##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended: March 31, 2006.
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission file number: 1-13521
 HYPERCOM CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    86-0828608(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number )
 2851 West Kathleen Road
Phoenix, Arizona 85053
(Address of principal executive offices) (Zip Code)
 (602) 504-5000
(Registrants telephone number, including area code)
 þ o
  o þ o
 o þ
  53,646, 925




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##### 



INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsConsolidated Balance Sheets  March 31, 2006 and
December 31, 2005
    
    
    3Consolidated Statements of Operations  Three months
ended March 31, 2006 and 2005
    
    
    4Consolidated Statements of Cash Flow  Three months
ended March 31, 2006 and 2005
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market
Risk
    
    
    17Item 4. Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    22EXHIBITSExhibit 31.1Exhibit 31.2Exhibit 32
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 HYPERCOM CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 March 31, 2006
    
    
    December 31,(unaudited)
    
    
    2005(Amounts in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    46,911
    
    
    $
    35,940Marketable securities
    
    
    61,107
    
    
    
    57,951Accounts receivable, net of allowance for doubtful accounts of
$2,798 and $3,266, respectively
    
    
    46,240
    
    
    
    48,852Inventories
    
    
    39,139
    
    
    
    39,414Prepaid expenses and other current assets
    
    
    6,159
    
    
    
    8,946Deferred tax assets, net
    
    
    598
    
    
    
    122Assets of discontinued operations held for sale
    
    
    10,153
    
    
    
    12,613Total current assets
    
    
    210,307
    
    
    
    203,838Property, plant and equipment, net
    
    
    28,237
    
    
    
    27,746Intangible assets, net
    
    
    3,129
    
    
    
    3,503Other long-term assets
    
    
    4,193
    
    
    
    3,827Total assets
    
    $
    245,866
    
    
    $
    238,914LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    19,715
    
    
    $
    17,721Accrued payroll and related expenses
    
    
    8,054
    
    
    
    8,460Accrued sales and other taxes
    
    
    8,959
    
    
    
    9,479Product
warranty liabilities
    
    
    4,301
    
    
    
    5,534Accrued liabilities
    
    
    7,962
    
    
    
    6,837Deferred revenue
    
    
    2,390
    
    
    
    2,762Income taxes payable
    
    
    2,410
    
    
    
    1,651Current portion of long-term debt
    
    
    8,261
    
    
    
    8,355Total current liabilities
    
    
    62,052
    
    
    
    60,799Long-term debt
    
    
    18
    
    
    
    22Deferred tax liabilities, net
    
    
    785
    
    
    
    341Other long-term liabilities
    
    
    5,840
    
    
    
    6,978Total liabilities
    
    
    68,695
    
    
    
    68,140Stockholders equity:Common stock, $.001 par value; 100,000,000 shares authorized;
53,673,349 and 52,991,959 shares outstanding, respectively
    
    
    55
    
    
    
    55Additional paid-in capital
    
    
    239,992
    
    
    
    238,186Accumulated deficit
    
    
    (50,196
    )
    
    
    (53,335
    )Unearned deferred compensation
    
    
    
    
    
    
    (2,123
    )Treasury stock (at cost), 1,900,720 and 1,815,620 shares, respectively
    
    
    (12,680
    )
    
    
    (12,009
    )Total stockholders equity
    
    
    177,171
    
    
    
    170,774Total liabilities and stockholders equity
    
    $
    245,866
    
    
    $
    238,914
  3




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##### Table of Contents



HYPERCOM CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended March 31,2006
    
    
    2005(Amounts in thousands, except share data)Net revenue:Product and other
    
    $
    51,041
    
    
    $
    43,654Services
    
    
    9,928
    
    
    
    6,779Total net revenue
    
    
    60,969
    
    
    
    50,433Costs of revenue:Product and other
    
    
    30,329
    
    
    
    28,609Services
    
    
    7,121
    
    
    
    5,287Total costs of revenue
    
    
    37,450
    
    
    
    33,896Gross profit
    
    
    23,519
    
    
    
    16,537Operating expenses:Research and development
    
    
    5,994
    
    
    
    7,258Selling, general and administrative
    
    
    14,615
    
    
    
    20,187Total operating expenses
    
    
    20,609
    
    
    
    27,445Income (loss) from continuing operations
    
    
    2,910
    
    
    
    (10,908
    )Interest income
    
    
    947
    
    
    
    557Interest expense
    
    
    (169
    )
    
    
    (174
    )Other expense
    
    
    (16
    )
    
    
    (45
    )Foreign currency loss
    
    
    (224
    )
    
    
    (272
    )Income (loss) before income taxes and discontinued operations
    
    
    3,448
    
    
    
    (10,842
    )Provision for income taxes
    
    
    (659
    )
    
    
    (805
    )Income (loss) before discontinued operations
    
    
    2,789
    
    
    
    (11,647
    )Income from discontinued operations
    
    
    349
    
    
    
    2,007Net income (loss )
    
    $
    3,138
    
    
    $
    (9,640
    )Basic income (loss) per share:Income (loss) before discontinued operations
    
    $
    0.05
    
    
    $
    (0.22
    )Income from discontinued operations
    
    
    0.01
    
    
    
    0.04Basic income (loss) per share
    
    $
    0.06
    
    
    $
    (0.18
    )Diluted income (loss) per share:Income (loss) before discontinued operations
    
    $
    0.05
    
    
    $
    (0.22
    )Income from discontinued operations
    
    
    0.01
    
    
    
    0.04Diluted income (loss) per share
    
    $
    0.06
    
    
    $
    (0.18
    )Basic weighted average common shares
    
    
    52,804,000
    
    
    
    52,391,115Diluted weighted average common shares
    
    
    53,730,873
    
    
    
    52,391,115
  4




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##### Table of Contents



HYPERCOM CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended March 31,2006
    
    
    2005(Amounts in thousands)Cash flows from continuing operations:Net income (loss) from continuing operations
    
    $
    2,789
    
    
    $
    (11,647
    )Adjustments to reconcile net income (loss) from continuing operations
to net cash provided by operating activities:Depreciation/amortization
    
    
    1,931
    
    
    
    1,697Amortization of deferred financing costs
    
    
    4
    
    
    
    4Amortization of discount on notes receivable
    
    
    (308
    )
    
    
    (172
    )Provision for bad debts
    
    
    400
    
    
    
    474Write-down of excess and obsolete inventory
    
    
    707
    
    
    
    2,323Provision for warranty expense
    
    
    181
    
    
    
    1,026Deferred income taxes
    
    
    (34
    )
    
    
    Noncash
share-based compensation
    
    
    867
    
    
    
    215Foreign
currency (gain) loss
    
    
    (359
    )
    
    
    1,121Other non-cash
    
    
    32
    
    
    
    441Changes in operating assets and liabilities, net
    
    
    3,715
    
    
    
    6,649Net cash provided by operating activities
    
    
    9,925
    
    
    
    2,131Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (2,055
    )
    
    
    (1,281
    )Software development costs capitalized
    
    
    
    
    
    
    (468
    )Purchase of marketable securities
    
    
    (66,848
    )
    
    
    (32,318
    )Proceeds from the sale or maturity of marketable securities
    
    
    64,000
    
    
    
    32,400Net cash used in investing activities
    
    
    (4,903
    )
    
    
    (1,667
    )Cash flows from financing activities:Repayments of bank notes payable and other debt instruments
    
    
    (92
    )
    
    
    (161
    )Proceeds from issuance of common stock
    
    
    3,211
    
    
    
    752Purchase of treasury stock
    
    
    (671
    )
    
    
    Net cash provided by financing activities
    
    
    2,448
    
    
    
    591Effect of exchange rate changes on cash
    
    
    255
    
    
    
    (76
    )Net increase in cash flows from continuing operations
    
    
    7,725
    
    
    
    979Net cash
provided by operating activities  discontinued operations
    
    
    3,246
    
    
    
    4,122Cash and cash equivalents, beginning of period
    
    
    35,940
    
    
    
    23,445Cash and cash equivalents, end of period
    
    $
    46,911
    
    
    $
    28,546
  5




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##### Table of Contents



HYPERCOM CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2006
 (Unaudited)
 1. Basis of Presentation
  Share-Based Payment
 2. 2005 Business Review
  
    
    Implementing an end-of-product-life cycle strategy, including identifying products and
related inventory with near term end-of-life requirements;
    
    More aggressively addressing and correcting product performance issues, including
negotiated warranty and product trade-in/trade-out programs required for the
end-of-product-life cycle strategies;
    
    Implementing certain workforce reductions, including members of the senior management
team, sales, operations and manufacturing personnel, as well as moving certain research and
development resources to lower cost foreign geographies, and compensation plan changes;
    
    Vacating a leased building in Phoenix, Arizona due to the reductions in force;
    
    Evaluating other assets and liabilities and evaluating the past underlying operating
decisions or strategies supporting the future benefit of the assets or the probability of a
liability;
    
    Addressing individual country/regional sales and profitability performance, and
reallocating resources based upon market share growth objectives by country to support the
new strategies going forward;
    
    Investing in the implementation of a comprehensive product marketing function within the
Companys organization; and
    
    Evaluating opportunities for short, medium and long-term improvements in manufacturing
costs.
  6




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##### Table of Contents





CostsIncurredDuring theThreeMonthPeriod
    
    
    AccruedTotal Costs
    
    
    Costs
    
    
    Ended
    
    
    Liability atExpected to
    
    
    Incurred
    
    
    March 31,
    
    
    March 31,be Incurred
    
    
    During 2005
    
    
    2006
    
    
    2006Costs of revenues:Warranty charges and product
replacement accruals (a)
    
    $
    7,374
    
    
    $
    3,832
    
    
    $
    1,201
    
    
    $
    2,341Inventory write-downs, primarily for
product end-of-life decisions
    
    
    12,111
    
    
    
    12,111
    
    
    
    
    
    
    
    One-time termination benefits and
related employment costs
    
    
    469
    
    
    
    351
    
    
    
    118
    
    
    
    Total costs of revenue charges
    
    
    19,954
    
    
    
    16,294
    
    
    
    1,319
    
    
    
    2,341Operating expenses:One-time termination benefits and
related employment costs (b)
    
    
    3,370
    
    
    
    2,551
    
    
    
    168
    
    
    
    651Idled
facility lease charge (c)
    
    
    1,013
    
    
    
    195
    
    
    
    60
    
    
    
    758Total operating expenses
    
    
    4,383
    
    
    
    2,746
    
    
    
    228
    
    
    
    1,409Total charges
    
    $
    24,337
    
    
    $
    19,040
    
    
    $
    1,547
    
    
    $
    3,750





|    |  |                                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | These accrued liability balances are recorded as current
product warranty liabilities as these amounts
are expected to be paid during 2006.                                                                                            
|   
|(b) |  | These accrued liability balances are recorded as current
accrued liabilities as these amounts are all expected to be paid
during 2006.                                                                                                 
|   
|(c) |  | The idled facility lease charge accrued liability is recorded
in current accrued liabilities ($243,000) and other long-term
liabilities ($515,000) based on the timing of
the projected lease payments that are scheduled through 2011.




    
    $0.7 million of charges related to negotiated warranty work and replacement cost
provisions for customer owned product as a result of higher than expected repair costs;
    
    $2.1 million of write-downs for inventory primarily related to products at or near
end-of-life.


3. Discontinued Operations




March 31,
    
    
    March 31,2006
    
    
    2005United Kingdom Lease Business:Net revenues
    
    $
    2,111
    
    
    $
    4,098Cost of revenues
    
    
    1,298
    
    
    
    2,076Gross profit
    
    
    813
    
    
    
    2,022Selling, general and administrative expenses
    
    
    (360
    )
    
    
    (416
    )Foreign currency gain
    
    
    (104
    )
    
    
    2349
    
    
    
    1,608Golden Eagle Leasing
    
    
    
    
    
    
    399Income from discontinued operations
    
    $
    349
    
    
    $
    2,007
 United Kingdom Lease Business
 Accounting for the Impairment or Disposal of Long-Lived
Assets
 7




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##### Table of Contents





March 31,
    
    
    December 31,2006
    
    
    2005Prepaid expenses and other current assets
    
    $
    153
    
    
    $
    57Net investment in sales-type leases
    
    
    10,000
    
    
    
    12,556Assets of discontinued operations held for sale
    
    $
    10,153
    
    
    $
    12,613


Golden Eagle Leasing




4. Share-Based Compensation


Accounting for Stock Issued to Employees Accounting for
Stock-Based Compensation




March 31,
    
    
    March 31,2006
    
    
    2005Costs of revenue
    
    $
    19
    
    
    $
    Research and development expenses
    
    
    180
    
    
    
    Selling, general and administrative expenses
    
    
    668
    
    
    
    215Total share-based compensation
    
    $
    867
    
    
    $
    215




Stock Options




8




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##### Table of Contents





WeightedWeighted
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    Value (InOptions
    
    
    Price
    
    
    Term
    
    
    Thousands)Options outstanding:Balance at December 31, 2005
    
    
    4,321,744
    
    
    $
    6.88Granted
    
    
    237,500
    
    
    
    7.57Exercised
    
    
    (778,985
    )
    
    
    3.98Terminated or expired
    
    
    (255,290
    )
    
    
    8.54Balance at March 31, 2006
    
    
    3,524,969
    
    
    
    7.42
    
    
    
    6.16
    
    
    $
    8,681Expected to
vest at March 31, 2006
    
    
    3,373,634
    
    
    $
    7.47
    
    
    
    6.03
    
    
    $
    8,215Options
vested and exercisable at March 31, 2006
    
    
    2,361,777
    
    
    $
    7.89
    
    
    
    4.66
    
    
    $
    5,342
   March 31,
    
    
    March 31,2006
    
    
    2005Weighted average fair value of options granted
    
    $
    4.95
    
    
    $
    3.11Key assumptions used in determing the fair value:Weighted average risk free interest rate
    
    
    4.63
    %
    
    
    4.05
    %Expected life of the options (in years)
    
    
    5.46
    
    
    
    5.00Expected stock price volatility
    
    
    73.0
    %
    
    
    77.3
    %Expected dividend yield
    
    
    
    
    
    
    
   9




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##### Table of Contents



Three MonthsEndedMarch 31, 2005Net loss, as reported
    
    $
    (9,640
    )Add share-based employee compensation expense included
in reported net loss
    
    
    215Deduct total
share-based employee compensation expense
determined under fair value methods for all awards
    
    
    (497
    )Add reversal
of share-based compensation expense for options
forfeited prior to vesting
    
    
    1,500Pro forma net loss
    
    $
    (8,422
    )Net loss per share:Basic and diluted, as reported
    
    $
    (0.18
    )Basic and diluted, pro forma
    
    $
    (0.16
    )Basic and
diluted weighted average shares used in pro forma computation:
    
    
    52,391,115
 Restricted Stock Awards
  Number of
    
    
    WeightedNonvested
    
    
    AverageRestricted
    
    
    Grant DateStock Awards
    
    
    Fair ValueBalance at December 31, 2005
    
    
    402,000
    
    
    $
    6.38Granted
    
    
    17,432
    
    
    
    7.50Compensation expenseForfeited
    
    
    (50,000
    )
    
    
    6.42Balance March 31, 2006
    
    
    369,432
    
    
    
    6.42
 Employee Stock Purchase Plan
  5. Short-term Investments
    March 31,
    
    
    December 31,2006
    
    
    2005Municipal debt securities
    
    $
    10,500
    
    
    $
    10,500U.S. government and agency debt securities
    
    
    23,440
    
    
    
    23,439Asset backed auction rate securities
    
    
    5,000
    
    
    
    Corporate debt securities
    
    
    4,992
    
    
    
    10,012Preferred equity securities
    
    
    17,175
    
    
    
    14,000$
    61,107
    
    
    $
    57,951
 10




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##### Table of Contents



6. Inventories
  March 31,
    
    
    December 31,2006
    
    
    2005Purchased parts
    
    $
    19,379
    
    
    $
    24,118Work in progress
    
    
    4,566
    
    
    
    3,609Finished goods
    
    
    15,194
    
    
    
    11,687$
    39,139
    
    
    $
    39,414
 7. Product Warranty
  March 31,
    
    
    March 31,2006
    
    
    2005Balance at beginning of period
    
    $
    5,534
    
    
    $
    1,434Warranty charges from normal operations
    
    
    192
    
    
    
    554Warranty charges related to the 2005 Business Review
    
    
    
    
    
    
    706Utilization of warranty liability
    
    
    (1,425
    )
    
    
    (544
    )Balance at end of period
    
    $
    4,301
    
    
    $
    2,150
   8. Earnings per Share
  March 31,
    
    
    March 31,2006
    
    
    2005Shares used in basic income (loss) per share calculation
(weighted average common shares outstanding)
    
    
    52,804,000
    
    
    
    52,391,115Effect of dilutive stock options, awards and warrants
    
    
    926,873
    
    
    
    Shares used in diluted income (loss) per share
calculation
    
    
    53,730,873
    
    
    
    52,391,115
  11




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##### Table of Contents



9. Equity Transactions
   10. Income Taxes
   Accounting for Income Taxes
 11. Commitments and Contingencies
   12. Subsequent Event
  12




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Critical Accounting Policies and Estimates
  Share-Based
Compensation
  Adoption of SFAS 123R
   13




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##### Table of Contents



Results of Operations
 Three Months Ended March 31,% of
    
    
    
    
    
    
    % of(Dollars in thousands, except per share data)
    
    2006
    
    
    Rev
    
    
    2005
    
    
    Rev
    
    
    $ ChangeNet revenue:Product and other
    
    $
    51,041
    
    
    
    83.7
    %
    
    $
    43,654
    
    
    
    86.6
    %
    
    $
    7,387Services
    
    
    9,928
    
    
    
    16.3
    %
    
    
    6,779
    
    
    
    13.4
    %
    
    
    3,149Total net revenue
    
    
    60,969
    
    
    
    100.0
    %
    
    
    50,433
    
    
    
    100.0
    %
    
    
    10,536Costs of revenue:Product and other
    
    
    30,329
    
    
    
    59.4
    %
    
    
    28,609
    
    
    
    65.5
    %
    
    
    1,720Services
    
    
    7,121
    
    
    
    71.7
    %
    
    
    5,287
    
    
    
    78.0
    %
    
    
    1,834Total costs of revenue
    
    
    37,450
    
    
    
    61.4
    %
    
    
    33,896
    
    
    
    67.2
    %
    
    
    3,554Gross profit:Product and other
    
    
    20,712
    
    
    
    40.6
    %
    
    
    15,045
    
    
    
    34.5
    %
    
    
    5,667Services
    
    
    2,807
    
    
    
    28.3
    %
    
    
    1,492
    
    
    
    22.0
    %
    
    
    1,315Total gross profit
    
    
    23,519
    
    
    
    38.6
    %
    
    
    16,537
    
    
    
    32.8
    %
    
    
    6,982Operating expenses:Research and development
    
    
    5,994
    
    
    
    9.8
    %
    
    
    7,258
    
    
    
    14.4
    %
    
    
    (1,264
    )Selling, general and administrative
    
    
    14,615
    
    
    
    24.0
    %
    
    
    20,187
    
    
    
    40.0
    %
    
    
    (5,572
    )Total operating expenses
    
    
    20,609
    
    
    
    33.8
    %
    
    
    27,445
    
    
    
    54.4
    %
    
    
    (6,836
    )Income (loss) from continuing operations
    
    
    2,910
    
    
    
    4.8
    %
    
    
    (10,908
    )
    
    
    -21.6
    %
    
    
    13,818Non-operating income
    
    
    538
    
    
    
    0.9
    %
    
    
    66
    
    
    
    0.1
    %
    
    
    472Income (loss) before income taxes and
discontinued operations
    
    
    3,448
    
    
    
    5.7
    %
    
    
    (10,842
    )
    
    
    -21.5
    %
    
    
    14,290Provision for income taxes
    
    
    (659
    )
    
    
    -1.1
    %
    
    
    (805
    )
    
    
    -1.6
    %
    
    
    146Income (loss) before discontinued
operations
    
    
    2,789
    
    
    
    4.6
    %
    
    
    (11,647
    )
    
    
    -23.1
    %
    
    
    14,436Income from discontinued operations
    
    
    349
    
    
    
    0.6
    %
    
    
    2,007
    
    
    
    4.0
    %
    
    
    (1,658
    )Net income (loss)
    
    $
    3,138
    
    
    
    5.1
    %
    
    $
    (9,640
    )
    
    
    -19.1
    %
    
    $
    12,778Income (loss) per diluted share
    
    $
    0.06
    
    
    
    
    
    
    $
    (0.18
    )
    
    
    
    
    
    $
    0.24
 Net Revenue
  14




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##### Table of Contents



Costs
of Revenue
   Gross Profit
   Operating Expenses
   Income (Loss) from Continuing Operations
  Non-Operating Income
  15




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##### Table of Contents



Provision for Income Taxes
    Income from Discontinued Operations
  Cash Flows, Liquidity and Capital Resources
  Cash Flows
      16




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##### Table of Contents



Liquidity and Capital Resources
   Contractual
Obligations
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
       17




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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
   Internal Control over Financial Reporting.
 18




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  Shareholder Class Action
  Colleen E. Ryan v. Hypercom Corporation, et al.
  
 Item 1A. Risk Factors
   19




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##### Table of Contents




    
    the volatility of our financial results and our stock price;
    
    the loss of a key customer;
    
    defects in our products;
    
    the accumulation of obsolete inventory;
    
    breaches in the security of transactions involving our products;
    
    our inability to adequately protect our proprietary technology;
    
    our technology infringing the proprietary rights of third parties;
    
    a disruption in our manufacturing capabilities or those of our third-party manufacturers
or suppliers;
    
    the challenges posed by conducting business in international markets;
    
    our failure to sell our UK lease portfolio or having to take a further write-down in the
value of this business;
    
    fluctuations in currency exchange rates;
    
    adverse resolution of litigation;
    
    the loss of a member of our senior management team or other key employees;
    
    risks associated with acquisitions and other strategic investments;
 
    
    force majeure events;
    
    Chinas changing economic environment;
    
    uncertainties related to the Chinese legal system;
    
    our ability to maintain the quality of our internal control over financial reporting;
    
    the highly-competitive nature of the markets in which we compete;
    
    industry and technological developments in the markets in which we sell our products and
services;
    
    the impact of industry standards and government regulations to which our products are
subject;
    
    the volatility of our stock price;
    
    the impact of SEC regulations and SEC review of our periodic filings;
    
    the anti-takeover effects of certain provisions in our charter, bylaws and Delaware law;
    
    dilution of our stock price caused by the exercise of outstanding warrants and options;
    
    lack of a plan to pay dividends on our common stock in the foreseeable future; and
    
    incurring debt to meet the future capital requirements of our business.
  20




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##### Table of Contents



Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 ISSUER PURCHASES OF EQUITY SECURITIES
 (d) MaximumNumber (or(c) Total Number
    
    
    Approximateof Shares (or
    
    
    Dollar Value) ofUnits) Purchased
    
    
    Shares that May(a) Total Number
    
    
    (b) Average Price
    
    
    as Part of Publicly
    
    
    Yet Be Purchasedof Shares (or
    
    
    Paid per Share (or
    
    
    Announced Plans
    
    
    Under the Plans orPeriod
    
    Units) Purchased
    
    
    Unit)
    
    
    or Programs
    
    
    ProgramsMonth #1 (January
1, 2006 to January
31, 2006)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Month #2 (February
1, 2006 to February
28, 2006)
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Month #3 (March 1,
2006 to March 31,
2006)
    
    
    85,100
    
    
    $
    7.85
    
    
    
    85,100
    
    
    
    19,888,209Total
    
    
    85,100
    
    
    $
    7.85
    
    
    
    85,100
    
    
    
    19,888,209
   
 Item 6. Exhibits
 Exhibit Number
    
    Description of Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of
Hypercom Corporation (incorporated by reference to Exhibit
3.1 to Hypercom Corporations Registration Statement on
Form S-1 (Registration No. 333-35641))3.2
    
    Amended and Restated Bylaws of Hypercom Corporation
(incorporated by reference to Exhibit 3.2 to Hypercom
Corporations Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002)4
    
    Amended and Restated Certificate of Incorporation of
Hypercom Corporation (incorporated by reference to Exhibit
3.1 to Hypercom Corporations Registration Statement on
Form S-1 (Registration No. 333-35641))31.1
    
    Certification of Chief Executive Officer, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *31.2
    
    Certification of Chief Financial Officer, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *32
    
    Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 **
 
 *
    
    Filed herewith.**
    
    Furnished herewith. 21




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##### Table of Contents



SIGNATURES
  HYPERCOM CORPORATIONBy:
    /s/ William KeiperDated: May 10, 2006
    
    William KeiperChief Executive Officer and PresidentBy:
    /s/ Thomas LiguoriDated: May 10, 2006
    
    Thomas LiguoriSenior Vice President and Chief Financial
Officer 22




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##### Table of Contents



Index to Exhibits
 Exhibit Number
    
    Description of Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of
Hypercom Corporation (incorporated by reference to Exhibit
3.1 to Hypercom Corporations Registration Statement on
Form S-1 (Registration No. 333-35641))3.2
    
    Amended and Restated Bylaws of Hypercom Corporation
(incorporated by reference to Exhibit 3.2 to Hypercom
Corporations Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002)4
    
    Amended and Restated Certificate of Incorporation of
Hypercom Corporation (incorporated by reference to Exhibit
3.1 to Hypercom Corporations Registration Statement on
Form S-1 (Registration No. 333-35641))31.1
    
    Certification of Chief Executive Officer, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *31.2
    
    Certification of Chief Financial Officer, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *32
    
    Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 **
 
 *
    
    Filed herewith.**
    
    Furnished herewith. 23