##### 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, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from
 to
 Commission file number: 1-13521
 HYPERCOM CORPORATION
  Delaware
    
    86-0828608(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)2851 West Kathleen Road, Phoenix, Arizona
    
    85053(Address of principal executive offices)
    
    (Zip Code)
 (602) 504-5000
  þ o
  o þ o
  o þ
  Class
    
    Outstanding at May 3, 2007Common Stock, $.001 par value per share
    
    53,251,781 shares




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##### Table of Contents



INDEX
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements
    
    3Consolidated Balance Sheets  and December 31, 2006
    
    3Consolidated Statements of Operations  Three months
ended and 2006
    
    4Consolidated Statements of Cash Flows  Three months
ended and 2006
    
    5Notes to Consolidated Financial Statements
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures About Market
Risk
    
    22Item 4.
    
    Controls and Procedures
    
    23PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    24Item 1A.
    
    Risk Factors
    
    24Item 6.
    
    Exhibits
    
    26Signatures
    
    27EX-31.1EX-31.2EX-32
 2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Consolidated Financial Statements.
 HYPERCOM CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 (Amounts in thousands, except shares and per share data)
 March 31, 2007
    
    
    December 31,(unaudited)
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    26,623
    
    
    $
    34,190Restricted cash
    
    
    171
    
    
    
    201Short-term investments
    
    
    37,339
    
    
    
    47,228Accounts receivable, net of allowance for doubtful accounts of
$2,358 and $1,934, respectively
    
    
    56,992
    
    
    
    52,777Inventories
    
    
    55,726
    
    
    
    52,632Prepaid expenses and other current assets
    
    
    10,530
    
    
    
    8,001Deferred tax assets, net
    
    
    921
    
    
    
    691Assets held for sale
    
    
    11,742
    
    
    
    Total current assets
    
    
    200,044
    
    
    
    195,720Property, plant and equipment, net
    
    
    16,600
    
    
    
    27,261Intangible assets, net
    
    
    11,620
    
    
    
    5,733Other long-term assets
    
    
    15,719
    
    
    
    8,002Total assets
    
    $
    243,983
    
    
    $
    236,716LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    26,030
    
    
    $
    22,931Accrued payroll and related expenses
    
    
    7,347
    
    
    
    6,201Accrued sales and other taxes
    
    
    7,761
    
    
    
    7,781Product warranty liabilities
    
    
    2,486
    
    
    
    2,636Accrued other liabilities
    
    
    11,813
    
    
    
    9,603Deferred revenue
    
    
    4,273
    
    
    
    2,185Income taxes payable
    
    
    2,133
    
    
    
    2,460Total current liabilities
    
    
    61,843
    
    
    
    53,797Deferred tax liabilities
    
    
    594
    
    
    
    380Other long-term liabilities
    
    
    3,483
    
    
    
    3,608Total liabilities
    
    
    65,920
    
    
    
    57,785Stockholders equity:Common stock, $.001 par value; 100,000,000 shares authorized;
53,236,181 and 53,127,205 shares outstanding, respectively
    
    
    56
    
    
    
    56Additional paid-in capital
    
    
    249,646
    
    
    
    247,989Accumulated deficit
    
    
    (48,890
    )
    
    
    (46,365
    )Treasury stock, 3,162,248 shares (at cost)
    
    
    (22,749
    )
    
    
    (22,749
    )Total stockholders equity
    
    
    178,063
    
    
    
    178,931Total liabilities and stockholders equity
    
    $
    243,983
    
    
    $
    236,716
  3




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HYPERCOM CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended March 31,2007
    
    
    2006(Amounts in thousands, exceptshares and per share data)Net revenue:Products
    
    $
    48,191
    
    
    $
    46,840Services
    
    
    16,636
    
    
    
    14,129Total net revenue
    
    
    64,827
    
    
    
    60,969Costs of revenue:Products
    
    
    29,815
    
    
    
    27,526Services
    
    
    14,284
    
    
    
    9,924Total costs of revenue
    
    
    44,099
    
    
    
    37,450Gross profit
    
    
    20,728
    
    
    
    23,519Operating expenses:Research and development
    
    
    7,329
    
    
    
    5,994Selling, general and administrative
    
    
    16,172
    
    
    
    14,615Total operating expenses
    
    
    23,501
    
    
    
    20,609Income (loss) from continuing operations
    
    
    (2,773
    )
    
    
    2,910Interest income
    
    
    884
    
    
    
    947Interest expense
    
    
    (45
    )
    
    
    (169
    )Foreign currency loss
    
    
    (618
    )
    
    
    (224
    )Other income (expense)
    
    
    4
    
    
    
    (16
    )Income (loss) before income taxes and
discontinued operations
    
    
    (2,548
    )
    
    
    3,448Provision for income taxes
    
    
    (667
    )
    
    
    (659
    )Income before discontinued operations
    
    
    (3,215
    )
    
    
    2,789Income from discontinued operations
    
    
    690
    
    
    
    349Net income (loss)
    
    $
    (2,525
    )
    
    $
    3,138Basic and diluted income (loss) per share:Income (loss) before discontinued operations
    
    $
    (0.06
    )
    
    $
    0.05Income from discontinued operations
    
    
    0.01
    
    
    
    0.01Basic and diluted income (loss) per share
    
    $
    (0.05
    )
    
    $
    0.06Basic weighted average common shares
    
    
    53,181,716
    
    
    
    52,804,000Diluted weighted average common shares
    
    
    53,181,716
    
    
    
    53,730,873
  4




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HYPERCOM CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended March 31,2007
    
    
    2006(Amounts in thousands)Cash flows from continuing operations:Net income (loss) from continuing operations
    
    $
    (3,215
    )
    
    $
    2,789Adjustments to reconcile net income (loss) from continuing operations
to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    2,061
    
    
    
    1,931Amortization of deferred financing costs
    
    
    
    
    
    
    4Amortization of discount on short-term investments
    
    
    (273
    )
    
    
    (308
    )Provision for doubtful accounts
    
    
    413
    
    
    
    400Provision for excess and obsolete inventory
    
    
    518
    
    
    
    707Provision for warranty and other product charges
    
    
    296
    
    
    
    181Deferred income tax benefit
    
    
    (16
    )
    
    
    (34
    )Non-cash share-based compensation
    
    
    1,738
    
    
    
    867Foreign currency (gains) losses
    
    
    334
    
    
    
    (359
    )Other non-cash write-off of intangibles and other assets
    
    
    2
    
    
    
    32Changes in operating assets and liabilities, net
    
    
    (4,368
    )
    
    
    3,715Net cash provided by (used in) continuing operating activities
    
    
    (2,510
    )
    
    
    9,925Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (2,332
    )
    
    
    (2,055
    )Cash paid for acquisitions, net of cash acquired
    
    
    (12,707
    )
    
    
    Software development cost capitalized
    
    
    (360
    )
    
    
    Net increase in restricted cash
    
    
    30
    
    
    
    Purchase of short-term investments
    
    
    (43,473
    )
    
    
    (66,848
    )Proceeds from the sale or maturity of investments
    
    
    53,635
    
    
    
    64,000Net cash used in investing activities
    
    
    (5,207
    )
    
    
    (4,903
    )Cash flows from financing activities:Repayments of bank notes payable and other debt instruments
    
    
    (3
    )
    
    
    (92
    )Proceeds from issuance of common stock
    
    
    104
    
    
    
    3,211Purchase of treasury stock
    
    
    
    
    
    
    (671
    )Net cash provided by financing activities
    
    
    101
    
    
    
    2,448Effect of exchange rate changes on cash and cash equivalents
    
    
    49
    
    
    
    255Net increase (decrease) in cash flows from continuing operations
    
    
    (7,567
    )
    
    
    7,725Net cash provided by operating activities  discontinued operations
    
    
    
    
    
    
    3,246Cash and cash equivalents, beginning of period
    
    
    34,190
    
    
    
    35,940Cash and cash equivalents, end of period
    
    $
    26,623
    
    
    $
    46,911
  5




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HYPERCOM CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2007
(Unaudited)
 1. Basis of Presentation
   2. 2005 Business Review
   6




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##### Table of Contents



Total
    
    
    Costs
    
    
    Costs
    
    
    CostsCosts
    
    
    Incurred
    
    
    Incurred
    
    
    Incurred
    
    
    Balance atExpected to
    
    
    During
    
    
    During
    
    
    During
    
    
    March 31,be Incurred
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2007Costs of revenues:Warranty charges and product
replacement accruals
    
    $
    7,374
    
    
    $
    3,832
    
    
    $
    2,702
    
    
    $
    100
    
    
    $
    740
    (a)Inventory 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
    
    
    
    2,820
    
    
    
    100
    
    
    
    Operating expenses:One-time termination benefits and
related employment costs
    
    
    3,370
    
    
    
    2,551
    
    
    
    819
    
    
    
    
    
    
    
    Idled facility lease charge
    
    
    1,013
    
    
    
    195
    
    
    
    267
    
    
    
    70
    
    
    
    481
    (b)Total operating expenses
    
    
    4,383
    
    
    
    2,746
    
    
    
    1,086
    
    
    
    70
    
    
    
    Total charges
    
    $
    24,337
    
    
    $
    19,040
    
    
    $
    3,906
    
    
    $
    170
    
    
    $
    
 
 (a)
    
    These accrued liability balances at March 31, 2007 are recorded as current product
warranty liabilities as these amounts are expected to be paid during 2007.(b)
    
    The idled facility lease charge accrued liability at March 31, 2007 is recorded in
current accrued liabilities ($0.2 million) and other long-term liabilities ($0.3 million)
based on the timing of the projected lease payments that are scheduled through 2011. 3. Discontinued Operations
  Three Months Ended March 31,2007
    
    
    2006United Kingdom Lease Business:Net revenues
    
    $
    
    
    
    $
    2,111Costs (reversal) of revenue
    
    
    (690
    )
    
    
    1,298Gross profit (a)
    
    
    690
    
    
    
    813Selling, general and administrative
expenses
    
    
    
    
    
    
    (360Foreign currency loss
    
    
    
    
    
    
    (104
    )Gain on sale
    
    
    
    
    
    
    690
    
    
    
    349Income from discontinued
operations
    
    $
    690
    
    
    $
    349
 
 (a)
    
    The Company recorded a gain in the first quarter of 2007 from a rebate of previously
paid lease origination commission payments related to the UK lease portfolio that was sold
in 2006. United Kingdom Lease Business
  7




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4. Business Acquisition
   Business Combinations
 Goodwill and Other Intangible Assets
 5. Share-Based Compensation
 Accounting for Stock Issued to Employees Accounting for
Stock-Based Compensation Share-Based Payment
  8




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Three Months Ended March 31,2007
    
    
    2006Costs of revenue  Products
    
    $
    49
    
    
    $
    19Costs of revenue  Services
    
    
    1
    
    
    
    Research and development costs
    
    
    151
    
    
    
    180Selling, general and administrative
expenses
    
    
    1,537
    
    
    
    668Total share-based compensation
    
    $
    1,738
    
    
    $
    867
  Stock Options
 Accounting
for Stock Appreciation Rights and other Variable Stock Option Award
Plans
  WeightedWeighted
    
    Average
    
    AggregateAverage
    
    Remaining
    
    IntrinsicNumber of
    
    Exercise
    
    Contractual
    
    Value (InOptions
    
    Price
    
    Term
    
    Thousands)Outstanding at March 31, 2007
    
    
    3,709,965
    
    
    $
    7.94
    
    
    
    6.14
    
    
    $
    1,498Vested and expected to vest at
March 31, 2007
    
    
    3,490,003
    
    
    $
    7.91
    
    
    
    5.97
    
    
    $
    1,487Exercisable at March 31, 2007
    
    
    2,299,954
    
    
    $
    7.68
    
    
    
    4.45
    
    
    $
    1,422
   9




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##### Table of Contents



Three Months Ended March 31,2007
    
    2006Weighted average fair value of
options granted
    
    $
    3.45
    
    
    $
    4.95Key assumptions used in
determining the fair value:Weighted average risk free
interest rate
    
    
    4.54
    %
    
    
    4.63
    %Expected life of the option (in
years)
    
    
    5.47
    
    
    
    5.46Expected stock price volatility
    
    
    63.5
    %
    
    
    73.0
    %Expected dividend rate
    
    
    
    
    
    
    
  Restricted Stock Awards
  Number of
    
    WeightedNonvested
    
    AverageRestricted
    
    Grant DateStock Awards
    
    Fair ValueBalance at December 31, 2006
    
    
    342,432
    
    
    $
    6.92Granted
    
    
    85,000
    
    
    
    5.90Vested
    
    
    (35,000
    )
    
    
    5.90Forfeited
    
    
    
    
    
    
    Balance at March 31, 2007
    
    
    392,432
    
    
    
    6.79
 Employee Stock Purchase Plan
  6. Restricted Cash
  10




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##### Table of Contents



7. Short-term Investments
    March 31,
    
    
    December 31,2007
    
    
    2006Municipal debt securities
    
    $
    3,850
    
    
    $
    10,400U.S. government and agency debt securities
    
    
    5,000
    
    
    
    5,977Asset backed auction rate securities
    
    
    14,325
    
    
    
    Corporate debt securities
    
    
    14,164
    
    
    
    23,001Preferred equity securities
    
    
    
    
    
    
    7,850$
    37,339
    
    
    $
    47,228
 8. Inventories
  March 31,
    
    
    December 31,2007
    
    
    2006Purchased parts
    
    $
    28,421
    
    
    $
    24,367Work in progress
    
    
    5,910
    
    
    
    6,008Finished goods
    
    
    21,395
    
    
    
    22,257$
    55,726
    
    
    $
    52,632
 11




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9. Product Warranty
  Three Months Ended March 31,2007
    
    
    2006Balance at beginning of period
    
    $
    2,636
    
    
    $
    5,534Warranty charges from normal operations
    
    
    296
    
    
    
    181Warranty reversals related to
the 2005 Business Review
    
    
    (100
    )
    
    
    Utilization of warranty liability
    
    
    (346
    )
    
    
    (1,414
    )Balance at end of period
    
    $
    2,486
    
    
    $
    4,301
   10. Potential Sale of Headquarter Facilities
 Long-Lived Assets to Be
Disposed Of by Sale,
 11. Equity Transactions
    12. Earnings per Share
  12




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Three Months Ended March 31,2007
    
    
    2006Shares used in basic income (loss) per
share calculation (weighted average
common shares outstanding)
    
    
    53,181,716
    
    
    
    52,804,000Dilutive effect of stock options and
warrants
    
    
    
    
    
    
    926,873Shares used in diluted income per
share calculation
    
    
    53,181,716
    
    
    
    53,730,873Options and warrants that could
potentially
dilute income per share in the future
that were not included in the computation
of diluted income per share (a)
    
    
    3,664,235
    
    
    
    3,504,704
 
 (a)
    
    These options and warrants were not included in the computation of diluted income
(loss) per share because they were not dilutive. 13. Segment and Geographic Information
 Disclosures about Segments of an Enterprise and Related
Information
  13




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Three Months Ended March 31,2007
    
    
    2006Net RevenueAmericas
    
    $
    34,269
    
    
    $
    36,187EMEA
    
    
    18,941
    
    
    
    15,359Asia Pacific
    
    
    11,617
    
    
    
    9,423Shared cost centers
    
    
    
    
    
    
    $
    64,827
    
    
    $
    60,969
 Three Months Ended March 31,2007
    
    
    2006Operating IncomeAmericas
    
    $
    3,323
    
    
    $
    8,076EMEA
    
    
    5,142
    
    
    
    3,386Asia Pacific
    
    
    2,510
    
    
    
    3,301Shared cost centers
    
    
    (13,748
    )
    
    
    (11,853
    )Total segment profit
    
    $
    (2,773
    )
    
    $
    2,910Interest income
    
    
    884
    
    
    
    947Interest expense
    
    
    (45
    )
    
    
    (169
    )Foreign currency loss
    
    
    (618
    )
    
    
    (224
    )Other Income (expense)
    
    
    4
    
    
    
    (16
    )Income (loss) before income taxes and
discontinued operations
    
    $
    (2,548
    )
    
    $
    3,448
 March 31,
    
    
    December 31,2007
    
    
    2006Total AssetsAmericas
    
    $
    75,157
    
    
    $
    68,578EMEA
    
    
    38,579
    
    
    
    35,710Asia Pacific
    
    
    64,315
    
    
    
    60,031Shared cost centers
    
    
    65,932
    
    
    
    72,397$
    243,983
    
    
    $
    236,716
 14. Income Taxes
   14




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Accounting
for Income Taxes
 Accounting for Uncertainty in Income
Taxes Accounting for Income Taxes
    15. Commitments and Contingencies
 Litigation
  International Taxes
  15




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Cautionary Statements Regarding Forward-looking Statements
    
    
    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;
    
    our ability to timely introduce new products, and to transition legacy products through end-of-life;
    
    our expected transition to a contract manufacturing model;
    
    the challenges posed by conducting business in international markets;
    
    fluctuations in currency exchange rates;
    
    the loss of a member of our senior management team or other key employees;
    
    risks associated with acquisitions and other strategic investments;
    
    force majeure events;
    
    country-specific changing economic environment;
    
    uncertainties related to country-specific legal and regulatory requirements, including
product-related regulations, requirements and certifications, and tax assessments and
interpretations;
    
    our ability to maintain the quality of our internal control over financial reporting;
 16




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##### Table of Contents




    
    our ability to assimilate and integrate acquired technologies or businesses;
    
    the highly-competitive nature of the markets in which we compete;
    
    industry and technological developments in the markets in which we sell our products and services;
    
    the impact of industry standards, certifications and government regulations to which our
products are subject;
    
    the impact of SEC regulations and SEC review of our periodic filings;
    
    the anti-takeover effects of certain provisions in our charter, bylaws and Delaware law;
    
    dilution of our stock price caused by the exercise of outstanding warrants and options;
    
    lack of a plan to pay dividends on our common stock in the foreseeable future; and
    
    incurring debt to meet the future capital requirements of our business.
  Critical Accounting Policies and Estimates
  Business Acquisition
   Business Combinations
 Goodwill and Other Intangible Assets
 17




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Results of Operations
 Three Months Ended March 31,% of
    
    
    
    
    
    
    % of
    
    
    Dollar(Dollars in thousands, except per share data)
    
    2007
    
    
    Revenue
    
    
    2006
    
    
    Revenue
    
    
    ChangeNet revenue:Product and other
    
    $
    48,191
    
    
    
    74.3
    %
    
    $
    46,840
    
    
    
    76.8
    %
    
    $
    1,351Services
    
    
    16,636
    
    
    
    25.7
    %
    
    
    14,129
    
    
    
    23.2
    %
    
    
    2,507Total net revenue
    
    
    64,827
    
    
    
    100.0
    %
    
    
    60,969
    
    
    
    100.0
    %
    
    
    3,858Costs of revenue:Product and other
    
    
    29,815
    
    
    
    61.9
    %
    
    
    27,526
    
    
    
    58.8
    %
    
    
    2,289Services
    
    
    14,284
    
    
    
    85.9
    %
    
    
    9,924
    
    
    
    70.2
    %
    
    
    4,360Total costs of revenue
    
    
    44,099
    
    
    
    68.0
    %
    
    
    37,450
    
    
    
    61.4
    %
    
    
    6,649Gross profit:Product and other
    
    
    18,376
    
    
    
    38.1
    %
    
    
    19,314
    
    
    
    41.2
    %
    
    
    (938
    )Services
    
    
    2,352
    
    
    
    14.1
    %
    
    
    4,205
    
    
    
    29.8
    %
    
    
    (1,853
    )Total gross profit
    
    
    20,728
    
    
    
    32.0
    %
    
    
    23,519
    
    
    
    38.6
    %
    
    
    (2,791
    )Operating expenses:Research and development
    
    
    7,329
    
    
    
    11.3
    %
    
    
    5,994
    
    
    
    9.8
    %
    
    
    1,335Selling, general and administrative
    
    
    16,172
    
    
    
    24.9
    %
    
    
    14,615
    
    
    
    24.0
    %
    
    
    1,557Total operating expenses
    
    
    23,501
    
    
    
    36.3
    %
    
    
    20,609
    
    
    
    33.8
    %
    
    
    2,892Income (loss) from continuing operations
    
    
    (2,773
    )
    
    
    (4.3
    )%
    
    
    2,910
    
    
    
    4.8
    %
    
    
    (5,683
    )Non-operating income
    
    
    225
    
    
    
    0.3
    %
    
    
    538
    
    
    
    0.9
    %
    
    
    (313
    )Income (loss) before income taxes and
discontinued operations
    
    
    (2,548
    )
    
    
    (3.9
    )%
    
    
    3,448
    
    
    
    5.7
    %
    
    
    (5,996
    )Provision for income taxes
    
    
    (667
    )
    
    
    (1.0
    )%
    
    
    (659
    )
    
    
    -1.1
    %
    
    
    (8
    )Income (loss) before discontinued operations
    
    
    (3,215
    )
    
    
    (5.0
    )%
    
    
    2,789
    
    
    
    4.6
    %
    
    
    (6,004
    )Income from discontinued operations
    
    
    690
    
    
    
    1.1
    %
    
    
    349
    
    
    
    0.6
    %
    
    
    341Net income (loss)
    
    $
    (2,525
    )
    
    
    (3.9
    )%
    
    $
    3,138
    
    
    
    5.1
    %
    
    $
    (5,663
    )Diluted income (loss) per share
    
    $
    (0.05
    )
    
    
    
    
    
    $
    0.06
    
    
    
    
    
    
    $
    (0.11
    )
 Net Revenue
   18




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Costs of Revenue and Gross Profit
    Operating Expenses
   Non-Operating Income
  19




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##### Table of Contents



Provision for Income Taxes
   Accounting for Income Taxes
 Income from Discontinued Operations
  Segment Information
 Disclosures about
Segments of an Enterprise and Related Information
    20




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##### Table of Contents



Three Months Ended March 31,Dollar2007
    
    
    % of Revenue
    
    
    2006
    
    
    % of Revenue
    
    
    ChangeNet revenues:Americas
    
    $
    34,269
    
    
    
    52.9
    %
    
    $
    36,187
    
    
    
    59.4
    %
    
    $
    (1,918
    )EMEA
    
    
    18,941
    
    
    
    29.2
    %
    
    
    15,359
    
    
    
    25.2
    %
    
    
    3,582Asia Pacific
    
    
    11,617
    
    
    
    17.9
    %
    
    
    9,423
    
    
    
    15.5
    %
    
    
    2,194Total net revenues
    
    $
    64,827
    
    
    
    100.0
    %
    
    $
    60,969
    
    
    
    100.0
    %
    
    $
    3,858Operating income:Americas
    
    $
    3,323
    
    
    
    5.1
    %
    
    $
    8,076
    
    
    
    13.2
    %
    
    $
    (4,753
    )EMEA
    
    
    5,142
    
    
    
    7.9
    %
    
    
    3,386
    
    
    
    5.6
    %
    
    
    1,756Asia Pacific
    
    
    2,510
    
    
    
    3.9
    %
    
    
    3,301
    
    
    
    5.4
    %
    
    
    (791
    )Shared cost centers
    
    
    (13,748
    )
    
    
    (21.2
    )%
    
    
    (11,853
    )
    
    
    (19.4
    )%
    
    
    (1,895
    )Total operating income
    
    $
    (2,773
    )
    
    
    (4.3
    )%
    
    $
    2,910
    
    
    
    4.8
    %
    
    $
    (5,683
    )
   Cash Flows, Liquidity and Capital Resources
  Cash Flows
   21




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##### Table of Contents



Liquidity and Capital Resources
  Contractual Obligations
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
     22




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Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  23




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  Verve LLC v. Hypercom Corporation
   
 Item 1A. Risk Factors.
  24




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##### Table of Contents



We may accumulate excess or obsolete inventory that could result in unanticipated price reductions
and write downs and adversely affect our financial results.
  
    
    the need to maintain significant inventory of components that are custom or in limited
supply;
    
    buying components in bulk for the best pricing;
    
    differences in forecasted compared to realized demand for products;
    
    unpredictability of demand for products;
    
    responding to customer requests for short lead-time delivery schedules;
    
    failure of customers to take delivery of ordered products; and
    
    product returns.
  A disruption in our manufacturing and assembly capabilities or those of our third-party
manufacturers or suppliers would negatively impact our ability to meet customer requirements.
   25




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##### Table of Contents



Item 6. Exhibits.
 Exhibit Number
    
    Description of Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of
Hypercom Corporation (incorporated by reference to Exhibit
3.1 to Hypercom Corporations Registration Statement on
Form S-1 (Registration No. 333-35641))3.2
    
    Second Amended and Restated Bylaws of Hypercom Corporation
(incorporated by reference to Exhibit 3.1 to Hypercom
Corporations Current Report on Form 8-K filed on November
6, 2006)4
    
    Amended and Restated Certificate of Incorporation of
Hypercom Corporation (incorporated by reference to Exhibit
3.1 to Hypercom Corporations Registration Statement on
Form S-1 (Registration No. 333-35641))10
    
    Employment Agreement, effective January 16, 2007, between
Philippe Tartavull and Hypercom Corporation (incorporated
by reference to Exhibit 10.1 to Hypercom Corporations
Current Report on Form 8-K filed on January 17, 2007)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. 26




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##### Table of Contents



SIGNATURES
  Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. HYPERCOM CORPORATIONDate: May 10, 2007
    By:
    /s/ William KeiperWilliam KeiperChief Executive Officer (duly authorized
officer and principal executive officer) Date: May 10, 2007
    By:
    /s/ Thomas LiguoriThomas LiguoriSenior Vice President and Chief Financial Officer (principal financial and accounting officer) 27