VendingData Results Down

16 November 2004

LAS VEGAS – (PRESS RELEASE) -- VendingData(TM) Corporation (Amex: VNX), today reported financial results for its third quarter ended September 30, 2004. The Company reported revenues of $1.2 million, which compares to $2.1 million for the previous quarter of 2004 and $2.5 million for the third quarter of 2003. The decrease in total revenues was due to delays in obtaining expected orders for SecureDrop® as well as a decline in sales of the Random Ejection Shuffler(TM) as the Company nears the launch of its next generation multi-deck shuffler, RandomPlus(TM). Sales of Deck Checker(TM) unts, which represented 78 percent of third quarter revenues, also experienced a 9.2 percent decrease from the prior quarter due to the timing of additional approvals from relevant gaming jurisdictions

The Company reported a net loss applicable to common stockholders for the third quarter of $2.4 million or $0.14 per share, which includes a $575,000 non-cash, pre-tax reserve for inventory obsolescence related to the Random Ejection Shuffler(TM) and a portion of SecureDrop(R) hard count inventory. Excluding the reserve, the Company would have reported a net loss of $1.8 million or $0.10 per share, in line with the Company's guidance reported on October 21, 2004. The Company reported a loss per share of $0.06 for its second quarter ended June 30, 2004. Upon commencement of sales of the RandomPlus(TM) shuffler, the VendingData(TM) management believes there will be an additional obsolescence reserve of the Random Ejection Shuffler(TM) inventory estimated to be in the range between $700,000 and $1,200,000, taken in future periods based on then existing factors.

Though the Company experienced a decline in revenue in the current quarter, its cost of sales during the three-month period increased due to the establishment of the inventory reserve, which resulted in a negative gross margin of 24.1 percent. This compares to a gross margin percentacge of 43.1 percent for the third quarter of the prior year and 48.1 percent for the second quarter of the current year. Excluding this reserve, the Company's gross margin for the quarter would have been 25.5 percent, due to the lower level of revenue.

Cash and equivalents on September 30, 2004 were $2.7 million compared to $2.4 million on June 30, 2004 and $11.5 million on December 31, 2003. Total liabilities increased to $8.2 million in the current quarter, compared to $5.4 million in the prior quarter and $9.9 million on December 31, 2003, reflecting the $3.2 million long term debt financing secured during the quarter. Interest expense in the quarter totaled $198,000 compared to $232,000 in the prior quarter and $760,000 in the quarter ended September 30, 2003. The Company believes that it has sufficient liquidity to support its operations into the first quarter of 2005 and has expressed confidence that additional capital can be raised to meet its needs in 2005. As of today, a $3 million lease line of credit is available to the Company.

Product Development Program Accelerates

The Company recently announced that is has received approval from the Nevada Gaming Control Board for its new PokerOne(TM) shuffler and that it may now commence sales of the product in that state. This approval is in addition to numerous other approvals for the new shuffler recently received from Gaming Laboratories International, Inc, which permits the shuffler to be offered for sale in numerous other jurisdictions in the U.S. Based on approvals received to date, the Company expects orders and deliveries of PokerOne(TM) to commence in its fourth quarter ending December 31, 2004. In addition to PokerOne(TM), earlier this year the Company announced its plans to launch RandomPlus(TM), its next generation Random Ejection Shuffler, as well as a new roulette chip sorting product. Both are expected to generate revenues in 2005.

Patent Matters

The Company previously announced that on October 14, 2004 Shuffle Master, Inc. filed a Motion for Preliminary Injunction seeking to enjoin VendingData(TM) from infringing its U.S. Patent No. 6,655,684 through the use, importing and offering for sale of its PokerOne(TM) shuffler. A hearing date for the motion will take place on November 29, 2004. The motion is further to the original patent infringement action filed against the Company announced on October 5, 2004. The Company believes that the Motion is without merit and it intends to vigorously defend its intellectual property rights.

Steven J. Blad, VendingData's(TM) CEO, commented, "Our Company is dedicated to contributing to the growth of the gaming industry and to the products that lead to increased satisfaction and reliability for casinos and its patrons throughout the world. Over the past year, the introduction of the Deck Checker(TM) contributed a high portion of the company's sales. We expect that new product introductions in the fourth quarter 2004 and continuing into 2005 will progressively improve revenues. Year to date the Deck Checker(TM) and PokerOne(TM) were required to undergo a highly demanding product approval process, the timing of which was difficult to predict. It has been the Company's experience however, that once clearance is received, market reception for our products has been encouraging."