##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q/A
 (Amendment
    No. 1)
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    April 30, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    001-32465
  VERIFONE HOLDINGS,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other jurisdiction
    of
    incorporation or organization)

04-3692546(I.R.S. Employer
    Identification No.)   2099
    Gateway Place, Suite 600
    San Jose, CA 95110 (Address
    of principal executive offices with zip code)
  (408) 232-7800
 (Registrants telephone
    number, including area code)
  N/A (Former
    name, former address and former fiscal year,
    if changed since last report)
  þ o
  12b-2
  Large
    accelerated
    filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ




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##### Table of Contents



EXPLANATORY
    NOTE
  10-Q) Form 10-Q
  10-Q,
    
    the three months ended January 31, 2007;
    the three and six months ended April 30, 2007; and
    the three and nine months ended July 31, 2007.          
    Part I  Item 1. Financial Statements
    (Unaudited);
    Part I  Item 2. Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations;
    Part I  Item 4. Controls and Procedures;
    Part II  Item 1. Legal Proceedings; 2




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##### Table of Contents




    Part II  Item 1A. Risk Factors;


    Part II  Item 6. Exhibits.  10-Q Form 10-Q 10-Q). 10-Q 10-Q 10-Q, 10-Q 10-Q
  Rule 12b-15 Rule 13a-14(a) 10-Q
 3




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##### 



TABLE OF
    CONTENTS
  VERIFONE
    HOLDINGS, INC.
  INDEX
   
 PART I  FINANCIAL
    INFORMATIONItem 1


Financial Statements (unaudited):Condensed Consolidated Balance Sheets 
    April 30, 2007 (restated) and October 31, 2006


5Condensed Consolidated Statements of
    Operations  Three and Six Months Ended
    April 30, 2007 (restated) and 2006


6Condensed Consolidated Statements of Cash
    Flows  Six Months Ended April 30, 2007
    (restated) and 2006


7Notes to Condensed Consolidated Financial
    Statements (restated)


8Item 2


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


52Item 3


Quantitative and Qualitative Disclosures About
    Market Risk


66Item 4


Controls and Procedures


67PART II  OTHER
    INFORMATIONItem 1


Legal Proceedings


69Item 1A


Risk Factors


70Item 2


Unregistered Sales of Equity Securities and Use
    of Proceeds


74Item 3


Defaults Upon Senior Securities


74Item 4


Submission of Matters to a Vote of Security
    Holders


74Item 5


Other Information


74Item 6


Exhibits


74Signatures


75EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1   4




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION  ITEM 1.
    FINANCIAL
    STATEMENTS  VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  CONDENSED
    CONSOLIDATED BALANCE SHEETS
  April 30,


October 31,2007


2006(Restated)(1)(Unaudited)(In thousands, exceptpar value)ASSETSCurrent assets:Cash and cash equivalents

$
175,760


$
86,564Accounts receivable, net of allowances of $3,746 and $2,364


168,199



119,839Inventories


101,449



86,631Deferred tax assets


15,885



13,267Prepaid expenses and other current assets


45,001



12,943Total current assets


506,294



319,244Property, plant and equipment, net


33,492



7,300Purchased intangible assets, net


193,606



16,544Goodwill


583,038



52,689Deferred tax assets


26,030



21,706Debt issuance costs, net


10,328



10,987Transaction costs






12,350Other assets


21,058



12,125Total assets

$
1,373,846


$
452,945LIABILITIES AND STOCK HOLDERS EQUITYCurrent liabilities:Accounts payable

$
72,558


$
66,685Income taxes payable


4,573



5,951Accrued compensation


20,758



16,202Accrued warranty


11,461



4,902Deferred revenue, net


36,599



23,567Accrued expenses


5,565



4,752Accrued transaction costs






12,000Other current liabilities


50,036



13,661Current portion of long-term debt


5,416



1,985Restructuring liabilities


2,808



2,963Total current liabilities


209,774



152,668Accrued warranty


670



530Deferred revenue


9,807



7,371Long-term debt, less current portion


494,036



190,904Deferred tax liabilities


75,646



859Other long-term liabilities


10,408



1,872Total liabilities


800,341



354,204Minority interest


437



Stockholders equity:Preferred Stock: 10,000 shares authorized as of
    April 30, 2007 and October 31, 2006; no shares issued
    and outstanding as of April 30, 2007 and October 31,
    2006






Common Stock: $0.01 par value, 100,000 shares
    authorized at April 30, 2007 and October 31, 2006;
    82,865 and 68,148 shares issued and outstanding as of
    April 30, 2007 and October 31, 2006


828



682Additional
    paid-in-capital


615,007



140,569Accumulated deficit


(53,965
)


(43,468
)Accumulated other comprehensive income


11,198



958Total stockholders equity


573,068



98,741Total liabilities and stockholders equity

$
1,373,846


$
452,945     (1)
    
    See Note 2, Restatement of Condensed Consolidated
    Financial Statements, of the Notes to Condensed
    Consolidated Financial Statements.   5




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  CONDENSED
    CONSOLIDATED STATEMENTS OF OPERATIONS
  Six Months EndedThree Months Ended April 30,


April 30,2007


2006


2007


2006(Restated)(1)





(Restated)(1)(Unaudited)(In thousands, except per share data)Net revenues:System Solutions

$
191,469


$
128,136


$
380,435


$
246,821Services


25,414



14,054



52,811



29,999Total net revenues


216,883



142,190



433,246



276,820Cost of net revenues:System Solutions


125,951



71,765



259,242



138,880Services


13,286



7,026



27,735



14,939Total cost of net revenues


139,237



78,791



286,977



153,819Gross profit


77,646



63,399



146,269



123,001Operating expenses:Research and development


16,009



12,221



32,907



23,628Sales and marketing


22,823



14,404



45,863



28,605General and administrative


25,565



9,993



42,941



19,691Amortization of purchased intangible assets


5,690



1,159



11,041



2,318In-process research and development


90







6,650



Total operating expenses


70,177



37,777



139,402



74,242Operating income


7,469



25,622



6,867



48,759Interest expense


(9,507
)


(3,197
)


(19,263
)


(6,476
)Interest income


1,534



927



2,525



1,614Other income (expense), net


(2
)


65



(263
)


266Income (loss) before income taxes


(506
)


23,417



(10,134
)


44,163Provision for income taxes


4,312



8,381



363



15,333Net income (loss)

$
(4,818
)

$
15,036


$
(10,497
)

$
28,830Net income (loss) per share:Basic

$
(0.06
)

$
0.23


$
(0.13
)

$
0.44Diluted

$
(0.06
)

$
0.22


$
(0.13
)

$
0.42Weighted average shares used in computing net income (loss) per
    share:Basic


81,705



65,799



81,343



65,751Diluted


81,705



68,959



81,343



68,887     (1)
    
    See Note 2, Restatement of Condensed Consolidated
    Financial Statements, of the Notes to Condensed
    Consolidated Financial Statements.   6




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
  Six Months EndedApril 30,2007


2006(Restated)(1)(Unaudited)(In thousands)Cash flows from operating activitiesNet income (loss)

$
(10,497
)

$
28,830Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Amortization of purchased intangible assets


30,236



5,330Depreciation and amortization of property, plant and equipment


3,765



1,651Amortization of capitalized software


570



598In-process research and development


6,650



Amortization of interest rate caps


2



139Amortization of debt issuance costs


660



539Stock-based compensation


16,095



2,112Minority interest and equity in earnings of affiliates


63



Other


(71
)


(81
)Net cash provided by operating activities before changes in
    working capital


47,473



39,118Changes in operating assets and liabilities:Accounts receivable, net


(13,490
)


(19,639
)Inventories


52,228



(14,450
)Deferred tax assets


(3,366
)


(1,871
)Prepaid expenses and other current assets


(21,405
)


(607
)Other assets


(3,034
)


42Accounts payable


(5,251
)


17,096Income taxes payable


151



4,593Tax benefit from stock-based compensation


(4,672
)


(1,374
)Accrued compensation


(3,030
)


(621
)Accrued warranty


(1,037
)


(674
)Deferred revenue


6,532



5,133Deferred tax liabilities


9,206



Accrued expenses and other liabilities


(20,179
)


(2,083
)Net cash provided by operating activities


40,126



24,663Cash flows from investing activitiesSoftware development costs capitalized


(2,921
)


(1,078
)Purchase of property, plant and equipment, net


(12,045
)


(2,161
)Purchase of other assets


(500
)


(1,114
)Purchases of marketable securities






(102,508
)Sales and maturities of marketable securities






106,625Acquisition of businesses, net of cash and cash equivalents
    acquired


(264,334
)


Net cash used in investing activities


(279,800
)


(236
)Cash flows from financing activitiesProceeds from long-term debt, net of costs


305,335



Repayment of long-term debt


(1,250
)


(925
)Repayments of capital leases


(34
)


(106
)Tax benefit of stock-based compensation


4,672



1,374Proceeds from exercises of stock options


18,412



508Other


23



85Net cash provided by financing activities


327,158



936Effect of foreign currency exchange rate changes on cash


1,712



790Net increase in cash and cash equivalents


89,196



26,153Cash and cash equivalents, beginning of period


86,564



65,065Cash and cash equivalents, end of period

$
175,760


$
91,218Supplemental disclosures of cash flow informationCash paid for interest

$
18,039


$
5,875Cash paid for taxes

$
13,381


$
13,289Supplemental schedule of non-cash transactions:Issuance of common stock and stock options for business
    acquisition

$
435,228


$
     (1)
    
    See Note 2, Restatement of Condensed Consolidated
    Financial Statements, of the Notes to Condensed
    Consolidated Financial Statements.   7




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Note 1.
    Description
    of Business      Note 2.
    Restatement
    of Condensed Consolidated Financial Statements  Background
    
    the three months ended January 31, 2007;
    the three and six months ended April 30, 2007; and
    the three and nine months ended July 31, 2007.    
    the circumstances surrounding the errors identified by
    management and described in the Companys December 3,
    2007 announcement;
    whether additional errors existed requiring further restatement
    in the interim periods of fiscal 2007 and the adjustments
    required to correct and restate the Companys interim
    financial statements; and
    whether evidence existed indicating that periods prior to fiscal
    2007 may also be required to be restated.     8




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      
    manual journal entries made for the three months ended
    January 31, 2007 that erroneously  added manufacturing and
    distribution overhead to inventory held at former Lipman
    subsidiaries, notwithstanding that overhead had already been
    allocated to that inventory. This duplication erroneously
    increased reported inventory and reduced reported cost of net
    revenues by $7.7 million in the three months ended
    January 31, 2007;
    manual journal entries made for the periods ended April 30,
    2007 and July 31, 2007 that erroneously recorded in-transit
    inventory of an additional $12.7 million at April 30,
    2007 and an additional $7.3 million at July 31, 2007
    based on erroneous methodology and application of source
    documents; and
    $6.3 million in errors made in the elimination of
    intercompany profit in inventory for the nine months ended
    July 31, 2007.    Restatement
    Adjustments
   9




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATED BALANCE SHEETS
  April 30, 2007As Reported


Adjustments


Ref.


Restated(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
175,760


$







$
175,760Accounts receivable, net of allowances


168,375



(176
)






168,199Inventories


125,390



(23,941
)


(b
)


101,449Deferred tax assets


14,726



1,159



(e
)


15,885Prepaid expenses and other current assets


33,291



11,710



(e
)


45,001Total current assets


517,542



(11,248
)






506,294Property, plant and equipment, net


36,236



(2,744
)


(f
)


33,492Purchased intangible assets, net


199,517



(5,911
)


(f
)


193,606Goodwill


549,073



33,965



(f
)


583,038Deferred tax assets


46,198



(20,168
)


(e
)


26,030Debt issuance costs, net


10,328











10,328Other assets


18,207



2,851



(f
)


21,058Total assets

$
1,377,101


$
(3,255
)





$
1,373,846LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
72,566


$
(8
)





$
72,558Income taxes payable


4,573











4,573Accrued compensation


21,208



(450
)






20,758Accrued warranty


11,461











11,461Deferred revenue, net


36,175



424







36,599Accrued expenses


5,565











5,565Other current liabilities


51,975



(1,939
)


(f
)


50,036Current portion of long-term debt


5,416











5,416Restructuring liabilities


2,808











2,808Total current liabilities


211,747



(1,973
)






209,774Accrued warranty


670











670Deferred revenue


9,807











9,807Long-term debt, less current portion


494,036











494,036Deferred tax liabilities


70,060



5,586



(e
)


75,646Other long-term liabilities


11,967



(1,559
)


(f
)


10,408Total liabilities


798,287



2,054







800,341Minority interest


5,632



(5,195
)


(f
)


437Total stockholders equity


573,182



(114
)


(g
)


573,068Total liabilities and stockholders equity

$
1,377,101


$
(3,255
)





$
1,373,846  10




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months Ended April 30, 2007


Six Months Ended April 30, 2007As Reported


Adjustments


Ref.


Restated


As Reported


Adjustments


Ref.


Restated(In thousands, except per share data)Net revenues:System Solutions

$
191,800


$
(331
)


(a
)

$
191,469


$
381,029


$
(594
)


(a
)

$
380,435Services


25,413



1







25,414



52,810



1







52,811Total net revenues


217,213



(330
)






216,883



433,839



(593
)






433,246Cost of net revenues:System Solutions


114,110



11,841







125,951



236,759



22,483







259,242Services


12,903



383







13,286



25,500



2,235







27,735Total cost of net revenues


127,013



12,224



(c
)


139,237



262,259



24,718



(c
)


286,977Gross profit


90,200



(12,554
)






77,646



171,580



(25,311
)






146,269Operating expenses:Research and development


16,238



(229
)






16,009



33,044



(137
)






32,907Sales and marketing


23,323



(500
)






22,823



45,846



17







45,863General and administrative


27,181



(1,616
)


(d
)


25,565



45,586



(2,645
)


(d
)


42,941Amortization of purchased intangible assets


6,061



(371
)






5,690



11,389



(348
)






11,041In-process research and development


110



(20
)






90



6,640



10







6,650Total operating expenses


72,913



(2,736
)






70,177



142,505



(3,103
)






139,402Operating income


17,287



(9,818
)






7,469



29,075



(22,208
)






6,867Interest expense


(9,595
)


88







(9,507
)


(19,351
)


88







(19,263
)Interest income


1,553



(19
)






1,534



2,525











2,525Other income (expense), net


106



(108
)






(2
)


(31
)


(232
)






(263
)Income (loss) before income taxes


9,351



(9,857
)






(506
)


12,218



(22,352
)






(10,134
)Provision for (benefit from) income taxes


4,492



(180
)


(e
)


4,312



8,343



(7,980
)


(e
)


363Net income (loss)

$
4,859


$
(9,677
)





$
(4,818
)

$
3,875


$
(14,372
)





$
(10,497
)Net income (loss) per share:Basic


0.06



(0.12
)






(0.06
)


0.05



(0.18
)






(0.13
)Diluted


0.06



(0.12
)






(0.06
)


0.05



(0.18
)






(0.13
)Weighted average shares used in computing net income (loss) per
    share:Basic


81,705











81,705



81,343











81,343Diluted


84,180



(2,475
)






81,705



83,861



(2,518
)






81,343  11




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
  Six Months Ended April 30, 2007As Reported


Adjustments


Restated(In thousands)Net income (loss)

$
3,875


$
(14,372
)

$
(10,497
)Net cash provided by operating activities

$
50,210


$
(10,084
)

$
40,126Net cash used in investing activities


(289,672
)


9,872



(279,800
)Net cash provided by financing activities


326,947



211



327,158Effect of foreign currency exchange rate changes on cash


1,711



1



1,712Net increase in cash and cash equivalents


89,196







89,196Cash and cash equivalents, beginning of period


86,564







86,564Cash and cash equivalents, end of period

$
175,760


$



$
175,760     a)
    Net revenues for the three and six months ended April 30,
    2007 were reduced primarily by errors in the timing of the
    recognition of revenue.b)
    The changes to inventories as of April 30, 2007 are as
    follows:  
    $12.7 million decrease to eliminate intercompany in-transit
    inventory that did not exist, which was originally recorded
    based upon erroneous methodology and application of source
    documents. Intercompany in-transit inventory is inventory which
    is in the process of being shipped between VeriFone entities,
    primarily from either Israel or Singapore to the United States;
    $7.7 million decrease due to the duplicate recording of
    manufacturing and distribution overhead to inventories at former
    Lipman subsidiaries;
    $3.9 million decrease to eliminate intercompany profit in
    inventory. Inventory at the end of a quarter in one VeriFone
    entity purchased from another VeriFone entity contains
    intercompany profit which must be eliminated upon consolidation;
    $0.5 million increase to correct errors in recording and
    eliminating intercompany transactions; and
    $0.1 million net decrease as a result of various
    adjustments, each individually less than $0.5 million.    
    $11.6 million increase to eliminate intercompany in-transit
    inventory that did not exist, which was originally recorded
    based upon erroneous methodology and application of source
    documents. Intercompany in-transit inventory is inventory which
    is in the process of being shipped between VeriFone entities,
    primarily from either Israel or Singapore to the United States;
    $7.7 million increase due to the duplicate recording of
    manufacturing and distribution overhead to inventories at former
    Lipman subsidiaries; 12




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    $3.9 million increase to eliminate intercompany profit in
    inventory. Inventory at the end of a quarter in one VeriFone
    entity purchased from another VeriFone entity contains
    intercompany profit which must be eliminated upon consolidation;
    $0.9 million increase due to an error in determining
    replacement costs of component inventory at former Lipman
    entities;
    $0.6 million increase to correct errors in recording and
    eliminating intercompany transactions; and
    Other adjustments, each individually less than $0.5 million.    
    $11.5 million increase to eliminate intercompany in-transit
    inventory that did not exist, which was originally recorded
    based upon erroneous methodology and application of source
    documents. Intercompany in-transit inventory is inventory which
    is in the process of being shipped between VeriFone entities,
    primarily from either Israel or Singapore to the United States;
    $3.5 million increase to eliminate intercompany profit in
    inventory. Inventory at the end of a quarter in one VeriFone
    entity purchased from another VeriFone entity contains
    intercompany profit which must be eliminated upon consolidation;
    $0.8 million increase to correct errors in the
    capitalization of overhead;
    $2.2 million decrease related to inventory recorded in the
    second fiscal quarter for a change in inventories at former
    Lipman entities due to standards revaluation which should have
    been recorded in the first fiscal quarter; and
    Other adjustments, each individually less than $0.5 million.  d)
    The changes to general and administrative expenses for the six
    months ended April 30, 2007 are as follows:  
    $2.6 million decrease in general and administrative
    expenses as a result of a reversal of executive bonuses and
    stock-based compensation, which were originally based upon
    information that, following the restatement, was no longer
    accurate; and
    Other adjustments were each individually less than
    $0.5 million.    
    $1.9 million decrease in general and administrative
    expenses as a result of a reversal of executive bonuses and
    stock-based compensation, which was originally based upon
    information that, following the restatement, was no longer
    accurate; and
    Other adjustments were each individually less than
    $0.5 million.  e)
    Prepaid expenses and other current assets (prepaid taxes),
    deferred tax assets and income tax expense adjustments reflect
    the tax impact of the restatement adjustments, and the
    application of the intraperiod accounting rules to tax expense.  f)
    The changes to these balance sheet accounts relate to
    adjustments and corrections of various errors to the purchase
    price allocations of the Lipman, Payware and VTS acquisitions
    and/or reclassifications. 13




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    $27.3 million increase as a result of adjustments in
    long-term deferred tax liabilities;
    $5.0 million increase to correct errors related to Lipman
    stock options assumed at acquisition;
    $8.4 million decrease as a result of corrections related to
    Lipman, Payware and VTS assets and liabilities assumed at
    acquisition; and
    $10.1 million increase as a result of cumulative
    translation adjustments related to the above adjustments and
    correction of errors.    
    $14.4 million decrease as a result of the restatement
    adjustments to the consolidated statement of operations;
    $2.4 million decrease due to correction of errors related
    to stock compensation expense;
    $5.0 million increase to correct errors related to Lipman
    stock options assumed at acquisition; and
    $11.7 million increase as a result of cumulative
    translation adjustments related to adjustments and correction of
    various errors noted above.  Note 3.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
    Unaudited
    Interim Financial Information
  Form 10-Q Regulation S-X.
  Form 10-K
 14




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Use of
    Estimates
    Revenue
    Recognition
  No. 00-21 (EITF 00-21), Revenue Arrangements with Multiple Deliverables 97-2 (SOP 97-2), Software Revenue Recognition 81-1 (SOP 81-1), Accounting for Performance of Construction-Type and Certain
    Production Type Contracts Revenue Recognition
  and/or
    
    if a product is shipped free on board destination, revenue is
    recognized when the shipment is delivered, or
    if an acceptance or a contingency clause exists, revenue is
    recognized upon the earlier of receipt of the acceptance letter
    or when the clause lapses.      and/or
    
    the delivered item(s) has value to the customer on a standalone
    basis;
    there is objective and reliable evidence of the fair value of
    the undelivered item(s); and
    if the arrangement includes a general right of return relative
    to the delivered item(s), delivery or performance of the
    undelivered item(s) is considered probable and substantially in
    the control of the Company.     15




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    EITF 00-21. and/or
    SOP 81-1.
      Foreign
    Currency Translation
      Concentrations
    of Credit Risk
     16




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                Product
    Manufacturing
    Fair
    Value of Financial Instruments
   17




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Derivative
    Financial Instruments
             18




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Cash
    and Cash Equivalents
    Marketable
    Securities
  Accounting for Certain Investments in Debt and Equity
    Securities.
  Minority
    Interest
      Debt
    Issuance Costs
    Inventories
  first-in,
 19




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Shipping
    and Handling Costs
    Warranty
    Costs
    Research
    and Development Costs
  Accounting for the Costs of Computer
    Software to be Sold, Leased or Otherwise Marketed,
  Advertising
    Costs
    Income
    Taxes
    Comprehensive
    Income (Loss)
    Property,
    Plant and Equipment, net
   20




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Goodwill
    and Other Purchased Intangible Assets
        Accounting
    for Impairment of Long-Lived Assets
    Stock-Based
    Compensation
  Share-Based
    Payment
  Severance
    Pay
   21




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Segment
    Reporting
    Net
    Income (Loss) Per Share
      Three Months Ended


Six Months EndedApril 30,


April 30,2007


2006


2007


2006(Restated)





(Restated)Basic and diluted net income (loss) per share:Numerator:Net income (loss)

$
(4,818
)

$
15,036


$
(10,497
)

$
28,830Denominator:Weighted-average shares of voting common stock outstanding


82,706



67,801



82,344



67,753Less: weighted-average shares subject to repurchase


(1,001
)


(2,002
)


(1,001
)


(2,002
)Weighted-average shares used in computing basic net income
    (loss) per share


81,705



65,799



81,343



65,751Add dilutive securities:Weighted-average shares subject to repurchase






2,002







2,002Stock options and restricted stock units






1,158







1,134Weighted-average shares used in computing diluted net income
    (loss) per share


81,705



68,959



81,343



68,887Net income (loss) per share:Basic

$
(0.06
)

$
0.23


$
(0.13
)

$
0.44Diluted

$
(0.06
)

$
0.22


$
(0.13
)

$
0.42    22




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Recent
    Accounting Pronouncements
  Accounting for Uncertainty in
    Income Taxes Accounting for Income Taxes.
  Considering the Effects of Prior Year Misstatements when
    Quantifying Misstatements in Current Year Financial Statements.
  Fair
    Value Measurements.
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities.
  Note 4.
    Business
    Combinations  Lipman
    Electronic Engineering Ltd. (Lipman)
     23




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (Restated)Cash

$
344,747Value of common stock issued


417,606Value of Lipman vested and unvested options assumed


38,008Transaction costs and expenses


14,837Sub-total


815,198Less: Value of unvested Lipman options assumed


(19,356
)Total purchase price

$
795,842            24




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (Restated)Cash

$
95,931Accounts receivable


33,257Inventories


66,359Property, plant and equipment


18,601Other assets


12,865Deferred revenue


(8,936
)Other current liabilities


(74,233
)Net deferred tax liabilities


(63,189
)Non current liabilities


(9,635
)Net tangible assets


71,020Amortizable intangible assets:Developed and core technology


133,480Customer backlog


50Customer relationships


64,870Internal use software


3,460Sub-total intangible assets


201,860In-process research and development


6,650Excess over fair value of vested options


1,030Goodwill


515,282Total preliminary estimated purchase price allocation

$
795,842   Net
    Tangible Assets
       25




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    EITF 95-3, Recognition of Liabilities in Connection with a Purchase
    Business Combination
    Intangible
    Assets
            In-Process
    Research and Development
     26




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Excess
    Over Fair Value of Vested Options
    Goodwill
    ,
 27




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended


Six Months EndedApril 30, 2006


April 30, 2006(Restated)(In millions, except per share amounts)Total net revenue

$
198.9


$
400.8Net income

$
6.6


$
5.4Net income per share  basic

$
0.08


$
0.07Net income per share  diluted

$
0.08


$
0.07     PayWare
      VeriFone
    Transportation Systems, Inc.
   28




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 5.
    Balance
    Sheet and Statements of Operations Detail  Inventories
    April 30,


October 31,2007


2006(Restated)Raw materials

$
24,147


$
4,095Work-in-process


3,492



808Finished goods


73,810



81,728$
101,449


$
86,631   Prepaid
    Expenses and Other Current Assets
    April 30,


October 31,2007


2006(Restated)Prepaid taxes

$
24,367


$
5,241Prepaid expenses


13,798



3,208Other receivables


5,980



750Other current assets


856



3,744$
45,001


$
12,943   Property,
    Plant and Equipment, net
    April 30,


October 31,2007


2006(Restated)Computer hardware and software

$
11,011


$
7,049Office equipment, furniture and fixtures


3,508



3,972Machinery and equipment


9,408



5,602Leasehold improvements


6,543



3,897Construction in progress


8,745



966Land


1,633



Buildings


5,206



Total


46,054



21,486Accumulated depreciation and amortization


(12,562
)


(14,186
)Property, plant and equipment, net

$
33,492


$
7,300    29




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Purchased
    Intangible Assets, net
    April 30, 2007


October 31, 2006Gross








GrossCarrying


Accumulated





Carrying


AccumulatedAmount


Amortization


Net


Amount


Amortization


Net(Restated)Developed technology

$
170,221


$
(46,291
)

$
123,930


$
35,164


$
(28,616
)

$
6,548Core technology


14,442



(13,960
)


482



14,442



(12,517
)


1,925Trade name


22,225



(21,712
)


513



22,225



(19,942
)


2,283Internal use software


4,101



(427
)


3,674











Customer relationships


87,384



(22,377
)


65,007



19,314



(13,526
)


5,788$
298,373


$
(104,767
)

$
193,606


$
91,145


$
(74,601
)

$
16,544     Three Months Ended


Six Months EndedApril 30,


April 30,2007


2006


2007


2006(Restated)





(Restated)Included in cost of net revenues

$
9,586


$
1,419


$
19,195


$
3,012Included in operating expenses


5,690



1,159



11,041



2,318$
15,276


$
2,578


$
30,236


$
5,330     Cost of


OperatingFiscal Year

Revenues


Expenses


Total(Restated)2007 (remaining six months)

$
19,024


$
9,025


$
28,0492008


31,746



24,719



56,4652009


31,137



19,897



51,0342010


24,281



11,603



35,884Thereafter


18,224



3,950



22,174$
124,412


$
69,194


$
193,606   Goodwill
    April 30,


October 31,2007


2006(Restated)Balance, beginning of year

$
52,689


$
47,260Additions related to acquisitions


523,210



6,352Resolution of tax contingencies and adjustments to tax reserves
    and valuation allowances established in purchase accounting


(2,722
)


(923
)Currency translation adjustments


9,861



Balance, end of period

$
583,038


$
52,689  30




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Warranty
    April 30,


October 31,2007


2006Balance, beginning of year

$
5,432


$
5,243Warranty charged to cost of net revenues


1,740



3,311Utilization of warranty


(2,918
)


(3,815
)Changes in estimates


43



693Warranty assumed in acquisitions


7,834



Balance, end of period


12,131



5,432Less current portion


(11,461
)


(4,902
)Long-term portion

$
670


$
530   Deferred
    Revenue, net
    April 30,


October 31,2007


2006(Restated)Deferred revenue

$
49,112


$
34,309Less long-term portion


(9,807
)


(7,371
)39,305



26,938Deferred cost of revenue


(2,706
)


(3,371
)Current portion, net

$
36,599


$
23,567   Other
    Income (Expense), net
    Three Months Ended


Six Months EndedApril 30,


April 30,2007


2006


2007


2006(Restated)





(Restated)Refund of foreign customs fees

$



$



$



$
288Foreign currency transaction gains, net


1,866



192



1,893



172Foreign currency contract losses, net


(1,801
)


(113
)


(2,014
)


(189
)Other, net


(67
)


(14
)


(142
)


(5
)$
(2
)

$
65


$
(263
)

$
266  31




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 6.
    Financing    April 30,


October 31,2007


2006Secured credit facility:Revolver

$



$
Term B loan


498,750



192,780Capital leases and other


702



109499,452



192,889Less current portion


(5,416
)


(1,985
)Long-term portion

$
494,036


$
190,904   Secured
    Credit Facility
           32




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 7.
    Restructuring
    Charges  Fiscal
    Year 2002 Restructuring Plan
      Short-Term


Long-TermFacilities


Other


Total


Portion


Portion(Restated)Balance at October 31, 2006

$
486


$
60


$
546


$
503


$
43Additions (reductions)


(248
)


2



(246
)


(235
)


(11
)Cash payments


(182
)






(182
)


(182
)


Balance at April 30, 2007

$
56


$
62


$
118


$
86


$
32   Short-Term


Long-TermFacilities


Other


Total


Portion


PortionBalance at October 31, 2005

$
1,200


$
60


$
1,260


$
765


$
495Additions (reductions)






7



7



360



(353
)Cash payments


(353
)


(8
)


(361
)


(361
)


Balance at April 30, 2006

$
847


$
59


$
906


$
764


$
142  33




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  GO
    Software Restructuring Plan
    Fiscal
    Year 2006 Restructuring Plan
      Short-Term


Long-TermSeverance


Portion


Portion(Restated)Balance at October 31, 2006

$
8


$
8


$
Reductions


(8
)


(8
)


Cash payments










Balance at April 30, 2007

$



$



$
   Short-Term


Long-TermSeverance


Portion


PortionBalance at October 31, 2005

$



$



$
Additions


546



546



Cash payments


(389
)


(389
)


Balance at April 30, 2006

$
157


$
157


$
   PayWare
    Restructuring Plan
      Short-Term


Long-TermSeverance


Facilities


Other


Total


Portion


Portion(Restated)Balance at October 31, 2006

$
1,234


$
1,098


$
76


$
2,408


$
2,408


$
Additions


547



154



105



806



806



Cash payments


(1,781
)


(309
)


(181
)


(2,271
)


(2,271
)


Balance at April 30, 2007

$



$
943


$



$
943


$
943


$
  34




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Fiscal
    Year 2007 Restructuring Plan
      Short-Term


Long-TermSeverance


Facilities


Other


Total


Portion


Portion(Restated)Balance at October 31, 2006

$



$



$



$



$



$
Additions


807



10



4



821



821



Cash payments


(440
)


(10
)


(3
)


(453
)


(453
)


Balance at April 30, 2007

$
367


$



$
1


$
368


$
368


$
   Lipman
    Restructuring Plan
      Short-Term


Long-TermSeverance


Facilities


Other


Total


Portion


Portion(Restated)Balance at October 31, 2006

$



$



$



$



$



$
Additions


3,102



3,097



2



6,201



3,706



2,495Cash payments


(1,750
)


(3,082
)


(2
)


(4,834
)


(2,339
)


(2,495
)Balance at April 30, 2007

$
1,352


$
15


$



$
1,367


$
1,367


$
   Note 8.
    Commitments
    and Contingencies    Minimum Lease


Sublease Rental


Net MinimumFiscal Year

Payments


Income


Lease PaymentsRemainder of 2007

$
4,633


$
68


$
4,5652008


7,839



137



7,7022009


5,877



89



5,7882010


5,271



4



5,2672011


4,150







4,150Thereafter


14,348







14,348$
42,118


$
298


$
41,820  35




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Manufacturing
    Agreements
    Employee
    Health and Dental Costs
    Litigation
     36




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           37




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 9.
    Comprehensive
    Income (Loss)    Three Months Ended April 30,


Six Months Ended April 30,2007


2006


2007


2006(Restated)(Restated)Net income (loss)

$
(4,818
)

$
15,036


$
(10,497
)

$
28,830Foreign currency translation adjustments, net of tax


3,928



231



10,263



318Unrecognized gain (loss) on interest rate hedges, net of tax


(4
)


25



(22
)


52Unrealized gain (loss) on marketable securities, net of tax










(1
)


1Comprehensive income

$
(894
)

$
15,292


$
(257
)

$
29,201     April 30,


October 31,2007


2006(Restated)Foreign currency translation adjustments, net of tax of $2,460
    and $1,068

$
11,266


$
1,003Unrecognized loss on interest rate hedges, net of tax of $44 and
    $29


(68
)


(46
)Unrealized gain on marketable securities, net of tax of zero and
    $1






1Accumulated other comprehensive income

$
11,198


$
958   Note 10.
    Stockholders
    Equity  Common
    and Preferred Stock
      Restricted
    Common Stock
     38




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock
    Option Plans
    New
    Founders Stock Option Plan
      WeightedAverageWeighted


Remaining


AggregateShares


Average


Contractual


IntrinsicUnder


Exercise


Term


ValueOption


Price


(Years)


(Thousands)(Restated)Balance at November 1, 2006


898,062


$
4.22Exercised


(202,285
)


3.17Cancelled


(5,605
)


4.57Balance at April 30, 2007


690,172


$
4.53



6.97


$
21,231Vested or expected to vest at April 30, 2007


649,573


$
4.49



6.96


$
20,007Exercisable at April 30, 2007


320,617


$
4.26



6.87


$
9,948       Outside
    Directors Stock Option Plan
   39




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      WeightedAverageWeighted


Remaining


AggregateShares


Average


Contractual


IntrinsicUnder


Exercise


Term


ValueOption


Price


(Years)


(Thousands)Balance at November 1, 2006


90,000


$
10.00Exercised


(16,875
)


10.00Cancelled






Balance at April 30, 2007


73,125


$
10.00



4.73


$
1,849Vested or expected to vest at April 30, 2007


73,125


$
10.00



4.73


$
1,849Exercisable at April 30, 2007


31,875


$
10.00



4.74


$
806       2005
    Equity Incentive Option Plan
   40




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    WeightedAverageWeighted


Remaining


AggregateShares


Average


Contractual


IntrinsicUnder


Exercise


Term


ValueOption


Price


(Years)


(Thousands)(Restated)Balance at November 1, 2006


1,878,801


$
12.13Exercised


(278,674
)


11.24Cancelled


(43,101
)


11.31Balance at April 30, 2007


1,557,026


$
12.31



4.65


$
35,775Vested or expected to vest at April 30, 2007


1,389,959


$
12.30



4.64


$
31,948Exercisable at April 30, 2007


412,716


$
12.55



4.52


$
9,384       2006
    Equity Incentive Plan
      WeightedAverageWeighted


Remaining


AggregateAverage


Contractual


IntrinsicExercise


Term


ValueShares


Price


(Years)


(Thousands)(Restated)Balance at November 1, 2006


2,539,245


$
29.10Granted


1,069,000



34.99Exercised


(5,125
)


29.23Cancelled


(329,600
)


31.41Balance at April 30, 2007


3,273,520


$
30.91



6.03


$
14,772Vested or expected to vest at April 30, 2007


3,008,684


$
30.90



6.03


$
13,607Exercisable at April 30, 2007


137,148


$
28.94



5.49


$
871  41




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            42




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Lipman
    Plans
    WeightedAverageWeighted


Remaining


AggregateAverage


Contractual


IntrinsicExercise


Term


ValueShares


Price


(Years)


(Thousands)(Restated)Options assumed on acquisition of Lipman on November 1, 2006


3,375,527


$
24.47Exercised


(736,192
)


20.07Cancelled


(353,678
)


27.35Balance at April 30, 2007


2,285,657


$
25.33



4.45


$
22,915Vested or expected to vest at April 30, 2007


2,040,944


$
24.98



4.44


$
21,034Exercisable at April 30, 2007


674,166


$
20.21



4.58


$
10,165       All
    Plans
    Share-Based
    Payment.
 43




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended April 30,

Six Months Ended April 30,2007

2006

2007

2006Expected term of the options

2 years

3 years

2 years

3 yearsRisk-free interest rate

4.6%

4.8%

4.8%

4.7%Expected stock price volatility

40%

41%

41%

45%Expected dividend rate

0.0%

0.0%

0.0%

0.0%     Three Months Ended April 30,


Six Months Ended April 30,2007


2006


2007


2006(Restated)





(Restated)Cost of net revenues

$
930


$
162


$
1,847


$
315Research and development


1,433



210



2,899



390Sales and marketing


1,683



409



3,512



740General and administrative


4,253



408



7,837



667$
8,299


$
1,189


$
16,095


$
2,112       Three Months


Six MonthsEnded


EndedApril 30,


April 30,2007


2007(Restated)New Founders Stock Option Plan

$
109


$
220Executive Plan


16



33Outside Directors Stock Option Plan


34



692005 Equity Incentive Option Plan


768



1,4722006 Equity Incentive Plan


2,316



4,240Lipman Plans


5,056



10,061$
8,299


$
16,095   Note 11.
    Segment
    and Geographic Information  Segment
    Information
  Disclosures About Segments of an
    Enterprise and Related Information.
 44




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    step-up over-and-under
    Six Months EndedThree Months Ended April 30,


April 30,2007


2006


2007


2006(Restated)





(Restated)Net revenues:International

$
121,948


$
61,845


$
250,745


$
119,502North America


95,857



80,466



184,938



157,641Corporate


(922
)


(121
)


(2,437
)


(323
)Total net revenues

$
216,883


$
142,190


$
433,246


$
276,820Operating income:International

$
30,402


$
14,066


$
61,826


$
28,233North America


39,098



31,002



70,826



61,505Corporate


(62,031
)


(19,446
)


(125,785
)


(40,979
)Total operating income

$
7,469


$
25,622


$
6,867


$
48,759     April 30,


October 31,2007


2006(Restated)International

$
21,617


$
3,277North America


14,853



6,270$
36,470


$
9,547     April 30,


October 31,2007


2006(Restated)International

$
516,203


$
19,102North America


66,835



33,587$
583,038


$
52,689  45




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    April 30,


October 31,2007


2006(Restated)International

$
1,055,606


$
125,681North America


318,240



327,264$
1,373,846


$
452,945     Six MonthsThree Months Ended


EndedApril 30,


April 30,2007


2006


2007


2006(Restated)





(Restated)International

$
1,052


$
193


$
2,382


$
352North America


711



684



1,383



1,299$
1,763


$
877


$
3,765


$
1,651   Geographic
    Information
    Three Months Ended April 30,


Six Months Ended April 30,2007


2006


2007


2006(Restated)





(Restated)Europe

$
68,808


$
26,151


$
139,963


$
49,200Latin America


41,497



26,529



82,168



50,445Asia


11,643



9,165



28,614



19,857United States


85,472



76,387



165,057



151,424Canada


9,463



3,958



17,444



5,894$
216,883


$
142,190


$
433,246


$
276,820       April 30,


October 31,2007


2006(Restated)Europe

$
20,195


$
2,191North America


14,853



6,409Asia


747



270Latin America


675



677$
36,470


$
9,547  46




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 12.
    Related-Party
    Transactions      Note 13.
    Income
    Taxes      Note 14.
    Employee
    Benefit Plans    Note 15.
    Subsequent
    Events  Class Action
    and Derivative Lawsuits
  In re VeriFone
    Holdings, Inc. Securities Litigation C 07-6140 Eichenholtz VeriFone Holdings, Inc. et al. 07-6140 Lien
 47




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  VeriFone Holdings, Inc. et al. C 07-6195 Vaughn et al. VeriFone Holdings, Inc. et
    al. 07-6197 Feldman et al. VeriFone
    Holdings, Inc. et al. 07-6218 MMC; Cerini VeriFone Holdings, Inc. et al. 07-6228 Westend Capital Management LLC VeriFone Holdings,
    Inc. et al. C 07-6237 MMC; Hill VeriFone Holdings, Inc. et al. 07-6238 Offutt VeriFone Holdings, Inc. et al. C 07-6241 Feitel VeriFone Holdings, Inc., et al. 08-0118 Rule 10b-5
  In re VeriFone Holdings, Inc. Shareholder
    Derivative Litigation 07-6347, King Bergeron, et al. No. 07-CV-6347), Hilborn v. VeriFone Holdings, Inc., et al. (Case No. 08-CV-1132), Patel v. Bergeron, et al. No. 08-CV-1133), Lemmond, et al. v. VeriFone Holdings, Inc., et al. No. 08-CV-1301); In re VeriFone Holdings, Inc. Derivative Litigation No. 1-07-CV-100980, Catholic Medical Mission Board v.
    Bergeron, et al. No. 1-07-CV-100980), Carpel v. Bergeron, et al. (Case No. 1-07-CV-101449).
      Regulatory
    Actions
   48




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Brazilian
    Tax Assessment
      Senior
    Convertible Notes
    Form 10-K
   49




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Amendments
    to the Credit Facility
       50




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Patent
    Infringement Lawsuits
      Investment
    in VeriFone Transportation Systems, Inc.
    (VTS)
   51




---



##### Table of Contents



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Forward-Looking
    Statements
  This section and other parts of this Quarterly Report on
    Form 10-Q
    contain forward-looking statements that involve risks and
    uncertainties. In some cases, forward-looking statements can be
    identified by words such as anticipates,
    expects, believes, plans,
    predicts, and similar terms. Such forward-looking
    statements are based on current expectations, estimates and
    projections about our industry, managements beliefs and
    assumptions made by management. Forward-looking statements are
    not guarantees of future performance and our actual results may
    differ significantly from the results discussed in the
    forward-looking statements. Factors that might cause such
    differences include, but are not limited to, those discussed in
    Part II, Item 1A Risk Factors below and in
    Item 1A of our Annual Report on
    Form 10-K
    for the year ended October 31, 2006 filed with the SEC on
    December 18, 2006. The following discussion should be read
    in conjunction with our consolidated financial statements and
    related notes included in our 2006 Annual Report on
    Form 10-K
    and the condensed consolidated financial statements and notes
    thereto included elsewhere in this Quarterly Report on
    Form 10-Q.
    Unless required by law, we expressly disclaim any obligation to
    update publicly any forward-looking statements, whether as
    result of new information, future events or otherwise.
    Form 10-Q/A
  Restatement
    and Audit Committee Investigation
  Background
    
    the three months ended January 31, 2007;
    the three and six months ended April 30, 2007; and
    the three and nine months ended July 31, 2007.    As of and for the Three Months EndedJanuary 31,


April 30,


July 31,2007


2007


2007(In millions)Reduction in Inventories

$
7.7


$
16.5


$
30.2Reduction in Income before income taxes

$
8.9


$
7.0


$
13.8   Audit
    Committee Investigation
   52




---



##### Table of Contents




    the circumstances surrounding the errors identified by
    management and described in our December 3, 2007
    announcement;
    whether additional errors existed requiring further restatement
    in the interim periods of fiscal 2007 and the adjustments
    required to correct and restate our interim financial
    statements; and
    whether evidence existed indicating that periods prior to fiscal
    2007 may also be required to be restated.        Restatement
      As of and for the Three Months EndedJanuary 31,

April 30,

July 31,2007

2007

2007(In millions)Reduction in Inventories

$
13.3


$
23.9


$
40.6Reduction in Income before income taxes

$
12.5


$
9.9


$
14.4Reduction in Net Income

$
4.7


$
9.7


$
55.8       
    manual journal entries made for the three months ended
    January 31, 2007 that erroneously added manufacturing and
    distribution overhead to inventory held at former Lipman
    subsidiaries, notwithstanding that overhead had already been
    allocated to that inventory. This duplication erroneously
    increased reported 53




---



##### Table of Contents



inventory and reduced reported cost of net revenues by
    $7.7 million in the three months ended January 31,
    2007;  
    manual journal entries made for the periods ended April 30,
    2007 and July 31, 2007 that erroneously recorded in-transit
    inventory of an additional $12.7 million at April 30,
    2007 and an additional $7.3 million at July 31, 2007
    based on erroneous methodology and application of source
    documents; and
    $6.3 million in errors made in the elimination of
    intercompany profit in inventory for the nine months ended
    July 31, 2007.    Overview
          Results
    of Operations
  Net
    Revenues
   54




---



##### Table of Contents



Three Months Ended April 30,


Six Months Ended April 30,Change


Change








Change


Change2007


2006


In Dollars


In Percent


2007


2006


In Dollars


In Percent(Restated)(Restated)Systems Solutions

$
191,469


$
128,136


$
63,333



49
%

$
380,435


$
246,821


$
133,614



54
%Services


25,414



14,054



11,360



81
%


52,811



29,999



22,812



76
%Total

$
216,883


$
142,190


$
74,693



53
%

$
433,246


$
276,820


$
156,426



57
%   System
    Solutions
            multi-lane
 55




---



##### Table of Contents



Services
      Gross
    Profit
    Three Months Ended April 30,


Six Months Ended April 30,Amount


Gross Profit Percentage


Amount


Gross Profit Percentage2007


2006


2007


2006


2007


2006


2007


2006(Restated)











(Restated)Systems Solutions

$
65,518


$
56,371



34.2
%


44.0
%

$
121,193


$
107,941



31.9
%


43.7
%Services


12,128



7,028



47.7
%


50.0
%


25,076



15,060



47.5
%


50.2
%Total

$
77,646


$
63,399



35.8
%


44.6
%

$
146,269


$
123,001



33.8
%


44.4
%         step-up step-up over-and-under
   56




---



##### Table of Contents



step-up
      Research
    and Development Expense
    Three Months Ended April 30,


Six Months Ended April 30,Change


Change








Change


Change2007


2006


In Dollars


In Percent


2007


2006


In Dollars


In Percent(Restated)











(Restated)Research and development

$
16,009


$
12,221


$
3,788



31
%

$
32,907


$
23,628


$
9,279



39
%Percentage of net revenues


7.4
%


8.6
%










7.6
%


8.5
%      57




---



##### Table of Contents



Sales
    and Marketing Expense
    Three Months Ended April 30,

Six Months Ended April 30,Change

Change





Change

Change2007

2006

In Dollars

In Percent

2007

2006

In Dollars

In Percent(Restated)







(Restated)Sales and marketing

$
22,823


$
14,404


$
8,419



58
%

$
45,863


$
28,605


$
17,258



60
%Percentage of net revenues


10.5
%


10.1
%










10.6
%


10.3
%       General
    and Administrative Expense
    Three Months Ended April 30,

Six Months Ended April 30,Change

Change





Change

Change2007

2006

In Dollars

In Percent

2007

2006

In Dollars

In Percent(Restated)







(Restated)General and administrative

$
25,565


$
9,993


$
15,572



156
%

$
42,941


$
19,691


$
23,250



118
%Percentage of net revenues


11.8
%


7.0
%










9.9
%


7.1
%      58




---



##### Table of Contents



Amortization
    of Purchased Intangible Assets
    In-Process
    Research and Development (IPR&D)
    Consumer-activated systems.
  multi-lane
  Countertop communication modules.
    Interest
    Expense
    Interest
    Income
    Other
    Income (Expense), net
   59




---



##### Table of Contents



Provision
    for (Benefit from) Income Taxes
          Segment
    Information
  Disclosures About Segments of an
    Enterprise and Related Information.
    step-up over-and-under
 60




---



##### Table of Contents



Three Months Ended April 30,


Six Months Ended April 30,Change


Change








Change


Change2007


2006


In Dollars


In Percent


2007


2006


In Dollars


In Percent(Restated)











(Restated)Net revenuesInternational

$
121,948


$
61,845


$
60,103



97
%

$
250,745


$
119,502


$
131,243



110
%North America


95,857



80,466



15,391



19
%


184,938



157,641



27,297



17
%Corporate


(922
)


(121
)


(801
)


662
%


(2,437
)


(323
)


(2,114
)


654
%Total net revenues

$
216,883


$
142,190


$
74,693



53
%

$
433,246


$
276,820


$
156,426



57
%Operating income:International

$
30,402


$
14,066


$
16,336



116
%

$
61,826


$
28,233


$
33,593



119
%North America


39,098



31,002



8,096



26
%


70,826



61,505



9,321



15
%Corporate


(62,031
)


(19,446
)


(42,585
)


219
%


(125,785
)


(40,979
)


(84,806
)


207
%Total operating income

$
7,469


$
25,622


$
(18,153
)


(71
)%

$
6,867


$
48,759


$
(41,892
)


(86
)%              61




---



##### Table of Contents



step-up over-and-under
  step-up over-and-under
  Liquidity
    and Capital Resources
        
    A reduction in inventories of $52.2 million following the
    restatement;
    A reduction in accounts payable of $5.3 million due to the
    reduction of inventory levels; 62




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##### Table of Contents




    An increase in deferred revenue of $6.5 million due to an
    increase in deferred service such as customer support and
    installations;
    An increase in accounts receivable of $13.5 million due to
    higher sales;
    A decrease in accrued compensation of $3.0 million;
    Increases in prepaid expenses and other current assets of
    $21.4 million and in other assets of $3.0 million;
    A decrease in accrued expenses and other liabilities of
    $20.2 million; and
    Increases in deferred tax liabilities of $9.2 million and
    income taxes payable of $0.2 million substantially offset
    by an increase in deferred tax assets of $3.4 million and
    the reclassification of tax benefits from stock-based
    compensation of $4.7 million.        Contractual
    Obligations
    Less Than


1-3


3-5


More ThanTotal


1 Year


Years


Years


5 YearsTerm B loan (including interest)

$
725,267


$
40,887


$
80,497


$
79,149


$
524,734Capital lease obligation


74



20



54







Operating leases


41,820



4,565



13,491



9,417



14,347Minimum purchase obligations


38,112



38,112











$
805,273


$
83,584


$
94,042


$
88,566


$
539,081   Earnings
    before Interest, Taxes, Depreciation and Amortization (EBITDA),
    as adjusted
   63




---



##### Table of Contents




    Provision for (benefit from) income
    taxes.  While income taxes are directly related to
    the amount of pre-tax income, they are also impacted by tax laws
    and the companys tax structure. As the tax laws and our
    tax structure are not under the control of our operational
    managers, management believes that the provision for (benefit
    from) income taxes should be excluded when evaluating our
    operational performance.
    Interest expense and interest income.While working
    capital supports the business, management does not believe that
    related interest expense or interest income is directly
    attributable to the operating performance of our business.
    Depreciation of property, plant and equipment. Management
    excludes depreciation because while tangible assets support the
    business, management does not believe the related depreciation
    costs are directly attributable to the operating performance of
    our business. In addition, depreciation may not be indicative of
    current or future capital expenditures.
    Amortization of capitalized software.Management excludes
    amortization of capitalized software because while capitalized
    software supports the business, management does not believe the
    related amortization costs are directly attributable to the
    operating performance of our business. In addition, amortization
    of capitalized software may not be indicative of current or
    future expenditures to develop software.
    Amortization of certain acquisition related items.We
    incur amortization of purchased core and developed technology
    assets, amortization of purchased intangible assets,
    amortization of step-down in deferred revenue on acquisition,
    and amortization of
    step-up in
    inventory on acquisition in connection with acquisitions.
    Management excludes these items because it does not believe
    these expenses are reflective of ongoing operating results in
    the period incurred. These amounts arise from prior acquisitions
    and management does not believe that they have a direct
    correlation to the operation of our business.
    In-process research and development. We incur IPR&D
    expenses when technological feasibility for acquired technology
    has not been established at the date of acquisition and no
    future alternative use for such technology exists. These amounts
    arise from prior acquisitions and management does not believe
    they have a direct correlation to the operation of
    VeriFones business.
    Stock-based compensation.These expenses consist
    primarily of expenses for employee stock options and restricted
    stock units under SFAS No. 123 (R). Management excludes
    stock-based compensation expenses from non-GAAP financial
    measures primarily because they are non-cash expenses which
    management believes are not reflective of ongoing operating
    results.
    Acquisition related charges and restructuring costs. This
    represents charges incurred for consulting services and other
    professional fees associated with acquisition related
    activities. These expenses also include charges related to
    restructuring activities, including costs associated with
    severance, benefits, and excess 64




---



##### Table of Contents



facilities. As management does not believe that these charges
    directly relate to the operation of our business, management
    believes they should be excluded when evaluating our operating
    performance.  
    Non-cash portion of loss on debt extinguishment.This
    represents the non-cash portion of loss incurred on the
    extinguishment of our credit facility. While this credit
    facility supported our business, management does not believe the
    related loss on extinguishment is a cost directly attributable
    to the operating performance of our business.    Three Months Ended


Six Months EndedApril 30,


April 30,2007


2006


2007


2006(Restated)





(Restated)U.S. GAAP net income (loss)

$
(4,818
)

$
15,036


$
(10,497
)

$
28,830Provision for income taxes


4,312



8,381



363



15,333Interest expense


9,507



3,197



19,263



6,476Interest income


(1,534
)


(927
)


(2,525
)


(1,614
)Depreciation and amortization of property, plant and equipment


1,761



877



3,765



1,651Amortization of capitalized software


275



323



570



598Amortization of purchased intangible assets


15,276



2,578



30,236



5,330Amortization of step-down in deferred revenue on acquisition


922



121



2,436



323Amortization of
    step-up in
    inventory on acquisition


3,513







13,961



In-process research and development


90







6,650



Stock-based compensation


8,299



1,189



16,095



2,112Acquisition related charges and restructuring costs


6,623







7,417



EBITDA as adjusted

$
44,226


$
30,775


$
87,734


$
59,039   Off-Balance
    Sheet Arrangements
  Regulation S-K,
  Recent
    Accounting Pronouncements
  Accounting for Uncertainty in
    Income Taxes , Accounting for Income Taxes.
  Considering the Effects of Prior Year Misstatements when
    Quantifying Misstatements in Current Year Financial
    Statements
 65




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##### Table of Contents



Fair
    Value Measurements
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities
  Critical
    Accounting Policies
  Form 10-K
  ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rates
   66




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##### Table of Contents



Foreign
    Currency Risk
  non-U.S. dollar
    non-U.S. denominated
  ITEM 4.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
    Form 10-Q
  Form 10-Q/A.
    
    A transaction-level material weakness in the design and
    operation of control activities relating to the preparation,
    review, approval, and entry of manual, non-standard, journal
    entries. This material weakness 67




---



##### Table of Contents



contributed to adjustments in several accounts and the
    restatement of the interim condensed consolidated financial
    statements for the quarterly periods during the fiscal year
    ended October 31, 2007. The accounts most affected in the
    restatement included inventories and cost of net revenues;
    however, this material weakness could impact all financial
    statement accounts.  
    An entity-level material weakness in the control environment
    related to our period-end financial reporting process due to an
    insufficient number of qualified personnel with the required
    proficiency to apply our accounting policies in accordance with
    U.S. GAAP following the November 1, 2006 acquisition
    of Lipman Electronic Engineering Ltd. This material weakness
    contributed to adjustments in several accounts and the
    restatement of the interim condensed consolidated financial
    statements for the quarterly periods during the fiscal year
    ended October 31, 2007. The accounts most affected in the
    restatement include inventories and cost of net revenues;
    however, this material weakness could impact all financial
    statement accounts, with a higher likelihood for accounts
    subject to non-routine or estimation processes, such as
    inventory reserves and income taxes.
    An entity-level material weakness in control activities related
    to the design and operation of our supervision, monitoring, and
    monthly financial statement review processes. This material
    weakness contributed to adjustments in several accounts and the
    restatement of interim condensed consolidated financial
    statements for the quarterly periods during the fiscal year
    ended October 31, 2007. The accounts most affected in the
    restatement include inventories and cost of net revenues;
    however, this material weakness could impact all financial
    statement accounts.
    A transaction-level material weakness in the design and
    operating effectiveness of controls related to income taxes.
    Specifically, our processes and procedures were not designed to
    provide for adequate and timely identification, documentation
    and review of various income tax calculations, reconciliations
    and related supporting documentation required to apply our
    accounting policy for income taxes in accordance with
    U.S. GAAP, particularly following the November 1, 2006
    acquisition of Lipman Electronic Engineering Ltd. This material
    weakness impacted our ability to report financial information
    related to income tax accounts and resulted in adjustments to
    income tax expense, income taxes payable, deferred tax assets
    and liabilities and goodwill accounts during the fiscal year
    ended October 31, 2007.      Managements
    Remediation Initiatives
  s
  
    We have enhanced our manual journal entry policy, including a
    more stringent manual journal entry review and approval process
    that requires tiered approval levels in which escalating dollar
    amounts require additional approval by increasingly more senior
    personnel;
    We migrated to a new worldwide, integrated, enterprise resource
    planning (ERP) system. The new ERP system is our
    principal computing platform and provides for a single unified
    chart of accounts worldwide. This system was activated for the
    majority of our worldwide operations in the first fiscal quarter
    of 2008 and by the end of the second fiscal quarter of 2008 over
    90% of our consolidated net revenues and cost of net revenues
    were processed on this system; 68




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
    We have added and expect to continue to add qualified accounting
    and finance personnel having sufficient knowledge and experience
    in general accepted accounting principles, cost accounting, tax,
    and management of financial systems;
    We intend to enhance our review process over the monthly
    financial results by requiring additional documentation and
    analysis to be provided that will then be reviewed by
    appropriate key senior personnel from both finance and
    non-finance areas;
    We expect to enhance the segregation of duties between the
    financial planning and the accounting and control
    functions; and
    We intend to enhance our governance and compliance functions to
    improve control consciousness and prevention of errors in
    financial reporting, as well as to improve tone, communication,
    education, and training for employees involved in the financial
    reporting process, including the appointment of a chief legal
    and compliance officer.  Changes
    in internal control over financial reporting
  Rule 13a-15(f)
 PART II 
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS         69




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ITEM 1A.
    RISK
    FACTORS  The following discussion supplements and amends the risk
    factors previously disclosed as Item 1A in our Annual
    Report on
    Form 10-K
    for the year ended October 31, 2006 which are incorporated
    herein by reference.
  Risks
    Related to Our Business
  Although
    we expect that the acquisition of Lipman will result in benefits
    to our Company, those benefits may not occur because of
    integration and other challenges.
    
    incorporating Lipmans technology and products into our
    next generation of products;
    integrating Lipmans technical team in Israel with our
    larger and more widely dispersed engineering organization;
    coordinating research and development activities to enhance
    introduction of new products, services and technologies;
    integrating Lipmans in-house manufacturing model with the
    outsource model employed by VeriFone;
    integrating Lipmans international operations with those of
    VeriFone; and
    persuading the employees in various jurisdictions that
    Lipmans business cultures are compatible with ours,
    maintaining employee morale and retaining key employees.   70




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A
    significant percentage of our business is executed towards the
    end of our fiscal quarters. This could negatively impact our
    business and results of operations.
    
    the manufacturing processes in our internal manufacturing could
    become concentrated in a shorter time period. This concentration
    of manufacturing could increase labor and other manufacturing
    costs and negatively impact gross margins. The risk of inventory
    write offs could also increase if we were to hold higher
    inventory levels to counteract this;
    the higher concentration of orders may make it difficult to
    accurately forecast component requirements and, as a result, we
    could experience a shortage of the components needed for
    production, possibly delaying shipments and causing lost
    orders; and
    if we are unable to fill orders at the end of a quarter,
    shipments may be delayed. This could cause us to fail to meet
    our revenue and operating profit expectations for a particular
    quarter and could increase the fluctuation of quarterly results
    if shipments are delayed from one fiscal quarter to the next or
    orders are cancelled by customers.  We
    face risks related to a planned migration to a common enterprise
    resource planning information system to integrate all business
    and finance activities.
    A
    majority of our net revenues is generated outside of North
    America and we intend to continue to expand our operations
    internationally. Our results of operations could suffer if we
    are unable to manage our international expansion and operations
    effectively.
    
    securing commercial relationships to help establish our presence
    in international markets; 71




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
    hiring and training personnel capable of marketing, installing
    and integrating our solutions, supporting customers and managing
    operations in foreign countries;
    localizing our solutions to target the specific needs and
    preferences of foreign customers, which may differ from our
    traditional customer base in the United States;
    building our brand name and awareness of our services among
    foreign customers; and
    implementing new systems, procedures and controls to monitor our
    operations in new markets on a basis consistent with our
    domestic operations.    
    multiple, changing and often inconsistent enforcement of laws
    and regulations;
    satisfying local regulatory or industry imposed security or
    other certification requirements;
    competition from existing market participants that may have a
    longer history in and greater familiarity with the foreign
    markets we enter;
    tariffs and trade barriers;
    laws and business practices that favor local competitors;
    fluctuations in currency exchange rates;
    extended payment terms and the ability to collect account
    receivables;
    economic and political instability in foreign countries;
    imposition of limitations on conversion of foreign currencies
    into U.S. dollars or remittance of dividends and other
    payments by foreign subsidiaries;
    changes in a specific countrys or regions political
    or economic conditions; and
    greater difficulty in safeguarding intellectual property in
    areas such as China, Russia and Latin America.    A
    significant portion of our gross finished goods consists of
    non-PCI compliant products. Due to an upcoming PCI deadline, we
    must successfully deplete the non-PCI inventory while
    transitioning customers to PCI products. Our results of
    operations could suffer if we are unable to manage our inventory
    and marketing programs to meet this objective.
   72




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We are
    exposed to various risks related to legal proceedings or claims
    that may harm our operating results or financial
    condition.
             73




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ITEM 2.
    UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS    ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS      For


WithheldDouglas G. Bergeron


53,888,382



482,940Craig A. Bondy


49,518,821



4,852,501Dr. James C. Castle


54,185,832



185,490Dr. Leslie G. Denend


51,477,158



2,894,164Alex W. Hart


54,207,004



164,318Robert B. Henske


51,477,474



2,893,848Charles R. Rinehart


54,271,981



99,341Collin E. Roche


50,616,140



3,755,182     For


54,348,118Against


12,954Abstain


10,249   ITEM 5.
    OTHER
    INFORMATION    ITEM 6.
    EXHIBITS    ExhibitNumber

Description31
.1

Certification of the Chief Executive Officer, as required by
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of the Chief Financial Officer, as required by
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of the Chief Executive Officer and the Chief
    Financial Officer as required by Section 906 of the
    Sarbanes-Oxley Act of 2002.  74




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SIGNATURES      By: /s/  Douglas
    G. Bergeron      By: /s/  Barry
    Zwarenstein       75




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EXHIBIT INDEX
  ExhibitNumber

Description31
.1

Certification of the Chief Executive Officer, as required by
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of the Chief Financial Officer, as required by
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of the Chief Executive Officer and the Chief
    Financial Officer as required by Section 906 of the
    Sarbanes-Oxley Act of 2002.  76