##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

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

For the quarterly period ended: March 31, 2003.

OR

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

For the transition period from         to         .

Commission file number: 1-13521

HYPERCOM CORPORATION

(Exact name of registrant as specified in its charter)


|                                |  |                        
|------------------------------- |  | -----------------------
|Delaware                        |  | 86-0828608             
|(State or other jurisdiction of |  | (I.R.S. Employer       
|incorporation or organization)  |  | 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 [X]  No  [   ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes [X]  No [   ]


Number of shares of the
registrants common stock, $.001 par value per share,outstanding
as of May 13, 2003,
was 48,258,759.





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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                           
|                               | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION   
|                               | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                    
|CERTIFICATION                 
|EXHIBIT INDEX                 
|EX-10.1                       
|EX-99.1                       
|EX-99.2                       
|EX-99.3                       



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INDEX

|         |  |                                                                                       |  |     
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                       |  | Page
|PART I.  |  | FINANCIAL INFORMATION                                                                 |  |     
|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 |  | 11  
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market
Risk                            |  | 14  
|Item 4.  |  | Controls and Procedures                                                               |  | 15  
|PART II. |  | OTHER INFORMATION                                                                     |  | 15  
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                      |  | 15  
|         |  | SIGNATURES                                                                            |  | 16  
|         |  | CERTIFICATION  Chief Executive Officer                                               |  | 17  
|         |  | CERTIFICATION  Chief Financial Officer                                               |  | 18  
|         |  | EXHIBIT INDEX                                                                         |  | 19  

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, 2003 |         |                   |   |        
|                                           |                                                                                                                                                                  |   | (unaudited)    |         | December 31, 2002
|                                           |                                                                                                                                                                  |   |                |         |                  
|ASSETS                                     |                                                                                                                                                                  |   |                |         |                   |   |         |        
|Current assets:                            |                                                                                                                                                                  |   |                |         |                   |   |         |        
|                                           | Cash and cash equivalents                                                                                                                                        |   | $              | 37,329  |                   |   | $       | 23,069  |  
|                                           | Restricted cash                                                                                                                                                  |   |                | 5,548   |                   |   |         | 6,777   |  
|                                           | Accounts receivable, net of allowance for
doubtful accounts of $3,638 and $3,282                                                                                 |   |                | 53,812  |                   |   |         | 56,007  |  
|                                           | Current portion of net investment in direct financing leases                                                                                                     |   |                | 10,375  |                   |   |         | 11,812  |  
|                                           | Current portion of net investment in sales-type leases                                                                                                           |   |                | 10,027  |                   |   |         | 9,774   |  
|                                           | Inventories, net                                                                                                                                                 |   |                | 39,353  |                   |   |         | 46,406  |  
|                                           | Income tax receivable                                                                                                                                            |   |                | 857     |                   |   |         | 9,118   |  
|                                           | Prepaid taxes                                                                                                                                                    |   |                | 416     |                   |   |         | 425     |  
|                                           | Prepaid expenses and other current assets                                                                                                                        |   |                | 16,762  |                   |   |         | 14,857  |  
|                                           | Long lived assets - held for sale                                                                                                                                |   |                | 653     |                   |   |         | 660     |  
|                                           | Assets of discontinued operations - held for sale                                                                                                                |   |                | 8,390   |                   |   |         | 8,834   |  
|                                           |                                                                                                                                                                  |   |                |         |                   |   |         |         |  
|Total current assets                       |                                                                                                                                                                  |   | 183,522        |         |                   |   | 187,739 |        
|                                           | Property, plant and equipment, net                                                                                                                               |   |                | 31,867  |                   |   |         | 30,214  |  
|                                           | Long-term marketable securities, at market                                                                                                                       |   |                | 152     |                   |   |         | 152     |  
|                                           | Net investment in direct financing leases                                                                                                                        |   |                | 13,264  |                   |   |         | 15,392  |  
|                                           | Net investment in sales-type leases                                                                                                                              |   |                | 11,307  |                   |   |         | 11,213  |  
|                                           | Intangible assets, net                                                                                                                                           |   |                | 4,282   |                   |   |         | 4,633   |  
|                                           | Other long-term assets                                                                                                                                           |   |                | 9,269   |                   |   |         | 10,660  |  
|                                           |                                                                                                                                                                  |   |                |         |                   |   |         |         |  
|Total assets                               |                                                                                                                                                                  | $ | 253,663        |         |                   | $ | 260,003 |        
|                                           |                                                                                                                                                                  |   |                |         |                   |   |         |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                                                                                                                                                  |   |                |         |                   |   |         |        
|Current liabilities:                       |                                                                                                                                                                  |   |                |         |                   |   |         |        
|                                           | Accounts payable                                                                                                                                                 |   | $              | 19,106  |                   |   | $       | 20,553  |  
|                                           | Accrued payroll and related expenses                                                                                                                             |   |                | 5,711   |                   |   |         | 6,419   |  
|                                           | Accrued sales and other taxes                                                                                                                                    |   |                | 7,002   |                   |   |         | 7,187   |  
|                                           | Accrued liabilities                                                                                                                                              |   |                | 7,161   |                   |   |         | 6,572   |  
|                                           | Deferred revenue                                                                                                                                                 |   |                | 2,158   |                   |   |         | 1,999   |  
|                                           | Income taxes payable                                                                                                                                             |   |                | 1,339   |                   |   |         | 1,707   |  
|                                           | Current portion of long-term debt                                                                                                                                |   |                | 10,634  |                   |   |         | 13,331  |  
|                                           | Liabilities of discontinued operations - held for sale                                                                                                           |   |                | 1,131   |                   |   |         | 649     |  
|                                           |                                                                                                                                                                  |   |                |         |                   |   |         |         |  
|Total current liabilities                  |                                                                                                                                                                  |   | 54,242         |         |                   |   | 58,417  |        
|                                           | Long-term debt                                                                                                                                                   |   |                | 10,570  |                   |   |         | 11,694  |  
|                                           | Other non-current liabilities                                                                                                                                    |   |                | 1,672   |                   |   |         | 777     |  
|                                           |                                                                                                                                                                  |   |                |         |                   |   |         |         |  
|Total liabilities                          |                                                                                                                                                                  |   | 66,484         |         |                   |   | 70,888  |        
|Stockholders equity:                      |                                                                                                                                                                  |   |                |         |                   |   |         |        
|                                           | Common stock, $.001 par value; 100,000,000 shares authorized;
48,050,108 and 48,014,350 shares outstanding at March 31,
2003 and December 31, 2002, respectively |   |                | 27      |                   |   |         | 27      |  
|                                           | Additional paid-in capital                                                                                                                                       |   |                | 214,100 |                   |   |         | 214,008 |  
|                                           | Receivables from stockholders                                                                                                                                    |   |                | (1,056  | )                 |   |         | (1,056  | )
|                                           | Accumulated deficit                                                                                                                                              |   |                | (23,390 | )                 |   |         | (21,362 | )
|                                           |                                                                                                                                                                  |   |                |         |                   |   |         |         |  
|                                           |                                                                                                                                                                  |   | 189,681        |         |                   |   | 191,617 |        
|                                           | Treasury stock, 230,088 shares (at cost)                                                                                                                         |   |                | (2,502  | )                 |   |         | (2,502  | )
|                                           |                                                                                                                                                                  |   |                |         |                   |   |         |         |  
|Total stockholders equity                 |                                                                                                                                                                  |   | 187,179        |         |                   |   | 189,115 |        
|                                           |                                                                                                                                                                  |   |                |         |                   |   |         |         |  
|Total liabilities and stockholders equity |                                                                                                                                                                  | $ | 253,663        |         |                   | $ | 260,003 |        
|                                           |                                                                                                                                                                  |   |                |         |                   |   |         |         |  

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

3



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

|                                                                                                    |                                                                                             |                          |        |                              |        |      |         |         |        | 
|--------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------ | ------ | ---------------------------- | ------ | ---- | ------- | ------- | ------ | 
|                                                                                                    |                                                                                             |                          |        | Three Months Ended March 31,
|                                                                                                    |                                                                                             |                          |        |                             
|                                                                                                    |                                                                                             |                          |        | 2003                         |        | 2002
|                                                                                                    |                                                                                             |                          |        |                              |        |     
|Net revenue                                                                                         |                                                                                             | $                        | 55,701 |                              |        | $    | 70,773  |        
|Costs and expenses:                                                                                 |                                                                                             |                          |        |                              |        |      |         |        
|                                                                                                    | Costs of revenue                                                                            |                          |        | 32,321                       |        |      |         | 43,253  |       
|                                                                                                    | Research and development                                                                    |                          |        | 5,813                        |        |      |         | 6,129   |       
|                                                                                                    | Selling, general and administrative                                                         |                          |        | 16,827                       |        |      |         | 16,978  |       
|                                                                                                    |                                                                                             |                          |        |                              |        |      |         |        
|                                                                                                    |                                                                                             | Total costs and expenses |        |                              | 54,961 |      |         |         | 66,360 | 
|                                                                                                    |                                                                                             |                          |        |                              |        |      |         |        
|Income from continuing operations                                                                   |                                                                                             |                          | 740    |                              |        |      | 4,413   |        
|                                                                                                    | Interest income                                                                             |                          |        | 78                           |        |      |         | 16      |       
|                                                                                                    | Interest expense                                                                            |                          |        | (601                         | )      |      |         | (1,978  | )     
|                                                                                                    | Loss on early extinguishment of debt                                                        |                          |        |                             |        |      |         | (2,618  | )     
|                                                                                                    | Other income (expense)                                                                      |                          |        | (157                         | )      |      |         | 219     |       
|                                                                                                    | Foreign currency loss                                                                       |                          |        | (463                         | )      |      |         | (1,592  | )     
|                                                                                                    |                                                                                             |                          |        |                              |        |      |         |        
|Loss before taxes, discontinued operations,
and cumulative effect of change in accounting principle |                                                                                             |                          | (403   | )                            |        |      | (1,540  | )      
|                                                                                                    | (Provision) benefit for income taxes                                                        |                          |        | (690                         | )      |      |         | 634     |       
|                                                                                                    |                                                                                             |                          |        |                              |        |      |         |        
|Loss before discontinued operations and cumulative effect of
change in accounting principle         |                                                                                             |                          | (1,093 | )                            |        |      | (906    | )      
|                                                                                                    | Loss from discontinued operations, net of related tax
benefit of $354 in 2002               |                          |        | (937                         | )      |      |         | (1,736  | )     
|                                                                                                    | Cumulative effect of change in accounting principle                                         |                          |        |                             |        |      |         | (21,766 | )     
|                                                                                                    |                                                                                             |                          |        |                              |        |      |         |        
|Net loss                                                                                            |                                                                                             | $                        | (2,030 | )                            |        | $    | (24,408 | )      
|                                                                                                    |                                                                                             |                          |        |                              |        |      |         |        
|Loss per share - basic and diluted:                                                                 |                                                                                             |                          |        |                              |        |      |         |        
|                                                                                                    | Loss before discontinued operations and cumulative effect of
change in accounting principle |                          | $      | (0.02                        | )      |      | $       | (0.02   | )     
|                                                                                                    | Loss from discontinued operations                                                           |                          |        | (0.02                        | )      |      |         | (0.04   | )     
|                                                                                                    | Cumulative effect of change in accounting principle                                         |                          |        |                             |        |      |         | (0.54   | )     
|                                                                                                    |                                                                                             |                          |        |                              |        |      |         |        
|Loss per share                                                                                      |                                                                                             | $                        | (0.04  | )                            |        | $    | (0.60   | )      
|                                                                                                    |                                                                                             |                          |        |                              |        |      |         |        
|                                                                                                    | Weighted average common shares - basic and diluted                                          |                          |        | 48,043                       |        |      |         | 40,639  |       
|                                                                                                    |                                                                                             |                          |        |                              |        |      |         |        

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

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

|                                                                                |                                                            |                                                     |        |                              |        |      |        |         |       |  
|------------------------------------------------------------------------------- | ---------------------------------------------------------- | --------------------------------------------------- | ------ | ---------------------------- | ------ | ---- | ------ | ------- | ----- | -
|                                                                                |                                                            |                                                     |        | Three Months Ended March 31,
|                                                                                |                                                            |                                                     |        |                             
|                                                                                |                                                            |                                                     |        | 2003                         |        | 2002
|                                                                                |                                                            |                                                     |        |                              |        |     
|Cash flows from continuing operations:                                          |                                                            |                                                     |        |                              |        |      |        |        
|                                                                                | Net loss from continuing operations                        |                                                     | $      | (1,093                       | )      |      | $      | (22,672 | )    
|Adjustments to reconcile net loss to net cash provided by
operating activities: |                                                            |                                                     |        |                              |        |      |        |        
|                                                                                | Depreciation/amortization                                  |                                                     |        | 2,634                        |        |      |        | 2,859   |      
|                                                                                | Amortization of deferred financing costs                   |                                                     |        | 366                          |        |      |        | 697     |      
|                                                                                | Amortization of discount on note payable                   |                                                     |        |                             |        |      |        | 83      |      
|                                                                                | Bad debt expense                                           |                                                     |        | 1,120                        |        |      |        | 1,087   |      
|                                                                                | Deferred components of direct financing leases             |                                                     |        | (66                          | )      |      |        | (142    | )    
|                                                                                | Provision for losses on direct financing leases            |                                                     |        | 1,639                        |        |      |        | 2,559   |      
|                                                                                | Provision for losses on sales-type leases                  |                                                     |        | 161                          |        |      |        |        |      
|                                                                                | Provision for excess and obsolete inventory                |                                                     |        | 706                          |        |      |        | 988     |      
|                                                                                | Foreign currency loss                                      |                                                     |        | 463                          |        |      |        | 1,592   |      
|                                                                                | Loss on early extinguishment of debt                       |                                                     |        |                             |        |      |        | 2,618   |      
|                                                                                | Cumulative effect of change in accounting principle        |                                                     |        |                             |        |      |        | 21,766  |      
|                                                                                | Other                                                      |                                                     |        |                             |        |      |        | 61      |      
|Changes in operating assets and liabilities                                     |                                                            |                                                     | 11,582 |                              |        |      | (9,822 | )      
|                                                                                |                                                            |                                                     |        |                              |        |      |        |         |      
|                                                                                |                                                            | Net cash provided by operating activities           |        |                              | 17,512 |      |        |         | 1,674 |  
|Cash flows from investing activities:                                           |                                                            |                                                     |        |                              |        |      |        |        
|                                                                                | Principal payments received on direct financing leases     |                                                     |        | 3,117                        |        |      |        | 3,204   |      
|                                                                                | Funding of direct financing leases                         |                                                     |        | (1,722                       | )      |      |        | (2,080  | )    
|                                                                                | (Increase) decrease in restricted cash                     |                                                     |        | 1,229                        |        |      |        | (462    | )    
|                                                                                | Acquisition of other assets                                |                                                     |        | (465                         | )      |      |        | (437    | )    
|                                                                                | Purchase of property, plant & equipment                    |                                                     |        | (2,009                       | )      |      |        | (1,468  | )    
|                                                                                | Payments received on notes receivable                      |                                                     |        |                             |        |      |        | 348     |      
|                                                                                |                                                            |                                                     |        |                              |        |      |        |         |      
|                                                                                |                                                            | Net cash provided by (used in) investing activities |        |                              | 150    |      |        |         | (895  | )
|Cash flows from financing activities:                                           |                                                            |                                                     |        |                              |        |      |        |        
|                                                                                | Borrowings on revolving line of credit                     |                                                     |        | 59,627                       |        |      |        | 37,235  |      
|                                                                                | Repayments on revolving line of credit                     |                                                     |        | (59,627                      | )      |      |        | (44,125 | )    
|                                                                                | Repayment of bank notes payable and other debt instruments |                                                     |        | (3,815                       | )      |      |        | (25,844 | )    
|                                                                                | Advances (to)/from discontinued operations                 |                                                     |        | 268                          |        |      |        | (2,092  | )    
|                                                                                | Proceeds from issuance of common stock                     |                                                     |        | 92                           |        |      |        | 36,870  |      
|                                                                                |                                                            |                                                     |        |                              |        |      |        |         |      
|                                                                                |                                                            | Net cash (used in) provided by financing activities |        |                              | (3,455 | )    |        |         | 2,044 |  
|Effect of exchange rate changes on cash                                         |                                                            |                                                     | 69     |                              |        |      | (380   | )      
|                                                                                |                                                            |                                                     |        |                              |        |      |        |         |      
|Net increase in cash flows from continuing operations                           |                                                            |                                                     | 14,276 |                              |        |      | 2,443  |        
|Net decrease in cash flows from discontinued operations                         |                                                            |                                                     | (16    | )                            |        |      | (93    | )      
|Cash and cash equivalents, beginning of period                                  |                                                            |                                                     | 23,069 |                              |        |      | 13,402 |        
|                                                                                |                                                            |                                                     |        |                              |        |      |        |         |      
|Cash and cash equivalents, end of period                                        |                                                            | $                                                   | 37,329 |                              |        | $    | 15,752 |        
|                                                                                |                                                            |                                                     |        |                              |        |      |        |         |      

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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 the Companys 2002 results of
operations and balance sheets of the loss on early extinguishment of debt (Note
8) and the cumulative effect of change in accounting principle (Note 7).
Operating results for the three months ended March 31, 2003, are not
necessarily indicative of the results to be expected for the year ending
December 31, 2003.

Certain prior year amounts have been reclassified to conform to the current
period presentation, including the results of operations and cash flows of the
Companys discontinued operations.

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, 2002.

NOTE 2  NEW AND PROPOSED ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2003 the
Company adopted SFAS 145,Rescission of FASB
Statements No.4, 44 and 64, amendment of FASB Statement No.13, and Technical
Corrections, which among other things, restricts the classification of gains
and losses from extinguishment of debt as extraordinary to only those
transactions that are unusual and infrequent in nature as defined by APB
Opinion No. 30. Upon adoption, gains and losses on certain future debt
extinguishment, if any, will be recorded in pre-tax income. In accordance with
the provisions of SFAS 145, the Company reclassified its $2.6 million
extraordinary loss from early extinguishment of debt for the three months ended
March 31, 2002 to pre-tax loss (see Note 8).

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities, an interpretation of Accounting Research Bulletin No. 51.
FIN No. 46 requires certain variable interest entities, or VIEs, to be
consolidated by the primary beneficiary of the entity if the equity investors
in the entity do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its

activities without additional subordinated financial support from other
parties. FIN No. 46 is effective for all VIEs created or acquired after January
31, 2003. For VIEs created or acquired prior to February 1, 2003, the
provisions of FIN No. 46 must be applied for the first interim or annual period
beginning after June 15, 2003. The Company currently has no contractual
relationship or other business relationship with a variable interest entity and
therefore the adoption of FIN No. 46 is not expected to have a material effect
on the Companys consolidated financial position, results of operations or cash
flows.

NOTE 3  STOCK-BASED COMPENSATION

Statement of Financial Accounting
Standards No. 123,Accounting for Stock-Based
Compensation, (SFAS 123) defines a fair value based method of accounting for
employee stock options or similar equity instruments. However, it also allows
an entity to continue to account for these plans according to Accounting
Principles Board Opinion No. 25 (APB 25) and related interpretations, provided
pro forma disclosures of net income are made as if the fair value based method
of accounting, defined by SFAS 123, had been applied.

The Company has elected to continue to measure compensation expense related to
employee stock purchase options using APB 25 and related interpretations. The
following table represents the effect on net losses and loss per share if the
Company had applied the fair value method and recognition provisions of SFAS
123 to stock based employee compensation (amounts in thousands, except share
data):

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|                                             |                                                                                                                                                         |   |                              |        |      |   |         |        |  
|-------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------------------------- | ------ | ---- | - | ------- | ------ | -
|                                             |                                                                                                                                                         |   | Three Months Ended March 31,
|                                             |                                                                                                                                                         |   |                             
|                                             |                                                                                                                                                         |   | 2003                         |        | 2002
|                                             |                                                                                                                                                         |   |                              |        |     
|Net loss, as reported                        |                                                                                                                                                         | $ | (2,030                       | )      |      | $ | (24,408 | )     
|                                             | Deduct: Total stock-based employee
compensation expense determined under
fair value methods for all awards, net of
tax in 2002 (no tax benefit in 2003) |   |                              | (1,428 | )    |   |         | (1,575 | )
|                                             |                                                                                                                                                         |   |                              |        |      |   |         |       
|Pro forma net loss                           |                                                                                                                                                         | $ | (3,458                       | )      |      | $ | (25,983 | )     
|                                             |                                                                                                                                                         |   |                              |        |      |   |         |       
|Net loss per share:                          |                                                                                                                                                         |   |                              |        |      |   |         |       
|                                             | Basic and diluted, as reported                                                                                                                          |   | $                            | (0.04  | )    |   | $       | (0.60  | )
|                                             | Basic and diluted, pro forma                                                                                                                            |   | $                            | (0.07  | )    |   | $       | (0.64  | )
|Weighted average shared used in computation: |                                                                                                                                                         |   |                              |        |      |   |         |       
|                                             | Basic and diluted                                                                                                                                       |   |                              | 48,043 |      |   |         | 40,639 |  

As required, the pro forma disclosures above include options granted since
January 1, 1995. Consequently, the effects of applying SFAS 123 for providing
pro forma disclosures may not be representative of the effects on reported net
income for future years until all options outstanding are included in the pro
forma disclosures. For purposes of pro forma disclosures, the estimated fair
value of stock-based compensation plans and other options is amortized to
expense primarily over the vesting period. See Note 16 of the Companys Annual
Report on Form 10-K for the year ended December 31, 2002 for further discussion
of the Companys stock-based employee compensation.

NOTE 4  INVENTORIES

Inventories consist of the following (dollars in thousands):

|                 |  |                |        |                   |  |   |        | 
|---------------- |  | -------------- | ------ | ----------------- |  | - | ------ | 
|                 |  | March 31, 2003 |        | December 31, 2002
|                 |  |                |        |                  
|Purchased parts  |  | $              | 12,252 |                   |  | $ | 15,715 | 
|Work in progress |  |                | 4,583  |                   |  |   | 4,986  | 
|Finished goods   |  |                | 22,518 |                   |  |   | 25,705 | 
|                 |  |                |        |                   |  |   |        | 
|                 |  | $              | 39,353 |                   |  | $ | 46,406 | 
|                 |  |                |        |                   |  |   |        | 

NOTE 5  SEGMENT INFORMATION

As of March 31, 2003, the Company had two segments: Point-of-Sale (POS)/Network
Systems and Direct-Finance Leasing. POS Systems develops, manufactures,
markets, and supports products that automate electronic payment transactions at
the point of sale in merchant establishments as well as supporting
non-payment applications and new markets, including government,
education and healthcare. Network Systems develops,
manufactures, markets, and supports enterprise-networking systems.
Direct-finance leasing includes the activities of our direct finance lease
subsidiary, Golden Eagle.

The Companys reportable segments are strategic business units that market
distinctly different products and services to a respectively different group of
customers. Their business models vary and each is separately managed given
their unique marketing, operations and financing strategies. The POS/Network
Systems segment information excludes the results of the operating units that
have been discontinued as more fully described in Note 6. The following table
presents certain segment financial information (dollars in thousands):

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As of and for the three months ended March 31, 2003:

|                                         |  |             |         |                |  |           |        |       |  |   |        |   |  |   |         | 
|---------------------------------------- |  | ----------- | ------- | -------------- |  | --------- | ------ | ----- |  | - | ------ | - |  | - | ------- | 
|                                         |  | POS/Network |         | Direct-Finance |  |           |        |       |  |   |        |  
|                                         |  | Systems     |         | Leasing        |  | Corporate |        | Total
|                                         |  |             |         |                |  |           |        |      
|Revenue from external customers          |  | $           | 49,796  |                |  | $         | 5,905  |       |  | $ |       |   |  | $ | 55,701  | 
|Income (loss) from continuing operations |  |             | 4,148   |                |  |           | 1,688  |       |  |   | (5,096 | ) |  |   | 740     | 
|Segment assets                           |  |             | 170,692 |                |  |           | 40,819 |       |  |   | 42,152 |   |  |   | 253,663 | 

As of and for the three months ended March 31, 2002:

|                                         |  |             |         |                |  |           |        |       |  |   |        |   |  |   |         | 
|---------------------------------------- |  | ----------- | ------- | -------------- |  | --------- | ------ | ----- |  | - | ------ | - |  | - | ------- | 
|                                         |  | POS/Network |         | Direct-Finance |  |           |        |       |  |   |        |  
|                                         |  | Systems     |         | Leasing        |  | Corporate |        | Total
|                                         |  |             |         |                |  |           |        |      
|Revenue from external customers          |  | $           | 63,898  |                |  | $         | 6,875  |       |  | $ |       |   |  | $ | 70,773  | 
|Income (loss) from continuing operations |  |             | 8,670   |                |  |           | 164    |       |  |   | (4,421 | ) |  |   | 4,413   | 
|Segment assets                           |  |             | 212,220 |                |  |           | 51,800 |       |  |   | 53,275 |   |  |   | 317,295 | 

NOTE 6  RESTRUCTURING CHARGES AND DISCONTINUED OPERATIONS

In September 2002, the Company committed to a plan to improve profits in its
POS/Network Systems segment. The plan entailed downsizing certain operations
and streamlining their product offerings, changing to a distributor sales model
versus a direct sales model in certain international locations and disposing of
unprofitable operations around the world. The profit improvement plan
encompasses both restructuring activities to be accounted and reported under
SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities,
as well as discontinued operations to be accounted and reported under SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived
Assets.

Restructuring Charges

The downsizing activities principally
focused on the Companys POS/Network Systems segment, including
our manufacturing
operations in Brazil. Such activities entailed moving to a contract
manufacturer, reducing the number of personnel and holding for sale certain
long-lived assets such as buildings and production equipment. Inventories were also written down to support a
more streamlined product offering. In addition, the Company identified certain
sales offices around the world to close in favor of a more cost-effective
distributor arrangement in those locations. Costs associated with closing these
sales offices principally included employee severance, inventory write-downs
and costs associated with exiting office space and disposing of office fixed
assets. The Company is actively marketing the assets held for sale. All other restructuring activities were completed during the fourth
quarter of 2002. Remaining unpaid balances relating to restructuring charges
were immaterial at December 31, 2002.

Discontinued Operations

In connection with the profit improvement plan, the Company identified and decided to
hold for sale certain
under-performing operating units whose activities were not
closely aligned with the Companys core business. The results of operations for these operating units
held for sale have been classified as discontinued operations and all periods
prior to September 2002 have been restated to present these operating units as
discontinued operations. At the time the Company determined to hold these
operations for sale, the carrying amounts of their assets were written down to
fair value less an estimate of costs to sell. Assets written down consisted principally of
accounts receivable, inventories, intangible assets and fixed assets. The
operations held for sale are being actively marketed to certain potential
buyers. The sales transactions are expected to be completed by
September 30, 2003 and include the sales of the operating
units shares of stock or sales of assets plus the transfer of liabilities.

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Net revenues and pretax losses of the operating units classified as
discontinued operations for the three months ended March 31, 2003 and 2002 were
$2.4 and $0.9 million, and $6.3 and $2.1 million, respectively.

The assets and liabilities of the operating units classified as discontinued
operations are separately reported in the balance sheet under the captions Net
assets of discontinued operations held for sale and Liabilities of
discontinued operations held for sale. Both captions are classified as
current due to the expected sale of these operations by September 30, 2003.
The assets and liabilities of discontinued operations held for sale consist of
the following (dollars in thousands):

|                    |  |                |       |                   |  |   |       | 
|------------------- |  | -------------- | ----- | ----------------- |  | - | ----- | 
|                    |  | March 31, 2003 |       | December 31, 2002
|                    |  |                |       |                  
|Accounts receivable |  | $              | 1,828 |                   |  | $ | 3,097 | 
|Inventory           |  |                | 5,746 |                   |  |   | 5,270 | 
|Other assets        |  |                | 816   |                   |  |   | 467   | 
|                    |  |                |       |                   |  |   |       | 
|Total assets        |  | $              | 8,390 |                   |  | $ | 8,834 | 
|                    |  |                |       |                   |  |   |       | 
|Accounts payable    |  | $              | 771   |                   |  | $ | 342   | 
|Other liabilities   |  |                | 360   |                   |  |   | 307   | 
|                    |  |                |       |                   |  |   |       | 
|Total liabilities   |  | $              | 1,131 |                   |  | $ | 649   | 
|                    |  |                |       |                   |  |   |       | 

In accordance with SFAS 144, the operating results of the discontinued
operating units will be classified as discontinued operations as they are
incurred.

NOTE 7  GOODWILL

During 2002 the Company implemented
SFAS No. 142, Goodwill and Other Intangible
Assets. Upon adoption of SFAS 142 on January 1, 2002, the carrying amount of
goodwill was $21.8 million, of which $20.3 million was attributed to Golden
Eagle, which comprises all of the Direct-Finance Leasing segment, with the
remaining amount of $1.5 million attributed to the POS/Network Systems segment.
Under the transitional provisions of SFAS 142, the Company evaluated its
reporting units for impairment of goodwill as of January 1, 2002, completing
the evaluations by June 30, 2002. The impairment test relative to Golden
Eagles goodwill was performed by an independent third party valuation firm
using market multiple, comparable transaction and discounted net earnings
methodologies, with the remaining amount of goodwill evaluated internally using
similar valuation methodologies.

The results of the impairment tests resulted in a full write-off of the
carrying value of goodwill of $21.8 million. In accordance with the transition
provisions of SFAS 142, the write-off was reported as a cumulative effect of a
change in accounting principle impacting the first quarter of 2002.

The Company provided a full valuation reserve against the deferred tax benefit
attributed to the write-off of the goodwill that had tax basis, and accordingly
did not report the cumulative effect of a change in accounting principle net of
tax. Due to the goodwill balances that had tax basis with amortizable lives
extending up to 13 years, the Company was uncertain as to whether the tax
benefits would be realized over such an extended time period. Although the
Company did not provide a tax benefit attributed to the write off of goodwill,
the tax benefit would be available to the Company in the future to the extent
sufficient taxable income is recognized in the United States.

NOTE 8  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 with the Securities and

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Exchange
Commission effective May 2, 2002.

The net proceeds of the private offering amounted to $36.5 million and were
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 revolving credit facility. The
remaining proceeds were used for general corporate purposes.

In connection with the early retirement of the term loans, the Company recorded
an extraordinary loss on retirement of debt of $2.6 million during the three
months ended March 31, 2002. In accordance with SFAS 145, Rescission of FASB
Statements No.4, 44 and 64, amendment of FASB Statement No.13, and Technical
Corrections, the Company has reclassified its $2.6 million extraordinary loss
from early extinguishment of debt for the three months ended March 31, 2002 to
pre-tax loss.

During March 2003, the Company amended its revolving credit facility to reduce
the available credit limit from $25 million to $15 million.
This reduction better matches the Companys current liquidity needs
and provides further cost savings.

NOTE 9  INCOME TAXES

Income tax (expense) benefit before discontinued operations and cumulative
effect of change in accounting principle for federal, state and foreign taxes
was ($0.7) million and $0.6 million for the three months ended March 31, 2003
and 2002, respectively. The income tax provision for the first quarter of 2003
is primarily comprised of income taxes associated with the Companys profitable
foreign locations.

As discussed in the Companys 2002 Annual Report on Form 10K, the Company
recorded full valuation reserves against the Companys unreserved deferred tax
asset balance existing at September 30, 2002. Consistent with the facts and
circumstances leading to our conclusion to provide a full valuation reserve
against our deferred tax assets in 2002, we have provided a further valuation
allowance against any net increases in deferred tax assets which in
2003 consisted principally
of net operating loss carryforwards for U.S. operating losses generated during the first quarter of
2003. Accordingly, the effective tax rate for 2003 is not meaningful. These
valuation allowances are subject to reversal in future years at such time that
the benefits are actually utilized or, the operating profits in the U.S. become
sustainable at a level that meets the recoverability criteria under SFAS 109.

The effective income tax benefit rate for the first quarter of 2002 was 40%,
which differed from the U.S. statutory rate principally due to foreign taxes
attributable to foreign operations that differed from the U.S. statutory rate.

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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 CONTINUING OPERATIONS

The results of continuing operations exclude the operations of the operating
units being reported as discontinued operations (see Note 6 to the financial
statements). Prior year results of continuing operations have been restated to
reflect the discontinued operations on a consistent basis with 2003.

NET REVENUE

Net revenue for the three months ended March 31, 2003, decreased $15.1 million
or 21% to $55.7 million from $70.8 million in the three months ended March 31,
2002. This decrease was principally due to the attainment of a performance
milestone under our Brazilian Health Ministry contract resulting in revenue of
$8.6 million during the three months ended March 31, 2002, versus $0.8 million
in revenue recognized under the same contract in the three months ended March
31, 2003. Performance milestones under this contract were substantially less
than the milestone achieved in the first quarter of 2002, as we have now
entered the maintenance phase of this contract. The additional decrease in net revenue
reflects a soft global economy, uncertainty relating to the conflict
in Iraq and the maturing of our direct finance lease portfolio.

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, 2003 and 2002. 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 and sales-type leases.
For the three months ended March 31, 2003, costs of revenue decreased $11
million or 25% to $32.3 million from $43.3 million for the three months ended
March 31, 2002. This decrease is a result of the decline in revenues year over
year offset in part by an increase in gross margin as a percentage of
revenue.

Gross margin for the three months ended March 31, 2003 was 42.0% compared to
38.9% in the same period in the prior year. The increase in the gross margin
percentage is principally attributed to our direct finance leasing segment
(Golden Eagle Leasing) whose margin was 29.7% in the first quarter of 2002
compared to a gross margin of 58.6% in the first quarter of 2003. The
improvement in Golden Eagles gross margin is a result of decreases in direct
finance lease defaults and incremental income from lease renewals as the lease portfolio matures.

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, 2003 decreased $0.3
million or 5% to $5.8 million from $6.1 million for the three months ended
March 31, 2002. This decrease is directly attributable to our

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continued cost cutting efforts of reducing personnel and curtailing spending
for research and development materials to better meet the core needs of the
Company. Present development activities are primarily focusing on the
continued reduction in the component costs of existing products and
production enhancements that support current market requirements.

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 $16.8 million for the three months ended March 31, 2003,
compared to $17.0 million for the three months in the prior year.
This $0.2 million or 1% decrease reflects our continued focus on worldwide cost
containment measures as well as general stabilization of resource requirements.

INCOME FROM CONTINUING OPERATIONS

Income from continuing operations for the quarter ended March 31, 2003
decreased $3.7 million to income of $0.7 million compared to income of $4.4
million for the same quarter in the prior year, as higher current year gross
margins and lower operating expenses were insufficient to fully offset the
decline in revenues. They also reflect a soft global economy and the effects
of the conflict in Iraq.

NET INTEREST, FOREIGN CURRENCY LOSSES AND OTHER ITEMS

The Company incurred interest expense of $0.6 million for the three months
ended March 31, 2003 compared to $2.0 million for the three
months ended March 31, 2002. Interest expense consists primarily of interest on borrowings for
long-term debt and amortization of debt issuance costs. The reduction in
interest expense year over year was principally the result of repaying $21.7
million of debt in March 2002. Other expenses in the amount of $0.2 million
for the three months ended March 31, 2003 compares to other income of $0.2
million in the same period in the prior year. These amounts reflect
various activities such as gains or losses on asset dispositions,
certain non-operating finance costs, and other non-operating activity. Foreign
currency loss for the first quarter of 2003 was $0.5 million and significantly
less than the loss of $1.6 million in the first quarter of 2002. The reduced
loss is a result of a hedging program the Company has since
undertaken to mitigate foreign currency exposures.

INCOME TAXES

Income tax (expense) benefit before discontinued operations and cumulative
effect of change in accounting principle for federal, state and foreign taxes
was ($0.7) million and $0.6 million for the three months ended March 31, 2003
and 2002, respectively. The income tax provision for the first quarter of 2003
is primarily comprised of income taxes associated with the Companys profitable
foreign locations.

As discussed in the Companys 2002 Annual Report on Form 10K, the Company
recorded full valuation reserves against the Companys unreserved deferred tax
asset balance existing at September 30, 2002. Consistent with the facts and
circumstances leading to our conclusion to provide a full valuation reserve
against our deferred tax assets in 2002, we have provided a further valuation
allowance against any net increases in deferred tax assets which in
2003 consisted principally
of net operating loss carryforwards for U.S. operating losses generated during the first quarter of
2003. Accordingly, the effective tax rate for 2003 is not meaningful. These
valuation allowances are subject to reversal in future years at such time that
the benefits are actually utilized or, the operating profits in the U.S. become
sustainable at a level that meets the recoverability criteria under SFAS 109.

The effective income tax benefit rate for the first quarter of 2002 was 40%,
which differed from the U.S. statutory rate principally due to foreign taxes
attributable to foreign operations that differed from the U.S. statutory rate.

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 subsidiary Golden Eagle Leasing, as well as borrowings under
notes payable to fund working capital requirements and reduce its bank debt.

Cash provided by continuing operations for the three months ended March 31,
2003 was $17.5 million compared to $1.7 million for the three months ended
March 31, 2002. The increase in operating cash flow between 2003 and 2002 is
principally

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due to the Companys continued focus on decreasing working capital requirements
as well as the receipt of an $8.3 million income tax refund related to a U.S.
net operating loss carryback claim filed during the quarter. The decrease in
working capital requirements during the first quarter of 2003 is principally
due to a $6.1 million reduction in inventory related to the need
for fewer inventories during our seasonally lower volume first quarter, increased
manufacturing efficiencies and the effects of focusing on production
requirements of core products.

Cash provided by investing activities was $0.2 million for the three months
ended March 31, 2003 compared to cash used by investing activities of $0.9
million for the three months ended March 31, 2002. The decrease in cash used
by investing activities is primarily related to a decrease in the Companys
restricted cash balances attributable to reductions in collateral requirements
due to significant debt repayments on debt securitized by the Companys lease
portfolio. The Company will continue to experience a decline in restricted
cash balances up to November 2003 when this debt is repaid. Capital
expenditures increased $0.5 million from $1.5 million for the three months
ended March 31, 2002 to $2.0 million for the three months ended March 31, 2003.
Capital expenditures in 2003 were principally for upgrades to computer
software and equipment

Cash used in financing activities was $3.5 million for the three months ended
March 31, 2003, compared to cash provided by financing activities of $2.0
million for the three months ended March 31, 2002. The increase in cash used
in financing activities of $5.5 million is the result of the Companys
reduction in overall debt balances and a decrease in advances to the
Companys discontinued operations. Long-term debt decreased $3.8 million to
$21.2 million at March 31, 2003, from $25.0 million at December 31, 2002,
principally as a result of repayments on debt related to the Companys
securitized lease portfolio. At March 31, 2003, working capital and cash was
$129.3 million and $37.3 million, respectively, compared to $129.3 and $23.1
million, respectively, at December 31, 2002.

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 with the Securities and Exchange
Commission effective May 2, 2002.

The net proceeds of the private offering amounted to $36.5 million and were
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 revolving credit facility. The
remaining proceeds were used for general corporate purposes.

In connection with the early retirement of the term loans, the Company recorded
an extraordinary loss on retirement of debt of $2.6 million during the three
months ended March 31, 2002. In accordance with SFAS 145, Rescission of FASB
Statements No.4, 44 and 64, amendment of FASB Statement No.13, and Technical
Corrections, the Company has reclassified its $2.6 million extraordinary loss
from early extinguishment of debt for the three months ended March 31, 2002 to
pre-tax income (see Note 8).

During March 2003, the Company amended its revolving credit facility to reduce
the available credit limit from $25 million to $15 million. This reduction
better matches the Companys current liquidity needs and provides further cost
savings.

The Company continues to accelerate cash generation through aggressively
pursuing collection of trade receivables, reducing inventories and controlling
expenses. We believe that our cash flow from operations, and the net cash
provided by our direct-financing leases, together with our current cash
reserves, will be sufficient to fund our projected liquidity and capital
resource requirements through 2003. If operating results are unfavorable or
our direct-financing lease fundings exceed direct-financing lease receipts, we
may need to use additional capital sources to meet our short-term liquidity and
capital resource requirements. These additional sources would include our
existing credit facility, including our $15 million revolving line of credit,
which is available based on certain accounts receivable and inventory balances,
or our direct-financing lease credit facilities with approximately $29.3
million of credit available at March 31, 2003.

BACKLOG

As of March 31, 2003, Hypercom had backlog of $83.7 million, compared to $61.0
million at March 31, 2002. The increase in backlog is primarily related to an
increase in sales orders in the United States that are subject to a customer
approved delivery schedule.

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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 transactions in
other currencies, such as the Hong Kong dollar, Australian dollar, Brazilian
Real and other Asian and European currencies. Beginning in June 2002, the
Company resumed its foreign currency risk management strategy, which had been
suspended starting in the fourth quarter of 2000 due to credit limitations
imposed by the Companys banks. As a policy, the Company hedges the
translation of its net investment in foreign subsidiaries in an attempt to
neutralize the effect of translation gains or losses in the statement of
operations. Financial hedging instruments are limited by Company policy to
foreign-currency forward or option contracts and foreign-currency debt. The
Company enters into forward or option contracts with its bank or other
financial institutions to accomplish its hedging strategy. At March 31, 2003,
the Company had foreign currency forward contracts outstanding in the amount of
$28.4 million, denominated principally in the Brazilian real, British pound,
Swedish krona, Chilean peso, and Australian dollar. Gains and losses on these
contracts principally consist of mark-to-market adjustments, recorded in
earnings as foreign currency gains or losses. See Net Interest, Foreign
Currency Losses and Other Items section above.

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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Item 4. Controls and Procedures

Within 90 days prior to the filing date of this report, Hypercom management
conducted an evaluation, under the supervision and with the participation of
the Companys Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure controls
and procedures. Based on this evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Companys disclosure controls and
procedures are effective in alerting them in a timely manner to material
information required to be included in the Companys SEC reports. In addition,
Hypercom management, including the Companys Chief Executive Officer and Chief
Financial Officer, reviewed our internal controls, and there have been no
significant changes in the Companys internal controls or in other factors that
could significantly affect those controls subsequent to the date of our last
evaluation.




PART II  OTHER INFORMATION




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 Quarterly Report on Form
10-Q for the quarter ended September 30, 2002)               
|               |      |                        |  |                                                                                                                                                                                                               
|               | 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. Eight dated May 12, 2003, to Loan and Security Agreement
dated July 31, 2001 by and among Hypercom Corporation, certain of its
subsidiaries and Foothill Capital Corporation *                  
|               |      |                        |  |                                                                                                                                                                                                               
|               | 99.1 |                        |  | Cautionary Statement Regarding Forward-Looking Statements and Risk Factors *                                                                                                                                  
|               |      |                        |  |                                                                                                                                                                                                               
|               | 99.2 |                        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*                                                           
|               |      |                        |  |                                                                                                                                                                                                               
|               | 99.3 |                        |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*                                                           



---

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



|(b) |  | Reports on Form 8-K.
|--- |  | --------------------

The Company filed the following reports on Form 8-K during the quarter
ended March 31, 2003:



| | a) |  | Form 8-K dated April 25, 2003; and
| | -- |  | ----------------------------------
|
| | b) |  | Form 8-K/A dated April 25, 2003.  

15



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##### Table of Contents






SIGNATURES

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

|                   |  |                                                                                                                               
|------------------ |  | ------------------------------------------------------------------------------------------------------------------------------
|                   |  | HYPERCOM CORPORATION                                                                                                          
|                   |  |                                                                                                                               
|Date: May 14, 2003 |  | By: /s/ John W. Smolak                                                                                                        
|                   |  |                                                                                                                               
|                   |  | John W. Smolak                                                                                                                
|                   |  |                                                                                                                               
|                   |  | Executive Vice President, Chief
Financial and Administrative Officer
(duly authorized officer and
Principal Financial Officer)

16



---



##### Table of Contents






CERTIFICATION

I, Christopher S. Alexander, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Hypercom
Corporation;                                                                                                                                                                                                                                                                                                      
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;                                                   
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                                                                      
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                                                                         
|  
|   |  | a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;                                                                               
|  
|   |  | b) Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                                                                                                 
|  
|   |  | c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                                                                                       
|  
|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):                                                                                                                                    
|  
|   |  | a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                
|  
|   |  | a) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                                                                                                        
|  
|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

|                   |  |                                 
|------------------ |  | --------------------------------
|Date: May 14, 2003 |  | By: /s/ Christopher S. Alexander
|                   |  |                                 
|                   |  | Christopher S. Alexander        
|                   |  | Chief Executive Officer         

17



---



##### Table of Contents



CERTIFICATION

I, John W. Smolak, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Hypercom
Corporation;                                                                                                                                                                                                                                                                                                      
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;                                                   
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                                                                      
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                                                                         
|  
|   |  | a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;                                                                               
|  
|   |  | b) Evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                                                                                                 
|  
|   |  | c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                                                                                       
|  
|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):                                                                                                                                    
|  
|   |  | a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                
|  
|   |  | b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                                                                                                        
|  
|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

|                   |  |                        
|------------------ |  | -----------------------
|Date: May 14, 2003 |  | By: /s/ John W. Smolak 
|                   |  |                        
|                   |  | John W. Smolak         
|                   |  | Chief Financial Officer

18



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##### Table of Contents






EXHIBIT INDEX

|               |      |                        |  |                                                                                                                                                                                                               
|-------------- | ---- | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 Quarterly Report on Form
10-Q for the quarter ended September 30, 2002)               
|               |      |                        |  |                                                                                                                                                                                                               
|               | 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. Eight dated May 12, 2003, to Loan and Security Agreement
dated July 31, 2001 by and among Hypercom Corporation, certain of its
subsidiaries and Foothill Capital Corporation *                  
|               |      |                        |  |                                                                                                                                                                                                               
|               | 99.1 |                        |  | Cautionary Statement Regarding Forward-Looking Statements and Risk Factors *                                                                                                                                  
|               |      |                        |  |                                                                                                                                                                                                               
|               | 99.2 |                        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*                                                           
|               |      |                        |  |                                                                                                                                                                                                               
|               | 99.3 |                        |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*                                                           



---

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

19