##### Table of Contents



FORM 10-Q
 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
  [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 0-19657
 TRM CORPORATION
  Oregon
    
    
    
    93-0809419(State or other jurisdiction of incorporation or organization)
    
    
    
    (I.R.S. Employer Identification No.)
 5208 N.E. 122nd Avenue  Portland, Oregon 97230  (Address of principal executive offices) (Zip Code)
 (503) 257-8766  (Registrants telephone number, including area code)
  X
    X




---



TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 3. DEFAULTS UPON SENIOR SECURITIESITEM 6. EXHIBITSSIGNATUREEmployment Agreement dated August 1, 2007Certification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of Principal Accounting OfficerCertification of Chief Executive Officer pursuant to Section 906Certification of Chief Financial Officer pursuant to Section 906Certification of Principal Accounting Officer pursuant to Section 906    Table of Contents  
 PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 TRM Corporation
Consolidated Balance Sheets
(Unaudited)
(In thousands)
 December 31,
    
    
    June 30,2006
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    

    $
    4,784
    
    

    $
    3,165Restricted cash
    

    
    
    
    

    
    4,384Accounts receivable, net
    

    
    4,328
    
    

    
    5,177Income taxes receivable
    

    
    215
    
    

    
    215Inventories
    

    
    674
    
    

    
    894Prepaid expenses and other
    

    
    1,579
    
    

    
    635Deferred financing costs
    

    
    5,270
    
    

    
    191Restricted cash  TRM Inventory Funding Trust
    

    
    73,701
    
    

    
    71,876Assets held for sale
    

    
    106,081
    
    

    
    Total current assets
    

    
    196,632
    
    

    
    86,537Equipment, less accumulated depreciation and amortization
    

    
    11,646
    
    

    
    7,834Goodwill
    

    
    16,748
    
    

    
    16,748Intangible assets, less accumulated amortization
    

    
    585
    
    

    
    601Other assets
    

    
    833
    
    

    
    863Total assets
    

    $
    226,444
    
    

    $
    112,583Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    

    $
    5,988
    
    

    $
    6,479Accrued expenses
    

    
    8,811
    
    

    
    13,862Term loans and line of credit
    

    
    99,318
    
    

    
    1,884TRM Inventory Funding Trust note payable
    

    
    71,697
    
    

    
    69,287Liabilities related to assets held for sale
    

    
    13,437
    
    

    
    Total current liabilities
    

    
    199,251
    
    

    
    91,512Minority interest
    

    
    1,500
    
    

    
    1,500Commitments and contingencies (notes 10 and 11)Shareholders equity:Common stock, no par value -

50,000 shares authorized; 17,194 shares issued and
outstanding 
(17,126 at December 31, 2006)
    

    
    135,595
    
    

    
    135,876Additional paid-in capital
    

    
    63
    
    

    
    63Accumulated other comprehensive income -

Accumulated foreign currency translation adjustment
    

    
    4,692
    
    

    
    2,733Accumulated deficit
    

    
    (114,657
    )
    

    
    (119,101
    )Total shareholders equity
    

    
    25,693
    
    

    
    19,571Total liabilities and shareholders equity
    

    $
    226,444
    
    

    $
    112,583
  2




---



##### Table of Contents



TRM Corporation
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
 Three months ended
    

    Six months endedJune 30,
    

    June 30,2006
    
    2007
    
    2006
    
    2007Sales
    

    $
    27,552
    
    

    $
    23,546
    
    

    $
    57,069
    
    

    $
    46,445Less discounts
    

    
    17,444
    
    

    
    14,749
    
    

    
    34,430
    
    

    
    29,017Net sales
    

    
    10,108
    
    

    
    8,797
    
    

    
    22,639
    
    

    
    17,428Cost of sales:Cost of vault cash
    

    
    1,612
    
    

    
    1,345
    
    

    
    3,041
    
    

    
    2,790Other
    

    
    3,701
    
    

    
    4,684
    
    

    
    7,945
    
    

    
    9,126Gross profit
    

    
    4,795
    
    

    
    2,768
    
    

    
    11,653
    
    

    
    5,512Selling, general and administrative expense (including
non-cash stock compensation of $795 in 2006 and $204 in
2007)
    

    
    7,742
    
    

    
    4,324
    
    

    
    15,379
    
    

    
    9,625Restructuring charges (Note 12)
    

    
    
    
    

    
    
    
    

    
    
    
    

    
    963Equipment write-offs
    

    
    11
    
    

    
    15
    
    

    
    56
    
    

    
    18Operating loss
    

    
    (2,958
    )
    

    
    (1,571
    )
    

    
    (3,782
    )
    

    
    (5,094
    )Interest expense and amortization of debt issuance costs
    

    
    1
    
    

    
    125
    
    

    
    1
    
    

    
    160Loss on early extinguishment of debt
    

    
    3,104
    
    

    
    24
    
    

    
    3,104
    
    

    
    4,059Other expense (income), net
    

    
    (842
    )
    

    
    213
    
    

    
    (795
    )
    

    
    351Loss from continuing operations before benefit from
income taxes
    

    
    (5,221
    )
    

    
    (1,933
    )
    

    
    (6,092
    )
    

    
    (9,664
    )Benefit for income taxes
    

    
    (1,937
    )
    

    
    
    
    

    
    (2,203
    )
    

    
    Loss from continuing operations
    

    
    (3,284
    )
    

    
    (1,933
    )
    

    
    (3,889
    )
    

    
    (9,664
    )Discontinued operations:Income (loss) from operations, including gains on sales
    

    
    (948
    )
    

    
    (280
    )
    

    
    (2,025
    )
    

    
    5,220Provision (benefit) for income taxes
    

    
    265
    
    

    
    
    
    

    
    82
    
    

    
    Income (loss) from discontinued operations
    

    
    (1,213
    )
    

    
    (280
    )
    

    
    (2,107
    )
    

    
    5,220Net loss
    

    $
    (4,497
    )
    

    $
    (2,213
    )
    

    $
    (5,996
    )
    

    $
    (4,444
    )Weighted average common shares outstanding
    

    
    17,046
    
    

    
    17,168
    
    

    
    16,959
    
    

    
    17,153Basic and diluted income (loss) per share:Continuing operations
    

    $
    (.19
    )
    

    $
    (.11
    )
    

    $
    (.23
    )
    

    $
    (.56
    )Discontinued operations
    

    
    (.07
    )
    

    
    (.02
    )
    

    
    (.12
    )
    

    
    .30Net loss
    

    $
    (.26
    )
    

    $
    (.13
    )
    

    $
    (.35
    )
    

    $
    (.26
    )
  3




---



##### Table of Contents



TRM Corporation
Consolidated Statement of Shareholders Equity
(Unaudited)
(In thousands)
 AccumulatedAdditional
    
    
    otherComprehensive
    
    
    
    
    
    
    Common
    
    
    paid-in
    
    
    comprehensive
    
    
    Accumulatedloss
    
    
    Shares
    
    
    Amounts
    
    
    capital
    
    
    income
    
    
    deficit
    
    
    TotalBalances, December 31, 2006
    

    
    
    
    
    
    17,126
    
    
    $
    135,595
    
    
    $
    63
    
    
    $
    4,692
    
    
    $
    (114,657
    )
    
    $
    25,693Comprehensive loss:Net loss
    

    $
    (4,444
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,444
    )
    
    
    (4,444
    )Other comprehensive income
(loss) -Foreign currency
translation adjustment:Recognized in income
    

    
    (2,622
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,622
    )
    
    
    
    
    
    
    (2,622
    )Current period adjustment
    

    
    663
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    663
    
    
    
    
    
    
    
    663Comprehensive loss
    

    $
    (6,403
    )Other capital additions
    

    
    
    
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53Exercise of stock options
    

    
    
    
    
    
    18
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Stock option expense
    

    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )Restricted stock expense
    

    
    
    
    
    
    
    
    
    
    212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    212Restricted shares vested
    

    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balances, June 30, 2007
    

    
    
    
    
    
    17,194
    
    
    $
    135,876
    
    
    $
    63
    
    
    $
    2,733
    
    
    $
    (119,101
    )
    
    $
    19,571
  4




---



##### Table of Contents



TRM Corporation
Consolidated Statements of Cash Flows
Six months ended June 30, 2006 and 2007
(Unaudited)
(In thousands)
 2006
    
    
    2007Operating activities:Net loss
    

    $
    (5,996
    )


    
    $
    (4,444
    )Adjustments to reconcile net loss to net cash used in operating activities:Impairment charges and asset write-downs
    

    
    
    


    
    
    2,701Depreciation and amortization
    

    
    10,412
    


    
    
    1,941Non-cash stock compensation
    

    
    795
    


    
    
    204Loss on disposal of equipment
    

    
    359
    


    
    
    146Provision for doubtful accounts
    

    
    200
    


    
    
    Loss on early extinguishment of debt
    

    
    2,560
    


    
    
    4,059Gain on sale of discontinued operations
    

    
    (648
    )


    
    
    (6,960
    )Cumulative foreign currency translation adjustments recognized in income
    

    
    (1,538
    )


    
    
    (2,622
    )Changes in items affecting operations, net of effects of business dispositions:Restricted cash
    

    
    
    


    
    
    (4,384
    )Accounts receivable
    

    
    1,386
    


    
    
    (604
    )Inventories
    

    
    235
    


    
    
    (172
    )Income tax receivable
    

    
    (124
    )


    
    
    Prepaid expenses and other
    

    
    (140
    )


    
    
    1,091Accounts payable
    

    
    (624
    )


    
    
    786Accrued expenses
    

    
    (6,279
    )


    
    
    (833
    )Deferred income taxes
    

    
    (2,297
    )


    
    
    Cash used in operating activities
    

    
    (1,699
    )


    
    
    (9,091
    )Investing activities:Proceeds from sale of equipment
    

    
    24
    


    
    
    22Capital expenditures
    

    
    (2,256
    )


    
    
    (41
    )Proceeds from sale of discontinued operations
    

    
    4,280
    


    
    
    103,671Acquisition of intangible and other assets
    

    
    (155
    )


    
    
    (294
    )Cash provided by investing activities
    

    
    1,893
    


    
    
    103,358Financing activities:Borrowings on notes payable
    

    
    113,461
    


    
    
    1,206Repayment of notes payable
    

    
    (105,293
    )


    
    
    (98,641
    )Debt
financing costs
    

    
    (2,917
    )


    
    
    Principal payments on capital lease obligations
    

    
    (472
    )


    
    
    (26
    )Decrease (increase) in restricted cash  TRM Inventory Funding Trust
    

    
    (14,997
    )


    
    
    1,825Proceeds (repayments) of TRM Inventory Funding Trust note, net
    

    
    10,529
    


    
    
    (2,409
    )Proceeds from exercise of stock options
    

    
    91
    


    
    
    25Other
    

    
    (19
    )


    
    
    53Cash provided by (used in) financing activities
    

    
    383
    


    
    
    (97,967
    )Effect of exchange rate changes
    

    
    174
    


    
    
    (1,221
    )Net increase (decrease) in cash and cash equivalents
    

    
    751
    


    
    
    (4,921
    )Beginning cash and cash equivalents, including $3,302 classified as assets held
for sale at December 31, 2006
    

    
    9,708
    


    
    
    8,086Ending cash and cash equivalents
    

    $
    10,459
    


    
    $
    3,165Supplemental cash flow information:Payments:Cash paid for interest
    

    $
    3,848
    


    
    $
    1,089Cash paid for income taxes
    

    $
    225
    


    
    $
    13
  5




---



##### Table of Contents



TRM Corporation
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 1.
    
    Interim Financial Data
   6
    Table of Contents       2.
    
    Financial Statement Reclassifications
  3.
    
    Net Loss Per Share
  7




---



##### Table of Contents



4.
    
    Inventories
 December 31,
    
    
    June 30,2006
    
    
    2007(in thousands)Parts
    

    $
    605
    
    


    $
    630ATMs held for resale
    

    
    69
    
    


    
    264$
    674
    
    


    $
    894
 5.
    
    Equipment
 December 31,
    
    
    June 30,2006
    
    
    2007(in thousands)Photocopiers
    

    $
    6,771
    
    


    $
    ATMs
    

    
    11,267
    
    


    
    10,762Furniture and fixtures
    

    
    1,307
    
    


    
    1,259Computer equipment
    

    
    7,116
    
    


    
    6,88626,461
    
    


    
    18,907Accumulated depreciation and amortization
    

    
    (14,815
    )
    


    
    (11,073
    )$
    11,646
    
    


    $
    7,834
 6.
    
    Term Loans and Line of Credit
 December 31,
    
    
    June 30,2006
    
    
    2007(in thousands)Term loans
    

    $
    92,808
    
    


    $
    1,884Lines of credit
    

    
    6,510
    
    


    
    $
    99,318
    
    


    $
    1,884
  8




---



##### Table of Contents



9




---



##### Table of Contents



7.
    
    Stock-based Compensation
  2006
    
    
    2007Modification of options previously granted
    

    $
    618
    
    


    $
    Amortization of:Option grants
    

    
    58
    
    


    
    (9
    )Restricted shares
    

    
    119
    
    


    
    212$
    795
    
    


    $
    203
  Number of
    
    Weighted averageshares
    
    exercise priceOutstanding January 1, 2007
    
    
    658,125
    
    
    $
    6.39Options granted
    
    
    
    
    
    
    Options exercised
    
    
    (20,375
    )
    
    
    1.59Options forfeited
    
    
    (78,125
    )
    
    
    9.09Outstanding June 30, 2007
    
    
    559,625
    
    
    
    6.19
   Number ofsharesUnvested shares outstanding January 1, 2007
    
    
    258,040Shares granted
    
    
    500,000Shares vested
    
    
    (50,000
    )Shares forfeited
    
    
    (2,010
    )Unvested shares outstanding June 30, 2007
    
    
    706,030
  10




---



##### Table of Contents



8.
    
    Provision for Income Taxes
  9.
    
    Segment Reporting
   10.
    
    Discontinued Operations and Sales of Businesses
    11




---



##### Table of Contents



12




---



##### Table of Contents



Three months ended
    
        
    Six months endedJune 30,
    
    
    June 30,2006
    

    2007
    
    
    2006
    
    
    2007Canada photocopy
    

    $
    1,128
    
    


    $
    577
    

    

    $
    2,005
    
    


    $
    1,102United Kingdom photocopy
    

    
    810
    
    


    
    
    

    

    
    1,646
    
    


    
    United States photocopy
    

    
    6,004
    
    


    
    
    

    

    
    11,906
    
    


    
    1,368Canada ATM
    

    
    1,936
    
    


    
    
    

    

    
    3,624
    
    


    
    United Kingdom ATM
    

    
    8,350
    
    


    
    
    

    

    
    15,432
    
    


    
    1,653Germany ATM
    

    
    11
    
    


    
    
    

    

    
    11
    
    


    
    130$
    18,239
    
    


    $
    577
    

    

    $
    34,624
    
    


    $
    4,253
  Three months ended June 30,2006
    
    2007Gain on
    
    
    
   
    
    
    

    
    
    
    
    Gain onOperations
    
    
    sale
    
    
    
    Total
    
    
    
    Operations
    
    sale
    
    
    TotalCanada photocopy
    

    $
    158
    
    

    $
    
    
    

    $
    158
    
    

    $
    (59
    )
    

    $
    29
    
    

    $
    (30
    )United Kingdom
photocopy
    

    
    (495
    )
    

    
    2,186
    
    

    
    1,691
    
    

    
    
    
    

    
    
    
    

    
    United States photocopy
    

    
    818
    
    

    
    
    
    

    
    818
    
    

    
    
    
    

    
    
    
    

    
    Canada ATM
    

    
    (159
    )
    

    
    
    
    

    
    (159
    )
    

    
    
    
    

    
    (189
    )
    

    
    (189
    )United Kingdom ATM
    

    
    (3,302
    )
    

    
    
    
    

    
    (3,302
    )
    

    
    
    
    

    
    (61
    )
    

    
    (61
    )Germany ATM
    

    
    (154
    )
    

    
    
    
    

    
    (154
    )
    

    
    
    
    

    
    
    
    

    
    $
    (3,134
    )
    

    $
    2,186
    
    

    $
    (948
    )
    

    $
    (59
    )
    

    $
    (221
    )
    

    $
    (280
    )Six months ended June 30,2006
    
    2007Gain on
    
    
    
    
    
    
    
    
    
    
    
    Gain onOperations
    
    sale
    
    
    
    Total
    
    Operations
    
    sale
    
    TotalCanada photocopy
    

    $
    138
    
    

    $
    
    

    
    $
    138
    
    

    $
    (2,975
    )
    

    $
    29
    
    

    $
    (2,946
    )United Kingdom
photocopy
    

    
    (787
    )
    

    
    2,186
    

    
    
    1,399
    
    

    
    
    
    

    
    
    
    

    
    United States photocopy
    

    
    1,420
    
    

    
    
    

    
    
    1,420
    
    

    
    398
    
    

    
    833
    
    

    
    1,231Canada ATM
    

    
    (171
    )
    

    
    
    

    
    
    (171
    )
    

    
    (113
    )
    

    
    2,361
    
    

    
    2,248United Kingdom ATM
    

    
    (4,380
    )
    

    
    
    

    
    
    (4,380
    )
    

    
    (1,617
    )
    

    
    6,359
    
    

    
    4,742Germany ATM
    

    
    (431
    )
    

    
    
    

    
    
    (431
    )
    

    
    (55
    )
    

    
    
    
    

    
    (55
    )$
    (4,211
    )
    

    $
    2,186
    

    
    $
    (2,025
    )
    

    $
    (4,362
    )
    

    $
    9,582
    
    

    $
    5,220
   13




---



##### Table of Contents



11.
    
    Litigation and Potential Claims
   12.
    
    Corporate Restructuring
   13.
    
    New Accounting Standards
  14




---



##### Table of Contents



15




---



##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
   Overview
   16
    Table of Contents    17




---



##### Table of Contents



Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006
 ATM
Results of Operations  Continuing Operations2006
    
    
    2007Amount
    
    
    %
    
    
    Amount
    
    
    %(in thousands, except operating and percentagedata)Transaction-based sales
    
    $
    25,521
    
    
    
    100.0
    %
    
    $
    21,520
    
    
    
    100.0
    %Less discounts
    
    
    17,444
    
    
    
    68.4
    
    
    
    14,749
    
    
    
    68.5Net transaction-based sales
    
    
    8,077
    
    
    
    31.6
    %
    
    
    6,771
    
    
    
    31.5
    %Service and other sales
    
    
    1,368
    
    
    
    
    
    
    
    1,192Sales of ATM equipment
    
    
    663
    
    
    
    
    
    
    
    834Net sales
    
    
    10,108
    
    
    
    
    
    
    
    8,797Cost of sales:Cost of vault cash
    
    
    1,612
    
    
    
    
    
    
    
    1,345Other
    
    
    3,701
    
    
    
    
    
    
    
    4,684Gross profit
    
    $
    4,795
    
    
    
    
    
    
    $
    2,768Operating data:Average number of transacting ATMs
    
    
    12,643
    
    
    
    
    
    
    
    10,473Withdrawal transactions
    
    
    11,358,693
    
    
    
    
    
    
    
    9,136,135Average withdrawals per ATM per month
    
    
    299
    
    
    
    
    
    
    
    291Average transaction-based sales per withdrawal transaction
    
    $
    2.25
    
    
    
    
    
    
    $
    2.36Average discount per withdrawal transaction
    
    $
    1.54
    
    
    
    
    
    
    $
    1.62Net transaction-based sales per withdrawal transaction
    
    $
    .71
    
    
    
    
    
    
    $
    .74
 Sales
    
    
    A 17.2% decrease in the average number of transacting ATMs in our
networks, primarily as a result of attrition of the contracts acquired from eFunds
Corporation in November 2004. We expect that the number of ATMs in our networks will
continue to decrease during the remainder of 2007.
    
    A 2.7% decrease in average withdrawal transactions per ATM per month.
 18




---



##### Table of Contents




    
    A 4.9% increase in average transaction-based sales per withdrawal
transaction.
  Sales Discounts
  Cost of Sales
    Selling, General and Administrative Expense
  19




---



##### Table of Contents




    
    Amortization expense decreased by $1.3 million due to the reduction of the basis of
our intangible assets as a result of impairment charges taken in the third quarter of
2006.
    
    Labor costs (excluding non-cash stock compensation expense) decreased by $1.3
million, or approximately 47%. In connection with and following the sales of
businesses in January 2007 we have substantially reduced our selling, general and
administrative staff, from 102 employees as of December 31, 2006, to 59 employees as of
June 30, 2007.
    
    Non-cash stock compensation
expense decreased by $592,000. In the second quarter of
2006, we recorded $618,000 of expense in connection with the acceleration of the
vesting of options granted to our former President and Chief Executive Officer.
 Loss on Early Extinguishment of Debt
  Other Income
  Tax Rate
  Discontinued Operations
  20




---



##### Table of Contents



Net Loss
  Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006
 ATM Results of Operations  Continuing Operations2006
    
    
    2007Amount
    
    
    %
    
    
    Amount
    
    
    %(in thousands, except operating and percentagedata)Transaction-based sales
    
    $
    51,443
    
    
    
    100.0
    %
    
    $
    42,896
    
    
    
    100.0
    %Less discounts
    
    
    34,430
    
    
    
    66.9
    
    
    
    29,017
    
    
    
    67.6Net transaction-based sales
    
    
    17,013
    
    
    
    33.1
    %
    
    
    13,879
    
    
    
    32.4
    %Service and other sales
    
    
    3,466
    
    
    
    
    
    
    
    2,370Sales of ATM equipment
    
    
    2,160
    
    
    
    
    
    
    
    1,179Net sales
    
    
    22,639
    
    
    
    
    
    
    
    17,428Cost of sales:Cost of vault cash
    
    
    3,041
    
    
    
    
    
    
    
    2,790Other
    
    
    7,945
    
    
    
    
    
    
    
    9,126Gross profit
    
    $
    11,653
    
    
    
    
    
    
    $
    5,512Operating data:Average number of transacting ATMs
    
    
    12,882
    
    
    
    
    
    
    
    10,641Withdrawal transactions
    
    
    22,595,000
    
    
    
    
    
    
    
    18,209,397Average withdrawals per ATM per month
    
    
    292
    
    
    
    
    
    
    
    285Average transaction-based sales per withdrawal
transaction
    
    $
    2.28
    
    
    
    
    
    
    $
    2.35Average discount per withdrawal transaction
    
    $
    1.53
    
    
    
    
    
    
    $
    1.59Net transaction-based sales per withdrawal transaction
    
    $
    .75
    
    
    
    
    
    
    $
    .76
 Sales
    21




---



##### Table of Contents




    
    A 17.4% decrease in the average number of transacting ATMs in our
networks, primarily as a result of attrition of the contracts acquired from eFunds
Corporation in November 2004. We expect that the number of ATMs in our networks will
continue to decrease during the remainder of 2007.
    
    A 2.4% decrease in average withdrawal transactions per ATM per month.
  
    
    A 3.1% increase in average transaction-based sales per withdrawal
transaction.
   Sales Discounts
  Cost of Sales
   22




---



##### Table of Contents




    
    A decrease in our cost of vault cash of $251,000, or 8.3%, as compared to the first
six months of 2006. The decrease in the cost of vault cash is due to a reduction of
the
amount of vault cash in our system, which has decreased from $85.5 million at June 30,
2006 to $71.9 million at June 30, 2007.
    
    A $627,000 decrease in the cost of ATM machines sold due to the $981,000 decrease in
ATM sales as compared to the first six months of 2006.
 Selling, General and Administrative Expense
  
    
    Amortization expense decreased by $2.5 million due to the reduction of the basis of
our intangible assets as a result of impairment charges taken in the third quarter of
2006.
    
    Labor costs (excluding non-cash stock compensation expense) decreased by $2.0
million, or approximately 37%. In connection with and following the sales of
businesses in January 2007 we have substantially reduced our selling, general and
administrative staff, from 102 employees as of December 31, 2006, to 59 employees as of
June 30, 2007.
    
    Non-cash stock compensation expense decreased by $592,000. In the second
quarter of 2006, we recorded $618,000 of expense in connection with the acceleration of
the vesting of options granted to our former President and Chief Executive Officer.
 Restructuring Charges
  23




---



##### Table of Contents



Loss on Early Extinguishment of Debt
  Other Income
  Tax Rate
  Discontinued Operations
     24




---



##### Table of Contents



Net Loss
  Liquidity and Capital Resources
 General
 25
    Table of Contents         26




---



##### Table of Contents



Syndicated Credit Facility
   27




---



##### Table of Contents



United States Vault Cash Facility
 General.
 Structure of the facility.
 
    
    TRM Inventory Funding Trust, or the Trust. The Trust is a Delaware
business trust that was created pursuant to a deposit trust agreement among GSS
Holdings, Inc. as depositor, Wilmington Trust Company as owner trustee, and TRM ATM
Corporation as servicer. The majority equity holder in the Trust is Autobahn Funding
Company, LLC, and the minority equity holder is GSS Holdings, Inc. Neither we, TRM ATM
Corporation nor any of our other affiliates have any ownership interest in the Trust.
    
    TRM ATM Corporation, or TRM ATM. TRM ATM is one of our subsidiaries and
acts as the servicer under the facility.
 28




---



##### Table of Contents




    
    Autobahn Funding Company, LLC, or Autobahn. Autobahn is an affiliate of DZ
Bank AG, Deutsche Zentral-Genossenschaftsbank Frankfurt am Main, and is the lender
under the facility. Autobahn is independent of us, TRM ATM and our other affiliates.
 Operation of the facility.
    Collateral and credit enhancement.
  Cost of the facility.
 
    
    Interest on the loaned funds. The loans bear interest at an interest rate
equal to 1.35% plus the interest rate borne by the commercial paper that was issued to
raise the funds for the loans. Interest for the six months ended June 30, 2007 was
$2.4 million.
 29




---



##### Table of Contents




    
    Return for equity investors. Autobahn and GSS Holdings, Inc., as equity
investors in the Trust, receive a return on the value of their investments, which were
$1,485,000 and $15,000, respectively, as of June 30, 2007. Autobahns annual return is
equal to 1.75% plus the interest rate borne by the commercial paper that is
outstanding. GSS Holdings annual return is equal to 25.0%.
    
    Fees. Autobahn receives a commitment fee and TRM ATM, as servicer, and the
collateral agent each receive administrative fees in connection with the facility.
Autobahns fees for the six months ended June 30, 2007 were $93,000.
 Risk of loss and insurance.
  United Kingdom Vault Cash Facility
  Canadian Vault Cash Facility
  Off-balance Sheet Arrangements
  30




---



##### Table of Contents



Contractual Commitments and Obligations
  Payments Due by PeriodJuly 1 December 31,Contractual obligations
    
    Total
    
    2007
    
    2008-2009
    
    2010-2011
    
    After 2011TRM Corporation and subsidiariesLong-term debt
    

    $
    3,355
    
    

    $
    159
    
    

    $
    632
    
    

    $
    632
    

    
    $
    1,932Operating leases
    

    
    1,562
    
    

    
    264
    
    

    
    884
    
    

    
    243
    

    
    
    171Purchase obligations
    

    
    11,875
    
    

    
    2,500
    
    

    
    9,375
    
    

    
    
    

    
    
    Total TRM Corporation and subsidiaries
    

    
    16,792
    
    

    
    2,923
    
    

    
    10,891
    
    

    
    875
    

    
    
    2,103TRM Inventory Funding Trust note payable
    

    
    92,051
    
    

    
    2,389
    
    

    
    9,478
    
    

    
    9,478
    

    
    
    70,706Total contractual cash obligations
    

    $
    108,843
    
    

    $
    5,312
    
    

    $
    20,369
    
    

    $
    10,353
    

    
    $
    72,809
  Critical Accounting Policies and Estimates
  New Accounting Standards
   31




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
    32




---



##### Table of Contents



Foreign Currency Risk
  
 ITEM 4. CONTROLS AND PROCEDURES
    Ineffective controls over segment disclosures and impairment analysis.
 Inadequate staffing in the United Kingdom.
 33




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  34




---



##### Table of Contents



ITEM 6. EXHIBITS
 (a) Exhibits
 2.1
    
    Asset Purchase Agreement dated June 19, 2007, between TRM (Canada)
Corporation and TRM Multitech Services Inc. (incorporated herein by reference to
Exhibit 2.1 of Form 10-Q for the period ended March 31, 2007).3.1(a)
    
    Amendments to the Restated Articles of Incorporation (incorporated herein by
reference to Exhibit 3.1(a) of Form 10-K for the fiscal year ended June 30, 1998).3.1(b)
    
    Restated Articles of Incorporation (incorporated herein by reference to Exhibit
3.1(b) of Form 10-K for the fiscal year ended June 30, 1998).3.2
    
    Restated Bylaws (incorporated herein by reference to Exhibit 3.2 of
Form 10-K for the fiscal year ended June 30, 1998).4.1
    
    Specimen Stock Certificate (incorporated herein by reference to
Exhibit 4.1 of Form S-3/A filed on August 25, 2004 [No. 333-116748]).4.2
    
    Investors Rights Agreement (incorporated herein by reference to
Exhibit 4.1 of Form 8-K dated July 9, 1998).4.3
    
    Articles V, VI and VII of the Restated Articles of Incorporation,
as amended (See Exhibit 3.1).4.4
    
    Articles I, II, V, VII and X of the Restated Bylaws (See Exhibit 3.2).
 10.6
    
    (a)
    
    Employment Agreement dated August 1, 2007 by and between TRM Corporation
and Michael Dolan.(b)
    
    Employment Agreement dated August 12, 2005 by
and between TRM Corporation and Daniel E. OBrien (incorporated herein
by reference to Exhibit 10.7(f) of Form 10-Q for the period ended June
30, 2005).(c)
    
    Retainer Agreement dated May 31, 2007 by and
between TRM Corporation and Jeffrey F. Brotman (incorporated herein by
reference to Exhibit 10.6(b) of Form 10-Q for the period ended March
31, 2007).(d)
    
    Employment Agreement dated May 21, 2007, by and
between TRM Corporation and Richard B. Stern (incorporated herein by
reference to Exhibit 10.6(c) of Form 10-Q for the period ended March
31, 2007).
 35




---



##### Table of Contents



(e)
    
    Consulting Agreement dated December 12, 2006,
by and between TRM Corporation and Danial J. Tierney (incorporated
herein by reference to Exhibit 10.6(d) of Form 10-K for the year ended
December 31, 2006).(f)
    
    Severance Agreement dated December 12, 2006 by
and between TRM Corporation and Danial J. Tierney (incorporated herein
by reference to Exhibit 10.6(e) of Form 10-K for the year ended
December 31, 2006).(g)
    
    Retainer Agreement dated May 3, 2006 by and
between TRM Corporation and Amy B. Krallman (incorporated herein by
reference to Exhibit 10.7(j) of Form 10-Q filed for the quarter ended
March 1, 2006).
 31.1
    
    Certification of Chief Executive Officer of TRM Corporation pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer of TRM Corporation pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.3
    
    Certification of Principal Accounting Officer of TRM Corporation
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer of TRM Corporation pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer of TRM Corporation pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.32.3
    
    Certification of Principal Accounting Officer of TRM Corporation
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
 
 SIGNATURE
  TRM CORPORATIONDate: August 14, 2007
    By:
    /s/ Jon S. PitcherJon S. PitcherPrincipal Accounting Officer 36