##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 OR
 o
    
    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
  Delaware
    
    86-0828608(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)2851 West Kathleen Road, Phoenix, Arizona
    
    85053(Address of principal executive offices)
    
    (Zip Code)
 (602) 504-5000
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class
    
    Outstanding at April 28, 2008Common Stock, $.001 par value per share
    
    53,393,279 shares




---



##### 



INDEX
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Consolidated Balance Sheets  March 31, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Operations  Three months ended March 31, 2008 and 2007
    
    
    4Consolidated Statements of Cash Flows  Three months ended March 31, 2008 and 2007
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4.
    
    Controls and Procedures
    
    
    27PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    27Item 1A.
    
    Risk Factors
    
    
    28Item 6.
    
    Exhibits
    
    
    30Signatures
    
    
    31EX-31.1EX-31.2EX-32
  2




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 HYPERCOM CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
(Unaudited)
 March 31,
    
    
    December 31,Amounts in thousands, except share data
    
    2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    95,095
    
    
    $
    76,925Short-term investments
    
    
    3,620
    
    
    
    4,988Accounts receivable, net of allowance for doubtful accounts of
$2,940 and $4,034, respectively
    
    
    56,064
    
    
    
    71,341Inventories
    
    
    28,828
    
    
    
    22,343Prepaid expenses and other current assets
    
    
    14,375
    
    
    
    15,251Deferred income taxes
    
    
    507
    
    
    
    497Total current assets
    
    
    198,489
    
    
    
    191,345Property, plant and equipment, net
    
    
    17,866
    
    
    
    17,694Intangible assets, net
    
    
    9,902
    
    
    
    10,502Goodwill
    
    
    12,195
    
    
    
    10,224Deferred acquisition costs
    
    
    13,651
    
    
    
    12,529Other long-term assets
    
    
    8,024
    
    
    
    7,950Total assets
    
    $
    260,127
    
    
    $
    250,244LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    38,999
    
    
    $
    30,448Accrued payroll and related expenses
    
    
    8,248
    
    
    
    9,889Accrued sales and other taxes
    
    
    7,428
    
    
    
    7,427Product warranty liabilities
    
    
    1,704
    
    
    
    1,754Accrued other liabilities
    
    
    16,165
    
    
    
    16,154Deferred revenue
    
    
    5,697
    
    
    
    5,497Income taxes payable
    
    
    476
    
    
    
    519Total current liabilities
    
    
    78,717
    
    
    
    71,688Deferred tax liabilities
    
    
    2,222
    
    
    
    620Other liabilities
    
    
    3,599
    
    
    
    3,437Total liabilities
    
    
    84,538
    
    
    
    75,745Commitments and contingenciesStockholders equity:Common stock, $.001 par value; 100,000,000 shares authorized;
53,393,279 and 53,167,702 shares outstanding, respectively
    
    
    57
    
    
    
    56Additional paid-in capital
    
    
    252,455
    
    
    
    251,034Accumulated deficit
    
    
    (54,174
    )
    
    
    (53,842
    )Treasury stock, 3,162,248 shares (at cost)
at March 31, 2008 and December 31, 2007
    
    
    (22,749
    )
    
    
    (22,749
    )Total stockholders equity
    
    
    175,589
    
    
    
    174,499Total liabilities and stockholders equity
    
    $
    260,127
    
    
    $
    250,244
  3




---



##### Table of Contents



HYPERCOM CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended March 31,2008
    
    
    2007(Amounts in thousands, except share and per share data)Net revenue:Products
    
    $
    49,584
    
    
    $
    48,168Services
    
    
    22,112
    
    
    
    16,659Total net revenue
    
    
    71,696
    
    
    
    64,827Costs of revenue:Products
    
    
    33,054
    
    
    
    29,746Services
    
    
    18,878
    
    
    
    14,353Total costs of revenue
    
    
    51,932
    
    
    
    44,099Gross profit
    
    
    19,764
    
    
    
    20,728Operating expenses:Research and development
    
    
    6,112
    
    
    
    7,329Selling, general and administrative
    
    
    15,717
    
    
    
    16,172Total operating expenses
    
    
    21,829
    
    
    
    23,501Loss from continuing operations
    
    
    (2,065
    )
    
    
    (2,773
    )Interest income
    
    
    797
    
    
    
    884Interest expense
    
    
    
    
    
    
    (45
    )Foreign currency (gain) loss
    
    
    49
    
    
    
    (618
    )Other expense
    
    
    79
    
    
    
    4Loss before income taxes and
discontinued operations
    
    
    (1,140
    )
    
    
    (2,548
    )Income tax benefit (provision)
    
    
    663
    
    
    
    (667
    )Loss before discontinued operations
    
    
    (477
    )
    
    
    (3,215
    )Income from discontinued operations
    
    
    145
    
    
    
    690Net loss
    
    $
    (332
    )
    
    $
    (2,525
    )Basic and diluted loss per share:Loss before discontinued operations
    
    $
    (0.01
    )
    
    $
    (0.06
    )Income from discontinued operations
    
    
    
    
    
    
    0.01Basic and diluted loss per share
    
    $
    (0.01
    )
    
    $
    (0.05
    )Basic and diluted weighted average common shares
    
    
    53,224,574
    
    
    
    53,181,716
  4




---



##### Table of Contents



HYPERCOM CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended March 31,(Amounts in thousands)
    
    2008
    
    
    2007Cash flows from continuing operations:Net loss from continuing operations
    
    $
    (477
    )
    
    $
    (3,215
    )Adjustments to reconcile net loss
from continuing operations to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    2,564
    
    
    
    2,061Amortization of discounts on short-term
investments
    
    
    (38
    )
    
    
    (273
    )Provision (reversal) for doubtful accounts
    
    
    (1,143
    )
    
    
    413Provision for excess and obsolete inventory
    
    
    665
    
    
    
    518Provision for warranty and other product charges
    
    
    495
    
    
    
    296Deferred income tax benefit (provision)
    
    
    1,592
    
    
    
    (16
    )Non-cash share-based compensation
    
    
    918
    
    
    
    1,738Foreign currency gains
    
    
    (165
    )
    
    
    (350
    )Non-cash write-off of intangibles and other assets
    
    
    42
    
    
    
    2Changes in operating assets and
liabilities, net
    
    
    14,664
    
    
    
    (4,098
    )Net cash provided by (used in) operating activities
    
    
    19,117
    
    
    
    (2,924
    )Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (1,265
    )
    
    
    (1,888
    )Cash paid for acquisitions including acquisition costs deferred, net of cash acquired
    
    
    (2,073
    )
    
    
    (12,707
    )Software development costs capitalized
    
    
    (29
    )
    
    
    (360
    )Purchase of short-term investments
    
    
    (14,969
    )
    
    
    (43,473
    )Proceeds from the sale or maturity of
short-term investments
    
    
    16,376
    
    
    
    53,635Net cash used in investing activities
    
    
    (1,960
    )
    
    
    (4,793
    )Cash flows from financing activities:Repayments of bank notes payable and other
debt instruments
    
    
    (1
    )
    
    
    (3
    )Debt issuance cost
    
    
    (125
    )
    
    
    Proceeds from issuance of common stock
    
    
    566
    
    
    
    104Net cash provided by financing activities
    
    
    440
    
    
    
    101Effect of exchange rate changes on cash
    
    
    573
    
    
    
    49Net increase (decrease) in cash flows from
continuing operations
    
    
    18,170
    
    
    
    (7,567
    )Cash and cash equivalents, beginning of period
    
    
    76,925
    
    
    
    34,190Cash and cash equivalents, end of period
    
    $
    95,095
    
    
    $
    26,623
  5




---



##### Table of Contents



HYPERCOM CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2008
 (Unaudited)
 1. Basis of Presentation
   Recent Accounting Pronouncements
 Business Combinations Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51
 Fair Value Measurements
 6




---



##### Table of Contents



Fair Value Option for Financial Assets and
Financial Liabilities  including an amendment of FASB Statement No. 115
 2. Business Combination
 ACG Group
    Goodwill and Other Intangible Assets
 TPI Software
   7




---



##### Table of Contents



Business Combinations
Accounted for by the Purchase Method
   Thales e-Transactions
   3. Restructuring and Other Charges
 Restructuring
  
 
 
 
 
  8




---



##### Table of Contents



Transition to ContractSeverance
    
    
    Manufacturing
    
    
    TotalBalance accrued at December 31, 2007
    
    $
    1,100
    
    
    $
    
    
    
    $
    1,1002008 charges
    
    
    181
    
    
    
    494
    
    
    
    675Foreign currency translation
    
    
    27
    
    
    
    
    
    
    
    27Amounts utilized
    
    
    (607
    )
    
    
    (494
    )
    
    
    (1,101
    )Balance accrued at March 31, 2008
    
    $
    701
    
    
    $
    
    
    
    $
    701
    CostsBalance at
    
    
    (Reversals)
    
    
    Foreign
    
    
    AmountsDecember 31,
    
    
    Incurred
    
    
    Currency
    
    
    Utilized during
    
    
    Balance at2007
    
    
    During 2008
    
    
    Translation
    
    
    2008
    
    
    March 31, 2008Americas
    
    $
    24
    
    
    $
    411
    
    
    $
    
    
    
    $
    (324
    )
    
    $
    111EMEA
    
    
    337
    
    
    
    186
    
    
    
    27
    
    
    
    (298
    )
    
    $
    252Asia Pacific
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    (57
    )
    
    $
    21Shared cost centers
    
    
    739
    
    
    
    
    
    
    
    
    
    
    
    (422
    )
    
    $
    317Total charges
    
    $
    1,100
    
    
    $
    675
    
    
    $
    27
    
    
    $
    (1,101
    )
    
    $
    701
 2005 Business Review
   Warranty
    
    
    Idle FacilityCharges
    
    
    Lease
    
    
    TotalBalance at December 31, 2007
    
    $
    294
    
    
    $
    
    
    
    $
    294Amounts utilized
    
    
    (66
    )
    
    
    
    
    
    $
    (66
    )Amounts reversed
    
    
    
    
    
    
    
    
    
    $
    Balance at March 31, 2008
    
    $
    228
    
    
    $
    
    
    
    $
    228
    (a)
 
 (a)
    
    These accrued liability balances are recorded as current product warranty liabilities
as these amounts are expected to be paid during 2008.  9




---



##### Table of Contents



AmountsBalance at
    
    
    Utilized /
    
    
    BalanceDecember 31,
    
    
    Reversed
    
    
    Remaining at2007
    
    
    during 2008
    
    
    March 31, 2008Americas
    
    $
    
    
    
    $
    
    
    
    $
    EMEA
    
    
    
    
    
    
    
    
    
    
    Asia Pacific
    
    
    294
    
    
    
    (66
    )
    
    
    228Shared cost centers
    
    
    
    
    
    
    
    
    
    
    Total charges
    
    $
    294
    
    
    $
    (66
    )
    
    $
    228
 4. Inventories
  March 31,
    
    
    December 31,2008
    
    
    2007Purchased parts
    
    $
    3,767
    
    
    $
    8,676Work in progress
    
    
    5,346
    
    
    
    4,566Finished goods
    
    
    19,715
    
    
    
    9,101$
    28,828
    
    
    $
    22,343
  5. Long-term Debt
 Credit Facilities
    10




---



##### Table of Contents



Acquisition Financing
    6. Share Based Plan Compensation
  Three Months Ended March 31,2008
    
    
    2007Costs (reversal) of revenue
    
    $
    (36
    )
    
    $
    50Research and development
    
    
    75
    
    
    
    151Selling, general and administrative
    
    
    879
    
    
    
    1,537Total
    
    $
    918
    
    
    $
    1,738
 11




---



##### Table of Contents



Stock Options
 Accounting for Stock Appreciation
Rights and other Variable Stock Option Award Plans
  WeightedWeighted
    
    Average
    
    AggregateAverage
    
    Remaining
    
    IntrinsicNumber of
    
    Exercise
    
    Contractual
    
    Value (InOptions
    
    Price
    
    Term
    
    Thousands)Outstanding at March 31, 2008
    
    
    3,643,951
    
    
    $
    6.23
    
    
    
    7.51
    
    
    $
    559,047Vested and expected to vest at March 31, 2008
    
    
    3,432,682
    
    
    $
    6.30
    
    
    
    7.40
    
    
    $
    510,443Exercisable at March 31, 2008
    
    
    1,912,234
    
    
    $
    7.33
    
    
    
    5.81
    
    
    $
    160,647
   Three Months Ended March 312008
    
    2007Weighted average risk free interest rate
    
    
    2.8
    %
    
    
    4.5
    %Expected life of the options (in years)
    
    
    4.28
    
    
    
    5.47Expected stock price volatility
    
    
    48
    %
    
    
    64
    %Expected dividend yield
    
    
    
    
    
    
    
  12




---



##### Table of Contents



Restricted Stock Awards
   WeightedNonvested
    
    
    Average GrantShares
    
    
    Date Fair ValueOutstanding
    
    
    per ShareBalance at December 31, 2007
    
    
    75,000
    
    
    $
    6.24Shares granted in 2008
    
    
    75,000
    
    
    
    3.99Shares vested in 2008
    
    
    (100,000
    )
    
    
    5.21Balance at March 31, 2008
    
    
    50,000
    
    
    $
    4.94
  Employee Stock Purchase Plan
  7. Earnings per Share
  13




---



##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Shares used in basic income (loss) per
share calculation (weighted average
common shares outstanding)
    
    
    53,224,574
    
    
    
    53,181,716Dilutive effect of stock options and
warrants
    
    
    
    
    
    
    Shares used in diluted income per
share calculation
    
    
    53,224,574
    
    
    
    53,181,716Options that could potentially
dilute income per share in the future
that were not included in the computation
of diluted income per share (a)
    
    
    3,643,490
    
    
    
    3,664,235
 
 (a)
    
    These options and warrants were not included in the computation of
diluted income (loss) per share because they were not dilutive.  8. Income Taxes
 Accounting for Income Taxes
 Accounting for Uncertainty in
Income Taxes
   14




---



##### Table of Contents



9. Commitments and Contingencies
 Litigation
  SPA Syspatronic AG v. Hypercom Corporation, et al. (United States District Court for the
Eastern District of Texas, Beaumont Division, Civil Action No. 2:07-CV-416 (LED), filed on
September 18, 2007)
 Wool v. Hypercom, et al. (Maricopa County, Arizona, Superior Court, Case No. CV 2008-050575,
filed on February 15, 2008)
 CardSoft, Inc., et al. v. Hypercom Corporation, et al. (United States District Court for the
Eastern District of Texas, Civil Action No. 2:08-CV-00098, filed on March 6, 2008)
 10. Segment and Geographic Information
 Disclosures about Segments of an Enterprise and
Related Information
   15




---



##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Net RevenueAmericas
    
    $
    42,202
    
    
    $
    34,269EMEA
    
    
    17,134
    
    
    
    18,941Asia Pacific
    
    
    12,360
    
    
    
    11,617Shared cost centers
    
    
    
    
    
    
    $
    71,696
    
    
    $
    64,827
 Three Months Ended March 31,2008
    
    
    2007Operating IncomeAmericas
    
    $
    5,450
    
    
    $
    3,323EMEA
    
    
    2,582
    
    
    
    5,142Asia Pacific
    
    
    1,763
    
    
    
    2,510Shared cost centers
    
    
    (11,860
    )
    
    
    (13,748
    )Total segment profit (loss)
    
    $
    (2,065
    )
    
    $
    (2,773
    )Interest income
    
    
    797
    
    
    
    884Interest expense
    
    
    
    
    
    
    (45
    )Foreign currency loss
    
    
    49
    
    
    
    (618
    )Other expense
    
    
    79
    
    
    
    4Income (loss) before income taxes
and discontinued operations
    
    $
    (1,140
    )
    
    $
    (2,548
    )
 March 31,
    
    
    December 31,2008
    
    
    2007Total AssetsAmericas
    
    $
    70,172
    
    
    $
    79,210EMEA
    
    
    29,453
    
    
    
    29,482Asia Pacific
    
    
    58,228
    
    
    
    55,004Shared cost centers
    
    
    102,274
    
    
    
    86,548$
    260,127
    
    
    $
    250,244
 11. Product Warranty
  16




---



##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Balance at beginning of period
    
    $
    1,754
    
    
    $
    2,636Warranty charges
from normal operations
    
    
    495
    
    
    
    296Warranty reversals related to
the 2005 Business Review
    
    
    
    
    
    
    (100
    )Utilization of warranty liability
    
    
    (545
    )
    
    
    (346
    )Balance at end of period
    
    $
    1,704
    
    
    $
    2,486
   17




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Cautionary Statements Regarding Forward-looking Statements
    
    
    with regard to our recent acquisition and ongoing integration of TeT: (i) the inability to assimilate the technologies,
operations and personnel of TeT; (ii) the potential disruption of our existing business, including the diversion of
management attention and the redeployment of resources; (iii) the loss of customers; (iv) the possibility of our
entering markets in which we have limited prior experience; (v) the loss of key employees of TeT; and (vi) the
inability to obtain the desired strategic and financial benefits from the acquisition;
    
    the volatility of our financial results and our stock price;
    
    the loss of a key customer;
    
    defects in our products;
    
    the accumulation of obsolete inventory;
    
    breaches in the security of transactions involving our products;
    
    our inability to adequately protect our proprietary technology;
    
    our technology infringing the proprietary rights of third parties;
    
    a disruption in our manufacturing capabilities or those of our third-party manufacturers or suppliers;
    
    risks associated with our dependence on single-source suppliers;
    
    our ability to timely and successfully introduce new products and product families on which our future sales will be
substantially dependent, and to transition legacy products through end-of-life;
 18




---



##### Table of Contents




    
    our expected transition to a contract manufacturing model;
    
    risks associated with transferring our data and systems to our new headquarters facility;
    
    the challenges posed by conducting business in international markets;
    
    fluctuations in currency exchange rates;
    
    the loss of a member of our senior management team or other key employees;
    
    risks associated with acquisitions and other strategic investments;
    
    force majeure events;
    
    country-specific changing economic or political environment;
    
    uncertainties related to country-specific legal and regulatory requirements, including product-related regulations,
requirements and certifications, and tax assessments and interpretations;
    
    our ability to maintain the quality of our internal control over financial reporting;
    
    our ability to assimilate and integrate technologies or businesses we may acquire in the future;
    
    the highly-competitive nature of the markets in which we compete;
    
    industry and technological developments in the markets in which we sell our products and services;
    
    the impact of industry standards, certifications and government regulations to which our products are subject;
    
    the impact of SEC regulations and SEC review of our periodic filings;
    
    the anti-takeover effects of certain provisions in our charter, bylaws and Delaware law;
    
    dilution of our stock price caused by the exercise of outstanding warrants and options;
    
    lack of a plan to pay dividends on our common stock in the foreseeable future; and
    
    incurring debt to meet the future capital requirements of our business.
  Critical Accounting Policies and Estimates
  19




---



##### Table of Contents



2008 Overview
 Operations
    2007 Restructuring
 
 
 
 
 
  Acquisition of Thales e-Transactions
 20




---



##### Table of Contents



21




---



##### Table of Contents



Results of Operations
 Three Months Ended March 31,% of
    
    
    
    
    
    
    % of
    
    
    Dollar(Dollars in thousands, except per share data)
    
    2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    ChangeNet revenue:Product and other
    
    $
    49,584
    
    
    
    69.2
    %
    
    $
    48,168
    
    
    
    74.3
    %
    
    $
    1,416Services
    
    
    22,112
    
    
    
    30.8
    %
    
    
    16,659
    
    
    
    25.7
    %
    
    
    5,453Total net revenue
    
    
    71,696
    
    
    
    100.0
    %
    
    
    64,827
    
    
    
    100.0
    %
    
    
    6,869Costs of revenue:Product and other
    
    
    33,054
    
    
    
    66.7
    %
    
    
    29,746
    
    
    
    61.8
    %
    
    
    3,308Services
    
    
    18,878
    
    
    
    85.4
    %
    
    
    14,353
    
    
    
    86.2
    %
    
    
    4,525Total costs of revenue
    
    
    51,932
    
    
    
    72.4
    %
    
    
    44,099
    
    
    
    68.0
    %
    
    
    7,833Gross profit:Product and other
    
    
    16,530
    
    
    
    33.3
    %
    
    
    18,422
    
    
    
    38.2
    %
    
    
    (1,892
    )Services
    
    
    3,234
    
    
    
    14.6
    %
    
    
    2,306
    
    
    
    13.8
    %
    
    
    928Total gross profit
    
    
    19,764
    
    
    
    27.6
    %
    
    
    20,728
    
    
    
    32.0
    %
    
    
    (964
    )Operating expenses:Research and development
    
    
    6,112
    
    
    
    8.5
    %
    
    
    7,329
    
    
    
    11.3
    %
    
    
    (1,217
    )Selling, general and administrative
    
    
    15,717
    
    
    
    21.9
    %
    
    
    16,172
    
    
    
    25.0
    %
    
    
    (455
    )Total operating expenses
    
    
    21,829
    
    
    
    30.4
    %
    
    
    23,501
    
    
    
    36.3
    %
    
    
    (1,672
    )Income (loss) from continuing operations
    
    
    (2,065
    )
    
    
    (2.9
    )%
    
    
    (2,773
    )
    
    
    (4.3
    )%
    
    
    708Non-operating income
    
    
    925
    
    
    
    1.3
    %
    
    
    225
    
    
    
    0.3
    %
    
    
    700Income (loss) before income taxes and discontinued operations
    
    
    (1,140
    )
    
    
    (1.6
    )%
    
    
    (2,548
    )
    
    
    (4.0
    )%
    
    
    1,408Benefit (provision) for income taxes
    
    
    663
    
    
    
    0.9
    %
    
    
    (667
    )
    
    
    (1.0
    )%
    
    
    1330
 22




---



##### Table of Contents



Three Months Ended March 31,% of
    
    
    
    
    
    
    % of
    
    
    Dollar(Dollars in thousands, except per share data)
    
    2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    ChangeIncome (loss) before discontinued operations
    
    
    (477
    )
    
    
    (0.7
    )%
    
    
    (3,215
    )
    
    
    (5.0
    )%
    
    
    2,738Income from discontinued operations
    
    
    145
    
    
    
    0.2
    %
    
    
    690
    
    
    
    1.1
    %
    
    
    (545
    )Net income (loss)
    
    $
    (332
    )
    
    
    (0.5
    )%
    
    $
    (2,525
    )
    
    
    (3.9
    )%
    
    $
    2,193Diluted income (loss) per share
    
    $
    (0.01
    )
    
    
    
    
    
    $
    (0.05
    )
    
    
    
    
    
    $
    0.04
 Net Revenue
    Costs of Revenue and Gross Profit
    23




---



##### Table of Contents



Operating Expenses
   Non-Operating Income
  Provision for Income Taxes
    Income from Discontinued Operations
  Segment Information
  24




---



##### Table of Contents



Three Months Ended March 31,% of
    
    
    
    
    
    
    % of
    
    
    Dollar2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    ChangeNet revenues:Americas
    
    $
    42,202
    
    
    
    58.9
    %
    
    $
    34,269
    
    
    
    52.9
    %
    
    $
    7,933EMEA
    
    
    17,134
    
    
    
    23.9
    %
    
    
    18,941
    
    
    
    29.2
    %
    
    
    (1,807
    )Asia-Pacific
    
    
    12,360
    
    
    
    17.2
    %
    
    
    11,617
    
    
    
    17.9
    %
    
    
    743Total net revenues
    
    $
    71,696
    
    
    
    100.0
    %
    
    $
    64,827
    
    
    
    100.0
    %
    
    $
    6,869Operating income:Americas
    
    $
    5,450
    
    
    
    7.6
    %
    
    $
    3,323
    
    
    
    5.1
    %
    
    $
    2,127EMEA
    
    
    2,582
    
    
    
    3.6
    %
    
    
    5,142
    
    
    
    7.9
    %
    
    
    (2,560
    )Asia-Pacific
    
    
    1,763
    
    
    
    2.4
    %
    
    
    2,510
    
    
    
    3.9
    %
    
    
    (747
    )Shared cost centers
    
    
    (11,860
    )
    
    
    (16.5
    )%
    
    
    (13,748
    )
    
    
    (21.2
    )%
    
    
    1,888Total operating income
    
    $
    (2,065
    )
    
    
    (2.9
    )%
    
    $
    (2,773
    )
    
    
    (4.3
    )%
    
    $
    708
   Cash Flows, Liquidity and Capital Resources
  25




---



##### Table of Contents



Cash Flows
     Liquidity and Capital Resources
  Contractual Obligations
  Effect of Inflation
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
   26




---



##### Table of Contents



Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
 27




---



##### Table of Contents



SPA Syspatronic AG v. Hypercom Corporation, et al. (United States District Court for the Eastern
District of Texas, Beaumont Division, Civil Action No. 2:07-CV-416 (LED), filed on September 18,
2007)
  Wool v. Hypercom, et al. (Maricopa County, Arizona, Superior Court, Case No. CV 2008-050575, filed
on February 15, 2008)
  
 Item 1A. Risk Factors.
  Our acquisition and subsequent integration of the Thales e-Transactions business line involves
numerous risks. We may not be able to address these risks without substantial expense, delay or
other operational or financial problems.
  
    
    the inability to assimilate the technologies, operations and personnel of TeT;
    
    the potential disruption of our existing business, including the diversion of management
attention and the redeployment of resources;
    
    the loss of customers;
    
    the possibility of our entering markets in which we have limited prior experience;
    
    the loss of key employees of TeT; and
    
    the inability to obtain the desired strategic and financial benefits from the TeT
acquisition.
 28




---



##### Table of Contents



A disruption in our manufacturing and assembly capabilities or those of our third-party
manufacturers or suppliers would negatively impact our ability to meet customer requirements.
     Force majeure events, such as threats of terrorism, terrorist attacks, other acts of violence or
war, and health epidemics may adversely affect the markets in which our common stock trades, our
ability to operate our business and our financial results.
  
 29




---



##### Table of Contents



Item 6. Exhibits.
 Exhibit Number
    
    Description of Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of
Hypercom Corporation (incorporated by reference to Exhibit
3.1 to Hypercom Corporations Registration Statement on
Form S-1 (Registration No. 333-35641))3.2
    
    Second Amended and Restated Bylaws of Hypercom Corporation
(incorporated by reference to Exhibit 3.1 to Hypercom
Corporations Current Report on Form 8-K filed on November
6, 2006)4
    
    Amended and Restated Certificate of Incorporation of
Hypercom Corporation (incorporated by reference to Exhibit
3.1 to Hypercom Corporations Registration Statement on
Form S-1 (Registration No. 333-35641))10.1
    
    Loan and Security Agreement, dated as of January 15, 2008,
among Hypercom U.S.A., Inc. and Hypercom Manufacturing
Resources, Inc., as Borrowers, Certain Financial
Institutions, as Lenders, and Bank of America, N.A., as
Agent (incorporated by reference to Exhibit 10.2 to
Hypercom Corporations Current Report on Form 8-K/A filed
on January 22, 2008)10.2
    
    Share Purchase Agreement, dated as of February 13, 2008, by
and among Thales SA, Thales Holding GmbH, Thales UK
Limited, and Hypercom Corporation (incorporated by
reference to Exhibit 10.1 to Hypercom Corporations Current
Report on Form 8-K filed on February 14, 2008)10.3
    
    Indemnification Agreement, dated as of February 13, 2008,
by and between Francisco Partners II, L.P. and Hypercom
Corporation (incorporated by reference to Exhibit 10.2 to
Hypercom Corporations Current Report on Form 8-K filed on
February 14, 2008)10.4
    
    Credit Agreement, dated as of February 13, 2008, by and
between Hypercom Corporation and Francisco Partners II,
L.P. (incorporated by reference to Exhibit 10.3 to Hypercom
Corporations Current Report on Form 8-K filed on February
14, 2008)10.5
    
    Separation Agreement and General Release, dated as of
February 22, 2008, by and between Hypercom Corporation and
Thomas Liguori (incorporated by reference to Exhibit 10.1
to Hypercom Corporations Current Report on Form 8-K filed
on February 25, 2008)31.1
    
    Certification of Chief Executive Officer, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *31.2
    
    Certification of Chief Financial Officer, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *32
    
    Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 **
 
 *
    
    Filed herewith.**
    
    Furnished herewith. 30




---



##### Table of Contents



SIGNATURES
  HYPERCOM CORPORATIONDate: May 12, 2008
    
    
    
    By: /s/ Philippe TartavullPhilippe TartavullChief Executive Officer and President (duly authorized officer and principal executive officer)Date: May 12, 2008
    
    
    
    By: /s/ Robert M. VreelandRobert M. VreelandInterim Chief Financial Officer(principal financial officer)Date: May 12, 2008
    
    
    
    By: /s/ Shawn C. RathjeShawn C. RathjeChief Accounting Officer and Controller (principal accounting officer)
 31