##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
   Form 10-Q/A
 (Amendment
    No. 2)
   (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    January 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(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
  Rule 12b-2
  Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    Company o(Do not check if a smaller reporting
    company)   Rule 12b-2 o þ




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##### Table of Contents





EXPLANATORY
    NOTE
  10-Q) Form 10-Q/A
  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; and
    Part II  Item 6. Exhibits.  10-Q Form 10-Q/A 10-Q). 10-Q 10-Q 10-Q,
 2




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##### Table of Contents



10-Q 10-Q
  Rule 12b-15 Rule 13a-14(a) 10-Q
 3




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##### 



VeriFone
    Holdings, Inc.
  INDEX
   
 PART I  FINANCIAL
    INFORMATIONItem 1


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


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


6Condensed Consolidated Statements of Cash
    Flows  Three Months Ended January 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


52Item 3


Quantitative and Qualitative Disclosures About
    Market Risk


64Item 4


Controls and Procedures


65PART II  OTHER
    INFORMATIONItem 1


Legal Proceedings


68Item 1A


Risk Factors


68Item 2


Unregistered Sales of Equity Securities and Use
    of Proceeds


72Item 3


Defaults Upon Senior Securities


72Item 4


Submission of Matters to a Vote of Security
    Holders


72Item 5


Other Information


72Item 6


Exhibits


72Signatures


73EXHIBIT 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
  January 31,


October 31,2007


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

$
161,889


$
86,564Accounts receivable, net of allowances of $2,917 and $2,364


155,719



119,839Inventories


117,481



86,631Deferred tax assets


15,231



13,267Prepaid expenses and other current assets


38,758



12,943Total current assets


489,078



319,244Property, plant and equipment, net


30,467



7,300Purchased intangible assets, net


201,396



16,544Goodwill


565,222



52,689Deferred tax assets


25,221



21,706Debt issuance costs, net


10,659



10,987Transaction costs






12,350Other assets


19,626



12,125Total assets

$
1,341,669


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

$
69,378


$
66,685Income taxes payable


4,573



5,951Accrued compensation


19,985



16,202Accrued warranty


5,843



4,902Deferred revenue, net


34,366



23,567Accrued expenses


4,306



4,752Accrued transaction costs






12,000Other current liabilities


45,172



13,661Current portion of long-term debt


5,058



1,985Restructuring liabilities


3,186



2,963Total current liabilities


191,867



152,668Accrued warranty


448



530Deferred revenue


12,324



7,371Long-term debt, less current portion


495,065



190,904Deferred tax liabilities


70,939



859Other long-term liabilities


12,383



1,872Total liabilities


783,026



354,204Stockholders equity:Preferred Stock: 10,000 shares authorized as of
    January 31, 2007 and October 31, 2006; no shares
    issued and outstanding as of January 31, 2007 and
    October 31, 2006






Common Stock: $0.01 par value, 100,000 shares
    authorized at January 31, 2007 and October 31, 2006;
    82,439 and 68,148 shares issued and outstanding as of
    January 31, 2007 and October 31, 2006


824



682Additional
    paid-in-capital


599,692



140,569Accumulated deficit


(49,147
)


(43,468
)Accumulated other comprehensive income


7,274



958Total stockholders equity


558,643



98,741Total liabilities and stockholders equity

$
1,341,669


$
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  Three Months Ended January 31,2007


2006(Restated)(1)(Unaudited)(In thousands, except per share data)Net revenues:System Solutions

$
188,966


$
118,685Services


27,397



15,945Total net revenues


216,363



134,630Cost of net revenues:System Solutions


133,291



67,115Services


14,449



7,913Total cost of net revenues


147,740



75,028Gross profit


68,623



59,602Operating expenses:Research and development


16,898



11,407Sales and marketing


23,040



14,201General and administrative


17,376



9,698Amortization of purchased intangible assets


5,351



1,159In-process research and development


6,560



Total operating expenses


69,225



36,465Operating income (loss)


(602
)


23,137Interest expense


(9,756
)


(3,279
)Interest income


991



687Other income (expense), net


(261
)


201Income (loss) before income taxes


(9,628
)


20,746Provision for (benefit from) income taxes


(3,949
)


6,952Net income (loss)

$
(5,679
)

$
13,794Net income (loss) per share:Basic

$
(0.07
)

$
0.21Diluted

$
(0.07
)

$
0.20Weighted-average shares used in computing net income (loss) per
    share:Basic


80,993



65,705Diluted


80,993



68,810     (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  Three Months EndedJanuary 31,2007


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

$
(5,679
)

$
13,794Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Amortization of purchased intangible assets


14,960



2,752Depreciation and amortization of property, plant and equipment


2,004



774Amortization of capitalized software


295



275In-process research and development


6,560



Amortization of debt issuance costs


328



266Stock-based compensation


7,796



923Minority interest and equity in earnings of affiliates and other


24



9Net cash provided by operating activities before changes in
    working capital


26,288



18,793Changes in operating assets and liabilities:Accounts receivable, net


(2,623
)


(5,543
)Inventories


35,289



(3,503
)Deferred tax assets


(1,903
)


(853
)Prepaid expenses and other current assets


(14,458
)


(956
)Other assets


(2,362
)


(190
)Accounts payable


(6,905
)


(5,298
)Income taxes payable


(1,705
)


4,639Tax benefit from stock-based compensation


(2,342
)


(874
)Accrued compensation


(3,762
)


(1,512
)Accrued warranty


(1,226
)


(333
)Deferred revenue, net


6,862



2,549Deferred tax liabilities


4,981



Accrued expenses and other liabilities


(13,796
)


(473
)Net cash provided by operating activities


22,338



6,446Cash flows from investing activitiesSoftware development costs capitalized


(1,145
)


(428
)Purchase of property, plant and equipment, net


(6,571
)


(610
)Purchase of other assets






(276
)Purchases of marketable securities






(55,950
)Sales and maturities of marketable securities






51,150Acquisition of business, net of cash and cash equivalents
    acquired


(259,857
)


Net cash used in investing activities


(267,573
)


(6,114
)Cash flows from financing activitiesProceeds from long-term debt, net of costs


304,950



Repayment of long-term debt






(462
)Repayments of capital leases


(13
)


(55
)Tax benefit of stock-based compensation


2,342



874Proceeds from exercises of stock options


12,986



324Other


22



45Net cash provided by financing activities


320,287



726Effect of foreign currency exchange rate changes on cash


273



473Net increase in cash and cash equivalents


75,325



1,531Cash and cash equivalents, beginning of period


86,564



65,065Cash and cash equivalents, end of period

$
161,889


$
66,596Supplemental disclosures of cash flow informationCash paid for interest

$
3,556


$
3,085Cash paid for taxes

$
2,404


$
3,434Supplemental 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.   9




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Restatement
    Adjustments
    CONDENSED
    CONSOLIDATED BALANCE SHEETS
  January 31, 2007As Reported


Adjustments


Ref.

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

$
161,889


$





$
161,889Accounts receivable, net of allowances


157,739



(2,020
)

(g)


155,719Inventories


130,815



(13,334
)

(b)


117,481Deferred tax assets


14,569



662


(e)


15,231Prepaid expenses and other current assets


24,823



13,935


(e), (g)


38,758Total current assets


489,835



(757
)




489,078Property, plant and equipment, net


32,461



(1,994
)

(f)


30,467Purchased intangible assets, net


201,130



266


(f)


201,396Goodwill


534,703



30,519


(f)


565,222Deferred tax assets


25,225



(4
)

(e)


25,221Debt issuance costs, net


10,659









10,659Other assets


13,816



5,810


(f)


19,626Total assets

$
1,307,829


$
33,840




$
1,341,669LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
69,893


$
(515
)



$
69,378Income taxes payable


3,490



1,083


(e)


4,573Accrued compensation


19,667



318





19,985Accrued warranty


5,843









5,843Deferred revenue, net


34,101



265





34,366Accrued expenses


4,306









4,306Other current liabilities


45,185



(13
)




45,172Current portion of long-term debt


5,058









5,058Restructuring liabilities


3,186









3,186Total current liabilities


190,729



1,138





191,867Long-term liabilities


563,145



28,014


(e)


591,159Total liabilities


753,874



29,152





783,026Total stockholders equity


553,955



4,688


(h)


558,643Total liabilities and stockholders equity

$
1,307,829


$
33,840




$
1,341,669  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 January 31, 2007As Reported


Adjustments


Ref.

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

$
189,229


$
(263
)

(a)

$
188,966Services


27,397









27,397Total net revenues


216,626



(263
)




216,363Cost of net revenues:System Solutions


122,649



10,642





133,291Services


12,597



1,852





14,449Total cost of net revenues


135,246



12,494


(c)


147,740Gross profit


81,380



(12,757
)




68,623Operating expenses:Research and development


16,806



92





16,898Sales and marketing


22,523



517


(d)


23,040General and administrative


18,405



(1,029
)

(d)


17,376Amortization of purchased intangible


5,328



23





5,351In-process research and development


6,530



30





6,560Total operating expenses


69,592



(367
)




69,225Operating income (loss)


11,788



(12,390
)




(602
)Interest expense


(9,756
)








(9,756
)Interest income


972



19





991Other expense, net


(137
)


(124
)




(261
)Income (loss) before income taxes


2,867



(12,495
)




(9,628
)Provision for (benefit from) income taxes


3,851



(7,800
)

(e)


(3,949
)Net income (loss)

$
(984
)

$
(4,695
)



$
(5,679
)Net income (loss) per share:Basic

$
(0.01
)

$
(0.06
)



$
(0.07
)Diluted

$
(0.01
)

$
(0.06
)



$
(0.07
)Weighted-average shares used in computing net income (loss) per
    share:Basic


80,993









80,993Diluted


80,993









80,993  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
  Three Months Ended January 31, 2007As Reported


Adjustments


Restated(In thousands)Net loss

$
(984
)

$
(4,695
)

$
(5,679
)Net cash provided by operating activities

$
31,687


$
(9,349
)

$
22,338Net cash used in investing activities


(277,813
)


10,240



(267,573
)Net cash provided by financing activities


321,178



(891
)


320,287Effect of foreign currency exchange rate changes on cash


273







273Net increase in cash and cash equivalents


75,325







75,325Cash and cash equivalents, beginning of period


86,564







86,564Cash and cash equivalents, end of period

$
161,889


$



$
161,889       b)
    The changes to inventories as of January 31, 2007 related
    to errors, revised judgments, and other are as follows:  
    $7.7 million decrease due to the duplicate recording of
    manufacturing and distribution overhead to inventories at former
    Lipman subsidiaries;
    $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;
    $3.2 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; and
    $0.2 million net decrease as a result of various
    adjustments, each individually less than $0.5 million.    
    $7.7 million increase due to the duplicate recording of
    manufacturing and distribution overhead to inventories at former
    Lipman subsidiaries;
    $2.2 million increase 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;
    $0.9 million increase due to an error in determining
    replacement costs of component inventory at former Lipman
    entities;
    $0.9 million increase to correct errors in recording and
    eliminating intercompany transactions; and 12




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    $0.8 million net increase as a result of various
    adjustments, each individually less than $0.5 million.  d)
    The changes to sales and marketing expenses and general and
    administrative expenses for the three months ended
    January 31, 2007 are as follows:  
    $0.3 million increase in sales and marketing expenses as a
    result of errors related to stock-based compensation;


    $0.7 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, 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 and Payware acquisitions and/or
    reclassifications.    
    $27.3 million increase as a result of adjustments in
    long-term deferred tax liabilities;
    $3.4 million increase to correct errors related to Lipman
    stock options assumed at acquisition;
    $4.4 million decrease as a result of corrections related to
    Lipman, Payware and VTS assets and liabilities assumed at
    acquisition; and
    $4.2 million increase as a result of cumulative translation
    adjustments related to the above adjustments and correction of
    errors.  g)
    $2.0 million change related to reclassification of a
    bankers acceptance instrument from accounts receivable to
    other current assets.    
    $4.7 million decrease as a result of the restatement
    adjustments to the consolidated statement of operations;
    $3.4 million increase to correct errors related to Lipman
    stock options assumed at acquisition;
    $5.6 million increase as a result of cumulative translation
    adjustments related to adjustments and correction of various
    errors as noted above; and
    $0.4 million net increase as a result of various
    adjustments, each individually less than $0.5 million.  Note 3.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
   13




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Unaudited
    Interim Financial Information
  Form 10-Q Regulation S-X.
  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.   14




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    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.      EITF 00-21. and/or
    SOP 81-1.
     15




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Foreign
    Currency Translation
      Concentrations
    of Credit Risk
                 16




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##### Table of Contents



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




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##### 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.
  Equity
    Earnings (Loss) in Affiliate
   18




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Minority
    Interest
    Debt
    Issuance Costs
    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
   19




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Income
    Taxes
    Comprehensive
    Income (Loss)
    Property,
    Plant and Equipment, net
    Goodwill
    and Other Purchased Intangible Assets
        Accounting
    for Impairment of Long-Lived Assets
   20




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##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock
    Based Compensation
  Share-Based Payment.
  Severance
    Pay
    Segment
    Reporting
    Net
    Income (Loss) Per Share
   21




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##### Table of Contents



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


2006(Restated)Basic and diluted net income (loss) per share:Numerator:Net income (loss)

$
(5,679
)

$
13,794Denominator:Weighted-average shares of voting common stock outstanding


81,994



67,707Less: weighted-average shares subject to repurchase


(1,001
)


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


80,993



65,705Add dilutive securities:Weighted-average shares subject to repurchase






2,002Stock options and restricted stock units






1,103Weighted-average shares used in computing diluted net income
    (loss) per share


80,993



68,810Net income (loss) per share:Basic

$
(0.07
)

$
0.21Diluted

$
(0.07
)

$
0.20     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.
 22




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair
    Value Measurements.
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities
  Note 4.
    Business
    Combination  Lipman
    Electronic Engineering Ltd. (Lipman)
        (Restated)Cash

$
344,747Value of common stock issued


417,606Value of Lipman vested and unvested options assumed


38,008Transaction costs and expenses


14,387Sub-total


814,748Less: Value of unvested Lipman options assumed


(19,356
)Total purchase price

$
795,392    23




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           24




---



##### Table of Contents



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

$
95,931Accounts receivable


33,257Inventories


66,139Property, plant and equipment


18,114Other assets


12,884Deferred revenue


(8,890
)Other current liabilities


(66,294
)Net deferred tax liabilities


(63,189
)Non current liabilities


(9,635
)Net tangible assets


78,317Amortizable intangible assets:Developed and core technology


131,480Customer backlog


50Customer relationships


63,740Internal use software


3,460Sub-total intangible assets


198,730In-process research and development


6,560Excess over fair value of vested options


1,030Goodwill


510,755Total preliminary estimated purchase price allocation

$
795,392   Net
    Tangible Assets
       25




---



##### 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




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Excess
    Over Fair Value of Vested Options
    Goodwill
    EITF 95-3
   27




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months EndedJanuary 31, 2006(Restated)(In millions, exceptper share amounts)Total net revenue

$
201.9Net loss

$
(1.2
)Net loss per share  basic

$
(0.02
)Net loss per share  diluted

$
(0.02
)     PayWare
      Note 5.
    Balance
    Sheet and Statements of Operations Detail  Inventories
    January 31,


October 31,2007


2006(Restated)Raw materials

$
31,848


$
4,095Work-in-process


836



808Finished goods


84,797



81,728$
117,481


$
86,631  28




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Prepaid
    Expenses and Other Current Assets
    January 31,


October 31,2007


2006(Restated)Prepaid taxes

$
14,309


$
5,241Prepaid expenses


13,924



3,208Other receivables


10,041



750Other current assets


484



3,744$
38,758


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


October 31,2007


2006(Restated)Computer hardware and software

$
8,362


$
7,049Office equipment, furniture and fixtures


3,679



3,972Machinery and equipment


13,012



5,602Leasehold improvements


4,622



3,897Construction in progress


6,236



966Land


1,633



Buildings


5,210



Total


42,754



21,486Accumulated depreciation and amortization


(12,287
)


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

$
30,467


$
7,300     Purchased
    Intangible Assets, net
    January 31, 2007


October 31, 2006Gross








GrossCarrying


Accumulated





Carrying


AccumulatedAmount


Amortization


Net


Amount


Amortization


Net(Restated)Developed technology

$
168,671


$
(37,211
)

$
131,460


$
35,164


$
(28,616
)

$
6,548Core technology


14,442



(13,239
)


1,203



14,442



(12,517
)


1,925Trade name


22,225



(20,827
)


1,398



22,225



(19,942
)


2,283Internal use software


3,680



(494
)


3,186











Customer relationships


81,913



(17,764
)


64,149



19,314



(13,526
)


5,788$
290,931


$
(89,535
)

$
201,396


$
91,145


$
(74,601
)

$
16,544  29




---



##### Table of Contents



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


2006(Restated)Included in cost of net revenues

$
9,609


$
1,593Included in operating expenses


5,351



1,159$
14,960


$
2,752     Cost of


OperatingFiscal Year

Revenues


Expenses


Total(Restated)


(Restated)


(Restated)2007 (remaining nine months)

$
29,605


$
13,220


$
42,8252008


31,396



22,898



54,2942009


30,770



18,562



49,3322010


23,896



10,746



34,642Thereafter


16,996



3,307



20,303$
132,663


$
68,733


$
201,396   Goodwill
    January 31,


October 31,2007


2006(Restated)Balance, beginning of year

$
52,689


$
47,260Additions related to acquisition


509,958



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


(1,671
)


(923
)Currency translation adjustments


4,246



Balance, end of period

$
565,222


$
52,689  30




---



##### Table of Contents



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


October 31,2007


2006Balance, beginning of year

$
5,432


$
5,243Warranty charged to cost of net revenues


722



3,311Utilization of warranty


(1,222
)


(3,815
)Changes in estimates


(431
)


693Warranty assumed in acquisition


1,790



Balance, end of period


6,291



5,432Less current portion


(5,843
)


(4,902
)Long-term portion

$
448


$
530   Deferred
    revenue, net
    January 31,


October 31,2007


2006(Restated)Deferred revenue

$
48,918


$
34,309Less long-term portion


(12,324
)


(7,371
)36,594



26,938Deferred cost of revenue


(2,228
)


(3,371
)Current portion, net

$
34,366


$
23,567   Other
    Income (Expense), net
    Three MonthsEndedJanuary 31,2007


2006(Restated)Refund of foreign customs fees

$



$
288Foreign currency transaction gains (losses), net


27



(20
)Foreign currency contract losses, net


(214
)


(76
)Other, net


(74
)


9$
(261
)

$
201  31




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 6.
    Financing    January 31,


October 31,2007


2006Secured credit facility:Revolver

$



$
Term B loan


500,000



192,780Capital leases and other


123



109500,123



192,889Less current portion


(5,058
)


(1,985
)Long-term portion

$
495,065


$
190,904   Secured
    Credit Facility
           32




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##### 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






1



1



1



Cash payments


(182
)






(182
)


(182
)


Balance at January 31, 2007

$
304


$
61


$
365


$
322


$
43   Short-Term


Long-TermFacilities


Other


Total


Portion


PortionBalance at October 31, 2005

$
1,200


$
60


$
1,260


$
765


$
495Additions


















Cash payments


(178
)






(178
)


(178
)


Balance at January 31, 2006

$
1,022


$
60


$
1,082


$
587


$
495  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
      Employee


Short-Term


Long-TermCosts


Portion


Portion(Restated)Balance at October 31, 2006

$
8


$
8


$
Reductions


(5
)


(5
)


Cash payments










Balance at January 31, 2007

$
3


$
3


$
   Employee


Short-Term


Long-TermCosts


Portion


PortionBalance at October 31, 2005

$



$



$
Additions


388



388



Cash payments


(22
)


(22
)


Balance at January 31, 2006

$
366


$
366


$
   PayWare
    Restructuring Plan
      Short-Term


Long-TermFacilities


Severance


Other


Total


Portion


Portion(Restated)Balance at October 31, 2006

$
1,098


$
1,234


$
76


$
2,408


$
2,408


$
Additions


106



543



2



651



651



Cash payments


(236
)


(1,777
)






(2,013
)


(2,013
)


Balance at January 31, 2007

$
968


$



$
78


$
1,046


$
1,046


$
  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


PortionBalance at October 31, 2006

$



$



$



$



$



$
Additions


292



10



4



306



306



Cash payments


(223
)


(10
)


(2
)


(235
)


(235
)


Balance at January 31, 2007

$
69


$



$
2


$
71


$
71


$
   Lipman
    Restructuring Plan
      Short-Term


Long-TermFacilities


Severance


Other


Total


Portion


Portion(Restated)Balance at October 31, 2006

$



$



$



$



$



$
Additions


2,970



2,526



23



5,519



3,024



2,495Cash payments






(1,278
)


(2
)


(1,280
)


(1,280
)


Balance at January 31, 2007

$
2,970


$
1,248


$
21


$
4,239


$
1,744


$
2,495    35




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 8.
    Commitments
    and Contingencies    Minimum Lease


Sublease Rental


Net MinimumFiscal Year

Payments


Income


Lease PaymentsRemainder of 2007

$
7,246


$
72


$
7,1742008


7,959



109



7,8502009


5,918



84



5,8342010


5,265



4



5,2612011


4,136







4,136Thereafter


14,323







14,323$
44,847


$
269


$
44,578     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    Three MonthsEndedJanuary 31,2007


2006(Restated)Net income (loss)

$
(5,679
)

$
13,794Foreign currency translation adjustments, net of tax


6,335



87Unrecognized gain (loss) on interest rate hedges, net of tax


(18
)


27Unrealized gain (loss) on marketable securities, net of tax


(1
)


1Comprehensive income (loss)

$
637


$
13,909     January 31,


October 31,2007


2006(Restated)Foreign currency translation adjustments, net of tax of $1,526
    and $1,068

$
7,338


$
1,003Unrecognized loss on interest rate hedges, net of tax of $41 and
    $29


(64
)


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






1Accumulated other comprehensive income

$
7,274


$
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


RemainingShares


Average


Contractual


AggregateUnder


Exercise


Term


IntrinsicOption


Price


(Years)


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


898,062


$
4.22Exercised


(98,367
)


3.16Cancelled


(2,330
)


4.02Balance at January 31, 2007


797,365


$
4.35



7.01


$
28,398Vested or expected to vest at January 31, 2007


748,236


$
4.31



6.99


$
26,683Exercisable at January 31, 2007


365,575


$
4.00



6.80


$
13,149       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)(Restated)Balance at November 1, 2006


90,000


$
10.00Exercised


(15,000
)


10.00Cancelled






Balance at January 31, 2007


75,000


$
10.00



4.97


$
2,248Vested or expected to vest at January 31, 2007


75,000


$
10.00



4.97


$
2,248Exercisable at January 31, 2007


28,125


$
10.00



4.98


$
843       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


(151,645
)


11.40Cancelled


(20,969
)


10.65Balance at January 31, 2007


1,706,187


$
12.21



4.81


$
47,355Vested or expected to vest at January 31, 2007


1,505,213


$
12.20



4.81


$
41,799Exercisable at January 31, 2007


414,279


$
12.27



4.72


$
11,475       2006
    Equity Incentive Plan
   41




---



##### Table of Contents



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


Remaining


AggregateAverage


Contractual


IntrinsicExercise


Term


ValueShares


Price


(Years)


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


2,539,245


$
29.10Granted


741,000



34.35Cancelled


(230,350
)


30.70Balance at January 31, 2007


3,049,895


$
30.35



6.09


$
29,354Expected to vest at January 31, 2007


2,788,210


$
30.35



6.09


$
26,835Exercisable at January 31, 2007





$







$
            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


(564,281
)


20.77Cancelled


(176,536
)


26.83Balance at January 31, 2007


2,634,710


$
25.03



4.09


$
39,569Vested or expected to vest at January 31, 2007


2,284,167


$
24.68



4.04


$
34,917Exercisable at January 31, 2007


357,421


$
14.94



3.05


$
8,946       share-based
  All
    Plans
    Share-Based Payment.
 43




---



##### Table of Contents



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


2006Expected term of the options


2.5 years



4 yearsRisk-free interest rate


4.9
%


4.3
%Expected stock price volatility


41
%


58
%Expected dividend rate


0.0
%


0.0
%     Three Months EndedJanuary 31,2007


2006(Restated)Cost of net revenues

$
917


$
153Research and development


1,466



180Sales and marketing


1,829



331General and administrative


3,584



259$
7,796


$
923     Note 11.
    Segment
    and Geographic Information  Segment
    Information
  Disclosures About Segments of an
    Enterprise and Related Information.
    step-up over-and-under
 44




---



##### Table of Contents



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


2006(Restated)Net revenues:International

$
128,797


$
57,657North America


89,081



77,175Corporate


(1,515
)


(202
)Total net revenues

$
216,363


$
134,630Operating income:International

$
31,424


$
14,167North America


31,728



30,503Corporate


(63,754
)


(21,533
)Total operating income (loss)

$
(602
)

$
23,137     January 31,


October 31,2007


2006(Restated)International

$
22,672


$
3,277North America


10,660



6,270$
33,332


$
9,547     January 31,


October 31,2007


2006(Restated)International

$
515,121


$
19,102North America


50,101



33,587$
565,222


$
52,689     January 31,


October 31,2007


2006(Restated)International

$
1,039,216


$
125,681North America


302,453



327,264$
1,341,669


$
452,945  45




---



##### Table of Contents



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


2006(Restated)International

$
1,332


$
160North America


672



614$
2,004


$
774   Geographic
    Information
    Three MonthsEndedJanuary 31,2007


2006(Restated)United States

$
79,585


$
75,037Europe


71,155



23,049Latin America


40,671



23,916Asia


16,971



10,692Canada


7,981



1,936$
216,363


$
134,630       January 31,


October 31,2007


2006(Restated)Europe

$
21,262


$
2,191North America


10,660



6,409Asia


744



270Latin America


666



677$
33,332


$
9,547   Note 12.
    Related-Party
    Transactions   46




---



##### 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 v. VeriFone Holdings,
    Inc. et al., 07-6140 Lien v. VeriFone Holdings, Inc. et al., 07-6195 Vaughn et al. v. VeriFone Holdings, Inc. et al., 07-6197 Feldman et al. v. VeriFone Holdings,
    Inc. et al., 07-6218 MMC; Cerini v. VeriFone Holdings, Inc. et al., 07-6228 Westend Capital Management LLC v. VeriFone Holdings, Inc. et
    al., C 07-6237 MMC; Hill v. VeriFone Holdings, Inc. et al., 07-6238 Offutt v. VeriFone Holdings, Inc. et al., C 07-6241 Feitel v. VeriFone Holdings, Inc., et al., 08-0118 Rule 10b-5
 47




---



##### Table of Contents



VERIFONE
    HOLDINGS, INC. AND SUBSIDIARIES
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    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
      Brazilian
    Tax Assessment
   48




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



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




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##### 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, 2007

April 30, 2007

July 31, 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




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##### 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, 2007

April 30, 2007

July 31, 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       
    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; 53




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
    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




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##### Table of Contents



Three Months Ended January 31,Change


Change2007


2006


In Dollars


in Percent(Restated)Systems Solutions

$
188,966


$
118,685


$
70,281



59.2
%Services


27,397



15,945



11,452



71.8
%Total

$
216,363


$
134,630


$
81,733



60.7
%   System
    Solutions
      multi-lane
  Services
   55




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##### Table of Contents



Gross
    Profit
    Three Months Ended January 31,Amount


Gross Profit Percentage2007


2006


2007


2006(Restated)Systems Solutions

$
55,675


$
51,570



29.5
%


43.5
%Services


12,948



8,032



47.3
%


50.4
%Total

$
68,623


$
59,602



31.7
%


44.3
%         step-up non-cash step-up step-down over-and-under
   56




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##### Table of Contents



Research
    and Development Expenses
    Three Months Ended January 31,Change

Change2007

2006

in Dollars

in Percent(Restated)Research and development

$
16,898


$
11,407


$
5,491



48
%Percentage of net revenues


7.8
%


8.5
%     Sales
    and Marketing Expenses
    Three Months Ended January 31,Change

Change2007

2006

in Dollars

in Percent(Restated)Sales and marketing

$
23,040


$
14,201


$
8,839



62
%Percentage of net revenues


10.6
%


10.5
%     General
    and Administrative Expenses
    Three Months Ended January 31,Change

Change2007

2006

in Dollars

in Percent(Restated)General and administrative

$
17,376


$
9,698


$
7,678



79
%Percentage of net revenues


8.0
%


7.2
%     Amortization
    of Purchased Intangible Assets
   57




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##### Table of Contents



In-Process
    Research and Development (IPR&D)
    Consumer-activated systems.
  multi-lane
  Countertop communication modules.
    Interest
    Expense
    Interest
    Income
    Other
    Income (Expense), net
    Provision
    for (Benefit from) Income Taxes
   58




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##### Table of Contents



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


Change2007


2006


in dollars


in percent(Restated)Net revenuesInternational

$
128,797


$
57,657


$
71,140



123
%North America


89,081



77,175



11,906



15
%Corporate


(1,515
)


(202
)


(1,313
)


(650
)%Total net revenues

$
216,363


$
134,630


$
81,733



61
%Operating income:International

$
31,424


$
14,167


$
17,257



122
%North America


31,728



30,503



1,225



4
%Corporate


(63,754
)


(21,533
)


(42,221
)


(196
)%Total operating income (loss)

$
(602
)

$
23,137


$
(23,739
)


(103
)%  59




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##### Table of Contents



step-up
  Liquidity
    and Capital Resources
        
    A reduction in inventories of $35.3 million following the
    restatement;
    A reduction in accounts payable of $6.9 million due to the
    reduction of inventory levels;
    An increase in deferred revenue of $6.9 million due to an
    increase in deferred service such as customer support and
    installations;
    An increase in accounts receivable of $2.6 million due to
    higher sales; 60




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
    A decrease in accrued compensation of $3.8 million as
    fiscal year-end bonuses relating to the prior year were paid
    during this fiscal quarter;
    Increases in prepaid expenses and other current assets of
    $14.5 million and in other assets of $2.4 million;
    A decrease in accrued expenses and other liabilities of
    $13.8 million; and
    A net cash outflow related to taxes of $1.0 million,
    consisting of an increase in deferred tax assets of
    $1.9 million, a decrease in income taxes payable of
    $1.7 million and the reclassification of tax benefits from
    stock-based compensation of $2.3 million, partially offset
    by an increase in deferred tax liabilities of $5.0 million.        Contractual
    Obligations
    Less than


1-3


3-5


More thanTotal


1 Year


Years


Years


5 YearsTerm B loan (including interest)

$
742,074


$
46,505


$
80,141


$
78,712


$
536,716Capital lease obligation


92



50



42







Operating leases


44,578



9,289



12,946



9,017



13,326Minimum purchase obligations


22,109



22,109











$
808,853


$
77,953


$
93,129


$
87,729


$
550,042   Earnings
    before Interest, Taxes, Depreciation and Amortization, (EBITDA,
    as adjusted)
     61




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##### 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 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 62




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##### Table of Contents



believe the related loss on extinguishment is a cost directly
    attributable to the operating performance of our business.    Three Months EndedJanuary 31,2007


2006(Restated)U.S. GAAP net income (loss)

$
(5,679
)

$
13,794Provision for (benefit from) income taxes


(3,949
)


6,952Interest expense


9,756



3,279Interest income


(991
)


(687
)Depreciation and amortization of property, plant and equipment


2,004



774Amortization of capitalized software


295



275Amortization of purchased intangible assets


14,960



2,752Amortization of step-down in deferred revenue on acquisition


1,514



202Amortization of
    step-up in
    inventory on acquisition


10,448



In-process research and development


6,560



Stock-based compensation


7,796



923Acquisition related charges and restructuring costs


794



EBITDA as adjusted

$
43,508


$
28,264   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
  Fair
    Value Measurements
 63




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##### Table of Contents



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
   64




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##### Table of Contents



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/A
  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 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 65




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##### Table of Contents



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. 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 66




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##### Table of Contents




    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)
  
    Adopted VeriFones accounting policies and processes for
    Lipmans transactions.
    Ensured the review of certain sales orders to ensure proper
    accounting.  Rule 13a-15(f)
 67




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##### Table of Contents



PART II 
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS          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.
 68




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##### Table of Contents



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.      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 increase the fluctuation of
    quarterly results if shipments are delayed from one fiscal
    quarter to the next or orders are cancelled by customers. 69




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##### Table of Contents



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;
    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; 70




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##### Table of Contents




    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 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.
    We are exposed to various risks related to legal
    proceedings or claims that may harm our operating results or
    financial condition.
       71




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##### Table of Contents



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    ITEM 5.
    OTHER
    INFORMATION    ITEM 6.
    EXHIBITS    ExhibitNumber

Description10
.1

Amended and Restated Employment Agreement, dated January 4,
    2007, among VeriFone Holdings, Inc., VeriFone, Inc., and Douglas
    G. Bergeron (incorporated herein by reference to
    Exhibit 10.1 to the registrants Current Report on
    Form 8-K
    filed January 5, 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.  72




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##### Table of Contents



SIGNATURES      By:
    /s/  Douglas
    G. Bergeron     By:
    /s/  Barry
    Zwarenstein   
   73




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description10
.1

Amended and Restated Employment Agreement, dated January 4,
    2007, among VeriFone Holdings, Inc., VeriFone, Inc., and Douglas
    G. Bergeron (incorporated herein by reference to
    Exhibit 10.1 to the registrants Current Report on
    Form 8-K
    filed January 5, 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.  74