UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 o
    
    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 0-19657
 TRM CORPORATION
  Oregon
    
    93-0809419(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 (Address of principal executive offices) (Zip Code)
 (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS
 Page No.PART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    2Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 4T.
    
    Control and Procedures
    
    
    26PART II
    
    OTHER INFORMATIONItem 6.
    
    Exhibits
    
    
    27
 i




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##### 



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS.
 TRM Corporation
Consolidated Balance Sheets
(Unaudited)
(In thousands)
 March 31,
    
    
    December 31,2009
    
    
    2008AssetsCurrent assets:Cash
    
    $
    6,225
    
    
    $
    4,535Restricted cash
    
    
    812
    
    
    
    2,012Accounts receivable, net
    
    
    3,130
    
    
    
    2,998Leases receivable, net
    
    
    135
    
    
    
    176Inventories
    
    
    739
    
    
    
    505Prepaid expenses and other
    
    
    291
    
    
    
    308Deferred financing costs
    
    
    2,237
    
    
    
    2,244Total current assets
    
    
    13,569
    
    
    
    12,778Property and equipment, net
    
    
    2,919
    
    
    
    2,815Non-current leases receivable, net
    
    
    786
    
    
    
    786Intangible assets, net
    
    
    2,033
    
    
    
    2,120Goodwill
    
    
    10,654
    
    
    
    10,657Deferred financial costs, long term
    
    
    2,349
    
    
    
    2,918Other assets
    
    
    524
    
    
    
    593Total assets
    
    $
    32,834
    
    
    $
    32,667Liabilities and Shareholders Equity (Deficit)Current liabilities:Accounts payable
    
    $
    7,799
    
    
    $
    6,851Accrued and other expenses
    
    
    5,291
    
    
    
    5,369Term loans
    
    
    4,891
    
    
    
    4,775Total current liabilities
    
    
    17,981
    
    
    
    16,995Long term liabilities:Term loans and other debt
    
    
    18,519
    
    
    
    18,890Warrants (see Note 2)
    
    
    1,059
    
    
    
    Shareholders equity (deficit):Common stock, no par value -
100,000 shares authorized; 21,486 shares issued and outstanding
    
    
    135,784
    
    
    
    145,938Additional paid-in capital
    
    
    63
    
    
    
    63Accumulated deficit
    
    
    (140,572
    )
    
    
    (149,219
    )Total shareholders equity (deficit)
    
    
    (4,725
    )
    
    
    (3,218
    )Total liabilities and shareholders equity (deficit)
    
    $
    32,834
    
    
    $
    32,667
  2




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##### 



TRM Corporation
Consolidated Statements of Operations
Three months ended March 31, 2009 and 2008
(Unaudited)
(In thousands, except per share data)
 2009
    
    
    2008Sales
    
    $
    22,245
    
    
    $
    18,065Commissions
    
    
    14,981
    
    
    
    10,627Net sales
    
    
    7,264
    
    
    
    7,438Cost of sales:Cost of vault cash
    
    
    465
    
    
    
    982Other
    
    
    3,142
    
    
    
    3,716Gross profit
    
    
    3,657
    
    
    
    2,740Selling, general and administrative expense (including non-cash stock
compensation of $27 in 2009 and $158 in 2008)
    
    
    2,810
    
    
    
    2,909Operating income (loss)
    
    
    847
    
    
    
    (169
    )Interest expense and amortization of debt issuance costs
    
    
    1,288
    
    
    
    315Other (income) expense, net
    
    
    (7
    )
    
    
    (48
    )Loss on asset disposal
    
    
    41
    
    
    
    Change in fair value of warrants (see Note 2)
    
    
    185
    
    
    
    Net loss
    
    $
    (660
    )
    
    $
    (436
    )Weighted average common shares outstanding
    
    
    21,486
    
    
    
    17,213Basic and diluted loss per share
    
    $
    (.03
    )
    
    $
    (.03
    )
  3




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TRM Corporation
Consolidated Statement of Shareholders Equity
Three months ended March 31, 2009
(Unaudited)
(In thousands)
 AdditionalCommon stock
    
    
    paid-in
    
    
    AccumulatedShares
    
    
    Amounts
    
    
    capital
    
    
    deficit
    
    
    TotalBalances, December 31, 2008
    
    
    21,486
    
    
    $
    145,938
    
    
    $
    63
    
    
    $
    (149,219
    )
    
    $
    (3,218
    )Cumulative effect of reclassification of warrants
    
    
    
    
    
    
    (10,181
    )
    
    
    
    
    
    
    9,307
    
    
    
    (874
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (660
    )
    
    
    (660
    )Stock option expense
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Restricted stock expense
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    20Balances, March 31, 2009
    
    
    21,486
    
    
    $
    135,784
    
    
    $
    63
    
    
    $
    (140,572
    )
    
    $
    (4,725
    )
  4




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TRM Corporation
Consolidated Statements of Cash Flows
Three months ended March 31, 2009 and 2008
(Unaudited)
(In thousands)
 2009
    
    
    2008Operating activities:Net (loss)
    
    $
    (660
    )
    
    $
    (436
    )Adjustments to reconcile net (loss) to net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    979
    
    
    
    527Non-cash stock compensation
    
    
    27
    
    
    
    158Loss on asset disposal
    
    
    41
    
    
    
    Provision for doubtful accounts
    
    
    37
    
    
    
    87Change in warrant value
    
    
    185
    
    
    
    Changes in items affecting operations, net of effects of business acquisitions
and dispositions:Restricted cash
    
    
    1,200
    
    
    
    398Accounts receivable
    
    
    (127
    )
    
    
    409Inventories
    
    
    (234
    )
    
    
    100Prepaid expenses and other
    
    
    17
    
    
    
    (650
    )Accounts payable
    
    
    947
    
    
    
    5Accrued and other expenses
    
    
    (78
    )
    
    
    (1,276
    )Cash provided by (used in) operating activities
    
    
    2,334
    
    
    
    (679
    )Investing activities:Capital expenditures
    
    
    (406
    )
    
    
    (36
    )Acquisition of intangible and other assets
    
    
    16
    
    
    
    (250
    )Proceeds from sale of equipment
    
    
    1
    
    
    
    Cash used in investing activities
    
    
    (389
    )
    
    
    (286
    )Financing activities:Borrowings on notes payable
    
    
    
    
    
    
    1,087Repayment of notes payable
    
    
    (255
    )
    
    
    Change in restricted cash
    
    
    
    
    
    
    (2,100
    )Proceeds of TRM Inventory Funding Trust Note, net
    
    
    
    
    
    
    3,015Cash (used in) provided by financing activities
    
    
    (255
    )
    
    
    2,002Net increase in cash and cash equivalents
    
    
    1,690
    
    
    
    1,037Beginning cash and cash equivalents
    
    
    4,535
    
    
    
    3,859Ending cash and cash equivalents
    
    $
    6,225
    
    
    $
    4,896Supplemental cash flow information:Non-cash transactions:Issuance of warrants in connection with new debt
    
    $
    
    
    
    $
    928Payments:Cash paid for interest
    
    $
    13
    
    
    $
    101Cash paid for income taxes
    
    $
    
    
    
    $
    11
  5




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TRM Corporation
 Notes to Consolidated Financial Statements
As of March 31, 2009
(Unaudited)
 Basis of Presentation
 Basis of Presentation
  Description of Business
  Summary of Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
  6




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Cash and Restricted Cash
  Revenue Recognition, Discounts and Accounts Receivable
   Inventories
   March 31,
    
    
    December 31,2009
    
    
    2008Parts
    
    $
    247
    
    
    $
    141ATMs held for resale
    
    
    492
    
    
    
    364$
    739
    
    
    $
    505
 7




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Fixed Assets
  ATMs
    
    3-10 yearsComputer equipment
    
    2-5 yearsFurniture and fixtures
    
    5-7 years
  Goodwill and Intangible Assets
    Gross Carry
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    NetGoodwill
    
    $
    10,654
    
    
    $
    
    
    
    $
    10,654Intangible Assets
    
    
    2,702
    
    
    
    669
    
    
    
    2,033Total
    
    $
    13,356
    
    
    $
    669
    
    
    $
    12,687
 8




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Income Taxes
  Stock-Based Compensation
  Net Income (Loss) Per Share
  Recent Accounting Pronouncements
 Fair Value
Measurements
 9




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
    
    Level 1  unadjusted quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access as of the measurement date.
    
    Level 2  inputs other than quoted prices included within Level 1 that are
directly observable for the asset or liability or indirectly observable through
corroboration with observable market data.
    
    Level 3  unobservable inputs for the asset or liability only used when there
is little, if any, market activity for the asset or liability at the measurement date.
    Balance as of January 1, 2009
    
    $
    874Increase in fair value of warrants
    
    
    185Balance as of March 31, 2009
    
    $
    1,059
   Determination of the
Useful Life of Intangible Assets
 10




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Warrants
 Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entitys Own
Stock
 
    
    Amended and Restated Warrant to GSO Credit Opportunities Fund (Helios), L.P.,
dated April 18, 2008, exercisable for 857,109 shares of our common stock, which expires
November 20, 2013.
    
    Amended and Restated Warrant to GSO Special Situations Overseas Benefit Plan
Fund Ltd., dated April 18, 2008, exercisable for 98,306 shares of our common stock,
which expires November 20, 2013.
    
    Amended and Restated Warrant to GSO Special Situations Fund Ltd., dated April
18, 2008, exercisable for 1,047,577 shares of our common stock, which expires
November 20, 2013.
    
    Amended and Restated Warrant to GSO Domestic Capital Funding Partners LP.,
dated April 18, 2008, exercisable for 1,069,082 shares of our common stock, which
expires November 20, 2013.
    
    Warrant to LC Capital Master Fund, Ltd., dated February 8, 2008, exercisable
for 2,500,000 shares of our common stock, which expires February 8, 2015.
    
    Warrant to LC Capital Master Fund, Ltd. dated April 18, 2008, exercisable for
11,250,000 shares of our common stock, which expires April 18, 2015.
 11




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
    
    Warrant to Cadence Special Holdings II, LLC., dated April 18, 2008 ,
exercisable for 1,250,000 shares of our common stock, which expires April 18, 2015.
  3. Leases Receivables
  4. Notes Payable and Other Debt (in thousands):
 March 31,
    
    
    December 31,2009
    
    
    2008Lampe Note Facility
    
    
    11,000
    
    
    
    11,000Note payable to former Access to Money owner
    
    
    9,755
    
    
    
    9,755Notemachine
    
    
    1,125
    
    
    
    1,306Other debt
    
    
    1,530
    
    
    
    1,604$
    23,410
    
    
    $
    23,665
  12




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13




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Other Debt
  Vault Cash
    14




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5. Shareholders Equity
 Stock-based Compensation
  2009
    
    
    2008Option grants
    
    $
    7
    
    
    $
    9Restricted shares
    
    
    20
    
    
    
    149Total stock-based compensation expense
    
    $
    27
    
    
    $
    158
  Number of
    
    Weighted averageshares
    
    exercise priceOutstanding December 31, 2008
    
    
    373,500
    
    
    $
    2.59Options granted
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    Options cancelled
    
    
    (126,000
    )
    
    
    4.95Outstanding March 31, 2009
    
    
    247,500
    
    
    
    1.39
   15




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Shares
    
    Weighted average grant-date fair valueUnvested shares January 1, 2009
    
    
    1,410,000
    
    
    $
    0.16Restricted shares granted
    
    
    75,000
    
    
    
    0.16Restricted shares vested
    
    
    
    
    
    
    Restricted shares forfeited
    
    
    50,000
    
    
    
    0.15Unvested shares March 31, 2009
    
    
    1,435,000
    
    
    
    0.16
 Common Stock Warrants
     6. Provision for Income Taxes
  16




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7. Commitments and Contingent Liabilities
  8. Subsequent Event
  
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
 Cautionary Statements Regarding Forward-Looking Statements
    17




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Overview
    Company-owned program
 
    
    We own the ATM and are responsible for all of the operating expenses including
maintenance, cash management and loading, supplies, signage and telecommunication
services;
    
    We own the ATM and are responsible for all operational aspects of the unit except
for cash management and loading; and
    
    The merchant owns the ATM and we are responsible for all operational aspects.
 Merchant-owned program
 18




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Operational Metrics
  Transaction-based sales
 
    
    Withdrawal fees  fees we receive from a processor derived from a customer making an
ATM withdrawal. Withdrawal fees are sometimes referred to as surcharge or convenience
fees in the industry.
    
    Interchange fees  fees that an EFTN charges the customers financial institution
for routing a withdrawal transaction or an account balance inquiry. The interchange fee
is shared between the EFTN and us, as the ATM service provider, based on an agreement
between us and the EFTN. Interchange fees apply to all transactions on ATMs that we
own and ATMs owned by merchants and managed or serviced by us.
 Service and other sales
 Sales of ATM equipment
  Restructuring and Branding
   19




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Economic and Strategic Outlook
   Factors Impacting Comparability
  20




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Comparison of Results of Operations for the Three Months Ended March 31, 2009 and 2008
 Results of Operations (in thousands, except operating and percentage data)Three months ended
    
    
    Three months endedMarch 31, 2009
    
    
    March 31, 2008Amount
    
    
    %
    
    
    Amount
    
    
    %Transaction-based sales
    
    $
    20,781
    
    
    
    100.0
    %
    
    $
    16,424
    
    
    
    100.0
    %Less commissions
    
    
    14,981
    
    
    
    72.1
    
    
    
    10,627
    
    
    
    64.7Net transaction-based sales
    
    
    5,800
    
    
    
    27.9
    %
    
    
    5,797
    
    
    
    35.3
    %Service and other sales
    
    
    1,034
    
    
    
    
    
    
    
    1,183Sales of ATM equipment
    
    
    363
    
    
    
    
    
    
    
    458Branch build out
    
    
    66
    
    
    
    
    
    
    
    Net sales
    
    
    7,264
    
    
    
    
    
    
    
    7,438Cost of sales:Cost of vault cash
    
    
    465
    
    
    
    
    
    
    
    982Other
    
    
    3,142
    
    
    
    
    
    
    
    3,716Gross profit
    
    $
    3,657
    
    
    
    
    
    
    $
    2,740Operating data:Average number of transacting ATMs
    
    
    11,425
    
    
    
    
    
    
    
    8,117Withdrawal transactions
    
    
    8,691,180
    
    
    
    
    
    
    
    6,746,827Average withdrawals per ATM per month
    
    
    254
    
    
    
    
    
    
    
    277Average transaction-based sales per withdrawal transaction
    
    $
    2.39
    
    
    
    
    
    
    $
    2.43Average commission per withdrawal transaction
    
    $
    1.72
    
    
    
    
    
    
    $
    1.57Net transaction-based sales per withdrawal transaction
    
    $
    .67
    
    
    
    
    
    
    $
    .86
 Sales
   21




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Commissions
  Cost of Sales
      22




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Selling, General and Administrative Expense
     Operating Income (loss)
  Interest Expense, Amortization of Debt Issuance Costs, Loss on Early Extinguishment of Debt
  23




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Provision for Income Taxes
  Net Loss
  Liquidity and Capital Resources
     24




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Lampe Loan Facility
    
    $
    11,000Note payable to former Access to Money owner
    
    
    9,755Notemachine
    
    
    1,125Other debt
    
    
    1,530$
    23,410
 Off-Balance Sheet Arrangements
  25




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Critical Accounting Policies and Estimates
  New Accounting Standards
  
 ITEM 4T. CONTROLS AND PROCEDURES
   26




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PART II  OTHER INFORMATION
 
 ITEM 6. EXHIBITS
 31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or
15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 27




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SIGNATURE
  TRM CORPORATIONDate:  May 15, 2009
    By:
    /s/ Michael J. DolanMichael J. DolanChief Financial Officer 28