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UNITED STATES

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, 2011

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 No. 000-51478

 

 

TRX, INC.

(Exact name of registrant as specified in charter)

 

 

 

Georgia		58-2502748
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2970 Clairmont Road, Suite 300, Atlanta, Georgia		30329
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number, including area code: (404) 929-6100

 

 

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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		¨		Accelerated filer		¨
Non-accelerated filer		¨  (Do not check if a small reporting company)		Smaller reporting company		x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of the registrant’s common stock, $0.01 par value, outstanding at November 4, 2011 was 18,486,366 shares.

 

 

 

 

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TRX, INC.

FORM 10-Q

TABLE OF CONTENTS

 

				PAGE NO.
PART I: FINANCIAL INFORMATION
Item 1.		Financial Statements
		Unaudited Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010			1
		Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010			2
		Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010			3
		Notes to Unaudited Condensed Consolidated Financial Statements			4
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 4T.		Controls and Procedures			16
PART II: OTHER INFORMATION
Item 1A.		Risk Factors			16
Item 6.		Exhibits			17
Signatures					18

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TRX, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

		September 30, 2011				December 31, 2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	2,207			$	2,565
Trade accounts receivable, net			4,892				6,127
Prepaids and other			1,732				3,318
Total current assets			8,831				12,010
NONCURRENT ASSETS:
Property and equipment, net			4,484				5,743
Deferred income tax			252				264
Other assets, net			644				795
Total noncurrent assets			5,380				6,802
Total assets		$	14,211			$	18,812
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities		$	6,688			$	8,275
Customer deposits and deferred revenue			4,124				4,624
Current portion of long-term debt			2,000				583
Total current liabilities			12,812				13,482
NONCURRENT LIABILITIES:
Long-term debt—less current portion			—				4,200
Other long-term liabilities			1,694				1,759
Total noncurrent liabilities			1,694				5,959
Total liabilities			14,506				19,441
COMMITMENTS AND CONTINGENCIES (NOTE 1)
SHAREHOLDERS’ DEFICIT:
Common stock, $.01 par value; 100,000,000 shares authorized; 18,666,111 and 18,653,802 shares issued; and 18,478,580 and 18,466,271 shares outstanding at September 30, 2011 and December 31, 2010, respectively			186				186
Additional paid-in capital			95,302				95,416
Treasury stock, at cost; 187,531 shares			(2,294	)			(2,294	)
Cumulative translation adjustment			193				413
Accumulated deficit			(93,682	)			(94,350	)
Total shareholders’ deficit			(295	)			(629	)
Total liabilities and shareholders’ deficit		$	14,211			$	18,812

See notes to unaudited condensed consolidated financial statements.

 

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TRX, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
REVENUES:
Transaction and other revenues		$	12,784			$	13,603			$	37,586			$	42,202
Client reimbursements			90				126				295				357
Total revenues			12,874				13,729				37,881				42,559
EXPENSES:
Operating, excluding depreciation and amortization			8,167				8,207				24,001				25,026
Selling, general, and administrative, excluding depreciation and amortization			2,138				2,673				6,878				8,665
Technology development			693				868				2,366				2,648
Client reimbursements			90				126				295				357
Impairment of goodwill			84				69				236				235
Depreciation and amortization			812				993				2,809				3,073
Total expenses			11,984				12,936				36,585				40,004
OPERATING INCOME			890				793				1,296				2,555
INTEREST (EXPENSE) INCOME:
Interest income			14				—				24				7
Interest expense			(117	)			(167	)			(369	)			(520	)
Total interest expense, net			(103	)			(167	)			(345	)			(513	)
INCOME BEFORE INCOME TAXES			787				626				951				2,042
INCOME TAX EXPENSE (BENEFIT)			44				(171	)			283				359
NET INCOME		$	743			$	797			$	668			$	1,683
WEIGHTED AVERAGE NUMBER OF SHARES:
Basic			18,476				18,466				18,471				18,466
Diluted			18,737				18,586				18,596				18,577
BASIC AND DILUTED NET INCOME PER SHARE		$	0.04			$	0.04			$	0.04			$	0.09

See notes to unaudited condensed consolidated financial statements.

 

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TRX, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

		Nine Months Ended September 30,
		2011				2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	668			$	1,683
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,809				3,073
Impairment of goodwill			236				235
Provision for bad debts			(103	)			322
Stock compensation credit			(121	)			(273	)
Debt issuance cost amortization			24				61
Changes in assets and liabilities:
Trade accounts receivable			1,324				792
Prepaids and other assets			1,519				(499	)
Deferred taxes			39				19
Accounts payable and accrued liabilities			(1,812	)			(2,219	)
Customer deposits and deferred revenue			(507	)			(2,277	)
Total adjustments			3,408				(766	)
Net cash provided by operating activities			4,076				917
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(1,449	)			(2,174	)
Payment of contingent consideration			(240	)			(253	)
Net cash used in investing activities			(1,689	)			(2,427	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt			(583	)			(875	)
Borrowings from credit facility			8,900				13,700
Payments on credit facility			(11,100	)			(10,900	)
Proceeds from stock plans			7				6
Net cash (used in) provided by financing activities			(2,776	)			1,931
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			31				(284	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(358	)			137
CASH AND CASH EQUIVALENTS—Beginning of period			2,565				2,897
CASH AND CASH EQUIVALENTS—End of period		$	2,207			$	3,034

See notes to unaudited condensed consolidated financial statements.

 

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TRX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(In thousands, except share and per share data)

1. ACCOUNTING AND REPORTING POLICIES

TRX, Inc. (“TRX” or “we”) is a travel technology and data services provider, offering more than 20 software-as-a-service utilities for online booking, reservation processing, data intelligence, and process automation. We provide patented savings maximization solutions, extending spend management services to travel buyers all over the world. We complement all of this with a global workforce focused on travel process automation and reengineering. For the foreseeable future, we intend primarily to focus our efforts on the opportunities within the travel industry. We deliver our technology applications as a service over the Internet to travel agencies, corporations, travel suppliers, government agencies, credit card associations, credit card issuing banks, and third-party administrators. TRX is headquartered in Atlanta, Georgia with operations and associates in North America, Europe, and Asia. We are majority-owned by BCD Technology, S.A. (“BCD”).

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements of TRX and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements. As a result, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes included in our Form 10-K for the year ended December 31, 2010. Due to the seasonal fluctuations for the purchase of air travel by leisure and corporate travelers, as well as credit card volume related to corporate travel, interim results are not necessarily indicative of results for a full year.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items, considered necessary for a fair statement of results for the interim periods presented.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

Allowance for Doubtful Accounts—We maintain an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The balance was $180 and $426 as of September 30, 2011 and December 31, 2010, respectively.

Goodwill—As a result of declining market conditions from January 1, 2009 to March 31, 2009, and their related effect on current and anticipated volumes and pricing with clients, we determined that it was necessary to test goodwill for impairment as of March 31, 2009. As a result of our impairment test, we determined that goodwill was fully impaired and recorded a noncash impairment charge to goodwill of $37,305 during the first quarter of 2009. Subsequent to the goodwill impairment charge recorded in the first quarter of 2009, we continued to record goodwill related to earnout payments on a previous business acquisition transaction. Since there was no improvement in our financial outlook, we determined that such goodwill was also impaired in that same period. We may be required to record additional goodwill impairment charges for future earnout payments associated with this business acquisition transaction through the contractual term of December 31, 2011, as determined necessary.

The following table discloses the changes in the carrying amount of goodwill during the nine months ended September 30, 2011:

 

Balance, January 1		$	37,975
Accumulated impairment losses			(37,975	)
			—
Earnout on previous business acquisition transaction			236
Impairment charge			(236	)
Balance, September 30			38,211
Accumulated impairment losses			(38,211	)
		$	—

 

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Other Intangible Assets—Our intangible assets are included in other assets, net in the accompanying condensed consolidated balance sheets. A summary of our intangible assets as of September 30, 2011 and December 31, 2010 is as follows:

 

						September 30, 2011								December 31, 2010
		Useful Lives				Gross Carrying Value				Accumulated Amortization				Gross Carrying Value				Accumulated Amortization
Trademarks and patents			10 years			$	866			$	(433	)		$	866			$	(303	)

We expect to record amortization expense related to these intangible assets of approximately $43 during the remainder of 2011, $173 in each of the next two years and $43 in the year thereafter. We recorded related amortization expense of $43 and $130 during the three and nine months ended September 30, 2011, respectively, and $43 and $130 during the three and nine months ended September 30, 2010, respectively.

Impairment of Long-Lived Assets—We regularly evaluate whether events and circumstances have occurred that indicate whether the carrying amount of property and equipment and other intangible assets may warrant revision or may not be recoverable. When factors indicate that these long-lived assets should be evaluated for recoverability, we assess the recoverability by determining whether the carrying value of such long-lived assets will be recovered through the future undiscounted cash flows expected from the use of the asset and its eventual disposition. We believe all long-lived assets are recoverable as of September 30, 2011.

Fair Value Measurements—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Current GAAP outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures.

We currently do not have financial or non-financial assets and liabilities that are required to be measured at fair value on a recurring basis. Our goodwill is measured at fair value on a non-recurring basis. The Financial Accounting Standards Board (“FASB”) guidance establishes a valuation hierarchy for disclosure of the inputs used to measure fair value. During the three months ended September 30, 2011 and 2010, earnout payments of $84 and $69, respectively, and during the nine months ended September 30, 2011 and 2010, earnout payments of $236 and $235, respectively, related to a previous business acquisition transaction were impaired based on Level 3 measurements.

Revenue Recognition and Cost Deferral—We recognize revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists; (2) services have been performed; (3) the fee for services is fixed or determinable; and (4) collectability is reasonably assured. Generally, these criteria are considered to have been met as follows:

 

•

For transaction revenue, in which we perform ticketing, file-finishing, data consolidation and reporting, and customer care services, when the services are provided;

 

•

For short-term client-specific customizations, which do not generate direct on-going incremental transaction revenue, when the customization has been delivered to our customer; and

 

•

For implementation and set-up fees, which generate direct on-going incremental transaction revenue, over the life of the underlying transaction service agreement. Related costs are deferred and recognized as expenses over the life of the underlying transaction service agreement.

Client reimbursements received for direct costs paid to third parties and related expenses are characterized as revenue. Client reimbursements represent direct costs paid to third parties primarily for voice and data and items such as paper tickets.

Concentration of Credit Risk—A significant portion of our revenues is derived from a limited number of clients. Our top five clients accounted for approximately 59% and 67% of our total revenues in the three months ended September 30, 2011 and 2010, respectively, and approximately 63% and 67% of our total revenues in the nine months ended September 30, 2011 and 2010, respectively. Contracts with the major clients may be terminated by the client if we fail to meet certain performance criteria. Expedia, Inc. and its affiliates accounted for 38% and 43% of our total revenues in the three months ended September 30, 2011 and 2010, respectively, and approximately 39% and 43% in the nine months ended September 30, 2011 and 2010, respectively. American Express Travel Related Services Company, Inc. (“American Express”) accounted for 14% and 16% of our total revenues in the three months ended September 30, 2011 and 2010, respectively, and approximately 14% and 16% of our total revenues in the nine months ended September 30, 2011 and 2010, respectively. Most of our larger clients remit payments for our services 30 to 90 days in advance of our service delivery. Advance payments from our clients are recorded as customer deposits and deferred revenue until the service is performed. At September 30, 2011 and December 31, 2010, 2% and 5% of our accounts receivable related to American Express.

 

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Net Income per Share—Basic net income per share is computed by dividing reported income available to common shareholders by weighted average shares outstanding during the period. Income available to common shareholders is the same as reported net income for all periods presented.

Diluted net income per share is computed by dividing reported income available to common shareholders, adjusted for the earnings effect of potentially dilutive securities, by weighted average shares outstanding during the period and the impact of securities that, if exercised, would have a dilutive effect on earnings per share.

All common stock equivalents with an exercise price less than the average market share price for the period are assumed to have a dilutive effect on earnings per share, unless when reporting a net loss for the period. The following table sets forth the computation of basic and diluted net income per share for the three and nine months ended September 30, 2011 and 2010:

 

		Three Months Ended September 30, 2011												Three Months Ended September 30, 2010
		Net Income				Weighted Average Shares				Per Share				Net Income				Weighted Average Shares				Per Share
Basic net income per share		$	743				18,476			$	0.04			$	797				18,466			$	0.04
Effect of dilutive securities:
Options to acquire common stock			—				261				—				—				120				—
Diluted net income per share		$	743				18,737			$	0.04			$	797				18,586			$	0.04
		Nine Months Ended September 30, 2011												Nine Months Ended September 30, 2010
		Net Income				Weighted Average Shares				Per Share				Net Income				Weighted Average Shares				Per Share
Basic net income per share		$	668				18,471			$	0.04			$	1,683				18,466			$	0.09
Effect of dilutive securities:
Options to acquire common stock			—				125				—				—				111				—
Diluted net income per share		$	668				18,596			$	0.04			$	1,683				18,577			$	0.09

All outstanding stock options with an exercise price greater than the average market share price for the period are assumed to have an anti-dilutive effect on net income per share. Because of their anti-dilutive effect on the net income per share recorded in each of the periods presented, the diluted share base excludes incremental shares related to 1,557 outstanding employee stock options for the three and nine months ended September 30, 2011 and 1,644 employee stock options for both the three and nine months ended September 30, 2010.

Stock-Based Employee Compensation—We account for stock-based employee compensation under the Compensation—Stock Compensation Topic of the FASB Standards Codification. The weighted average grant-date fair value of the options granted during the three and nine months ended September 30, 2011, calculated using the Black-Scholes model, ranged from $0.47 to $0.87. The weighted average grant-date fair value of the options granted during the three and nine months ended September 30, 2010, calculated using the Black-Scholes model, ranged from $0.41 to $0.70.

The following assumptions were used for grants in the three and nine months ended September 30, 2011: dividend yield of zero, volatility of 132.89% to 192.6%, risk-free interest rate of 0.21% to 1.99%, and an expected life of 2.00 to 4.25 years. The following assumptions were used for grants in the three and nine months ended September 30, 2010: dividend yield of zero, volatility of 133.5% to 189.0%, risk-free interest rate of 0.86% to 2.17%, and an expected life of 2.00 to 4.25 years. Volatility is based on the volatility of our stock. We use historical data to estimate the expected life and employee termination assumptions in our accounting under the FASB’s guidance. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant over the expected life of the grant.

The following table summarizes stock options outstanding as of September 30, 2011, as well as activity during the nine months then ended:

 

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		Options				Weighted Average Exercise Price
Outstanding at January 1			2,339,000			$	3.04
Granted			302,000				0.77
Cancelled			(224,000	)			4.67
Outstanding at September 30			2,417,000			$	2.61

The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. At September 30, 2011, the aggregate intrinsic value of options outstanding was $461 with a weighted average remaining contractual term of 6.7 years; the aggregate intrinsic value of the 1,639,000 options exercisable was $203 with a weighted average exercise price of $3.52 and a weighted average remaining contractual term of 5.9 years; and the aggregate intrinsic value of the 2,160,798 options vested or expected to vest was $412 with a weighted average exercise price of $2.61 and a weighted average remaining contractual term of 6.3 years.

The following table summarizes unvested stock options outstanding as of September 30, 2011, as well as activity during the nine months then ended:

 

		Options				Weighted Average Grant- Date Fair Price
Outstanding at January 1			835,251			$	0.84
Granted			302,000				0.77
Cancelled			(53,000	)			0.96
Vested			(306,250	)			1.02
Outstanding at September 30			778,001			$	0.73

Compensation cost from nonvested stock granted to employees is recognized as expense using the straight-line method over the vesting period. As of September 30, 2011, total unrecognized compensation cost related to nonvested stock options was approximately $178. Approximately half of this cost is expected to be recognized over the next year, with the remainder primarily over the subsequent two years. For the three and nine months ended September 30, 2011, our total stock-based compensation credit was $(110) and $(121), respectively. For the three and nine months ended September 30, 2010, our total stock-based compensation credit was $(198) and $(273), respectively.

Comprehensive Income—Our comprehensive income includes net income and cumulative translation adjustments. The components of comprehensive income are as follows:

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Net income		$	743			$	797			$	668			$	1,683
Cumulative translation adjustment			(275	)			195				(220	)			92
Total comprehensive income		$	468			$	992			$	448			$	1,775

Statement of Cash Flows—Cash paid for interest was $398 and $493 for the nine months ended September 30, 2011 and 2010, respectively. Cash paid for income taxes was $107 for both the nine months ended September 30, 2011 and 2010, respectively. We had accrued capital expenditures of $43 and $0 at September 30, 2011 and 2010, respectively.

Segment Reporting—Operating segments are defined by the Segments Topic of the FASB Accounting Standards Codification. The Chief Executive Officer, our chief operating decision maker, currently operates one operating segment and the expense structure of the business is managed functionally. Our measure of segment profit is consolidated operating income.

Our revenue, aggregated by service offering, is as follows:

 

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		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Transaction processing		$	9,751			$	11,063			$	28,925			$	33,949
Data reporting			3,033				2,540				8,661				8,253
Transaction and other revenues			12,784				13,603				37,586				42,202
Client reimbursements			90				126				295				357
Total		$	12,874			$	13,729			$	37,881			$	42,559

The following is a geographic breakdown of revenues for the three and nine months ended September 30, 2011 and 2010, and a geographic breakdown of property and equipment, net as of September 30, 2011 and December 31, 2010:

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Revenues:
United States		$	8,366			$	10,186			$	25,152			$	30,971
Germany			3,536				2,418				9,754				8,090
Other International			972				1,125				2,975				3,498
Total		$	12,874			$	13,729			$	37,881			$	45,559

 

		At September 30, 2011				At December 31, 2010
Property and equipment, net:
United States		$	3,879			$	5,266
Germany			429				277
Other International			176				200
		$	4,484			$	5,743

Litigation—We are involved in a few claims incidental to our business. Management has provided for such legal claims when, in the opinion of management, a loss is probable and estimable. At September 30, 2011, no such legal proceedings, individually or in the aggregate, are material to the condensed consolidated financial statements.

Recent Accounting Pronouncements—In September 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-08. The provisions of ASU 2011-08 amend guidance on testing goodwill for impairment. The new guidance gives entities testing goodwill for impairment the option of performing a qualitative assessment before calculating the fair value of a reporting unit in step 1 of the goodwill impairment test. If entities determine, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. Otherwise, further testing would not be needed. ASU No. 2011-08 is effective for all entities for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We do not expect the adoption of this guidance to have a material effect on our financial position, cash flows or results of operations.

In June 2011, the FASB issued ASU No. 2011-05, which revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in Accounting Standards Codification (“ASC”) 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We do not expect the adoption of this guidance will have a material effect on our financial position, cash flows or results of operations.

In May 2011, the FASB issued ASU No. 2011-04. The provisions of ASU 2011-04 amend FASB ASC Topic 820, clarify the Board’s intent regarding application of existing fair value measurement guidance, and revise certain measurement and disclosure requirements to achieve convergence of U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments clarify the FASB’s intent about the application of the highest-and-best-use and also expand the information required to be disclosed with respect to fair value measurements categorized in Level 3 as well as items not measured at fair value but for which fair value must be

 

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disclosed. For public entities, the ASU is effective for interim and annual periods beginning after December 15, 2011. We do not expect the adoption of this guidance will have a material effect on our financial position, cash flows or results of operations.

2. DEBT

Debt consists of the following as of September 30, 2011 and December 31, 2010:

 

		Maturity Date				September 30, 2011				December 31, 2010
Note payable			April 2011			$	—			$	583
Revolver			June 2012				2,000				4,200
Total							2,000				4,783
Less current maturities							2,000				583
Long-term debt						$	—			$	4,200

Our note payable related to partial consideration for the acquisition of certain assets and the assumption of certain liabilities of Hi-Mark, LLC in 2007. Hi-Mark was principally owned by Kevin Austin, our Executive Vice President of TRAVELTRAX. Our quarterly principal payments were approximately $300 plus interest at a fixed annual rate of 8.0%. This note matured and was paid in April 2011.

Our credit agreement with Atlantic Capital Bank (“ACB”) provides for a senior secured revolving credit facility with aggregate principal commitments not to exceed $10,000, which includes a $2,000 letter of credit subfacility limit. Any outstanding letters of credit on this subfacility reduce the borrowing capacity of the credit agreement. A loan under the credit agreement may be a Base Rate loan or a LIBOR loan, at the option of TRX. Interest under the credit agreement accrues at an interest rate indexed to the prime rate as announced publicly by ACB from time to time (the “Base Rate”) or LIBOR (plus 1.75% for Base Rate loans and 3.00% for LIBOR loans) for the revolving credit facility, with a minimum borrowing rate of 4.25%. For letters of credit, the letter of credit fee is equal to the Applicable Rate (as defined in the credit agreement) times the daily amount available to be drawn under the letter of credit. Overdue amounts bear a fee of 2% per annum above the rate applicable to these amounts. We capitalized $215 of issuance cost related to this facility and our letter of credit, which is amortized as interest expense over the specific terms of the facility and letter of credit.

The credit agreement requires us to maintain (i) a ratio of consolidated funded indebtedness to consolidated EBITDA (as defined in the credit agreement, which may not be comparable to consolidated total debt or measures of GAAP profitability presented elsewhere in this document) of not more than 1.75 to 1.00 and (ii) a ratio of the remainder of consolidated EBITDA minus capital expenditures to the sum of interest expense for the period and debt principal payments required to be made in the next twelve months of not more than 1.40 to 1.00. The credit agreement also contains additional covenants which, among other things, require us to deliver to ACB specified financial information, including annual and quarterly financial information, and limit our ability to (or to permit any subsidiaries to), subject to various exceptions and limitations, (i) merge with other companies, (ii) create liens on our property, (iii) incur debt obligations, (iv) enter into transactions with affiliates, except on an arms-length basis, (v) dispose of property, or (vi) pay dividends. As of September 30, 2011, we were in compliance with all financial covenants in the credit agreement.

BCD Holdings N.V. (“BCD Holdings”), the parent of our majority shareholder, BCD, is the guarantor to our credit agreement. We pay BCD Holdings a guarantee fee of 250-350 basis points, depending on borrowing levels under the credit agreement.

Our financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Our ability to continue as a going concern is dependent on having sufficient liquidity for our operations. We are currently in compliance with all financial covenants in the credit agreement. As of September 30, 2011, we have borrowed $2,000 against the facility and there was a $1,500 letter of credit against this facility relating to the lease of our Atlanta office, leaving $6,500 that is currently available for borrowing. As of September 30, 2011, the interest rate on our outstanding borrowings was 4,25%. We expect to remain in compliance with all financial covenants over the remaining term of our revolving credit facility with ACB, however, we acknowledge that market conditions remain uncertain, and, as such, can provide no assurances that we will remain in compliance. We monitor our expected debt compliance and believe we would have time to further reduce our expenses and/or capital expenditures if needed to remain in compliance. If we are not successful in maintaining our debt compliance, ACB as lender is entitled to enforce the guarantee under our credit facility. Management believes that the existing cash on hand, cash flow from operations, availability under the credit agreement and through our ability to obtain future external financing will provide the needed liquidity to fund operations sufficient to continue as a going concern.

Our credit agreement with ACB matures June 30, 2012. Based on our favorable history of renewals and expected capital needs, we expect to renew the facility prior to its maturity.

 

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3. RELATED-PARTY TRANSACTIONS

BCD Travel USA, LLC (“BCD Travel”) is majority-owned by the parent of our majority shareholder, BCD Holdings. Effective January 1, 2011, the existing online booking services agreement between TRX Technology Services, L.P. (“TRX Technology”) and BCD Travel was extended to January 1, 2015 and updated certain pricing and other terms under agreement. . Effective October 31, 2011, the online booking services agreement was assigned by us to nuTravel Technology Solutions, LLC (“nuTravel”) as part of the sale transaction further described below. During the three and nine months ended September 30, 2011, we recognized transaction and other revenues from BCD Travel totaling $288 and $907, respectively. During the three and nine months ended September 30, 2010, we recognized transaction and other revenues from BCD Travel, totaling $351 and $1,077, respectively. At September 30, 2011 and December 31, 2010, respectively, $91 and $107 was receivable from BCD Travel.

Airtrade International, Inc. (“Vayama”) is majority-owned by the parent of our majority shareholder, BCD Holdings. The agreement between TRX Technologies India PVT Ltd. and Vayama, dated February 15, 2009 and amended on February 17, 2010, was entered into between the parties for travel management services and was effective January 28, 2010 through November 19, 2010. Effective June 1, 2011 the existing reservation processing services agreement between TRX Technology and Vayama automatically renewed for one year to May 31, 2012. During the three and nine months ended September 30, 2011, we recognized transaction and other revenues from Vayama totaling $15 and $47, respectively. During the three and nine months ended September 30, 2010, we recognized transaction and other revenues from Vayama totaling $302 and $758, respectively. At September 30, 2011 and December 31, 2010, respectively, $6 and $278 was receivable from Vayama.

Park ‘N Fly, Inc (“Park ‘N Fly”) is owned by the parent of our majority shareholder, BCD Holdings. TRX and Park ‘N Fly entered into an agreement, dated September 1, 2011, for referral services through TRX’s corporate travel self-booking tool. This referral services agreement has been assigned by us to nuTravel as part of the sale transaction further described below. During the nine months ended September 30, 2011, we recognized revenues from Park ‘N Fly totaling $3. At September 30, 2011 no amounts were receivable from Park ‘N Fly

4. SUBSEQUENT EVENTS

On November 3, 2011, TRX, its subsidiary TRX Technology Services, L.P., and nuTravel Technology Solutions, LLC (nuTravel) executed and closed an Asset Purchase Agreement effective October 31, 2011 (the “Agreement”) in which nuTravel acquired software, websites, certain customer agreements and intellectual property related to TRX’s corporate travel self-booking tool, RESX.

TRX shall receive consideration of up to $3.5 million as follows: Upon closing, TRX received $2.6 million, of which $200 was placed with a third party escrow agent to be held for up to two years and distributed in accordance with the Indemnity Escrow Agreement. Additionally, TRX has the ability to earn up to an additional $0.9 million on or before December 31, 2012, subject to the conversion of certain nonassignable contracts to nuTravel as provided for in the Agreement.

In conjunction with the execution of the Agreement, TRX and nuTravel also entered into a Transition Services Agreement (the “Services Agreement”). Under the terms of the Services Agreement, for a period not to exceed December 31, 2012, TRX will provide certain transition and technical services at an annualized rate of $1.8 million to support the continued operation of the RESX services and to facilitate the orderly and effective transition of the RESX services from TRX to nuTravel.

 

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis presents the factors that had a material effect on our results of operations during the three and nine months ended September 30, 2011 and 2010. Also discussed is our financial position as of September 30, 2011. You should read this discussion in conjunction with our unaudited condensed consolidated financial statements and the notes to those unaudited condensed consolidated financial statements included elsewhere in this report and the audited consolidated financial statements in our Annual Report on Form 10-K. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See “Cautionary Notice Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

TRX is a travel technology and data services provider, offering more than 20 software-as-a-service utilities for online booking, reservation processing, data intelligence, and process automation. We provide patented savings maximization solutions, extending spend management services to travel buyers all over the world. We complement all of this with a global workforce focused on travel process automation and reengineering. For the foreseeable future, we intend primarily to focus our efforts on the large opportunities within the travel industry. We deliver our technology applications as a service over the Internet to travel agencies, corporations, travel suppliers, government agencies, credit card associations, credit card issuing banks, and third-party administrators. TRX is headquartered in Atlanta, Georgia with operations and associates in North America, Europe, and Asia.

We are focused on transaction-based revenue from data intelligence, reservation processing and online booking technologies that provide economies of scale to our clients and to us. These transactions are an integral part of our clients’ daily operations. Transaction levels, and thus revenues, fluctuate with our clients’ business levels, which are impacted by market changes and seasonality. We supplement our transaction-based revenue with short-term projects to implement, customize or enhance our service delivery.

A significant portion of our revenue is derived from long-term contracts with several large clients. Our largest client, Expedia and its affiliates, accounted for 38% and 43% of our total revenues in the three months ended September 30, 2011 and 2010, respectively, and 39% and 43% of our total revenues in the nine months ended September 30, 2011 and 2010, respectively.

Expedia has been a client since its launch in 1996. In 2006, we replaced our existing contracts with Expedia with a Master Services Agreement (the “Expedia Agreement”). The Expedia Agreement is amended from time to time and now continues through December, 31 2012. We expect that 2011 revenues from Expedia will be approximately $7 million less than their 2010 level. We can give no assurance that we will retain any business from Expedia during the current contract term or beyond.

Our scale and process-reengineering expertise has allowed us to reduce our costs in several areas when measured on a per transaction basis, and we continue to take steps to reduce our cost structure in the normal course of business. We have established pricing models that provide volume-based discounts to share scale efficiencies with our clients to ensure long-term, mutually-beneficial relationships. As a result, our average revenue per transaction has generally declined over the last few years. We expect it to continue to decline in the future because of scale efficiencies, as well as trends in the travel processing supply chain that are putting negative pressure on our revenue per transaction.

Effective January 1, 2009, the BCD Agreement was entered into between the parties for online booking services. Effective January 1, 2011, the BCD Agreement was extended to January 1, 2015 and updated certain pricing and other terms under the BCD Agreement. Effective October 31, 2011, the BCD Agreement was assigned by us to nuTravel Technology Solutions, LLC (“nuTravel”) as part of the sale transaction further described below.

Industry factors impacting our operating results include the channel shifts toward online bookings and direct distribution, cost compression in the travel processing supply chain, use of corporate credit cards, reduction in airline seat capacity, changing and increasing access methods to reach supplier inventory, reduction in supplier commission rates, global distribution system incentive levels, and overall economic conditions. Our estimates of future results are primarily affected by assumptions of transaction volumes, pricing levels, our ability to efficiently scale with our clients, and client retention and acquisition. These anticipated results may be impacted by seasonality of the travel industry and credit card volumes related to travel.

On November 3, 2011, TRX, its subsidiary TRX Technology Services, L.P., and nuTravel Technology Solutions, LLC (nuTravel) executed and closed an Asset Purchase Agreement effective October 31, 2011 (the “Agreement”) in which nuTravel acquired software, websites, certain customer agreements and intellectual property related to TRX’s corporate travel self-booking tool, RESX.

TRX shall receive consideration of up to $3.5 million as follows: Upon closing, TRX received $2.6 million, of which $200 was placed with a third party escrow agent to be held for up to two years and distributed in accordance with the Indemnity

 

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Escrow Agreement. Additionally, TRX has the ability to earn up to an additional $0.9 million on or before December 31, 2012, subject to the conversion of certain nonassignable contracts to nuTravel as provided for in the Agreement.

In conjunction with the execution of the Agreement, TRX and nuTravel also entered into a Transition Services Agreement (the “Services Agreement”). Under the terms of the Services Agreement, for a period not to exceed December 31, 2012, TRX will provide certain transition and technical services at an annualized rate of $1.8 million to support the continued operation of the RESX services and to facilitate the orderly and effective transition of the RESX services from TRX to nuTravel.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates. There have been no material changes to our critical accounting policies and estimates from those described in our Form 10-K for the year ended December 31, 2010.

Results of Operations

Comparison of Three and Nine Months Ended September 30, 2011 and September 30, 2010

The following tables set forth comparative revenue and expense items by type, in dollars and as a percentage of transaction and other revenue, for the three and nine months ended September 30, 2011 and 2010, respectively:

 

		Three Months Ended September 30,
		2011								2010								Change
		(dollars in thousands)
Revenue:
Transaction processing		$	9,751				76	%		$	11,063				81	%		$	(1,312	)			(12	)%
Data intelligence			3,033				24				2,540				19				493				19
Transaction and other revenues			12,784				100	%			13,603				100	%			(819	)			(6	)%
Client reimbursements			90								126
Total revenues			12,874								13,729
Expenses:
Operating			8,167								8,207								(40	)			—
Selling, general, and administrative			2,138								2,673								(535	)			(20	)
Technology development			693								868								(175	)			(20	)
Client reimbursements			90								126								(36	)			(29	)
Impairment of goodwill			84								69								15				22
Depreciation and amortization			812								993								(181	)			18
Interest (expense) income:
Interest income			14								—								14				—
Interest expense			(117	)							(167	)							(50	)			(30	)
Income tax (provision) benefit			(44	)							171								215				126
Net income		$	743							$	797

 

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		Nine Months Ended September 30,
		2011								2010								Change
		(dollars in thousands)
Revenue:
Transaction processing		$	28,925				77	%		$	33,949				80	%		$	(5,024	)			(15	)%
Data intelligence			8,661				23				8,253				20				408				5
Transaction and other revenues			37,586				100	%			42,202				100	%			(4,616	)			(11	)%
Client reimbursements			295								357
Total revenues			37,881								42,559
Expenses:
Operating			24,001								25,026								(1,025	)			(4	)
Selling, general, and administrative			6,878								8,665								(1,787	)			(21	)
Technology development			2,366								2,648								(282	)			(11	)
Client reimbursements			295								357								(62	)			(17	)
Impairment of goodwill			236								235								1				—
Depreciation and amortization			2,809								3,073								(264	)			(9	)
Interest (expense) income:
Interest income			24								7								17				243
Interest expense			(369	)							(520	)							(151	)			(29	)
Income tax provision			(283	)							(359	)							24				7
Net income		$	668							$	1,683

Transaction processing revenues. The decrease for the three and nine months ended September 30, 2011 compared to the same period in the prior year was primarily due to the decreased scope of services and/or pricing provided to Expedia and American Express. Overall we expect the rate of decline in our transaction processing revenues to slow when compared to the past few years, and we expect our revenues per transaction to continue to decline because of trends in the travel processing supply chain that are putting negative pressure on our revenue per transaction.

Data intelligence revenues. The increase in data intelligence revenues for the three months ended September 30, 2011 compared to the same period in the prior year was primarily due to higher annual contractual transaction revenues as well as underlying core business growth. The increase in data intelligence revenues for the nine months ended September 30, 2011 compared to the same period in the prior year was also due to non-recurring project-based revenues. We expect growth in data intelligence revenues based on recent sales activity and market interest in these products and services.

Operating expenses. Operating expenses for the three months ended September 30, 2011 compared to the same period in the prior year were essentially flat. The decrease in operating expenses for the nine months ended September 30, 2011 compared to the same periods in the prior year was primarily due to reduced personnel-related costs.

Selling, general and administrative expenses. The decrease in selling, general and administrative expenses for the three and nine months ended September 30, 2011 compared to the same periods in the prior year was primarily due to reduced personnel-related costs and a credit to the bad debt provision in 2011 as a result of improved collections.

Technology development expenses. The decrease in technology development expense for the three and nine months ended September 30, 2011 compared to the same periods in the prior year was primarily due to reduced personnel-related costs.

Depreciation and amortization. The decrease in depreciation and amortization expense for the three and nine months ended September 30, 2011 and 2010 compared to the same periods in the prior year was primarily due to decreased capital spending.

Interest income. The increase for the three and nine months ended September 30, 2011 compared to the same periods in the prior year was primarily due to increased average cash balances available for investment.

Interest expense. The decrease for the three and nine months ended September 30, 2011 compared to the same periods in the prior year was primarily due to lower principal balance related to our Hi-Mark note payable, which matured and was paid in April 2011.

 

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Income tax provision. The decrease in the income tax provision for the three and nine months ended September 30, 2011 compared to the same periods in the prior year was primarily due to lower pretax income and a change in the mix of pretax income between our U.S. and international operations.

Liquidity and Capital Resources

We fund our ongoing operations primarily with cash from operating activities. The underlying drivers of cash from operating activities include cash receipts from the sale of our services and cash payments to our employees and service providers. Most of our larger clients remit payment for our services 30 to 90 days in advance of our service delivery. Advance payments from clients are recorded as customer deposits and deferred revenue until the service is performed.

At September 30, 2011, our principal sources of liquidity were cash and cash equivalents of $2.2 million and $6.5 million of availability under our revolving credit facility with ACB. We had $2.0 million of borrowings outstanding under our credit facility at September 30, 2011. Neither our access to nor the value of our cash equivalents has been negatively affected by the liquidity problems of financial institutions. Although we have been prudent in our strategy for our anticipated near-term liquidity needs, it is not possible to accurately predict how macroeconomic conditions may affect our financial position, results of operations or cash flows. Additional failures of financial and other institutions could impact our customers’ ability to pay us, reduce amounts available under our credit facility, cause losses to the extent cash amounts or the value of securities exceed government deposit insurance limits, and restrict our access to the equity and debt markets. A continuation of the turmoil in the capital and credit markets and the general economic downturn could adversely impact the availability, terms and/or pricing of financing if we need additional liquidity. We will experience liquidity problems if we are unable to obtain sufficient additional financing as our debt becomes due. Adverse economic conditions, increased competition, or other unfavorable events also could affect our liquidity.

Our credit agreement with ACB matures June 30, 2012. Based on our favorable history of renewals and expected capital needs, we expect to renew the facility prior to its maturity.

Net cash provided by operating activities was $4.1 million during the nine months ended September 30, 2011, compared to $0.9 million during the nine months ended September 30, 2010. The increase in cash provided was primarily due to the reduction in prepayments from a major customer, which adversely impacted operating cash flow in 2010, have been less extensive in 2011. In addition, during 2011 our operating cash flow benefited from improved collections and the return of a deposit related to the relocation of our Bangalore, India operations center.

Net cash used in investing activities was $1.7 million during the nine months ended September 30, 2011, compared to $2.4 million during the nine months ended September 30, 2010. The driver of our investing activities is our capital expenditures, which include costs associated with internally developed software, as well as infrastructure required to support and maintain our existing systems and opportunities to reduce costs. As of September 30, 2011, we had no material commitments related to capital expenditures. We expect our 2011 capital expenditures will be approximately five percent of revenues.

Net cash used in financing activities was $2.8 million during the nine months ended September 30, 2011, compared to net cash provided by financing activities of $1.9 million during the nine months ended September 30, 2010. The primary driver for 2011 was the repayment of our credit facility, which exceeded borrowings from the credit facility.

We believe that we will be able to meet our current and long-term liquidity and capital requirements, including fixed charges, through our cash flow from operations and other available sources of liquidity, including borrowings under the credit agreement and through our ability to obtain future external financing. We expect to continue to use a portion of our cash flows to fund our strategic capital expenditures, to invest in business opportunities and to meet our debt repayment obligations. Our financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Our ability to continue as a going concern is dependent on having sufficient liquidity for our operations. We believe that we are able to maintain a sufficient level of liquidity for our domestic operations and commitments without repatriation of the cash held by our foreign subsidiaries. We are currently in compliance with all financial covenants in the credit agreement. As of September 30, 2011, we have borrowed $2.0 million against the facility and there was a $1.5 million letter of credit against this facility relating to the lease of our Atlanta office, leaving $6.5 million that is currently available for borrowing. As of September 30, 2011, the interest rate on our outstanding borrowings was 4.25%. We expect to remain in compliance with all financial covenants over the remaining term of our revolving credit facility with ACB, however, we acknowledge that market conditions remain uncertain, and, as such, can provide no assurances that we will remain in compliance. We monitor our expected debt compliance and believe we would have time to further reduce our expenses and/or capital expenditures if needed to remain in compliance. If we are not successful in maintaining our debt compliance, ACB as lender is entitled to enforce the guarantee under our credit facility. Management believes that the existing cash on hand, availability under the credit agreement and cash flow from operations will provide the needed liquidity to fund operations sufficient to continue as a going concern. The credit agreement requires us to maintain (i) a ratio of consolidated funded indebtedness to consolidated EBITDA (as

 

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defined in the credit agreement, which may not be comparable to consolidated total debt or measures of GAAP profitability presented elsewhere in this document) of not more than 1.75 to 1.00 and (ii) a ratio of the remainder of consolidated EBITDA minus capital expenditures to the sum of interest expense for the period and debt principal payments required to be made in the next twelve months of not more than 1.40 to 1.00. The credit agreement also contains additional covenants which, among other things, require us to deliver to ACB specified financial information, including annual and quarterly financial information, and limit our ability to (or to permit any subsidiaries to), subject to various exceptions and limitations, (i) merge with other companies, (ii) create liens on our property, (iii) incur debt obligations, (iv) enter into transactions with affiliates, except on an arms-length basis, (v) dispose of property, or (vi) pay dividends.

Seasonality

Our business experiences seasonal fluctuations, reflecting seasonal trends for the purchase of air travel by both leisure and corporate travelers as well as credit card volume related to corporate travel. For example, traditional leisure air travel bookings are higher in the first two calendar quarters of the year in anticipation of spring and summer vacations and holiday periods. Corporate travel air bookings and credit card spending levels are generally higher in the first and third calendar quarters of the year. Business and consumer travel bookings typically decline during the fourth quarter of each calendar year. Accordingly, our fourth calendar quarter generally reflects lower revenues as compared to the first three calendar quarters.

Inflation and Changing Prices

We do not believe that inflation and changing prices have materially impacted our results of operations during the past two years.

Cautionary Notice Regarding Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933 (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), or in releases made by the Securities and Exchange Commission (the “SEC”), all as may be amended from time to time. Statements contained in this quarterly report that are not historical facts may be forward-looking statements within the meaning of the PSLRA. You can identify forward-looking statements as those that are not historical in nature, particularly those that use terminology such as “may,” “should,” “expect,” “anticipate,” “contemplate,” “estimate,” “believe,” “plan,” “project,” “predict,” “potential” or “continue,” or the negative of these, or similar terms.

 

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Any such forward-looking statements reflect our beliefs and assumptions and are based on information currently available to us. Forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. We caution investors that any forward-looking statements we make are not guarantees or indicative of future performance.

In evaluating these forward-looking statements, you should consider the following factors, as well as others set forth in Item 1A under the caption “Risk Factors” included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC and as are detailed from time to time in other reports we file with the SEC, any or all of which may cause our actual results to differ materially from any forward-looking statement:

 

•

the loss of current key clients or the inability to obtain new clients;

 

•

volatility in the number of transactions we service;

 

•

failure or interruptions of our software, hardware or other systems;

 

•

industry declines and other competitive pressures; and

 

•

our ability to control costs and implement measures designed to enhance operating efficiencies.

Any subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth or referred to above, as well as the risk factors contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2010 . Except as required by law, we disclaim any obligation to update such statements or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

 

Item 4T.

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, including our principal executive officer and principal financial officer, concluded an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2011. Our evaluation tested controls and other procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures. Based on our evaluation, as of September 30, 2011, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective.

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15(d)-15(f) of the Exchange Act, identified in connection with the evaluation that occurred during the third quarter of fiscal 2011 that has materially affected our internal control over financial reporting.

PART II – OTHER INFORMATION

 

Item 1A.

Risk Factors

There have been no material changes to the risk factors as presented in our annual report on Form 10-K, filed on March 1, 2011, under Item 1A, “Risk Factors.”

 

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Item 6.

Exhibits

 

Exhibit No.		Description
10.1		Amended and Restated Statement of Work #7 to the Amended and Restated Master Service Agreement for Application Service Provider between TRX, Inc. and American Express Travel Related Services Company, Inc., dated August 17, 2011. †*
10.2		Referral Source Agreement between TRX, Inc. and Park ‘N Fly, Inc., dated September 6, 2011. †*
10.3		Amendment #2 to the RESX Distributor Agreement between TRX Technology Services, L.P. and BCD Travel USA LLC, effective July 1, 2011. †*
10.4		Amendment #4 to Services Agreement between TRX Fulfillment Services, LLC. and American Airlines, Inc., effective September 1, 2011. †*
10.5		Amendment #5 to Services Agreement between TRX Fulfillment Services, LLC. and American Airlines, Inc., effective September 28, 2011. †*
10.6		Amendment #2 to the Amendment and Restated Statement of Work for Contact Center Services between TRX, Inc. and Expedia, Inc., effective March 1, 2011. †*
31.1		Certification of H. Shane Hammond, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †
31.2		Certification of David D. Cathcart, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †
32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †
101		The following financial information from TRX, Inc’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2011 and 2011, (iii) Condensed Consolidated Cash Flows Statements (Unaudited) for the nine months ended September 30, 2011 and 2010, and (iv) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. †

 

†	Filed herewith.

 

*	Confidential treatment requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

 

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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.

 

				TRX, INC.
Dated: November 10, 2011				By:		/s/    David D. Cathcart
						David D. Cathcart
						Chief Financial Officer (principal financial and accounting officer)

 

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