##### Table of Contents



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

FORM 10-Q



|(X) |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|--- |  | ----------------------------------------------------------------------------------------

For the quarterly period ended: June 30, 2001.

OR



|(   ) |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|----- |  | -----------------------------------------------------------------------------------------

For the transition period from ____ to ____.
Commission file number: 1-13521

HYPERCOM CORPORATION



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(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
Number)

2851 West Kathleen Road
Phoenix, Arizona 85053



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(Address of principal executive offices) (Zip Code)
(602) 504-5000



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(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant wasrequired to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.

Yes [X]        No [ ]

Number of shares of the registrants common stock, $.001 par value per share,
outstanding as of August 6, 2001, was39,754,963.



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TABLE OF CONTENTS



|                                                                                              |                                            |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION                                                                
|ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                                                                              | CONSOLIDATED BALANCE SHEETS               
|                                                                                              | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                                                                              | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                                                              | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                                                                              | INDEPENDENT ACCOUNTANTS REVIEW REPORT    
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II OTHER INFORMATION                                                                   
|ITEM 1. LEGAL PROCEEDINGS                                                                    
|ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                                                                   
|EXHIBIT INDEX                                                                                
|EX-11.1                                                                                      
|EX-15.1                                                                                      
|EX-99.1                                                                                      



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##### Table of Contents



INDEX

|         |  |                                                            |  |      |    | 
|-------- |  | ---------------------------------------------------------- |  | ---- | -- | 
|PART I.  |  | FINANCIAL INFORMATION                                      |  |     
|         |  |                                                            |  | Page
|ITEM 1.  |  | Financial Statements                                       |  |      | 3  | 
|        
|        
|        
|        
|         |  | Notes to Consolidated Financial Statements                 |  |      | 6  | 
|        
|        
|        
|        
|         |  | Independent Accountants Review Report                     |  |      | 10 | 
|        
|        
|        
|        
|ITEM 2.  |  | Managements Discussion and Analysis of                    |  |      |    | 
|        
|        
|        
|        
|         |  | Financial Condition and Results of Operations              |  |      | 11 | 
|        
|        
|        
|        
|ITEM 3.  |  | Quantitative and Qualitative Disclosures About Market Risk |  |      | 14 | 
|        
|        
|        
|        
|PART II. |  | OTHER INFORMATION                                          |  |      |    | 
|        
|        
|        
|        
|ITEM 1.  |  | Legal Proceedings                                          |  |      | 15 | 
|ITEM 2.  |  | Changes in Securities and Use of Proceeds                  |  |      | 15 | 
|        
|        
|        
|        
|ITEM 4.  |  | Submission of Matters to a Vote of Security Holders        |  |      | 15 | 
|        
|        
|        
|        
|ITEM 6.  |  | Exhibits and Reports on Form 8-K                           |  |      | 15 | 

2



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##### Table of Contents






PART I FINANCIAL INFORMATION







ITEM 1. FINANCIAL STATEMENTS

HYPERCOM CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

|                                                                                                          |                                                                                                                                                                             |             |          |         |              |   |         |         |  
|--------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | -------- | ------- | ------------ | - | ------- | ------- | -
|                                                                                                          |                                                                                                                                                                             |             | June 30, |         |              |   |        
|                                                                                                          |                                                                                                                                                                             |             | 2001     |         | December 31,
|ASSETS                                                                                                    |                                                                                                                                                                             | (unaudited) |          | 2000   
|                                                                                                          |                                                                                                                                                                             |             |          |        
|Current assets:                                                                                           |                                                                                                                                                                             |             |          |         |              |   |         |        
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Cash and cash equivalents                                                                                                                                                   |             | $        | 7,997   |              |   | $       | 13,008  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Restricted cash                                                                                                                                                             |             |          | 4,642   |              |   |         |        |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Marketable securities, at market                                                                                                                                            |             |          |        |              |   |         | 2,110   |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Accounts receivable, net of allowance for
doubtful accounts of $3,124 and $3,655                                                                                            |             |          | 83,727  |              |   |         | 79,010  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Current portion of net investment in direct financing leases                                                                                                                |             |          | 17,041  |              |   |         | 20,023  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Inventories, net                                                                                                                                                            |             |          | 57,552  |              |   |         | 70,358  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Deferred income taxes                                                                                                                                                       |             |          | 12,947  |              |   |         | 12,946  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Prepaid taxes                                                                                                                                                               |             |          | 1,594   |              |   |         | 3,035   |  
|                                                                                                          | Prepaid expenses and other current assets                                                                                                                                   |             |          | 20,843  |              |   |         | 19,059  |  
|                                                                                                          |                                                                                                                                                                             |             |          |         |              |   |         |        
|Total current assets                                                                                      |                                                                                                                                                                             |             | 206,343  |         |              |   | 219,549 |        
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Property, plant and equipment, net                                                                                                                                          |             |          | 41,800  |              |   |         | 42,164  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Long-term marketable securities, at market                                                                                                                                  |             |          | 155     |              |   |         | 820     |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Long-term portion of net investment in direct financing leases                                                                                                              |             |          | 30,576  |              |   |         | 42,102  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Deferred income taxes                                                                                                                                                       |             |          | 9,024   |              |   |         | 9,024   |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Goodwill, net of amortization of $6,609 and $4,609                                                                                                                          |             |          | 31,710  |              |   |         | 31,785  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Intangible assets, net of amortization of $3,294 and $2,459                                                                                                                 |             |          | 6,488   |              |   |         | 6,780   |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Other assets                                                                                                                                                                |             |          | 14,742  |              |   |         | 17,013  |  
|                                                                                                          |                                                                                                                                                                             |             |          |         |              |   |         |        
|Total assets                                                                                              |                                                                                                                                                                             | $           | 340,838  |         |              | $ | 369,237 |        
|                                                                                                          |                                                                                                                                                                             |             |          |         |              |   |         |        
|LIABILITIES
AND STOCKHOLDERS EQUITY
Current liabilities:                                                 |                                                                                                                                                                             |             |          |         |              |   |         |        
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Notes payable, net of loan discounts of $1,011                                                                                                                              |             | $        | 16,963  |              |   | $       |        |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Accounts payable                                                                                                                                                            |             |          | 31,743  |              |   |         | 32,531  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Accrued liabilities                                                                                                                                                         |             |          | 25,126  |              |   |         | 22,137  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Deferred revenue                                                                                                                                                            |             |          | 2,608   |              |   |         | 2,390   |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Income taxes payable                                                                                                                                                        |             |          |        |              |   |         | 3,237   |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Current portion of long-term debt                                                                                                                                           |             |          | 36,737  |              |   |         | 84,036  |  
|                                                                                                          |                                                                                                                                                                             |             |          |         |              |   |         |        
|Total current liabilities                                                                                 |                                                                                                                                                                             |             | 113,177  |         |              |   | 144,331 |        
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Long-term debt                                                                                                                                                              |             |          | 35,244  |              |   |         | 16,355  |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Other non-current liabilities                                                                                                                                               |             |          | 307     |              |   |         | 404     |  
|                                                                                                          |                                                                                                                                                                             |             |          |         |              |   |         |        
|Total liabilities                                                                                         |                                                                                                                                                                             |             | 148,728  |         |              |   | 161,090 |        
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Stockholders equity:                                                                                     |                                                                                                                                                                             |             |          |         |              |   |         |        
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Common stock, $.001 par value; 100,000,000 shares authorized;
34,398,444 and 34,299,999 shares issued and outstanding for
June 30, 2001 and December 31, 2000, respectively |             |          | 14      |              |   |         | 14      |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Additional paid-in capital                                                                                                                                                  |             |          | 155,462 |              |   |         | 152,658 |  
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Receivables from stockholder                                                                                                                                                |             |          | (1,498  | )            |   |         | (1,498  | )
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Retained earnings                                                                                                                                                           |             |          | 40,634  |              |   |         | 59,923  |  
|                                                                                                          |                                                                                                                                                                             |             |          |         |              |   |         |        
|                                                                                                          |                                                                                                                                                                             |             | 194,612  |         |              |   | 211,097 |        
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Treasury stock, 230,088 and 276,500 shares (at cost) at June 30, 2001
and December 31, 2000, respectively |                                                                                                                                                                             |             | (2,502   | )       |              |   | (2,950  | )      
|                                                                                                          |                                                                                                                                                                             |             |          |         |              |   |         |        
|Total stockholders equity                                                                                |                                                                                                                                                                             |             | 192,110  |         |              |   | 208,147 |        
|                                                                                                          |                                                                                                                                                                             |             |          |         |              |   |         |        
|Total liabilities and stockholders equity                                                                |                                                                                                                                                                             | $           | 340,838  |         |              | $ | 369,237 |        
|                                                                                                          |                                                                                                                                                                             |             |          |         |              |   |         |        

The accompanying notes are an integral part of the consolidated financial
statements.

3



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##### Table of Contents






HYPERCOM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share amounts)

|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |   |        |         |  
|---------------------------------------- |  | ---------------------------------------- | -------------------------------------- | - | --------------------------- | ------ | ------------------------- | - | ------ | ------ | ------- | - | ------ | ------- | ------- | - | ------ | ------- | -
|                                         |  |                                          |                                        |   | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                         |  |                                          |                                        |   |                             |        |                          
|                                         |  |                                          |                                        |   | 2001                        |        | 2000                      |   | 2001   |        | 2000   
|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |        
|Net revenue                              |  | $                                        | 75,095                                 |   |                             | $      | 89,817                    |   |        | $      | 146,169 |   |        | $       | 167,150 |  
|                                        
|                                        
|                                        
|                                        
|Costs and expenses:                      |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  
|                                        
|                                        
|                                        
|                                        
|                                         |  | Costs of revenue                         |                                        |   | 49,285                      |        |                           |   | 52,484 |        |         |   | 95,233 |         |         |   | 99,130 |        
|                                        
|                                        
|                                        
|                                        
|                                         |  | Research and development                 |                                        |   | 7,017                       |        |                           |   | 10,607 |        |         |   | 15,270 |         |         |   | 21,310 |        
|                                        
|                                        
|                                        
|                                        
|                                         |  | Selling, general and administrative      |                                        |   | 20,873                      |        |                           |   | 23,890 |        |         |   | 42,342 |         |         |   | 46,707 |        
|                                        
|                                        
|                                        
|                                        
|                                         |  | Special direct financing lease provision |                                        |   |                            |        |                           |   |       |        |         |   | 7,182  |         |         |   |       |        
|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  
|                                         |  |                                          | Total costs and expenses               |   |                             | 77,175 |                           |   |        | 86,981 |         |   |        | 160,027 |         |   |        | 167,147 |  
|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  
|                                         |  |                                          | Income (loss) from operations          |   |                             | (2,080 | )                         |   |        | 2,836  |         |   |        | (13,858 | )       |   |        | 3       |  
|                                        
|                                        
|                                        
|                                        
|Interest and other income                |  |                                          | 200                                    |   |                             |        | 188                       |   |        |        | 455     |   |        |         | 874     |  
|                                        
|                                        
|                                        
|                                        
|Interest and other expense               |  |                                          | (3,650                                 | ) |                             |        | (1,282                    | ) |        |        | (6,141  | ) |        |         | (1,472  | )
|                                        
|                                        
|                                        
|                                        
|Foreign currency loss                    |  |                                          | (1,668                                 | ) |                             |        | (517                      | ) |        |        | (4,219  | ) |        |         | (899    | )
|                                        
|                                        
|                                        
|                                        
|Loss from investment in equity affiliate |  |                                          |                                       |   |                             |        | (2,215                    | ) |        |        |        |   |        |         | (3,914  | )
|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  
|                                         |  |                                          | Loss before income taxes               |   |                             | (7,198 | )                         |   |        | (990   | )       |   |        | (23,763 | )       |   |        | (5,408  | )
|                                        
|                                        
|                                        
|                                        
|Income tax (expense) benefit             |  |                                          | 1,439                                  |   |                             |        | (245                      | ) |        |        | 4,753   |   |        |         | 299     |  
|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  
|                                         |  |                                          | Net loss                               |   | $                           | (5,759 | )                         |   | $      | (1,235 | )       |   | $      | (19,010 | )       |   | $      | (5,109  | )
|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  
|Net loss per share:                      |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  
|                                        
|                                        
|                                        
|                                        
|                                         |  |                                          | Basic loss per share                   |   | $                           | (0.17  | )                         |   | $      | (0.04  | )       |   | $      | (0.55   | )       |   | $      | (0.15   | )
|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  
|                                         |  |                                          | Weighted average basic common shares   |   |                             | 34,390 |                           |   |        | 34,216 |         |   |        | 34,358  |         |   |        | 34,088  |  
|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  
|                                         |  |                                          | Diluted loss per share                 |   | $                           | (0.17  | )                         |   | $      | (0.04  | )       |   | $      | (0.55   | )       |   | $      | (0.15   | )
|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  
|                                         |  |                                          | Weighted average diluted common shares |   |                             | 34,390 |                           |   |        | 34,216 |         |   |        | 34,358  |         |   |        | 34,088  |  
|                                         |  |                                          |                                        |   |                             |        |                           |   |        |        |         |   |        |         |         |  

The accompanying notes are an integral part of the consolidated financial
statements.

4



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##### Table of Contents






HYPERCOM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)

|                                                                                                                                        |                                                                            |                                                     |        |                  |        |               |         |         |         |  
|--------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | --------------------------------------------------- | ------ | ---------------- | ------ | ------------- | ------- | ------- | ------- | -
|                                                                                                                                        |                                                                            |                                                     |        | Six Months Ended
|                                                                                                                                        |                                                                            |                                                     |        |                 
|                                                                                                                                        |                                                                            |                                                     |        | June 30, 2001    |        | June 30, 2000
|                                                                                                                                        |                                                                            |                                                     |        |                  |        |              
|Cash flows from operating activities:                                                                                                   |                                                                            |                                                     |        |                  |        |               |         |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Net loss                                                                   |                                                     | $      | (19,010          | )      |               | $       | (5,109  | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:                                               |                                                                            |                                                     |        |                  |        |               |         |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Amortization of discount on notes payable                                  |                                                     |        | 1,011            |        |               |         |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Amortization of beneficial notes payable conversion feature                |                                                     |        | 667              |        |               |         |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Depreciation/amortization                                                  |                                                     |        | 7,502            |        |               |         | 5,815   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Bad debt expense                                                           |                                                     |        | 582              |        |               |         | 1,094   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Deferred components of direct financing leases                             |                                                     |        | (316             | )      |               |         | 705     |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Provision for losses on direct financing leases                            |                                                     |        | 12,761           |        |               |         | 2,194   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Provision for excess and obsolete inventory                                |                                                     |        | 1,040            |        |               |         | 1,080   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Equity loss in affiliates                                                  |                                                     |        |                 |        |               |         | 3,914   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Foreign currency loss                                                      |                                                     |        | 4,219            |        |               |         | 899     |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Deferred income taxes                                                      |                                                     |        | (5               | )      |               |         | 853     |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Other                                                                      |                                                     |        | 130              |        |               |         | 23      |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Decrease (increase) in accounts receivable, inventories, prepaid income taxes,
prepaid expenses and other current assets & other assets |                                                                            |                                                     | 1,447  |                  |        |               | (46,467 | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Decrease in accounts payable, accrued liabilities,
deferred revenue & income taxes payable                                              |                                                                            |                                                     | (2,826 | )                |        |               | (5,112  | )      
|                                                                                                                                        |                                                                            |                                                     |        |                  |        |               |         |        
|                                                                                                                                        |                                                                            | Net cash provided by (used in) operating activities |        |                  | 7,202  |               |         |         | (40,111 | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash flows from investing activities:                                                                                                   |                                                                            |                                                     |        |                  |        |               |         |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Advances to related parties                                                |                                                     |        |                 |        |               |         | (1,185  | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Payments received on notes receivable                                      |                                                     |        | 492              |        |               |         | 535     |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Principal payments received on direct financing leases                     |                                                     |        | 6,256            |        |               |         | 4,407   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Funding of direct financing leases                                         |                                                     |        | (12,998          | )      |               |         | (22,415 | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Increase in restricted cash                                                |                                                     |        | (1,001           | )      |               |         |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Acquisition of controlling interests in subsidiaries,
net of cash acquired |                                                     |        |                 |        |               |         | (25,793 | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Acquisition of other assets                                                |                                                     |        | (544             | )      |               |         | (1,301  | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from disposal of property,
plant & equipment                      |                                                     |        | 184              |        |               |         | 1,672   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Purchase of property, plant & equipment                                    |                                                     |        | (1,177           | )      |               |         | (6,821  | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Purchase of marketable securities                                          |                                                     |        |                 |        |               |         | (708    | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from maturity of marketable securities                            |                                                     |        | 2,775            |        |               |         | 27,947  |        
|                                                                                                                                        |                                                                            |                                                     |        |                  |        |               |         |        
|                                                                                                                                        |                                                                            | Net cash used in investing activities               |        |                  | (6,013 | )             |         |         | (23,662 | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash flows from financing activities:                                                                                                   |                                                                            |                                                     |        |                  |        |               |         |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from notes payable                                                |                                                     |        | 18,400           |        |               |         |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Repayment of notes payable                                                 |                                                     |        | (426             | )      |               |         |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from long-term debt, net of restricted cash in 2001               |                                                     |        | 30,415           |        |               |         | 128,099 |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Repayment of long-term debt                                                |                                                     |        | (62,466          | )      |               |         | (90,926 | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from sale of lease receivables                                    |                                                     |        | 7,977            |        |               |         |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from issuance of common stock                                     |                                                     |        | 285              |        |               |         | 6,795   |        
|                                                                                                                                        |                                                                            |                                                     |        |                  |        |               |         |        
|                                                                                                                                        |                                                                            | Net cash provided by (used in) financing activities |        |                  | (5,815 | )             |         |         | 43,968  |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Effect of exchange rate changes on cash                                                                                                 |                                                                            |                                                     | (385   | )                |        |               | (271    | )      
|                                                                                                                                        |                                                                            |                                                     |        |                  |        |               |         |        
|Net decrease in cash                                                                                                                    |                                                                            |                                                     | (5,011 | )                |        |               | (20,076 | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash & cash equivalents, beginning of period                                                                                            |                                                                            |                                                     | 13,008 |                  |        |               | 26,093  |        
|                                                                                                                                        |                                                                            |                                                     |        |                  |        |               |         |        
|Cash & cash equivalents, end of period                                                                                                  |                                                                            | $                                                   | 7,997  |                  |        | $             | 6,017   |        
|                                                                                                                                        |                                                                            |                                                     |        |                  |        |               |         |        

The accompanying notes are an integral part of the consolidated financial
statements.

5



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##### Table of Contents






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN THOUSANDS)

NOTE 1 BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements do not include all
the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair statement of results for the periods have been
included. Operating results for the six months ended June 30, 2001, are not
necessarily indicative of the results to be expected for the year ending
December 31, 2001.

Certain prior year amounts have been reclassified to conform with the current
period presentation.

This financial information is intended to be read in conjunction with
Hypercoms audited financial statements and footnotes thereto included in
Hypercoms Annual Report on Form 10-K for the year ended December 31, 2000.

NOTE 2 RESTRICTED CASH

In connection with the securitization of direct finance leases (see Note 6),
the Companys Equipment Leasing segment (Golden Eagle) was required to
establish restricted cash collection, collateral and reserve accounts. The
accounts are principally used for the collection of monthly equipment lease
payments, remittance of funds to service the related debt, and to maintain
certain credit enhancement and liquidity levels.

NOTE 3 INVENTORIES

Inventories consist of the following:

|                 |  |          |        |              |  |   |        | 
|---------------- |  | -------- | ------ | ------------ |  | - | ------ | 
|                 |  | June 30, |        | December 31,
|                 |  | 2001     |        | 2000        
|                 |  |          |        |             
|Purchased parts  |  | $        | 27,205 |              |  | $ | 29,744 | 
|                
|                
|                
|                
|Work in progress |  |          | 7,119  |              |  |   | 7,256  | 
|                
|                
|                
|                
|Finished goods   |  |          | 23,228 |              |  |   | 33,358 | 
|                 |  |          |        |              |  |   |        | 
|                 |  | $        | 57,552 |              |  | $ | 70,358 | 
|                 |  |          |        |              |  |   |        | 

NOTE 4 SEGMENT INFORMATION

As of December 31, 2000 Hypercom had two segments: Point-of-Sale (POS) and
Network Systems, and Equipment Leasing.

Hypercoms reportable segments are strategic business units that offer
different products and services. They are managed separately because each
requires different technologies and marketing strategies.

The following table presents certain segment financial information unaudited
and in thousands for the three and six month periods ended June 30, 2001 and
2000, respectively:

6



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##### Table of Contents



For the Three Months Ended June 30, 2001:

|                        |  |                 |         |           |  |           |        |              |  |       |         |   |  |   |          |   |  |   |         |  
|----------------------- |  | --------------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------- | - |  | - | -------- | - |  | - | ------- | -
|                        |  | POS and Network |         | Equipment |  |           |        |              |  |       |         |   |  |   |          |  
|                        |  | Systems         |         | Leasing   |  | Corporate |        | Eliminations |  | Total
|                        |  |                 |         |           |  |           |        |              |  |      
|Net revenue             |  | $               | 68,114  |           |  | $         | 6,981  |              |  | $     | 0       |   |  | $ | 0        |   |  | $ | 75,095  |  
|                       
|                       
|                       
|                       
|Operating income (loss) |  | $               | 1,887   |           |  | $         | (37    | )            |  | $     | (3,930  | ) |  | $ | 0        |   |  | $ | (2,080  | )
|                       
|                       
|                       
|                       
|Segment Assets          |  | $               | 632,481 |           |  | $         | 78,563 |              |  | $     | 200,786 |   |  | $ | (570,992 | ) |  | $ | 340,838 |  

For the Three Months Ended June 30, 2000:

|                        |  |                 |         |           |  |           |        |              |  |       |         |   |  |   |          |   |  |   |         | 
|----------------------- |  | --------------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------- | - |  | - | -------- | - |  | - | ------- | 
|                        |  | POS and Network |         | Equipment |  |           |        |              |  |       |         |   |  |   |          |  
|                        |  | Systems         |         | Leasing   |  | Corporate |        | Eliminations |  | Total
|                        |  |                 |         |           |  |           |        |              |  |      
|Net revenue             |  | $               | 83,979  |           |  | $         | 5,838  |              |  | $     | 0       |   |  | $ | 0        |   |  | $ | 89,817  | 
|                       
|                       
|                       
|                       
|Operating income (loss) |  | $               | 10,019  |           |  | $         | (987   | )            |  | $     | (6,196  | ) |  | $ | 0        |   |  | $ | 2,836   | 
|                       
|                       
|                       
|                       
|Segment Assets          |  | $               | 537,267 |           |  | $         | 79,712 |              |  | $     | 146,787 |   |  | $ | (390,629 | ) |  | $ | 373,137 | 

For the Six Months Ended June 30, 2001:

|                        |  |                 |         |           |  |           |        |              |  |       |         |   |  |   |          |   |  |   |         |  
|----------------------- |  | --------------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------- | - |  | - | -------- | - |  | - | ------- | -
|                        |  | POS and Network |         | Equipment |  |           |        |              |  |       |         |   |  |   |          |  
|                        |  | Systems         |         | Leasing   |  | Corporate |        | Eliminations |  | Total
|                        |  |                 |         |           |  |           |        |              |  |      
|Net revenue             |  | $               | 131,636 |           |  | $         | 14,533 |              |  | $     | 0       |   |  | $ | 0        |   |  | $ | 146,169 |  
|                       
|                       
|                       
|                       
|Operating income (loss) |  | $               | 2,699   |           |  | $         | (7,578 | )            |  | $     | (8,979  | ) |  | $ | 0        |   |  | $ | (13,858 | )
|                       
|                       
|                       
|                       
|Segment Assets          |  | $               | 632,481 |           |  | $         | 78,563 |              |  | $     | 200,786 |   |  | $ | (570,992 | ) |  | $ | 340,838 |  

For the Six Months Ended June 30, 2000:

|                        |  |                 |         |           |  |           |        |              |  |       |         |   |  |   |          |   |  |   |         | 
|----------------------- |  | --------------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------- | - |  | - | -------- | - |  | - | ------- | 
|                        |  | POS and Network |         | Equipment |  |           |        |              |  |       |         |   |  |   |          |  
|                        |  | Systems         |         | Leasing   |  | Corporate |        | Eliminations |  | Total
|                        |  |                 |         |           |  |           |        |              |  |      
|Net revenue             |  | $               | 156,092 |           |  | $         | 11,058 |              |  | $     | 0       |   |  | $ | 0        |   |  | $ | 167,150 | 
|                       
|                       
|                       
|                       
|Operating income (loss) |  | $               | 13,277  |           |  | $         | (978   | )            |  | $     | (12,296 | ) |  | $ | 0        |   |  | $ | 3       | 
|                       
|                       
|                       
|                       
|Segment Assets          |  | $               | 537,267 |           |  | $         | 79,712 |              |  | $     | 146,787 |   |  | $ | (390,629 | ) |  | $ | 373,137 | 

NOTE 5 INCOME TAXES

The income tax (expense) benefit for federal, state and foreign taxes was $4.8
million and $1.4 million for the six and three months ended June 30, 2001,
respectively, and $0.3 million and $(0.2) million for the six and three months
ended June 30, 2000, respectively. The Companys effective rate of income tax
benefit was 20% for the six and three months ended June 30, 2001, and 12.31%
for the six and three months ended June 30, 2000, respectively.

The income tax benefit for the three and six months ended June 30, 2001 and
2000, differed from the U.S. statutory rate principally due to foreign taxes,
attributable to foreign operations, that are less than the U.S. statutory rate,
research and experimentation credits, the non-recognition of tax benefit on
foreign currency translation losses, and valuation reserves.

NOTE 6 NET INVESTMENT IN DIRECT FINANCING LEASES

During the six months ended June 30, 2001, Golden Eagle recorded an incremental
charge to strengthen credit reserves for certain segments of its lease
receivables in the amount of $7.2 million in addition to its normal provision.
This charge represents managements estimate of potential loan losses that
exceed its historical rate of loan losses.

7



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##### Table of Contents



Additionally, during the six months ended June 30, 2001, Golden Eagle sold a
portion of its lease receivables. Proceeds from the sales amounted to $8.0
million, of which $6.9 million was recorded in the first quarter of 2001.
There was a corresponding reduction in net investment in financing leases of
$8.1 million as a result of these sales, of which $7.0 million was recorded in
the first quarter of 2001.

During the quarter ended June 30, 2001, Golden Eagle completed a securitization
of $45.6 million in principal balances of leases. The securitization was
accounted for as a financing transaction. In connection with the
securitization, Golden Eagle, through a special purpose subsidiary, Golden
Eagle Funding Corp., issued $32 million of contract-backed term notes (the
Notes). The
Notes are collateralized by equipment leases acquired from Golden Eagle,
security interest in the leased equipment, cash collateral and reserve
accounts, as well as other contractual rights and residual proceeds. Proceeds
from the Notes were used to payoff existing Golden Eagle debt facilities,
including $4.1 million, which was paid against Hypercoms revolving credit
facility. The Notes bear interest at an annual rate of 8.58%. Principal and
interest are payable on a monthly basis until maturity on November 16, 2006.
The principal balance outstanding on the Notes at June 30, 2001 was $31
million.

NOTE 7  NOTES PAYABLE

On June 4th, 2001, the Company entered into loan agreements with individual
investors for an aggregate sum of $3.4 million bearing interest at 7.5% per
annum. Proceeds from the loans were limited for the purpose of buying
inventory components and other inventory raw materials. During the term of the
loans, the loans may be converted, in whole or in part, into shares of common
stock of the Company, at a conversion price of $3.16 per share. A director and
stockholder of the Company has pledged his notes receivable due from the
Company in the aggregate amount of $3.1 million as security for these loans.
All principal and accrued interest are due September 5, 2001. The principal
balance outstanding at June 30, 2001 was $3.4 million and is included in Notes
Payable on the balance sheet.

Concurrent with the loan agreements, the Company entered into Stock Warrant
agreements (Series B) whereby the individual investors can buy an aggregate of
460,000 shares of the Companys common stock at an exercise price of $3.16 per
share. The stock warrants have a term of two years. The estimated fair value
of the stock warrants at the date issued was $1.44 per share using a
Black-Scholes option pricing model. The total fair value of these stock
warrants of $0.7 million, was recorded as additional paid in capital and loan
discount. Amortization of the loan discount, in the amount of $0.3 million,
has been charged to interest expense during the quarter ended June 30, 2001,
based on the estimated life of the loan.

On June 6th, 2001, the Company entered into a $15 million loan agreement with a
bridge investor, who is a shareholder of one of the Companys largest customers
(the Customer). The loan has a one-year term and bears interest at 7.5% per
annum. Proceeds from the loan were used to pay trade creditors and the
Companys principal lending group. The Company has pledged the stock and
assets of Hypercom Horizon, a subsidiary of the Company, as well as the
Customers payable to the Company (totaling $1.9 million at June 30, 2001) as
security for the loan. The principal balance outstanding at June 30, 2001, was
$14.6 million and is reported in Notes Payable on the balance sheet.

Concurrent with the loan agreement, the Company entered into a Stock Warrant
agreement (Series A) with the bridge investor. In accordance with the Stock
Warrant agreement, the bridge investor has a stock warrant to purchase
1,000,000 shares of the Companys common stock, at an exercise price of $3.19
expiring June 6, 2003. The estimated fair value of the stock warrant to
purchase 1,000,000 shares of the Companys common stock, at the date issued,
was $1.36 per share using a Black-Scholes option pricing model. The total fair
value of the stock warrant, of $1.4 million was recorded as additional paid in
capital and loan discount. Amortization of the loan discount, in the amount of
$0.7 million, has been charged to interest expense during the quarter ended
June 30, 2001, based on the estimated life of the loan.

NOTE 8  RELATED PARTY TRANSACTIONS

During the six months ended June 30, 2001, the Company entered into loan
agreements as amended and restated, with a director and stockholder of the
Company in the aggregate amount of $1.6 million. The loans bear
interest at 12% annually, and are due January 31, 2003.

8



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##### Table of Contents



NOTE 9  SUBSEQUENT EVENTS

On July 30, 2001 the individual investors elected to convert their $3.4 million
in loans, plus accrued interest, into 1,088,342 shares of the companys common
stock, at $3.16 per share.

In addition, on July 30, 2001 additional individual investors, as well as
certain individual investors who converted their loans to stock, purchased
1,745,201 shares of the Companys common stock for $7.5 million, at $4.2975 per
share.

On July 31, 2001 the bridge investor purchased 2,475,248 shares of the
Companys common stock for $7.5 million through a reduction in the Companys
note payable balance by the same amount.

On August 2, the Company closed and received funding from a $45 million credit
facility with a new lending group. The credit facility includes a revolving
line of credit of $25 million and two separate term loans for $5 million and
$15 million respectively. Borrowings under the revolving line of credit are
based primarily on inventory and accounts receivable levels. Proceeds from the
financing package were used to payoff the existing primary lending group, as
well as the remaining unpaid principal owed to the bridge investor. The
aggregate principal balances outstanding under the existing primary lending
group facility and the bridge investor note payable at June 30, 2001 were
$36.9 million. The revolving line of credit has a term of three years. The $5
million term loan matures in one year and the $15 million term loan matures in
three years.

In connection with obtaining the new credit facility, the Company issued Series
C and D stock purchase warrants, both of which expire in 5 years. The Series C
warrant entitle the holder to purchase an initial 375,000 shares of the
Companys common stock at an exercise price of $4.00. Additionally, the Series
C warrant holder is entitled to purchase up to an additional 1,750,000 shares
of the Companys common stock, at an exercise price of $4.00, if amounts are
outstanding under the term loans at six month intervals. The Series D warrant
holder is entitled to purchase 312,477 shares of the Companys common stock at
an exercise price of $5.33, with such warrants being issued as part of a fee
for acting as placement agent in the above mentioned new credit facility. In
addition to the warrants, a cash fee of $2.5 million was also paid.

NOTE 10 NEW PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards (SFAS) No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the statements. Other intangible
assets will continue to be amortized over their useful lives. The Company is
currently reviewing the impact of SFAS Nos. 141 and 142 and will be performing
a fair-value analysis at a later date in connection with the adoption of SFAS
No. 142 on January 1, 2002.

9



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##### Table of Contents






INDEPENDENT ACCOUNTANTS REVIEW REPORT

To the Board of Directors and Stockholders of Hypercom Corporation

We have reviewed the accompanying consolidated balance sheet of Hypercom
Corporation as of June 30, 2001, and the related consolidated statements of
operations for the three and six months ended June 30, 2001, and the statements
of cash flows for the six months ended June 30, 2001. These financial
statements are the responsibility of the Companys management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with accounting principles generally accepted in
the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Hypercom
Corporation as of December 31, 2000, and the related consolidated statements of
operations, stockholders equity, and cash flows for the year ended December
31, 2000, not presented herein, and in our report dated February 15, 2001,
except for Note 20 as to which the date is March 26, 2001, we expressed an
unqualified opinion on those consolidated financial statements.



|Phoenix, Arizona
July 25, 2001 | /s/ Ernst & Young LLP
|------------------------------ | ---------------------



10



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##### Table of Contents






ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of The Private Securities Litigation Reform Act of 1995. Words such
as believe, expect, intend, anticipate, estimate, project, and
similar expressions identify forward-looking statements, which speak only as of
the date the statement was made. These forward-looking statements may include,
but not be limited to, projections of revenue or net income and issues that may
affect revenue or net income, projections of capital expenditures, plans for
future operations, products or services, financing needs of the Company, and
economic conditions, as well as assumptions relating to the foregoing.

Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Statements in this Quarterly Report,
including the Notes To The Consolidated Financial Statements and Managements
Discussion and Analysis of Financial Condition and Results of Operations
describe factors, among others, that could contribute to or cause such
differences. Additional risk factors that could cause actual results to differ
materially from those expressed in such forward-looking statements, and that
could affect the Companys results of operations and financial position
generally, are set forth in Exhibit 99.1. Which is attached hereto and
incorporated by reference into this Quarterly Report on Form 10-Q. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.

RESULTS OF OPERATIONS

NET REVENUE

Net revenue for the three-month period ended June 30, 2001, decreased $14.7
million or 16.4% to $75.1 million from $89.8 million in the three months ended
June 30, 2000. This decrease was principally due to delays in the receipt of
certain key components caused by constraints on cash and the timing of several
large Latin America orders in the three-month period ended June 30, 2000, which
did not recur in 2001.

Net revenue for the six-month period ended June 30, 2001, decreased $21 million
or 12.6% to $146.2 million from $167.2 million in the six-month period ended
June 30, 2000. This decrease was principally due to delays in the receipt of
certain key components as noted in the preceding paragraph, which occurred near the end of the
second quarter in 2001, and the Latin America orders as noted above.

COST OF REVENUE

Hypercoms cost of revenue includes the cost of raw materials, manufacturing
labor, overhead and subcontracted manufacturing costs, as well as interest
expense with respect to direct financing leases. The costs of revenue for the
three-month period ended June 30, 2001 decreased $3.2 million or 6.0% to $49.3
million from $52.5 million in the three months ended June 30, 2000. For the
six-month period ended June 2001, costs of revenue decreased $3.9 million or
3.9% to $95.2 million from $99.1 million in the six-month period ended June 30,
2000.

As a percentage of revenue, gross margin decreased from 41.6% in the
three-months ended June 30, 2000 to 34.4% for the three months ended June 30,
2001. This decline was a result of certain higher component costs, and a change
in product mix whereby a larger portion of revenues were attributed to the
Companys services business units during the second quarter of 2001.

As a percentage of revenue, gross margin decreased from 40.7% in the six-months
ended June 30, 2000 to 34.8% for the six-months ended June 30, 2001. This
decline results from the factors affecting the second quarter noted above as
well as competitive pricing pressures on legacy products experienced in the
first quarter of 2001.

RESEARCH AND DEVELOPMENT

Research and development (R&D) expenses consist mainly of software and hardware
engineering costs and the cost of development personnel. Research and
development expenses for the quarter ended June 30, 2001 decreased $3.6 million
or 33.9% to $7.0 million from $10.6 million in the quarter ended June 30, 2000,
and for the six-months ended June 30, 2001 decreased $6.0 million or 28.3% to
$15.3 million from $21.3 million in the six-months ended June 30, 2000. These
decreases are attributable to decreased R&D activities related to the ICE
product family and to the ePic initiative as substantially all development for
such

11



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##### Table of Contents



efforts are complete. The Company is principally focusing on product cost
reduction efforts.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

Sales and marketing expenses, administrative personnel costs, and facilities
operations make up the selling, general and administrative expenses. These
expenses totaled $20.9 million for the quarter ended June 30, 2001, compared to
$23.9 for the comparative quarter in the prior year. This $3.0 million or 12.6%
decrease is attributable to worldwide cost containment measures and the
decreased revenue relative to the same quarter in the prior year, which results
in lower sales commissions.

Selling, general and administrative expenses for the six-month period ended
June 30, 2001 decreased $4.4 million or 9.3% to $42.3 million from $46.7
million in the six-month period ended June 30, 2000. This decrease was also
the result of cost containment efforts and lower sales
commission expenses.

SPECIAL DIRECT FINANCING LEASE PROVISION

During the quarter ended March 31, 2001, the Companys Equipment Leasing
segment recorded an incremental charge to strengthen credit reserves for
certain segments of its lease receivables in the amount of $7.2 million in
addition to its normal provision. This charge represents managements estimate
of potential loan losses that exceed its historical rate of loan losses.

LOSS FROM OPERATIONS

Loss from operations for the quarter ended June 30, 2001 increased $4.9 million
to $2.1 million compared to income of $2.8 million for the same quarter in the
prior year. The loss resulted primarily from the decreased revenue and related
gross margin percentage decline when compared to the same quarter of the prior
year.

For the six-months ended June 30, 2001 the loss from operations of $13.9
million compares to break-even results from operations for the same period in
the prior year. The decrease over the same six-month period in the prior year
includes the $7.2 million reserve adjustment discussed above, as well as the
effects of the decreased revenue and related gross margin decline.

NET INTEREST, FOREIGN CURRENCY LOSSES AND OTHER ITEMS

Interest and other income of $0.2 and $0.5 million for the three and six-month
periods ended June 30, 2001, respectively consisted primarily of returns on
short and long-term investments. The Company incurred interest and other
expense of $3.7 million during the quarter ended June 30, 2001, which consisted
primarily of interest expense of $3.1 million on borrowings for notes payable,
long-term debt, amortization of loan discounts from warrants issued, and the
amortization of a beneficial conversion feature on convertible notes payable.
Other expenses in the amount of $0.5 million consisted primarily of charges
associated with the requirements under the debt forbearance agreements and
other related costs associated with being in default with its lenders. Interest
and other expense for the six-month period ended June 30, 2001 of $6.1 million
consisted of the same items noted above for the whole six month period, whereas
the six-month period ended June 30, 2000 consisted principally of non-default
interest on long-term debt. Foreign currency losses of $1.7 million resulted
principally from the unfavorable translation of its net foreign investments in
Brazil and the United Kingdom. Further, the Company was unable to continue its
hedging strategies during the quarter ended June 30, 2001, as a result of being
in default with its lenders.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations primarily through cash
generated from operations and from borrowings under a line of credit. The
Company has also used securitization conduits to finance lease receivables
generated by its Golden Eagle Leasing subsidiary, as well as
borrowings under notes payable to fund working capital requirements
and reduce its bank debt.

Due to the Companys continued focus on expense reduction as well as its
emphasis on lowering accounts receivable and inventory levels, the Company
experienced positive cash flow from operations in the six-months ended June 30,
2001 of $7.2 million. The Company used $6.0 million in investing activities.
Long-term debt (most of which was categorized as current at quarter end)
decreased $28.4 million to $72.0 million at June 30, 2001, from $100.4 million
at December 31, 2000. Working capital and cash were $93.2 and
$8.0 million at
June 30, 2001, compared to $75.2 and $13.0 million at December 31, 2000,
respectively.

12



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##### Table of Contents



Capital expenditures totaled $1.2 million for the six months ended June 30,
2001, compared to $6.8 million for the six months ended June 30, 2000.
Depreciation expense was $4.7 million and $3.5 million for the six months ended
June 30, 2001 and 2000, respectively.

Credit Agreements and Liquidity Concerns

Due to recent losses, the Company was not in compliance with certain debt
covenants under various loan agreements, including the ratio of funded debt to
EBITDA and a minimum tangible net worth requirement at June 30, 2001. During
the six-months ended June 30, 2001 and in July and August of 2001, the Company
completed a series of financing transactions.

On May 24, 2001, Golden Eagle securitized approximately $45 million of its equipment leases (based on total
discounted contract balances at the closing date). The securitization was
accomplished through the sale by Golden Eagle of these receivables to a newly formed
bankruptcy remote company, Golden Eagle Funding Corp.
(GEF). GEF issued notes in the principal amount of
approximately $32 million which are secured by the lease receivables. The interest rate on the notes is
8.58% per annum and the notes mature on November 16, 2006.

On June 6, 2001, the Company entered into certain interim financing
arrangements pending the completion of the refinancing of the Companys credit
facilities. The Company borrowed $15 million from Michelle Investments LLC, a
shareholder of one of the Companys significant customers, pursuant to a Loan and
Security Agreement. The loan bore interest at 7.5% per annum and had a
maturity date of June 6, 2002. In connection with the Michelle Investments
loan, the Company granted to Michelle Investments a Series A Warrant to
purchase up to 1,000,000 shares of the Companys common stock, subject to
certain adjustments, at an exercise price of $3.19 per share. In August 2001,
the Company and Michelle Investments entered into a Stock Purchase Agreement
under which Michelle Investments purchased 2,475,248 shares of the Companys
common stock at a price of $3.03 per share. Michelle Investments paid for the
stock through a $7.5 million reduction of the outstanding balance under this
loan. Concurrently with the issuance of these shares to Michelle Investments,
the Company repaid the remaining balance of the loan out of funds available
under the Companys new credit facility.

Also on June 6, 2001, the Company borrowed an aggregate of $3.4 million from a
group of eight investors pursuant to a Loan Agreement. The loans bore interest
at 7.5% per annum and had a maturity date of September 5, 2001. The promissory
notes evidencing the loans are convertible into shares of the Companys common
stock at a conversion rate of $3.16 per share. In connection with this
borrowing, the Company issued to the lenders Series B Warrants to purchase up
to 460,000 shares of the Companys common stock in the aggregate at an exercise
price of $3.16 per share. In July 2001, all of the notes, plus accrued interest, were converted into
an aggregate of 1,088,342 shares of common stock. In addition, the Company
entered into a Stock Purchase Agreement with several investors, including four
of the Series B Warrant holders, under which they purchased an aggregate of
1,745,201 shares of common stock at a price of $4.2975 per share.

As a condition to obtaining forebearance from the Companys principal lenders
under pre-existing loan agreements, and to secure the $3.4 million in loans
above, George Wallner, Chairman and Chief Strategist and a principal
stockholder, agreed to loan the Company $3.1 million and to subordinate these
loans to the Companys other indebtedness, including the Companys new lending
facility.

In August 2001, the Company replaced its principal
credit facility with a new $45 million senior secured credit
facility comprised of a $25
million revolving credit facility and two separate term loans for $5 million
and $15 million. The maximum
borrowing capacity under this facility is based on inventory and receivables levels and other
factors. The borrowers under the new credit facility are the Company
and seven of its domestic subsidiaries, and the guarantors consist of
Golden Eagle and two of the Company's foreign subsidiaries.

The revolving credit facility, which has a term of
three years, bears interest at the greater of 8% per annum or the
prime rate plus 2%, and includes a $6 million letter of credit
sub-facility. At closing, $12 million was available under the
revolving credit facility, after repayment of existing debt and
payment of closing costs. The $5 million term loan bears interest at
the greater of 10% per annum or the prime rate plus 3%. The $5
million term loan is repayable in six principal installments of
$833,333, with the first installment due on the seventh month
following closing, and matures one year after closing. The $15
million term loan bears interest at the greater of 14% per annum or
the prime rate plus 7%. The $15 million term loan is repayable in
$250,000 principal installments, with the first installment due on
the thirteenth month following closing, and matures three years after
closing. At August 8, 2001, the prime rate used to compute interest
rates under the new credit facility was 6.75%.

Under the covenant provisions of the new credit
facility, Hypercom has agreed to, among other things, maintain certain
specified financial ratios and consolidated net worth, not make
certain distributions with respect to the Company's capital stock
(including cash dividends), not make certain investments and not
allow the Company's subsidiaries to incur certain types and amounts
of debt.

Due to the high cost of funds and the maturity date
of a portion of the debt under the new credit facility, the Company
anticipates refinancing all or a portion of this indebtedness within
the next 12 months. The Company may seek to refinance the new senior
credit facility by obtaining additional capital from current or third
party sources. The Company's ability to obtain additional capital is
dependent upon future operating performance, general economic and
competitive conditions and financial, business and other factors,
many of which the Company cannot control. The Company's inability to
obtain additional capital could place the Company in default under
its principal credit agreement or otherwise have an adverse effect on
the Company's business and stock price.

13



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##### Table of Contents



As partial consideration for the senior secured credit facility, the Company
issued to one of its lenders, Ableco Finance LLC, a Series C Warrant to purchase up to 375,000
shares of common stock at an exercise price of $4.00 per share. The Series C
Warrant is exercisable over a period of five years. The Series C Warrant may
be exercised, at the same exercise price, for either an additional 350,000
shares at every six-month anniversary of the issue date of the term loans while
there remain amounts outstanding under the term loans. The Company also paid
to Roth Capital Partners LLC, which assisted in obtaining the new credit
facility, a fee of $2.5 million and issued to it a Series D Warrant to purchase
up to 312,477 shares of the Companys common stock at an exercise price of
$5.33 per share. The Series D Warrant is exercisable over a period of five
years. This fee and the value of the Series C and D Warrants will be amortized
as part of the loan costs, and effectively increase the interest rate.

The Company continues to accelerate cash generation through aggressively
pursuing collection of trade receivables, reducing inventories and reducing
costs.

BACKLOG

As of June 30, 2001, Hypercom had backlog of $157.1 million, an increase of
34.3%, compared to the same date in 2000.

The Company includes in its backlog all revenue specified in signed contracts
and purchaser orders to the extent that the Company contemplates recognition of
the related revenue within one year. There can be no assurance that the
contracts included in backlog will actually generate the specified revenues or
that the actual revenues will be generated within the one-year period.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Hypercom is exposed to financial market risks, including changes in interest
rates and foreign currency exchange rates. Nevertheless, the fair value of
Hypercoms investment portfolio or related income would not be significantly
impacted by either a 100 basis point increase or decrease in interest rates,
due primarily to the short-term nature of the major portion of Hypercoms
investment portfolio.

A substantial portion of Hypercoms revenue and capital spending is transacted
in U.S. dollars. However, Hypercom does at times enter into these transactions
in other currencies, such as the Hong Kong dollar, Australian dollar, Brazilian
Real and other Asian and European currencies. Hypercom has, from time to time,
established revenue and balance sheet hedging programs to protect against
reductions in value and cash flow volatility caused by changes in foreign
exchange rates. Such programs are intended to reduce market risks, but do not
always eliminate the impact of foreign currency exchange volatility. During
the quarter ended June 30, 2001, the Company was unable to continue its hedging
strategies as a result of being in default with its lenders. The
Company incurred translation losses of $1.7 million during the
quarter ended June 30, 2001, principally from the unfavorable
translation of its net foreign investments in Brazil and the United
Kingdom.

Hypercom does not purchase or hold any derivative financial instruments for the
purpose of speculation or arbitrage. See information/discussion appearing in
subcaption Risks Associated with International Operations and Foreign Currency
Fluctuations of CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND
RISK FACTORS set forth in Exhibit 99.1, attached hereto.

14



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##### Table of Contents






PART II OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

See Item 3 of Part I of Hypercoms Form 10-K for the year ended December 31,
2000, for disclosures regarding pending matters.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(c) Pursuant to Item 701(a)-(e)
of Regulation S-K, the following information is provided as to
all equity securities of Hypercom Corporation issued by the Company
during the period covered by this report that were not registered
under the Securities Act of 1933, as amended, and have not been
previously reported in a quarterly report on Form 10-Q, or on an
annual report on Form 10-K.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     On June 6, 2001, the Company issued a
Series A Warrant to Michelle Investments LLC ("Michelle") to
purchase up to 1,000,000 shares of the Company's common stock,
subject to certain adjustments at $3.19 per share, in connection with
a $15 million loan that Michelle made to the Company. The
Series A Warrant has a term of two years. In August 2001,
the Company and Michelle Investments entered into a Stock Purchase
Agreement pursuant to which it purchased 2,475,248 shares of the
Company's common stock, at a price of $3.03 per share, through a
reduction of the outstanding balance of the loan.                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 2.     On June 6, 2001, the Company received $3.4 million
in loans from a group of local investors pursuant to a Loan
Agreement. The loans bore interest at 7.5% per annum and had a
maturity date of September 5, 2001. The promissory notes evidencing
the loans are convertible into shares of Company's common stock at a price
of $3.16 per share. The proceeds from the $3.4 million in loans, after
expenses of the transactions, were applied primarily to the payment of
trade creditors. In July, 2001, all of the notes were converted into an aggregate of
1,088,342 shares of the Company's common stock. In connection with the
loans, the Company issued Series B Warrants to the local investors
to purchase up to 460,000 shares of the Company's common stock at an
exercise price of $3.16 per share. The Series B Warrants have a term
of two years.

See Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
for additional information on these transactions.

The foregoing transactions were effected pursuant to Section 4(2) of the Securities Act
of 1933, governing non-public transactions. Michelle Investments and all of the investors are accredited investors
within the meaning of Rule 501(a) under the Securities Act.




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

On May 21, 2001, the Company held their Annual Meeting of Stockholders, at
which Jock Patton, William Keiper and Christopher S. Alexander were re-elected
as Class II Directors to serve for a two-year term which expires at the Annual
Meeting of Stockholders in 2003. George Wallner, Jane Evans and Al Irato
continue as Class I Directors and will be up for election at the Annual Meeting
of Stockholders in 2002. Voting results for these nominees elected at the 2001
Annual Meeting are summarized as follows:

|                         |  |           |            |                |  |  |           | 
|------------------------ |  | --------- | ---------- | -------------- |  |  | --------- | 
|                         |  | Votes For |            | Votes Withheld
|                         |  |           |            |               
|Jock Patton              |  |           | 30,893,856 |                |  |  | 1,461,959 | 
|                        
|                        
|                        
|                        
|William Keiper           |  |           | 30,868,856 |                |  |  | 1,486,959 | 
|                        
|                        
|                        
|                        
|Christopher S. Alexander |  |           | 30,744,864 |                |  |  | 1,580,951 | 

Additionally, the Stockholders approved an amendment to the Hypercom
Corporation Long-Term Incentive Plan which increased the number of shares of
common stock authorized for issuance thereunder from 5,000,000 to 6,000,000
shares. Voting results are as follows:

|                 |  |                          |            | 
|---------------- |  | ------------------------ | ---------- | 
|                 |  | Approval to Amendment to
|                 |  | Long-Term Incentive Plan
|                 |  |                         
|Shares For       |  |                          | 28,933,431 | 
|                
|                
|                
|                
|Shares Against   |  |                          | 2,936,163  | 
|                
|                
|                
|                
|Shares Abstained |  |                          | 486,221    | 




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

|               |  |                                                                                                                                                                              
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                                                                       
|               |  |                                                                                                                                                                              
|3.1            |  | Amended and Restated Certificate of Incorporation of the Company.
Incorporated by reference to the Companys Registration Statement on Form
S-1 (Registration No. 333-35641).
|              
|              
|              
|              
|3.2            |  | Amended and Restated Bylaws of the Company. Incorporated by reference to
the Companys Registration Statement on Form S-1 (Registration No.
333-35641).                      
|              
|              
|              
|              
|4.0            |  | Amended and Restated Certificate of Incorporation of the Company.
Incorporated by reference to the Companys Registration Statement on Form
S-1 (Registration No. 333-35641).

15



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##### Table of Contents



|               |  |                                                                                                                                      
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                               
|               |  |                                                                                                                                      
|              
|              
|              
|              
|10.1*          |  | Michelle Investments, LLC Loan Agreement dated June 6, 2001.                                                                         
|              
|              
|              
|              
|10.2*          |  | Michelle Investments, LLC Note dated June 6, 2001.                                                                                   
|              
|              
|              
|              
|10.3*          |  | Michelle Investments, LLC Warrant dated June 6, 2001.                                                                                
|              
|              
|              
|              
|10.4*          |  | Local Investors Loan Agreement dated June 4, 2001.                                                                                  
|              
|              
|              
|              
|10.5*          |  | Local Investors Security Agreement dated June 4, 2001.                                                                              
|              
|              
|              
|              
|10.6*          |  | Form of Local Investors Note.                                                                                                       
|              
|              
|              
|              
|10.7*          |  | Form of Local Investors Warrant.                                                                                                    
|              
|              
|              
|              
|10.8*          |  | Amended and Restated Promissory Note dated December 27, 2000.                                                                        
|              
|              
|              
|              
|10.9*          |  | Amended and Restated Promissory Note dated March 31, 2001.                                                                           
|              
|              
|              
|              
|10.10*         |  | Promissory Note dated June 5, 2001.                                                                                                  
|              
|              
|              
|              
|10.11**        |  | Loan and Security Agreement dated July 31, 2001 by and among Hypercom
Corporation, its subsidiaries and Foothill Capital Corporation.
|              
|              
|              
|              
|10.12**        |  | Warrant to Abelco Holding LLC, dated August 2, 2001.                                                                                 
|              
|              
|              
|              
|10.13**        |  | Warrant to Roth Capital Partners LLC, dated July 31, 2001.                                                                           
|              
|              
|              
|              
|10.14**        |  | Stock Purchase Agreement dated July 31, 2001 by and between Michelle
Investments LLC and Hypercom Corporation.                       
|              
|              
|              
|              
|10.15**        |  | Stock Purchase Agreement dated July 30, 2001 by and between Local
Investors and Hypercom Corporation.                                
|              
|              
|              
|              
|11.1           |  | Statement re Computation of Per Share Earnings.                                                                                      
|              
|              
|              
|              
|15.1           |  | Letter re Unaudited Interim Financial Information.                                                                                   
|              
|              
|              
|              
|99.1           |  | Cautionary Statement Regarding Forward-Looking Statements and Risk Factors.                                                          



---

|*  |  | Incorporated by reference to the Companys current report on Form 8-K
dated June 5, 2001. 
|-- |  | ------------------------------------------------------------------------------------------
|  
|  
|  
|  
|** |  | Incorporated by reference to the Companys current report on Form 8-K
dated July 30, 2001.

(b) The Company filed Form 8-Ks as follows:



| |  |  | February 9, 2001, re: First Amendment to Forbearance and Modification Agreement.                                                                                                                                  
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | April 19, 2001, re: Second Amendment to Forbearance and Modification Agreement.                                                                                                                                   
|
| |  |  | June 5, 2001, re: Third Amendment to Forbearance and Modification
Agreement, Michelle Investments, LLC loan and warrants, Local Investors
loans and warrants and a loan from the Companys Chairman of the Board.
|
| |  |  | June 5, 2001, re: Conversion feature of Local Investors loans (filed
on Form 8-K/A).                                                                                                                             
|
| |  |  | June 25, 2001, re: Commitment letter for an asset-based lending
arrangement to replace existing principal lending facility.                                                                                       
|
| |  |  | July 30, 2001, re: New debt facility and privately-placed common
equity.                                                                                                                                          

16



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                      |  |                                                                                                                                             
|--------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|HYPERCOM CORPORATION  |  |                                                                                                                                             
|                     
|Date: August 13, 2001 |  | By: /s/ Jonathon E. Killmer                                                                                                                 
|                      |  | Jonathon E. Killmer                                                                                                                         
|                     
|                      |  | Executive Vice President, Chief
Financial Officer And Chief
Administrative Officer (duly
authorized officer and Principal
Financial Officer)

17



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##### Table of Contents






EXHIBIT INDEX

|               |  |                                                                                                                                                                              
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                                                                       
|               |  |                                                                                                                                                                              
|3.1            |  | Amended and Restated Certificate of Incorporation of the Company.
Incorporated by reference to the Companys Registration Statement on Form
S-1 (Registration No. 333-35641).
|              
|              
|              
|              
|3.2            |  | Amended and Restated Bylaws of the Company. Incorporated by reference to
the Companys Registration Statement on Form S-1 (Registration No.
333-35641).                      
|              
|              
|              
|              
|4.0            |  | Amended and Restated Certificate of Incorporation of the Company.
Incorporated by reference to the Companys Registration Statement on Form
S-1 (Registration No. 333-35641).



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##### Table of Contents



|               |  |                                                                                                                                      
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                               
|               |  |                                                                                                                                      
|              
|              
|              
|              
|10.1*          |  | Michelle Investments, LLC Loan Agreement dated June 6, 2001.                                                                         
|              
|              
|              
|              
|10.2*          |  | Michelle Investments, LLC Note dated June 6, 2001.                                                                                   
|              
|              
|              
|              
|10.3*          |  | Michelle Investments, LLC Warrant dated June 6, 2001.                                                                                
|              
|              
|              
|              
|10.4*          |  | Local Investors Loan Agreement dated June 4, 2001.                                                                                  
|              
|              
|              
|              
|10.5*          |  | Local Investors Security Agreement dated June 4, 2001.                                                                              
|              
|              
|              
|              
|10.6*          |  | Form of Local Investors Note.                                                                                                       
|              
|              
|              
|              
|10.7*          |  | Form of Local Investors Warrant.                                                                                                    
|              
|              
|              
|              
|10.8*          |  | Amended and Restated Promissory Note dated December 27, 2000.                                                                        
|              
|              
|              
|              
|10.9*          |  | Amended and Restated Promissory Note dated March 31, 2001.                                                                           
|              
|              
|              
|              
|10.10*         |  | Promissory Note dated June 5, 2001.                                                                                                  
|              
|              
|              
|              
|10.11**        |  | Loan and Security Agreement dated July 31, 2001 by and among Hypercom
Corporation, its subsidiaries and Foothill Capital Corporation.
|              
|              
|              
|              
|10.12**        |  | Warrant to Abelco Holding LLC, dated August 2, 2001.                                                                                 
|              
|              
|              
|              
|10.13**        |  | Warrant to Roth Capital Parnters LLC, dated July 31, 2001.                                                                           
|              
|              
|              
|              
|10.14**        |  | Stock Purchase Agreement dated July 31, 2001 by and between Michelle
Investments LLC and Hypercom Corporation.                       
|              
|              
|              
|              
|10.15**        |  | Stock Purchase Agreement dated July 30, 2001 by and between Local
Investors and Hypercom Corporation.                                
|              
|              
|              
|              
|11.1           |  | Statement re Computation of Per Share Earnings.                                                                                      
|              
|              
|              
|              
|15.1           |  | Letter re Unaudited Interim Financial Information.                                                                                   
|              
|              
|              
|              
|99.1           |  | Cautionary Statement Regarding Forward-Looking Statements and Risk Factors.                                                          



---

|*  |  | Incorporated by reference to the Companys current report on Form 8-K
dated June 5, 2001. 
|-- |  | ------------------------------------------------------------------------------------------
|  
|  
|  
|  
|** |  | Incorporated by reference to the Companys current report on Form 8-K
dated July 30, 2001.