant’s interest in this Lease (all such assignees, sublessees and purchasers being hereinafter referred to as “Successors”), by assuming Tenant’s obligations hereunder, shall assume liability to Landlord for all amounts paid to persons other than Landlord by such Successor in consideration of any such sale, assignment or subletting, in violation of the provisions hereof.

     17.4 No assignment, sublease or other transfer consented to by Landlord, shall release Tenant or change Tenant’s primary liability to pay the rent and to perform all other obligations of Tenant under this Lease. Upon the occurrence of any default under this Lease, Landlord may proceed directly against Tenant without the necessity of exhausting any remedies against any subtenant or assignee. Upon termination of this Lease, any permitted subtenant shall, at Landlord’s option, attorn to Landlord and shall pay all Rent directly to Landlord. Landlord’s acceptance of Rent from any other person shall not constitute a waiver of any provision of this Article 17. Consent to one transfer shall not constitute a consent to any subsequent transfer. Landlord may consent to subsequent assignments or modifications of this Lease by Tenant’s transferee, without notifying Tenant or obtaining its consent. Such action shall not relieve Tenant of its liability under this Lease.

     17.5 No merger shall result from Tenant’s sublease of the Premises under this Article 17, Tenant’s surrender of this Lease or the termination of this Lease in any other manner. In any such event, Landlord may terminate any or all subtenancies or succeed to the interest of Tenant as sublandlord thereunder.

ARTICLE 18
LIENS

     Tenant will not permit any mechanic’s lien(s) or other liens to be placed upon the Premises or the Building and nothing in this Lease shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied, by inference or otherwise, to any person for the performance of any labor or the furnishing of any materials to the Premises, or any part thereof, nor as giving Tenant any right, power, or authority to contract for or permit the rendering of any services or the furnishing of any materials that would give rise to any mechanics’ or other liens against the Premises. In the event any such lien is attached to the Premises, then, in addition to any other right or remedy of Landlord, Landlord may, but shall not be obligated to, discharge the same. Any amount paid by Landlord for any of the aforesaid purposes shall be paid by Tenant to Landlord on demand as Additional Rent.

ARTICLE 19
INSURANCE

     19.1 Property Insurance.

     Landlord shall maintain property coverage insurance on the Building Shell and appurtenant structures in the Common Areas in such amounts as Landlord and any Mortgagees may deem necessary or appropriate. Such insurance shall be maintained at the expense of Landlord (as a part of Operating Expenses), and payments for losses thereunder shall be made solely to Landlord or the Mortgagees as their respective interests shall appear. Tenant shall obtain and keep in force at all times during the Lease Term, a policy or policies of insurance covering loss or damage to all of the improvements, betterments, income and business contents located within the Premises other than the Building Shell (including all improvements constructed pursuant to Exhibit “D”) in the amount of the full replacement value thereof as ascertained by the Tenant’s insurance carrier, as the same may exist from time to time, against all perils normally covered in an “all risk” policy (including the perils of flood and surface waters), as such term is used in the insurance industry; provided, however, that Tenant shall have no obligation to insure against earthquake.

     19.2 Liability Insurance.

     Tenant shall, at Tenant’s expense, maintain a policy of Commercial General Liability insurance insuring Landlord and Tenant against liability arising out of the ownership, use, occupancy or maintenance of the Premises. Such insurance shall be on an occurrence basis providing single-limit coverage in an amount not less than Two Million Dollars ($2,000,000) per occurrence. The initial amount of such insurance shall be subject to periodic increase upon reasonable demand by Landlord based upon inflation, increased liability awards, recommendation of professional insurance advisers, and other relevant factors. However, the limits of such insurance shall not limit Tenant’s liability nor relieve

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Tenant of any obligation hereunder. Landlord shall be named as an additional insured on said policies and the policies shall contain the following provision: “Such insurance as afforded by this policy for the benefit of Landlord shall be primary as respects any claims, losses or liabilities arising out of the use of Premises by the Tenant or by Tenant’s operation and any insurance carried by Landlord shall be excess and non-contributing.” The policy shall insure Tenant’s performance of the indemnity provisions of Articles 14 and 20.

     19.3 Requirements for Insurance Policies.

     Insurance required to be maintained by Tenant hereunder shall be in companies holding a “General Policyholders’ Rating” of A or better and a “financial rating” of 10 or better, as set forth in the most current issue of “Best’s Insurance Guide.” Tenant shall promptly deliver to Landlord, within thirty (30) days of the Commencement Date, original certificates evidencing the existence and amounts of such insurance. No such policy shall be cancelable or subject to reduction of coverage except after sixty (60) days prior written notice to Landlord. Tenant shall, within thirty (30) days prior to the expiration, cancellation or reduction of such policies, furnish Landlord with renewals or “binders” thereof. Tenant shall not do or permit to be done anything which shall invalidate the insurance policies required under this Lease.

     19.4 Waiver of Subrogation Rights.

     Tenant and Landlord shall obtain from the issuer of the insurance policies referred to in Section 19.1 a waiver of subrogation provision in said policies and Tenant and Landlord hereby release, relieve and waive any and all rights of recovery against Landlord or Tenant, or against the employees, officers, agents and representatives of Landlord or Tenant, for loss or damage arising out of or incident to the perils insured against under Section 19.1 which perils occur in, on or about the Premises or the Building, whether due to the negligence of Landlord or Tenant or their agents, employees, contractors or invitees. The extent of the waiver described in the immediately preceding sentence is limited to the extent of insurance carried by Landlord and Tenant pursuant to Section 19.1 of this Lease.

ARTICLE 20
INDEMNITY

     Tenant shall indemnify and hold harmless Landlord and all agents, servants and employees of Landlord from and against all claims, losses, damages, liabilities, expenses (including reasonable attorneys’ fees), penalties and charges arising from or in connection with (i) Tenant’s use of the Premises during the Lease Term, or (ii) the conduct of Tenant’s business, or (iii) any activity, work or things done, permitted or suffered by Tenant in or about the Premises during the Lease Term. Tenant shall further indemnify and hold harmless Landlord from and against any and all claims, loss, damage, liability, expense (including reasonable attorneys’ fees), penalty or charge arising from any default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease, or arising from any negligence of Tenant, or any of Tenant’s agents, contractors, or employees, and from and against all costs, attorneys’ fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon. If any action or proceeding be brought against Landlord by reason of any such claim, Tenant, upon notice from Landlord, shall defend the same at Tenant’s expense by legal counsel reasonably satisfactory to Landlord. Tenant, as a material part of its consideration to Landlord, hereby assumes all risk of damage to property or injury to persons in or upon the Premises arising from any cause and Tenant hereby waives all claims in respect thereof against Landlord. Notwithstanding the foregoing, Tenant shall not be required to defend, save harmless or indemnify Landlord from any liability for injury, loss, accident or damage to any person or property resulting from Landlord’s negligence or willful acts or omissions, or those of Landlord’s officers, agents, contractors or employees. Tenant’s indemnity is not intended to nor shall it relieve any insurance carrier of its obligations under policies required to be carried by Tenant pursuant to the provisions of this Lease to the extent that such policies cover the results of negligent acts or omissions of Landlord, its officers, agents, contractors or employees, or the failure of Landlord to perform any of its obligations under this Lease.

ARTICLE 21
PROPERTY DAMAGE

     If the Premises or any part thereof shall be damaged by fire or other peril, Tenant shall give prompt written notice thereof to Landlord. In case the Building shall be so damaged that substantial alteration or reconstruction of the Building shall, in Landlord’s sole opinion, be required (whether or not the Premises shall have been damaged by such peril) or in the event any Mortgagee shall require that the insurance proceeds payable as a result of a peril be applied to the payment of the mortgage debt or in the event of any material uninsured loss to the Building, Landlord may, at its option, terminate this Lease by notifying Tenant in writing of such termination within ninety (90) days after the date of such casualty. If Landlord does not thus elect to terminate this Lease, Landlord shall, as Landlord’s sole obligation, commence and proceed with reasonable diligence to restore the Building Shell to substantially the same

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condition in which it was immediately prior to the occurrence of the peril. When the Building Shell has been restored by Landlord, Tenant shall complete the restoration of the Premises, including the reconstruction of all improvements in order to complete the Premises and restore the Premises to the same condition and build-out as prior to the casualty, including all improvements constructed pursuant to Exhibit “D.” Any plans and specifications for such restoration and reconstruction and the contractor retained by Tenant for such restoration and reconstruction shall be subject to the approval of Landlord. All insurance proceeds payable pursuant to policies maintained by Tenant pursuant to Section 19.1 shall be applied by Tenant to such reconstruction. Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from such damage or the repair thereof, except that, subject to the provisions of the next sentence, Landlord shall allow Tenant a fair diminution of rent to the extent the Premises are unfit for occupancy during the period commencing as of the date of the casualty and continuing for the period of time, as determined by Landlord, required for Tenant and Landlord to complete the repairs described in this Article 21. If the Premises or any other portion of the Building is damaged by fire or other peril resulting from the fault or negligence of Tenant or any of Tenant’s agents, employees, or invitees, the rent hereunder shall not be diminished during the repair of such damage and Tenant shall be liable to Landlord for the cost of the repair and restoration of the Building caused thereby to the extent such cost and expense are not covered by insurance proceeds.

ARTICLE 22
CONDEMNATION

     If the whole or substantially the whole of the Building or the Premises shall be taken for any public or quasi-public use, by right of eminent domain or otherwise or shall be sold in lieu of condemnation, then this Lease shall terminate as of the date when physical possession of the Building or the Premises is taken by the condemning authority. If less than the whole or substantially the whole of the Building or the Premises is thus taken or sold, Landlord (whether or not the Premises are affected thereby) may terminate this Lease by giving written notice thereof to Tenant, in which event this Lease shall terminate as of the date when physical possession of such portion of the Building or Premises is taken by the condemning authority. If the Lease is not so terminated upon any such taking or sale, the Base Rent payable hereunder shall be diminished by an equitable amount, and Landlord shall, to the extent Landlord deems feasible, restore the Building and the Premises to substantially their former condition, but such work shall not exceed the scope of the work done by Landlord in originally constructing the Building and installing Building Standard Improvements in the Premises, nor shall Landlord in any event be required to spend for such work an amount in excess of the amount received by Landlord as compensation for such taking. All amounts awarded upon a taking of any part or all of the Building or the Premises shall belong to Landlord, and Tenant shall not be entitled to and expressly waives all claims to any such compensation.

ARTICLE 23
DAMAGES FROM CERTAIN CAUSES

     Landlord shall not be liable to Tenant for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition, or order of governmental body or authority or by any other cause beyond the control of Landlord. In addition, Landlord shall not be liable for any damage or inconvenience which may arise through repair or alteration of any part of the Building or Premises.

ARTICLE 24
EVENTS OF DEFAULT

     The following events shall be deemed to be events of default (“Events of Default”) by Tenant under this Lease:

     (a) If Tenant abandons the Premises or if Tenant vacates the Premises for thirty (30) consecutive days;

     (b) If Tenant fails to pay Rent or any other charge required to be paid by Tenant, as and when due;

     (c) If Tenant fails to perform any of Tenant’s non-monetary obligations under this Lease for a period of ten (10) days after written notice from Landlord; provided that if more than ten (10) days are required to complete such performance, Tenant shall not be in default if Tenant commences such performance within such ten (10) day period and thereafter diligently pursues its completion;

     (d) If (i) Tenant makes a general assignment or general arrangement for the benefit of creditors; (ii) a petition for adjudication of bankruptcy or for reorganization or rearrangement is filed by or against Tenant and is not dismissed within thirty (30) days;

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(iii) a trustee or receiver is appointed to take possession of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease and possession is not restored to Tenant within thirty (30) days; or (iv) substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease is subjected to attachment, execution or other judicial seizure which is not discharged within thirty (30) days. If a court of competent jurisdiction determines that any of the acts described in this subsection (d) is not a default under this Lease, and a trustee is appointed to take possession (or if Tenant remains a debtor in possession) and such trustee or Tenant transfers Tenant’s interest hereunder, then Landlord shall receive, as Additional Rent, the difference between the rent (or any other consideration) paid in connection with such assignment or sublease and the rent payable by Tenant hereunder; or

     (e) If any representation or warranty made by Tenant or by a subtenant or assignee in connection with this Lease shall have been false or misleading as of the date such representation or warranty was made.

ARTICLE 25
LANDLORD’S REMEDIES

     Upon the occurrence of any Event of Default by Tenant, Landlord may, at any time thereafter, with or without notice or demand and without limiting Landlord in the exercise of any right or remedy which Landlord may have:

     (a) Terminate Tenant’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. In such event, Landlord shall be entitled to recover from Tenant all damages incurred by Landlord by reason of Tenant’s default, including without limitation (i) the worth at the time of the award of the unpaid Base Rent, Additional Rent and other charges which had been earned at the time of the termination; (ii) the worth at the time of the award of the amount by which the unpaid Base Rent, Additional Rent and other charges which would have been earned after termination until the time of the award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; (iii) the worth at the time of the award of the amount by which the unpaid Base Rent, Additional Rent and other charges which would have been paid for the balance of the Lease term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; and (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under the Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, any costs or expenses incurred by Landlord in maintaining or preserving the Premises after such default, the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation or alteration of the Premises, Landlord’s reasonable attorneys’ fees incurred in connection therewith, and any real estate commission paid or payable. As used in subparts (i) and (ii) above, the “worth at the time of the award” is computed by allowing interest on unpaid amounts at the rate of eighteen percent (18%) per annum, or such lesser amount as may then be the maximum lawful rate, accruing the date such payments are due until paid. As used in subpart (iii) above, the “worth at the time of the award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%);

     (b) Maintain Tenant’s right to possession, in which case this Lease shall continue in effect whether or not Tenant shall have abandoned the Premises. In such event, Landlord shall be entitled to enforce all of Landlord’s rights and remedies under this Lease, including the right to recover Rent as it becomes due hereunder. Landlord’s election to maintain Tenant’s right to possession shall not prejudice Landlord’s right, at any time thereafter to terminate Tenant’s right to possession and proceed in accordance with Section 25(a) above; or

     (c) Pursue any other remedy now or hereafter available to Landlord under Laws or judicial decisions of the State of Nevada.

     Landlord’s exercise of any right or remedy shall not prevent it from exercising any other right or remedy.

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ARTICLE 26
LANDLORD’S DEFAULT

     Landlord shall be in default hereunder in the event Landlord has not begun and pursued with reasonable diligence the cure of any failure of Landlord to meet its obligations hereunder within thirty (30) days of receipt by Landlord of written notice from Tenant of the alleged failure to perform. In no event shall Tenant have the right to terminate or rescind this Lease as a result of Landlord’s default as to any covenant or agreement contained in this Lease or as a result of the breach of any promise or inducement hereof, whether in the Lease or elsewhere. Tenant hereby waives such remedies of termination and recession and hereby agrees that Tenant’s remedies for default hereunder and for breach of any promise or inducement shall be limited to a suit for damages and/or injunction. In addition, Tenant hereby covenants that, prior to the exercise of any such remedies, it will give any Mortgagee notice and a reasonable time to cure any default by Landlord.

ARTICLE 27
PEACEFUL ENJOYMENT

     Tenant shall, and may peacefully have, hold, and enjoy the Premises, subject to the other terms hereof, provided that Tenant pays the Rent and other sums herein recited to be paid by Tenant and performs all of Tenant’s covenants and agreements herein contained. This covenant and any and all other covenants of Landlord shall be binding upon Landlord and its successors only with respect to breaches occurring during its or their respective periods of ownership of Landlord’s interest hereunder. Landlord shall be entitled to cause Tenant to relocate from the Premises to other space (a “Relocation Space”) within the Building at any time after reasonable written notice of Landlord’s election (not in excess of ninety (90) days) is given to Tenant. Any such relocation shall be entirely at the expense of Landlord or the third party tenant replacing Tenant in the Premises. Such a relocation shall not terminate or otherwise affect or modify this Lease except that from and after the date of such relocation, “Premises” shall refer to the Relocation Space into which Tenant has been moved, rather than the original Premises as herein defined.

ARTICLE 28
HOLDING OVER

     In the event of holding over by Tenant after the expiration or other termination of this Lease or in the event Tenant continues to occupy the Premises after the termination of Tenant’s right of possession pursuant to Article 25 above, Tenant shall, throughout the entire holdover period, pay rent equal to twice the Base Rent and Additional Rent which would have been applicable had the term of this Lease continued through the period of such holding over by Tenant. If Tenant remains in possession of all or any part of the Premises after the expiration of the Lease Term, with the express written consent of Landlord: (a) such tenancy will be deemed to be a periodic tenancy from month-to-month only; (b) such tenancy will not constitute a renewal or extension of this Lease for any further term; and (c) such tenancy may be terminated by Landlord upon the earlier of thirty (30) days prior written notice or the earliest date permitted by law. Such month-to-month tenancy will be subject to every other term, condition, and covenant contained in this Lease including the Base Rent and Additional Rent provisions. Nothing contained in this Article 28 shall be construed as consent by Landlord to any holding over of the Premises by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord upon the expiration or earlier termination of this Lease. If Tenant fails to surrender the Premises upon the expiration or earlier termination of this Lease despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or liability, including, without limitation, any claim made by any succeeding tenant founded on or resulting from such failure to surrender.

ARTICLE 29
SUBORDINATION TO MORTGAGE

     Tenant accepts this Lease subject and subordinate to any mortgage, deed of trust or other lien presently existing or hereafter arising upon the Premises, upon the Building as a whole, and to any renewals, refinancing and extensions thereof, but Tenant agrees that any such Mortgagee shall have the right at any time to subordinate such mortgage, deed of trust or other lien to this Lease on such terms and subject to such conditions as such Mortgagee may deem appropriate in its discretion. Landlord is hereby irrevocably vested with full power and authority to subordinate this Lease to any mortgage, deed of trust or other lien now existing or hereafter placed upon the Premises, or the Building as a whole, and Tenant agrees upon demand to execute such further instruments subordinating this Lease or attorning to the holder of any such liens as Landlord may request. In the event that any mortgage or deed of trust is foreclosed or conveyance in lieu of foreclosure is made for any reason, Tenant shall, if requested by the Mortgagee, attorn to and become the Tenant of the successor-in-interest to Landlord and in such event Tenant hereby waives its right under any current or future law which gives or purports to give Tenant any right to terminate or otherwise adversely affect this Lease and the obligations of Tenant hereunder. If in connection with obtaining construction, interim or permanent financing for the Building, the lender shall request modifications to this Lease as a condition to such financing, Tenant will not withhold or delay its consent thereto, provided that such modifications do not increase the obligations of Tenant hereunder and

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do not otherwise materially adversely affect Tenant’s rights hereunder. In the event that Tenant should fail to execute any instrument described in this Article 29 promptly as requested, Tenant hereby irrevocably constitutes Landlord as its attorney-in-fact to execute such instrument in Tenant’s name, place and stead, it being agreed that such power is one coupled with an interest. Tenant agrees that it will from time to time within ten (10) business days following a request by Landlord execute and deliver to such persons as Landlord shall request a statement in recordable form certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), stating the dates to which rent and other charges payable under the Lease have been paid, stating that Landlord is not in default hereunder (or if Tenant alleges a default stating the nature of such alleged default) and further stating such other matters as Landlord shall reasonably require. Tenant acknowledges that any such statement may be relied upon by any Mortgagee, prospective Mortgagee, purchaser or prospective purchaser of the Building or any interest therein.

ARTICLE 30
LANDLORD’S LIEN

     Tenant hereby grants to Landlord a lien and security interest on all property of Tenant now or hereafter placed in or upon the Premises, and such property shall be and remain subject to such lien and security interest of Landlord for payment of all rent and other sums agreed to be paid by Tenant herein. The provisions of this paragraph relating to such lien and security interest shall constitute a security agreement under and subject to the Nevada Uniform Commercial Code so that Landlord shall have and may enforce a security interest on all property of Tenant now or hereafter placed in or on the Premises, in addition to and cumulative of the Landlord’s liens and rights provided by law or by the other terms and provisions of this Lease. Tenant agrees to execute as debtor such financing statement or statements as Landlord now or hereafter may request. Landlord may at its election at any time file a copy of this Lease as a financing statement. Notwithstanding the above, Landlord shall neither sell nor withhold from Tenant, Tenant’s business records.

ARTICLE 31
ATTORNEYS’ FEES

     If either party commences litigation or arbitration against the other for the specific performance of any provision of this Lease, for damages for the breach hereof or otherwise for enforcement of any remedy hereunder, the prevailing party shall be entitled to recover from the other party such costs and reasonable attorney fees as may have been incurred.

ARTICLE 32
NO IMPLIED WAIVER

     The failure of Landlord to insist at any time upon the strict performance of any covenant or agreement herein, or to exercise any option, right, power or remedy contained in this Lease, shall not be construed as a waiver or a relinquishment thereof for the future. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Rent due under this Lease shall be deemed to be other than on account of the earliest Rent due hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy in this Lease provided.

ARTICLE 33
PERSONAL LIABILITY

     The liability of Landlord to Tenant for any default by Landlord under the terms of this Lease shall be limited to the lesser of (i) the interest of Landlord in the Building, or (ii) the interest Landlord would have in said Building if the same were encumbered by third party debt in an amount equal to eighty percent (80%) of the value of said Building (as such value is determined by Landlord) and Tenant agrees to look solely to such amount for recovery of any judgment from Landlord, it being intended that Landlord shall not be personally liable for any judgment or deficiency.

ARTICLE 34
SECURITY DEPOSIT/LETTER OF CREDIT

     As a condition of this Lease, in lieu of a third-party guaranty, Tenant shall, with delivery of the Lease executed by Tenant, deliver to Landlord an unconditional and irrevocable letter of credit, in a form approved by Landlord, from a commercial banking institution which is a member of FDIC with assets of more than $250,000,000.00, approved by Landlord, in the amount of $100,000.00 (“Letter of Credit”) to be held by Landlord as security for the performance by Tenant of all the covenants and obligations of Tenant set forth in this Lease. Tenant shall submit its proposed form of Letter of Credit

Page 20

prior to execution of the Lease for Landlord’s review and approval. Tenant acknowledges and agrees that it shall keep the Letter of Credit in full force and effect throughout the Term of this Lease (and any extension or renewal thereof) and for thirty (30) days following the end thereof. In the event the term of the Letter of Credit must be renewed annually, then not less than thirty (30) days prior to any expiration date of the Letter of Credit (“Renewal Deadline”), Tenant shall provide Landlord with a replacement Letter of Credit or extension amendment.

     Said Letter of Credit shall contain terms whereby it can be drawn on by Landlord at sight on any date during its term on which issuer shall receive from Landlord a certification signed by Landlord stating that an Event of Default has occurred by Tenant under this Lease or that Tenant has failed to provide a replacement Letter of Credit, as required under the Lease. Tenant acknowledges that the Landlord is the beneficiary of the Letter of Credit and the proceeds thereof are not the property of the Tenant. Landlord shall have the right, but not the obligation, to apply the proceeds against any or all amounts then due and owing by Tenant hereunder and/or against sums expended by Landlord, including attorneys fees. Such actions by Landlord do not negate Tenant’s obligations to pay Rental thereafter. Any balance left of the sum received from drawing on the Letter of Credit, after the curing of defaults and/or the payment of amounts due by Tenant, shall be held by Landlord, as beneficiary, until the earlier of the replacement of the Letter of Credit, as required below, or thirty (30) days following the end of the Term of this Lease (and any extension or renewal thereof).

     The original Letter of Credit or any portion of the proceeds which are not utilized by Landlord for any purpose permitted under this Lease shall be returned to the issuing banking institution within thirty (30) days after the end of the Term provided Tenant has performed all of the remaining obligations imposed upon Tenant pursuant to this Lease.

     In the event Landlord shall draw on any Letter of Credit provided by Tenant, Tenant shall replace same no later than thirty (30) days after the date of such drawing and, if same is not replaced, such failure shall constitute an additional Event of Default under the terms of this Lease and Landlord shall have the benefit of all remedies permitted pursuant to the terms of this Lease and the laws of the State where the Premises are located.

ARTICLE 35
NOTICE

     Any notice in this Lease provided for must, unless otherwise expressly provided herein, be in writing, and may, unless otherwise in this Lease expressly provided, be given or be served by depositing the same in the United States mail, postage paid and certified and addressed to the party to be notified, with return receipt requested, or by delivering the same in person to an officer of such party, or by prepaid telegram, when appropriate, addressed to the party to be notified at the address stated in this Lease or such other address, notice of which has been given to the other party. Notice deposited in the mail in the manner hereinabove described shall be effective from and after the expiration of three (3) calendar days after it is so deposited.

ARTICLE 36
SEVERABILITY

     If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law notwithstanding the invalidity of any other term or provision hereof.

ARTICLE 37
RECORDATION

     Tenant agrees not to record this Lease or any memorandum hereof.

ARTICLE 38
GOVERNING LAW

     This Lease and the rights and obligations of the parties hereto shall be interpreted, construed, and enforced in accordance with the laws of the State of Nevada.

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ARTICLE 39
FORCE MAJEURE

     Whenever a period of time is herein prescribed for the taking of any action by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation of such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions, or any other cause whatsoever beyond the control of Landlord.

ARTICLE 40
TIME OF PERFORMANCE

     Except as expressly otherwise herein provided, with respect to all required acts of Tenant, time is of the essence of this Lease.

ARTICLE 41
TRANSFERS BY LANDLORD

     Landlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder and in the Building and property referred to herein, and in such event and upon such transfer Landlord shall be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of Landlord for the performance of such obligations.

ARTICLE 42
COMMISSIONS

     Except for a commission to be paid by Landlord to CB Richard Ellis (“Broker”) in accordance with a separate commission agreement to be entered into by Landlord and Broker, Landlord and Tenant hereby indemnify and hold each other harmless against any loss, claim, expense or liability with respect to any commissions or brokerage fees claimed on account of the execution and/or renewal of this Lease due to any action of the indemnifying party.

ARTICLE 43
EFFECT OF DELIVERY OF THIS LEASE

     Landlord has delivered a copy of this Lease to Tenant for Tenant’s review only, and the delivery hereof does not constitute an offer to Tenant or option. This Lease shall not be effective until a copy executed by both Landlord and Tenant is delivered to and accepted by Landlord.

ARTICLE 44
CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY

     If Tenant is a corporation, each person signing this Lease on behalf of Tenant represents and warrants that he or she has full authority to do so and that this Lease binds the corporation. Within thirty (30) days after this Lease is signed, Tenant shall deliver to Landlord a certified copy of a resolution of Tenant’s Board of Directors authorizing the execution of this Lease or other evidence of such authority reasonably acceptable to Landlord. If Tenant is a partnership, each person signing this Lease for Tenant represents and warrants that he or she is a general partner of the partnership, that he or she has full authority to sign for the partnership and that this Lease binds the partnership and all general partners of the partnership. Tenant shall give written notice to Landlord of any general partner’s withdrawal or addition. Within thirty (30) days after this Lease is signed, Tenant shall deliver to Landlord a copy of Tenant’s recorded statement of partnership or certificate of limited partnership.

ARTICLE 45
JOINT AND SEVERAL LIABILITY

     All parties signing this Lease as Tenant shall be jointly and severally liable for all obligations of Tenant.

ARTICLE 46
INTERPRETATION

     The captions of the Articles of this Lease, and each specific Section within the respective Articles, are to assist the parties in reading this Lease and are not a part of the terms or provisions of this Lease. Whenever required by the context of this Lease, the singular shall include the plural and the plural shall include the singular. The masculine, feminine and neuter genders shall each include the other. In any provision relating to the conduct, acts or omissions of Tenant, the term “Tenant” shall include Tenant’s agents, employees, contractors, invitees, successors or others using the Premises with Tenant’s expressed or implied permission.

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ARTICLE 47
INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS

     This Lease is the only agreement between the parties pertaining to the lease of the Premises and no other agreements are effective. All amendments to this Lease shall be in writing and signed by all parties. Any other attempted amendment shall be void.

ARTICLE 48
WAIVER OF JURY TRIAL

     Landlord and Tenant by this Article 48 waive trial by jury in any action, proceeding, or counterclaim brought by either of the parties to this Lease against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use or occupancy of the Premises, or any other claims (except claims for personal injury or property damage), and any emergency statutory or any other statutory remedy.

ARTICLE 49
NO MERGER

     The voluntary or other surrender of this Lease by Tenant or the cancellation of this Lease by mutual agreement of Tenant and Landlord or the termination of this Lease on account of Tenant’s default will not work a merger, and will, at Landlord’s option, (a) terminate all or any subleases and subtenancies or (b) operate as an assignment to Landlord of all or any subleases or subtenancies. Landlord’s option under this Article 49 will be exercised by written notice to Tenant and all known sublessees or subtenants in the Premises or any part of the Premises.

ARTICLE 50
COUNTERPARTS

     This Lease may be executed in counterparts, and, when all counterpart documents are executed, the counterparts shall constitute a single binding instrument.

ARTICLE 51
EXHIBITS

     All Exhibits as listed on the “List of Exhibits” and as attached hereto are incorporated herein and made a part of this Lease for all purposes.

     IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease (which may be in multiple original counterparts) as of the day and year first above written.

Address:

10000 West Charleston Boulevard, Suite 200
Las Vegas, Nevada 89135
Attention: Property Management

LANDLORD:

HOWARD HUGHES PROPERTIES,
LIMITED PARTNERSHIP,
a Delaware limited partnership
By its sole general partner:
THE HOWARD HUGHES CORPORATION,
a Delaware corporation
By:	/s/ Kevin T. Orrock
Print Name:	Kevin T. Orrock
Print Title:	Top Division Executive

Address:

6830 Spencer Street
Las Vegas, Nevada 89119
Attention: Arnaldo Galassi
agalassi@vendingdata.com

TENANT:
VENDING DATA CORPORATION,
a Nevada corporation
By:	/s/ Arnaldo F. Galassi
Print Name:	Arnaldo F. Galassi
Print Title:	VP & CFO

Page 23

LEGAL DESCRIPTION FOR BUILDING — EXHIBIT A

EXHIBIT “A”

CANYONS CENTER

LEGAL DESCRIPTION FOR BUILDING

THAT PORTION OF SECTION 30, TOWNSHIP 20 SOUTH, RANGE 60 EAST, M.D.M., CITY OF LAS VEGAS, CLARK COUNTY, NEVADA.

A PORTION OF LOT 3, OF A SUMMERLIN VILLAGE 3, UNIT 1A — A PLANNED COMMUNITY, AS SHOWN BY A MAP THEREOF ON FILE IN BOOK 71, PAGE 10 OF PLATS IN THE CLARK COUNTY RECORDER’S OFFICE, CLARK COUNTY, NEVADA.

CONTAINING APPROXIMATELY 6.80 ACRES.

Landlord, from time to time, shall have the right to amend this legal description to accurately reflect the legal parcel if and when it becomes necessary to adjust the legal description to accommodate the development of other adjacent buildings.

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FLOOR PLAN OF PREMISES — EXHIBIT B

EXHIBIT “B”

CANYONS CENTER

FLOOR PLAN OF PREMISES

Page 25

PARKING AGREEMENT — EXHIBIT C

EXHIBIT “C”

CANYONS CENTER

PARKING AGREEMENT

     This Parking Agreement is incorporated by reference into that certain Lease Agreement dated as of ___, 2006 between VENDING DATA CORPORATION as Tenant and HOWARD HUGHES PROPERTIES, LIMITED PARTNERSHIP as Landlord (the “Lease”).

     1. Parking Facilities. The parking facilities appurtenant to the Building include asphalt surface parking with some covered spaces (“Parking Area”). Tenant shall be entitled to use six (6) vehicle parking spaces within the covered portions of the Parking Area and fifteen (15) vehicle parking spaces within the uncovered portions of the Parking Area for the monthly parking of Tenant’s employees. Tenant’s use of the Parking Area shall be based upon a non-exclusive use in common with Landlord, other tenants of the Building, and their guests and invitees. Tenant shall not use more parking spaces than said number, or any spaces (a) which have been specifically assigned by Landlord to other tenants or for such other uses as visitor parking or (b) which have been designated by governmental entities of competent jurisdiction as being restricted to certain uses. Landlord reserves the right to erect such security and access and egress control devices as it may reasonably deem to be appropriate (including, without limitation card controlled gates) and Tenant agrees to cooperate fully with Landlord in such matters. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant’s employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas other than those designated by Landlord for such activities. If Tenant permits or allows any of such prohibited activities, then Landlord shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Tenant, which cost shall be immediately payable upon demand by Landlord.

     2. Parking Fee. Tenant shall pay, throughout the entire Term, an amount equal to the number of parking spaces Tenant is entitled to use times the applicable fees (the “Parking Fees”) which Landlord is charging for use of the parking facilities. Currently, Landlord is charging Forty and 00/100 Dollars ($40.00) per space per month for covered parking and Zero Dollars ($0.00) per space per month for uncovered parking. Landlord shall have the right from time to time to increase the Parking Fees being charged Tenant upon thirty (30) days prior written notice, which Parking Fees shall in no event exceed the rates then being charged for parking in comparable parking areas having a comparable method of operation. Tenant agrees and acknowledges that Tenant shall be obligated to pay such rates regardless of whether or not Tenant actually uses or needs the parking spaces which Tenant is entitled to use. Such Parking Fees shall be payable monthly commencing with the first installment of Base Rent due under the Lease. If the Commencement Date is other than the first day of a calendar month, the first installment of the Parking Fees shall be prorated on the basis of a thirty (30) day calendar month.

     3. Definitions. All capitalized terms contained in this Parking Agreement that are not defined herein shall have the same definition as set forth in the Lease.

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WORK LETTER — EXHIBIT D

EXHIBIT “D”

CANYONS CENTER

WORK LETTER

     This Work Letter supplements the Lease Agreement (the “Lease”) dated concurrently herewith, by and between HOWARD HUGHES PROPERTIES, LIMITED PARTNERSHIP, a Delaware limited partnership, as Landlord, and VENDING DATA CORPORATION, a Nevada corporation, as Tenant, covering the Premises. All terms not defined herein shall have the same meaning as set forth in the Lease.

1. Construction of Building.

     1.1 Base Building Improvements.

     Landlord has constructed, or shall construct, through its contractor, at Landlord’s sole cost, a building shell, including the following (“Base Building Improvements”):

(a)	outside walls (not including drywall), core walls which are unfinished on tenant’s side, elevator lobby and corridor which connect exit stairwells on multi-tenant floors (but not an elevator lobby or corridor on floors with a single tenant);
(b)	unfinished concrete floors throughout the Premises, broom clean;
(c)	building standard 110-volt service power and 277-volt and/or 110-volt florescent lighting power at the core;
(d)	men’s and women’s restroom facilities with building-standard finishes located on each floor on which the Premises are located;
(e)	building standard fire alarms and smoke detectors in public areas in accordance with applicable building code on an unoccupied basis and provided only at the core of the Building;
(f)	plumbing systems stubbed at the core of the Building;
(g)	primary fire and life safety in a general pattern sprinkler loop throughout the Premises ready for expansion and adjustment when the ceiling for the Premises is installed; and
(h)	primary heating ventilating and air conditioners loop (but not including branch distribution controls and mixing boxes).

     1.2 Tenant Improvements Descriptions.

     Without limiting the generality of the foregoing description of Base Building Improvements, tenant improvements (“Tenant Improvements”) shall include the following items:

(a)	ceiling and lighting in the Premises;
(b)	floor finishes in the Premises;
(c)	interior finishes of any kind within the Premises;
(d)	interior partitions, demising walls, doors and hardware within the Premises;
(e)	terminal boxes and reheat coils or other heating, ventilating and air conditioning or air distribution devices, including distribution duct work and controls or supplemental systems;
(f)	distribution of electrical services, plumbing services and sprinklers from the core (except primary sprinkler loop as specified in base building description);
(g)	fire and life safety systems throughout the Premises, including without limitation exit signs, horn/strobe or intercoms and extinguishers (except as provided in Base Building Improvements);
(h)	window coverings;
(i)	architectural and engineering preparation of plans and specifications for the Tenant Improvements to conform to building standards;
(j)	permits and fees to local jurisdictions; and
(k)	construction costs related to obtaining final approval of government agencies in order to obtain the Certificate of Occupancy.

2. Plans and Specifications for Tenant Improvements

     2.1 Landlord shall retain a licensed architect (“Architect”) to prepare the plans and specifications for the Tenant Improvements; provided, however, Tenant shall directly work with the Architect to prepare the preliminary plans and final plans. Notwithstanding the foregoing, Tenant may retain its own licensed architect to design and prepare the preliminary plans and final plans; provided, however, such plans and specifications shall be submitted to Landlord’s Architect for review and to

Page 27

WORK LETTER — EXHIBIT D

Landlord for approval. All such plans and specifications shall be submitted to Landlord in accordance with the schedule set forth in Section 6 below.

     2.2 Tenant shall cause the Architect to furnish to Landlord for Landlord’s approval space plans sufficient to convey the architectural design of the Premises, including, without limitation, the location of doors, partitions, electrical and telephone outlets, plumbing fixtures, heavy floor loads and other special requirements, together with reflective ceiling plans (“Tenant’s Preliminary Space Plans”). If Landlord shall disapprove of any portion of Tenant’s Preliminary Space Plans, Landlord shall advise Tenant of such revisions, and reasons therefor, as are reasonably required by Landlord for the purpose of obtaining approval. Tenant shall then submit to Landlord, for Landlord’s approval, a redesign of Tenant’s Preliminary Space Plans, incorporating the revisions required by Landlord and such modifications thereof as are suggested by Tenant, said modifications to be subsequently approved by Landlord prior to Tenant’s submission of Final Plans (as hereinafter defined).

     2.3 Tenant shall cause the Architect to prepare from Tenant’s Preliminary Space Plans (approved by Landlord in accordance with Section 2.2 above) complete architectural plans, drawings and specifications and, utilizing Landlord’s mechanical, electrical and structural engineers, complete engineered and cross coordinated mechanical, electrical and structural working drawings for (i) all of the Premises, showing the subdivision, layout, finish and decoration work (including carpeting and other floor coverings) desired by Tenant therefor, and (ii) any internal or external communications or special utility facilities which will require conduiting or other improvements within common areas, all in such form and in such detail as may be reasonably required by Landlord. Such complete plans, drawings and specifications are referred to herein as the “Final Plans”. Tenant’s Final Plans shall (i) be compatible with the Base Building Improvements, (ii) comply with all applicable laws and ordinances, and the rules and regulations of all governmental authorities having jurisdiction, and (iii) comply with Landlord’s insurance company requirements. Tenant shall submit the Final Plans for the approval of Landlord in the same manner as provided in Section 2.2 above for approval by Landlord of Tenant’s Preliminary Space Plans.

     2.4 Tenant acknowledges that, unless specifically shown as Landlord’s responsibility on the Final Plans, the Tenant Improvements shall not include, nor shall Landlord be responsible for the design, construction or installation of, various nonstructural items which Tenant may find desirable for the Premises including, without limitation, furniture, trade fixtures, office equipment, telephone, telecommunications and data equipment and systems, plantscaping, artwork or cabling required in connection with any of these items. Notwithstanding the fact that Landlord’s architects and engineers shall have the right to review Tenant’s Preliminary Space Plans and Tenant’s Final Plans, Tenant shall be solely responsible for the design and function of such plans, including, without limitation, their integration with all of the Building’s systems. A list of standard improvements for space within the Building (“Building Standards”) is available to Tenant upon request. All Tenant Improvements shall be of equal or greater quality than the Building Standards; provided that Tenant shall be required to utilize Building Standard window blinds, ceiling systems and light fixtures.

     2.5 Landlord shall cooperate with Tenant in obtaining approval of the Final Plans by all governmental agencies having jurisdiction.

     2.6 Tenant shall cause the Architect to provide documentation for all changes to the Final Plans at the time each change is authorized for construction.

3. Allowance for Work and Work Costs.

     3.1 Tenant shall receive from Landlord the Allowance as specified in the Lease, which Allowance shall be used solely for “Work Costs” (as that term is defined in Section 3.2 below). All Tenant Improvements, whether or not the cost thereof is covered by the Allowance, shall become the property of Landlord upon expiration or earlier termination of the Lease and shall remain on the Premises at all times during the Lease Term. Tenant shall be entitled to no other payment or rent reduction for any part of the Allowance not utilized by Tenant. The Allowance must be utilized by Tenant within one (1) year of the Commencement Date. If the Allowance or any portion thereof is not utilized within such time period Tenant shall forfeit its right to receive the unpaid portion of the Allowance whether or not the Tenant Improvements have been completed, and Landlord shall have no obligation to make payment thereof.

     In the event Landlord has made payment of the Allowance to Tenant and this Lease subsequently terminates prior to the end of the Term due to an Event of Default by Tenant or this Lease is assigned, conveyed or transferred to another entity or to the surviving corporation in connection with a merger, consolidation or acquisition of Tenant (other than Tenant’s parent, subsidiary or affiliate), Tenant shall be required to repay Landlord, upon demand, a portion of the Allowance received (whether by cash or credit) determined by multiplying the total amount of the Allowance received (whether by cash or credit) by a

Page 28

WORK LETTER — EXHIBIT D

fraction, the numerator of which shall be the number of months remaining of the Lease Term, and the denominator of which shall be the full Lease Term.

     3.2 As used herein, “Work Costs” mean (i) all fees and expenses incurred by Landlord and Tenant in connection with the design and construction of the Tenant Improvements, including, without limitation, architectural and engineering fees for the review of Tenant’s Preliminary Space Plans and Final Plans (ii) the actual contractor costs and charges for material and labor, contractor’s profit, overhead and general conditions incurred by Landlord in having the Tenant Improvements constructed in accordance with the Final Plans, (iii) governmental agency plan check, permit and other fees and sales and use taxes, (iv) testing and inspection costs, (v) any paint touch-up or repair work necessary due to Tenant’s move into the Premises, (vi) all other costs expended or to be expended by Landlord in the construction of the Tenant Improvements including a charge for VAV boxes on the floors upon which the Premises is located, mini-blinds within the Premises, fluorescent light fixtures, air balancing, and other pre-stocked materials, and (vii) a fee to be paid to Landlord equal to ten percent (10%) of all Work Costs for administration by Landlord of construction of the Tenant Improvements.

     3.3 As promptly as practicable following Landlord’s approval of the Final Plans, Landlord shall submit to Tenant a written estimate of Work Costs of all Tenant Improvements. Thereupon, Tenant shall either approve the estimate or disapprove specific items and submit to Landlord revisions of Final Plans to reflect the deletion of and/or substitution for such disapproved items. Any such deletions and/or substitutions to the Final Plans will be processed in accordance with Section 3.8 below. Upon Tenant’s final written approval of said estimate, such approved estimate to be referred to herein as the “Work Costs Estimate”, Landlord shall have the right to purchase materials as set forth on the Final Plans and to commence the construction of the items included in said Work Costs Estimate pursuant to Section 4 hereof.

     3.4 The parties acknowledge that Landlord has “pre-stocked” certain Building Standards improvement items for use in the Building, which items must be used by Tenant for construction of the Tenant Improvements.

     3.5 If the Final Plans or any amendment thereof or supplement thereto shall require changes in the Base Building Improvements, the increased cost of the Base Building Improvements caused by such changes shall be charged as Work Costs. The cost thereof shall include all direct architectural and/or engineering fees and expenses in connection therewith.

     3.6 Landlord’s written estimate of Work Costs shall include a reasonable contingency to allow for changes in the Tenant Improvements and/or other unforeseen costs and expenses arising after Tenant’s approval thereof.

     3.7 In the event that the Work Costs Estimate exceeds the Allowance, Tenant shall pay one hundred percent (100%) of such excess (“Over Allowance”) to Landlord within ten (10) days after Tenant’s approval of the Work Costs Estimate; provided, however, Landlord shall not be required to commence construction of the Tenant Improvements until Landlord receives the Over-Allowance.

     3.8 Any changes to the approved Final Plans (“Changes”) which are requested by Tenant or required by any governmental agency shall be forwarded to Landlord for approval and costing. If Landlord approves of the Changes, Tenant shall be given a written cost estimate for the completion of said Changes which must be approved by Tenant prior to construction of the Changes. Landlord shall pay the cost of the Changes to the extent of any remaining Allowance and to the extent the revised contract amount exceeds the Allowance, Tenant shall pay the cost of the Changes as an Over-Allowance within ten (10) days pursuant to Section 3.7 above. Any delay in the construction of Tenant Improvements as a result of Changes shall be a Tenant Delay (as defined in Section 7 below).

4. Construction.

     4.1 Following Tenant’s approval of Landlord’s Work Costs Estimate, Tenant’s payment of initial amounts payable under Section 3.7 above and receipt by Landlord of all relevant governmental agency approvals and permits, and at such time when, in Landlord’s sole discretion, the Building has reached the stage of construction where it is appropriate to commence construction of Tenant Improvements, Landlord shall cause its general contractor (“General Contractor”) to commence the construction of the Tenant Improvements. The bid process, if any, for the General Contractor shall be mutually agreed upon by Landlord’s construction representative and Tenant’s construction representative. Landlord and/or such General Contractor shall have the right to cause all or any portion of such work to be performed by one or more subcontractors. Landlord shall furnish Tenant with a schedule setting forth the projected completion dates therefor and showing the deadlines for any actions required to be taken by Tenant during such construction, and Landlord may from time to time during the prosecution of the Tenant Improvements reasonably modify or amend such schedule due to delays encountered by Landlord. Within sixty (60) days after the date of substantial completion of the Tenant Improvements, the General

Page 29

WORK LETTER — EXHIBIT D

Contractor shall submit to Landlord a set of conformed reproducible “as-built” plans incorporating all field changes made and all changes and/or revisions that have been made subsequent to Landlord’s approval of the Final Plans.

     4.2 In connection with the construction of the Tenant Improvements, each party shall be entitled to rely upon the other party’s construction representative who shall be as follows: Landlord’s construction representative (“Landlord’s Construction Representative”): Andrew Bernhardy, Tenant’s construction representative (“Tenant’s Construction Representative”):                                          [TO BE DESIGNATED PRIOR TO EXECUTION]. Each respective construction representative shall have the authority to make binding commitments relative to the Tenant Improvements on behalf of the party appointing such construction representative. All inquiries of Tenant pertaining to construction of the Tenant Improvements shall be directed in writing to Landlord’s Construction Representative. A party may designate a substitute construction representative by giving written notice to the other party at any time. Any representatives of Tenant who desires to visit the Premises during construction of the Tenant Improvements must obtain the prior consent of Landlord and the General Contractor. Such consent shall be obtained from Landlord’s Construction Representative only by Tenant’s Construction Representative.

5. Punch List.

     On or before the date upon Tenant occupies the Premises, Landlord shall cause the General Contractor to inspect the Premises with Landlord’s Construction Representative and Tenant’s Construction Representative and to complete a written punch list of unfinished items of Tenant Improvements prior to Tenant’s move into the Premises. Tenant’s Construction Representative shall execute said written punch list to indicate approval thereof, and Landlord shall cause the General Contractor to correct all such punch list items with reasonable diligence.

6. Schedule.

     Preparation and approval of Tenant’s Preliminary Space Plans, Final Plans and the Work Costs Estimate shall proceed as indicated below and each action shall be completed on or before the date herein specified. Time is of the essence.

	Action	Responsibility	Due Date
(i)	Executed Lease or Reimbursement Agreement	Tenant	November 22, 2006
(ii)	Submission of Tenant’s Preliminary Space Plans to Landlord	Tenant	Complete
(iii)	Delivery of written approval of Tenant’s Space Plans by Landlord (including any necessary design revision comments)	Landlord	Complete
(iv)	Delivery of Work Costs Estimate to Tenant	Landlord	November 27, 2006
(v)	Delivery of written approval of Work Costs Estimate to Landlord	Tenant	November 29, 2006
(vi)	Delivery of Over-Allowance, if any, as approved on Work Costs Estimate to Landlord	Tenant	December 1, 2006
(vii)	Substantial Completion of Premises	Landlord	December 31, 2006

7. Delays.

     If Landlord shall be delayed in substantially completing the Tenant Improvements as a result of any of the following (“Tenant Delays”):

     (i) Tenant’s failure to complete any action item which is the responsibility of Tenant on or before the due date specified in Section 6 above to the extent that such failure is not caused by failure of Landlord to timely perform its obligations in accordance with the schedule in Section 6, or

     (ii) Tenant’s changes to Final Plans after the final submission date in Section 6(iii) above, or Landlord’s approval thereof, whichever is earlier, or

Page 30

WORK LETTER — EXHIBIT D

     (iii) Tenant’s request for materials, finishes, or installations other than Building Standards, or

     (iv) Any delay of Tenant in making payment to Landlord of the Over-Allowance as provided in Section 3.7 above, or

     (v) Any other delay requested or caused by Tenant;

     then the Lease Term shall nevertheless commence and the Commencement Date shall be the date it would have been had the delay not occurred.

8. Miscellaneous.

     Any default by Tenant under the terms of this Work Letter shall constitute a default under the Lease and shall entitle Landlord to exercise all remedies set forth therein. Both Landlord and Tenant agree to use reasonable diligence in performing all of their respective obligations and duties under this Work Letter and in proceeding with the construction and completion of the Building and all Tenant Improvements in the Premises.

TENANT:
VENDING DATA CORPORATION,
a Nevada corporation
By:	/s/ Arnaldo F. Galassi
Print Name:	Arnaldo F. Galassi
Print Title:	VP & CFO

LANDLORD:
HOWARD HUGHES PROPERTIES,
LIMITED PARTNERSHIP,
a Delaware limited partnership
By its sole general partner:
THE HOWARD HUGHES CORPORATION,
a Delaware corporation
By:	/s/ Kevin T. Orrock
Print Name:	Kevin T. Orrock
Print Title:	Top Division Executive

Page 31

RULES AND REGULATIONS — EXHIBIT E

EXHIBIT “E”

CANYONS CENTER

RULES AND REGULATIONS

     1. Sidewalks, doorways, vestibules, halls, stairways, and similar areas shall not be obstructed nor shall refuse, furniture, boxes, or other items be placed therein by Tenant or its officers, agents, servants, and employees, or used for any purpose other than ingress and egress to and from the Premises, or for going from one part of the Building to another part of the Building. Canvassing, soliciting and peddling in the Building are prohibited.

     2. Plumbing, fixtures and appliances shall be used only for the purposes for which constructed, and no unsuitable material shall be placed therein.

     3. No signs, directories, posters, advertisements, or notices shall be painted or affixed on or to any of the windows or doors, or in corridors or other parts of the Building, except in such color, size, and style, and in such places, as shall be first approved in writing by Landlord in its discretion. Building standard suite identification signs will be prepared by Landlord at Tenant’s expense. Landlord shall have the right to remove all unapproved signs without notice to Tenant, at the expense of Tenant.

     4. Tenant shall not do, or permit anything to be done in or about the Building, or bring or keep anything therein, that will in any way increase the rate of fire or other insurance on the Building, or on property kept therein or otherwise increase the possibility of fire or other casualty.

     5. Landlord shall have the power to prescribe the weight and position of heavy equipment or objects which may overstress any portion of the floor. All damage done to the Building by the improper placing of such heavy items will be repaired at the sole expense of the responsible Tenant.

     6. Tenant shall notify the Building manager when safes or other heavy equipment are to be taken in or out of the Building, and the moving shall be done after written permission is obtained from Landlord on such conditions as Landlord shall require.

     7. Corridor doors, when not in use, shall be kept closed.

     8. All deliveries must be made via the service entrance and service elevator, when provided, during normal working hours. Landlord’s written approval must be obtained for any delivery after normal working hours.

     9. Tenant shall cooperate with Landlord’s employees in keeping the Premises neat and clean.

     10. Tenant shall not cause or permit any improper noises in the Building, or allow any unpleasant odors to emanate from the Premises, or otherwise interfere, injure or annoy in any way other tenants, or persons having business with them.

     11. No animals shall be brought into or kept in or about the Building.

     12. When conditions are such that Tenant must dispose of crates, boxes, etc. on the sidewalk, it will be the responsibility of Tenant to dispose of same prior to 7:30 a.m., or after 5:30 p.m.

     13. No machinery of any kind, other than ordinary office machines such as typewriters and calculators, shall be operated on Premises without the prior written consent of Landlord, nor shall Tenant use or keep in the Building any inflammable or explosive fluid or substance (including Christmas trees and ornaments), or any illuminating materials, except candles. No space heaters or fans shall be operated in the Building.

     14. No bicycles, motorcycles or similar vehicles will be allowed in the Building.

     15. No nails, hooks, or screws shall be driven into or inserted in any part of the Building except as approved by Building maintenance personnel.

     16. Landlord has the right to evacuate the Building in the event of an emergency or catastrophe.

Page 32

RULES AND REGULATIONS — EXHIBIT E

     17. No food and/or beverages shall be distributed from Tenant’s office without the prior written approval of the Building Manager.

     18. No additional locks shall be placed upon any doors without the prior written consent of Landlord. All necessary keys shall be furnished by Landlord, and the same shall be surrendered upon termination of this lease, and Tenant shall then give Landlord or its agent an explanation of the combination of all locks on the doors or vaults. Tenant shall initially be given two (2) keys to the Premises by Landlord. No duplicates of such keys shall be made by Tenant. Additional keys shall be obtained only from Landlord, at a fee to be determined by Landlord.

     19. Tenant will not locate furnishings or cabinets adjacent to mechanical or electrical access panels or over air conditioning outlets so as to prevent operating personnel from servicing such units as routine or emergency access may require. Cost of moving such furnishings for Landlord’s access will be for Tenant’s account. The lighting and air conditioning equipment of the Building will remain the exclusive charge of the Building designated personnel.

     20. Tenant shall comply with parking rules and regulations as may be posted and distributed from time to time.

     21. No portion of the Building shall be used for the purpose of lodging rooms.

     22. Vending machines or dispensing machines of any kind will not be placed in the Premises by Tenant.

     23. Prior written approval, which shall be at Landlord’s sole discretion, must be obtained for installation of window shades, blinds, drapes, or any other window treatment of any kind whatsoever. Landlord will control all internal lighting that may be visible from the exterior of the Building and shall have the right to change any unapproved lighting, without notice to Tenant, at Tenant’s expense.

     24. No Tenant shall make any changes or alterations to any portion of the Building without Landlord’s prior written approval, which may be given on such conditions as Landlord may elect. All such work shall be done by Landlord or by contractors and/or workers approved by Landlord, working under Landlord’s supervision.

     25. Tenant shall provide plexiglass or other pads for all chairs mounted on rollers or casters.

     26. Landlord reserves the right to rescind any of these rules and make such other and further rules and regulations as in its judgment shall from time to time be needful for the operation of the Building, which rules shall be binding upon each Tenant upon delivery to such Tenant of notice thereof in writing.

     27. Smoking shall not be permitted in Common Areas throughout the Building, including lobbies, hallways, restrooms and stairwells. Smoking is permitted outside the Building; however, smokers must utilize the ash urns which are located outside the Building.

Page 33

COMMENCEMENT MEMORANDUM — EXHIBIT F

EXHIBIT “F”

CANYONS CENTER

COMMENCEMENT MEMORANDUM

[TENANT]:

Re: Commencement Memorandum

Dear                                           :

     With reference to that certain lease (the “Lease”), dated                      , 200     , between HOWARD HUGHES PROPERTIES, LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”), and, a                                           (“Tenant”), you are hereby notified of the following. All capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Lease.

     1. The Commencement Date of the Lease was                                          , and the Lease will expire at midnight                                          , if not extended or renewed or terminated earlier pursuant to the Lease.

     2. The Premises consist of                                            (                     ) square feet of Rentable Area and                                           (                    ) square feet of Useable Area.

     3. The prorated amount of Base Rent and Additional Rent for Operating Expenses for the partial month of                                           is $                                           and $                                         , respectively.

     4. The amount of Base Rent and Additional Rent for Operating Expenses for the first full month is $                                          and $                                         , respectively.

     5. Pursuant to Paragraph/Article/Section/Subsection/Exhibit                                           of the Lease, you have the right to renew the term of the Lease for one (1) additional term of                                            (                    ) years. The Second Lease Term shall commence on                                           ,                     , provided Tenant gives Landlord written notice on or before                                           ,                     , in accordance with the terms of the Lease.

Very truly yours,


[LANDLORD]
 

Acknowledged and agreed to by                                          

                                                                                                         ,

this                      day                                           of, 200     

By:                                                                                                 

Print Name:                                                                                     

Print Title:                                                                                       

Page 34

DATE: DEC. 21, 2006

DECEMBER 21, 2006

BENEFICIARY:
HOWARD HUGHES PROPERTIES LP
10000 W. CHARLESTON BLVD,
SUITE 200
LAS VEGAS, NV 89135
ATTN: CLAUDINE KOSLER

LETTER OF CREDIT NO. 61 61656922

GENTLEMEN:
BY ORDER OF OUR CLIENT, VENDINGDATA CORPORATION, 6830 SPENCER STREET, LAS VEGAS, NV 89119 (THE “APPLICANT”), WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. 61656922, IN YOUR FAVOR FOR AN AMOUNT NOT TO EXCEED IN AGGREGATE USD 100,000.00 (ONE HUNDRED THOUSAND AND 00/100 U.S. DOLLARS), EFFECTIVE IMMEDIATELY AND EXPIRING AT THE OFFICE OF OUR SERVICER, CITICORP NORTH AMERICA, INC. AT 3800 CITIBANK CENTER, BUILDING B, 3RD FLOOR, TAMPA, FLORIDA 33610 ATTN. STANDBY LETTER OF CREDIT UNIT OR SUCH OTHER OFFICE AS WE MAY ADVISE YOU FROM TIME TO TIME (THE “OFFICE”), ON DECEMBER 15, 2011.

FUNDS HEREUNDER ARE AVAILABLE TO YOU AGAINST PRESENTATION OF YOUR SIGHT DRAFT(S), DRAWN ON US, MENTIONING THEREON OUR LETTER OF CREDIT NUMBER 61656922, ACCOMPANIED BY YOUR WRITTEN AND DATED STATEMENT, SIGNED BY A REPRESENTATIVE OF YOUR COMPANY, STATING THE FOLLOWING:

“WE HEREBY CERTIFY THAT THE AMOUNT OF ANY DRAFT(S) DRAWN HEREUNDER REPRESENTS FUNDS DUE AND PAYABLE BECAUSE APPLICANT HAS FAILED TO PAY RENT AS DESCRIBED THE LEASE.”

WE HEREBY AGREE TO HONOR EACH DRAFT DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT IF PRESENTED, AS SPECIFIED, AT OUR OFFICE ON OR BEFORE EXPIRATION DATE.

SHOULD YOU HAVE OCCASION TO COMMUNICATE WITH US REGARDING THIS LETTER OF CREDIT, PLEASE DIRECT YOUR CORRESPONDENCE TO OUR OFFICE, MAKING SPECIFIC MENTION OF THE LETTER OF CREDIT NUMBER INDICATED ABOVE.

EXCEPT AS FAR AS OTHERWISE EXPRESSLY STATED HEREIN, THIS STANDBY LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (“ISP98”), INTERNATIONAL CHAMBER OF COMMERCE,

PUBLICATION NO. 590, AND AS TO MATTERS NOT GOVERNED BY THE ISP98, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND APPLICABLE U.S. FEDERAL LAW.

AUTHORIZED SIGNATURE(S)
CITIBANK,N.A.

  EX-10.18 5 a28889exv10w18.txt EXHIBIT 10.18 EXHIBIT 10.18 PETER ZEE EXECUTIVE EMPLOYMENT AGREEMENT VENDINGDATA OCTOBER 3RD, 2005 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of October 3rd, 2005, between VendingData Corporation, a Nevada corporation (together with its successors or assigns as permitted under this Agreement, the "Company"), and Peter Zee, an individual (the "Executive"). RECITALS The Company desires to employ the Executive and enter into this Agreement embodying the terms of such employment and the Executive desires to enter into this Agreement and to accept such employment. In consideration of the mutual covenants and for other good and valuable consideration, the Company and the Executive (individually a "Party" and together the "Parties") agree as follows: 1. DEFINITIONS (a) "Base Salary" shall mean the salary provided for in Section 4 below subject to such increases as may be made from time to time. (b) "Cause" shall mean: (i) the conviction of (including any act as a result of pleading nolo contendere) or entry of judgment against the Executive by a civil or criminal court of competent jurisdiction of a felony, or any other offense or wrongdoing involving embezzlement, fraud, misappropriation of funds, any act of moral turpitude or dishonesty; (ii) the indictment of the Executive by a state or federal grand jury or the filing of a criminal complaint or information for a felony, or any other offense involving embezzlement, fraud, misappropriation of funds, any act of moral turpitude or dishonesty, unless such indictment or filing is dismissed within one hundred eighty (180) days from the date of such indictment or filing. The Board may elect to suspend and extend the Term of Employment by such one hundred eighty (180) day period or the number of days actually taken by the Executive to dismiss such indictment or filing, whichever is less; provided that the Executive notifies the Company in writing that the Executive intends to contest in good faith such indictment or filing and pursues the dismissal of such indictment or filing with reasonable diligence. During such period of suspension, Executive may be relieved of duties, but shall be entitled to receive Base Salary; (iii) the written confession by the Executive of embezzlement, fraud, misappropriation of funds, any act of moral turpitude or dishonesty or acts constituting a felony; (iv) the finding by a court of competent jurisdiction in a criminal or civil action or by the U.S. Securities and Exchange Commission or state blue sky agency in an administrative proceeding that the Executive has willfully violated any federal or state securities law; Page 1 of 10 PETER ZEE EXECUTIVE EMPLOYMENT AGREEMENT VENDINGDATA OCTOBER 3RD, 2005 (v) the engagement by the Executive in willful and continued misconduct, or the Executive's willful and continued failure to substantially perform the Executive's obligations; (vi) the use by the Executive of alcohol or any controlled substance to an extent that it interferes, in the sole discretion of the Board, on a continuing and material basis with the performance of the Executive's duties under the Agreement; (vii) the willful, unauthorized disclosure by the Executive of Confidential Information, as defined in Section 12, concerning the Company or any Subsidiary, unless such disclosure was (A) believed in good faith by the Executive to be appropriate in the course of properly carrying out duties under the Agreement, or (B) required by an order of a court having jurisdiction over the subject matter or a summons, subpoena or order in the nature thereof of any legislative body (including any committee thereof) or any governmental or administrative agency; (viii) performance of services by the Executive, other than in the course of properly carrying out his or her duties under the Agreement and as otherwise provided herein, for any other corporation or person that competes with the Company while the Executive is employed by the Company (ix) misconduct in connection with the performance of any of Executive's duties, including, without limitation, misappropriation of funds or property of the Company, securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company, misrepresentation to the Company, or any violation of law or regulations on Company premises or to which the Company is subject; (x) commission by Executive of an act involving moral turpitude, dishonesty, theft or unethical business conduct, or conduct which impairs or injures the reputation of, or harms, the Company; (xi) disloyalty by Executive, including without limitation, aiding a competitor; (xii) any breach of this Agreement or Company rules; or (xiii) any other bad act or misconduct by Executive; (c) "Change in Control" means, and shall be deemed to occur upon the happening of the acquisition, directly or indirectly, in a single transaction or a series of related transactions by any person resulting in the beneficial ownership of 50% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote; (d) "Term of Employment" shall mean the initial two-year period specified in Section 2 below and if, but only if, automatically renewed as provided in Section 2, shall include the period of such renewal. (e) "Voting Securities" means securities of the Company, the holders of which are entitled to vote for the election of directors. Page 2 of 10 PETER ZEE EXECUTIVE EMPLOYMENT AGREEMENT VENDINGDATA OCTOBER 3RD, 2005 2. TERM OF EMPLOYMENT (a) The Company hereby employs the Executive, and the Executive hereby accepts employment with the Company, in the position and with the duties and responsibilities as set forth in Section 3 below for the Term of Employment, subject to the terms and conditions of the Agreement. (b) The initial Term of Employment shall commence on October 3rd, 2005 and shall terminate on September 30, 2007, unless terminated earlier as provided in Section 8; provided that the Term of Employment shall automatically renew for successive one-year periods unless (i) it has sooner terminated as provided in Section 8 or (ii) either party has notified the other in writing at least thirty (30) days prior to the otherwise scheduled expiration of the Term of Employment that such Term of Employment shall not so renew. 3. POSITION, DUTIES AND AUTHORITIES During the Term of Employment, the Executive shall be employed as the Vice President of Engineering and Manufacturing of the Company. Subject to supervision and in accordance with the policies and directives established by the Chief Executive Officer, the Executive's duties and responsibilities shall include those duties set forth on Exhibit 'A', attached hereto, and such other duties, responsibilities and authorities customarily associated with such positions. 4. BASE SALARY During the Term of Employment, the Executive shall be paid by the Company a Base Salary payable no less frequently than in equal monthly installments at an annualized rate of $175,000.00; subject to increase as may be determined by the Company within its sole discretion. 5. OPTIONS Executive will receive options ("Options") to purchase 150,000 shares of the Company's common stock at an exercise price of $1.34 per share, which options shall be exercisable upon a Change in Control, and which Options vest upon a Change in Control. Except for any conflicting provisions in this Agreement, which shall prevail, the Options shall be issued under and governed by the terms of the Company's 1999 Stock Option Plan. These Options are intended to benefit Executive upon a Change in Control, and are in addition to stock options already granted to Executive in connection with Executive's employment. 6. BONUS The Executive will be entitled to receive a performance-based bonus of up to 50% of the Executive's annual Base Salary for the calendar year commencing January 1, 2006 and for each calendar year during the remainder of the Term of Employment. The performance bonus shall be subject to the Executive's satisfaction of certain performance goals determined by the Chief Executive Officer. Prior to January 1, 2006 and the commencement of each calendar year thereafter during the remainder of the Term of Employment, the Chief Executive Officer shall determine, in that Officer's sole and absolute discretion, the performance goals for the Executive and deliver a written description of those goals to Executive. The written description shall be incorporated into and become a part of this Agreement. All payments of bonuses earned during any calendar year shall be due and payable no later than March 31st of the following year. The determination of whether the Executive has satisfied the performance goals shall be made by the Board of Directors in its reasonable discretion. Page 3 of 10 PETER ZEE EXECUTIVE EMPLOYMENT AGREEMENT VENDINGDATA OCTOBER 3RD, 2005 7. EMPLOYEE BENEFIT PROGRAMS During the Term of Employment, the Executive and his dependents shall be entitled to participate in, at the Company's expense, whatever employee benefit plans the Company endorses to obtain, if any, such as medical, surgical, hospitalization, dental and visual insurance coverage. The Company will pay all expenses for these insurance program(s) or plan(s). 8. TERMINATION OF EMPLOYMENT (a) Termination by the Company for Cause. At any time after learning of an event constituting Cause, the Company may elect to give the Executive written notice of its intention to terminate for Cause, specifying in such notice the event forming the basis for Cause. Termination shall be effective immediately upon delivery of notice hereunder. In the event the Executive's employment is terminated by the Company for Cause, the Executive shall be entitled only to: (i) Base Salary, at the rate in effect at the time of termination, accrued and payable through the date of termination of employment; (ii) reimbursement for expenses incurred but not yet reimbursed by the Company; and (iii) any other compensation and benefits accrued and to which the Executive is entitled under applicable plans, programs and agreements of the Company as of the date of termination of employment. The Executive's entitlement to the foregoing shall be without prejudice to the right of the Company to claim or sue for any damages or other legal or equitable remedy to which the Company may be entitled as a result of such Cause; provided, however, that offset shall not be available to the Company in any event. (b) Termination Without Cause. In the event the Executive's employment is terminated by the Company without Cause (which shall not include a termination pursuant to Section 8(a)), the Executive shall be entitled only to those items described in the subsections (i) through (vi) below. Termination Without Cause shall be effective immediately, unless a later date is stated, upon delivery of a written notice of such termination from the Company to the Executive. (i) Base Salary, at the rate in effect at the time of termination, accrued and payable through the date of termination of employment; (ii) an amount equal to the greater of (a) the Base Salary owing over the balance of the term of this agreement or (b) 12 months' Base Salary (Base Salary as used in this section shall be determined at the rate of compensation in effect as of the date of termination Without Cause) (the "Base Salary Termination Payment"); (iii) in lieu of any bonus under Section 6, an amount equal to 50% of the Base Salary Termination Payment; (iv) reimbursement for expenses incurred but not yet reimbursed by the Company; (v) any amounts due to the Executive under Section 9; and Page 4 of 10 PETER ZEE EXECUTIVE EMPLOYMENT AGREEMENT VENDINGDATA OCTOBER 3RD, 2005 (vi) any other compensation and benefits accrued and to which the Executive is entitled under applicable plans, programs and agreements of the Company as of the date of Termination Without Cause. (c) Voluntary Termination. A "Voluntary Termination" shall mean a termination of employment by the Executive on his own initiative other than a termination under Section 8(a) or 8(b). In the event of a Voluntary Termination, the Executive shall be entitled only to: (i) Base Salary, at the rate in effect at the time of termination, accrued and payable through the date of termination of employment; (ii) reimbursement for expenses incurred but not yet reimbursed by the Company; and (iii) any other compensation and benefits accrued and to which the Executive is entitled under applicable plans, programs and agreements of the Company. A Voluntary Termination shall not, solely due to a Voluntary Termination, be deemed a breach of this Agreement and shall be effective upon the expiration of 30 days after written notice is delivered to the Company, unless another period of time is agreed to in writing by the Parties. (d) No Mitigation; No Offset. In the event of any termination of the Executive's employment under the Agreement without Cause, the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under the Agreement on account of any remuneration attributable to any subsequent employment that the Executive may obtain. (e) Nature of Payments. Any amounts due the Executive under the Agreement in the event of any termination of employment with the Company are in the nature of severance payments, or liquidated damages which contemplate both direct damages and consequential damages that the Executive may suffer as a result of the termination of employment, or both, and are not in the nature of a penalty. 9. PAYMENTS IN CASE OF CHANGE IN CONTROL Upon a Change in Control, as such term is defined herein, and in addition to any other payments to which Executive is entitled under Section 8 or any other provision of this Agreement, Executive shall be entitled to: (i) an amount equal to 12 months' Base Salary in effect as of the effective date of the Change in Control; and (ii) an amount equal to 50% of the annual Base Salary in effect as of the effective date of the Change in Control. 10. CONDITIONS OF ENTITLEMENT TO PAYMENT The consideration described in Section 8(b)(i) and (ii) and Section 9 are due and owing if and only if all of the conditions set forth in this Section 10 are satisfied: (a) Executive must have signed and delivered to the Chairman of the Board of the Company upon the termination of employment a release in substantially the form attached as Exhibit B (the "Release") subject to the timing and effectiveness requirements set forth in the Release; Executive must Page 5 of 10 PETER ZEE EXECUTIVE EMPLOYMENT AGREEMENT VENDINGDATA OCTOBER 3RD, 2005 have substantially complied with all written contractual obligations owed to the Company, including without limitation obligations of Executive under this Agreement. This subpart (a) is applicable to payments under Section 9 only if prior to the Change in Control the Executive has received notice of termination without Cause to take effect upon the Change in Control or within 30 days thereafter. (b) No cash payments shall be due or owing to Executive under this Agreement if the Company is (i) out of compliance with any covenants imposed by its senior lenders and such lenders have failed to waive the non-compliance or grant a forbearance, or (ii) is insolvent, or (iii), in the good faith discretion of the Board of Directors of the Company, any such payment or payments, by itself or when combined with any other obligations of the Company, would cause the Company to be out of compliance with such covenants (and the Board of Directors in its sole judgment has determined that it is unlikely that its senior lenders will waive the non-compliance or grant a forbearance) or insolvent. In the event of application of (i), (ii) or (iii) above, the cash payment shall be become due and owing and shall be paid promptly after the Board of Directors in its good faith determines that sections (i), (ii) and (iii) cease to apply. (c) No payments shall have been made previously under this Agreement with regard to a prior Change in Control. 11. COVENANT NOT TO COMPETE In the event of a termination of this Agreement prior to the scheduled expiration of the Term of Employment, the Executive shall not, for the remaining Term of Employment or 12 months, whichever is longer, engage in competition with the Company. For purposes of this Section 11, the Executive shall be engaging in competition with the Company if the Executive engages in the manufacture of playing card shufflers, playing card readers and/or playing card deck setters in Clark County, Nevada or any other location in which the Company is engaging in business at the time of the termination of the Executive's employment, whether as an employee, executive, partner, principal, agent, representative, stockholder or consultant (other than as a holder of not more than a 10% equity interest) or in any other corporate or any capacity, so long as the Company is engaged in business in the location in question. 12. COVENANTS TO PROTECT CONFIDENTIAL INFORMATION The Executive shall not, during the Term of Employment or anytime thereafter, without prior written consent of the Company, divulge, publish or otherwise disclose to any other person any Confidential Information regarding the Company except in the course of carrying out the Executive's responsibilities on behalf of the Company (e.g., providing information to the Company's attorneys, accountants, bankers, etc.) or if required to do so pursuant to the order of a court having jurisdiction over the subject matter or a summons, subpoena or order in the nature thereof of any legislative body (including any committee thereof and any litigation or dispute resolution method against the Company related to or arising out of this Agreement) or any governmental or administrative agency. For this purpose, Confidential Information shall include, but is not limited to, the Company's financial position and results of operations, trades secrets and intellectual property, products and product development plans, marketing and promotional plans and strategies, customer lists and customer data bases. Confidential Information does not include information that is generally available to the public other than through a breach of the Agreement on the part of the Executive. 13. NON-SOLICITATION Except with the prior written consent of the Company, Executive shall not solicit customers, clients, or employees of the Company or any of its affiliates for a period of twelve (12) months after the Page 6 of 10 PETER ZEE EXECUTIVE EMPLOYMENT AGREEMENT VENDINGDATA OCTOBER 3RD, 2005 date of the expiration or termination of this Agreement. Without limiting the generality of the foregoing, Executive will not, for a period of twelve (12) months after the date of the expiration or termination of this Agreement, willfully canvas or solicit any such business in competition with the business of the Company from any customers of the Company with whom Executive had contact during, or of which Executive had knowledge solely as a result of, his performance of services for the Company pursuant to this Agreement. Executive will not, for a period of twelve (12) months after the date of the expiration or termination of this Agreement, directly or indirectly request, induce or advise any customers of the Company with whom Executive had contact during the term of this Agreement to withdraw, curtail or cancel their business with the Company. Executive will not, for a period of twelve (12) months after the date of the expiration or termination of this Agreement, induce or attempt to induce any employee of the Company to terminate his/her employment with the Company. 14. REMEDIES (a) Executive acknowledges and agrees that immediate and irreparable harm, for which damages would be an inadequate remedy, would occur in the event any of the provisions of Sections 11, 12 and 13 of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, Executive agrees that Company shall be entitled to an injunction or injunctions to prevent breaches of such provisions of this Agreement and to enforce specifically the terms and provisions thereof without the necessity of proving actual damages or securing or posting any bond or providing prior notice, in addition to any other remedy to which it may be entitled at law or equity. (b) Nothing herein contained is intended to waive or diminish any rights Company may have at law or in equity at any time to protect and defend its legitimate property interests (including its business relationship with third parties), the foregoing provisions being intended to be in addition to and not in derogation or limitation of any other rights the Company may have at law or equity. (c) Executive shall have no rights, remedies or claims for damages, at law, in equity or otherwise with respect to any termination of Executive's employment by the Company other than as set forth in Section 8 of this Agreement. 15. REPRESENTATION The Company and the Executive respectively represent and warrant to each other that each respectively is fully authorized and empowered to enter into the Agreement and that their entering into the Agreement and the performance of their respective obligations under the Agreement will not violate any agreement between the Company or the Executive respectively and any other person, firm or organization or any law or governmental regulation. 16. ENTIRE AGREEMENT This Agreement contains the entire agreement between the Parties and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the Parties. 17. AMENDMENT OR WAIVER This Agreement cannot be changed, modified or amended without the consent in writing of both the Executive and the Company. No waiver by either Party at any time of any breach by the other Party of any condition or provision of the Agreement shall be deemed a waiver of a similar or dissimilar Page 7 of 10 PETER ZEE EXECUTIVE EMPLOYMENT AGREEMENT VENDINGDATA OCTOBER 3RD, 2005 condition or provision at the same or at any prior or subsequent time. Any waiver must be in writing and signed by the Executive or an authorized officer of the Company, as the case may be. 18. SEVERABILITY The provisions of this Agreement shall be severable and the invalidity, illegality or unenforceability of any provision of this Agreement shall not affect, impair or render unenforceable this Agreement or any other provision hereof, all of which shall remain in full force and effect. If any provision of this Agreement is adjudicated by a court of competent jurisdiction as invalid, illegal or otherwise unenforceable, but such provision may be made enforceable by a limitation or reduction of its scope, the Parties agree to abide by such limitation or reduction as may be necessary so that said provision shall be enforceable to the fullest extent permitted by law. The Parties further intend to and hereby confer jurisdiction to enforce the covenants contained in Sections 11, 12 and 13 (the "Restrictive Covenants") upon the courts of any jurisdiction within the geographical scope of such Restrictive Covenants. If the courts of any one or more of such jurisdictions hold any Restrictive Covenant unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the Company and Executive that such determination not bar or in any way affect the right of the Company to the relief provided for in this section in the courts of any other jurisdiction within the geographical scope of such Restrictive Covenant as to breaches of such Restrictive Covenant in such other respective jurisdictions (such Restrictive Covenant as it relates to each jurisdiction being, for this purpose, severable into diverse and independent covenants). 19. SURVIVAL The respective rights and obligations of the Parties shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. 20. GOVERNING LAW This Agreement shall be governed by and construed under the law of the State of Nevada, disregarding any principles of conflicts of law that would otherwise provide for the application of the substantive law of another jurisdiction. The Parties each hereby consents to the jurisdiction and venue of the state courts of Clark County, Nevada and the United States district courts with jurisdiction in Nevada with respect to any matter arising out of or relating to this Agreement other than matters that are subject to the arbitration provisions of Section 21 of this Agreement. 21. SETTLEMENT OF DISPUTES Except for equitable actions seeking to enforce the provisions of Sections 11, 12 and 13 of this Agreement which may be brought by a court in any competent jurisdiction, in the event a dispute, claim or controversy arises between the parties relating to the validity, interpretation, performance, termination or breach of this Agreement, (collectively, a "Dispute"), the Parties agree to hold a meeting regarding the Dispute, attended by individuals with decision-making authority, to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies. If, within thirty (30) days after such meeting or after good faith attempts to schedule such a meeting have failed, the Parties have not succeeded in negotiating a resolution of the Dispute, the Dispute shall be resolved through final and binding arbitration to be held in Nevada in accordance with the rules and procedures of the American Arbitration Association. The prevailing party in such proceeding shall be entitled to recover the costs of the arbitration from the other party, including, without limitation, reasonable attorneys' fees. Page 8 of 10 PETER ZEE EXECUTIVE EMPLOYMENT AGREEMENT VENDINGDATA OCTOBER 3RD, 2005 22. HEADINGS The headings of the paragraphs contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. 23. COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 24. TAXES The Compensation payable is stated in gross amounts and shall be subject to such withholding taxes and other taxes as may be required by law. 25. ACKNOWLEDGMENT The Executive acknowledges that he/she has been given a reasonable period of time to study this Agreement before signing it and has had an opportunity to secure counsel of his/her own. The Executive certifies that he/she has fully read and completely understands the terms, nature, and effect of this Agreement. The Executive further acknowledges that he/she is executing this Agreement freely, knowingly, and voluntarily and that the Executive's execution of this Agreement is not the result of any fraud, duress, mistake, or undue influence whatsoever. In executing this Agreement, the Executive does not rely on any inducements, promises, or representations by the Company other than that which is stated in this Agreement. 26. WAIVER OF JURY TRIAL Each Party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any litigation arising out of or relating to this Agreement and Executive's employment by the Company. Each Party (a) certifies that no representative, agent or attorney of the other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications set forth in this section. Page 9 of 10 PETER ZEE EXECUTIVE EMPLOYMENT AGREEMENT VENDINGDATA OCTOBER 3RD, 2005 IN WITNESS WHEREOF, the undersigned have executed the Agreement as of the date first written above. VENDINGDATA CORPORATION, VENDINGDATA CORPORATION, a Nevada corporation a Nevada corporation By: By: --------------------------------- ------------------------------- Mark R. Newburg James E. Crabbe Its: Executive Director of the Board Its: Chairman of the Board EXECUTIVE - ----------------------------------------------- Peter Zee Page 10 of 10 EX-23.1 6 a28889exv23w1.htm EXHIBIT 23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (SEC File Nos.333-123401 and 333-115033), and on Form S-8 (SEC File Nos. 333-108672 and 333-108673) of VendingData Corporation of our report dated March 23, 2007, which appears on page F-2 of this annual report on Form 10-KSB for the year ended December 31, 2006.

/s/ Piercy Bowler Taylor & Kern

April 12, 2007

EX-10.18

                                                                   EXHIBIT 10.18


PETER ZEE                                         EXECUTIVE EMPLOYMENT AGREEMENT
VENDINGDATA                                                    OCTOBER 3RD, 2005


                              EMPLOYMENT AGREEMENT


        THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of October 3rd,
2005, between VendingData Corporation, a Nevada corporation (together with its
successors or assigns as permitted under this Agreement, the "Company"), and
Peter Zee, an individual (the "Executive").

                                    RECITALS

        The Company desires to employ the Executive and enter into this
Agreement embodying the terms of such employment and the Executive desires to
enter into this Agreement and to accept such employment.

        In consideration of the mutual covenants and for other good and valuable
consideration, the Company and the Executive (individually a "Party" and
together the "Parties") agree as follows:


    1.     DEFINITIONS

        (a) "Base Salary" shall mean the salary provided for in Section 4 below
subject to such increases as may be made from time to time.

        (b) "Cause" shall mean:

                (i) the conviction of (including any act as a result of pleading
                nolo contendere) or entry of judgment against the Executive by a
                civil or criminal court of competent jurisdiction of a felony,
                or any other offense or wrongdoing involving embezzlement,
                fraud, misappropriation of funds, any act of moral turpitude or
                dishonesty;

                (ii) the indictment of the Executive by a state or federal grand
                jury or the filing of a criminal complaint or information for a
                felony, or any other offense involving embezzlement, fraud,
                misappropriation of funds, any act of moral turpitude or
                dishonesty, unless such indictment or filing is dismissed within
                one hundred eighty (180) days from the date of such indictment
                or filing. The Board may elect to suspend and extend the Term of
                Employment by such one hundred eighty (180) day period or the
                number of days actually taken by the Executive to dismiss such
                indictment or filing, whichever is less; provided that the
                Executive notifies the Company in writing that the Executive
                intends to contest in good faith such indictment or filing and
                pursues the dismissal of such indictment or filing with
                reasonable diligence. During such period of suspension,
                Executive may be relieved of duties, but shall be entitled to
                receive Base Salary;

                (iii) the written confession by the Executive of embezzlement,
                fraud, misappropriation of funds, any act of moral turpitude or
                dishonesty or acts constituting a felony;

                (iv) the finding by a court of competent jurisdiction in a
                criminal or civil action or by the U.S. Securities and Exchange
                Commission or state blue sky agency in an administrative
                proceeding that the Executive has willfully violated any federal
                or state securities law;



                                  Page 1 of 10



PETER ZEE                                         EXECUTIVE EMPLOYMENT AGREEMENT
VENDINGDATA                                                    OCTOBER 3RD, 2005


                (v) the engagement by the Executive in willful and continued
                misconduct, or the Executive's willful and continued failure to
                substantially perform the Executive's obligations;

                (vi) the use by the Executive of alcohol or any controlled
                substance to an extent that it interferes, in the sole
                discretion of the Board, on a continuing and material basis with
                the performance of the Executive's duties under the Agreement;

                (vii) the willful, unauthorized disclosure by the Executive of
                Confidential Information, as defined in Section 12, concerning
                the Company or any Subsidiary, unless such disclosure was (A)
                believed in good faith by the Executive to be appropriate in the
                course of properly carrying out duties under the Agreement, or
                (B) required by an order of a court having jurisdiction over the
                subject matter or a summons, subpoena or order in the nature
                thereof of any legislative body (including any committee
                thereof) or any governmental or administrative agency;

                (viii) performance of services by the Executive, other than in
                the course of properly carrying out his or her duties under the
                Agreement and as otherwise provided herein, for any other
                corporation or person that competes with the Company while the
                Executive is employed by the Company

                (ix) misconduct in connection with the performance of any of
                Executive's duties, including, without limitation,
                misappropriation of funds or property of the Company, securing
                or attempting to secure personally any profit in connection with
                any transaction entered into on behalf of the Company,
                misrepresentation to the Company, or any violation of law or
                regulations on Company premises or to which the Company is
                subject;

                (x) commission by Executive of an act involving moral turpitude,
                dishonesty, theft or unethical business conduct, or conduct
                which impairs or injures the reputation of, or harms, the
                Company;

                (xi) disloyalty by Executive, including without limitation,
                aiding a competitor;

                (xii) any breach of this Agreement or Company rules; or

                (xiii) any other bad act or misconduct by Executive;

        (c) "Change in Control" means, and shall be deemed to occur upon the
happening of the acquisition, directly or indirectly, in a single transaction or
a series of related transactions by any person resulting in the beneficial
ownership of 50% or more of the combined voting power of the then outstanding
voting securities of the Company entitled to vote;

        (d) "Term of Employment" shall mean the initial two-year period
specified in Section 2 below and if, but only if, automatically renewed as
provided in Section 2, shall include the period of such renewal.

        (e) "Voting Securities" means securities of the Company, the holders of
which are entitled to vote for the election of directors.



                                  Page 2 of 10



PETER ZEE                                         EXECUTIVE EMPLOYMENT AGREEMENT
VENDINGDATA                                                    OCTOBER 3RD, 2005



    2.     TERM OF EMPLOYMENT

        (a) The Company hereby employs the Executive, and the Executive hereby
accepts employment with the Company, in the position and with the duties and
responsibilities as set forth in Section 3 below for the Term of Employment,
subject to the terms and conditions of the Agreement.

        (b) The initial Term of Employment shall commence on October 3rd, 2005
and shall terminate on September 30, 2007, unless terminated earlier as provided
in Section 8; provided that the Term of Employment shall automatically renew for
successive one-year periods unless (i) it has sooner terminated as provided in
Section 8 or (ii) either party has notified the other in writing at least thirty
(30) days prior to the otherwise scheduled expiration of the Term of Employment
that such Term of Employment shall not so renew.


    3.     POSITION, DUTIES AND AUTHORITIES

        During the Term of Employment, the Executive shall be employed as the
Vice President of Engineering and Manufacturing of the Company. Subject to
supervision and in accordance with the policies and directives established by
the Chief Executive Officer, the Executive's duties and responsibilities shall
include those duties set forth on Exhibit 'A', attached hereto, and such other
duties, responsibilities and authorities customarily associated with such
positions.


    4.     BASE SALARY

        During the Term of Employment, the Executive shall be paid by the
Company a Base Salary payable no less frequently than in equal monthly
installments at an annualized rate of $175,000.00; subject to increase as may be
determined by the Company within its sole discretion.


    5.     OPTIONS

        Executive will receive options ("Options") to purchase 150,000 shares of
the Company's common stock at an exercise price of $1.34 per share, which
options shall be exercisable upon a Change in Control, and which Options vest
upon a Change in Control. Except for any conflicting provisions in this
Agreement, which shall prevail, the Options shall be issued under and governed
by the terms of the Company's 1999 Stock Option Plan. These Options are intended
to benefit Executive upon a Change in Control, and are in addition to stock
options already granted to Executive in connection with Executive's employment.


    6.     BONUS

        The Executive will be entitled to receive a performance-based bonus of
up to 50% of the Executive's annual Base Salary for the calendar year commencing
January 1, 2006 and for each calendar year during the remainder of the Term of
Employment. The performance bonus shall be subject to the Executive's
satisfaction of certain performance goals determined by the Chief Executive
Officer. Prior to January 1, 2006 and the commencement of each calendar year
thereafter during the remainder of the Term of Employment, the Chief Executive
Officer shall determine, in that Officer's sole and absolute discretion, the
performance goals for the Executive and deliver a written description of those
goals to Executive. The written description shall be incorporated into and
become a part of this Agreement. All payments of bonuses earned during any
calendar year shall be due and payable no later than March 31st of the following
year. The determination of whether the Executive has satisfied the performance
goals shall be made by the Board of Directors in its reasonable discretion.



                                  Page 3 of 10


PETER ZEE                                         EXECUTIVE EMPLOYMENT AGREEMENT
VENDINGDATA                                                    OCTOBER 3RD, 2005


    7.     EMPLOYEE BENEFIT PROGRAMS

        During the Term of Employment, the Executive and his dependents shall be
entitled to participate in, at the Company's expense, whatever employee benefit
plans the Company endorses to obtain, if any, such as medical, surgical,
hospitalization, dental and visual insurance coverage. The Company will pay all
expenses for these insurance program(s) or plan(s).


    8.     TERMINATION OF EMPLOYMENT

        (a) Termination by the Company for Cause. At any time after learning of
an event constituting Cause, the Company may elect to give the Executive written
notice of its intention to terminate for Cause, specifying in such notice the
event forming the basis for Cause. Termination shall be effective immediately
upon delivery of notice hereunder. In the event the Executive's employment is
terminated by the Company for Cause, the Executive shall be entitled only to:

                (i) Base Salary, at the rate in effect at the time of
        termination, accrued and payable through the date of termination of
        employment;

                (ii) reimbursement for expenses incurred but not yet reimbursed
        by the Company; and

                (iii) any other compensation and benefits accrued and to which
        the Executive is entitled under applicable plans, programs and
        agreements of the Company as of the date of termination of employment.

The Executive's entitlement to the foregoing shall be without prejudice to the
right of the Company to claim or sue for any damages or other legal or equitable
remedy to which the Company may be entitled as a result of such Cause; provided,
however, that offset shall not be available to the Company in any event.

        (b) Termination Without Cause. In the event the Executive's employment
is terminated by the Company without Cause (which shall not include a
termination pursuant to Section 8(a)), the Executive shall be entitled only to
those items described in the subsections (i) through (vi) below. Termination
Without Cause shall be effective immediately, unless a later date is stated,
upon delivery of a written notice of such termination from the Company to the
Executive.

                (i) Base Salary, at the rate in effect at the time of
        termination, accrued and payable through the date of termination of
        employment;

                (ii) an amount equal to the greater of (a) the Base Salary owing
        over the balance of the term of this agreement or (b) 12 months' Base
        Salary (Base Salary as used in this section shall be determined at the
        rate of compensation in effect as of the date of termination Without
        Cause) (the "Base Salary Termination Payment");

                (iii) in lieu of any bonus under Section 6, an amount equal to
        50% of the Base Salary Termination Payment;

                (iv) reimbursement for expenses incurred but not yet reimbursed
        by the Company;

                (v) any amounts due to the Executive under Section 9; and



                                  Page 4 of 10


PETER ZEE                                         EXECUTIVE EMPLOYMENT AGREEMENT
VENDINGDATA                                                    OCTOBER 3RD, 2005


                (vi) any other compensation and benefits accrued and to which
        the Executive is entitled under applicable plans, programs and
        agreements of the Company as of the date of Termination Without Cause.

        (c) Voluntary Termination. A "Voluntary Termination" shall mean a
termination of employment by the Executive on his own initiative other than a
termination under Section 8(a) or 8(b). In the event of a Voluntary Termination,
the Executive shall be entitled only to:

                (i) Base Salary, at the rate in effect at the time of
        termination, accrued and payable through the date of termination of
        employment;

                (ii) reimbursement for expenses incurred but not yet reimbursed
        by the Company; and

                (iii) any other compensation and benefits accrued and to which
        the Executive is entitled under applicable plans, programs and
        agreements of the Company.

A Voluntary Termination shall not, solely due to a Voluntary Termination, be
deemed a breach of this Agreement and shall be effective upon the expiration of
30 days after written notice is delivered to the Company, unless another period
of time is agreed to in writing by the Parties.

        (d) No Mitigation; No Offset. In the event of any termination of the
Executive's employment under the Agreement without Cause, the Executive shall be
under no obligation to seek other employment, and there shall be no offset
against amounts due the Executive under the Agreement on account of any
remuneration attributable to any subsequent employment that the Executive may
obtain.

        (e) Nature of Payments. Any amounts due the Executive under the
Agreement in the event of any termination of employment with the Company are in
the nature of severance payments, or liquidated damages which contemplate both
direct damages and consequential damages that the Executive may suffer as a
result of the termination of employment, or both, and are not in the nature of a
penalty.


    9.     PAYMENTS IN CASE OF CHANGE IN CONTROL

        Upon a Change in Control, as such term is defined herein, and in
addition to any other payments to which Executive is entitled under Section 8 or
any other provision of this Agreement, Executive shall be entitled to:

                (i) an amount equal to 12 months' Base Salary in effect as of
        the effective date of the Change in Control; and

                (ii) an amount equal to 50% of the annual Base Salary in effect
        as of the effective date of the Change in Control.


    10.    CONDITIONS OF ENTITLEMENT TO PAYMENT

        The consideration described in Section 8(b)(i) and (ii) and Section 9
are due and owing if and only if all of the conditions set forth in this Section
10 are satisfied:

        (a) Executive must have signed and delivered to the Chairman of the
Board of the Company upon the termination of employment a release in
substantially the form attached as Exhibit B (the "Release") subject to the
timing and effectiveness requirements set forth in the Release; Executive must



                                  Page 5 of 10


PETER ZEE                                         EXECUTIVE EMPLOYMENT AGREEMENT
VENDINGDATA                                                    OCTOBER 3RD, 2005


have substantially complied with all written contractual obligations owed to the
Company, including without limitation obligations of Executive under this
Agreement. This subpart (a) is applicable to payments under Section 9 only if
prior to the Change in Control the Executive has received notice of termination
without Cause to take effect upon the Change in Control or within 30 days
thereafter.

        (b) No cash payments shall be due or owing to Executive under this
Agreement if the Company is (i) out of compliance with any covenants imposed by
its senior lenders and such lenders have failed to waive the non-compliance or
grant a forbearance, or (ii) is insolvent, or (iii), in the good faith
discretion of the Board of Directors of the Company, any such payment or
payments, by itself or when combined with any other obligations of the Company,
would cause the Company to be out of compliance with such covenants (and the
Board of Directors in its sole judgment has determined that it is unlikely that
its senior lenders will waive the non-compliance or grant a forbearance) or
insolvent. In the event of application of (i), (ii) or (iii) above, the cash
payment shall be become due and owing and shall be paid promptly after the Board
of Directors in its good faith determines that sections (i), (ii) and (iii)
cease to apply.

        (c) No payments shall have been made previously under this Agreement
with regard to a prior Change in Control.


    11.    COVENANT NOT TO COMPETE

        In the event of a termination of this Agreement prior to the scheduled
expiration of the Term of Employment, the Executive shall not, for the remaining
Term of Employment or 12 months, whichever is longer, engage in competition with
the Company. For purposes of this Section 11, the Executive shall be engaging in
competition with the Company if the Executive engages in the manufacture of
playing card shufflers, playing card readers and/or playing card deck setters in
Clark County, Nevada or any other location in which the Company is engaging in
business at the time of the termination of the Executive's employment, whether
as an employee, executive, partner, principal, agent, representative,
stockholder or consultant (other than as a holder of not more than a 10% equity
interest) or in any other corporate or any capacity, so long as the Company is
engaged in business in the location in question.


    12.    COVENANTS TO PROTECT CONFIDENTIAL INFORMATION

        The Executive shall not, during the Term of Employment or anytime
thereafter, without prior written consent of the Company, divulge, publish or
otherwise disclose to any other person any Confidential Information regarding
the Company except in the course of carrying out the Executive's
responsibilities on behalf of the Company (e.g., providing information to the
Company's attorneys, accountants, bankers, etc.) or if required to do so
pursuant to the order of a court having jurisdiction over the subject matter or
a summons, subpoena or order in the nature thereof of any legislative body
(including any committee thereof and any litigation or dispute resolution method
against the Company related to or arising out of this Agreement) or any
governmental or administrative agency. For this purpose, Confidential
Information shall include, but is not limited to, the Company's financial
position and results of operations, trades secrets and intellectual property,
products and product development plans, marketing and promotional plans and
strategies, customer lists and customer data bases. Confidential Information
does not include information that is generally available to the public other
than through a breach of the Agreement on the part of the Executive.


    13.    NON-SOLICITATION

        Except with the prior written consent of the Company, Executive shall
not solicit customers, clients, or employees of the Company or any of its
affiliates for a period of twelve (12) months after the



                                  Page 6 of 10


PETER ZEE                                         EXECUTIVE EMPLOYMENT AGREEMENT
VENDINGDATA                                                    OCTOBER 3RD, 2005


date of the expiration or termination of this Agreement. Without limiting the
generality of the foregoing, Executive will not, for a period of twelve (12)
months after the date of the expiration or termination of this Agreement,
willfully canvas or solicit any such business in competition with the business
of the Company from any customers of the Company with whom Executive had contact
during, or of which Executive had knowledge solely as a result of, his
performance of services for the Company pursuant to this Agreement. Executive
will not, for a period of twelve (12) months after the date of the expiration or
termination of this Agreement, directly or indirectly request, induce or advise
any customers of the Company with whom Executive had contact during the term of
this Agreement to withdraw, curtail or cancel their business with the Company.
Executive will not, for a period of twelve (12) months after the date of the
expiration or termination of this Agreement, induce or attempt to induce any
employee of the Company to terminate his/her employment with the Company.


    14.    REMEDIES

        (a) Executive acknowledges and agrees that immediate and irreparable
harm, for which damages would be an inadequate remedy, would occur in the event
any of the provisions of Sections 11, 12 and 13 of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Accordingly, Executive agrees that Company shall be entitled to an injunction or
injunctions to prevent breaches of such provisions of this Agreement and to
enforce specifically the terms and provisions thereof without the necessity of
proving actual damages or securing or posting any bond or providing prior
notice, in addition to any other remedy to which it may be entitled at law or
equity.

        (b) Nothing herein contained is intended to waive or diminish any rights
Company may have at law or in equity at any time to protect and defend its
legitimate property interests (including its business relationship with third
parties), the foregoing provisions being intended to be in addition to and not
in derogation or limitation of any other rights the Company may have at law or
equity.

        (c) Executive shall have no rights, remedies or claims for damages, at
law, in equity or otherwise with respect to any termination of Executive's
employment by the Company other than as set forth in Section 8 of this
Agreement.


    15.    REPRESENTATION

        The Company and the Executive respectively represent and warrant to each
other that each respectively is fully authorized and empowered to enter into the
Agreement and that their entering into the Agreement and the performance of
their respective obligations under the Agreement will not violate any agreement
between the Company or the Executive respectively and any other person, firm or
organization or any law or governmental regulation.


    16.    ENTIRE AGREEMENT

        This Agreement contains the entire agreement between the Parties and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Parties.


    17.    AMENDMENT OR WAIVER

        This Agreement cannot be changed, modified or amended without the
consent in writing of both the Executive and the Company. No waiver by either
Party at any time of any breach by the other Party of any condition or provision
of the Agreement shall be deemed a waiver of a similar or dissimilar



                                  Page 7 of 10


PETER ZEE                                         EXECUTIVE EMPLOYMENT AGREEMENT
VENDINGDATA                                                    OCTOBER 3RD, 2005


condition or provision at the same or at any prior or subsequent time. Any
waiver must be in writing and signed by the Executive or an authorized officer
of the Company, as the case may be.


    18.    SEVERABILITY

        The provisions of this Agreement shall be severable and the invalidity,
illegality or unenforceability of any provision of this Agreement shall not
affect, impair or render unenforceable this Agreement or any other provision
hereof, all of which shall remain in full force and effect. If any provision of
this Agreement is adjudicated by a court of competent jurisdiction as invalid,
illegal or otherwise unenforceable, but such provision may be made enforceable
by a limitation or reduction of its scope, the Parties agree to abide by such
limitation or reduction as may be necessary so that said provision shall be
enforceable to the fullest extent permitted by law. The Parties further intend
to and hereby confer jurisdiction to enforce the covenants contained in Sections
11, 12 and 13 (the "Restrictive Covenants") upon the courts of any jurisdiction
within the geographical scope of such Restrictive Covenants. If the courts of
any one or more of such jurisdictions hold any Restrictive Covenant
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the Company and Executive that such determination not bar or in any
way affect the right of the Company to the relief provided for in this section
in the courts of any other jurisdiction within the geographical scope of such
Restrictive Covenant as to breaches of such Restrictive Covenant in such other
respective jurisdictions (such Restrictive Covenant as it relates to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants).


    19.    SURVIVAL

        The respective rights and obligations of the Parties shall survive any
termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations.


    20.    GOVERNING LAW

        This Agreement shall be governed by and construed under the law of the
State of Nevada, disregarding any principles of conflicts of law that would
otherwise provide for the application of the substantive law of another
jurisdiction. The Parties each hereby consents to the jurisdiction and venue of
the state courts of Clark County, Nevada and the United States district courts
with jurisdiction in Nevada with respect to any matter arising out of or
relating to this Agreement other than matters that are subject to the
arbitration provisions of Section 21 of this Agreement.


    21.    SETTLEMENT OF DISPUTES

        Except for equitable actions seeking to enforce the provisions of
Sections 11, 12 and 13 of this Agreement which may be brought by a court in any
competent jurisdiction, in the event a dispute, claim or controversy arises
between the parties relating to the validity, interpretation, performance,
termination or breach of this Agreement, (collectively, a "Dispute"), the
Parties agree to hold a meeting regarding the Dispute, attended by individuals
with decision-making authority, to attempt in good faith to negotiate a
resolution of the Dispute prior to pursuing other available remedies. If, within
thirty (30) days after such meeting or after good faith attempts to schedule
such a meeting have failed, the Parties have not succeeded in negotiating a
resolution of the Dispute, the Dispute shall be resolved through final and
binding arbitration to be held in Nevada in accordance with the rules and
procedures of the American Arbitration Association. The prevailing party in such
proceeding shall be entitled to recover the costs of the arbitration from the
other party, including, without limitation, reasonable attorneys' fees.


                                  Page 8 of 10



PETER ZEE                                         EXECUTIVE EMPLOYMENT AGREEMENT
VENDINGDATA                                                    OCTOBER 3RD, 2005


    22.    HEADINGS

        The headings of the paragraphs contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.


    23.    COUNTERPARTS

        This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.


    24.    TAXES

        The Compensation payable is stated in gross amounts and shall be subject
to such withholding taxes and other taxes as may be required by law.


    25.    ACKNOWLEDGMENT

        The Executive acknowledges that he/she has been given a reasonable
period of time to study this Agreement before signing it and has had an
opportunity to secure counsel of his/her own. The Executive certifies that
he/she has fully read and completely understands the terms, nature, and effect
of this Agreement. The Executive further acknowledges that he/she is executing
this Agreement freely, knowingly, and voluntarily and that the Executive's
execution of this Agreement is not the result of any fraud, duress, mistake, or
undue influence whatsoever. In executing this Agreement, the Executive does not
rely on any inducements, promises, or representations by the Company other than
that which is stated in this Agreement.


    26.    WAIVER OF JURY TRIAL

        Each Party waives, to the fullest extent permitted by applicable law,
any right it may have to a trial by jury in respect of any litigation arising
out of or relating to this Agreement and Executive's employment by the Company.
Each Party (a) certifies that no representative, agent or attorney of the other
Party has represented, expressly or otherwise, that such other Party would not,
in the event of litigation, seek to enforce the foregoing waiver and (b)
acknowledges that it has been induced to enter into this Agreement by, among
other things, the mutual waivers and certifications set forth in this section.



                                  Page 9 of 10


PETER ZEE                                         EXECUTIVE EMPLOYMENT AGREEMENT
VENDINGDATA                                                    OCTOBER 3RD, 2005

IN WITNESS WHEREOF, the undersigned have executed the Agreement as of the date
first written above.



VENDINGDATA CORPORATION,                    VENDINGDATA CORPORATION,
a Nevada corporation                        a Nevada corporation


By:                                         By:
     ---------------------------------           -------------------------------
     Mark R. Newburg                             James E. Crabbe
Its: Executive Director of the Board        Its: Chairman of the Board

EXECUTIVE





- -----------------------------------------------
Peter Zee



                                  Page 10 of 10

EX-23.1

exv23w1

EX-23.2

Exhibit 23.2

[BDO LETTERHEAD]

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (SEC File Nos. 333-123401 and 333-115033), and on Form S-8 (SEC File Nos. 333-108672 and 333-108673) of VendingData Corporation of our Independent Audit Report dated 22 March, 2007 to the directors of Dolphin Advanced Technologies Pty Ltd which appears in Item 7 in this annual report on Form 10-KSB for the year ended 31 December, 2006.

/s/ BDO Kendalls Audit & Assurance (VIC)
(Formerly Horwath Melbourne)

BDO Kendalls Audit & Assurance (VIC)
(Formerly Horwath Melbourne)

Melbourne, 5^th April 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Section 302 Certification

I, Mark R. Newburg, certify that:

     1. I have reviewed this annual report on Form 10-KSB of VendingData Corporation;

     2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

     4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

     5. The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial data information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: April 12, 2007	By:	/s/ Mark R. Newburg
	Mark R. Newburg,
	Chief Executive Officer, Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER

Section 302 Certification

I, Arnaldo F. Galassi, certify that:

     1. I have reviewed this annual report on Form 10-KSB of VendingData Corporation;

     2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

     4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

     5. The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial data information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: April 12, 2007	By:	/s/ Arnaldo F. Galassi
		Arnaldo F. Galassi,
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of VendingData Corporation (the “Company”) on Form 10-KSB for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Mark R. Newburg, Chief Executive Officer, and Arnaldo F. Galassi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By:	/s/ Mark R. Newburg	Dated: April 12, 2007
	Mark R. Newburg
Title:	Chief Executive Officer, Principal Executive Officer
By:	/s/ Arnaldo F. Galassi	Dated: April 12, 2007
	Arnaldo F. Galassi
Title:	Chief Financial Officer of VendingData Corporation

     This certification is made solely for the purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.