##### 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
    July 31, 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


04-3692546(State or other jurisdiction
    of
    incorporation or organization)


(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 II  Item 4. Controls and Procedures;
    Part II  Item 1. Legal Proceedings;
    Part II  Item 1A. Risk Factors; and
    Part II  Item 6. Exhibits.  10-Q Form 10-Q 10-Q). 10-Q 10-Q 10-Q, 10-Q
 2




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##### Table of Contents



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 
    July 31, 2007 (restated) and October 31, 2006


5Condensed Consolidated Statements of
    Operations  Three and Nine Months Ended July 31,
    2007 (restated) and 2006


6Condensed Consolidated Statements of Cash
    Flows  Nine Months Ended July 31, 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


56Item 3


Quantitative and Qualitative Disclosures About
    Market Risk


71Item 4


Controls and Procedures


72PART II  OTHER
    INFORMATIONItem 1


Legal Proceedings


74Item 1A


Risk Factors


75Item 2


Unregistered Sales of Equity Securities and Use
    of Proceeds


79Item 3


Defaults Upon Senior Securities


80Item 4


Submission of Matters to a Vote of Security
    Holders


80Item 5


Other Information


80Item 6


Exhibits


81Signatures


82EXHIBIT 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
  July 31,


October 31,2007


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

$
212,946


$
86,564Accounts receivable, net of allowances of $5,276 and $2,364


182,920



119,839Inventories


104,784



86,631Deferred tax assets


21,991



13,267Prepaid expenses and other current assets


29,438



12,943Total current assets


552,079



319,244Property, plant, and equipment, net


40,290



7,300Purchased intangible assets, net


180,396



16,544Goodwill


610,351



52,689Deferred tax assets


55,276



21,706Debt issuance costs, net


13,427



10,987Transaction costs






12,350Other assets


22,961



12,125Total assets

$
1,474,780


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

$
97,296


$
66,685Income taxes payable


41,687



5,951Accrued compensation


18,641



16,202Accrued warranty


10,102



4,902Deferred revenue, net


39,552



23,567Accrued expenses


6,138



4,752Accrued transaction costs






12,000Other current liabilities


71,218



13,661Current portion of long-term debt


5,367



1,985Restructuring liabilities


2,661



2,963Total current liabilities


292,662



152,668Accrued warranty


426



530Deferred revenue


10,310



7,371Long-term debt, net of current portion


549,006



190,904Deferred tax liabilities


78,470



859Other long-term liabilities


10,692



1,872Total liabilities


941,566



354,204Minority interest


2,620



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






Common stock: $0.01 par value, 100,000 shares
    authorized at July 31, 2007 and October 31, 2006;
    83,316 and 68,148 shares issued and outstanding as of
    July 31, 2007 and October 31, 2006


833



682Additional
    paid-in-capital


611,565



140,569Accumulated deficit


(96,351
)


(43,468
)Accumulated other comprehensive income


14,547



958Total stockholders equity


530,594



98,741Total liabilities and stockholders equity

$
1,474,780


$
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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VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  CONDENSED
    CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months Ended July 31,


Nine Months Ended July 31,2007


2006


2007


2006(Restated)(1)





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

$
205,972


$
131,960


$
586,407


$
378,781Services


25,729



15,657



78,540



45,656Total net revenues


231,701



147,617



664,947



424,437Cost of net revenues:System Solutions


132,268



72,704



391,510



211,584Services


13,837



8,452



41,572



23,391Total cost of net revenues


146,105



81,156



433,082



234,975Gross profit


85,596



66,461



231,865



189,462Operating expenses:Research and development


15,365



11,726



48,272



35,354Sales and marketing


23,686



14,181



69,549



42,786General and administrative


19,364



10,936



62,306



30,627Amortization of purchased intangible assets


5,416



1,159



16,456



3,477In-process research and development










6,650



Total operating expenses


63,831



38,002



203,233



112,244Operating income


21,765



28,459



28,632



77,218Interest expense


(9,468
)


(3,438
)


(28,731
)


(9,914
)Interest income


2,226



938



4,751



2,552Other income (expense), net


(4,156
)


(195
)


(4,419
)


71Income before income taxes


10,367



25,764



233



69,927Provision for income taxes


52,753



9,009



53,116



24,342Net income (loss)

$
(42,386
)

$
16,755


$
(52,883
)

$
45,585Net income (loss) per share:Basic

$
(0.51
)

$
0.25


$
(0.65
)

$
0.69Diluted

$
(0.51
)

$
0.24


$
(0.65
)

$
0.66Weighted average shares used in computing net income (loss) per
    share:Basic


82,407



66,284



81,699



65,936Diluted


82,407



69,079



81,699



68,906     (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
  Nine Months Ended July 31,2007


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

$
(52,883
)

$
45,585Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Amortization of purchased intangible assets


44,930



7,560Depreciation and amortization of property, plant, and equipment


5,814



2,532Amortization of capitalized software


800



892In-process research and development


6,650



Amortization of interest rate caps


5



236Amortization of debt issuance costs


1,129



819Stock-based compensation


21,954



3,798Non-cash portion of loss on debt extinguishment


4,764



Minority interest and equity in earnings of affiliates


(86
)


Other


(86
)


(74
)Net cash provided by operating activities before changes in
    working capital


32,991



61,348Changes in operating assets and liabilities:Accounts receivable, net


(28,035
)


(19,097
)Inventories


47,967



(40,369
)Deferred tax assets


(7,161
)


(2,663
)Prepaid expenses and other current assets


(5,852
)


(1,204
)Other assets


(3,709
)


(924
)Accounts payable


19,487



15,421Income taxes payable


39,475



431Tax benefit from stock-based compensation


(6,882
)


(2,666
)Accrued compensation


(5,147
)


200Accrued warranty


(2,640
)


(886
)Deferred revenue


10,317



5,509Deferred tax liabilities


9,434



Accrued expenses and other liabilities


(15,432
)


(1,460
)Net cash provided by operating activities


84,813



13,640Cash flows from investing activitiesSoftware development costs capitalized


(4,532
)


(1,731
)Purchase of property, plant, and equipment, net


(20,366
)


(2,780
)Purchase of other assets


(500
)


(673
)Purchases of marketable securities






(125,034
)Sales and maturities of marketable securities






127,325Transaction costs, pending acquisitions






(2,497
)Acquisition of businesses, net of cash and cash equivalents
    acquired


(267,745
)


Net cash used in investing activities


(293,143
)


(5,390
)Cash flows from financing activitiesProceeds from long-term debt, net of costs


613,252



Purchase of convertible note hedge


(80,236
)


Sale of warrants


31,188



Repayment of long-term debt


(262,554
)


(1,386
)Tax benefit of stock-based compensation


6,882



2,666Repayments of capital leases


(43
)


(125
)Investment in subsidiary by minority stockholder


1,050



Proceeds from exercises of stock options


24,539



2,120Other


26



Net cash provided by financing activities


334,104



3,275Effect of foreign currency exchange rate changes on cash


608



1,011Net increase in cash and cash equivalents


126,382



12,536Cash and cash equivalents, beginning of period


86,564



65,065Cash and cash equivalents, end of period

$
212,946


$
77,601Supplemental disclosures of cash flow informationCash paid for interest

$
25,345


$
9,013Cash paid for taxes

$
13,779


$
26,881Supplemental schedule of non-cash transactions:Debt issuance costs withheld from proceeds

$
8,333


$
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
  July 31, 2007As Reported


Adjustments


Ref.


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

$
212,946


$







$
212,946Accounts receivable, net of allowances


183,096



(176
)






182,920Inventories


145,398



(40,614
)


(b
)


104,784Deferred tax assets


20,832



1,159



(e
)


21,991Prepaid expenses and other current assets


24,911



4,527



(e
)


29,438Total current assets


587,183



(35,104
)






552,079Property, plant, and equipment, net


42,857



(2,567
)


(f
)


40,290Purchased intangible assets, net


180,835



(439
)


(f
)


180,396Goodwill


564,718



45,633



(f
)


610,351Deferred tax assets


75,493



(20,217
)


(e
)


55,276Debt issuance costs, net


13,427











13,427Other assets


19,742



3,219



(f
)


22,961Total assets

$
1,484,255


$
(9,475
)





$
1,474,780LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
97,810


$
(514
)





$
97,296Income taxes payable


5,489



36,198



(e
)


41,687Accrued compensation


19,990



(1,349
)






18,641Accrued warranty


9,613



489







10,102Deferred revenue, net


39,271



281







39,552Accrued expenses


6,138











6,138Other current liabilities


73,468



(2,250
)


(f
)


71,218Current portion of long-term debt


5,367











5,367Restructuring liabilities


2,661











2,661Total current liabilities


259,807



32,855







292,662Accrued warranty


426











426Deferred revenue


10,310











10,310Long-term debt, net of current portion


549,006











549,006Deferred tax liabilities


70,155



8,315



(e
)


78,470Other long-term liabilities


10,692











10,692Total liabilities


900,396



41,170







941,566Minority interest


3,299



(679
)


(f
)


2,620Total stockholders equity


580,560



(49,966
)


(g
)


530,594Total liabilities and stockholders equity

$
1,484,255


$
(9,475
)





$
1,474,780  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 July 31, 2007


Nine Months Ended July 31, 2007As Reported


Adjustments


Ref.


Restated


As Reported


Adjustments


Ref.


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

$
206,216


$
(244
)


(a)


$
205,972


$
587,245


$
(838
)


(a)


$
586,407Services


25,729











25,729



78,539



1







78,540Total net revenues


231,945



(244
)






231,701



665,784



(837
)






664,947Cost of net revenues:System Solutions


116,622



15,646







132,268



353,381



38,129







391,510Services


13,312



525







13,837



38,812



2,760







41,572Total cost of net revenues


129,934



16,171



(c)



146,105



392,193



40,889



(c)



433,082Gross profit


102,011



(16,415
)






85,596



273,591



(41,726
)






231,865Operating expenses:Research and development


15,560



(195
)






15,365



48,604



(332
)






48,272Sales and marketing


23,644



42







23,686



69,490



59







69,549General and administrative


21,134



(1,770
)


(d)



19,364



66,721



(4,415
)


(d)



62,306Amortization of purchased intangible assets


5,167



249







5,416



16,555



(99
)






16,456In-process research and development


















6,640



10







6,650Total operating expenses


65,505



(1,674
)






63,831



208,010



(4,777
)






203,233Operating income


36,506



(14,741
)






21,765



65,581



(36,949
)






28,632Interest expense


(9,584
)


116







(9,468
)


(28,935
)


204







(28,731
)Interest income


2,226











2,226



4,751











4,751Other income (expense), net


(4,386
)


230







(4,156
)


(4,417
)


(2
)






(4,419
)Income (loss) before income taxes


24,762



(14,395
)






10,367



36,980



(36,747
)






233Provision for income taxes


11,323



41,430



(e)



52,753



19,666



33,450



(e)



53,116Net income (loss)

$
13,439


$
(55,825
)





$
(42,386
)

$
17,314


$
(70,197
)





$
(52,883
)Net income (loss) per share:Basic

$
0.16


$
(0.67
)





$
(0.51
)

$
0.21


$
(0.86
)





$
(0.65
)Diluted

$
0.16


$
(0.67
)





$
(0.51
)

$
0.20


$
(0.85
)





$
(0.65
)Weighted average shares used in computing net income (loss) per
    share:Basic


82,407











82,407



81,699











81,699Diluted


84,374



(1,967
)






82,407



84,507



(2,808
)






81,699  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
  Nine Months Ended July 31, 2007Reported


Adjustments


Restated(In thousands)Net income (loss)

$
17,314


$
(70,197
)

$
(52,883
)Net cash provided by operating activities

$
93,247


$
(8,434
)

$
84,813Net cash used in investing activities


(301,586
)


8,443



(293,143
)Net cash provided by (used in) financing activities


334,113



(9
)


334,104Effect of foreign currency exchange rates on cash


608







608Net increase in cash and cash equivalents


126,382







126,382Cash and cash equivalents, beginning of period


86,564







86,564Cash and cash equivalents, end of period

$
212,946


$



$
212,946     (a)
    Net revenues for the three and nine months ended July 31,
    2007 were reduced primarily by errors in the timing of the
    recognition of revenue.  (b)
    The changes to inventories as of July 31, 2007 are as
    follows:  
    $20.1 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;
    $10.5 million decrease due to the duplicate recording of
    manufacturing and distribution overhead to inventories at former
    Lipman subsidiaries;
    $6.3 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;
    $2.4 million decrease to correct errors in the
    capitalization of overhead;
    $0.6 million decrease to correct errors in excess and
    obsolete inventory;
    $1.1 million decrease to correct errors in recording and
    eliminating intercompany transactions; and
    $0.4 million net increase as a result of various
    adjustments, each individually less than $0.5 million.  (c)
    The changes to total cost of net revenues for the nine months
    ended July 31, 2007 are as follows:  
    $20.1 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;
    $10.5 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)
   
    $6.3 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;
    $2.4 million increase to correct errors in the
    capitalization of overhead;
    $0.9 million increase due to an error in determining
    replacement cost of component inventory at former Lipman
    entities;
    $0.6 million increase to correct errors in excess and
    obsolete inventory;
    $0.5 million increase to correct errors in recording and
    eliminating intercompany transactions; and
    $0.4 million net decrease as a result of various
    adjustments, each individually less than $0.5 million.    
    $8.4 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;
    $2.8 million increase due to the duplicate recording of
    manufacturing and distribution overhead to inventories at former
    Lipman subsidiaries;
    $2.4 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;
    $2.1 million increase to correct errors in the
    capitalization of overhead;
    $0.6 million increase to correct errors in excess and
    obsolete inventory; and
    $0.1 million net decrease as a result of various
    adjustments, each individually less than $0.5 million.  (d)
    The changes to general and administrative expenses for the nine
    months ended July 31, 2007 are as follows:  
    $4.3 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.    
    $1.7 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. 13




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (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.     
    $29.9 million increase as a result of adjustments in
    long-term deferred tax liabilities;
    $5.5 million increase to correct errors related to Lipman
    stock-options assumed at acquisition;
    $5.8 million decrease as a result of corrections related to
    Lipman, Payware and VTS assets and liabilities assumed at
    acquisition; and
    $16.0 million increase as a result of cumulative
    translation adjustments related to the above adjustments and
    correction of errors.  (g)
    The changes to total stockholders equity as of
    July 31, 2007 are as follows:  
    $70.2 million decrease as a result of the restatement
    adjustments to the consolidated statement of operations;
    $3.3 million decrease due to correction of errors related
    to stock compensation expense;
    $5.5 million increase to correct errors related to Lipman
    stock-options assumed at acquisition; and
    $18.1 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.
 14




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Form 10-K
  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
   19




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Inventories
  first-in,
  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)
   20




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##### Table of Contents



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




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Severance
    Pay
    Segment
    Reporting
    Net
    Income (Loss) Per Share
   22




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##### Table of Contents



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


Nine Months EndedJuly 31,


July 31,2007


2006


2007


2006(Restated)





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

$
(42,386
)

$
16,755


$
(52,883
)

$
45,585Denominator:Weighted-average shares of voting common stock outstanding


83,078



67,956



82,589



67,822Less: weighted-average shares subject to repurchase


(671
)


(1,672
)


(890
)


(1,886
)Weighted-average shares used in computing basic net income
    (loss) per share


82,407



66,284



81,699



65,936Add dilutive securities:Weighted-average shares subject to repurchase






1,672







1,886Stock options and restricted stock units






1,123







1,084Weighted-average shares used in computing diluted net income
    (loss) per share


82,407



69,079



81,699



68,906Net income (loss) per share:Basic

$
(0.51
)

$
0.25


$
(0.65
)

$
0.69Diluted

$
(0.51
)

$
0.24


$
(0.65
)

$
0.66     No. 90-19 (EITF 90-19), Convertible Bonds with Issuer Option to Settle for Cash upon
    Conversion EITF 90-19.
   23




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##### 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
    Combination  Lipman
    Electronic Engineering Ltd. (Lipman)
     24




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##### Table of Contents



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

$
347,347Value of common stock issued


417,606Value of Lipman vested and unvested options assumed


38,008Transaction costs and expenses


15,964Sub-total


818,925Less: Value of unvested Lipman options assumed


(19,356
)Total purchase price

$
799,569            25




---



##### Table of Contents



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

$
95,931Accounts receivable


33,433Inventories


65,765Property, plant, and equipment


18,631Other assets


12,743Deferred revenue


(8,607
)Other current liabilities


(89,157
)Net deferred tax liabilities


(65,576
)Non current liabilities


(9,635
)Net tangible assets


53,528Amortizable 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


536,501Total preliminary estimated purchase price allocation

$
799,569   Net
    Tangible Assets
       26




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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
     27




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Excess
    Over Fair Value of Vested Options
    Goodwill
     28




---



##### Table of Contents



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


Nine Months EndedJuly 31, 2006


July 31, 2006(Restated)(In millions, except per share amounts)Total net revenues

$
209.7


$
610.5Net income

$
8.8


$
14.2Net income per share  basic

$
0.11


$
0.18Net income per share  diluted

$
0.11


$
0.17     PayWare
      VeriFone
    Transportation Systems, Inc.
   29




---



##### 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
    July 31,


October 31,2007


2006(Restated)Raw materials

$
23,916


$
4,095Work-in-process


4,160



808Finished goods


76,708



81,728$
104,784


$
86,631   Prepaid
    Expenses and Other Current Assets
    July 31,


October 31,2007


2006(Restated)Prepaid taxes

$
6,781


$
5,241Prepaid expenses


14,924



3,208Other receivables


7,161



750Other current assets


572



3,744$
29,438


$
12,943   Property,
    Plant, and Equipment, net
    July 31,


October 31,2007


2006(Restated)Computer hardware and software

$
11,809


$
7,049Office equipment, furniture, and fixtures


4,444



3,972Machinery and equipment


9,824



5,602Leasehold improvements


6,920



3,897Construction in progress


14,726



966Land


1,633



Buildings


5,206



Total


54,562



21,486Accumulated depreciation and amortization


(14,272
)


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

$
40,290


$
7,300    30




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Purchased
    Intangible Assets, net
    July 31, 2007


October 31, 2006Gross








GrossCarrying


Accumulated





Carrying


AccumulatedAmount


Amortization


Net


Amount


Amortization


Net(Restated)Developed technology

$
170,607


$
(55,109
)

$
115,498


$
35,164


$
(28,616
)

$
6,548Core technology


14,442



(14,442
)






14,442



(12,517
)


1,925Trade name


22,225



(22,225
)






22,225



(19,942
)


2,283Internal use software


4,288



(647
)


3,641











Customer relationships


88,230



(26,973
)


61,257



19,314



(13,526
)


5,788$
299,792


$
(119,396
)

$
180,396


$
91,145


$
(74,601
)

$
16,544     Three Months Ended


Nine Months EndedJuly 31,


July 31,2007


2006


2007


2006(Restated)





(Restated)Included in cost of net revenues

$
9,278


$
1,071


$
28,474


$
4,083Included in operating expenses


5,416



1,159



16,456



3,477$
14,694


$
2,230


$
44,930


$
7,560     Cost of


OperatingFiscal Year

Revenues


Expenses


Total(Restated)2007 (remaining three months)

$
9,819


$
3,653


$
13,4722008


31,917



25,125



57,0422009


31,173



20,180



51,3532010


24,311



11,808



36,119Thereafter


18,278



4,132



22,410$
115,498


$
64,898


$
180,396  31




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Goodwill
    July 31,


October 31,2007


2006(Restated)Balance, beginning of year

$
52,689


$
47,260Additions related to acquisitions


545,417



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


(3,262
)


(923
)Currency translation adjustments


15,507



Balance, end of period

$
610,351


$
52,689   Warranty
    July 31,


October 31,2007


2006Balance, beginning of year

$
5,432


$
5,243Warranty charged to cost of net revenues


2,412



3,311Utilization of warranty


(5,530
)


(3,815
)Changes in estimates


483



693Warranty assumed in acquisitions


7,731



Balance, end of period


10,528



5,432Less current portion


(10,102
)


(4,902
)Long-term portion

$
426


$
530   Deferred
    Revenue, net
    July 31,


October 31,2007


2006(Restated)Deferred revenue

$
53,431


$
34,309Less long-term portion


(10,310
)


(7,371
)43,121



26,938Deferred cost of revenue


(3,569
)


(3,371
)Current portion, net

$
39,552


$
23,567  32




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Other
    Current Liabilities
    July 31,


October 31,2007


2006Taxes payable (excluding income tax)

$
31,999


$
1,990Other accounts payable


13,758



7,511Accrued audit and legal fees


5,221



3,135Interest payable


482



5Other liabilities


19,758



1,020$
71,218


$
13,661   Other
    Income (Expense), net
    Three Months


Nine MonthsEnded


EndedJuly 31,


July 31,2007


2006


2007


2006(Restated)





(Restated)Refund of foreign customs fees

$



$



$



$
288Foreign currency transaction gains, net


1,213



137



3,106



309Foreign currency contract losses, net


(914
)


(354
)


(2,929
)


(543
)Loss on debt extinguishment


(4,764
)






(4,764
)


Other, net


309



22



168



17$
(4,156
)

$
(195
)

$
(4,419
)

$
71   Note 6.
    Financing    July 31,


October 31,2007


2006Secured credit facility:Revolver

$



$
Term B loan


237,500



192,7801.375% Senior convertible notes


316,250



Capital leases and other


623



109554,373



192,889Less current portion


(5,367
)


(1,985
)Long-term portion

$
549,006


$
190,904   Secured
    Credit Facility
   33




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           34




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  1.375% Senior
    Convertible Notes
    business-day trading-day trading-day
     35




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Form 10-K,
       36




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  No. 00-19 (EITF 00-19), Accounting for Derivative Financial Instruments Indexed to,
    and Potentially Settled in, a Companys Own Stock
  Earnings per
    Share
  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


10







10



10



Reductions


(266
)


(49
)


(315
)


(300
)


(15
)Cash payments


(182
)






(182
)


(182
)


Foreign exchange impact






4



4



4



Balance at July 31, 2007

$
48


$
15


$
63


$
35


$
28   Short-Term


Long-TermFacilities


Other


Total


Portion


PortionBalance at October 31, 2005

$
1,200


$
60


$
1,260


$
765


$
495Additions (reductions)






8



8



455



(447
)Cash payments


(533
)


(8
)


(541
)


(541
)


Balance at July 31, 2006

$
667


$
60


$
727


$
679


$
48   GO
    Software Restructuring Plan
   37




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    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 July 31, 2007

$



$



$
   Short-Term


Long-TermSeverance


Portion


PortionBalance at October 31, 2005

$



$



$
Additions


599



599



Cash payments


(575
)


(575
)


Balance at July 31, 2006

$
24


$
24


$
   PayWare
    Restructuring Plan
   38




---



##### Table of Contents



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


663



357



105



1,125



1,125



Cash payments


(1,846
)


(497
)


(181
)


(2,524
)


(2,524
)


Balance at July 31, 2007

$
51


$
958


$



$
1,009


$
1,009


$
   Fiscal
    Year 2007 Restructuring Plan
      Short-Term


Long-TermSeverance


Facilities


Other


Total


Portion


Portion(Restated)Balance at October 31, 2006

$



$



$



$



$



$
Additions


808



10



4



822



822



Cash payments


(696
)


(10
)


(3
)


(709
)


(709
)


Foreign exchange impact














Balance at July 31, 2007

$
112


$



$
1


$
113


$
113


$
   Lipman
    Restructuring Plan
   39




---



##### Table of Contents



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


Long-TermSeverance


Facilities


Other


Total


Portion


Portion(Restated)Balance at October 31, 2006

$



$



$



$



$



$
Additions


3,394



3,030







6,424



3,929



2,495Cash payments


(1,979
)


(2,952
)






(4,931
)


(2,436
)


(2,495
)Foreign exchange impact


14



(3
)






11



11



Balance at July 31, 2007

$
1,429


$
75


$



$
1,504


$
1,504


$
   All
    Restructuring Plans
    Note 8.
    Commitments
    and Contingencies    Minimum Lease


Sublease Rental


Net MinimumPayments


Income


Lease PaymentsFiscal YearRemainder of 2007

$
2,676


$
34


$
2,6422008


9,500



137



9,3632009


7,292



89



7,2032010


6,612



4



6,6082011


5,374







5,374Thereafter


15,834







15,834$
47,288


$
264


$
47,024     Manufacturing
    Agreements
   40




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Employee
    Health and Dental Costs
    Litigation
         41




---



##### Table of Contents



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


Nine Months EndedJuly 31,


July 31,2007


2006


2007


2006(Restated)





(Restated)Net income (loss)

$
(42,386
)

$
16,755


$
(52,883
)

$
45,585Foreign currency translation adjustments, net of tax


3,345



(110
)


13,608



208Unrecognized gain (loss) on interest rate hedges, net of tax


4



(35
)


(18
)


17Unrealized gain (loss) on marketable securities, net of tax






1



(1
)


2Comprehensive income (loss)

$
(39,037
)

$
16,611


$
(39,294
)

$
45,812     July 31,


October 31,2007


2006(Restated)Foreign currency translation adjustments, net of tax of $3,395
    and $1,068

$
14,611


$
1,003Unrecognized loss on interest rate hedges, net of tax of $42 and
    $29


(64
)


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






1Accumulated other comprehensive income

$
14,547


$
958  42




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 10.
    Stockholders
    Equity  Common
    and Preferred Stock
      Restricted
    Common Stock
      Stock
    Option Plans
    SharesUnderOption(Restated)Balance at November 1, 2006


5,406,108Assumed in Lipman acquisition


3,375,527Granted


3,169,205Exercised


(1,686,220
)Cancelled


(928,472
)Balance at July 31, 2007


9,336,148Vested or expected to vest at July 31, 2007


8,575,419Exercisable at July 31, 2007


1,842,257  43




---



##### Table of Contents



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


Remaining


AggregateShares


Average


Contractual


IntrinsicUnder


Exercise


Term


ValueOption


Price


(Years)


(Thousands)Balance at November 1, 2006


898,062


$
4.22Exercised


(322,082
)


4.04Cancelled


(11,740
)


7.33Balance at July 31, 2007


564,240


$
4.26



6.77


$
18,138Vested or expected to vest at July 31, 2007


531,594


$
4.21



6.75


$
17,117Exercisable at July 31, 2007


259,090


$
3.62



6.46


$
8,496       Outside
    Directors Stock Option Plan
   44




---



##### 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


(18,750
)


10.00Cancelled






Balance at July 31, 2007


71,250


$
10.00



4.48


$
1,882Vested or expected to vest at July 31, 2007


71,250


$
10.00



4.48


$
1,882Exercisable at July 31, 2007


35,625


$
10.00



4.49


$
941       2005
    Equity Incentive Option Plan
      WeightedAverageWeighted


Remaining


AggregateShares


Average


Contractual


IntrinsicUnder


Exercise


Term


ValueOption


Price


(Years)


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


1,878,801


$
12.13Exercised


(405,114
)


11.24Cancelled


(62,414
)


11.39Balance at July 31, 2007


1,411,273


$
12.42



4.51


$
33,857Vested or expected to vest at July 31, 2007


1,276,180


$
12.41



4.51


$
30,623Exercisable at July 31, 2007


411,072


$
12.78



4.48


$
9,713  45




---



##### Table of Contents



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


3,169,205



35.31Exercised


(66,435
)


29.28Cancelled


(392,401
)


31.56Balance at July 31, 2007


5,249,614


$
32.74



6.21


$
19,260Vested or expected to vest at July 31, 2007


4,855,397


$
32.70



6.21


$
18,011Exercisable at July 31, 2007


471,045


$
29.23



5.65


$
3,381       Twenty-five
 46




---



##### 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 onNovember 1, 2006


3,375,527


$
24.47Exercised


(873,839
)


19.65Cancelled


(461,917
)


27.69Balance at July 31, 2007


2,039,771


$
25.68



4.56


$
22,037Vested or expected to vest at July 31, 2007


1,840,997


$
25.44



4.56


$
20,194Exercisable at July 31, 2007


665,425


$
22.60



4.88


$
9,189    47




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  share-based
  All
    Plans
    Share-Based Payment
    Three Months Ended


Nine Months EndedJuly 31,


July 31,2007


2006


2007


2006(Restated)





(Restated)Expected term of the options


2 years



3 years



2 years



3.1 yearsRisk-free interest rate


4.8
%


5.2
%


4.8
%


5.0
%Expected stock price volatility


40
%


41
%


40
%


42
%Expected dividend rate


0.0
%


0.0
%


0.0
%


0.0
%     Nine Months EndedThree Months Ended July 31,


July 31,2007


2006


2007


2006(Restated)





(Restated)Cost of net revenues

$
570


$
204


$
2,417


$
519Research and development


1,443



326



4,342



716Sales and marketing


1,974



569



5,486



1,309General and administrative


1,872



587



9,709



1,254$
5,859


$
1,686


$
21,954


$
3,798    48




---



##### Table of Contents



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


Nine Months EndedJuly 31,


July 31,2007


2007(Restated)New Founders Stock Option Plan

$
103


$
323Executive Plan


12



45Outside Directors Stock Option Plan


35



1042005 Equity Incentive Option Plan


761



2,2332006 Equity Incentive Plan


2,822



7,062Lipman Plans


2,126



12,187$
5,859


$
21,954   Note 11.
    Segment
    and Geographic Information  Segment
    Information
  Disclosures About Segments of an
    Enterprise and Related Information.
    step-up over-and-under
 49




---



##### Table of Contents



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


Nine Months EndedJuly 31,


July 31,2007


2006


2007


2006(Restated)





(Restated)Net revenues:International

$
128,391


$
62,289


$
379,136


$
181,791North America


103,961



85,404



288,899



243,045Corporate


(651
)


(76
)


(3,088
)


(399
)Total net revenues

$
231,701


$
147,617


$
664,947


$
424,437Operating income:International

$
28,789


$
16,819


$
90,615


$
45,052North America


43,148



32,763



113,974



94,268Corporate


(50,172
)


(21,123
)


(175,957
)


(62,102
)Total operating income

$
21,765


$
28,459


$
28,632


$
77,218     July 31,


October 31,2007


2006(Restated)International

$
22,138


$
3,277North America


20,817



6,270$
42,955


$
9,547     July 31,


October 31,2007


2006(Restated)International

$
555,576


$
19,102North America


54,775



33,587$
610,351


$
52,689     July 31,


October 31,2007


2006(Restated)International

$
1,116,916


$
125,681North America


357,864



327,264$
1,474,780


$
452,945  50




---



##### Table of Contents



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


Nine Months EndedJuly 31,


July 31,2007


2006


2007


2006(Restated)





(Restated)International

$
1,258


$
207


$
3,639


$
560North America


792



674



2,175



1,972$
2,050


$
881


$
5,814


$
2,532   Geographic
    Information
    Three Months Ended


Nine Months EndedJuly 31,


July 31,2007


2006


2007


2006(Restated)





(Restated)Europe

$
69,912


$
31,554


$
209,875


$
80,754Latin America


42,673



23,981



124,841



74,426Asia


15,806



6,754



44,420



26,611United States


92,513



79,976



257,569



231,400Canada


10,797



5,352



28,242



11,246$
231,701


$
147,617


$
664,947


$
424,437       July 31,


October 31,2007


2006(Restated)North America

$
20,817


$
6,409Europe


20,194



2,191Asia


1,039



270Latin America


905



677$
42,955


$
9,547   Note 12.
    Related-Party
    Transactions   51




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      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, 07-6140 Eichenholtz VeriFone
    Holdings, Inc. et al. 07-6140 Lien VeriFone Holdings, Inc. et al. 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. 07-6237 MMC; Hill VeriFone Holdings, Inc. et al. 07-6238 Offutt VeriFone Holdings, Inc. et al. 07-6241 Feitel VeriFone Holdings, Inc., et al. 08-0118
 52




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  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. 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. No. 1-07-CV-101449).
      Regulatory
    Actions
     53




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Brazilian
    Tax Assessment
      Amendments
    to the Credit Facility
       54




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Patent
    Infringement Lawsuits
     55




---



##### 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
   56




---



##### 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 Inventory

$
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      57




---



##### Table of Contents




    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.    Overview
    third-party third-party,
   58




---



##### Table of Contents



Results
    of Operations
  Net
    Revenues
      Three Months Ended July 31,


Nine Months Ended July 31,Change


Change








Change


Change2007


2006


in Dollars


in Percent


2007


2006


in Dollars


in Percent(Restated)











(Restated)Systems Solutions

$
205,972


$
131,960


$
74,012



56
%

$
586,407


$
378,781


$
207,626



55
%Services


25,729



15,657



10,072



64
%


78,540



45,656



32,884



72
%Total

$
231,701


$
147,617


$
84,084



57
%

$
664,947


$
424,437


$
240,510



57
%   System
    Solutions
      multi-lane
     59




---



##### Table of Contents



multi-lane
  Services
      Gross
    Profit
    Three Months Ended July 31,


Nine Months Ended July 31,Amount


Gross Profit Percentage


Amount


Gross Profit Percentage2007


2006


2007


2006


2007


2006


2007


2006(Restated)











(Restated)Systems Solutions

$
73,704


$
59,256



35.8
%


44.9
%

$
194,897


$
167,197



33.2
%


44.1
%Services


11,892



7,205



46.2
%


46.0
%


36,968



22,265



47.1
%


48.8
%Total

$
85,596


$
66,461



36.9
%


45.0
%

$
231,865


$
189,462



34.9
%


44.6
%        60




---



##### Table of Contents



over-and-under
        step-up
      Research
    and Development Expenses
    Three Months Ended July 31,


Nine Months Ended July 31,Change


Change








Change


Change2007


2006


in Dollars


in Percent


2007


2006


in Dollars


in Percent(Restated)











(Restated)Research and development

$
15,365


$
11,726


$
3,639



31
%

$
48,272


$
35,354


$
12,918



37
%Percentage of net revenues


6.6
%


7.9
%










7.3
%


8.3
%  61




---



##### Table of Contents



Sales
    and Marketing Expenses
    Three Months Ended July 31,


Nine Months Ended July 31,Change


Change








Change


Change2007


2006


in Dollars


in Percent


2007


2006


in Dollars


in Percent(Restated)











(Restated)Sales and marketing

$
23,686


$
14,181


$
9,505



67
%

$
69,549


$
42,786


$
26,763



63
%Percentage of net revenues


10.2
%


9.6
%










10.5
%


10.1
%       General
    and Administrative Expenses
    Three Months Ended July 31,


Nine Months Ended July 31,Change


Change








Change


Change2007


2006


in Dollars


in Percent


2007


2006


in Dollars


in Percent(Restated)











(Restated)General and administrative

$
19,364


$
10,936


$
8,428



77
%

$
62,306


$
30,627


$
31,679



103
%Percentage of net revenues


8.4
%


7.4
%










9.4
%


7.2
%    62




---



##### 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
   63




---



##### Table of Contents



Interest
    Income
    Other
    Income (Expense), net
    Provision
    for (Benefit from) Income Taxes
     64




---



##### Table of Contents



Segment
    Information
  Disclosures About Segments of an
    Enterprise and Related Information.
    step-up over-and-under
    Three Months Ended July 31,


Nine Months Ended July 31,Change


Change








Change


Change2007


2006


In Dollars


In Percent


2007


2006


In Dollars


In Percent(restated)











(restated)Net revenuesInternational

$
128,391


$
62,289


$
66,102



106
%

$
379,136


$
181,791


$
197,345



109
%North America


103,961



85,404



18,557



22
%


288,899



243,045



45,854



19
%Corporate


(651
)


(76
)


(575
)


757
%


(3,088
)


(399
)


(2,689
)


674
%Total net revenues

$
231,701


$
147,617


$
84,084



57
%

$
664,947


$
424,437


$
240,510



57
%Operating income:International

$
28,789


$
16,819


$
11,970



71
%

$
90,615


$
45,052


$
45,563



101
%North America


43,148



32,763



10,385



32
%


113,974



94,268



19,706



21
%Corporate


(50,172
)


(21,123
)


(29,049
)


138
%


(175,957
)


(62,102
)


(113,855
)


183
%Total operating income

$
21,765


$
28,459


$
(6,694
)


(24
)%

$
28,632


$
77,218


$
(48,586
)


(63
)%      65




---



##### Table of Contents



over-and-under non-cash acquisition-related
  step-up
 66




---



##### Table of Contents



Liquidity
    and Capital Resources
        
    A reduction in inventories of $48.0 million following the
    restatement;
    An increase in accounts receivable of $28.0 million due to
    higher sales;
    Increases in prepaid expenses and other current assets of
    $5.9 million and in other assets of $3.7 million;
    A decrease in accrued expenses and other liabilities of
    $15.4 million;
    A decrease in accrued compensation of $5.1 million;
    An increase in accounts payable of $19.5 million;
    An increase in deferred revenue of $10.3 million due to an
    increase in deferred service such as customer support and
    installations; and
    Increases in deferred tax liabilities of $9.4 million and
    income taxes payable of $39.5 million partially offset by
    an increase in deferred tax assets of $7.2 million and the
    reclassification of tax benefits from stock-based compensation
    of $6.9 million.       67




---



##### Table of Contents



Contractual
    Obligations
    Less Than


1-3


3-5


More ThanTotal


1 Year


Years


Years


5 YearsTerm B loan (including interest)

$
337,677


$
22,002


$
42,830


$
41,430


$
231,415Senior convertible notes


337,763



3,865



8,818



325,080



Capital lease obligation


78



10



68







Operating leases


47,024



2,642



16,566



11,982



15,834Minimum purchase obligations


42,514



42,514











$
765,056


$
71,033


$
68,282


$
378,492


$
247,249   Earnings
    before Interest, Taxes, Depreciation and Amortization (EBITDA),
    as adjusted
        
    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. 68




---



##### Table of Contents




    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 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. 69




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Three Months Ended July 31,


Nine Months Ended July 31,2007


2006


2007


2006(Restated)





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

$
(42,386
)

$
16,755


$
(52,883
)

$
45,585Provision for income taxes


52,753



9,009



53,116



24,342Interest expense


9,468



3,438



28,731



9,914Interest income


(2,226
)


(938
)


(4,751
)


(2,552
)Depreciation and amortization of property, plant, and equipment


2,049



881



5,814



2,532Amortization of capitalized software


230



294



800



892Amortization of purchased intangible assets


14,694



2,230



44,930



7,560Amortization of step-down in deferred revenue on acquisition


652



76



3,088



399Amortization of
    step-up in
    inventory on acquisition










13,961



In-process research and development










6,650



Stock-based compensation


5,859



1,686



21,954



3,798Acquisition related charges and restructuring costs


2,297







9,714



Extinguishment of debt issuance costs


4,764







4,764



EBITDA as adjusted

$
48,154


$
33,431


$
135,888


$
92,470   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
 70




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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
    Foreign
    Currency Risk
   71




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non-U.S. dollar
    non-U.S. denominated
  Equity
    Price Risk
    ITEM 4.CONTROLS
    AND PROCEDURES
  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
    Form 10-Q
  Form 10-Q/A.
   72




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
    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 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
    
    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. 73




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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;  
    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
       74




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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. 75




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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 at our internal manufacturing
    facility 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.
   76




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
    securing commercial relationships to help establish our presence
    in international markets;
    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
    diminishing 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.
   77




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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.
             78




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Any
    modification of the accounting guidelines for convertible debt
    could result in higher interest expense related to our
    convertible debt, which could materially impact our results of
    operations and earnings per share.
    ITEM 2.UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Convertible
    Debt
          
    on any date during any fiscal quarter beginning after
    October 31, 2007 (and only during such fiscal quarter) if
    the closing sale price of our common stock was more than 130% of
    the then current conversion price for at least 20 trading days
    in the period of the 30 consecutive trading days ending on the
    last trading day of the previous fiscal quarter;
    at any time on or after March 15, 2012;
    if we distribute to all holders of our common stock rights or
    warrants (other than pursuant to a rights plan) entitling them
    to purchase, for a period of 45 calendar days or less, shares of
    our common stock at a price less than the average closing sale
    price for the ten trading days preceding the declaration date
    for such distribution;
    if we distribute to all holders of our common stock, cash or
    other assets, debt securities or rights to purchase our
    securities (other than pursuant to a rights plan), which
    distribution has a per share value exceeding 10% of the closing
    sale price of our common stock on the trading day preceding the
    declaration date for such distribution;
    during a specified period if certain types of fundamental
    changes occur; or 79




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
    during the five
    business-day
    period following any five consecutive
    trading-day
    period in which the average trading price for the notes was less
    than 98% of the average of the closing sale price of our common
    stock for each day during such five
    trading-day
    period multiplied by the then current conversion rate.    ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES    ITEM 4.SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS
    ITEM 5.OTHER
    INFORMATION
   80




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ITEM 6.EXHIBITS
      ExhibitNumber

Description4
.1

Indenture related to the 1.375% Senior Convertible Notes
    due 2012, dated as of June 22, 2007, between VeriFone
    Holdings, Inc. and U.S. Bank National Association, as trustee
    (incorporated herein by reference to Exhibit 4.1 to the
    registrants current Report on
    Form 8-K
    filed June 22, 2007).4
.2

Registration Rights Agreement, dated as of June 22, 2007,
    between VeriFone Holdings, Inc. and Lehman Brothers Inc.
    and J.P. Morgan Securities Inc. (incorporated herein by
    reference to Exhibit 4.2 to the registrants current
    Report on
    Form 8-K
    filed June 22, 2007).10
.1

Confirmation of Convertible Note Hedge Transaction, dated
    June 18, 2007, by and between VeriFone Holdings, Inc. and
    Lehman Brothers OTC Derivatives Inc. (incorporated herein by
    reference to Exhibit 10.1 to the registrants current
    Report on
    Form 8-K
    filed June 22, 2007).10
.2

Confirmation of Convertible Note Hedge Transaction, dated
    June 18, 2007, by and between VeriFone Holdings, Inc. and
    JPMorgan Chase Bank, National Association, London Branch
    (incorporated herein by reference to Exhibit 10.2 to the
    registrants current Report on
    Form 8-K
    filed June 22, 2007).10
.3

Confirmation of Warrant Transaction, dated June 18, 2007,
    by and between VeriFone Holdings, Inc. and Lehman Brothers OTC
    Derivatives Inc. (incorporated herein by reference to
    Exhibit 10.3 to the registrants current Report on
    Form 8-K
    filed June 22, 2007).10
.4

Confirmation of Warrant Transaction, dated June 18, 2007,
    by and between VeriFone Holdings, Inc. and JPMorgan Chase Bank,
    National Association, London Branch (incorporated herein by
    reference to Exhibit 10.4 to the registrants current
    Report on
    Form 8-K
    filed June 22, 2007).10
.5

Amendment to Confirmation of Warrant Transaction, dated
    June 21, 2007, by and between VeriFone Holdings, Inc. and
    Lehman Brothers OTC Derivatives Inc. (incorporated herein by
    reference to Exhibit 10.5 to the registrants current
    Report on
    Form 8-K
    filed June 22, 2007).10
.6

Amendment to Confirmation of Warrant Transaction, dated
    June 21, 2007, by and between VeriFone Holdings, Inc. and
    JPMorgan Chase Bank, National Association, London Branch
    (incorporated herein by reference to Exhibit 10.6 to the
    registrants current Report on
    Form 8-K
    filed June 22, 2007).31
.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.  81




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SIGNATURES      By:
    /s/  Douglas
    G. Bergeron     By:
    /s/  Barry
    Zwarenstein       82




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EXHIBIT INDEX
  ExhibitNumber

Description4
.1

Indenture related to the 1.375% Senior Convertible Notes
    due 2012, dated as of June 22, 2007, between VeriFone
    Holdings, Inc. and U.S. Bank National Association, as trustee
    (incorporated herein by reference to Exhibit 4.1 to the
    registrants current Report on
    Form 8-K
    filed June 22, 2007).4
.2

Registration Rights Agreement, dated as of June 22, 2007,
    between VeriFone Holdings, Inc. and Lehman Brothers Inc.
    and J.P. Morgan Securities Inc. (incorporated herein by
    reference to Exhibit 4.2 to the registrants current
    Report on
    Form 8-K
    filed June 22, 2007).10
.1

Confirmation of Convertible Note Hedge Transaction, dated
    June 18, 2007, by and between VeriFone Holdings, Inc. and
    Lehman Brothers OTC Derivatives Inc. (incorporated herein by
    reference to Exhibit 10.1 to the registrants current
    Report on
    Form 8-K
    filed June 22, 2007).10
.2

Confirmation of Convertible Note Hedge Transaction, dated
    June 18, 2007, by and between VeriFone Holdings, Inc. and
    JPMorgan Chase Bank, National Association, London Branch
    (incorporated herein by reference to Exhibit 10.2 to the
    registrants current Report on
    Form 8-K
    filed June 22, 2007).10
.3

Confirmation of Warrant Transaction, dated June 18, 2007,
    by and between VeriFone Holdings, Inc. and Lehman Brothers OTC
    Derivatives Inc. (incorporated herein by reference to
    Exhibit 10.3 to the registrants current Report on
    Form 8-K
    filed June 22, 2007).10
.4

Confirmation of Warrant Transaction, dated June 18, 2007,
    by and between VeriFone Holdings, Inc. and JPMorgan Chase Bank,
    National Association, London Branch (incorporated herein by
    reference to Exhibit 10.4 to the registrants current
    Report on
    Form 8-K
    filed June 22, 2007).10
.5

Amendment to Confirmation of Warrant Transaction, dated
    June 21, 2007, by and between VeriFone Holdings, Inc. and
    Lehman Brothers OTC Derivatives Inc. (incorporated herein by
    reference to Exhibit 10.5 to the registrants current
    Report on
    Form 8-K
    filed June 22, 2007).10
.6

Amendment to Confirmation of Warrant Transaction, dated
    June 21, 2007, by and between VeriFone Holdings, Inc. and
    JPMorgan Chase Bank, National Association, London Branch
    (incorporated herein by reference to Exhibit 10.6 to the
    registrants current Report on
    Form 8-K
    filed June 22, 2007).31
.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.  83