##### Table of Contents



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

FORM 10-Q

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

For the quarterly period ended: June 30, 2002.

OR

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

For the transition period from  to
.

Commission file number: 1-13521

HYPERCOM CORPORATION
(Exact name of registrant as specified in its charter)

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

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

(602) 504-5000
(Registrants telephone number, including area code)

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

Yes þ     No Box

Number of shares of the registrants common stock, $.001 par value per share,
outstanding as of August 6, 2002, was 47,985,196.



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TABLE OF CONTENTS



|                               |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1. Financial Statements                                                                 
|                               |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                               | Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
|                               | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|PART II  OTHER INFORMATION   
|                               | Item 1. Legal Proceedings                                                                    
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                               | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                    
|EXHIBIT INDEX                 
|EX-10.1                       
|EX-10.2                       
|EX-10.3                       
|EX-10.4                       
|EX-10.5                       
|EX-11.1                       
|EX-21                         
|EX-99.1                       



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##### Table of Contents



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 |  |                                            | 10 |     
|        
|        
|        
|        
|         |  |                                                                                      
|        
|        
|        
|        
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |                                            | 14 |     
|        
|        
|        
|        
|         |  |                                                                                      
|        
|        
|        
|        
|PART II. |  | OTHER INFORMATION                                                                     |  |                                            |    |     
|        
|        
|        
|        
|         |  |                                                                                      
|        
|        
|        
|        
|Item 1.  |  | Legal Proceedings                                                                     |  |                                            | 15 |     
|        
|        
|        
|        
|         |  |                                                                                      
|        
|        
|        
|        
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  |                                            | 15 |     
|        
|        
|        
|        
|         |  |                                                                                      
|        
|        
|        
|        
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                      |  |                                            | 16 |     
|        
|        
|        
|        
|         |  |                                                                                      
|        
|        
|        
|        
|         |  |                                                                                       |  | SIGNATURES                                 |    |      | 17 | 
|        
|        
|        
|        
|         |  |                                                                                      
|        
|        
|        
|        
|         |  |                                                                                       |  | EXHIBIT INDEX                              |    |      | 18 | 

2



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##### Table of Contents






PART I  FINANCIAL INFORMATION




Item 1. Financial Statements

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

|                                                                                |                                                                                                                                                                             |   |             |         |              |   |         |         |  
|------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | ------- | ------------ | - | ------- | ------- | -
|                                                                                |                                                                                                                                                                             |   | June 30,    |         |              |   |        
|                                                                                |                                                                                                                                                                             |   | 2002        |         | December 31,
|                                                                                |                                                                                                                                                                             |   | (unaudited) |         | 2001        
|                                                                                |                                                                                                                                                                             |   |             |         |             
|ASSETS                                                                          |                                                                                                                                                                             |   |             |         |              |   |         |        
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Current assets:                                                                 |                                                                                                                                                                             |   |             |         |              |   |         |        
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Cash and cash equivalents                                                                                                                                                   |   | $           | 13,908  |              |   | $       | 13,402  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Restricted cash                                                                                                                                                             |   |             | 6,885   |              |   |         | 6,367   |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Accounts receivable, net of allowance for
doubtful accounts of $3,610 and $4,029                                                                                            |   |             | 78,847  |              |   |         | 70,860  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Current portion of net investment in direct financing leases                                                                                                                |   |             | 14,480  |              |   |         | 16,242  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Inventories, net                                                                                                                                                            |   |             | 61,581  |              |   |         | 62,411  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Deferred income taxes                                                                                                                                                       |   |             | 16,125  |              |   |         | 16,090  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Prepaid taxes                                                                                                                                                               |   |             | 858     |              |   |         | 762     |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Prepaid expenses and other current assets                                                                                                                                   |   |             | 28,710  |              |   |         | 26,568  |  
|                                                                                |                                                                                                                                                                             |   |             |         |              |   |         |        
|Total current assets                                                            |                                                                                                                                                                             |   | 221,394     |         |              |   | 212,702 |        
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Property, plant and equipment, net                                                                                                                                          |   |             | 38,184  |              |   |         | 37,964  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Long-term marketable securities, at market                                                                                                                                  |   |             | 153     |              |   |         | 155     |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Long-term portion of net investment in direct financing leases                                                                                                              |   |             | 19,379  |              |   |         | 24,761  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Deferred income taxes                                                                                                                                                       |   |             | 10,003  |              |   |         | 10,003  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Goodwill, net of amortization of $3,293                                                                                                                                     |   |             |        |              |   |         | 21,766  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Intangible assets, net of amortization of $12,392 and $9,873                                                                                                                |   |             | 13,131  |              |   |         | 13,537  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Other assets                                                                                                                                                                |   |             | 13,935  |              |   |         | 16,806  |  
|                                                                                |                                                                                                                                                                             |   |             |         |              |   |         |        
|Total assets                                                                    |                                                                                                                                                                             | $ | 316,179     |         |              | $ | 337,694 |        
|                                                                                |                                                                                                                                                                             |   |             |         |              |   |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                            |                                                                                                                                                                             |   |             |         |              |   |         |        
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Current liabilities:                                                            |                                                                                                                                                                             |   |             |         |              |   |         |        
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Accounts payable                                                                                                                                                            |   | $           | 29,226  |              |   | $       | 31,761  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Accrued liabilities                                                                                                                                                         |   |             | 24,733  |              |   |         | 22,744  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Deferred revenue                                                                                                                                                            |   |             | 3,980   |              |   |         | 2,180   |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Income taxes payable                                                                                                                                                        |   |             |        |              |   |         | 1,495   |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Current portion of long-term debt                                                                                                                                           |   |             | 15,994  |              |   |         | 20,716  |  
|                                                                                |                                                                                                                                                                             |   |             |         |              |   |         |        
|Total current liabilities                                                       |                                                                                                                                                                             |   | 73,933      |         |              |   | 78,896  |        
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Long-term debt                                                                                                                                                              |   |             | 16,669  |              |   |         | 47,172  |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Other non-current liabilities                                                                                                                                               |   |             | 165     |              |   |         | 257     |  
|                                                                                |                                                                                                                                                                             |   |             |         |              |   |         |        
|Total liabilities                                                               |                                                                                                                                                                             |   | 90,767      |         |              |   | 126,325 |        
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Stockholders equity:                                                           |                                                                                                                                                                             |   |             |         |              |   |         |        
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Common stock, $.001 par value; 100,000,000 shares authorized;
47,936,090 and 39,795,554 shares issued and outstanding for
June 30, 2002 and December 31, 2001, respectively |   |             | 27      |              |   |         | 19      |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Additional paid-in capital                                                                                                                                                  |   |             | 213,691 |              |   |         | 175,628 |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Receivables from stockholder                                                                                                                                                |   |             | (1,498  | )            |   |         | (1,498  | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Retained earnings                                                                                                                                                           |   |             | 15,694  |              |   |         | 39,722  |  
|                                                                                |                                                                                                                                                                             |   |             |         |              |   |         |        
|                                                                                |                                                                                                                                                                             |   | 227,914     |         |              |   | 213,871 |        
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Treasury stock, 230,088 shares (at cost) at June 30, 2002
and December 31, 2001 |                                                                                                                                                                             |   | (2,502      | )       |              |   | (2,502  | )      
|                                                                                |                                                                                                                                                                             |   |             |         |              |   |         |        
|Total stockholders equity                                                      |                                                                                                                                                                             |   | 225,412     |         |              |   | 211,369 |        
|                                                                                |                                                                                                                                                                             |   |             |         |              |   |         |        
|Total liabilities and stockholders equity                                      |                                                                                                                                                                             | $ | 316,179     |         |              | $ | 337,694 |        
|                                                                                |                                                                                                                                                                             |   |             |         |              |   |         |        

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

3



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##### Table of Contents



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

|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |         |         |  
|------------------------------ | -------------------------------------------------------------------------------------------------------------- | ----------------------------- | ------ | --------------------------- | ------ | ------------------------- | ------ | ------ | ------ | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                               |                                                                                                                |                               |        | Three Months Ended June 30, |        | Six Months Ended June 30,
|                               |                                                                                                                |                               |        |                             |        |                          
|                               |                                                                                                                |                               |        | 2002                        |        | 2001                      |        | 2002   |        | 2001
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |     
|Net revenue                    |                                                                                                                | $                             | 75,142 |                             |        | $                         | 75,095 |        |        | $    | 152,218 |         |         | $ | 146,169 |        
|                              
|                              
|                              
|                              
|Costs and expenses:            |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                              
|                              
|                              
|                              
|                               | Costs of revenue                                                                                               |                               |        | 48,160                      |        |                           |        | 49,285 |        |      |         | 97,964  |         |   |         | 102,415 |        
|                              
|                              
|                              
|                              
|                               | Research and development                                                                                       |                               |        | 6,462                       |        |                           |        | 7,017  |        |      |         | 12,859  |         |   |         | 15,270  |        
|                              
|                              
|                              
|                              
|                               | Selling, general and administrative                                                                            |                               |        | 17,260                      |        |                           |        | 20,873 |        |      |         | 35,538  |         |   |         | 42,342  |        
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                               |                                                                                                                | Total costs and expenses      |        |                             | 71,882 |                           |        |        | 77,175 |      |         |         | 146,361 |   |         |         | 160,027 |  
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                               |                                                                                                                | Income (loss) from operations |        |                             | 3,260  |                           |        |        | (2,080 | )    |         |         | 5,857   |   |         |         | (13,858 | )
|                              
|                              
|                              
|                              
|Interest income                |                                                                                                                |                               | 32     |                             |        |                           | 200    |        |        |      | 52      |         |         |   | 455     |        
|                              
|                              
|                              
|                              
|Interest expense               |                                                                                                                |                               | (767   | )                           |        |                           | (3,113 | )      |        |      | (2,769  | )       |         |   | (4,346  | )      
|                              
|                              
|                              
|                              
|Other expense                  |                                                                                                                |                               | (17    | )                           |        |                           | (537   | )      |        |      | (64     | )       |         |   | (1,795  | )      
|                              
|                              
|                              
|                              
|Foreign currency loss          |                                                                                                                |                               | (2,008 | )                           |        |                           | (1,668 | )      |        |      | (3,588  | )       |         |   | (4,219  | )      
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                               | Income (loss) before income taxes,
extraordinary item, and cumulative effect
of change in accounting principle |                               |        | 500                         |        |                           |        | (7,198 | )      |      |         | (512    | )       |   |         | (23,763 | )      
|                              
|                              
|                              
|                              
|Income tax (expense) benefit   |                                                                                                                |                               | (120   | )                           |        |                           | 1,439  |        |        |      | 83      |         |         |   | 4,753   |        
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                               | Income (loss) before extraordinary item and
cumulative effect of change in accounting
principle                |                               |        | 380                         |        |                           |        | (5,759 | )      |      |         | (429    | )       |   |         | (19,010 | )      
|                              
|                              
|                              
|                              
|                               | Extraordinary loss on early retirement of
debt, net of tax benefit of $785                                     |                               |        |                            |        |                           |        |       |        |      |         | (1,833  | )       |   |         |        |        
|                              
|                              
|                              
|                              
|                               | Cumulative effect of change in accounting
principle                                                            |                               |        |                            |        |                           |        |       |        |      |         | (21,766 | )       |   |         |        |        
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                               |                                                                                                                | Net income (loss)             |        | $                           | 380    |                           |        | $      | (5,759 | )    |         | $       | (24,028 | ) |         | $       | (19,010 | )
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|Net earnings (loss) per share: |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                              
|                              
|                              
|                              
|                               | Basic earnings (loss) per share:                                                                               |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |         |        
|                              
|                              
|                              
|                              
|                               | Income (loss) per share before extraordinary
item and accounting change                                        |                               | $      | 0.01                        |        |                           | $      | (0.17  | )      |      | $       | (0.01   | )       |   | $       | (0.55   | )      
|                              
|                              
|                              
|                              
|                               | Extraordinary item                                                                                             |                               |        |                            |        |                           |        |       |        |      |         | (0.04   | )       |   |         |        |        
|                              
|                              
|                              
|                              
|                               | Cumulative effect of change in accounting
principle                                                            |                               |        |                            |        |                           |        |       |        |      |         | (0.49   | )       |   |         |        |        
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                               | Net earnings (loss)                                                                                            |                               | $      | 0.01                        |        |                           | $      | (0.17  | )      |      | $       | (0.54   | )       |   | $       | (0.55   | )      
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                               | Weighted average basic common shares                                                                           |                               |        | 47,834                      |        |                           |        | 34,390 |        |      |         | 44,256  |         |   |         | 34,358  |        
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                               | Diluted earnings (loss) per share:                                                                             |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |         |        
|                              
|                              
|                              
|                              
|                               | Income (loss) per share before extraordinary
item and accounting change                                        |                               | $      | 0.01                        |        |                           | $      | (0.17  | )      |      | $       | (0.01   | )       |   | $       | (0.55   | )      
|                              
|                              
|                              
|                              
|                               | Extraordinary item                                                                                             |                               |        |                            |        |                           |        |       |        |      |         | (0.04   | )       |   |         |        |        
|                              
|                              
|                              
|                              
|                               | Cumulative effect of change in accounting
principle                                                            |                               |        |                            |        |                           |        |       |        |      |         | (0.49   | )       |   |         |        |        
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                               | Net earnings (loss)                                                                                            |                               | $      | 0.01                        |        |                           | $      | (0.17  | )      |      | $       | (0.54   | )       |   | $       | (0.55   | )      
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        
|                               | Weighted average diluted common shares                                                                         |                               |        | 51,212                      |        |                           |        | 34,390 |        |      |         | 44,256  |         |   |         | 34,358  |        
|                               |                                                                                                                |                               |        |                             |        |                           |        |        |        |      |         |         |         |   |         |        

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

4



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##### Table of Contents



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

|                                                                                                                                        |                                                              |                                                     |         |                  |        |               |        |         |        |  
|--------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------------------------------- | ------- | ---------------- | ------ | ------------- | ------ | ------- | ------ | -
|                                                                                                                                        |                                                              |                                                     |         | Six Months Ended
|                                                                                                                                        |                                                              |                                                     |         |                 
|                                                                                                                                        |                                                              |                                                     |         | June 30, 2002    |        | June 30, 2001
|                                                                                                                                        |                                                              |                                                     |         |                  |        |              
|Cash flows from operating activities:                                                                                                   |                                                              |                                                     |         |                  |        |               |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Net loss                                                     |                                                     | $       | (24,028          | )      |               | $      | (19,010 | )     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:                                               |                                                              |                                                     |         |                  |        |               |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Amortization of discount on notes payable                    |                                                     |         | 83               |        |               |        | 1,011   |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Amortization of beneficial notes payable conversion feature  |                                                     |         |                 |        |               |        | 667     |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Amortization of deferred financing costs                     |                                                     |         | 1,073            |        |               |        |        |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Depreciation/amortization                                    |                                                     |         | 7,384            |        |               |        | 7,502   |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Bad debt expense                                             |                                                     |         | 312              |        |               |        | 582     |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Deferred components of direct financing leases               |                                                     |         | (248             | )      |               |        | (316    | )     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Provision for losses on direct financing leases              |                                                     |         | 4,766            |        |               |        | 12,761  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Provision for excess and obsolete inventory                  |                                                     |         | 2,542            |        |               |        | 1,040   |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Extraordinary loss on early extinguishment of debt           |                                                     |         | 2,618            |        |               |        |        |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Cumulative effect of change in accounting principle          |                                                     |         | 21,766           |        |               |        |        |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Foreign currency loss                                        |                                                     |         | 3,588            |        |               |        | 4,219   |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Deferred income taxes                                        |                                                     |         | (35              | )      |               |        | (5      | )     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Other                                                        |                                                     |         | 289              |        |               |        | 130     |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|(Increase) decrease in accounts receivable, inventories, prepaid income taxes,
prepaid expenses and other current and noncurrent assets |                                                              |                                                     | (13,832 | )                |        |               | 1,447  |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Decrease in accounts payable, accrued liabilities, deferred revenue
& income taxes payable                                              |                                                              |                                                     | (3,282  | )                |        |               | (2,826 | )      
|                                                                                                                                        |                                                              |                                                     |         |                  |        |               |        |        
|                                                                                                                                        |                                                              | Net cash provided by operating activities           |         |                  | 2,996  |               |        |         | 7,202  |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash flows from investing activities:                                                                                                   |                                                              |                                                     |         |                  |        |               |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Payments received on notes receivable                        |                                                     |         | 349              |        |               |        | 492     |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Principal payments received on direct financing leases       |                                                     |         | 6,425            |        |               |        | 6,256   |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Funding of direct financing leases                           |                                                     |         | (4,196           | )      |               |        | (12,998 | )     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Increase in restricted cash                                  |                                                     |         | (518             | )      |               |        | (1,001  | )     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Acquisition of other assets                                  |                                                     |         | (1,238           | )      |               |        | (544    | )     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from disposal of property, plant & equipment        |                                                     |         | 139              |        |               |        | 184     |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Purchase of property, plant & equipment                      |                                                     |         | (4,662           | )      |               |        | (1,177  | )     
|                                                                                                                                        |                                                              |                                                     |         |                  |        |               |        |        
|                                                                                                                                        |                                                              | Net cash used in investing activities               |         |                  | (3,701 | )             |        |         | (8,788 | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash flows from financing activities:                                                                                                   |                                                              |                                                     |         |                  |        |               |        |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from notes payable                                  |                                                     |         |                 |        |               |        | 18,400  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Repayment of notes payable                                   |                                                     |         |                 |        |               |        | (426    | )     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from long-term debt, net of restricted cash in 2001 |                                                     |         | 89,156           |        |               |        | 30,415  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Repayment of long-term debt                                  |                                                     |         | (124,989         | )      |               |        | (62,466 | )     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from sale of lease receivables                      |                                                     |         |                 |        |               |        | 7,977   |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Proceeds from issuance of common stock                       |                                                     |         | 37,238           |        |               |        | 285     |       
|                                                                                                                                        |                                                              |                                                     |         |                  |        |               |        |        
|                                                                                                                                        |                                                              | Net cash provided by (used in) financing activities |         |                  | 1,405  |               |        |         | (5,815 | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Effect of exchange rate changes on cash                                                                                                 |                                                              |                                                     | (194    | )                |        |               | (385   | )      
|                                                                                                                                        |                                                              |                                                     |         |                  |        |               |        |        
|Net increase (decrease) in cash                                                                                                         |                                                              |                                                     | 506     |                  |        |               | (7,786 | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Cash & cash equivalents, beginning of period                                                                                            |                                                              |                                                     | 13,402  |                  |        |               | 13,008 |        
|                                                                                                                                        |                                                              |                                                     |         |                  |        |               |        |        
|Cash & cash equivalents, end of period                                                                                                  |                                                              | $                                                   | 13,908  |                  |        | $             | 5,222  |        
|                                                                                                                                        |                                                              |                                                     |         |                  |        |               |        |        

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

5



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##### Table of Contents






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 1  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements do not include all
the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair statement of
results for the periods have been included and are considered of a normal
recurring nature except for the impact on quarterly results and balance sheet
amounts related to the extraordinary loss on early retirement of debt (see Note
6) and the cumulative effect of change in accounting principle (see Note 8).
Operating results for the six months ended June 30, 2002, are not necessarily
indicative of the results to be expected for the year ending December 31, 2002.

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

This financial information is intended to be read in conjunction with
Hypercoms audited financial statements and footnotes thereto included in
Hypercoms Annual Report on Form 10-K for the year ended December 31, 2001.

NOTE 2  INVENTORIES

Inventories consist of the following:

|                 |  |          |        |              |  |   |        | 
|---------------- |  | -------- | ------ | ------------ |  | - | ------ | 
|                 |  | June 30, |        | December 31,
|                 |  | 2002     |        | 2001        
|                 |  |          |        |             
|Purchased parts  |  | $        | 20,410 |              |  | $ | 21,502 | 
|                
|                
|                
|                
|Work in progress |  |          | 7,879  |              |  |   | 8,560  | 
|                
|                
|                
|                
|Finished goods   |  |          | 33,292 |              |  |   | 32,349 | 
|                 |  |          |        |              |  |   |        | 
|                 |  | $        | 61,581 |              |  | $ | 62,411 | 
|                 |  |          |        |              |  |   |        | 

NOTE 3  SEGMENT INFORMATION

As of December 31, 2001, Hypercom had two segments: Point-of-Sale (POS) /
Network Systems and Equipment Leasing.

Hypercom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 following table presents certain segment financial information unaudited
and in thousands for the three and six month periods ended June 30, 2002 and
2001, respectively:

6



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##### Table of Contents



For the Three Months Ended June 30, 2002:

|                        |  |                 |         |           |  |           |        |              |  |       |         |   |  |   |          |   |  |   |         | 
|----------------------- |  | --------------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------- | - |  | - | -------- | - |  | - | ------- | 
|                        |  | POS and Network |         | Equipment |  |           |        |              |  |       |         |   |  |   |          |  
|                        |  | Systems         |         | Leasing   |  | Corporate |        | Eliminations |  | Total
|                        |  |                 |         |           |  |           |        |              |  |      
|Net revenue             |  | $               | 68,425  |           |  | $         | 6,717  |              |  | $     | 0       |   |  | $ | 0        |   |  | $ | 75,142  | 
|                       
|                       
|                       
|                       
|Operating income (loss) |  | $               | 7,587   |           |  | $         | 237    |              |  | $     | (4,564  | ) |  | $ | 0        |   |  | $ | 3,260   | 
|                       
|                       
|                       
|                       
|Segment Assets          |  | $               | 886,783 |           |  | $         | 47,174 |              |  | $     | 188,268 |   |  | $ | (806,046 | ) |  | $ | 316,179 | 

For the Three Months Ended June 30, 2001:

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

For the Six Months Ended June 30, 2002:

|                        |  |                 |         |           |  |           |        |              |  |       |         |   |  |   |          |   |  |   |         | 
|----------------------- |  | --------------- | ------- | --------- |  | --------- | ------ | ------------ |  | ----- | ------- | - |  | - | -------- | - |  | - | ------- | 
|                        |  | POS and Network |         | Equipment |  |           |        |              |  |       |         |   |  |   |          |  
|                        |  | Systems         |         | Leasing   |  | Corporate |        | Eliminations |  | Total
|                        |  |                 |         |           |  |           |        |              |  |      
|Net revenue             |  | $               | 138,626 |           |  | $         | 13,592 |              |  | $     | 0       |   |  | $ | 0        |   |  | $ | 152,218 | 
|                       
|                       
|                       
|                       
|Operating income (loss) |  | $               | 14,441  |           |  | $         | 401    |              |  | $     | (8,985  | ) |  | $ | 0        |   |  | $ | 5,857   | 
|                       
|                       
|                       
|                       
|Segment Assets          |  | $               | 886,783 |           |  | $         | 47,174 |              |  | $     | 188,268 |   |  | $ | (806,046 | ) |  | $ | 316,179 | 

For the Six Months Ended June 30, 2001:

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

NOTE 4  INCOME TAXES

The income tax (expense) benefit before extraordinary item and cumulative
effect of change in accounting principle for federal, state and foreign taxes
was $(0.1) million and $0.1 million for the three and six months ended June 30,
2002, respectively. The income tax benefit for federal, state and foreign
taxes was $1.4 million and $4.8 million for the three and six months ended June
30, 2001, respectively. The Companys effective rate of income tax (expense)
benefit before extraordinary item and cumulative effect of change in accounting
principle was (24%) and 16% for the three and six months ended June 30, 2002,
and 20% for the three and six months ended June 30, 2001, respectively.

The income tax (expense) benefit for the three and six months ended June 30,
2002 and 2001, differed from the U.S. statutory rate principally due to foreign
taxes, attributable to foreign operations, that are less than the U.S.
statutory rate, research and experimentation credits, the non-recognition of
tax benefit on foreign currency translation losses, and valuation reserves.

7



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##### Table of Contents



NOTE 5  COST OF REVENUES

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

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

NOTE 6  DEBT AND EQUITY TRANSACTIONS

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

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

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

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

NOTE 7  FOREIGN CURRENCY RISK MANAGEMENT

During the second quarter of 2002 the Company resumed its foreign currency risk
management strategy. The primary objectives of the strategy are to protect
cash flows and net investments in foreign subsidiaries that are exposed to
volatility in foreign currency exchange rates. Financial hedging instruments
used in this strategy are limited by Company policy to foreign-currency forward
or option contracts and foreign-currency debt. The Company does not acquire,
hold or issue derivative financial instruments for trading purposes.

As of June 30, 2002 the Company had two three-month foreign-currency forward
contracts in place to hedge its foreign currency denominated net monetary
assets in Brazil and the United Kingdom. These net monetary assets are
translated at the exchange rates in effect on the balance sheet date, with any
changes in the net monetary assets resulting from changes in exchange rates
reported as foreign currency gains or losses in the statement of operations.
Likewise, changes in the fair value of foreign-currency forward contracts are
reported as foreign currency gains or losses in the statement of operations.
The change in fair value in the foreign-currency forward contracts during the
second quarter ended June 30, 2002 amounted to a net foreign currency loss of
$0.3 million. The Company did not hedge its foreign currency exposure during
2001 due to financing restrictions.

NOTE 8  ACCOUNTING PRONOUNCEMENTS

Recently adopted accounting pronouncements

Effective January 1, 2002, the Company adopted Financial Accounting Standards
Board Statement of Accounting Standards (SFAS) 141, Business Combinations, SFAS
142, Goodwill and Intangible Assetsand SFAS 144, Accounting for the

8



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##### Table of Contents



Impairment or Disposal of Long-Lived Assets. SFAS 141 eliminated the
pooling-of-interests method of accounting for business combinations and changed
the criteria to recognize intangible assets apart from goodwill.
Implementation of SFAS 141 did not have an effect on the Companys financial
statements. SFAS 142 sets forth the accounting for goodwill and intangible
assets already recorded. The impact of adopting SFAS 142 is discussed further
in this note. SFAS 144 addresses the accounting and reporting for the
impairment or disposal of long lived assets. The adoption of SFAS 144 did not
have an effect on the Companys financial statements.

The carrying amount of goodwill upon the adoption of SFAS 142 was $21.7 million
at January 1, 2002, of which $20.3 million was attributed to Golden Eagle with
the remaining amount of $1.4 million attributed to the POS and 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 $21.7 million. In accordance with the transition
provisions of SFAS 142, the write-off is reported as a cumulative effect of a
change in accounting principle impacting the first quarter of 2002. The
following table reflects the impact of the cumulative effect of a change in
accounting principle on the reported results for the Companys first quarter
ended March 31, 2002:

|                                                    |         |   |         |       |  
|--------------------------------------------------- | ------- | - | ------- | ----- | -
|Net loss, as reported                               |         | $ | (2,642  | )    
|                                                   
|                                                   
|                                                   
|                                                   
|Cumulative effect of change in accounting principle |         |   | (21,766 | )    
|                                                    |         |   |         |      
|Adjusted net loss                                   |         | $ | (24,408 | )    
|                                                    |         |   |         |      
|Net loss per share, as reported:                    |         |   |         |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Basic   |   | $       | (0.07 | )
|                                                    |         |   |         |      
|                                                    | Diluted |   | $       | (0.07 | )
|                                                    |         |   |         |      
|Adjusted net loss per share                         |         |   |         |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Basic   | $ | (0.60   | )    
|                                                    |         |   |         |      
|                                                    | Diluted |   | $       | (0.60 | )
|                                                    |         |   |         |      

The Company provided a full valuation reserve against the deferred tax benefit
attributed to the write-off of the goodwill that has tax basis,
and accordingly has not reported the cumulative effect of a change in
accounting principle net of tax. Due to the goodwill balances that
have 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.

Additionally, with the adoption of SFAS 142, the Company reassessed the useful
lives and residual values of all acquired intangible assets to make any
necessary amortization adjustments. No amortization adjustments were
necessary.

The following table reflects the reconciliation of reported net earnings and
earnings per share to adjust for the exclusion of goodwill amortization in
prior year periods.

9



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##### Table of Contents



|                                                                                                         |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |         |  
|-------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ---- | ------------------ | ---- | ---------------- | ---- | ------ | ------ | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                                         |                                                                                                          |      | Three Months Ended |      | Six Months Ended
|                                                                                                         |                                                                                                          |      | June 30,           |      | June 30,        
|                                                                                                         |                                                                                                          |      |                    |      |                 
|(in thousands except per share data)                                                                     |                                                                                                          | 2002 |                    | 2001 |                  | 2002 |        | 2001  
|                                                                                                         |                                                                                                          |      |                    |      |                  |      |        |       
|Net income (loss)                                                                                        |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|Reported income (loss) before extraordinary item and
cumulative effect of change in accounting principle |                                                                                                          | $    | 380                |      |                  | $    | (5,759 | )      |   | $ | (429    | )       |   | $ | (19,010 | )      
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|Add back: Goodwill amortization, net of tax                                                              |                                                                                                          |      |                   |      |                  |      | 411    |        |   |   |        |         |   |   | 658     |        
|                                                                                                         |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        
|Adjusted income (loss) before extraordinary item and
cumulative effect of change in accounting principle |                                                                                                          |      | 380                |      |                  |      | (5,348 | )      |   |   | (429    | )       |   |   | (18,352 | )      
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|Extraordinary item, net of tax                                                                           |                                                                                                          |      |                   |      |                  |      |       |        |   |   | (1,833  | )       |   |   |        |        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|Cumulative effect of change in accounting principle                                                      |                                                                                                          |      |                   |      |                  |      |       |        |   |   | (21,766 | )       |   |   |        |        
|                                                                                                         |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        
|                                                                                                         | Adjusted net income (loss)                                                                               |      | $                  | 380  |                  |      | $      | (5,348 | ) |   | $       | (24,028 | ) |   | $       | (18,352 | )
|                                                                                                         |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        
|Per share of common stock                                                                                |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|Basic:                                                                                                   |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Reported income (loss) before extraordinary item
and cumulative effect of change in accounting
principle |      | $                  | 0.01 |                  |      | $      | (0.17  | ) |   | $       | (0.01   | ) |   | $       | (0.55   | )
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Add back: Goodwill amortization, net of tax                                                              |      |                    |     |                  |      |        | 0.01   |   |   |         |        |   |   |         | 0.02    |  
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Extraordinary item, net of tax                                                                           |      |                    |     |                  |      |        |       |   |   |         | (0.04   | ) |   |         |        |  
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Cumulative effect of change in accounting principle                                                      |      |                    |     |                  |      |        |       |   |   |         | (0.49   | ) |   |         |        |  
|                                                                                                         |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        
|                                                                                                         | Adjusted net income (loss) per share                                                                     |      | $                  | 0.01 |                  |      | $      | (0.16  | ) |   | $       | (0.54   | ) |   | $       | (0.53   | )
|                                                                                                         |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        
|Diluted:                                                                                                 |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Reported income (loss) before extraordinary item
and cumulative effect of change in accounting
principle |      | $                  | 0.01 |                  |      | $      | (0.17  | ) |   | $       | (0.01   | ) |   | $       | (0.55   | )
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Add back: Goodwill amortization, net of tax                                                              |      |                    |     |                  |      |        | 0.01   |   |   |         |        |   |   |         | 0.02    |  
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Extraordinary item, net of tax                                                                           |      |                    |     |                  |      |        |       |   |   |         | (0.04   | ) |   |         |        |  
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                        
|                                                                                                         | Cumulative effect of change in accounting principle                                                      |      |                    |     |                  |      |        |       |   |   |         | (0.49   | ) |   |         |        |  
|                                                                                                         |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        
|                                                                                                         | Adjusted net income (loss) per share                                                                     |      | $                  | 0.01 |                  |      | $      | (0.16  | ) |   | $       | (0.54   | ) |   | $       | (0.53   | )
|                                                                                                         |                                                                                                          |      |                    |      |                  |      |        |        |   |   |         |         |   |   |         |        

Recently issued accounting pronouncements

In April 2002, the FASB issued 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. SFAS 145 is
effective January 1, 2003. Upon adoption, gains and losses on certain future
debt extinguishment, if any, will be recorded in pre-tax income. In addition,
the $1.8 million extraordinary loss from early extinguishment of debt, net of
tax, recorded during the first quarter of 2002 will be reclassified to income
before extraordinary loss to conform to the requirements under SFAS 145.




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

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Company, and
economic conditions, as well as assumptions relating to the foregoing.

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

RESULTS OF OPERATIONS

NET REVENUE

Net revenue for the three-month period ended June 30, 2002 of $75.1 million,
was equal to the same period a year ago. Revenue by segment and product mix
were generally consistent on a year over year basis, with a slight increase in
sales at certain international operations, principally Sweden, offset by a
slight decrease in domestic sales due to the timing of orders.

Net revenue for the six-month period ended June 30, 2002 increased $6.0 million
or 4.1% to $152.2 million from $146.2 million in the six-month period ended
June 30, 2001. This increase was principally due to the attainment of a
performance milestone under our Brazilian Health Ministry contract resulting in
revenue of $8.6 million during the six months ended June 30, 2002, versus $1.6
million in revenue recognized under the same contract during the same period a
year ago. Remaining milestones under this contract are expected to be
substantially less than the milestone achieved in the first quarter of 2002, as
we are now entering the maintenance phase of this contract.

COST OF REVENUE

Hypercoms cost of revenue includes the cost of raw materials, manufacturing
labor, overhead and subcontracted manufacturing costs, as well as interest
expense and loan loss provisions with respect to direct financing leases. The
costs of revenue for the three-month period ended June 30, 2002 decreased $1.1
million or 2.3% to $48.2 million from $49.3 million in the three months ended
June 30, 2001. Gross margin for the three months ended June 30, 2002 was 35.9%
compared to 34.4% in the same period in the prior year. Improvement in the
gross margin for the three months ended June 30, 2002 compared to the same
period in the prior year has resulted from continued manufacturing and product
cost reductions as well as improved pricing in certain service operations.

For the six-month period ended June 30, 2002, costs of revenue decreased $4.5
million or 4.3% to $98.0 million from $102.4 million in the six-month period
ended June 30, 2001. Gross margin for the six months ended June 30, 2002 was
35.6% compared to 29.9% in the same period in the prior year.

In addition to the effects of our continued manufacturing and product cost
reductions and improved pricing in certain service operations, the reduction in
costs on higher net revenues in the six-months ended June 30, 2002, also
reflects the effect of an incremental charge, in addition to the normal loan
loss provisions recorded in cost of revenues, of $7.2 million in the three
months ended March 31, 2001, to strengthen credit reserves for certain segments
of Golden Eagles direct finance lease receivables. This incremental charge
represented managements estimate of potential loan losses that would exceed
its historical rate of loan losses based on analysis of results through March
31, 2001.

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



| |  | We identified several new vendor programs established in 2000, that were
experiencing losses at higher than historic loss levels for other vendor
programs. These programs required that independent sales organizations
provide additional services to the merchants (lessees) as part of the
lease program. To the extent that service levels were not as the
merchants expected, the likelihood of their making required lease payments
was reduced. Losses for these programs began to exceed historical levels
as of the quarter ended March 31, 2001;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | Leases funded for electronic payments software, such as payment software
loaded into a personal computer without the need for a terminal, were at
higher funding levels in 2000 than in previous years. Performance on
these leases worsened in the first quarter of 2001;                           
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The overall credit mix of the portfolio was slightly skewed (a few
percentage points) toward higher risk credits, commonly referred to as C
and D rated credits. C and D credit leases booked in the year 2000 were
performing significantly worse than C and D credits booked in previous
years; and
| 
| |  | The overall softening of the economy at the start of 2001, coupled with
the results of our analysis of collection status and default trends as of
March 31, 2001, also contributed to the conclusion that the increase in
reserves would be appropriate.                                             

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

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 quarter ended June 30, 2002 decreased $0.6 million
or 7.9% to $6.5 million from $7.0 million in the quarter ended June 30, 2001,
and for the six-months ended June 30, 2002 decreased $2.4 million or 15.8% to
$12.9 million from $15.3 million in the six-months ended June 30, 2001.

The decreases over prior year are directly attributable to our cost cutting
efforts of reducing personnel and curtailing spending for research and
development materials. Since substantially all development activities related
to the introduction of the ICE product family and the ePic initiative are
complete, the overall level of research and development activities has been
reduced. Present development activities are primarily focusing on reducing the
component costs of existing product and to select new product introductions.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

Sales and marketing expenses, administrative personnel costs, and facilities
operations make up the selling, general and administrative expenses. These
expenses totaled $17.3 million for the quarter ended June 30, 2002, compared to
$20.9 for the comparative quarter in the prior year. This $3.6 million or 17.3%
decrease is attributable to worldwide cost containment measures.

Selling, general and administrative expenses for the six-month period ended
June 30, 2002 decreased $6.8 million or 16.1% to $35.5 million from $42.3
million in the six-month period ended June 30, 2001. This decrease was also
the result of cost containment efforts.

INCOME (LOSS) FROM OPERATIONS

Income from operations for the quarter ended June 30, 2002 increased $5.3
million to $3.2 million compared to a loss of $2.1 million for the same quarter
in the prior year. For the six-months ended June 30, 2002 income from
operations increased $19.7 million to $5.9 million compared to a loss of $13.9
million for the same period in the prior year. The improvement in operating
results is principally from the aforementioned improvement in gross margins
coupled with cost containment measures throughout the Company.

NET INTEREST, FOREIGN CURRENCY LOSSES AND OTHER ITEMS

The Company incurred $0.8 million and $2.8 million in interest expense for the
three and six months ended June 30, 2002 compared to $3.1 million and $4.3
million for the same periods in the prior year. The reduction in interest
expense is primarily related to the repayment of two term loans totaling $18.6
million, a reduction in the outstanding borrowings under the Companys $25
million revolving credit facility, and a repayment of a $3.1 million note from
a director and principal stockholder during the first quarter of 2002 (see
Liquidity and Capital Resourcessection below). Interest expense for 2002
consists primarily of interest expense on long-term borrowings, amortization of
loan discounts from warrants issued, and

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amortization of deferred financing
charges. Interest expense for 2001 includes the same items as well as
amortization relating to a beneficial notes payable conversion feature. Other
expenses in the amount of $0.5 million and $1.8 million for the three and six
months ended June 30, 2001 consisted primarily of charges associated with the
requirements under the debt forbearance agreements and other related costs
associated with being in default with our lenders at that time. During the
first and second quarters of 2002 we were not in default with our lenders and
accordingly did not incur similar default related charges.

Foreign currency losses totaling $2.0 million and $3.6 million for the three
and six months ended June 30, 2002 were largely
attributable to the devaluation of the Brazilian real and Argentinean peso
partially offset by gains on European currencies. In comparison, foreign
currency losses for the three and six months ended June 30, 2001 were $1.7
million and $4.2 million, respectively, and were primarily due to the
unfavorable translation of the Companys net foreign investments in Brazil and
the United Kingdom. Beginning in June of 2002 the Company resumed its foreign
currency risk management strategy, which had been suspended during 2000 due to
financial restrictions. At June 30, 2002, the Company had foreign currency
forward contracts outstanding in the amount of $35 million, denominated
principally in the British pound and Brazilian real. Gains and losses on these
contracts will be recorded in net earnings as foreign currency gains or losses.
See further discussion in Note 7 to the financial statements.

INCOME TAXES

The income tax (expense) benefit before extraordinary item and cumulative
effect of change in accounting principle for federal, state and foreign taxes
was $(0.1) million and $0.1 million for the three and six months ended June 30,
2002, respectively. The income tax benefit for federal, state and foreign
taxes was $1.4 million and $4.8 million for the three and six months ended June
30, 2001, respectively. The Companys effective rate of income tax (expense)
benefit before extraordinary item and cumulative effect of change in accounting
principle was (24%) and 16% for the three and six months ended June 30, 2002,
and 20% for the three and six months ended June 30, 2001, respectively.

The income tax (expense) benefit for the three and six months ended June 30,
2002 and 2001, differed from the U.S. statutory rate principally due to foreign
taxes, attributable to foreign operations, that are less than the U.S.
statutory rate, research and experimentation credits, the non-recognition of
tax benefit on foreign currency translation losses, and valuation reserves.

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 operations for the six months ended June 30, 2002 was $3.0
million compared to cash provided by operations of $7.2 million for the six
months ended June 30, 2001. The principal reason for the change in operating
cash flow between 2002 and 2001 was the increase in accounts receivable.
Accounts receivable increased due to increased sales in the United Kingdom
during the first half of 2002 compared to activity at the end of 2001 and as a
result of our attainment of the performance milestone under our Brazilian
Health Ministry contract at the end of March 2002 in the amount of $8.6
million. Such performance milestones are based on approval from the Brazilian
Health Ministry, after full delivery of products and services for each
scheduled performance milestone. Payment is generally received within four to
six months after such approval. Payment terms on our terminal product sales
generally range from net 30 to 60 days depending on the circumstances of each
order.

Cash used by investing activities decreased $5.1 million to $3.7 million for
the six months ended June 30, 2002 compared to cash used in investing
activities of $8.8 million in the same period a year ago. This decrease is
primarily related to a decrease in cash required to fund the Companys direct
financing leases in the amount of $8.8 million resulting from a continued focus
on higher quality leases at less volume, offset by an increase in purchases of
property, plant and equipment of $3.5 million. Increases in property, plant
and equipment relate to leasehold improvements at our manufacturing facility in
Brazil and various software upgrades.

Cash provided by financing activities was in the amount of $1.4 million for the
six months ended June 30, 2002, compared to cash used in financing activities
of $5.8 million in the same period a year ago. This improvement is
attributable to the

13



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Companys ability to utilize its $25 million revolving
credit facility, which was significantly restricted in 2001 due to
non-compliance with certain financial covenants. Additionally, the Company was
able to significantly reduce its long-term debt to $32.7 million from $67.9
million at December 31, 2001, with proceeds from the private issuance and sale
of stock in the first quarter of 2002, as discussed below. At June 30, 2002,
working capital and cash was $147.4 and $13.9 million, respectively, compared
to $133.8 and $13.4 million at December 31, 2001, respectively.

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

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

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

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

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

BACKLOG

As of June 30, 2002, Hypercom had backlog of $50.1 million, compared to $157.1
million at June 30, 2001. This decrease is due to deliveries under prior sales
orders and the timing of new orders with several large customers that were
pending completion as of June 30, 2002.

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




Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

A substantial portion of Hypercoms revenue and capital spending is transacted
in U.S. dollars. However, Hypercom does at times enter into transactions in
other currencies, such as the Hong Kong dollar, Australian dollar, Brazilian
Real and other Asian and European currencies. Hypercom has, from time to time,
established revenue and balance sheet hedging programs to protect against
reductions in value and cash flow volatility caused by changes in foreign
exchange rates. Such programs are intended to reduce market risks, but do not
always eliminate the impact of foreign currency exchange volatility. See Net
Interest, Foreign Currency Losses and Other Itemssection above and Note 7 to
the financial statements.

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

14



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##### Table of Contents






PART II  OTHER INFORMATION




Item 1. Legal Proceedings

Colleen E. Ryan v. Hypercom Corporation, et al.On June 25, 2002, the Arizona
Court of Appeals ruled on the appeal of a former employee from a decision of
the Superior Court of Maricopa County which had granted summary judgment in the
Companys favor and dismissed the employees sexual misconduct claims against
the Company, a former executive, and a current executive, based on the
enforceability of a settlement agreement with such employee. The Court of
Appeals reversed
the lower courts ruling and held that the factual issues related to the
summary judgment motion must be decided by a jury, rather than the court. The
case was remanded back to the trial court for further proceedings. Although
there can be no assurance in this regard, the Company does not believe that
this lawsuit will have a material adverse effect on its financial condition.




Item 4. Submission of Matters to a Vote of Security Holders

(a)  On May 22, 2002, the Company held its Annual Meeting of Stockholders at
which the following matters were voted upon:

(b)  Election of Directors. All three nominees for election as Class I
Directors were unopposed and elected as follows:

|                  |  |            |            |                 |  |  |           | 
|----------------- |  | ---------- | ---------- | --------------- |  |  | --------- | 
|Director          |  | Shares For |            | Shares Withheld
|                  |  |            |            |                
|George R. Wallner |  |            | 40,392,110 |                 |  |  | 1,047,909 | 
|                 
|                 
|                 
|                 
|Albert A. Irato   |  |            | 40,932,892 |                 |  |  | 507,127   | 
|                 
|                 
|                 
|                 
|Jane Evans        |  |            | 40,933,936 |                 |  |  | 506,083   | 

The terms of the Class II Directors (Chris Alexander, Jock Patton, William
Keiper and Daniel Diethelm) will expire in 2003.

(c)  Approval of Amendment to the Companys Nonemployee Directors Stock Option
Plan. The proposal to amend the Companys Nonemployee Directors Stock Option
Plan to increase the number of shares available under the Plan from 93,750 to
175,000 was approved as follows:

|           |  |               |           |             |  |  |           | 
|---------- |  | ------------- | --------- | ----------- |  |  | --------- | 
|Votes For  |  | Votes Against |           | Abstentions
|           |  |               |           |            
|35,490,503 |  |               | 4,909,332 |             |  |  | 1,040,184 | 

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Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

|               |  |                                                                                                                                                                                                                
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                
|3.1            |  | Amended and Restated Certificate of Incorporation of Hypercom Corporation
(incorporated by reference to Exhibit 3.1 to Hypercom Corporations
Registration Statement on Form S-1 (Registration
No. 333-35641)).
|              
|              
|              
|              
|3.2            |  | Amended and Restated Bylaws of Hypercom Corporation (incorporated by
reference to Exhibit 3.2 to Hypercom Corporations Annual Report on Form
10-K for the fiscal year ended December 31, 2001).               
|              
|              
|              
|              
|4              |  | Amended and Restated Certificate of Incorporation of Hypercom Corporation
(incorporated by reference to Exhibit 3.1 to Hypercom Corporations
Registration Statement on Form S-1 (Registration
No. 333-35641)).
|              
|              
|              
|              
|10.1           |  | Amendment No. 2, dated June 30, 2002, to Loan and Security Agreement,
dated August 28, 2001, among Congress Financial Corporation, Golden Eagle
Leasing Inc., and Hypercom Corporation.                        
|              
|              
|              
|              
|10.2           |  | Waiver and Consent, dated June 20 2002, among Foothill Capital Corporation
and Hypercom Corporation, including certain of its subsidiaries.                                                                    
|              
|              
|              
|              
|10.3           |  | Amendment No. 4, dated June 24, 2002, to Loan and Security Agreement,
dated July 31, 2001, among Foothill Capital Corporation and Hypercom
Corporation, including certain of its subsidiaries.                 
|              
|              
|              
|              
|10.4           |  | Employment Agreement, dated May 17, 2002, between Christopher S. Alexander
and Hypercom Corporation.                                                                                                           
|              
|              
|              
|              
|10.5           |  | Deferred Compensation Agreement, dated June 3, 2002, between Christopher
S. Alexander and Hypercom Corporation.                                                                                                
|              
|              
|              
|              
|11.1           |  | Statement re Computation of Per Share Earnings.                                                                                                                                                                
|              
|              
|              
|              
|21             |  | Subsidiaries of Hypercom Corporation.                                                                                                                                                                          
|              
|              
|              
|              
|99.1           |  | Cautionary Statement Regarding Forward-Looking Statements and Risk Factors.                                                                                                                                    

(b)  Reports on Form 8-K.

The Company filed no Reports on Form 8-K during the quarter ended June 30,
2002.

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SIGNATURES

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

|                      |  |                      |  |                                                                                                                                              
|--------------------- |  | -------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|                      |  | HYPERCOM CORPORATION
|                     
|                     
|                     
|                     
|                      |  |                      |  |                                                                                                                                              
|                     
|                     
|                     
|                     
|Date: August 14, 2002 |  | By:                  |  | /s/ John W. Smolak                                                                                                                           
|                      |  |                      |  |                                                                                                                                              
|                      |  |                      |  | John W. Smolak                                                                                                                               
|                     
|                     
|                     
|                     
|                      |  |                      |  |                                                                                                                                              
|                     
|                     
|                     
|                     
|                      |  |                      |  | Executive Vice President, Chief
Financial Officer, and Chief
Administrative Officer (duly
authorized officer and Principal
Financial Officer)

Certification of Chief Executive Officer and Chief Financial Officer of Hypercom Corporation
Pursuant to 18 U.S.C. Section 1350

We certify that: (i) the Quarterly Report on Form 10-Q for the period ended
June 30, 2002 of Hypercom Corporation (the Report) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
and (ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
Hypercom Corporation.

| |  |     |  |                                                                 
| |  | --- |  | ----------------------------------------------------------------
| |  |     |  |                                                                 
| |  | By: |  | /s/ Christopher S. Alexander                                    
| |  |     |  |                                                                 
| |  |     |  | Christopher S. Alexander
Chief Executive Officer
August 14, 2002
|
|
|
|
| |  |     |  |                                                                 
|
|
|
|
| |  | By: |  | /s/ John W. Smolak                                              
| |  |     |  |                                                                 
| |  |     |  | John W. Smolak
Chief Financial Officer
August 14, 2002          

17



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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 Annual Report on Form 10-K for the fiscal
year ended December 31, 2001).               
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                
|       
|       
|       
|       
|4       |  | Amended and Restated Certificate of Incorporation of
Hypercom Corporation (incorporated by reference to Exhibit
3.1 to Hypercom Corporations Registration Statement on
Form S-1 (Registration No. 333-35641)).
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                
|       
|       
|       
|       
|10.1    |  | Amendment No. 2, dated June 30, 2002, to Loan and Security
Agreement, dated August 28, 2001, among Congress Financial
Corporation, Golden Eagle Leasing Inc., and Hypercom
Corporation.*                       
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                
|       
|       
|       
|       
|10.2    |  | Waiver and Consent, dated June 20 2002, among Foothill
Capital Corporation and Hypercom Corporation, including
certain of its subsidiaries.*                                                                   
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                
|       
|       
|       
|       
|10.3    |  | Amendment No. 4, dated June 24, 2002, to Loan and Security
Agreement, dated July 31, 2001, among Foothill Capital
Corporation and Hypercom Corporation, including certain of
its subsidiaries.*                
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                
|       
|       
|       
|       
|10.4    |  | Employment Agreement, dated May 17, 2002, between
Christopher S. Alexander and Hypercom Corporation.*                                                                                                         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                
|       
|       
|       
|       
|10.5    |  | Deferred Compensation Agreement, dated June 3, 2002,
between Christopher S. Alexander and Hypercom Corporation.*                                                                                              
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                
|       
|       
|       
|       
|11.1    |  | Statement re Computation of Per Share Earnings.*                                                                                                                                                               
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                
|       
|       
|       
|       
|21      |  | Subsidiaries of Hypercom Corporation.*                                                                                                                                                                         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                
|       
|       
|       
|       
|99.1    |  | Cautionary Statement Regarding Forward-Looking Statements
and Risk Factors.*                                                                                                                                   



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|* |  | Filed herewith.                                         
|- |  | --------------------------------------------------------
| 
| 
| 
| 
| |  | Management contract or compensatory plan or arrangement.