<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended SEPTEMBER 30, 1996 or

/ / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from __________ to __________



COMMISSION FILE NUMBER 0-18376


                                 VERIFONE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

     DELAWARE                                          99-0206064
     (State or other jurisdiction of                   (I.R.S. Employer
     incorporation or organization)                    Identification No.)

              THREE LAGOON DRIVE, SUITE 400, REDWOOD CITY, CA 94065
                    (Address of principal executive offices)

                                 (415) 591-6500
              (Registrant's telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes  X  No
                                        ---    ---


The number of shares of the registrant's Common Stock outstanding on October 31,
1996, was 24,446,732.


<PAGE>

                                    FORM 10-Q

                                 VERIFONE, INC.

                                      INDEX



                                                                            Page
                                                                          Number

PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements

            Condensed Consolidated Balance Sheets as of
            September 30, 1996 and December 31, 1995 . . . . . . . . . . . .   1

            Condensed Consolidated Statements of Income
            for the Three Months Ended September 30, 1996 and 1995
            and for the Nine Months Ended September 30, 1996 and 1995. . . .   2

            Condensed Consolidated Statements of Cash Flows
            for the Nine Months Ended September 30, 1996
            and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3

            Notes to Condensed Consolidated
            Financial Statements . . . . . . . . . . . . . . . . . . . . . .   4

Item 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations. . . . . . . . . . . . . . .   6



PART II.    OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .  15

Signature    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

Exhibit 11.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17



<PAGE>

PART I.     FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS


                                 VERIFONE, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)



                                                  September 30,   December 31,
                                                      1996            1995
                                                   (unaudited)  (see note below)

Assets
Current assets:
     Cash and cash equivalents                      $ 43,109        $ 72,882
     Short-term investments                           29,106           9,939
     Accounts receivable, net                        112,573          96,419
     Net investment in sales-type leases              11,675          10,487
     Inventories                                      67,317          76,611
     Deferred income taxes                            18,715          16,827
     Prepaid expenses and other current assets         9,772           7,158
                                                    --------        --------
          Total current assets                       292,267         290,323

Net investment in sales-type leases                   18,483          15,360
Property and equipment, at cost                      114,876          97,652
     Less accumulated depreciation
          and amortization                           (54,956)        (46,710)
                                                    --------        --------
     Net property and equipment                       59,920          50,942
Other assets, net                                     52,006          22,891
                                                    --------        --------
                                                    $422,676        $379,516
                                                    --------        --------
                                                    --------        --------
Liabilities and stockholders' equity
Current liabilities:
     Accounts payable                               $ 29,025        $ 20,693
     Accrued compensation                             12,615          11,072
     Other accrued liabilities                        23,283          18,805
     Income taxes payable                             14,609          12,910
     Deferred revenue                                  6,379           5,275
     Long-term debt                                   15,112          10,569
                                                    --------        --------
          Total current liabilities                  101,023          79,324

Long-term debt                                           774           2,205
Deferred income taxes                                 42,759          33,602
Stockholders' equity                                 278,120         264,385
                                                    --------        --------
                                                    $422,676        $379,516
                                                    --------        --------
                                                    --------        --------


Note: The balance sheet at December 31, 1995 has been derived from the
      audited financial statements at that date but does not include all of the
      information and footnotes required by generally accepted accounting
      principles for complete financial statements.

            See notes to condensed consolidated financial statements.


                                        1

<PAGE>

                                 VERIFONE, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                        (unaudited, dollars in thousands,
                             except per share data)


<TABLE>
<CAPTION>

                                                  THREE MONTHS ENDED SEPTEMBER 30,         NINE MONTHS ENDED SEPTEMBER 30,
                                                  --------------------------------         -------------------------------
                                                      1996                1995                1996                1995
                                                    --------            --------            --------            --------

<S>                                                 <C>                 <C>                 <C>                 <C>
Net revenues                                        $120,897            $102,742            $348,783            $277,748
Costs and expenses:
     Cost of revenues                                 65,928              54,011             186,957             143,870
     Research and development                         13,070              11,467              38,477              33,409
     Selling, general and administrative              27,007              26,238              84,521              70,600
                                                      ------              ------              ------              ------
          Total costs and expenses                   106,005              91,716             309,955             247,879

Income from operations                                14,892              11,026              38,828              29,869
Interest income, net                                     578               2,060               1,937               2,947
                                                      ------              ------              ------              ------
Income before income taxes                            15,470              13,086              40,765              32,816
Provision for income taxes                             4,487               3,795              11,822               9,517
                                                      ------              ------              ------              ------
NET INCOME                                          $ 10,983            $  9,291            $ 28,943            $ 23,299
                                                      ------              ------              ------              ------
                                                      ------              ------              ------              ------

NET INCOME PER SHARE                                $   0.42            $   0.38             $  1.11             $  0.96
                                                      ------              ------              ------              ------


Common and common equivalent shares used in
     computing per share amounts                      26,073              24,423              26,145              24,328
                                                      ------              ------              ------              ------
</TABLE>


            See notes to condensed consolidated financial statements.




The Company has reclassified certain prior-year balances to conform with
current-year presentation.

                                        2

<PAGE>

                                 VERIFONE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands, unaudited)
                Increase (decrease) in cash and cash equivalents


                                                            NINE MONTHS ENDED
                                                              SEPTEMBER 30,
                                                         -----------------------
                                                           1996           1995
                                                         --------       --------

Cash flows from operating activities:
     Net income                                          $ 28,943      $ 23,299
     Adjustments to reconcile net income to net cash
     provided by operating activities:
          Depreciation and amortization                    16,272        14,358
          Deferred income taxes                            (1,755)          108
          Net increase in receivables,
               inventories and prepaid expenses           (13,785)      (39,153)
          Net increase in payables, accruals
               and other current liabilities               17,156         5,933
          Other, net                                         (337)          255
                                                         --------      --------

     Net cash provided by operating activities             46,494         4,800
                                                         --------      --------

Cash flows from investing activities:
     Capital expenditures                                 (21,706)      (17,406)
     Acquisition of other assets                           (9,659)       (6,709)
     Available-for-sale investments:
          Purchases                                       (58,151)      (13,919)
          Maturities                                       38,804        36,311
     Held-to-maturity investments:
          Maturities                                        ---          10,785
                                                         --------      --------

     Net cash (used for) provided by investing
          activities                                      (50,712)        9,062
                                                         --------      --------

Cash flows from financing activities:
     Proceeds of long-term debt                             7,115         1,793
     Payments of long-term debt                            (4,003)      (10,584)
     Proceeds from issuance of Common Stock                18,881         8,186
     Purchase of treasury stock                           (47,548)      (14,543)
                                                         --------      --------

     Net cash used for financing activities               (25,555)      (15,148)
                                                         --------      --------

Net decrease in cash and cash equivalents                 (29,773)       (1,286)
Cash and cash equivalents at beginning of period           72,882        43,831
                                                         --------      --------

Cash and cash equivalents at end of period               $ 43,109      $ 42,545
                                                         --------      --------
                                                         --------      --------

            See notes to condensed consolidated financial statements.



The Company has reclassified certain prior-year balances to conform with
current-year presentation.


                                        3

<PAGE>

                                 VERIFONE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



INTERIM FINANCIAL STATEMENTS

The interim financial information furnished is unaudited.  In the opinion of
management, financial statements included in this report reflect all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the results of operations for the interim
periods covered.  The interim results are not necessarily indicative of the
results to be expected for the entire year.

This financial information should be read in conjunction with the Company's
audited financial statements for the year ended December 31, 1995 filed with the
Company's Annual Report on Form 10-K.


INVENTORIES

Inventories, stated at the lower of cost (first-in, first-out) or market,
consist of (in thousands):

                                   September 30,       December 31,
                                       1996                1995
                                      ------              ------

Raw materials                         $37,158             $39,183
Work in process                         4,959               6,369
Finished goods                         25,200              31,059

                                       ------              ------
                                      $67,317             $76,611
                                       ------              ------
                                       ------              ------

BUSINESS COMBINATION

In November 1995, the Company merged with Enterprise Integration Technologies
Corporation ("EIT") and TimeCorp Systems, Inc. ("TimeCorp").  EIT and TimeCorp
outstanding stock was exchanged for Common Stock of VeriFone at rates of
approximately 0.77 and 0.15 VeriFone share for each share of outstanding EIT and
TimeCorp stock, respectively.  A total of 1,188,757 shares of VeriFone's Common
Stock were issued in connection with the mergers.  The mergers were accounted
for as poolings of interests and, accordingly, the Company's consolidated
financial statements and notes to consolidated financial statements have been
restated to include the results of EIT and TimeCorp.


                                        4

<PAGE>

CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS

Cash and cash equivalents consist of cash on deposit with banks and highly
liquid investments with a maturity from date of purchase of 90 days or less.
Short-term investments consist of high-quality money market instruments with
original maturities greater than 90 days.  Marketable investments include
$954,000 and $57,344,000 of cash equivalents, and $29,106,000 and $9,939,000 of
short-term investments at September 30, 1996 and December 31, 1995,
respectively.

Available-for-sale securities are carried at fair market value with unrealized
gains or losses, net of tax, included in the Stockholders' Equity section of the
Balance Sheet. The Company had an unrealized loss of $88,000 and an unrealized
gain of $33,000, net of tax, on its available-for-sale securities at September
30, 1996 and December 31, 1995, respectively.


OTHER ASSETS

Included in other assets is an investment in available-for-sale securities
carried at fair market value with unrealized gains or losses, net of tax,
included in the Stockholders' Equity section of the Balance Sheet.  The Company
had an unrealized gain of $13,904,000, net of tax, on its available-for-sale
securities at September 30, 1996.


RECLASSIFICATION

The Company has reclassified certain prior-year balances to conform with
current-year presentation.


                                        5

<PAGE>

Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

All references herein to the "Company" mean VeriFone, Inc. and its consolidated
subsidiaries.

In November 1995, the Company merged with Enterprise Integration Technologies
Corporation ("EIT") and TimeCorp Systems, Inc. ("TimeCorp").  The mergers have
been accounted for as poolings of interest, and accordingly, the financial
results for all periods have been restated to include the results of EIT and
TimeCorp.

Forward-looking statements in this Management's Discussion and Analysis --
including statements regarding international markets; gross margins; research
and development expenses; selling, general and administrative expenses;
liquidity and cash needs; and the Company's plans and strategies -- are all
based on current expectations, and the Company assumes no obligation to update
this information.  Numerous factors could cause actual results to differ from
those described in the forward-looking statements, including the factors set
forth below under the heading "Factors That May Affect Future Results" (which
are also discussed in the Company's Annual Report on Form 10-K for 1995).  The
Company cautions investors that its business is subject to significant risks and
uncertainties.

The Company's net revenues during the third quarter of 1996 increased 17.7% to
$120.9 million, from $102.7 million during the third quarter of 1995.  The
Company's net revenues in the first nine months of 1996 increased 25.6% to
$348.8 million, from $277.7 million in the same period in 1995.


UNITED STATES OPERATIONS -- The following table sets forth, by market, revenues
from sales in the United States for the third quarter and first nine months of
1996 and 1995, and the percentage change year-over-year:


                                        6

<PAGE>

                                             Revenues
                                         Third Quarter of:
                                           (IN MILLIONS)
                                        -------------------        Percentage
                                        1996           1995          Change
                                        ----           ----          ------

Financial retail                        $47.5          $44.5            6.7%
Petroleum/convenience-store              11.0            8.1           35.8
Healthcare and Government                 5.0            4.0           25.0
Multi-lane *                              8.1            8.4           (3.6)
Other                                     1.7           (0.4)         525.0
                                        -----          -----          -----
     United States net revenues         $73.3          $64.6           13.5%
                                        -----          -----          -----
                                        -----          -----          -----

                                             Revenues
                                          Nine Months of:
                                           (IN MILLIONS)
                                        -------------------        Percentage
                                        1996           1995          Change
                                        ----           ----          ------

Financial retail                       $143.7         $124.4           15.5%
Petroleum/convenience-store              31.5           21.6           45.8
Healthcare and Government                 8.4            7.1           18.3
Multi-lane *                             27.4           26.5            3.4
Other                                     2.7           (0.6)         550.0
                                        -----          -----          -----
     United States net revenues        $213.7         $179.0           19.4%
                                       ------         ------          -----
                                       ------         ------          -----

     *  The multi-lane retail figures above have been restated year-to-date to
     reflect the combination of multi-lane retail and labor management systems.


The increase in revenues from sales in the United States during the third
quarter and first nine months of 1996 was due primarily to increased sales in
the financial retail market and petroleum/convenience-store market.

Revenue from the financial retail market as a percentage of total United States
revenue declined during the third quarter and first nine months of 1996 when
compared to the same periods in 1995.  Revenue growth (in absolute dollars) in
the financial retail market during the third quarter and first nine months of
1996 was due primarily to continued acceptance of credit and debit card
transaction systems.

Revenue growth in the petroleum/convenience-store market during the third
quarter and first nine months of 1996 was due primarily to demand for Ruby
SuperSystems and OMNI 490 terminals by distributor organizations -- which place
products in independent service stations, major oil companies, and 
convenience-store chains.

Revenue from the healthcare and government market as a percentage of total
United States revenue was relatively stable during the third quarter and
first nine months of 1996 when compared to the

                                        7

<PAGE>

same periods in 1995.  Revenue in the third quarter of 1996 was due primarily to
the strength of electronic benefits transfer programs in Oklahoma, Illinois, and
Kansas.

Revenue from the multi-lane market declined during the third quarter of 1996 and
remained relatively stable for the first nine months of 1996 when compared to
the same period in 1995.  These results were due primarily to lower demand for
the Company's OMNI 490 system by supermarket chains and mass merchandisers,
partially offset by an increase in labor management system sales.  Revenue from
the multi-lane retail market was $4.7 million and $7.4 million for the third
quarter of 1996 and 1995, respectively, and $19.4 million and $20.9 million for
the first nine months of 1996 and 1995, respectively.  Revenue from labor
management systems was $3.4 million and $1.0 million for the third quarter of
1996 and 1995, respectively, and $8.0 million and $5.6 million for the first
nine months of 1996 and 1995, respectively.


INTERNATIONAL OPERATIONS -- The following table sets forth, by geographic
region, revenues from sales outside the United States for the third quarter and
first nine months of 1996 and 1995, and the percentage change year-over-year:


                                             Revenues
                                         Third Quarter of:
                                           (IN MILLIONS)
                                        -------------------         Percentage
                                        1996           1995           Change
                                        ----           ----           ------

     Europe, Middle East, Africa        $20.4          $13.3           53.4%
     Asia-Pacific                        16.8           10.6           58.5
     Americas                            10.4           14.2          (26.8)
                                        -----          -----          -----
          International net revenues    $47.6          $38.1           24.9%
                                        -----          -----          -----
                                        -----          -----          -----

                                             Revenues
                                          Nine Months of:
                                           (IN MILLIONS)
                                        -------------------        Percentage
                                        1996           1995          Change
                                        ----           ----          ------

     Europe, Middle East, Africa        $50.5          $41.8           20.8%
     Asia-Pacific                        48.1           27.0           78.1
     Americas                            36.5           29.9           22.1
                                        -----          -----          -----
          International net revenues   $135.1          $98.7           36.9%
                                       ------          -----          -----
                                       ------          -----          -----


The increase in revenues from sales outside the United States during the third
quarter of 1996 was driven by worldwide demand for electronic payments, the
expansion of chip-card opportunities, and the continued development of new
country markets.  In the third quarter of 1996, sales outside the


                                       8

<PAGE>

United States represented 39.4% of net revenues, compared with 37.1% of net
revenues in the same period of 1995.  For the first nine months of 1996, sales
outside the United States represented 38.7% of the Company's net revenues,
compared with 35.5% of net revenues in the same period of 1995.

Growth in international sales during the third quarter and first nine months of
1996 occurred in the Europe, Middle East, and Africa region and in the Asia-
Pacific region.  Growth in the Europe, Middle East and Africa region was
primarily due to sales in Netherlands, Spain, the United Kingdom and France,
partially offset by lower demand in Germany.  Growth in the Asia-Pacific region
was due primarily to sales in Japan, Australia and Hong Kong.  Sales in the
Americas region declined in the third quarter of 1996 due primarily to lower
demand in Mexico.

The Company plans to continue to expand its global infrastructure with the aim
of increasing market share in established country markets, as well as opening
new country markets.  Achievement of these plans is subject to various risks,
including local economic conditions, as discussed below under "Factors That May
Affect Future Results."

International growth has increased the Company's exposure to the effects of
foreign currency fluctuations.  The Company engages in a foreign currency
management program that is intended to minimize the effects of these
fluctuations.  This program includes the use of foreign exchange contracts to
hedge its intercompany balances.  The gains and losses on these contracts were
immaterial as the majority of the Company's sales are denominated in U.S.
dollars.


PRODUCT ANALYSIS -- The following table sets forth, by product type, net
revenues for the third quarter and first nine months of 1996 and 1995, and the
percentage change year-over-year:

                                            Net Revenues
                                          Third Quarter of:
                                             (IN MILLIONS)
                                          -------------------       Percentage
                                          1996           1995          Change
                                          ----           ----          ------
High-Functionality Systems               $ 51.1         $ 43.0           18.8%
Basic Terminals                             3.2            3.7          (13.5)
Fully Integrated Systems                    9.9            6.7           47.8
Printers and PinPads                       30.1           35.6          (15.4)
Smart Card Systems                          8.1            2.6          211.5
Other                                      18.5           11.1           66.7
                                         ------         ------           ----
                                         $120.9         $102.7           17.7%
                                         ------         ------           ----
                                         ------         ------           ----


                                       9

<PAGE>

                                           Net Revenues
                                          Nine Months of:
                                           (IN MILLIONS)
                                       --------------------      Percentage
                                        1996           1995         Change
                                       -----          -----         ------
High-Functionality Systems             $143.9         $116.7          23.3%
Basic Terminals                          12.3           13.3          (7.5)
Fully Integrated Systems                 32.7           19.1          71.2
Printers and PinPads                     93.3           91.1           2.4
Smart Card Systems                       15.5            6.8         127.9
Other                                    51.1           30.7          66.4
                                       ------         ------          ----
                                       $348.8         $277.7          25.6%
                                       ------         ------          ----
                                       ------         ------          ----

The increase in net revenues in the third quarter and first nine months of 1996
was due to a number of factors, including among them a shift in product mix to
high-functionality systems (such as TRANZ 330 and TRANZ 460 products), fully
integrated systems (such as the OMNI 490 and the Ruby Super-System), and smart
card systems (such as SC 552 and SC 542 Smart Card Reader/Writers).

Unit shipments of products, other than printers and pinpads, increased 12.6%
with 233,000 units shipped in the third quarter of 1996, compared with 207,000
units shipped in the third quarter of 1995.  Unit shipments of products, other
than printers and pinpads, increased 21.5% to 696,000 in the first nine months
of 1996, compared with 573,000 in the first nine months of 1995.


GROSS MARGINS (net revenues less cost of revenues) -- Gross margins were 45.5%
and 47.4% in the third quarter of 1996 and 1995, respectively.  Gross margins
for the first nine months of 1996 and 1995 were 46.4% and 48.2%, respectively.
The decrease in gross margins was due in part to a higher proportion of sales to
international markets, which tend to have lower gross margins due to competitive
pricing pressures.  The decrease was also due to other factors, including
general competitive pricing pressures and shifts in the Company's overall
business and product mix.

The Company currently expects its gross margins to continue to be affected by
changes in business segment mix, product mix, competition and other factors.


R&D EXPENSES -- Research and development (R&D) expenses increased 14.0% in the
third quarter of 1996 over the same period in 1995, and represented 10.8% of net
revenues in the third quarter of 1996, compared with 11.2% of net revenues for
the same period in 1995.  R&D expenses represented 11.0% and 12.0% of net
revenues for the first nine months of 1996 and 1995, respectively. The Company
currently expects that, in the long term, R&D expenses will continue to increase
in absolute dollars but may decline as a percentage of net revenues.


SG&A EXPENSES -- Selling, general and administrative (SG&A) expenses increased
2.9% in the third quarter of 1996 over the same period in 1995, and represented


                                       10

<PAGE>

22.3% of net revenues in the third quarter of 1996, compared with 25.5% of 
net revenues for the same period in 1995. SG&A expenses represented 24.2% and 
25.4% of net revenues for the nine months of 1996 and 1995, respectively.

The Company currently expects to make additional investments in sales and 
marketing to further develop established international markets, introduce 
products to new international markets, and to develop additional vertical 
markets and distribution channels on a global basis.  (Achievement of these 
plans is subject to various risks, as discussed below under "Factors That May 
Affect Future Results.")  Accordingly, the Company currently expects that, in
the long-term, its SG&A expenses will continue to increase in absolute dollars.
However, the Company also expects that its SG&A expenses may decline as a 
percentage of net revenues in the future.

INTEREST INCOME AND OTHER, NET -- Net interest income and other, net for the
third quarter of 1996 was $0.6 million compared with $2.1 million for the same
period in 1995.  Net interest income and other, net was $1.9 million and $2.9
million for the first nine months of 1996 and 1995, respectively.  During the
third quarter of 1995, the Company recorded a gain of $1.8 million due to a cash
distribution from EIT's interest in Terisa Systems.  Interest income and other,
net, excluding the one-time transaction involving Terisa Systems, increased for
the third quarter and first nine months of 1996 due primarily to higher
investment balances.


TAX RATE -- The Company's combined federal, state and foreign effective income
tax rate was 29.0% for both the third quarter of 1996 and 1995.  The combined
tax rate differs from the federal statutory rate primarily because the Company
does not provide for U.S. federal income taxes on the undistributed earnings of
its foreign subsidiaries, which the Company intends to permanently reinvest in
those operations.


NET INCOME -- In the third quarter of 1996, net income increased 18.2% over the
same period in 1995.  For the first nine months of 1996, net income increased
24.2% over the same period in 1995.  Earnings per share increased 10.5% to $0.42
in the third quarter of 1996, compared with $0.38 in the third quarter of 1995.
Earnings per share were $1.11 and $0.96 for the first nine months of 1996 and
1995, respectively.



LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents, and short-term investments at September 30, 1996
decreased to $72.2 million from $82.8 million at December 31, 1995.  The Company
experienced positive cash flow from operations of $48.8 million during the first
nine months of 1996 as a result of net income, an increase in trade payables and
other accrued liabilities, and depreciation and amortization.  The Company used
$50.7 million for investing in the first nine months of 1996, which included an
increase in investments of $19.1 million, as well as the purchase of fixed


                                       11

<PAGE>

assets for operations and the construction of the new manufacturing facility 
in Kunshan, People's Republic of China.  The Company used $27.9 million for 
financing activities during the first nine months of 1996, which included the 
repurchase of shares partially offset by proceeds from issuance of shares.

During the first nine months of 1996, the Company repurchased 995,500 shares of
outstanding Common Stock in the open market for an aggregate purchase price of
$47.5 million, of which 640,300 shares were repurchased for an aggregate
purchase price of $30.6 million in the third quarter of 1996.  The Company's
Board of Directors has authorized the Company to repurchase during the fourth
quarter of 1996 up to 1,500,000 shares of outstanding Common Stock in the open
market for an aggregate purchase price of up to $67.5 million.

At September 30, 1996, the Company's principal sources of liquidity included
$72.2 million in cash, cash equivalents, and short-term investments; $30.0
million available under an unsecured bank line of credit, expiring in April
1997; and $5.0 million available under a bank line of credit for foreign
exchange transactions, expiring in January 1997.  At September 30, 1996, no
borrowings were outstanding under the $30.0 million line of credit, and $1.1
million was outstanding under the $5.0 million line of credit.  In connection
with the activities of VeriFone Finance, the Company also has non-recourse notes
payable to a financing company due in monthly installments, with interest rates
ranging from 7.93% to 9.32%.  These notes mature at various dates through June
1998 and are secured by all rights to certain leases, including a security
interest in equipment under certain lease agreements and future minimum lease
payments.  At September 30, 1996, the Company had $1.8 million outstanding under
these notes. The Company also has a $15.0 million unsecured line of credit for
foreign exchange transactions that expires in May 1997.  At September 30, 1996,
$12.0 million was outstanding under this line of credit.  In addition, at
September 30, 1996, the Company had obligations under capital leases of $1.0
million.

Inventories at September 30, 1996 decreased to $67.3 million, compared with
$76.6 million at December 31, 1995.  This decline was due primarily to inventory
management programs.

Net trade accounts receivable at September 30, 1996 increased to $112.6 million
from $96.4 million at December 31, 1995.  Days sales outstanding were 84 days at
September 30, 1996, compared with 79 days at December 31, 1995.

The Company currently expects to have significant cash needs during 1996 and
1997 in connection with various events, including the repurchase of shares,
development of new products, and possible acquisitions.  However, the Company
currently believes that the liquidity provided by its ongoing operations,
existing cash, cash equivalents, and short-term investments, as well as the
borrowing arrangements described above, will be sufficient to meet its projected
cash needs.


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<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company's quarterly operating results -- including revenues; gross margins;
research and development expenses; selling, general and administrative expenses;
and net income -- are subject to various risks and uncertainties, including
risks and uncertainties related to the composition, timing and size of orders
from and shipments to major customers; variations in product mix and the mix
between leases and sales; variations in product cost; infrastructure costs;
obsolescence of inventory; local economic conditions; competitive pressures; and
other factors discussed below.  Accordingly, the Company's operating results may
vary materially from quarter to quarter.

One of the more significant risks potentially affecting the Company's operating
results is that a substantial portion of the Company's net revenues in each
quarter generally results from shipments during the latter part of the quarter.
Because the Company establishes its operating expense level primarily based on
expected revenue, if anticipated shipments in any quarter do not occur as
expected, net profits may be adversely affected.  For these and other reasons,
the Company may not learn of shortfalls in revenues, earnings or other financial
results relative to the expectations of securities analysts until late in a
quarter.  Any such shortfall could have an immediate and significant adverse
effect on the trading price of the Company's Common Stock.

The Company aims to prudently control its operating expenses.  However, there is
no assurance that, in the event of any revenue, gross margin or other shortfalls
in a quarter, the Company will be able to control expenses sufficiently to meet
profitability objectives for the quarter.

The Company is entering new markets, including the Internet commerce market, 
the labor management software market and the consumer market.  The Company 
does not expect that the net revenues or profits from these new markets will 
be material in the near term.  At present, in addition to being relatively 
small, these new markets are undeveloped and rapidly changing.  If the 
markets do not develop as expected by the Company, or the Company's 
strategies for these markets are unsuccessful, or the Company fails to 
successfully and timely develop and introduce products suitable for these 
markets, the Company may be adversely affected.

The Company is currently developing a number of products for these new 
markets -- including the vPOS, vGATE and vWALLET Internet commerce products, 
the VeriSmart system and the Personal ATM device.  There is no assurance that 
these development efforts will be successful or that, if successfully 
developed, these products will achieve commercial success.  Similarly, in 
connection with entering these new markets, the Company has entered into or 
expects to enter into relationships with a number of companies in these 
markets - including Netscape, Microsoft, Oracle and others. These 
relationships may not develop as expected by the Company, and thus, the 
expected benefits from the relationships may not be obtained.

The Company may acquire other businesses in the future.  Acquisitions require
significant financial and management resources both at the time of the
transaction and during the process of integrating the newly acquired businesses
into the Company's operations.  The Company's operating results could be
adversely affected if it is unable to successfully integrate such new companies
into its operations.  Future acquisitions by the Company could also result in


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<PAGE>

substantial cash expenditures, potentially dilutive issuance of equity 
securities, the incurrence of additional debt and contingent liabilities, and 
amortization expenses related to goodwill and other intangible assets, which 
could adversely affect the Company and its future operating results.

In general, as discussed above (under "Results of Operations"), the Company's
future results are dependent on its ability to successfully develop, manufacture
and market products for customers worldwide.  In this regard, the Company's
future growth is very dependent on the Company's ability to successfully and
timely enhance existing products, develop and introduce new products, establish
new distribution channels, develop affiliations with leading market participants
in order to facilitate product development and distribution, and certify its
existing and new products with service providers, telephone companies and
others.  The failure to achieve these and other objectives could limit future
growth and have an adverse effect on the Company and its future operating
results.  On a related note, the pressure to develop and enhance products, and
to establish and expand markets, may cause the Company's research and
development expenses and selling, general and administrative expenses to
increase substantially, which could also have an adverse effect on the Company
and its future operating results.

As discussed above (under "Results of Operations -- International Operations"),
international operations, including sales and manufacturing, is an increasingly
important contributor to the Company's overall operations.  As a result,
operating results are increasingly affected by the risks of such activities,
including fluctuations in currency exchange rates, changes in international
regulatory requirements, international staffing and employment issues, tariffs
and other trade barriers, import and export controls, the burden of complying
with foreign laws, and political and economic instability.  The Company's
manufacturing facilities, which are located in Taiwan and the People's Republic
of China, are subject to particular risks relating to political developments and
trade barriers.  The inability to effectively manage these and other risks could
adversely affect the Company and its future operating results.

Most of the Company's products are used to process payment transactions, and
thus, the security features of the products are important.  In general, the
Company's products are designed to comply with industry practices relating to
security in payment transactions.  However, no security feature, whether or not
an industry practice, is infallible.  In the event of a significant breach of
the security features in the Company's products, the Company and its future
operating results could be adversely affected.

The Company is currently dependent on single suppliers for certain product
components, including mask-programmed microcontrollers, various printer
mechanisms, display devices and certain magnetic parts.  The failure of any such
supplier to meet its obligations could result in significant manufacturing
delays that could adversely affect the Company and its future operating results.

The Company's manufacturing and distribution facilities, as well as a portion of
the Company's research and development, sales and administrative functions, are
located near major earthquake faults.  In the event of a major earthquake, the
Company and its future operating results could be adversely affected.


                                       14

<PAGE>

The Company's operations are also subject to laws, regulations, governmental
policies and product certification requirements worldwide.  Changes in such
laws, regulations, policies or requirements could affect the demand for the
Company's products or result in the need to modify products, which may involve
substantial costs or delays in sales and could have an adverse effect on the
Company and its future operating results.

In recent years, the stock market in general, and the market for technology
stocks in particular, including the Company's Common Stock, have experienced
extreme price fluctuations.  There can be no assurance that the market price of
the Company's Common Stock will not experience significant fluctuations in the
future.



PART II.  OTHER INFORMATION


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  EXHIBITS

               Exhibit 11.1 - Statement of Computation of Earnings per Share


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<PAGE>

                                    SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        VERIFONE, INC.
                                        (Registrant)



                                        By:  /s/ Joseph M. Zaelit
                                             --------------------------------
                                             Joseph M. Zaelit
                                             Senior Vice President, Finance and
                                             Administration, and Chief Financial
                                             Officer (Authorized Officer and
                                             Principal Financial Officer)



Date:  November 6, 1996


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