##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    
   Form 10-K/A
 
 
 Amendment No. 1
 
  þ

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

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number: 1-13521
      Hypercom Corporation
 (Exact name of registrant as
    specified in its charter)
  Delaware

86-0828608(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   2851 West Kathleen Road
 Phoenix, Arizona 85053
 (Address of principal executive
    offices) (Zip Code)
  (602) 504-5000
 (Registrants telephone number, including area code)
  Securities
    registered pursuant to Section 12(b) of the Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $.001 par value
    per share

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
 
   
  
 Class

Outstanding at March 6, 2007Common Stock, $.001 par value
    per share

53,061,798 shares  
  DOCUMENTS
    INCORPORATED BY REFERENCE
  Document

Parts Into Which IncorporatedProxy Statement for the Annual

Part III (Items 10,
    11, 12, 13 and 14)Meeting of Stockholders to be heldMay 17, 2007 (Proxy
    Statement)




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Explanatory
    Note
 
 
  Form 10-K (Form 10-K); Form 10-K. Form 10-K, Form 10-K,
 
 
  Rule 12b-15




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##### 



PART I  Unless otherwise indicated, the terms Hypercom,
    the Company, we, our, and
    our business refer to Hypercom Corporation and its
    subsidiaries on a consolidated basis.
  Item 1.
    Business  General
  end-to-end
    Business
    History
  24/7 on-site
      Electronic
    Payment Industry
   3




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Market
    Concentration and Barriers to Entry
      
    Price.  Pricing is a significant consideration
    in our customers purchase decisions. Consequently,
    terminal manufacturers have been increasingly challenged to
    deliver products and services that target critical
    specifications at competitive price points.
    Scale.  The design, manufacture and
    distribution of POS terminals on a global basis requires a
    significant investment in development, manufacturing and
    distribution resources. As a result, smaller or regional
    manufacturers may have limited ability to compete with larger
    manufacturers who can spread costs on a broader basis at higher
    volumes.
    Certification Standards and Costs.  All payment
    solutions must be certified with card associations, financial
    institutions and payment processors. Certification standards are
    constantly changing and the certification process can be a
    lengthy and expensive undertaking. Many terminal manufacturers
    in the industry lack the relationships, knowledge and experience
    necessary to obtain these certifications quickly and
    cost-effectively, thereby limiting or delaying their time to
    market and overall competitiveness.
    Commitment to Future Technologies.  New
    standards, regulations and certifications in the electronic
    payment industry require terminal manufacturers to continually
    develop new technologies that enhance the performance and
    profitability of both customers and end-users. This commitment
    requires significant annual investment in research and
    development.
    Global Presence.  Large customers may prefer
    terminal manufacturers that have a worldwide presence with the
    ability to provide services and support in many geographic
    regions. Smaller or regional 4




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manufacturers may be competitive in their niche, but they may
    not be able to provide cost-effective equipment, services and
    timely support on a global scale.  Market
    Growth Drivers
    
    Security and Interoperability Standards.  New
    industry security and interoperability standards are driving
    recertification and replacement of electronic payment systems,
    particularly in Europe and the U.S. In order to offer
    electronic payment systems that connect to payment networks,
    electronic payment system providers must certify their products
    and services with card associations, financial institutions and
    payment processors as well as comply with government and
    telecommunication company regulations. The major card
    associations have introduced new security standards to address
    the continually growing need for transaction security. The two
    major security initiatives in the industry are EMV and PCI. EMV
    is a set of global specifications for cards, terminals, and
    applications designed to ensure interoperability between smart
    cards and electronic payment systems on a global basis, increase
    functionality of electronic payment systems and reduce fraud.
    The move to comply with EMV specifications should significantly
    promote terminal replacement, particularly in regions such as
    Europe, Asia/Pacific, and Central and South America where EMV
    implementation conversion dates have been established. Visa
    International and MasterCard International recently cooperated
    on the development and release of the Payment Card Industry
    (PCI) specification and test methods for the
    certification of electronic payment systems for secure debit
    transactions. This new set of standards supersedes previous
    standards separately issued by Visa and MasterCard and will
    drive additional terminal replacement. In the U.S., payment
    processors have two levels of certification, referred to as
    Class A and Class B. Class B certification
    ensures that an electronic payment system adheres to the payment
    processors basic functional and network requirements.
    Class A certification adds another stipulation that the
    payment processor will support the electronic payment system on
    its internal help desk systems. Obtaining these certifications
    can be costly and time intensive and is required by
    U.S. payment processors. Electronic payment systems must
    also comply with evolving country-specific security regulations.
    Countries such as Australia, Canada, Germany, the Netherlands,
    New Zealand, Singapore, Sweden and Switzerland have particularly
    stringent and specific security standards. Electronic payment
    systems also must comply with recommendations of
    quasi-regulatory authorities and standard-setting committees,
    which address, among other things, fraud prevention, processing
    protocols and technologies utilized. New standards are
    continually being adopted as a result of worldwide fraud
    prevention initiatives, increasing the need for system
    compatibility and new developments in technology. These complex
    and evolving requirements will provide an opportunity for
    continuous replacement of outdated equipment with newly
    certified electronic payment systems.
    Broadband & Internet
    Protocol.  Internet Protocol (IP)
    connectivity provides faster transmission of transaction data at
    a lower cost, enabling more advanced payment and other
    value-added applications at the point of sale. Major
    telecommunications carriers have expanded their communications
    networks and lowered fees to allow more merchants to utilize IP
    networks cost effectively. The faster processing and lower costs
    associated with IP connectivity have opened new markets for
    electronic payment systems, many of which have previously been
    primarily cash-only industries such as quick service restaurants
    (QSRs).
    Contactless.  Contactless technology creates a
    convenient way to pay for goods and services. It is an emerging
    technology and rapidly gaining acceptance. It can deliver
    extremely fast transaction times, reduce waiting times and
    eliminate the need for paper signatures and receipts. It is
    especially suitable for access control and use in employee
    cafeterias, QSRs, gas stations and public transit systems.
    Wireless.  Wireless electronic payment
    solutions are being developed to increase transaction efficiency
    and mobility. Wireless terminals can provide consumers with
    additional security by allowing them to maintain control of
    their payment card at all times. Additionally, the cost per
    transaction using wireless terminals may be lower than that of
    wired terminals in regions burdened with high telecommunications
    costs such as Europe and Asia/Pacific. It also enables terminal
    deployment in those regions lacking an established 5




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landline telecommunications infrastructure. We provide IP,
    Code-Division Multiple Access (CDMA), General
    Packet Radio Service (GPRS), Bluetooth and wi-fi
    connectivity across our range of wireless products.  
    Debit.  Debit is the dominant payment
    instrument in most international markets and is rapidly growing
    in the U.S. Debit cards allow banks to reach a wider
    population of potential cardholders, thereby increasing the
    number of transactions. The cost of a debit transaction is
    generally lower than that of a credit transaction and combined
    with PIN-based security or biometric technology, provides a
    solution to reduce high rates of fraud. As a consequence,
    electronic payment is now an affordable and convenient option in
    markets lacking a significant consumer credit base as well as
    for small ticket or lower margin merchants.
    Emerging Regions and Market Segments.  In the
    U.S. and Europe, consumer segments such as QSRs and
    unattended/self service have started using IP POS terminal
    devices. These lesser penetrated vertical markets represent a
    significant opportunity for us, as do geographies such as
    Brazil, China, Eastern Europe, India, Mexico and Russia, who are
    experiencing rapid growth in the usage of card-based payments.
    In China, Visa and MasterCard purchase volume increased 68% from
    2003 to 2004, where only 3% of merchants currently have POS
    terminals, according to a MasterCard International survey. The
    increasing adoption of electronic payments in these regions is
    driven primarily by strong economic growth, improving
    telecommunications infrastructure development, strong support
    from governments seeking to increase sales tax collection, and
    the dramatic increase of wireless networks for voice and data
    communications.
    Multiple Applications.  In addition to payment,
    terminals have the capability to perform concurrent applications
    like loyalty, stored value, on-screen advertising, electronic
    signature capture, age identification, benefits authorization
    and transfer. The secure integration of these applications along
    with payment processing provides a comprehensive solution that
    allows merchants a means of competitive differentiation, revenue
    enhancement and cost reduction.
    Non-Traditional Applications.  The government
    sector, particularly in the U.S., is a significant opportunity
    for terminal manufacturers. Initiatives such as identity
    verification, check imaging/conversion, electronic benefit
    transfer programs, and the U.S. militarys payment
    programs are all potential drivers of terminal deployment.
    Additionally, electronic transaction terminals and transaction
    services technology can be utilized in the healthcare sector to
    provide fast and secure transmission of health benefits
    eligibility, authorization and payment.  Competition
  start-ups
 
   
  multi-lane
 6




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Competitive
    Strategy
  end-to-end
  
    Further Penetrate Existing Market Segments.  We
    plan to continue promoting and marketing the functionality of
    our product portfolio to address the specific needs of key
    vertical markets. We intend to continue to focus on these
    attractive electronic transaction markets, as well as increase
    our penetration of markets such as automatic teller machines
    (ATMs), Electronic Benefit Transfer
    (EBT), Medical EBT and unattended and integrated
    kiosks. In planning to maintain our leadership in the
    independent retail segment, we have further segmented our
    products to target both the high-end and low-end segments,
    through acceptance of magnetic and smart cards, support of
    credit, debit, check, EBT and a full range of prepaid products,
    including gift cards and loyalty programs, among others. Our
    products are easily integrated with a full range of optional
    internal or external devices, including secure PIN pads, check
    imaging equipment, barcode readers, contactless and RFID
    readers, and biometric devices. Our secure PIN pads support
    credit and debit transactions, as well as a wide range of
    applications that are either built into electronic payment
    systems or connect to electronic cash registers
    (ECRs) and other electronic payment systems.
    Capitalize on Demand for Wireless
    Transactions.  We plan to accommodate the growing
    demand for reliable, secure, convenient and cost-efficient
    wireless devices. Potential users of this technology include
    mobile merchants such as taxi and delivery drivers, in-flight
    airline service providers, stadium event operators, off-site
    services and
    pay-at-table
    restaurants. These merchants are looking for a POS terminal that
    utilizes the convenience of wireless communication technologies
    and the security of being able to receive real-time
    authorizations with the reliability of a wired terminal.
    Simultaneously, we are aggressively transitioning into the
    consumer transaction market by providing processing alternatives
    like stored value and prepaid replenishment services for the
    transportation sector and electronic wallet technology as an
    alternative to cash payments.
    Capitalize on Terminalization Requirements of Emerging
    Geographic Regions.  We plan to continue seeking
    opportunities to expand global market share by leveraging our
    product portfolio and distribution channels in emerging,
    high-growth regions in Europe, Asia/Pacific and Latin America.
    In addition to expanding into new geographic markets, we will
    benefit from a replacement cycle that is ongoing in various
    geographic regions for a variety of reasons, including
    valued-added technologies (signature capture, contactless,
    multi-application); new security standards (EMV and PCI); and
    newer communications technologies (wireless and IP connectivity).
    Focus on Market-Driven Product Development.  We
    plan to continue concentrating our research and development
    resources on new products and services that address the current
    and near future requirements of our customers and end-users. We
    plan to focus our development efforts in the following areas:
    enhanced security at both the terminal and transaction level;
    advanced communications technologies such as
    IP-enabled
    and wireless terminals; multiple-application; contactless
    technologies; and products for new vertical markets such as
    unattended/integrated kiosks and ATMs. We will continue to work
    with our customers to ensure our products meet their needs and
    technical requirements and are brought to market in a timely and
    cost-effective manner.
    Improve Total Cost Structure.  We plan to
    continue reducing our cost of manufacturing, research and
    development, selling, services delivery, general, and
    administrative functions to enhance our profitability and
    competitiveness. We intend to further reduce our product costs
    through design and process improvements, reductions in component
    costs, and more efficient inventory management and distribution.
    We will continue to maintain a market-centric approach to our
    research and product development activities, thus ensuring that
    our efforts are directed at commercially feasible opportunities.
    As our current infrastructure is suitable to our current and
    foreseeable business requirements, our incremental investment
    requirements should be nominal and our existing cost structure
    is expected to be significantly leverageable at higher volumes
    of revenue. We continue to evaluate our sales channel
    infrastructure and will pursue alternate channels where it makes
    economic sense to do so. We also intend to continue to refine
    our foreign exchange 7




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##### 



hedging program and global tax strategy to minimize those costs
    and risks associated with international operations.  
    Continue to Pursue Recurring Revenue
    Opportunities.  We plan to further identify and
    pursue opportunities that are complementary to our existing
    products to provide recurring revenue including expanding our
    services business in Australia, Brazil and Mexico that provides
    deployment, help-desk, repair and other post-sale services. We
    will continue to pursue similar opportunities that will help us
    enhance our primary business of terminal manufacturing to a more
    diversified business model that includes both one-time and
    recurring revenue streams.
    Consider Strategic Acquisitions.  We may
    augment our growth by acquiring complementary businesses, new
    products to enhance our core competencies, or new technologies
    to complement our research and development activities. Any
    acquisition would be intended to broaden our suite of electronic
    payment solutions, expand our presence in selected geographies,
    broaden our customer base, expand recurring revenue
    opportunities or increase our penetration of selected channels
    and vertical markets.  Product
    Lines and Services
    Terminals
    and Peripherals
    
    Optimum  includes the L4100, L4200 and L4250,
    compact, high-performance signature capture and PIN entry card
    payment terminals specifically designed for multilane retailers;
    the T4100, a powerful 32-bit desktop terminal for true
    multi-application; the T2100, a handover desktop terminal
    specifically designed to quickly perform EMV transactions; the
    M2100 and M4100, mobile terminals that leverage the latest in
    wireless communication technologies; and the P2100, an
    EMV-compliant PIN pad for integrated retail environments. The
    L4100, L4200, L4250 and T4100 are RFID-ready terminals.
    T7Plus  includes a combination of features and
    functions for merchants who need a reliable, low-cost POS
    terminal.
    Peripherals  includes printers, PIN pads,
    check readers, receipt capture devices, biometric, RFID
    verification devices and external modems. Our family of durable,
    high-security PIN pads and card acceptance devices are designed
    for either indoor or outdoor use. The products include the S9,
    S9S and S9C, secure PIN pads built for indoor use, and the S1200
    and S1300, the outdoor components to our QSR drive-thru solution.  Transaction
    Networking Devices, Transaction Management Systems and
    Application Software
  ® tm tact ® ®
  Services
   8




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Asset Management Services on-site
  
    NetSet Brazil, NetSet Chile and Hypercom de
    Mexico  NetSet Brazil, NetSet Chile and Hypercom
    de Mexico are highly capable service organizations that provide
    services to major banks, card associations and other customers
    in our industry. NetSet Brazil is our largest service
    organization, covering all of Brazil with multiple service
    centers and service resources located throughout the country. We
    continually seek to expand our service market share by
    increasing the deployed population of our terminals and product
    offerings in Brazil, as well as servicing terminals manufactured
    by our competitors. Hypercom de Mexico and NetSet Chile operate
    under a similar business model as NetSet Brazil and cover
    substantially all of their respective countries.
    ACG Group  On February 8, 2007, we
    acquired the existing business and assets of ACG Group Pty Ltd
    and its associated entities in Australia to provide asset
    management services to merchant locations throughout Australia.
    We expect to leverage this investment and apply this service
    capability to opportunities throughout the Asia/Pacific region.
    Pan-region Repair Services  Utilizing a new
    facility established in Sonora, Mexico, operating as NetSet
    Americas Servicio Centro, we provide quality repair services for
    in-warranty and
    out-of-warranty
    equipment repairs to North American customers. During the first
    half of 2007, we are transitioning our existing U.S. based
    repair operations to this new facility.
    Authorized Repair Facilities  In addition to
    our direct repair service offering, we selectively authorize
    capable third-party repair facilities to service and repair
    Hypercom equipment through our Authorized Repair Facility
    program. This program seeks to offer increased choices for
    repair service with our assurance of repair service quality and
    cycle time for our customers.
    Enhanced Warranty Solutions  Our agreement
    with The Warranty Group allows customers to purchase enhanced
    warranty plans for select Hypercom POS terminals and other
    devices. The plans will extend the term protection of our
    standard warranty for a total coverage of up to five years.  Trusted Transaction Services dial-up
  Payment Solutions
 9




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
    TPI Software, LLC  On December 14, 2006,
    we acquired the existing technology and assets of TPI Software,
    LLC, a US-based software and enterprise payment solutions
    business, that expands our transaction software portfolio with
    PC-based payment solutions, including support for PC-based
    retail POS systems. The acquisition of TPI Software, LLC is
    expected to broaden the Companys customer base and enables
    the generation of new revenue streams by addressing the
    technology requirements of, and rising market interest in, a
    converged payment infrastructure that places electronic payment
    functionality on PC-based cash registers.  Product
    Marketing
    Sales and
    Distribution
    
    Payment processors;
    Distributors/resellers;
    Large retail chains and QSRs;
    Financial institutions;
    ISOs; and
    Government entities.        
    Global Presence.  We are one of the largest
    worldwide providers of electronic payment system solutions for
    use at the point of sale. We have developed a global network of
    sales, support and development centers. We believe that our
    experience and global presence enable us to manufacture, market,
    distribute and service our products more effectively, and in
    more markets than most of our competitors.
    Comprehensive Product Portfolio.  We offer a
    full range of products and services that address the spectrum of
    market requirements. Our product portfolio ranges from the
    low-cost, established and reliable T7 family of terminals to the
    recently released, high-performance 32-bit Optimum family. Our
    terminals are further complemented by a wide variety of
    peripherals that enhance their capabilities. Our services
    include deployment, help-desk, repair and maintenance. We have
    major service centers in Brazil, Mexico, Chile, Australia and
    the United Kingdom. 10




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
    Low Total Cost of Ownership.  The total cost of
    ownership includes the following costs: deployment,
    implementation, application certification, repair and
    maintenance and product obsolescence. We continue to support and
    focus on providing our customers with a clear migration strategy
    for new technologies, versus a buy today, replace tomorrow
    strategy.
    Technology Adoption.  Our technological
    advances have continued to support industry adoption of
    value-added features, such as electronic receipt capture, smart
    cards, electronic signature capture, positive identification and
    multi-application. We offer network products to host such
    multi-application offerings. Other technology innovations
    include IP and wireless connectivity, as well as RFID and
    contactless acceptance. Our engineering has consistently focused
    on quality and performance, including speed of the transaction,
    number of and type of completed transactions, the speed of
    application download and the user interface. Our modular design
    allows our customers to only select the features that meet their
    specific needs, thereby minimizing their costs and increasing
    their flexibility. We have reorganized our development team to
    more rapidly develop, prototype, and release new products to
    meet customer needs.
    Terminal Management and Networking
    Expertise.  We are a leader in the fields of
    terminal management and networking with a significant number of
    installations of our POS network controllers worldwide, managing
    not only our terminals, but those of our competitors as well.
    Security Expertise.  We are the industry leader
    in secure,
    state-of-the-art,
    network payment transactions providing full EMV and PCI
    certification, regulatory certifications, association
    certifications, contactless authentication, signature capture,
    ID and biometric authentication and enterprise security
    management, ensuring both physical and logical high performance
    interfaces are secure and certified for use globally, by both
    public telephony and mission critical computing processors.  Research
    and Development
    
    Identification of the applicable market and development
    parameters;
    Rapid development of engineering specifications, including
    target costs;
    State of the art design and engineering;
    Accelerated testing;
    Quality assurance; and
    Pilot production.     11




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Manufacturing
    and Resource Procurement
          Industry
    Standards and Government Regulations
      
    Security Standards.  Security standards in our
    industry are promulgated largely by government, regional bank
    associations and card associations. These standards ensure the
    integrity of the payment process and protect the privacy of
    consumers using electronic transaction systems. New standards
    are continually being adopted or proposed as a result of
    worldwide fraud prevention initiatives, increasing the need for
    new security solutions and technologies. We have developed a
    security architecture that incorporates physical, electronic,
    operating system, encryption and application-level security
    measures in order to remain compliant with the growing variety
    of international requirements. This architecture is particularly
    successful in countries that have stringent and specific
    security requirements.
    EMV and PCI Standards.  EMV standards define a
    set of requirements to ensure interoperability between chip
    cards and terminals on a global basis, regardless of the
    manufacturer, the financial institution, or where the card is
    used or issued. Specific certifications are required for all
    electronic payment systems and their application software. PCI
    is a set of specification and test methods for the certification
    of electronic payment systems for secure debit transactions. We
    obtain EMV/PCI certifications where required.
    Payment Processor/Financial Institution
    Requirements.  In the U.S., we are required to
    certify our products with payment processors. We actively
    perform the essential Class B and Class A product
    certifications with all the major payment processors in the U.S.
    and international markets. The Class B certification
    process pertains to successful testing of the integrity of the
    host (interface) message formats with the payment
    processors requirements and specifications. Once the
    Class B certification process is completed, the payment
    processor may elect to take the software application and the
    hardware for additional in-house 12




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testing and support. Class A certification (which may take
    up to 12 months or more) includes more intensive functional
    and user-acceptance testing in order to establish their
    help-desk infrastructure. Class A Certification enables
    payment processors to provide direct support, deploy and promote
    the new products with their merchant base and sales force. We
    have significant experience in attaining these critical payment
    processor certifications and have a large portfolio of
    Class A certifications with major U.S. payment
    processors. We also have obtained certifications from
    international financial institutions and payment processors so
    that our products can be used on their specific networks.  
    WEEE and RoHS Directives.  In the European
    Union, we are subject to the Waste Electrical and Electronic
    Equipment (WEEE) Directive and the Restriction on
    Hazardous Substances (RoHS) Directive. The WEEE
    Directive requires producers of electrical and electronic
    equipment to label all covered products and also establish
    collection, treatment, and recovery systems for their electric
    and electronic waste. The RoHS Directive restricts the use of
    certain material in physical devices that include our solutions
    and/or
    require active steps to promote the recycling of materials.
    Telecommunications Regulatory Authority and Carrier
    Requirements.  Our products must comply with
    government regulations, including those imposed by the Federal
    Communications Commission (FCC) and similar
    telecommunications authorities worldwide regarding emissions,
    hazardous materials, radiation, safety and connections with
    telephone lines and radio networks. Our products must also
    comply with recommendations of quasi-regulatory authorities and
    of standards-setting committees. Our products have been
    certified as compliant with a large number of national
    requirements, including those of the FCC and Underwriters
    Laboratory in the U.S., and similar requirements in other
    countries. Wireless network carriers have standards with which
    systems connected to their networks must comply. In addition to
    national requirements for telecommunications systems, many
    wireless network carriers have their own certification process
    for devices to be used on their networks.  Proprietary
    Rights
        Employees
    U.S.


International


TotalSales, Marketing and Operations


76



54



130Development


104



138



242Service Operations


12



292



304Manufacturing


83



181



264Finance and Administration


69



349



418Total
    Employees


344



1,014



1,358  13




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##### 



Available
    Information
  (602) 504-5000. Form 10-K, Form 10-Q, Form 8-K,
  Item 1A.
    Risk
    Factors  Form 10-K 10-K, .
  Risks
    Related To Our Business
  We
    have incurred significant losses in the past and our results of
    operations have and may continue to vary from quarter to
    quarter, impacted in particular by business reviews performed by
    management. If our financial performance is not in line with
    investor expectations, the price of our common stock will suffer
    and our access to future capital may be impaired.
    period-to-period
  Quarterly
    revenue and operating results can vary, depending on a number of
    factors, including:
  
    variations in product mix, timing and size of fulfilled orders
    as a result of customer deferral of purchases
    and/or
    delays in the delivery of our products and services;
    accomplishment of certain performance parameters embedded in our
    service level agreements;
    market demand for new product offerings;
    delays in the delivery of our products and services;
    the type, timing and size of orders and shipments;
    product returns and warranty claims;
    variations in product mix and cost during any period;
    development of new relationships and maintenance and enhancement
    of existing relationships with customers and strategic partners; 14




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
    deferral of customer contracts in anticipation of product or
    service enhancements;
    incremental costs incurred as a result of product quality
    and/or
    performance issues;
    write-off of doubtful accounts receivable;
    inventory obsolescence and write-downs related to product life
    cycles;
    write-offs of research and development expenses;
    variations in operating expenses, including research and
    development, selling, and general and administrative expenses;
    lease portfolio risk adjustments and loss provisions;
    restructuring activities;
    employment and severance agreement charges;
    foreign currency exchange rate fluctuations;
    availability and cost of financing;
    variations in income tax as a function of income recognition by
    tax jurisdiction; and
    industry and economic conditions, including competition,
    industry standards, product certification requirements, trade
    restrictions and other regulations.  The
    loss of one or more of our key customers could significantly
    reduce our revenues and profits.
    Our
    products may contain defects that may be difficult or even
    impossible to correct. Product defects could result in lost
    sales, additional costs and customer erosion.
    
    delays in shipping products;
    cancellation of orders;
    additional warranty expense;
    delays in the collection of receivables;
    product returns;
    the loss of market acceptance of our products;
    claims against us;
    diversion of research and development resources from new product
    development; and 15




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
    inventory write-downs.    We may
    accumulate excess or obsolete inventory that could result in
    unanticipated price reductions and write downs and adversely
    affect our financial results.
    
    the need to maintain significant inventory of components that
    are in limited supply;
    buying components in bulk for the best pricing;
    responding to the unpredictable demand for products;
    responding to customer requests for short lead-time delivery
    schedules;
    failure of customers to take delivery of ordered
    products; and
    product returns.    Security
    is vital to our customers and therefore breaches in the security
    of transactions involving our products or services could
    adversely affect our reputation and results of
    operations.
    If we
    are unable to adequately protect our proprietary technology, our
    competitors may develop products substantially similar to our
    products and use similar technologies, which may result in the
    loss of customers.
     16




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Our
    products and other proprietary rights may infringe on the
    proprietary rights of third parties, which may expose us to
    claims and litigation.
      A
    disruption in our manufacturing capabilities or those of our
    third-party manufacturers or suppliers would negatively impact
    our ability to meet customer requirements.
      International
    operations pose additional challenges and risks that if not
    properly managed could adversely affect our financial
    results.
    
    changes in foreign country regulatory requirements;
    various import/export restrictions and the availability of
    required import/export licenses;
    imposition of foreign tariffs and other trade barriers; 17




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
    political and economic instability;
    foreign currency exchange rate fluctuations;
    inability to secure commercial relationships to help establish
    our presence in international markets;
    inability to hire and train personnel capable of marketing,
    installing and integrating our products and services, supporting
    customers and managing operations in foreign countries;
    building our brand name and awareness of our products and
    services among foreign customers;
    competition from existing market participants that may have a
    longer history in and greater familiarity with the foreign
    markets we enter;
    extended payment terms and the ability to collect accounts
    receivable;
    the ability to repatriate funds;
    complicated tax and regulatory schemes where failure to comply
    may result in fines, penalties or litigation;
    complications associated with enforcing legal agreements in
    certain foreign countries, including Brazil, China and in
    developing countries; and
    availability of qualified and affordable staff with which to
    manage our foreign operations.    We are
    subject to a complex system of domestic and foreign taxation and
    unanticipated changes in our tax rates or exposure to additional
    tax liabilities could affect our profitability.
      Fluctuations
    in currency exchange rates may adversely affect our financial
    results.
  non-U.S. dollar non-U.S. denominated
 18




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Adverse
    resolution of litigation may adversely affect our business or
    financial results.
    Our
    future success is substantially dependent on the continued
    service of our senior management and other key
    employees.
      We
    have in the past and may in the future make acquisitions and
    strategic investments, which involve numerous risks. We may not
    be able to address these risks without substantial expense,
    delay or other operational or financial problems.
    
    the inability to assimilate the technologies, operations and
    personnel of the acquired business, technology or product;
    the potential disruption of our existing business, including the
    diversion of management attention and the redeployment of
    resources;
    the loss of customers;
    the possibility of our entering markets in which we have limited
    prior experience;
    the loss of key employees of an acquired business; and
    the inability to obtain the desired strategic and financial
    benefits from the acquisition or investment.    Shipments
    of electronic payment systems may be delayed by factors outside
    of our control, which can harm our relationships with our
    customers.
    While
    we believe we comply with environmental laws and regulations, we
    are still exposed to potential risks associated with
    them.
   19




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and/or and/or
  Force
    majeure events, such as terrorist attacks, other acts of
    violence or war, and health epidemics may adversely affect the
    markets in which our common stock trades, our ability to operate
    and our financial results.
    Chinas
    changing economic environment may impact our ability to do
    business in China.
    Uncertainties
    with respect to the Chinese legal system may adversely affect
    us.
   20




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If we
    are unable to maintain the quality of our internal control over
    financial reporting, any unremediated material weaknesses could
    materially and adversely affect our ability to provide timely
    and accurate information about our business, which could harm
    our business and stock price.
  Form 10-K.
  Risks
    Related To The Industry
  The
    markets in which we compete are highly competitive, maturing,
    and subject to price erosion.
    ease-of-use,
   21




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We are
    subject to industry and technology changes and are dependent on
    development and market acceptance of new products. If we are
    unable to adequately respond to these changes and to market
    demands in a timely manner, our business will not be
    successful.
    
    identify, develop, or manufacture new products, services and
    technologies in a cost effective manner;
    market or support these new products, services and technologies
    on a timely and effective basis;
    eliminate defects in new products and service offerings;
    gain market acceptance for new products, services and
    technologies; or
    respond to technological changes, new industry standards, and
    announcements of new products, services and technologies by
    competitors.    We are
    subject to extensive industry standards and government
    regulations. Our failure to properly comply with these standards
    and regulations could adversely affect our production and
    sales.
    
    industry standards imposed by EuroPay International, MasterCard
    International, VISA International, and others;
    certification standards required for connection to some public
    telecommunications networks;
    Federal Communications Commission regulations;
    Underwriters Laboratories regulations;
    the WEEE and RoHS Directives in the European Union; and
    certification standards set by domestic processors.    Risks
    Related To Our Common Stock
  Our
    stock price has been and may continue to be
    volatile.
   22




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Our
    publicly-filed reports are reviewed by the SEC from time to time
    and any significant changes required as a result of such review
    may have a material adverse impact on the trading price of our
    common stock.
    We are
    subject to anti-takeover effects of certain charter and bylaw
    provisions and Delaware law.
    
    make it more difficult for a third party to acquire control of
    us, and discourage a third party from attempting to acquire
    control of us;
    may limit the price some investors are willing to pay for our
    common stock;
    enable us to issue preferred stock without a vote of our
    stockholders or other stockholder action;
    provide for a classified Board of Directors and regulate
    nominations for the Board of Directors;
    make it more difficult for stockholders to take certain
    corporate actions; and
    may delay or prevent a change of control.    Our
    stock price could be affected because a substantial number of
    shares of our common stock will be available for sale in the
    future.
 
   
  We
    currently do not intend to pay any dividends on our common
    stock.
    Risks
    Related To Our Indebtedness
  Although
    our current indebtedness is limited, we may be required to incur
    additional debt to meet the future capital requirements of our
    business. Should we be required to incur additional debt, the
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
    our vulnerability to adverse economic conditions and competitive
    pressures may be heightened;
    our flexibility in planning for, or reacting to, changes in our
    business and industry may be limited;
    we may be sensitive to fluctuations in interest rates if any of
    our debt obligations are subject to variable interest
    rates; and
    our ability to obtain additional financing in the future for
    working capital, capital expenditures, acquisitions, general
    corporate purposes or other purposes may be impaired. 
   
 24




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SIGNATURES      
 Date: March 23, 2007

By: /s/  William
    KeiperWilliam
    KeiperChief Executive Officer  
 51




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EXHIBIT INDEX  
 ExhibitNumber



Description of Exhibit and Method of Filing31
.1



Certification of Chief Executive
    Officer, as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002, dated March 23, 2007*31
.2



Certification of Chief Financial
    Officer, as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002, dated March 23, 2007*  
   
  *
    
    Filed herewith. 
 91