Revenue for the first quarter was $64.8 million, an increase of $3.8 million or 6.3%, compared to $61.0 million of revenue in the same quarter of 2006, and no change compared to fourth quarter 2006. The year over year increase in first quarter revenue was the result of incremental sales in the EMEA, Mexico, Brazil, and Asia Pacific regions which more than offset a significant sales decline in the North American market. The revenue growth was attributable to both countertop and mobile unit sales increases. The decline in North American revenue was primarily attributable to a large one-time U.S. customer order in the first quarter 2006 that had a significant positive impact on the comparable first quarter of 2006. Revenue grew in the Asia Pacific region primarily as a result of the acquisition of ACG Group in February 2007.

Gross profit for the first quarter 2007 was $20.7 million, or 32.0% of revenue compared to first quarter 2006 gross profit of $23.5 million, or 38.6% of revenue, and an increase over fourth quarter 2006 gross profit of $19.2 million or 29.6% of revenue. First quarter 2007 gross profit percentage was lower than the same quarter of the prior year due to the impact of $3.7 million of lower margin revenue in Brazil, as well as a reduced volume of higher margin North American product sales. Conversely, first quarter 2007 gross margins were higher than fourth quarter 2006 due to a decrease of $3.3 million revenue related to lower margin sales in Brazil. First quarter 2007 gross margin also benefited from an increased contribution from higher margin mobile and networking products.

Operating expenses for first quarter 2007 were $23.5 million, an increase of $2.9 million compared to $20.6 million in the same quarter of 2006, and down $0.1 million compared to fourth quarter 2006 operating expenses of $23.6 million. First quarter operating expenses were higher than the same quarter of the prior year as a result of $1.3 million of increased R&D spending primarily related to new product development, $0.6 million of increased selling costs, and $1.0 million of increased general and administrative cost. Included in the increase in general and administrative costs are $1.7 million of legal and accounting costs associated with the evaluation of a strategic proposal received for a combination of our company with another business that we believed could have been beneficial to our shareholders. The sequential quarter reduction of $0.1 million in operating expenses resulted from a $1.9 million reduction in R&D expense of which $0.9 million related to general R&D expense reduction and $1.0 million related to the non-recurrence of a fourth quarter 2006 write- off of in-process R&D related to the acquisition of TPI Software LLC. The reduction in R&D expense was offset by $1.7 million of incremental legal and accounting cost related to the assessment of the strategic proposal and $0.1 million of increased selling, general, and administrative costs.

First quarter 2007 net loss from continuing operations was $3.2 million or ($0.06) per share compared to net income from continuing operations of $2.8 million or $0.05 per share in the same quarter of 2006, and a net loss from continuing operations of $2.7 million or ($0.05) per share in the fourth quarter of 2006. The first quarter 2007 loss from continuing operations includes the $1.7 million of legal and accounting costs discussed above or the equivalent of ($0.03) per share.

Hypercom has recently announced several new business initiatives including:

• The new Hypercom P4100 PIN Pad is now PCI PED approved and includes a choice of contactless, EMV Smart Card, or magnetic stripe payment, and also includes a touch screen display. The P4100 supports multiple point of sale vendor protocols allowing retailers to easily add PIN and contactless based technology to existing point of sale systems without upgrading the entire terminal or electronic cash register hardware and;
• Apriva, the leading point of sale wireless solutions provider, has Class A certified Hypercom's Optimum T4100 IP-enabled payment terminal for use on Apriva's Intelligent Gateway, enabling credit, debit, gift, loyalty, and check transactions to be processed by most major US merchant processors that have previously certified with Apriva's PCI compliant IP data center.

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