##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  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

56,224,046 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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##### 



TABLE OF
    CONTENTS
  
  Item No.

Caption

PagePART I1.


Business


31A.


Risk
    Factors


141B.


Unresolved Staff
    Comments


242.


Properties


243.


Legal
    Proceedings


244.


Submission of
    Matters to a Vote of Security Holders


26PART II5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


286.


Selected Financial
    Data


297.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


317A.


Quantitative and
    Qualitative Disclosures About Market Risk


488.


Financial
    Statements and Supplementary Data


489.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


489A.


Controls and
    Procedures


499B.


Other
    Information


49PART III10.


Directors,
    Executive Officers and Corporate Governance


4911.


Executive
    Compensation


5012.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


5013.


Certain
    Relationships and Related Transactions, and Director
    Independence


5014.


Principal
    Accountant Fees and Services


50PART IV15.


Exhibits and
    Financial Statement Schedules


50Signatures


51Exhibit Index


90Exhibit 21.1Exhibit 23.1Exhibit 24.1Exhibit 31.1Exhibit 31.2Exhibit 32   1




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##### Table of Contents



CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
      Form 10-K
 2




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##### Table of Contents



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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##### Table of Contents



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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##### Table of Contents



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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##### Table of Contents




    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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##### Table of Contents




    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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##### Table of Contents



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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##### Table of Contents




    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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##### Table of Contents



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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##### Table of Contents



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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##### Table of Contents



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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##### Table of Contents



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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##### Table of Contents



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
 23




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##### Table of Contents



restrictions imposed by the terms of our debt arrangements
    could adversely affect our financial condition and our ability
    to respond to changes in our business.
    
    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.   Item 1B.  Unresolved
    Staff Comments    Item 2.
    Properties              Item 3.
    Legal
    Proceedings   24




---



##### Table of Contents



Shareholder Derivative Actions. 2005-007093)
      Verve LLC v. Hypercom Corporation No. 05-CV-0365-PHX-FJM,
    five-day
 25




---



##### Table of Contents



Hypercom Corporation v. Omron
    Corporation No. 04-CV-0400-PHX-PGR,
  Brazilian Central Bank Administrative
    Proceeding.
  Item 4.
    Submission
    of Matters to a Vote of Securities Holders   26




---



##### Table of Contents



Executive
    Officers of the Registrant
    Name

Age

Title

Other Business Experience since 1/1/2001William Keiper


56


Chief Executive
    Officer (since August 2005)

Chairman and Interim Chief
    Executive Officer, Hypercom Corporation; Director, Hypercom
    Corporation (since 2000); Chairman and Chief Executive Officer,
    Arrange Technology, LLCPhilippe Tartavull


49


President (Since
    February 2007)

President, Oberthur Card Systems,
    USAThomas Liguori


48


Senior Vice President
    and Chief Financial
    Officer (since November 2005)

Chief Financial Officer, Iomega
    Corporation; Chief Financial Officer, Channell Commercial
    Corporation.John Andrews


51


Senior Vice President,
    Global Customer Service
    (since May 2006)

Principal of iClient Global, LLC;
    Chief Executive Officer of Excell Agent Services, LLCNeil Hudd


61


Senior Vice President,
    Global Product Development
    and Marketing
    (since September 2005)

President, Americas Sales and Vice
    President, Strategic Initiatives, Way Systems Incorporated;
    President, NBS Transaction Systems, Inc.Douglas J. Reich


63


Senior Vice President,
    General Counsel,
    Chief Compliance Officer
    and Secretary
    (since November 2001)

Senior Vice President, General
    Counsel and Secretary, Wavo CorporationScott Tsujita


43


Senior Vice President, Finance,
    Treasury and
    Investor Relations
    (since October 2003)

Vice President, Finance and
    Treasurer, Hypercom Corporation; Senior Executive Officer,
    Golden Eagle Leasing, Inc., Hypercoms former U.S. leasing
    subsidiary  27




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##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    RANGE OF
    SALES PRICES
  High


LowYear Ended
    12/31/06First Quarter

$
9.57


$
6.32Second Quarter


11.16



8.00Third Quarter


9.70



6.77Fourth Quarter


7.95



6.08Year Ended
    12/31/05First Quarter

$
6.00


$
4.11Second Quarter


6.83



4.65Third Quarter


7.17



5.73Fourth Quarter


7.25



5.57       ISSUER
    PURCHASES OF EQUITY SECURITIES
  (c) Total Number


(d) Approximateof Shares Purchased


Dollar Value ofas Part of Publicly


Shares that May Yet(a) Total Number of


(b) Average Price


Announced Plans or


Be Purchased UnderPeriod

Shares Purchased


Paid per Share


Programs


the Plans or ProgramsMonth #1 (October 1,
    2006 to October 31, 2006)














Month #2 (November 1,
    2006 to November 30, 2006)














Month #3 (December 1,
    2006 to December 31, 2006)














Total













$
9,870,925   Rule 10b5-1
 28




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##### Table of Contents



Item 6.
    Selected
    Financial Data    Years Ended December 31,2006


2005


2004


2003


2002Statements of Operations
    Data:Net revenue

$
248,565


$
245,223


$
241,285


$
218,816


$
232,666Costs of revenue


159,540



172,091
d


144,140



128,212



147,094
eProvision for deferred contract
    costs










11,305
f






Gross profit

$
89,025


$
73,132


$
85,840


$
90,604


$
85,572Gross profit percentage


35.8
%


29.8
%


35.6
%


41.4
%


36.8
%Research and development

$
27,706


$
27,555


$
27,188


$
24,163


$
24,744Selling, general, and
    administrative


60,105



72,649



65,242



57,662



57,256In-process research and development


1,000
a














Gain on sale of real property


(2,953
)b














Restructuring charges


















4,434
eTotal operating expenses

$
85,858


$
100,204d


$
92,430


$
81,825


$
86,434Income (loss) from continuing
    operations

$
3,167


$
(27,072
)

$
(6,590
)

$
8,779


$
(862
)Income (loss) before discontinued
    operations and cumulative effect of change in accounting
    principle

$
4,737


$
(30,243
)

$
(12,530
)

$
851


$
(29,716
)eIncome (loss) from discontinued
    operations


2,233



(3,123
)c


3,868
g


10,347
chi


(9,602
)chiCumulative effect of change in
    accounting principle


















(21,766
)jNet income (loss)

$
6,970


$
(33,366
)

$
(8,662
)

$
11,198


$
(61,084
)Diluted income (loss) per share:Income (loss) before discontinued
    operations and cumulative effect of change in accounting
    principle

$
0.09


$
(0.58
)

$
(0.24
)

$
0.02


$
(0.64
)Loss from discontinued operations


0.04



(0.06
)


0.07



0.20



(0.21
)Cumulative effect of change in
    accounting principle


















(0.47
)Diluted income (loss) per share

$
0.13


$
(0.64
)

$
(0.17
)

$
0.22


$
(1.32
)Weighted average basic shares


53,248



52,395



51,252



49,146



46,142Weighted average diluted shares


53,966



52,395



51,252



50,351



46,142Balance Sheet Data:Cash and equivalents

$
34,190


$
35,940


$
23,445


$
65,415


$
23,069Short-term investments


47,228



57,951



69,962



17,400



Working capital


141,923



143,039



159,789



155,048



128,179Total assets


236,716



238,914



277,260



264,568



258,860Short and long-term debt






8,377



8,829



9,857



25,025Total shareholders equity


178,931



170,774



205,372



204,297



187,972     a)
    
    During December 2006, the Company acquired TPI Software, LLC and
    incurred a $1.0 million charge for the acquired in-process
    research and development. See Note 20 to the consolidated
    financial statements. 29




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##### Table of Contents



b)
    
    During September 2006, the Company completed the sale of its
    real property in Hong Kong for $5.2 million. The Company
    recorded a gain of approximately $3.0 million on the sale
    in the third quarter of 2006. See Note 7 to the
    consolidated financial statements.c)
    
    During the fourth quarter of 2005, the Company made the decision
    to sell its United Kingdom lease portfolio (the UK Lease
    Business) as this leasing business did not align with its
    core business. As of December 31, 2005, the UK Lease
    Business operating results have been classified as
    discontinued operations in the statements of operations for all
    periods presented. The Company recognized a $6.6 million
    loss on the write-down of the UK Lease Business to it estimated
    fair value based on purchase offers received from potential
    buyers. See Note 5 to the consolidated financial statements.d)
    
    During 2005, the Company performed a comprehensive review of its
    financial performance; market strategy; products; product
    development and life cycle management; and employee, customer
    and vendor relationships. The objective of the business review
    was to create a plan to improve profitability and customer
    relations, transition more rapidly to 32-bit technology
    products, rationalize operations and reorganize the
    Companys corporate structure. As a result of this business
    review, the Company recorded charges of $20.0 million to
    cost of revenue and $7.7 million to operating expenses
    during 2005. See Note 4 to the consolidated financial
    statements.e)
    
    During the third quarter of 2002, the Company committed to a
    profit improvement plan which included the closure of offices
    around the world in favor of a more cost-effective distributor
    sales model and the termination of our direct manufacturing
    operations in Brazil. Restructuring charges in cost of sales
    include $2.0 million related to the write-down of
    inventories and other related costs. Restructuring charges of
    $4.4 million, which are separately stated, include
    $3.6 million related to the write-down of a building and
    other fixed assets to their estimated fair value and
    $0.8 million related to termination costs and other
    charges. See Note 4 to the consolidated financial
    statements.f)
    
    During the second quarter of 2004, the Company recorded an
    $11.3 million charge to cost of revenue to reserve all
    costs previously deferred under a contract with the Brazilian
    Health Ministry. See Note 16 to the consolidated financial
    statements.g)
    
    During 2002, the Company recorded a $2.6 million loss on
    early extinguishment of debt in connection with the early
    retirement of two term loans. The loss resulted from the
    write-off of unamortized debt issuance costs and a loan discount
    associated with the term loans.h)
    
    During 2003, the Company completed the disposition of all
    remaining operating units identified and initially held for sale
    in September 2002. In connection with the disposition of these
    operating units, the Company recorded a loss on sale of the
    units totaling $3.2 million during 2003 comprised of a
    $0.3 million cash infusion made by the Company in
    accordance with the terms of the sale, non-cash inventory and
    fixed asset write-downs of $1.4 million, severance costs of
    $0.5 million, the write-off of $0.8 million in
    uncollectible accounts receivable, and facility lease and other
    exit costs of $0.2 million.i)
    
    Consistent with the Companys strategy of disposing of
    operating units not aligned with its core business, the Company
    sold its direct finance lease subsidiary, Golden Eagle,
    effective October 1, 2003, for $30.0 million gross cash
    proceeds, and recorded a $7.0 million gain net of severance
    and other exit costs. As a result of the disposition, the net
    operating results of Golden Eagle have been classified as
    discontinued operations in the statement of operations for all
    periods presented.j)
    
    During 2002, the Company adopted SFAS No. 142,
    Goodwill and Other Intangible Assets(SFAS
    142). Under the transition provisions of SFAS 142,
    the Company evaluated our reporting units for impairment of
    goodwill and recorded a $21.8 million write-off primarily
    attributable to goodwill associated with the 2000 acquisition of
    Golden Eagle Leasing.   30




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K. Form 10-K.
  Critical
    Accounting Policies and Estimates
      Share-Based
    Compensation
     31




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##### Table of Contents



Allowance
    for Doubtful Accounts
      Sales-Type
    Leases
  Accounting for
    Leases.
    Inventories
  first-in, and/or
  Revenue
    Recognition
  No. 00-21, Revenue Arrangements with Multiple Deliverables, 97-2, Software Revenue Recognition, 81-1, Accounting for Performance of Construction-Type and Certain
    Production Type Contracts, Revenue Recognition in Financial Statements, and/or
   32




---



##### Table of Contents



percentage-of-completion
    
    The delivered item(s) has value to the customer on a standalone
    basis;
    There is objective and reliable evidence of the fair value of
    the undelivered item(s); and
    If the arrangement includes a general right of return relative
    to the delivered item(s), delivery or performance of the
    undelivered item(s) is considered probable and substantially in
    our control.    Product
    Warranty
    Legal
    Contingencies
    Foreign
    Currency
   33




---



##### Table of Contents



Income
    Taxes
      Overview
    of Financial Results
  10-K
  Year
    2006
  multi-lane
         34




---



##### Table of Contents



Form 10-K.
    Year
    2005
  multi-lane
    
    Implementing an
    end-of-product-life
    cycle strategy, including identifying products and related
    inventory with near term
    end-of-life
    requirements resulting in charges of $12.1 million;
    More aggressively addressing and correcting product performance
    issues, including negotiated warranty and product
    trade-in/trade-out programs required for the
    end-of-product-life
    cycle strategies resulting in charges of $7.4 million;
    Implementing certain workforce reductions, including members of
    the senior management team, sales, operations and manufacturing
    personnel, as well as moving certain research and development
    resources to lower cost foreign geographies, and compensation
    plan changes resulting in charges of $5.4 million;
    Vacating a leased building in Phoenix, Arizona due to the
    reductions in force resulting in a charge of $1.0 million
    in future rental expense, net of estimated sublet recoveries;
    Evaluating other assets and liabilities and evaluating the past
    underlying operating decisions or strategies supporting such
    assets and liabilities resulting in charges of $1.8 million;
    Investing in the implementation of a comprehensive product
    marketing function; and
    Evaluating opportunities for short, medium and long-term
    improvements in manufacturing costs. 35




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##### Table of Contents



2005


2005


2005First


Second


Fourth


2005Quarter


Quarter


Quarter


Full YearCosts of revenue:Warranty charges and product
    return accruals

$
706


$
6,076


$
667


$
7,449Inventory write-downs


2,132



7,090



2,889



12,111One-time termination benefits and
    related costs






177



292



469Other


148



161







309Total costs of revenue


2,986



13,504



3,848



20,338Operating expenses:One-time termination benefits and
    related costs


1,543



2,021



1,349



4,913Idle facility lease charge










1,013



1,013Other


525



463



632



1,620Total operating expenses


2,068



2,484



2,994



7,546Non-operating expenses and income
    taxes:Other, including tax impact of
    above entries






61



(203
)


(142
)Total non-operating expenses and
    income taxes






61



(203
)


(142
)$
5,054


$
16,049


$
6,639


$
27,742           Year
    2004
  multi-lane
  multi-lane
 36




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##### Table of Contents



multi-lane
    Results
    of Continuing Operations
    Year Ended December 31,2006


2005


2004Net revenue


100.0
%


100.0
%


100.0
%Costs of revenue


64.2



70.2



59.7Provision for deferred contract
    costs










4.7Gross profit


35.8



29.8



35.6Research and development


11.1



11.2



11.3Selling, general and administrative


24.2



29.6



27.0Acquired in-process research and
    development


0.4







Gain on sale of real property


(1.2
)






Income (loss) from continuing
    operations


1.3



(11.0
)


(2.7
)Interest and other income net of
    interest and other expense


1.4



0.7



(0.1
)Foreign currency loss


(0.3
)


(0.6
)


(0.8
)Income (loss) before taxes and
    discontinued operations


2.4



(10.9
)


(3.6
)Provision for income taxes


(0.5
)


(1.4
)


(1.6
)Income (loss) before discontinued
    operations


1.9



(12.3
)


(5.2
)Income (loss) from discontinued
    operations


0.9



(1.3
)


1.6Net income (loss)


2.8
%


(13.6
)%


(3.6
)%  37




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##### Table of Contents



Year Ended December 31,Revenues by Region

2006


2005


2004North America


32.6
%


39.4
%


34.1
%Latin America including Central
    and South America and Mexico


26.0



20.3



18.3Asia/Pacific


14.3



16.4



17.8Europe, Middle East and Africa


27.1



23.9



29.8Totals


100.0
%


100.0
%


100.0
%     Comparison
    of Years Ended December 31, 2006 and 2005
  Dollars in thousands% of





% of


Increase2006


Rev


2005


Rev


(Decrease)(Dollars in thousands)Net revenue:Product

$
191,286



77.0
%

$
190,214



77.6
%

$
1,072Services


57,279



23.0
%


55,009



22.4
%


2,270Total net revenue


248,565



100.0
%


245,223



100.0
%


3,342Costs of revenue:Product


117,756



61.6
%


131,326



69.0
%


(13,570
)Services


41,784



72.9
%


40,765



74.1
%


1,019Provision for deferred contract
    costs






0.0
%






0.0
%


Total costs of revenue


159,540



64.2
%


172,091



70.2
%


(12,551
)Gross profit


89,025



35.8
%


73,132



29.8
%


15,893Operating expenses:Research and development


27,706



11.1
%


27,555



11.2
%


151Selling, general and administrative


60,105



24.2
%


72,649



29.6
%


(12,544
)In-process research and development


1,000



0.4
%










1,000Gain on sale of real property


(2,953
)


(1.2
)%










(2,953
)Total operating expenses


85,858



34.5
%


100,204



40.9
%


(14,346
)Income (loss) from continuing
    operations


3,167



1.3
%


(27,072
)


(11.0
)%


30,239Non-operating income


2,916



1.1
%


355



0.1
%


2,561Income (loss) before income taxes
    and discontinued operations


6,083



2.4
%


(26,717
)


(10.9
)%


32,800Provision for income taxes


(1,346
)


(0.5
)%


(3,526
)


(1.4
)%


2,180Income (loss) before discontinued
    operations


4,737



1.9
%


(30,243
)


(12.3
)%


34,980Income (loss) from discontinued
    operations


2,233



0.9
%


(3,123
)


(1.3
)%


5,356Net income (loss)

$
6,970



2.8
%

$
(33,366
)


(13.6
)%

$
40,336Income (loss) per diluted share

$
0.13






$
(0.64
)





$
0.77  38




---



##### Table of Contents



Net
    revenue
    multi-lane
  multi-lane
  Cost of
    revenue and gross profit
       39




---



##### Table of Contents



Research
    and development
    Applicability of FASB Statement No. 2
    Business Combinations Accounted for by the Purchase Method
  Selling,
    general and administrative
     40




---



##### Table of Contents



Interest
    income, interest expense, and foreign currency
    Income
    tax expense
    Accounting for
    Income Taxes
   41




---



##### Table of Contents



Comparison
    of Years Ended December 31, 2005 and 2004
  Years Ended December 31,% of





% of


Increase2005


Rev


2004


Rev


(Decrease)(Dollars in thousands)Net revenue:Product

$
190,214



77.6
%

$
192,468



79.8
%

$
(2,254
)Services


55,009



22.4
%


48,817



20.2
%


6,192Total net revenue


245,223



100.0
%


241,285



100.0
%


3,938Costs of revenue:Product


131,326



69.0
%


107,473



55.8
%


23,853Services


40,765



74.1
%


36,667



75.1
%


4,098Provision for deferred contract
    costs






0.0
%


11,305



4.7
%


(11,305
)Total costs of revenue


172,091



70.2
%


155,445



64.4
%


16,646Gross profit


73,132



29.8
%


85,840



35.6
%


(12,708
)Operating expenses:Research and development


27,555



11.2
%


27,188



11.3
%


367Selling, general and administrative


72,649



29.6
%


65,242



27.0
%


7,407Total operating expenses


100,204



40.9
%


92,430



38.3
%


7,774Loss from continuing operations


(27,072
)


(11.0
)%


(6,590
)


(2.7
)%


(20,482
)Non-operating expenses


355



0.1
%


(2,107
)


(0.9
)%


2,462Loss before income taxes and
    discontinued operations


(26,717
)


(10.9
)%


(8,697
)


(3.6
)%


(18,020
)Provision for income taxes


(3,526
)


(1.4
)%


(3,833
)


(1.6
)%


307Loss before discontinued operations


(30,243
)


(12.3
)%


(12,530
)


(5.2
)%


(17,713
)Income from discontinued operations


(3,123
)


(1.3
)%


3,868



1.6
%


(6,991
)Net loss

$
(33,366
)


(13.6
)%

$
(8,662
)


(3.6
)%

$
(24,704
)Loss per diluted share

$
(0.64
)





$
(0.17
)





$
(0.47
)   Net
    revenue
    multi-lane,
   42




---



##### Table of Contents



Costs of
    revenue and gross profit
        Research
    and development
    Selling,
    general and administrative
   43




---



##### Table of Contents



Interest
    income, interest expense, and foreign currency
    Income
    tax expense
    Accounting for
    Income Taxes
    Liquidity
    and Capital Resources
  and/or
  Cash
    flows from continuing operations
   44




---



##### Table of Contents



2006


2005


ChangeAccounts receivable

$
(3,641
)

$
8,201


$
(11,842
)Inventories


(15,559
)


(15,057
)


(502
)Accounts payable


4,638



(8,294
)


12,932Other


(9,966
)


3,070



(13,036
)Increase (decrease) in operating
    assets and liabilities

$
(24,528
)

$
(12,080
)

$
(12,448
)     Cash
    flows from investing activities
        Cash
    flows from financing activities
      Cash
    flows from discontinued operations (See Note 5 and
    Note 24)
   45




---



##### Table of Contents



Projected
    liquidity and capital resources
      Contractual
    Obligations
    Less than








AfterTotal


1 Year


1-3 Years


3-5 Years


5 YearsLong-term debt

$



$



$



$



$
Capital lease obligations


















Operating leases


4,764



2,022



2,161



417



164Minimum purchase obligations(1)


28,419



28,019



400







Total

$
33,183


$
30,041


$
2,561


$
417


$
164     (1)
    
    Minimum purchase obligations include all outstanding obligations
    to purchase goods or services at December 31, 2006
    including agreements that are cancelable without penalty and
    agreements which are enforceable and legally binding. We
    estimate that approximately 46% of the outstanding purchase
    obligations at December 31, 2006 are non-cancelable due to
    the customized nature of the order and the long lead time
    requirements.  Debt
    Amendments
    Stock
    Repurchase
   46




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
  Regulation S-K Consolidation of
    Variable Interest Entities
  2007
    Outlook
          Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes
  Fair Value Measurements
 47




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk        mark-to-market
  Form 10-K.
      Item 8.
    Financial
    Statements and Supplementary Data  Regulation S-X Form 10-K.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   48




---



##### Table of Contents



Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
    Rules 13a-15(e) 15d-15(e)
  Changes
    in Internal Control over Financial Reporting
    Managements
    Report on Internal Control Over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f). Internal Control 
    Integrated Framework.
    10-K.
  Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers of the Registrant and Corporate
    Governance     49




---



##### Table of Contents



www.hypercom.com 8-K
 Item 11.  Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   Item 13.  Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    (1) Audited Consolidated
    Financial StatementsReports of
    Independent Registered Public Accounting FirmConsolidated
    Balance Sheets at December 31, 2006 and 2005Consolidated
    Statements of Operations for the years ended December 31,
    2006, 2005, and 2004Consolidated
    Statements of Stockholders Equity for the years ended
    December 31, 2006, 2005, and 2004Consolidated
    Statements of Cash Flows for the years ended December 31,
    2006, 2005, and 2004Notes to
    Consolidated Financial Statements(2) Financial Statement
    ScheduleSchedule II 
    Valuation and Qualifying Accounts      50




---



##### Table of Contents



SIGNATURES      By:
    /s/  William
    Keiper   Chief Executive Officer
      Signature

TitlePrincipal Executive, Financial and
    Accounting Officers/s/  William
    KeiperWilliam
    Keiper

Chief Executive Officer and
    Director/s/  Thomas
    LiguoriThomas
    Liguori

Senior Vice President and Chief
    Financial OfficerDirectors*Daniel
    Diethelm

Director*Phillip
    J. Riese

Director*Norman
    Stout

Director   Form 10-K
  *By:
    /s/  William
    Keiper  Attorney-in-Fact
 51




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
            Ernst &
    Young LLP
   52




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 Ernst &
    Young LLP
   53




---



##### Table of Contents



HYPERCOM
    CORPORATION
 CONSOLIDATED
    BALANCE SHEETS  December 31,2006


2005(Dollars in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
34,190


$
35,940Restricted cash


201



Short-term investments


47,228



57,951Accounts receivable, net of
    allowance for doubtful accounts of $1,934 and $3,266,
    respectively


52,777



48,852Inventories


52,632



39,414Prepaid expenses and other current
    assets


8,001



8,946Deferred income taxes


691



122Assets of discontinued operations
    held for sale






12,613Total current assets


195,720



203,838Property, plant and equipment, net


27,261



27,746Intangible assets, net


5,733



3,503Other long-term assets


8,002



3,827Total assets

$
236,716


$
238,914LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
22,931


$
17,721Accrued payroll and related
    expenses


6,201



8,460Accrued sales and other taxes


7,781



9,479Product warranty liabilities


2,636



5,534Accrued other liabilities


9,603



6,837Deferred revenue


2,185



2,762Income taxes payable


2,460



1,651Current portion of long-term debt






8,355Total current liabilities


53,797



60,799Long-term debt






22Deferred tax liabilities


380



341Other liabilities


3,608



6,978Total liabilities


57,785



68,140Stockholders equity:Common stock, $.001 par
    value; 100,000,000 shares authorized; 53,127,205 and
    52,991,959 shares outstanding at December 31, 2006 and
    2005, respectively


56



55Additional paid-in capital


247,989



238,186Deferred compensation






(2,123
)Accumulated deficit


(46,365
)


(53,335
)Treasury stock, 3,162,248 and
    1,815,620 shares (at cost) at December 31, 2006 and
    2005, respectively


(22,749
)


(12,009
)Total stockholders equity


178,931



170,774Total liabilities and
    stockholders equity

$
236,716


$
238,914    54




---



##### Table of Contents



HYPERCOM
    CORPORATION
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended December 31,2006


2005


2004(Dollars in thousands, except share data)Net revenue:Products

$
191,286


$
190,214


$
192,468Services


57,279



55,009



48,817Total net revenue


248,565



245,223



241,285Costs of revenue:Products


117,756



131,326



107,473Services


41,784



40,765



36,667Write-off of deferred contract
    costs










11,305Total costs of revenue


159,540



172,091



155,445Gross profit


89,025



73,132



85,840Operating expenses:Research and development


27,706



27,555



27,188Selling, general and administrative


60,105



72,649



65,242In-process research and development


1,000







Gain on sale of real property


(2,953
)






Income (loss) from continuing
    operations


3,167



(27,072
)


(6,590
)Interest income


4,758



2,679



1,198Interest expense


(1,072
)


(787
)


(1,412
)Foreign currency loss


(699
)


(1,297
)


(1,906
)Other income (expense)


(71
)


(240
)


13Income (loss) before income taxes
    and discontinued operations


6,083



(26,717
)


(8,697
)Provision for income taxes


(1,346
)


(3,526
)


(3,833
)Income (loss) before discontinued
    operations


4,737



(30,243
)


(12,530
)Income (loss) from discontinued
    operations


2,233



(3,123
)


3,868Net income (loss)

$
6,970


$
(33,366
)

$
(8,662
)Basic income (loss) per share:Income (loss) before discontinued
    operations

$
0.09


$
(0.58
)

$
(0.24
)Income (loss) from discontinued
    operations


0.04



(0.06
)


0.07Basic income (loss) per share

$
0.13


$
(0.64
)

$
(0.17
)Diluted income (loss) per share:Income (loss) before discontinued
    operations

$
0.09


$
(0.58
)

$
(0.24
)Income (loss) from discontinued
    operations


0.04



(0.06
)


0.07Diluted income (loss) per share

$
0.13


$
(0.64
)

$
(0.17
)Shares used in computing net
    income (loss) per common share:Basic


53,248,194



52,395,001



51,251,975Diluted


53,965,576



52,395,001



51,251,975    55




---



##### Table of Contents



HYPERCOM
    CORPORATION
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY  Additional


Receivables











TotalCommon Stock


Paid-in


from


Deferred


Accumulated


Treasury


StockholdersShares


Balance


Capital


Stockholders


Compensation


Deficit


Stock


Equity(Dollars in thousands, except share data)Balance as of December 31, 2003


49,930,803



50



219,983



(1,056
)


(600
)


(11,307
)


(2,773
)


204,297Issuance of common stock


2,274,484



2



8,274



















8,276Restricted common stock issued for
    deferred compensation, net of cancellations


49,648







310







(310
)










Recognition of deferred
    compensation, net of award reacquisitions


















405











405Decrease in stockholders
    receivable














1,056















1,056Net loss






















(8,662
)






(8,662
)Balance as of December 31, 2004


52,254,935



52



228,567







(505
)


(19,969
)


(2,773
)


205,372Issuance of common stock


1,873,021



3



7,173



















7,176Purchase of treasury stock


(1,525,409
)






















(9,236
)


(9,236
)Restricted common stock issued for
    deferred compensation, net of cancellations


389,412







2,446







(2,446
)










Recognition of deferred
    compensation, net of award reacquisitions


















828











828Net loss






















(33,366
)






(33,366
)Balance as of December 31, 2005


52,991,959



55



238,186







(2,123
)


(53,335
)


(12,009
)


170,774Issuance of common stock


1,439,442



1



6,650



















6,651Purchase of treasury stock


(1,346,628
)






















(10,740
)


(10,740
)Reclassification due to the
    adoption of SFAS 123R










(2,123
)






2,123











Restricted common stock issued for
    compensation, net of forfeitures


42,432



























Share-based compensation










5,276



















5,276Net Income






















6,970







6,970Balance as of December 31, 2006


53,127,205


$
56


$
247,989


$



$



$
(46,365
)

$
(22,749
)

$
178,931    56




---



##### Table of Contents



HYPERCOM
    CORPORATION
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended December 31,2006


2005


2004(Dollars in thousands)Cash flows from continuing
    operations:Net income (loss) from continuing
    operations

$
4,737


$
(30,243
)

$
(12,530
)Adjustments to reconcile net
    income (loss) from continuing operations to net cash provided by
    (used in) operating activities:Amortization of deferred financing
    costs


4



15



529Depreciation and amortization


7,872



7,890



8,007Acquired in-process research and
    development


1,000







Amortization of discount on
    short-term investments


(1,303
)


(1,099
)


(223
)Provision for doubtful accounts


826



2,046



1,915Provision for excess and obsolete
    inventory


2,342



18,539



7,922Provision for warranty and other
    product charges


125



8,926



727Foreign currency (gains) losses


(514
)


(976
)


74Provision for deferred contract
    costs










11,305Gain on sale of real property


(2,953
)






Non-cash stock-based compensation


6,253



828



405Non-cash write-off of intangibles
    and other assets


324



2,181



1,515Deferred income tax benefit


(530
)


219



Changes in operating assets and
    liabilities, net


(24,528
)


(12,080
)


(10,797
)Net cash provided by (used in)
    operating activities


(6,345
)


(3,754
)


8,849Cash flows from investing
    activities:Purchase of property, plant and
    equipment


(7,320
)


(4,916
)


(5,855
)Proceeds from the sale of real
    property


5,190







Cash paid for acquisitions, net of
    cash acquired


(8,319
)






Software development costs
    capitalized


(787
)


(559
)


(2,953
)Net increase in restricted cash


(201
)






Purchase of short-term investments


(295,054
)


(216,915
)


(90,239
)Proceeds from the sale or maturity
    of short-term investments


307,080



230,025



37,900Net cash provided by (used in)
    investing activities


589



7,635



(61,147
)Cash flows from financing
    activities:Repayment of bank notes payable
    and other debt instruments


(8,364
)


(425
)


(995
)Proceeds from issuance of common
    stock


6,651



7,176



8,276Purchase of treasury stock


(10,740
)


(9,236
)


Payment of receivables from
    stockholders










1,056Net cash provided by (used in)
    financing activities


(12,453
)


(2,485
)


8,337Effect of exchange rate changes on
    cash and cash equivalents


469



(333
)


407Net increase (decrease) in cash
    flow from continuing operations


(17,740
)


1,063



(43,554
)Net cash provided by operating
    activities from discontinued operations


3,853



11,432



4,450Net cash provided by (used in)
    investing activities from discontinued operations


12,137







(2,866
)Cash and cash equivalents,
    beginning of year


35,940



23,445



65,415Cash and cash equivalents, end of
    year

$
34,190


$
35,940


$
23,445    57




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 December 31,
    2006
  1.
    Description
    of Business  point-of-transaction.
    2.
    Significant
    Accounting Policies  Principles
    of Consolidation
    Use
    of Estimates
    Cash
    and Cash Equivalents
    Short-term
    Investments
   58




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
  other-than-temporary. other-than-temporary,
  Fair
    Value of Financial Instruments
  Disclosures about Fair Value of Financial
    Instruments.
  Allowance
    for Doubtful Accounts
      Sales-Type
    Leases
  Accounting for Leases.
 59




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
     Inventories
  first-in, and/or
  Property,
    Plant and Equipment
    Building


15-30 yearsComputer equipment and software


3-5 yearsMachinery and equipment


2-10 yearsEquipment leased to customers


1-5 yearsFurniture and fixtures


3-10 years     Capitalized
    Software Development Costs
    Goodwill
    Impairment
    of Long-Lived Assets
   60




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
    Revenue
    Recognition
  No. 00-21, Revenue Arrangements with Multiple Deliverables 97-2, Software Revenue Recognition 81-1, Accounting for Performance of Construction-Type and Certain
    Production Type Contracts Revenue Recognition in Financial Statements and/or
  on-site percentage-of-completion
    
    The delivered item(s) has value to the customer on a standalone
    basis;
    There is objective and reliable evidence of the fair value of
    the undelivered item(s); and
    If the arrangement includes a general right of return relative
    to the delivered item(s), delivery or performance of the
    undelivered item(s) is considered probable and substantially in
    the control of the Company.   61




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   Contract
    Accounting
  percentage-of-completion
    Product
    Warranty
    Legal
    Contingencies
    Shipping
    and Handling Costs
    Advertising
    Costs
    Share-Based
    Compensation
  Accounting for Stock Issued to Employees
    and related Interpretations Accounting for Stock-Based
    Compensation Share Based
    Payment
 62




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
    Foreign
    Currency
    Income
    Taxes
      Income
    (Loss) Per Share
   63




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
    2006


2005


2004Shares used in basic income (loss)
    per share calculation (weighted average common shares
    outstanding)


53,248,194



52,395,001



51,251,975Effect of dilutive stock options
    and warrants


717,382







Shares used in diluted income
    (loss) per share calculation


53,965,576



52,395,001



51,251,975     Derivative
    Financial Instruments
      Fair
    Value of Financial Instruments
    Impact
    of Recently Issued Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes
 64




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   Fair Value Measurements
  3.
    Reclassification     65




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
    December 312006


2005


2004As previously
    reported:Net revenue:Product

$
209,622


$
210,963


$
214,239Services


38,943



34,260



27,046Total net revenue


248,565



245,223



241,285Costs of revenue:Product


130,683



144,649



123,419Services


28,857



27,442



20,721Write-off of deferred contract
    costs










11,305Total costs of revenue


159,540



172,091



155,445Gross Margin

$
89,025


$
73,132


$
85,840As reclassified:Net revenue:Product

$
191,286


$
190,214


$
192,468Services


57,279



55,009



48,817Total net revenue


248,565



245,223



241,285Costs of revenue:Product


117,756



131,326



107,473Services


41,784



40,765



36,667Write-off of deferred contract
    costs










11,305Total costs of revenue


159,540



172,091



155,445Gross Margin

$
89,025


$
73,132


$
85,840Changes:Net revenue:Product

$
(18,336
)

$
(20,749
)

$
(21,771
)Services


18,336



20,749



21,771Total net revenue










Costs of revenue:Product


(12,927
)


(13,323
)


(15,946
)Services


12,927



13,323



15,946Write-off of deferred contract
    costs










Total costs of revenue










Gross Margin

$



$



$
  66




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
  4.
    Business
    Review and Restructuring Charges    
    Implementing an
    end-of-product-life
    cycle strategy, including identifying products and related
    inventory with near term
    end-of-life
    requirements;
    More aggressively addressing and correcting product performance
    issues, including negotiated warranty and product
    trade-in/trade-out programs required for the
    end-of-product-life
    cycle strategies;
    Implementing certain workforce reductions, including members of
    the senior management team, sales, operations and manufacturing
    personnel, as well as moving certain research and development
    resources to lower cost foreign geographies, and compensation
    plan changes;
    Vacating a leased building in Phoenix, Arizona due to the
    reductions in force;
    Evaluating other assets and liabilities and evaluating the past
    underlying operating decisions or strategies supporting the
    future benefit of the assets or the probability of a liability;
    Addressing individual country/regional sales and profitability
    performance, and reallocating resources based upon market share
    growth objectives by country to support the new strategies going
    forward;
    Investing in the implementation of a comprehensive product
    marketing function within the Companys
    organization; and
    Evaluating opportunities for short, medium and long-term
    improvements in manufacturing costs.   67




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##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
    Total Costs


Costs


Costs


Accruals


Balance atExpected to be


Incurred


Incurred


Reversed


December 31,Incurred


During 2005


During 2006


During 2006


2006Costs of revenues:Warranty charges and product
    replacement accruals(a)

$
7,374


$
3,832


$
1,294


$
1,408


$
840Inventory write-downs, primarily
    for product
    end-of-life
    decisions


12,111



12,111











One-time termination benefits and
    related employment costs


469



351



118







Total costs of revenue charges


19,954



16,294



1,412



1,408



840Operating expenses:One-time termination benefits and
    related employment costs


3,370



2,551



623



196



Idled facility lease charge(b)


1,013



195



267







551Total operating expenses


4,383



2,746



890



196



551Total charges

$
24,337


$
19,040


$
2,302


$
1,604


$
1,391     (a)
    
    These accrued liability balances are recorded as current product
    warranty liabilities as these amounts are expected to be paid
    during 2007. Two customers that agreed to participate in the
    trade-in program in June 2005 for the replacement of certain
    electronic payment equipment ultimately opted out of the
    program. Accordingly, the Company reduced its product warranty
    liabilities by $1.4 million in June 2006 upon the
    expiration of the program.(b)
    
    The idled facility lease charge accrued liability is recorded in
    current accrued liabilities ($0.2 million) and other
    long-term liabilities ($0.4 million) based on the timing of
    the projected lease payments that are scheduled through 2011. 68




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##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   5.
    Discontinued
    Operations    2006


2005


2004United Kingdom Lease Business:Net revenues

$
3,230


$
14,355


$
13,870Cost of revenues


1,195



9,531



7,614Gross profit


2,035



4,824



6,256Selling, general and
    administrative expenses


(1,020
)


(1,397
)


(1,071
)Foreign currency loss


(343
)


(340
)


(1,317
)Loss on asset impairment






(6,609
)


Gain on Sale


1,561







2,233



(3,522
)


3,868Golden Eagle Leasing






399



Income (loss) from discontinued
    operations

$
2,233


$
(3,123
)

$
3,868   United
    Kingdom Lease Business
  Accounting for the Impairment or
    Disposal of Long-Lived Assets
      2005Prepaid expenses and other current
    assets

$
57Net investment in sales-type leases


10,782Property, plant and equipment, net


475Other assets


1,299Assets of discontinued operations
    held for sale

$
12,613   Golden
    Eagle Leasing
   69




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##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   6.
    Restricted
    Cash    7.
    Sale of
    Real Property in Hong Kong    8.
    Short-term
    Investments  available-for-sale
  available-for-sale available-for-sale
    2006


2005Municipal debt securities

$
10,400


$
10,500U.S. government and agency
    debt securities


5,977



23,439Corporate debt securities


23,001



10,012Preferred equity securities


7,850



14,000$
47,228


$
57,951   35-day
  9.
    Inventories    2006


2005Purchased parts

$
24,367


$
24,118Work in progress


6,008



3,609Finished goods


22,257



11,687$
52,632


$
39,414  70




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
  10.
    Property,
    Plant and Equipment    2006


2005Land and improvements

$
4,743


$
4,743Buildings


12,753



15,133Computer equipment and software


23,956



20,656Machinery and equipment


27,143



23,318Equipment leased to customers


1,004



1,195Furniture and fixtures


4,945



4,803Leasehold improvements


3,118



3,156Construction in process


375



44878,037



73,452Less accumulated depreciation


(50,776
)


(45,706
)$
27,261


$
27,746     11.
    Intangible
    Assets    2006


2005Capitalized software

$
5,668


$
5,039Unpatented technology


2,300



Other


884



248,852



5,063Less accumulated amortization


(3,119
)


(1,560
)$
5,733


$
3,503      71




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   12.
    Product
    Warranty    2006


2005Balance at beginning of period

$
5,534


$
1,434Warranty charges to normal
    operations


1,533



1,552Warranty (reversal)/charges
    related to the 2005 Business Review


(1,408
)


7,374Utilization of warranty liability


(3,023
)


(4,826
)Balance at end of period

$
2,636


$
5,534       13.
    Long-term
    Debt  Debt
    Instruments
    2005Floating Rate Option Note
    payable to a bank:Note is payable in
    semi-annual installments plus interest at a variable rate, due
    April 1, 2019; collateralized by unconditional,
    irrevocable, direct pay letter of credit

$
8,327Other


508,377Current portion of long-term debt


(8,355
)Long-term debt

$
22       14.
    Share-Based
    Compensation   72




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##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
    Accounting for
    Stock-Based Compensation
    Stock
    Options
  Accounting for Stock Appreciation
    Rights and Other Variable Stock Option Award Plans
    WeightedAverageWeighted


RemainingNumber of


Average


Contractual


AggregateOptions


Exercise Price


Term


Intrinsic Value(In Thousands)Outstanding at December 31,
    2006


3,726,642



8.04



6.18


$
1,880Vested and expected to vest at
    December 31, 2006


3,496,209


$
8.01



5.99


$
1,857Exercisable at December 31,
    2006


2,249,506


$
7.77



4.31


$
1,732    73




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
     2006


2005


2004Weighted average risk free
    interest rate


4.8
%


4.1
%


3.2
%Expected life of the options (in
    years)


5.48



5.77



6.98Expected stock price volatility


67
%


75
%


86
%Expected dividend yield










       2005


2004Net loss, as reported

$
(33,366
)

$
(8,662
)Add stock-based employee
    compensation expense included in reported net loss


828



405Deduct total stock-based employee
    compensation expense determined under fair value methods for
    awards


(2,837
)


(2,680
)Add reversal of stock-based
    compensation expense for options forfeited prior to vesting


2,694



266Pro forma net loss

$
(32,681
)

$
(10,671
)Net loss per share:Basic, as reported

$
(0.64
)

$
(0.17
)Basic, pro forma

$
(0.62
)

$
(0.21
)Diluted, as reported

$
(0.64
)

$
(0.17
)Diluted, pro forma

$
(0.62
)

$
(0.21
)Weighted average shares used in
    pro forma computation:Basic


52,395,001



51,251,975Diluted


52,395,001



51,251,975   Restricted
    Stock Awards
   74




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   Employee
    Stock Purchase Plan
    15.
    Stockholders
    Equity      Stock
    Options
    2006


2005


2004Weighted





Weighted





WeightedShares


Average


Shares


Average


Shares


AverageUnder


Exercise


Under


Exercise


Under


ExerciseOption


Price


Option


Price


Option


PriceBeginning balance outstanding


4,321,744


$
6.88



8,610,291


$
6.75



10,056,327


$
6.26Granted


1,083,500



9.54



1,041,500



6.08



212,500



8.38Exercised


(1,060,942
)


4.38



(1,811,639
)


3.83



(1,492,686
)


3.44Cancellations


(617,660
)


8.73



(3,518,408
)


7.89



(165,850
)


8.92Ending balance outstanding


3,726,642


$
8.04



4,321,744


$
6.88



8,610,291


$
6.75Exercisable at end of year


2,249,506


$
7.77



3,227,802


$
7.13



7,056,279


$
6.98  75




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
    Options Outstanding


Options ExercisableWeighted


Weighted





WeightedShares


Average


Average


Shares


AverageUnder


Remaining


Exercise


Under


ExerciseRange of Exercise Prices

Option


Contractual Life


Price


Option


Price$ 2.46 - 3.50


424,375



4.18


$
3.49



421,875


$
3.49$ 3.52 - 5.28


371,673



6.26



4.83



277,158



4.69$ 5.48 - 6.25


373,750



7.00



6.08



244,166



6.09$ 6.28 - 9.29


877,250



8.47



7.19



242,832



6.71$ 9.31 - 9.38


267,500



3.10



9.37



267,500



9.37$ 9.40 - 10.00


325,100



2.60



9.65



262,460



9.59$10.25 - 14.88


1,086,994



5.98



11.46



533,515



12.313,726,642











2,249,506   Restricted
    Stock Awards
  and/or
 76




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
     WeightedAverageNonvested Shares


Grant Date FairOutstanding


Value per ShareBalance at December 31, 2003


124,224



4.83Shares granted in 2004


60,000



6.00Shares vested in 2004


(56,936
)


4.83Shares forfeited in 2004


(10,352
)


4.83Balance at December 31, 2004


116,936



5.43Shares granted in 2005


464,000



6.20Shares vested in 2005


(104,348
)


4.78Shares forfeited in 2005


(74,588
)


6.04Balance at December 31, 2005


402,000



6.38Shares granted in 2006


92,432



8.40Shares vested in 2006


(102,000
)


6.36Shares forfeited in 2006


(50,000
)


6.42Balance at December 31, 2006


342,432


$
6.92     Stock
    Warrants
        Employee
    Stock Purchase Plan
   77




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   Directors
    Stock Plan
  and/or
  Stock
    Repurchase
  first-in,
    Preferred
    Stock
    16.
    Brazilian
    Health Ministry Contract  81-1,
   78




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
        17.
    Income
    Taxes    2006


2005


2004Income (loss) before income taxes
    and discontinued operations:United States

$
(18,952
)

$
(14,645
)

$
1,048Foreign


25,035



(12,072
)


(9,745
)$
6,083


$
(26,717
)

$
(8,697
)     2006


2005


2004Current:State

$
3


$
(5
)

$
59Foreign


813



3,312



3,774816



3,307



3,833Deferred  Foreign


530



219



Total

$
1,346


$
3,526


$
3,833  79




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
    2006


2005


2004Tax expense (benefit) at the
    federal statutory rate


35.0
%


35.0
%


35.0
%State income taxes, net of federal
    income tax effect


0.0



0.0



(0.7
)Foreign taxes


(119.7
)


(28.9
)


(81.5
)Tax credits


0.0



3.0



5.9Translation gain


19.7



2.6



2.1Change in valuation allowance


85.0



(24.8
)


(27.0
)UK loss recapture


0.0



0.0



23.1Other


1.6



(0.1
)


(1.0
)Effective tax rate


21.6
%


(13.2
)%


(44.1
)%     2006


2005Deferred tax assets (liabilities),
    current:Inventory valuation and reserves

$
2,447


$
3,785Compensation accruals


1,059



1,059Allowance for doubtful accounts


37



549Foreign, net


1,895



3,757Other


15



9Valuation allowance


(4,762
)


(9,037
)Deferred tax assets, current

$
691


$
122Deferred tax assets (liabilities),
    non-current:Tax loss carry forwards -
    United States

$
26,662


$
19,999Tax loss carry forwards -
    Foreign


23,581



23,229Intangibles


201



179Property, plant and equipment


103



106Foreign


(380
)


(341
)Other


6,035



6,212Valuation allowance


(56,582
)


(49,725
)Net deferred tax liabilities,
    non-current

$
(380
)

$
(341
)    80




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
  Accounting for Income taxes
          18.
    Profit
    Sharing Plan    19.
    Commitments
    and Contingencies    Lease
    Commitments
   81




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
     2007

$
2,0222008


1,4382009


7232010


4172011


164$
4,764     Litigation
    International
    Taxes
    20.
    Business
    Acquisitions    Business Combinations (Rule 3-05 Regulation S-X).
 82




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   Business Combinations Accounted for by the
    Purchase Method
  Goodwill and Other Intangible
    Assets
    21.
    Concentrations
    of Credit and Other Risks  Financial
    Instruments
          Inventories
   83




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
     International
    Operations
        22.
    Subsequent
    Events  Business
    Acquisition
  point-of-sale Business Combinations (Rule 3-05 Regulation S-X).
  Sale
    of Headquarter Facilities
  Long-Lived Assets
    to Be Disposed Of by Sale, .
  23.
    Segment,
    Geographic, and Customer Information  Segment
  transaction-network
 84




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
    Geographic
    Europe,MiddleNorth America


Latin America


Asia/Pacific


East and Africa


Total2006:Revenues

$
80,860


$
64,715


$
35,514


$
67,476


$
248,565Long-lived assets


28,321



7,874



2,522



2,279



40,9962005:Revenues

$
96,681


$
49,763


$
40,219


$
58,560


$
245,223Long-lived assets


19,510



5,595



4,815



5,156



35,0762004:Revenues

$
82,375


$
44,033


$
43,006


$
71,871


$
241,285Long-lived assets


20,555



7,159



4,260



7,584



39,558   Customer
   85




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   24.
    Supplemental
    Cash Flow Information  2006


2005


2004(In thousands)Changes in operating assets and
    liabilities:Accounts receivable

$
(3,641
)

$
8,201


$
(8,059
)Net investment in sales-type leases










373Inventories


(15,559
)


(15,057
)


(11,634
)Income tax receivable










Prepaid expenses and other current
    assets


2,153



2,967



(315
)Other assets


(600
)


(774
)


(205
)Accounts payable


4,638



(8,294
)


4,925Accrued payroll and related
    expenses


(3,653
)


51



687Accrued sales and other tax


(2,101
)


1,843



497Accrued liabilities


(1,929
)


(2,632
)


(391
)Deferred revenue


(669
)


52



1,410Income taxes payable


608



(1,708
)


1,495Other liabilities


(3,775
)


3,271



420Net decrease in operating assets
    and liabilities

$
(24,528
)

$
(12,080
)

$
(10,797
)Cash paid during the year by
    continuing operations:Interest

$
(575
)

$
(786
)

$
(879
)Income taxes

$
(1,823
)

$
(4,298
)

$
(3,569
)Noncash investing
    activities:Changes in accounts payable
    related to the purchase of property, plant and equipment

$
116


$
166


$
   Discontinued
    Operations  Revised Disclosure:
    Year
    2006
    Year
    2005
   86




---



##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   Year
    2004
      25.
    Interim
    Financial Results (Unaudited)  quarter-to-quarter
  First


Second


Third


Fourth


FiscalQuarter


Quarter(A)


Quarter


Quarter(B)


Year(C)2006:Net revenue

$
60,969


$
66,144


$
56,669


$
64,783


$
248,565Gross profit

$
23,519


$
27,394


$
18,922


$
19,190


$
89,025Income (loss) before discontinued
    operations

$
2,789


$
4,210


$
473


$
(2,735
)

$
4,737Income (loss) from discontinued
    operations


349



2,018



(127
)


(7
)


2,233Net income (loss)

$
3,138


$
6,228


$
346


$
(2,742
)

$
6,970Basic income (loss) per share:Continuing operations

$
0.05


$
0.08


$
0.01


$
(0.05
)

$
0.09Discontinued operations


0.01



0.04



0.01







0.04Net income (loss)

$
0.06


$
0.12


$
0.01


$
(0.05
)

$
0.13Diluted income (loss) per share:Continuing operations

$
0.05


$
0.08


$
0.01


$
(0.05
)

$
0.09Discontinued operations


0.01



0.03



0.01







0.04Net income (loss)

$
0.06


$
0.11


$
0.02


$
(0.05
)

$
0.13   87




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##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
  First


Second


Third


Fourth


FiscalQuarter(D)


Quarter(E)


Quarter


Quarter(F)


Year(D)2005:Net revenue

$
50,433


$
60,154


$
66,547


$
68,089


$
245,223Gross profit

$
16,537


$
7,733


$
25,479


$
23,383


$
73,132Income (loss) before discontinued
    operations

$
(11,647
)

$
(18,149
)

$
2,845


$
(3,292
)

$
(30,243
)Income (loss) from discontinued
    operations


2,007



1,493



656



(7,279
)


(3,123
)Net income (loss)

$
(9,640
)

$
(16,656
)

$
3,501


$
(10,571
)

$
(33,366
)Basic and diluted income (loss)
    per share:Continuing operations

$
(0.22
)

$
(0.35
)

$
0.05


$
(0.06
)

$
(0.58
)Discontinued operations


0.04



0.03



0.02



(0.14
)


(0.06
)Net income (loss)

$
(0.18
)

$
(0.32
)

$
0.07


$
(0.20
)

$
(0.64
)     (A)
    
    During the 2006 second quarter, the Company had a
    $1.6 million gain on the sale of our UK Lease Business
    which was disposed of effective May 31, 2006.(B)
    
    During the 2006 fourth quarter, the Company acquired TPI and
    incurred in a one-time charge of $1.0 million for the
    acquired in-process research and development.(C)
    
    Earnings per share calculations are based on the weighted
    average number of shares outstanding for each quarter. The sum
    of the quarters may not be equal to the fiscal year amount.(D)
    
    During the 2005 first quarter, the Company incurred charges
    totaling $5.1 million as a result of actions taken during
    the 2005 Business Review. The following is a summary of the 2005
    Business Review charges recorded in the 2005 first quarter:  
    $0.7 million for charges related to negotiated warranty
    work;
    $2.1 million for write-downs of inventory primarily for
    products at or near
    end-of-life;
    $1.5 million for severance and related employment
    provisions related to certain executives and other
    employees; and
    $0.8 million for other individually immaterial charges and
    provisions.  (E)
    
    During the 2005 second quarter, the Company incurred charges
    totaling $16.0 million as a result of actions taken during
    the 2005 Business Review. The following is a summary of the 2005
    Business Review charges recorded in the 2005 second quarter:  
    $4.8 million for replacement cost provisions related to
    electronic payment equipment that the Company elected to provide
    certain customers;
    $1.3 million for charges related to additional negotiated
    warranty work;
    $7.1 million for write-downs of inventory primarily for
    products at or near
    end-of-life;
    $2.2 million for severance and related employment
    provisions related to certain executives and other employees and
    the elimination of certain executive benefits; and
    $0.6 million for other individually immaterial charges and
    provisions. 88




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##### Table of Contents



HYPERCOM
    CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 December 31,
    2006
   (F)
    
    During the fourth quarter of  2005, the Company incurred charges
    totaling $6.6 million as a result of actions taken during
    the 2005 Business Review. The following is a summary of the 2005
    Business Review charges recorded in the 2005 fourth quarter:  
    $0.6 million for charges related to additional negotiated
    warranty work;
    $2.9 million for write-downs of inventory primarily for
    products at or near
    end-of-life;
    $1.0 million for future rent charges in excess of estimated
    sublet recoveries on a vacated building:
    $1.6 million for severance and related employment
    provisions related to certain executives and other
    employees; and
    $0.5 million for other individually immaterial charges and
    provisions. 89




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##### Table of Contents



FINANCIAL
    STATEMENT SCHEDULE
  SCHEDULE II
    VALUATION AND QUALIFYING ACCOUNTS
  AdditionsCharges toCosts andBalance at


Expense in


Charges toBeginning


Continuing


Other


Deductions


Balance atof Period


Operations


Accounts


(A)


End of Period(Dollars in thousands)Year Ended December 31,
    2006:Allowance for doubtful accounts

$
3,266


$
826


$



$
(2,158
)

$
1,934Year Ended December 31,
    2005:Allowance for doubtful accounts

$
2,390


$
2,046


$



$
(1,170
)

$
3,266Year Ended December 31,
    2004:Allowance for doubtful accounts

$
993


$
1,915


$



$
(518
)

$
2,390      90




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber



Description of Exhibit and Method of Filing3
.1



Amended and Restated Certificate
    of Incorporation of Hypercom Corporation (incorporated by
    reference to Exhibit 3.1 to Hypercom Corporations
    Registration Statement on
    Form S-1
    (Registration
    No. 333-35461))3
.2



Second Amended and Restated Bylaws
    of Hypercom Corporation (incorporated by reference to
    Exhibit 3.1 to Hypercom Corporations Current Report
    on
    Form 8-K
    dated October 31, 2006)4
.1



Amended and Restated Certificate
    of Incorporation of Hypercom Corporation (incorporated by
    reference to Exhibit 3.1 to Hypercom Corporations
    Registration Statement on
    Form S-1
    (Registration
    No. 333-35461))10
.1



Lease, as amended, dated
    June 14, 1996, by and between Estes-Samuelson Partnership
    and Hypercom, Inc. (incorporated by reference to
    Exhibit 10.2 to Hypercom Corporations Registration
    Statement on
    Form S-1
    (Registration
    No. 333-35461))10
.2



Hypercom Corporation Long-Term
    Incentive Plan (incorporated by reference to Exhibit 4.3 to
    Hypercom Corporations Registration Statement on
    Form S-8
    (Registration
    No. 333-67440))10
.3



Amended and Restated Hypercom
    Corporation 1997 Employee Stock Purchase Plan (incorporated by
    reference to Exhibit 10.1 to Hypercom Corporations
    Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2004)10
.4



Hypercom Corporation 2000
    Broad-Based Stock Incentive Plan (incorporated by reference to
    Exhibit 10.1 to Hypercom Corporations Registration
    Statement on
    Form S-8
    (Registration
    No. 333-97181))10
.5



Hypercom Corporation Nonemployee
    Directors Stock Option Plan (incorporated by reference to
    Exhibit 10.1 to Hypercom Corporations Registration
    Statement on
    Form S-8
    (Registration
    No. 333-97179))10
.6



Amendment to the Hypercom
    Corporation Nonemployee Directors Stock Option Plan
    (Incorporated by reference to Appendix I of the
    Companys Proxy Statement on Schedule 14A filed on
    April 17, 2006)10
.7



Employment Agreement, effective
    August 29, 2005, between William Keiper and Hypercom
    Corporation (incorporated by reference to Exhibit 10.1 to
    Hypercom Corporations Current Report on
    Form 8-K
    dated August 31, 2005)10
.8



Offer Letter to Thomas Liguori
    from Hypercom Corporation dated October 3, 2005
    (incorporated by reference to Exhibit 10.1 to Hypercom
    Corporations Current Report on
    Form 8-K
    dated October 26, 2005)10
.9



Amended Employment Agreement,
    effective March 31, 2005, between Christopher S. Alexander
    and Hypercom Corporation (incorporated by reference to
    Exhibit 10.1 to Hypercom Corporations Current Report
    on
    Form 8-K
    dated April 5, 2005)10
.10



Factory Premises and Quarters
    Lease Agreement between Hypercom Electronic Manufacturing
    (Shenzhen) Co., Ltd. And Xin He Economic Development Company, Fu
    Yong Town, Boa An District, Shenzhen City, dated
    September 1, 2004 (incorporated by reference to
    Exhibit 10.1 to Hypercom Corporations Quarterly
    Report on
    Form 10-Q
    for the quarter ended September 30, 2004)10
.11



Credit Agreement dated
    January 31, 2005, by and between Hypercom Corporation and
    Wells Fargo N.A. (incorporated by reference to Exhibit 10.1
    to Hypercom Corporations Current Report on
    Form 8-K
    dated February 3, 2005)10
.12



First Amendment dated
    February 15, 2005, to the Credit Agreement dated
    January 31, 2005, by and between Hypercom Corporation and
    Wells Fargo N.A. (incorporated by reference to Exhibit 10.1
    to Hypercom Corporations Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2005)10
.13



Second Amendment dated
    March 15, 2006, to the Credit Agreement dated
    January 31, 2005, by and between Hypercom Corporation and
    Wells Fargo N.A. (incorporated by reference to
    Exhibit 10.12 to Hypercom Corporations Annual Report
    on
    Form 10-K
    dated March 16, 2006)10
.14



Employment Agreement, effective
    January 16, 2007, between Philippe Tartavull and Hypercom
    Corporation (incorporated by reference to Exhibit 10.1 to
    Hypercom Corporations Current Report on
    Form 8-K
    dated January 17, 2007) 91




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##### Table of Contents



ExhibitNumber



Description of Exhibit and Method of Filing10
.15



Business Sale Agreement dated
    June 27, 2006, by and among Hypercom Corporation, Hypercom
    EMEA Ltd., Forrester UK Holdings, LLC and Northern Leasing
    Systems, Inc. (incorporated by reference to Exhibit 2.1 to
    Hypercom Corporations Current Report on
    Form 8-K
    dated June 27, 2006)21
.1



List of Subsidiaries*23
.1



Consent of Independent Registered
    Public Accounting Firm*24
.1



Powers of Attorney*31
.1



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



Certification of Chief Financial
    Officer, as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002*32




Certification of Chief Executive
    Officer and Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002**     *
    
    Filed herewith.  **
    
    Furnished herewith.  
    
    Management or compensatory plan or agreement. 92