##### Table of Contents



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

FORM 10-Q

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

For the quarterly period ended: March 31, 2002.

OR

(BOX)       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

(Exact name of registrant as specified in its charter)

|                                                                        |  |                                                    
|----------------------------------------------------------------------- |  | ---------------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 86-0828608
(I.R.S. Employer
Identification Number )

2851 West Kathleen Road
Phoenix, Arizona 85053
(Address of principal executive offices) (Zip Code)

(602) 504-5000
(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 the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  (XBOX)      No  (BOX)

Number of shares of the registrants common stock, $.001 par value per share, outstanding as of May 6, 2002, was
47,844,840.



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TABLE OF CONTENTS



|                               |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1. Financial Statements                                                                 
|                               |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                               | 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 2. Changes in Securities and Use of Proceeds                                            
|                               | Item 6. Exhibits and Reports on Form 8-K                                                     
|                               |                                                                                               | SIGNATURES                                
|                               |                                                                                               | EXHIBIT INDEX                             
|EX-10.1                       
|EX-10.2                       
|EX-11.1                       
|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   
|        
|        
|        
|        
|         |  |                                                                                       |  |     
|        
|        
|        
|        
|Item 2.  |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations |  | 9   
|        
|        
|        
|        
|         |  |                                                                                       |  |     
|        
|        
|        
|        
|Item 3.  |  | Quantitative and Qualitative Disclosures
About Market Risk                            |  | 12  
|        
|        
|        
|        
|         |  |                                                                                       |  |     
|        
|        
|        
|        
|PART II. |  | OTHER INFORMATION                                                                     |  |     
|        
|        
|        
|        
|         |  |                                                                                       |  |     
|        
|        
|        
|        
|Item 2.  |  | Changes in Securities and Use of Proceeds                                             |  | 13  
|        
|        
|        
|        
|         |  |                                                                                       |  |     
|        
|        
|        
|        
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                      |  | 13  
|        
|        
|        
|        
|         |  |                                                                                       |  |     
|        
|        
|        
|        
|         |  | SIGNATURES                                                                            |  | 14  
|        
|        
|        
|        
|         |  |                                                                                       |  |     
|        
|        
|        
|        
|         |  | EXHIBIT INDEX                                                                         |  | 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)

|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |         |  
|-------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | --------- | ------------ | - | - | ------- | ------- | -
|                                                                                 |                                                                                                                                                                             |             | March 31, |              |   |   |        
|ASSETS                                                                           |                                                                                                                                                                             | 2002        |           | December 31,
|                                                                                 |                                                                                                                                                                             | (unaudited) |           | 2001        
|                                                                                 |                                                                                                                                                                             |             |           |              |  
|Current assets:                                                                  |                                                                                                                                                                             |             |           |              |   |   |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cash and cash equivalents                                                                                                                                                   |             | $         | 15,752       |   |   | $       | 13,402  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Restricted cash                                                                                                                                                             |             |           | 6,829        |   |   |         | 6,367   |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accounts receivable, net of allowance for
doubtful accounts of $4,773 and $4,029                                                                                            |             |           | 79,023       |   |   |         | 70,860  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Current portion of net investment in direct financing leases                                                                                                                |             |           | 15,412       |   |   |         | 16,242  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Inventories, net                                                                                                                                                            |             |           | 59,914       |   |   |         | 62,411  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Deferred income taxes                                                                                                                                                       |             |           | 16,123       |   |   |         | 16,090  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Prepaid taxes                                                                                                                                                               |             |           | 920          |   |   |         | 762     |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Prepaid expenses and other current assets                                                                                                                                   |             |           | 27,126       |   |   |         | 26,568  |  
|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |        
|Total current assets                                                             |                                                                                                                                                                             |             | 221,099   |              |   |   | 212,702 |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Property, plant and equipment, net                                                                                                                                          |             |           | 37,562       |   |   |         | 37,964  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Long-term marketable securities, at market                                                                                                                                  |             |           | 155          |   |   |         | 155     |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Long-term portion of net investment in direct financing leases                                                                                                              |             |           | 21,782       |   |   |         | 24,761  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Deferred income taxes                                                                                                                                                       |             |           | 10,003       |   |   |         | 10,003  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Goodwill, net of amortization of $3,293                                                                                                                                     |             |           | 21,706       |   |   |         | 21,706  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Intangible assets, net of amortization of $11,090 and $9,873                                                                                                                |             |           | 12,475       |   |   |         | 13,597  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other assets                                                                                                                                                                |             |           | 14,280       |   |   |         | 16,806  |  
|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |        
|Total assets                                                                     |                                                                                                                                                                             | $           | 339,062   |              |   | $ | 337,694 |        
|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                             |                                                                                                                                                                             |             |           |              |   |   |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |         |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Current liabilities:                                                             |                                                                                                                                                                             |             |           |              |   |   |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accounts payable                                                                                                                                                            |             | $         | 30,911       |   |   | $       | 31,761  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accrued liabilities                                                                                                                                                         |             |           | 21,583       |   |   |         | 22,744  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Deferred revenue                                                                                                                                                            |             |           | 3,133        |   |   |         | 2,180   |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Income taxes payable                                                                                                                                                        |             |           | 280          |   |   |         | 1,495   |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Current portion of long-term debt                                                                                                                                           |             |           | 15,742       |   |   |         | 20,716  |  
|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |        
|Total current liabilities                                                        |                                                                                                                                                                             |             | 71,649    |              |   |   | 78,896  |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Long-term debt                                                                                                                                                              |             |           | 20,690       |   |   |         | 47,172  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other non-current liabilities                                                                                                                                               |             |           | 293          |   |   |         | 257     |  
|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |        
|Total liabilities                                                                |                                                                                                                                                                             |             | 92,632    |              |   |   | 126,325 |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Stockholders equity:                                                            |                                                                                                                                                                             |             |           |              |   |   |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Common stock, $.001 par value; 100,000,000 shares authorized;
47,760,309 and 39,795,554 shares issued and outstanding at
March 31, 2002 and December 31, 2001, respectively |             |           | 27           |   |   |         | 19      |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Additional paid-in capital                                                                                                                                                  |             |           | 213,323      |   |   |         | 175,628 |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Receivables from stockholders                                                                                                                                               |             |           | (1,498       | ) |   |         | (1,498  | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Retained earnings                                                                                                                                                           |             |           | 37,080       |   |   |         | 39,722  |  
|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |        
|                                                                                 |                                                                                                                                                                             |             | 248,932   |              |   |   | 213,871 |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Treasury stock, 230,088 shares (at cost) at March 31, 2002
and December 31, 2001 |                                                                                                                                                                             |             | (2,502    | )            |   |   | (2,502  | )      
|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |        
|Total stockholders equity                                                       |                                                                                                                                                                             |             | 246,430   |              |   |   | 211,369 |        
|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |        
|Total liabilities and stockholders equity                                       |                                                                                                                                                                             | $           | 339,062   |              |   | $ | 337,694 |        
|                                                                                 |                                                                                                                                                                             |             |           |              |   |   |         |        

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
|                                                                           |                                        |                                                 |        |                   
|                                                                           |                                        |                                                 |        | March 31, 2002     |        | March 31, 2001
|                                                                           |                                        |                                                 |        |                    |        |               
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Net revenue                                                                |                                        | $                                               | 77,076 |                    |        | $              | 71,075 |       
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Costs and expenses:                                                        |                                        |                                                 |        |                    |        |                |        |       
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Costs of revenue                       |                                                 |        | 49,804             |        |                |        | 53,131 |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Research and development               |                                                 |        | 6,397              |        |                |        | 8,253  |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Selling, general and administrative    |                                                 |        | 18,279             |        |                |        | 21,469 |        
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                           |                                        | Total costs and expenses                        |        |                    | 74,480 |                |        |        | 82,853  |  
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                           |                                        | Income (loss) from operations                   |        |                    | 2,596  |                |        |        | (11,778 | )
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Interest income                                                            |                                        |                                                 | 19     |                    |        |                | 254    |       
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Interest expense                                                           |                                        |                                                 | (2,002 | )                  |        |                | (1,234 | )     
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Other expense                                                              |                                        |                                                 | (45    | )                  |        |                | (1,257 | )     
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Foreign currency loss                                                      |                                        |                                                 | (1,580 | )                  |        |                | (2,551 | )     
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                           |                                        | Loss before income taxes and extraordinary item |        |                    | (1,012 | )              |        |        | (16,566 | )
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Income tax benefit                                                         |                                        |                                                 | 203    |                    |        |                | 3,313  |       
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                           |                                        | Loss before extraordinary item                  |        |                    | (809   | )              |        |        | (13,253 | )
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Extraordinary loss on early retirement of debt, net of tax
benefit of $785 |                                        |                                                 | (1,833 | )                  |        |                |       |       
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                           |                                        | Net loss                                        |        | $                  | (2,642 | )              |        | $      | (13,253 | )
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|Net loss per share:                                                        |                                        |                                                 |        |                    |        |                |        |       
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Basic loss per share:                  |                                                 |        |                    |        |                |        |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Loss before extraordinary item         |                                                 | $      | (0.02              | )      |                | $      | (0.39  | )      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Extraordinary item                     |                                                 |        | (0.05              | )      |                |        |       |        
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                           | Net loss                               |                                                 | $      | (0.07              | )      |                | $      | (0.39  | )      
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                           | Weighted average basic common shares   |                                                 |        | 40,639             |        |                |        | 34,336 |        
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                           | Diluted loss per share:                |                                                 |        |                    |        |                |        |        |        
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Loss before extraordinary item         |                                                 | $      | (0.02              | )      |                | $      | (0.39  | )      
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                           | Extraordinary item                     |                                                 |        | (0.05              | )      |                |        |       |        
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                           | Net loss                               |                                                 | $      | (0.07              | )      |                | $      | (0.39  | )      
|                                                                           |                                        |                                                 |        |                    |        |                |        |       
|                                                                           | Weighted average diluted common shares |                                                 |        | 40,639             |        |                |        | 34,336 |        
|                                                                           |                                        |                                                 |        |                    |        |                |        |       

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)

|                                                                                                                                        |                                                            |                                                     |        |                    |        |                |        |         |         |  
|--------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | --------------------------------------------------- | ------ | ------------------ | ------ | -------------- | ------ | ------- | ------- | -
|                                                                                                                                        |                                                            |                                                     |        | Three Months Ended
|                                                                                                                                        |                                                            |                                                     |        |                   
|                                                                                                                                        |                                                            |                                                     |        | March 31, 2002     |        | March 31, 2001
|                                                                                                                                        |                                                            |                                                     |        |                    |        |               
|Cash flows from operating activities:                                                                                                   |                                                            |                                                     |        |                    |        |                |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Net loss                                                   |                                                     | $      | (2,642             | )      |                | $      | (13,253 | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Adjustments to reconcile net loss to net cash from
operating activities:                                                                |                                                            |                                                     |        |                    |        |                |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Depreciation/amortization                                  |                                                     |        | 3,591              |        |                |        | 3,839   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Amortization of deferred financing costs                   |                                                     |        | 697                |        |                |        |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Amortization of discount on note payable                   |                                                     |        | 83                 |        |                |        |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Bad debt expense                                           |                                                     |        | 1,161              |        |                |        | 556     |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Deferred components of direct financing leases             |                                                     |        | (142               | )      |                |        | (130    | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Provision for losses on direct financing leases            |                                                     |        | 2,559              |        |                |        | 10,145  |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Provision for excess and obsolete inventory                |                                                     |        | 988                |        |                |        | 445     |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Extraordinary loss on early extinguishment of debt         |                                                     |        | 2,618              |        |                |        |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Foreign currency loss                                      |                                                     |        | 1,580              |        |                |        | 2,720   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Deferred income taxes                                      |                                                     |        | (90                | )      |                |        |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Other                                                      |                                                     |        | 151                |        |                |        | 51      |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|(Increase) decrease in accounts receivable, inventories, prepaid income taxes,
prepaid expenses and other current assets & other assets |                                                            |                                                     | (8,501 | )                  |        |                | 6,472  |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Decrease in accounts payable, accrued liabilities,
deferred revenue & income taxes payable                                              |                                                            |                                                     | (2,491 | )                  |        |                | (2,824 | )      
|                                                                                                                                        |                                                            |                                                     |        |                    |        |                |        |        
|                                                                                                                                        |                                                            | Net cash (used in) provided by operating activities |        |                    | (438   | )              |        |         | 8,021   |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash flows from investing activities:                                                                                                   |                                                            |                                                     |        |                    |        |                |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Payments received on notes receivable                      |                                                     |        | 348                |        |                |        | 355     |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Principal payments received on direct financing leases     |                                                     |        | 3,204              |        |                |        | 3,182   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Funding of direct financing leases                         |                                                     |        | (2,080             | )      |                |        | (8,324  | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Increase in restricted cash                                |                                                     |        | (462               | )      |                |        |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Acquisition of other assets                                |                                                     |        | (446               | )      |                |        | (326    | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from disposal of property, plant & equipment      |                                                     |        | 9                  |        |                |        | 206     |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Purchase of property, plant & equipment                    |                                                     |        | (1,915             | )      |                |        | (228    | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from maturity of marketable securities            |                                                     |        |                   |        |                |        | 2,775   |        
|                                                                                                                                        |                                                            |                                                     |        |                    |        |                |        |        
|                                                                                                                                        |                                                            | Net cash used in investing activities               |        |                    | (1,342 | )              |        |         | (2,360  | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash flows from financing activities:                                                                                                   |                                                            |                                                     |        |                    |        |                |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds of bank notes payable and other debt instruments  |                                                     |        | 37,740             |        |                |        | 1,000   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Repayment of bank notes payable and other debt instruments |                                                     |        | (70,100            | )      |                |        | (17,617 | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from sale of lease receivables                    |                                                     |        |                   |        |                |        | 5,420   |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from issuance of common stock                     |                                                     |        | 36,870             |        |                |        | 97      |        
|                                                                                                                                        |                                                            |                                                     |        |                    |        |                |        |        
|                                                                                                                                        |                                                            | Net cash provided by (used in) financing activities |        |                    | 4,510  |                |        |         | (11,100 | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Effect of exchange rate changes on cash                                                                                                 |                                                            |                                                     | (380   | )                  |        |                | (344   | )      
|                                                                                                                                        |                                                            |                                                     |        |                    |        |                |        |        
|Net increase (decrease) in cash                                                                                                         |                                                            |                                                     | 2,350  |                    |        |                | (5,783 | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash & cash equivalents, beginning of period                                                                                            |                                                            |                                                     | 13,402 |                    |        |                | 13,008 |        
|                                                                                                                                        |                                                            |                                                     |        |                    |        |                |        |        
|Cash & cash equivalents, end of period                                                                                                  |                                                            | $                                                   | 15,752 |                    |        | $              | 7,225  |        
|                                                                                                                                        |                                                            |                                                     |        |                    |        |                |        |        

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

5



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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 considered necessary for a fair statement of
results for the periods have been included and are considered of a normal
recurring nature except for the impact on quarterly results and balance sheet
amounts related to the extraordinary loss on early retirement of debt (See Note
6). Operating results for the three months ended March 31, 2002, are not
necessarily indicative of the results to be expected for the year ending
December 31, 2002.

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, 2001.

NOTE 2  INVENTORIES

Inventories consist of the following:

|                 |  |           |        |              |  |   |        | 
|---------------- |  | --------- | ------ | ------------ |  | - | ------ | 
|                 |  | March 31, |        | December 31,
|                 |  | 2002      |        | 2001        
|                 |  |           |        |             
|Purchased parts  |  | $         | 21,976 |              |  | $ | 21,502 | 
|                
|                
|                
|                
|Work in progress |  |           | 6,756  |              |  |   | 8,560  | 
|                
|                
|                
|                
|Finished goods   |  |           | 31,182 |              |  |   | 32,349 | 
|                 |  |           |        |              |  |   |        | 
|                 |  | $         | 59,914 |              |  | $ | 62,411 | 
|                 |  |           |        |              |  |   |        | 

NOTE 3  SEGMENT INFORMATION

As of December 31, 2001 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 as each also
reflects different marketing strategies and financing requirements.

The following table presents certain unaudited segment financial information
for the three months ended March 31, 2002 and 2001, respectively. Amounts
shown are in thousands.

6



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For the Three Months Ended March 31, 2002:

|                        |  |                 |         |           |  |           |        |              |  |       |         |   |  |   |          |   |  |   |         | 
|----------------------- |  | --------------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------- | - |  | - | -------- | - |  | - | ------- | 
|                        |  | POS and Network |         | Equipment |  |           |        |              |  |       |         |   |  |   |          |  
|                        |  | Systems         |         | Leasing   |  | Corporate |        | Eliminations |  | Total
|                        |  |                 |         |           |  |           |        |              |  |      
|                        |  |                 |         |           |  |           |        |              |  |      
|Net revenue             |  | $               | 70,201  |           |  | $         | 6,875  |              |  | $     |        |   |  | $ |         |   |  | $ | 77,076  | 
|                       
|                       
|                       
|                       
|Operating income (loss) |  | $               | 6,853   |           |  | $         | 164    |              |  | $     | (4,421  | ) |  | $ |         |   |  | $ | 2,596   | 
|                       
|                       
|                       
|                       
|Segment Assets          |  | $               | 823,051 |           |  | $         | 72,155 |              |  | $     | 207,893 |   |  | $ | (764,037 | ) |  | $ | 339,062 | 

For the Three Months Ended March 31, 2001:

|                        |  |                 |         |           |  |           |        |              |  |       |         |   |  |   |          |   |  |   |         |  
|----------------------- |  | --------------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------- | - |  | - | -------- | - |  | - | ------- | -
|                        |  | POS and Network |         | Equipment |  |           |        |              |  |       |         |   |  |   |          |  
|                        |  | Systems         |         | Leasing   |  | Corporate |        | Eliminations |  | Total
|                        |  |                 |         |           |  |           |        |              |  |      
|                        |  |                 |         |           |  |           |        |              |  |      
|Net revenue             |  | $               | 63,523  |           |  | $         | 7,552  |              |  | $     |        |   |  | $ |         |   |  | $ | 71,075  |  
|                       
|                       
|                       
|                       
|Operating income (loss) |  | $               | 812     |           |  | $         | (7,541 | )            |  | $     | (5,049  | ) |  | $ |         |   |  | $ | (11,778 | )
|                       
|                       
|                       
|                       
|Segment Assets          |  | $               | 596,205 |           |  | $         | 76,074 |              |  | $     | 185,719 |   |  | $ | (520,175 | ) |  | $ | 337,823 |  

NOTE 4  INCOME TAXES

The income tax benefit before extraordinary item for federal, state and foreign
taxes was $0.2 million and $3.3 million for the three months ended March 31,
2002 and 2001, respectively. The Companys effective rate of income tax
benefit before extraordinary item was 20% for the three months ended March 31,
2002 and 2001.

The income tax rate for the three months ended March 31, 2002 and 2001,
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,
the impact of research and experimentation credits, the non-recognition of tax
benefit on foreign currency translation losses, and charges relating to the
estimated portion of certain deferred tax assets that management estimates may
not be recoverable

NOTE 5  COST OF REVENUES

In the three month-period ended March 31, 2001, Golden Eagle Leasing recorded,
in cost of revenues, an incremental charge of $7.2 million to strengthen credit
reserves for certain segments of its lease receivables. This charge
represented managements estimate of potential loan losses that exceed its
historical rate of loan losses based on analysis of results through March 31,
2001. See Managements Discussion and Analysis of Financial Condition and
Results of Operations for further discussion.

Golden Eagles micro ticket leasing business is characterized by high
incidences of delinquencies, which in turn can lead to significant levels of
loan losses. However, based on historical default rates and our credit
assessments, we believe collectibility of the minimum lease payments is
reasonably predictable.

Continued losses that exceed historical trends could result in the substantial
impairment of Golden Eagles goodwill, which amounted to $20.4 million, net as
of March 31, 2002.

NOTE 6  DEBT AND EQUITY TRANSACTIONS

On March 22, 2002, the Company completed the issuance and sale of 7,870,000
shares of its common stock, par value $0.001 per share (the Shares), at a
price of $5.00 per Share. The Shares were sold in a private transaction exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended.
The shares were subsequently registered effective May 2, 2002.

The net proceeds of the private offering amounted to $36.5 million and have
been used to repay two term loans under the
Companys credit facility with principal balances of $15.3 million and $3.3
million, to repay $3.1 million in outstanding loans from a director and
principal stockholder, and to reduce the outstanding borrowings under the
Companys $25 million revolving credit facility. The remaining proceeds will
be used for general corporate purposes.

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In connection with the early retirement of our term loans, we recorded an
extraordinary loss on retirement of debt of $1.8 million, net of tax benefit of
$0.8 million. The extraordinary loss resulted from the write-off of
unamortized debt issuance costs and a loan discount associated with the term
loans.

In connection with the private offering, the Company entered into an agreement
with its principal lenders relating to its revolving credit facility which
waived any default or event of default with respect to the delivery of certain
collateral documents that the Company was obligated to deliver under the
facility and permitted the Company to repay the term loans. The effective date
of the Amendment was March 13, 2002.

NOTE 7  CURRENT AND FUTURE ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2002, the Company adopted Financial Accounting Standards
Board Statement of Accounting Standards (SFAS) 141, Business Combinations,
SFAS 142, Goodwill and Intangible Assets and SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 142 sets forth the
accounting for goodwill and intangible assets already recorded. Commencing
January 1, 2002, goodwill is no longer being amortized. Goodwill will be
tested for impairment by comparing the assets fair value to the carrying
value. Management is in the process of conducting preliminary valuations of
its reporting units and will finalize the analysis in the second
quarter of 2002. With
the adoption of SFAS 142, the Company reassessed the useful lives and residual
values of all acquired intangible assets to make any necessary amortization
period adjustments. No amortization period adjustments were necessary.

The following table reflects the reconciliation of reported net earnings and
earnings per share to the amounts adjusted for the exclusion of goodwill
amortization.

|                                            |                                             |      |                    |        |   |   |         |         |  
|------------------------------------------- | ------------------------------------------- | ---- | ------------------ | ------ | - | - | ------- | ------- | -
|                                            |                                             |      | Three Months Ended
|                                            |                                             |      | March 31,         
|                                            |                                             |      |                   
|(in thousands except per share data)        |                                             | 2002 |                    | 2001  
|                                            |                                             |      |                    |       
|Net loss                                    |                                             |      |                    |        |   |   |         |        
|                                           
|                                           
|                                           
|                                           
|Reported loss before extraordinary item     |                                             | $    | (809               | )      |   | $ | (13,253 | )      
|                                           
|                                           
|                                           
|                                           
|Add back: Goodwill amortization, net of tax |                                             |      |                   |        |   |   | 247     |        
|                                           
|                                           
|                                           
|                                           
|Extraordinary item, net of tax              |                                             |      | (1,833             | )      |   |   |        |        
|                                            |                                             |      |                    |        |   |   |         |        
|                                            | Adjusted net loss                           |      | $                  | (2,642 | ) |   | $       | (13,006 | )
|                                            |                                             |      |                    |        |   |   |         |        
|Per share of common stock                   |                                             |      |                    |        |   |   |         |        
|                                           
|                                           
|                                           
|                                           
|Basic:                                      |                                             |      |                    |        |   |   |         |        
|                                           
|                                           
|                                           
|                                           
|                                            | Reported loss before extraordinary item     |      | $                  | (0.02  | ) |   | $       | (0.39   | )
|                                           
|                                           
|                                           
|                                           
|                                            | Add back: Goodwill amortization, net of tax |      |                    |       |   |   |         | 0.01    |  
|                                           
|                                           
|                                           
|                                           
|                                            | Extraordinary item, net of tax              |      |                    | (0.05  | ) |   |         |        |  
|                                            |                                             |      |                    |        |   |   |         |        
|                                            | Adjusted net loss                           |      | $                  | (0.07  | ) |   | $       | (0.38   | )
|                                            |                                             |      |                    |        |   |   |         |        
|Diluted:                                    |                                             |      |                    |        |   |   |         |        
|                                           
|                                           
|                                           
|                                           
|                                            | Reported loss before extraordinary item     |      | $                  | (0.02  | ) |   | $       | (0.39   | )
|                                           
|                                           
|                                           
|                                           
|                                            | Add back: Goodwill amortization, net of tax |      |                    |       |   |   |         | 0.01    |  
|                                           
|                                           
|                                           
|                                           
|                                            | Extraordinary item, net of tax              |      |                    | (0.05  | ) |   |         |        |  
|                                            |                                             |      |                    |        |   |   |         |        
|                                            | Adjusted net loss                           |      | $                  | (0.07  | ) |   | $       | (0.38   | )
|                                            |                                             |      |                    |        |   |   |         |        

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SFAS 144 addresses the accounting and reporting for the impairment or disposal
of long-lived assets. The statement provides a consistent method to value
long-live assets to be disposed of and broadens the presentation of
discontinued operations to include more disposal transactions. The adoption of
SFAS 144 did not have a material effect on the Companys financial statements.




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 months ended March 31, 2002, increased $6.0 million
or 8.4% to $77.1 million from $71.1 million in the three months ended March 31,
2001. This increase was principally due to the attainment of a performance
milestone under our Brazilian Health Ministry contract resulting in revenue of
$8.6 million, or 11.2%, during the three months ended March 31, 2002, versus
$1.6 million in revenue recognized under the same contract in the first quarter
of 2001. Remaining performance milestones under this contract are expected to
be substantially less than the milestone achieved in the first quarter of 2002,
as we are now entering the maintenance phase of this contract.

Net revenues from services activities, principally derived from POS support
services, comprised less than 10% of total net revenue in both the three months
ended March 31, 2002 and 2001. Our only revenues from long-term
contracts in these periods were derived from our contract with the Brazilian
Health Ministry as discussed previously.

COST OF REVENUE

Cost of revenue includes the cost of raw materials, manufacturing labor,
overhead and subcontracted manufacturing costs, as well as interest expense and
loan loss provisions with respect to direct financing leases. For the three
months ended March 31, 2002, costs of revenue decreased $3.3 million or 6.3% to
$49.8 million from $53.1 million for the three months ended March 31, 2001.
Gross margin increased $9.3 million for the three months ended March 31, 2002,
compared to the same period in the prior year.

The current period reduction in cost on higher net revenues reflected the
effect of an incremental charge, in addition to the normal loan loss provisions
recorded in cost of revenues, of $7.2 million in the three months ended March
31, 2001, to strengthen credit reserves for certain segments of Golden Eagles
direct finance lease receivables. This incremental charge represented
managements estimate of potential loan losses that would exceed its historical
rate of loan losses based on analysis of results through March 31, 2001.

9



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The factors contributed to Golden Eagles decision in the first quarter of 2001
to strengthen credit reserves:



| |  |  | We identified several new vendor programs established in 2000, that
were experiencing losses at higher than historic loss levels for other
vendor programs. These programs required that independent sales
organizations provide additional services to the merchants (lessees) as
part of the lease program. To the extent that service levels were not
as the merchants expected, the likelihood of their making required
lease payments was reduced. Losses for these programs began to exceed
historical levels as of the quarter ended March 31, 2001;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Leases funded for electronic payments software, such as payment
software loaded into a personal computer without the need for a
terminal, were at higher funding levels in 2000 than in previous years.
Performance on these leases worsened in the first quarter of 2001;                                                                                                                                                                                                                                                                                 
|
| |  |  | The overall credit mix of the portfolio was slightly skewed (a few
percentage points) toward higher risk credits, commonly referred to as
C and D rated credits. C and D credit leases booked in the year 2000
were performing significantly worse than C and D credits booked in
previous years; and                                                                                                                                                                                                                                                      
|
| |  |  | The overall softening of the economy at the start of 2001, coupled
with the results of our analysis of collection status and default
trends as of March 31, 2001, also contributed to the conclusion that
the increase in reserves would be appropriate.                                                                                                                                                                                                                                                                                                   

Golden Eagles micro ticket leasing business is characterized by high
incidences of delinquencies, which in turn can lead to significant levels of
loan losses. However, based on historical default rates and our credit
assessments, we believe collectibility of the minimum lease payments is
reasonably predictable.

Continued losses that exceed historical trends could result in the substantial
impairment of Golden Eagles goodwill, which amounted to $20.4 million, net as
of March 31, 2002.

As a percentage of revenue, gross margin increased from 25.2% in the three
months ended March 31, 2001 to 35.4% for the three months ended March 31, 2002.
Exclusive of the $7.2 million incremental credit reserve, the gross margin
percentage for the three months ended March 31, 2001 was 35.4%.

The gross margin of 35.4% for the first quarter of 2002 reflects an improvement
of gross margin in our terminal and services business, offset by the lower
margin on the Brazilian Health Ministry contract revenue recorded in the first
quarter of 2002. Exclusive of the revenue and gross margin attributed to the
Brazilian Health Ministry contract our gross margin was 38.7% for the three
months ended March 31, 2002, compared to 36% for the same period in the prior
year, after excluding the credit reserve and Brazilian Health Ministry revenue
and gross margin. This improvement can be attributed to production
efficiencies, more cost effective engineering of our products and improved
selling prices in certain of our service operations.

RESEARCH AND DEVELOPMENT

Research and development expenses consist mainly of software and hardware
engineering costs and the cost of development personnel. Research and
development expenses for the three months ended March 31, 2002 decreased $1.9
million or 22.5% to $6.4 million from $8.3 million for the three months ended
March 31, 2001. This decrease is directly attributable to our cost cutting
efforts of reducing personnel and curtailing spending for research and
development materials. Since substantially all development activities related
to the introduction of the ICE product family and the ePic initiative are
complete, the overall level of research and development activities has been
reduced. Present development activities are primarily focusing on reducing the
component costs of existing product and to a much lesser extent, new product
introductions.

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 $18.3 million for the three months ended March 31, 2002,
compared to $21.5 million for the comparative three months in the prior year.
This $3.2 million or 14.9% decrease is attributable to worldwide cost
containment measures.

10



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##### Table of Contents



INCOME (LOSS) FROM OPERATIONS

Income from operations for the three months ended March 31, 2002 increased
$14.4 million to $2.6 million compared to a loss of $11.8 million for the same
three months in the prior year. The increase resulted primarily from the gross
margin improvement and expense reductions when compared to the same quarter of
the prior year.

NET INTEREST, FOREIGN CURRENCY LOSSES AND OTHER ITEMS

The Company incurred interest expense of $2.0 million during the three months
ended March 31, 2002, which consisted primarily of interest on borrowings for
long-term debt, amortization of loan discounts from warrants issued and debt
issuance costs. Other expenses in the amount of $1.3 million, for the three
months ended March 31, 2001, consisted primarily of charges associated with the
requirements under the debt forbearance agreements and other related costs
associated with being in default with our lenders at that time. During the
first quarter 2002, we were not in default with our lenders and accordingly did
not incur default related costs. Foreign currency loss of $1.6 million during
the three months ended March 31, 2002, resulted principally from the
devaluation of the Argentine Peso, which accounted for $1.0 million of the
translation loss.

INCOME TAXES

The income tax benefit before extraordinary item for federal, state and foreign
taxes was $0.2 million and $3.3 million for the three months ended March 31,
2002 and 2001, respectively. The Companys effective rate of income tax
benefit before extraordinary item was 20% for the three months ended March 31,
2002 and 2001.

The income tax rate for the three months ended March 31, 2002 and 2001,
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,
the impact of research and experimentation credits, the non-recognition of tax
benefit on foreign currency translation losses, and charges relating to the
estimated portion of certain deferred tax assets that management estimates may
not be recoverable.

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.

Cash used in operations for the three months ended March 31, 2002 was $0.4
million compared to cash provided by operations of $8.0 million for the three
months ended March 31, 2001. The principal reason for the change in operating
cash flow between 2002 and 2001 was the increase in accounts receivable.
Accounts receivable increased mainly as a result of our attainment of the
performance milestone under our Brazilian Health Ministry contract at the end
of March 2002, which exceeded the milestone attained at the end of March 2001
by approximately $7.0 million. This resulted in a use of operating cash for the
three months ended March 31, 2002, which was greater than the same period in
the prior year. Such performance milestones are based on approval from the
Brazilian Health Ministry, after full delivery of products and services for
each scheduled performance milestone. Payment is generally received within
four to six months after such approval. Payment terms on our terminal product
sales generally range from net 30 to 60 days depending on the circumstances of
each order.

The Company used $1.3 million in investing activities for the three months
ended March 31, 2002 compared to cash used in investing of $2.4 million for the
three months ended March 31, 2001. Capital expenditures totaled $1.9 million
for the three months ended March 31, 2002, compared to $0.2 million for the
three months ended March 31, 2001. Expenditures in 2002 were principally for
upgrades to computer software and equipment. Depreciation expense was $2.4
million and $2.3 million for the three months ended March 31, 2002 and 2001,
respectively.

Cash provided by financing activities was $4.5 million for the three months
ended March 31, 2002, compared to cash used in financing activities of $11.1
million for the three months ended March 31, 2001. This improvement of $15.6
million reflects our
ability to utilize our credit facility in 2002 versus having significant
restrictions in place during 2001, and the issuance and sale of stock during
the three months ended March 31, 2002, as discussed below. Long-term debt
decreased $31.5 million to $36.4 million at March 31, 2002, from $67.9 million
at December 31, 2001, principally as a result of repaying the debt with
proceeds

11



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from the sale of stock. At March 31, 2002, working capital and cash
was $150.6 million and $15.8 million, respectively, compared to $133.8 and
$13.4 million at December 31, 2001, respectively.

On March 22, 2002, the Company completed the issuance and sale of 7,870,000
shares of its common stock, par value $0.001 per share (the Shares), at a
price of $5.00 per Share. The Shares were sold in a private transaction exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended.
The shares were subsequently registered effective May 2, 2002.

The net proceeds of the private offering amounted to $36.5 million and have
been used to repay two term loans with principal balances of $15.3 million and
$3.3 million, respectively, under the Companys credit facility, to repay $3.1
million in outstanding loans from a director and principal stockholder, and to
reduce the outstanding borrowings under the Companys $25 million revolving
credit facility. The remaining proceeds will be used for general corporate
purposes.

In connection with the early retirement of our term loans, we recorded an
extraordinary loss on retirement of debt of $1.8 million, net of tax benefit of
$0.8 million. The extraordinary loss resulted from the write-off of
unamortized debt issuance costs and a loan discount associated with the term
loans.

Further, in connection with the private offering, the Company entered into an
agreement with its principal lenders relating to its revolving credit facility
which waived any default or event of default with respect to the delivery of
certain collateral documents that the Company was obligated to deliver under
the facility and permitted the Company to repay the term loans. The effective
date of the Amendment was March 13, 2002.

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

BACKLOG

As of March 31, 2002, Hypercom had backlog of $61.0 million, compared to $163.0
million at March 31, 2001. This decrease is due to deliveries under prior
sales orders and the timing of new orders with several large customers that
were pending completion as of March 31, 2002.

The Company includes in its backlog all revenue specified in signed contracts
and purchase 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, as
the majority of its holdings are short-term in nature.

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. The
Company incurred translation losses of $1.6 million during the quarter ended
March 31, 2002, principally due to the continued devaluation of the Argentine
Peso, which accounted for $1.0 million of the translation loss.

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.

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PART II  OTHER INFORMATION




Item 2. Changes in Securities and Use of Proceeds

(c)  On March 22, 2002, the Company completed a private offering of
7,870,000 shares of its common stock at the price of $5.00 per share.
Information regarding this private offering is incorporated herein by reference
to the Companys Current Report on Form 8-K, filed on March 27, 2002.

Also see Note 6 to Consolidated Financial Statements in Item 1 of Part I of
this Report and Managements Discussion and Analysis of Financial Condition and
Results of Operations Liquidity and Capital Resourcesin Item 2 of Part I of
this Report for additional information regarding the sale of such equity
securities.




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 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            |  | Amended and Restated Bylaws of Hypercom Corporation (incorporated by
reference to Exhibit 3.2 to Hypercom Corporations Annual Report on Form
10-K for the fiscal year ended December 31, 2001).               
|               |  |                                                                                                                                                                                                                
|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           |  | Amendment No. 1, dated March 31, 2002, to Loan and Security Agreement and
Consents, dated August 28, 2001, among Congress Financial Corporation,
Golden Eagle Leasing Inc., and Hypercom Corporation.          
|               |  |                                                                                                                                                                                                                
|10.2           |  | Second amendment, dated March 28, 2002, to Loan and Security Agreement,
dated August 24, 2001, between Golden Eagle Leasing, Inc. and Webster
Bank.                                                            
|               |  |                                                                                                                                                                                                                
|11.1           |  | Statement re Computation of Per Share Earnings.                                                                                                                                                                
|               |  |                                                                                                                                                                                                                
|99.1           |  | Cautionary Statement Regarding Forward-Looking Statements and Risk Factors.                                                                                                                                    

(b)  The Company filed Reports on Form 8-K during the quarter ended March 31, 2002, as follows:

     February 14, 2001, reporting in Item 5 its financial results for the fourth quarter and year ended December 31, 2001.

     February 19, 2002, reporting in Item 5 an amendment to its principal credit facility.

     March 27, 2002, reporting in Item 5 the completion of a private offering of common stock.

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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: May 10, 2002 |  | By: /s/ John W. Smolak
John W. Smolak                                                                                                        
|                  
|                  
|                  
|                  
|                   |  |                                                                                                                                              
|                  
|                  
|                  
|                  
|                   |  | Executive Vice President, Chief
Financial Officer, and Chief
Administrative Officer (duly
authorized officer and Principal
Financial Officer)

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##### Table of Contents






EXHIBIT INDEX

|               |  |                                                                                                                                                                                                                
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                
|
|               |  |                                                                                                                                                                                                                
|               |  |                                                                                                                                                                                                                
|3.2            |  | Amended and Restated Bylaws of Hypercom Corporation (incorporated by
reference to Exhibit 3.2 to Hypercom Corporations Annual Report on Form
10-K for the fiscal year ended December 31, 2001).               
|               |  |                                                                                                                                                                                                                
|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           |  | Amendment No. 1, dated March 31, 2002, to Loan and Security Agreement and
Consents, dated August 28, 2001, among Congress Financial Corporation,
Golden Eagle Leasing Inc., and Hypercom Corporation.*         
|               |  |                                                                                                                                                                                                                
|10.2           |  | Second amendment, dated March 28, 2002, to Loan and Security Agreement,
dated August 24, 2001, between Golden Eagle Leasing, Inc. and Webster
Bank.*                                                           
|               |  |                                                                                                                                                                                                                
|11.1           |  | Statement re Computation of Per Share Earnings.*                                                                                                                                                               
|               |  |                                                                                                                                                                                                                
|99.1           |  | Cautionary Statement Regarding Forward-Looking Statements and Risk Factors.*                                                                                                                                   



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|* |  | Filed herewith.
|- |  | ---------------

15