##### Table of Contents





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 March 31, 2008

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.)



|                                           |  |           
|------------------------------------------ |  | ----------
|6 West Druid Hills Drive, 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 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 April 29, 2008 was 18,341,454 shares.









---

##### Table of Contents

TRX, INC.

FORM 10-Q

TABLE OF CONTENTS



|          |  |                                                                                                    |  |        
|--------- |  | -------------------------------------------------------------------------------------------------- |  | -------
|          |  |                                                                                                    |  | PAGENO.
|          |  |                                                                                                   
|PART I:   |  | FINANCIAL INFORMATION                                                                              |  |        
|          |  |                                                                                                   
|Item 1.   |  | Financial Statements                                                                               |  |        
|          |  |                                                                                                   
|          |  | Unaudited Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007                   |  | 3      
|          |  |                                                                                                   
|          |  | Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2007 |  | 4      
|          |  |                                                                                                   
|          |  | Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 |  | 5      
|          |  |                                                                                                   
|          |  | Notes to Unaudited Consolidated Financial Statements                                               |  | 6      
|          |  |                                                                                                   
|Item 2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations              |  | 12     
|          |  |                                                                                                   
|Item 4.   |  | Controls and Procedures                                                                            |  | 16     
|          |  |                                                                                                   
|PART II:  |  | OTHER INFORMATION                                                                                  |  |        
|          |  |                                                                                                   
|Item 5.   |  | Other Information                                                                                  |  | 17     
|          |  |                                                                                                   
|Item 6.   |  | Exhibits                                                                                           |  | 17     
|          | 
|Signature |  | 18                                                                                                



2



---

##### Table of Contents

PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

TRX, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                                         |  | March 31,2008 |         |   | December 31,2007 |  
|ASSETS                                                                                                                                                                                                   |  |               |         |   |                  |   |         |  
|CURRENT ASSETS:                                                                                                                                                                                          |  |               |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                                                |  | $             | 5,061   |   |                  | $ | 8,879   |  
|Settlement assets                                                                                                                                                                                        |  |               | 9,720   |   |                  |   | 60      |  
|Trade accounts receivable, net                                                                                                                                                                           |  |               | 11,785  |   |                  |   | 16,181  |  
|Prepaids and other                                                                                                                                                                                       |  |               | 3,304   |   |                  |   | 2,786   |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total current assets                                                                                                                                                                                     |  |               | 29,870  |   |                  |   | 27,906  |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|NONCURRENT ASSETS:                                                                                                                                                                                       |  |               |         |   |                  |   |         |  
|Property and equipment, net                                                                                                                                                                              |  |               | 19,703  |   |                  |   | 19,496  |  
|Goodwill                                                                                                                                                                                                 |  |               | 36,993  |   |                  |   | 36,981  |  
|Other assets, net                                                                                                                                                                                        |  |               | 3,082   |   |                  |   | 3,406   |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total noncurrent assets                                                                                                                                                                                  |  |               | 59,778  |   |                  |   | 59,883  |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                                                                                             |  | $             | 89,648  |   |                  | $ | 87,789  |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                     |  |               |         |   |                  |   |         |  
|CURRENT LIABILITIES:                                                                                                                                                                                     |  |               |         |   |                  |   |         |  
|Accounts payable and accrued liabilities                                                                                                                                                                 |  | $             | 16,418  |   |                  | $ | 22,966  |  
|Customer deposits and deferred revenue                                                                                                                                                                   |  |               | 24,133  |   |                  |   | 21,859  |  
|Settlement obligations                                                                                                                                                                                   |  |               | 9,720   |   |                  |   | 60      |  
|Current portion of long-term debt                                                                                                                                                                        |  |               | 2,333   |   |                  |   | 2,333   |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total current liabilities                                                                                                                                                                                |  |               | 52,604  |   |                  |   | 47,218  |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|NONCURRENT LIABILITIES:                                                                                                                                                                                  |  |               |         |   |                  |   |         |  
|Long-term debtless current portion                                                                                                                                                                      |  |               | 2,333   |   |                  |   | 2,917   |  
|Other long-term liabilities                                                                                                                                                                              |  |               | 778     |   |                  |   | 635     |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total noncurrent liabilities                                                                                                                                                                             |  |               | 3,111   |   |                  |   | 3,552   |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                                                        |  |               | 55,715  |   |                  |   | 50,770  |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|COMMITMENTS AND CONTINGENCIES (NOTE 1)                                                                                                                                                                   |  |               |         |   |                  |   |         |  
|SHAREHOLDERS EQUITY:                                                                                                                                                                                    |  |               |         |   |                  |   |         |  
|Common stock, $.01 par value; 100,000,000 shares authorized; 18,507,913 and 18,492,332 shares issued; 18,320,382 and 18,304,801 shares
outstanding at March 31, 2008 and December 31, 2007, respectively |  |               | 184     |   |                  |   | 184     |  
|Additional paid-in capital                                                                                                                                                                               |  |               | 95,648  |   |                  |   | 95,519  |  
|Treasury stock, at cost; 187,531 shares                                                                                                                                                                  |  |               | (2,294  | ) |                  |   | (2,294  | )
|Cumulative translation adjustment                                                                                                                                                                        |  |               | 310     |   |                  |   | 142     |  
|Accumulated deficit                                                                                                                                                                                      |  |               | (59,915 | ) |                  |   | (56,532 | )
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total shareholders equity                                                                                                                                                                               |  |               | 33,933  |   |                  |   | 37,019  |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total liabilities and shareholders equity                                                                                                                                                               |  | $             | 89,648  |   |                  | $ | 87,789  |  
|                                                                                                                                                                                                         |  |               |         |   |                  |   |         |  

See notes to unaudited consolidated financial statements.



3



---

##### Table of Contents

TRX, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



|                                                                              |  |                             |        |   |      |   |        |  
|----------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                              |  | Three Months EndedMarch 31, |       
|                                                                              |  | 2008                        |        |   | 2007 |  
|REVENUES:                                                                     |  |                             |        |   |      |   |        |  
|Transaction and other revenues                                                |  | $                           | 21,875 |   |      | $ | 25,253 |  
|Client reimbursements                                                         |  |                             | 127    |   |      |   | 622    |  
|                                                                              |  |                             |        |   |      |   |        |  
|Total revenues                                                                |  |                             | 22,002 |   |      |   | 25,875 |  
|                                                                              |  |                             |        |   |      |   |        |  
|EXPENSES:                                                                     |  |                             |        |   |      |   |        |  
|Operating, excluding depreciation and amortization                            |  |                             | 14,220 |   |      |   | 14,772 |  
|Selling, general, and administrative, excluding depreciation and amortization |  |                             | 4,451  |   |      |   | 4,261  |  
|Technology development                                                        |  |                             | 3,870  |   |      |   | 3,021  |  
|Client reimbursements                                                         |  |                             | 127    |   |      |   | 622    |  
|Depreciation and amortization                                                 |  |                             | 2,669  |   |      |   | 2,788  |  
|                                                                              |  |                             |        |   |      |   |        |  
|Total expenses                                                                |  |                             | 25,337 |   |      |   | 25,464 |  
|                                                                              |  |                             |        |   |      |   |        |  
|OPERATING (LOSS) INCOME                                                       |  |                             | (3,335 | ) |      |   | 411    |  
|INTEREST (EXPENSE) INCOME:                                                    |  |                             |        |   |      |   |        |  
|Interest income                                                               |  |                             | 49     |   |      |   | 152    |  
|Interest expense                                                              |  |                             | (97    | ) |      |   | (140   | )
|                                                                              |  |                             |        |   |      |   |        |  
|Total interest (expense) income, net                                          |  |                             | (48    | ) |      |   | 12     |  
|                                                                              |  |                             |        |   |      |   |        |  
|NET (LOSS) INCOME                                                             |  | $                           | (3,383 | ) |      | $ | 423    |  
|                                                                              |  |                             |        |   |      |   |        |  
|WEIGHTED AVERAGE NUMBER OF SHARES:                                            |  |                             |        |   |      |   |        |  
|Basic                                                                         |  |                             | 18,320 |   |      |   | 18,214 |  
|                                                                              |  |                             |        |   |      |   |        |  
|Diluted                                                                       |  |                             | 18,320 |   |      |   | 18,220 |  
|                                                                              |  |                             |        |   |      |   |        |  
|Basic and diluted net (loss) income per share                                 |  | $                           | (0.18  | ) |      | $ | 0.02   |  
|                                                                              |  |                             |        |   |      |   |        |  

See notes to unaudited consolidated financial statements.



4



---

##### Table of Contents

TRX, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                         |  |                             |        |   |      |   |         |  
|---------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                         |  | Three Months EndedMarch 31, |       
|                                                                                         |  | 2008                        |        |   | 2007 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                             |        |   |      |   |         |  
|Net (loss) income                                                                        |  | $                           | (3,383 | ) |      | $ | 423     |  
|                                                                                         |  |                             |        |   |      |   |         |  
|Adjustments to reconcile net (loss) income to net cash provided by operating activities: |  |                             |        |   |      |   |         |  
|Depreciation and amortization                                                            |  |                             | 2,669  |   |      |   | 2,788   |  
|Provision for bad debts                                                                  |  |                             | 32     |   |      |   | (62     | )
|Stock compensation expense                                                               |  |                             | 100    |   |      |   | 215     |  
|Changes in assets and liabilities, net of effects of acquisitions:                       |  |                             |        |   |      |   |         |  
|Trade accounts receivable                                                                |  |                             | 4,496  |   |      |   | (302    | )
|Prepaids and other assets                                                                |  |                             | 253    |   |      |   | 239     |  
|Accounts payable and accrued liabilities                                                 |  |                             | (7,713 | ) |      |   | 138     |  
|Customer deposits and deferred revenue                                                   |  |                             | 2,233  |   |      |   | (3,999  | )
|                                                                                         |  |                             |        |   |      |   |         |  
|Total adjustments                                                                        |  |                             | 2,070  |   |      |   | (983    | )
|                                                                                         |  |                             |        |   |      |   |         |  
|Net cash used in operating activities                                                    |  |                             | (1,313 | ) |      |   | (560    | )
|                                                                                         |  |                             |        |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                             |        |   |      |   |         |  
|Capital expenditures                                                                     |  |                             | (2,165 | ) |      |   | (1,368  | )
|Acquisitions, net of cash acquired                                                       |  |                             |       |   |      |   | (10,049 | )
|                                                                                         |  |                             |        |   |      |   |         |  
|Net cash used in investing activities                                                    |  |                             | (2,165 | ) |      |   | (11,417 | )
|                                                                                         |  |                             |        |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |                             |        |   |      |   |         |  
|Repayments of long-term debt                                                             |  |                             | (584   | ) |      |   | (64     | )
|Proceeds from stock plans                                                                |  |                             | 25     |   |      |   | 24      |  
|                                                                                         |  |                             |        |   |      |   |         |  
|Net cash used in financing activities                                                    |  |                             | (559   | ) |      |   | (40     | )
|                                                                                         |  |                             |        |   |      |   |         |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                             |  |                             | 219    |   |      |   | 45      |  
|                                                                                         |  |                             |        |   |      |   |         |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                |  |                             | (3,818 | ) |      |   | (11,972 | )
|CASH AND CASH EQUIVALENTSBeginning of period                                            |  |                             | 8,879  |   |      |   | 24,444  |  
|                                                                                         |  |                             |        |   |      |   |         |  
|CASH AND CASH EQUIVALENTSEnd of period                                                  |  | $                           | 5,061  |   |      | $ | 12,472  |  
|                                                                                         |  |                             |        |   |      |   |         |  

See notes to unaudited consolidated financial statements.



5



---

##### Table of Contents

TRX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(In thousands, except share data)

1. ACCOUNTING AND REPORTING POLICIES

TRX, Inc. and its subsidiaries (we, us, our or TRX) is a global technology company. We develop and
host software applications to automate manual processes and track transaction data, enabling our clients to optimize performance and control costs. We are a leading provider to the travel industry and expect to eventually include growth in
industries beyond travel, such as financial services and health care. For the foreseeable future, we intend 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 majority-owned by BCD Technology, S.A. (BCD). The accompanying consolidated financial statements include the accounts of TRX, Inc. and its subsidiaries for the periods presented.

Basis of PresentationThe accompanying unaudited consolidated financial statements of TRX, Inc. 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 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, 2007. 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
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 will differ from those estimates.

Settlement Assets and Settlement Liabilities We provide back office processing services for a client. We recognize fees associated
with such services as revenues when services are rendered. We collect cash relating to the sale of travel on behalf of our client, and remit such cash to the providers of related travel services (such as airline, hotel, etc.). We have a legal
obligation to settle these transactions on behalf of our client each month, and therefore classify both the obligation and related asset as current on the accompanying consolidated balance sheet. During 2007, our client transitioned the majority of
back office processing in-house, which significantly reduced the recorded amounts of settlement assets and settlement liabilities at December 31, 2007. Additionally, during the first quarter of 2008, the entity that acts as the settlement agent
between travel processors and the suppliers required our Germany operation to post a letter of credit or cash of $9.7 million, based on our estimated annual gross volumes processed. As a result, our client deposited with us this required restricted
cash balance. Because this $9.7 million cash held at March 31, 2008 is restricted for the purposes of funding the settlement agent if needed, we have included both the cash balance and the offsetting liability to our client in settlement assets
and settlement liabilities, respectively.

Allowance for Doubtful AccountsWe maintain an allowance for doubtful
accounts to reserve for potentially uncollectible receivables. The balance was $275 and $229 as of March 31, 2008 and December 31, 2007, respectively.

GoodwillThe following table discloses the changes in the carrying amount of goodwill during the three months ended March 31, 2008:



|                                        |  |   |       
|--------------------------------------- |  | - | ------
|Balance, January 1                      |  | $ | 36,981
|Earnout on Travel Analytics acquisition |  |   | 12    
|                                        |  |   |       
|Balance, March 31                       |  | $ | 36,993
|                                        |  |   |       

Other Intangible AssetsA summary of our intangible assets as of March 31,
2008 and December 31, 2007 is as follows:



|                       |  |              |  |                    |       |                         |                   |      |                    |  |                         |       |  |   |      |  
|---------------------- |  | ------------ |  | ------------------ | ----- | ----------------------- | ----------------- | ---- | ------------------ |  | ----------------------- | ----- |  | - | ---- | -
|                       |  |              |  | March 31, 2008     |       |                         | December 31, 2007 |     
|                       |  | Useful Lives |  | GrossCarryingValue |       | AccumulatedAmortization |                   |      | GrossCarryingValue |  | AccumulatedAmortization |      
|Customer relationships |  | 6  8 years  |  | $                  | 615   |                         | $                 | (324 | )                  |  | $                       | 615   |  | $ | (309 | )
|Trademarks and patents |  | 10 years     |  |                    | 2,062 |                         |                   | (276 | )                  |  |                         | 2,062 |  |   | (224 | )
|Non-compete agreements |  | 4 5 years   |  |                    | 382   |                         |                   | (114 | )                  |  |                         | 382   |  |   | (93  | )
|                       |  |              |  |                    |       |                         |                   |      |                    |  |                         |       |  |   |      |  
|                       |  |              |  | $                  | 3,059 |                         | $                 | (714 | )                  |  | $                       | 3,059 |  |   | (626 | )
|                       |  |              |  |                    |       |                         |                   |      |                    |  |                         |       |  |   |      |  



6



---

##### Table of Contents

We recorded related amortization expense of $88 during each of the three months ended March 31, 2008
and 2007, respectively.

Revenue Recognition and Cost Deferral We recognize revenue in accordance with Emerging Issues
Task Force (EITF) Issue 00-21, Accounting for Revenue Arrangements with Multiple Deliverables when certain other consulting or other services are combined with our transaction processing revenues and Securities
and Exchange Commission (SEC) Staff Accounting Bulletin No. 104, Revenue Recognition, 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) collectibility 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On
July 13, 2007, TRX Data Services, Inc. (TRX Data Services), a wholly-owned subsidiary of TRX, and Citibank, N.A. (Citibank) executed an amendment to the Master Services Agreement dated February 1, 2002, as amended
(the Amendment). The Amendment extends the scheduled expiration date of the Master Services Agreement from January 13, 2009 to December 31, 2010. The primary purpose of the Amendment is for TRX Data Services to sell a limited
perpetual license of certain source code to Citibank in order for Citibank to perform certain services in-house that have previously been hosted by TRX Data Services. TRX Data Services continues to perform maintenance and project services for
Citibank.

The Amendment also provided that we would continue to provide the hosting services historically provided to Citibank until such
time as the sale of the perpetual license occurs. The sale price for the perpetual license is $4.5 million and the sale was to occur once the requisite activities to assist Citibank in readying its information technology environment to support
the technology had been performed by us and accepted by Citibank. Citibank notified us of acceptance, and the license sale occurred on April 30, 2008. In addition to the license sale, Citibank will also pay us approximately $1.4 million
for certain assets that we have purchased in the past for Citibanks benefit, which are essential to the functionality of the technology.

The sale of the license, the compensation for the assets referred to above, and the hosting services are all elements of the Amendment. Revenue recognition for these elements is governed by American Institute of Certified Public Accountants
(AICPA) Statement of Position (SOP) 97-2, Software Revenue Recognition (SOP 97-2). In accordance with SOP 97-2, as there was no vendor specific objective evidence of the fair value of the
perpetual license at the effective date of the Amendment, revenue associated with the hosting services was deferred until April 30, 2008, when the sale of the perpetual license occurred. The amount of revenue deferred for the hosting
services is $10.0 million and $6.5 million as of March 31, 2008 and December 31, 2007, respectively, and such amounts will be recognized as revenue during the second quarter of 2008. All costs associated with the hosting services are
being expensed as incurred.

We apply EITF Issue 01-14, Income Statement Characterization of Reimbursements Received for Out
of Pocket Expenses Incurred, which requires that client reimbursements received for direct costs paid to third parties and related expenses be 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 73% and 80% of our total revenues in the three months ended March 31, 2008 and 2007, respectively. Contracts with our major
clients may be terminated by the applicable client if we fail to meet certain performance criteria. Expedia, Inc. (Expedia) and its affiliates accounted for 44% of our revenues in the three months ended March 31, 2008. Expedia and
its affiliates accounted for 41% of our revenues in the three months ended March 31, 2007. Citibank accounted for 5% and 18% of our revenues during the three months ended March 31, 2008 and 2007, respectively. At March 31, 2008 and
December 31, 2007, 18% and 15%, respectively, of our accounts receivable were related to Citibank. We expect a further decline in the concentration of Citibank revenue as a result of the Amendment discussed above in Revenue Recognition
and Cost Deferral.

Earnings per ShareBasic earnings 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 earnings per share is computed by dividing reported earnings 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.



7



---

##### Table of Contents

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. The following table sets forth the computation of basic and diluted net income per share:



|                                    |  |                                  |        |   |                                  |        |           |   |       |            |  |                       |     |           |        |  |   |     
|----------------------------------- |  | -------------------------------- | ------ | - | -------------------------------- | ------ | --------- | - | ----- | ---------- |  | --------------------- | --- | --------- | ------ |  | - | ----
|                                    |  | Three Months EndedMarch 31, 2008 |        |   | Three Months EndedMarch 31, 2007
|                                    |  | Net loss                         |        |   | WeightedAverageShares            |        | Per Share |   |       | Net Income |  | WeightedAverageShares |     | Per Share
|Basic net (loss) income per share   |  | $                                | (3,383 | ) |                                  | 18,320 |           | $ | (0.18 | )          |  | $                     | 423 |           | 18,214 |  | $ | 0.02
|Effect of dilutive securities:      |  |                                  |        |   |                                  |        |           |   |       |            |  |                       |     |           |        |  |   |     
|Options to acquire common stock     |  |                                  |       |   |                                  |       |           |   |      |            |  |                       |    |           | 6      |  |   |    
|                                    |  |                                  |        |   |                                  |        |           |   |       |            |  |                       |     |           |        |  |   |     
|Diluted net (loss) income per share |  | $                                | (3,383 | ) |                                  | 18,320 |           | $ | (0.18 | )          |  | $                     | 423 |           | 18,220 |  | $ | 0.02
|                                    |  |                                  |        |   |                                  |        |           |   |       |            |  |                       |     |           |        |  |   |     

Because of their anti-dilutive effect on the income per share recorded in each of the periods
presented, the diluted share base excludes incremental shares related to 1,929 and 1,785 employee stock options for the three months ended March 31, 2008 and 2007, respectively.

Stock-Based Employee Compensation We account for stock-based employee compensation under Statement of Financial Accounting Standards
(SFAS) Statement No. 123 (revised 2004) (SFAS 123(R)) entitled, Share-Based Payment. This standard requires the recognition of compensation expense for the grant-date fair value of all share-based
awards granted to employees. SFAS 123(R) applies to new awards and to awards modified, repurchased, or cancelled after January 1, 2006, as well as to the unvested portion of awards outstanding as of January 1, 2006. We adopted SFAS 123(R)
by using the modified prospective transition method, which requires us to value stock options granted prior to our adoption of SFAS 123(R) under the fair value method and expense the unvested portion over the remaining vesting period, for existing
unvested options, as well as shares purchased by employees under our ESPP. SFAS 123(R) also requires us to estimate forfeitures in calculating the expense related to stock-based compensation.

The weighted average grant-date fair value of the options granted during the three months ended March 31, 2008, calculated using the Black-Scholes
model, ranged from $0.22 to $0.46. The weighted average grant-date fair value of the options granted during the three months ended March 31, 2007, calculated using the Black-Scholes model, ranged from $0.59 to $1.81.

The following assumptions were used for grants in the three months ended March 31, 2008: dividend yield of zero, volatility of 26.42% to 32.93%,
risk-free interest rate of 2.17% to 2.96%, and an expected life of 2.00 to 4.25 years. The following assumptions were used for grants in the three months ended March 31, 2007: dividend yield of zero, volatility of 22.1% to 23.3%, risk-free
interest rate of 4.48% to 4.86%, and an expected life of 2.00 to 4.25 years. Expected volatility is based on the volatility of a group of stocks we view as peer companies, due to the limited history of our stock trading on an exchange. We use
historical data to estimate the expected life and employee termination assumptions in our accounting under SFAS 123(R). 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 March 31, 2008, as well as activity during the three months
then ended:



|                         |  |           |   |  |                               |     
|------------------------ |  | --------- | - |  | ----------------------------- | ----
|                         |  | Options   |   |  | WeightedAverageExercise Price
|Outstanding at January 1 |  | 1,598,810 |   |  | $                             | 8.18
|Granted                  |  | 480,000   |   |  |                               | 1.27
|Cancelled                |  | (149,810  | ) |  |                               | 9.70
|Exercised                |  |          |   |  |                               |    
|                         |  |           |   |  |                               |     
|Outstanding at March 31  |  | 1,929,000 |   |  | $                             | 6.35
|                         |  |           |   |  |                               |     

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 March 31, 2008, the aggregate intrinsic value of options outstanding was $121,500 with a weighted average remaining contractual term of 8.2 years; the aggregate intrinsic value of the 887,500
options exercisable was $0 with a weighted average exercise price of $8.52 and a weighted average remaining contractual term of 7.5 years.

The following table summarizes nonvested stock options outstanding as of March 31, 2008, as well as activity during the three months then ended:



|                         |  |           |   |  |                                      |     
|------------------------ |  | --------- | - |  | ------------------------------------ | ----
|                         |  | Options   |   |  | WeightedAverage Grant-DateFair Price
|Outstanding at January 1 |  | 631,500   |   |  | $                                    | 7.27
|Granted                  |  | 480,000   |   |  |                                      | 1.27
|Forfeited                |  | (27,500   | ) |  |                                      | 4.32
|Vested                   |  | (42,500   | ) |  |                                      | 7.33
|                         |  |           |   |  |                                      |     
|Outstanding at March 31  |  | 1,041,500 |   |  | $                                    | 4.58
|                         |  |           |   |  |                                      |     

Compensation cost from nonvested stock granted to employees is recognized as expense using the
straight-line method over the vesting period. As of March 31, 2008, total unrecognized compensation cost related to nonvested stock options was approximately



8



---

##### Table of Contents

$0.5 million. 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 months ended March 31, 2008 and 2007, our total stock-based compensation expense was approximately $104 and $219, respectively.

Comprehensive (Loss) IncomeOur comprehensive (loss) income includes net (loss) income and cumulative translation adjustments. The components of comprehensive (loss) income are as follows:



|                                  |  |                             |        |   |      |   |     |  
|--------------------------------- |  | --------------------------- | ------ | - | ---- | - | --- | -
|                                  |  | Three Months EndedMarch 31, |       
|                                  |  | 2008                        |        |   | 2007 |  
|Net (loss) income                 |  | $                           | (3,383 | ) |      | $ | 423 |  
|Cumulative translation adjustment |  |                             | 168    |   |      |   | (6  | )
|                                  |  |                             |        |   |      |   |     |  
|Total                             |  | $                           | (3,215 | ) |      | $ | 417 |  
|                                  |  |                             |        |   |      |   |     |  

Statement of Cash FlowsCash paid for interest was $119 and $28 for the three
months ended March 31, 2008 and 2007, respectively. Cash paid for income taxes was $5 and $216 for the three months ended March 31, 2008 and 2007, respectively. We had accrued capital expenditures of $591 and $34 at March 31, 2008 and
2007, respectively.

Segment ReportingOperating segments are defined by SFAS No. 131, Disclosure About
Segments of an Enterprise and Related Information (SFAS No. 131). 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.

Prior to 2007, we executed on a strategic decision made in 2004 to reduce our call
center operations. This reduction concluded in 2006. Ongoing call center revenues of $1,774 and $1,051 for the three months ended March 31, 2008 and 2007, respectively, which were previously included as customer care, are now reflected in
transaction processing revenues in the table below. Our revenue, aggregated by service offering, is as follows:



|                               |  |                             |        |      |   |       
|------------------------------ |  | --------------------------- | ------ | ---- | - | ------
|                               |  | Three Months EndedMarch 31,
|                               |  | 2008                        |        | 2007
|Transaction processing         |  | $                           | 17,647 |      | $ | 18,529
|Data reporting                 |  |                             | 4,228  |      |   | 6,724 
|                               |  |                             |        |      |   |       
|Transaction and other revenues |  |                             | 21,875 |      |   | 25,253
|Client reimbursements          |  |                             | 127    |      |   | 622   
|                               |  |                             |        |      |   |       
|Total                          |  | $                           | 22,002 |      | $ | 25,875
|                               |  |                             |        |      |   |       

The following is a geographic breakdown of revenues for the three months ended March 31, 2008
and 2007, and a geographic breakdown of long-lived assets at March 31, 2008 and December 31, 2007:



|                    |  |                             |        |      |   |       
|------------------- |  | --------------------------- | ------ | ---- | - | ------
|                    |  | Three Months EndedMarch 31,
|                    |  | 2008                        |        | 2007
|Revenues:           |  |                             |        |      |   |       
|United States       |  | $                           | 17,272 |      | $ | 21,561
|United Kingdom      |  |                             | 2,130  |      |   | 2,578 
|Other International |  |                             | 2,600  |      |   | 1,736 
|                    |  |                             |        |      |   |       
|                    |  | $                           | 22,002 |      | $ | 25,875
|                    |  |                             |        |      |   |       



|                    |  |                  |        |                     |   |       
|------------------- |  | ---------------- | ------ | ------------------- | - | ------
|                    |  | At March31, 2008 |        | At December 31,2007
|Long-Lived Assets:  |  |                  |        |                     |   |       
|United States       |  | $                | 18,883 |                     | $ | 18,587
|United Kingdom      |  |                  | 199    |                     |   | 275   
|Other International |  |                  | 621    |                     |   | 634   
|                    |  |                  |        |                     |   |       
|                    |  | $                | 19,703 |                     | $ | 19,496
|                    |  |                  |        |                     |   |       



9



---

##### Table of Contents

LitigationWe are involved in various claims and lawsuits incidental to our business.
In the opinion of management, the ultimate resolution of such claims and lawsuits will not have a material effect on our financial position, liquidity, or results of operations.

Recent Accounting PronouncementsIn February 2007, the Financial Accounting Standards Board (FASB) issued SFAS 159,
The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115 (SFAS No. 159). Under SFAS No. 159, companies may elect to measure
specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. This election, called the fair value
option, will enable some companies to reduce volatility in reported earnings caused by measuring related assets and liabilities differently. We did not elect the fair value option for any of our existing financial instruments as of
January 1, 2008, and we have not determined whether or not we will elect this option for financial instruments we may acquire in the future.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 establishes a single authoritative definition of fair value, sets out a framework for
measuring fair value, and expands on required disclosures about fair value measurement. In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157(FSP No. 157-2) which delayed the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). The adoption of SFAS No. 157, effective January 1, 2008, did not have a material effect on our consolidated financial statements. We have not determined the impact
of implementing the provisions of SFAS No. 157 to the items deferred by FSP No. 157-2.

2. DEBT

Debt consists of the following as of March 31, 2008 and December 31, 2007:



|                        |  |               |       |                  |   |      
|----------------------- |  | ------------- | ----- | ---------------- | - | -----
|                        |  | March 31,2008 |       | December 31,2007
|Note payable            |  | $             | 4,666 |                  | $ | 5,250
|Less current maturities |  |               | 2,333 |                  |   | 2,333
|                        |  |               |       |                  |   |      
|Long-term portion       |  | $             | 2,333 |                  | $ | 2,917
|                        |  |               |       |                  |   |      

Our note payable relates to the acquisition of certain assets and assumption of certain
liabilities of Hi-Mark, LLC (Hi-Mark:), with quarterly principal payments (which began in April 2007 and continue through January 2010) in the amount of $583 together with accrued interest, which accrues at the Prime rate (7.25% at
March 31, 2008).

On April 30, 2008, we amended our credit agreement with Bank of America, N.A, effective March 30, 2008, to
clarify the treatment of the Citibank revenues and to delay the effectiveness of the Consolidated Fixed Charge Coverage Ratio from March 31, 2008 to June 30, 2008 and to modify certain other related provisions of the Credit Agreement.

We have a $10.0 million revolving line of credit facility expiring April 2009. The lender holds a senior security interest in all of our
domestic assets and a 66% interest in the stock of our international subsidiaries. Under the facility, we are subject to certain financial covenants, including maintenance of certain leverage ratios. The facility also requires that we reduce our
borrowings to $2.0 million or less for 30 days during each calendar quarter. Further, we are restricted in our ability to, among other things, make advances to our European operations, make acquisitions, make capital expenditures, incur additional
indebtedness and pay dividends. We pay a variable rate of interest on draws, at LIBOR plus 0.5%, and an annual fee of 0.5% of the unused portion of the $10.0 million commitment. As of March 31, 2008, we are in compliance with all financial
covenants, $10.0 million was available for borrowing, and there were no borrowings against the facility. We have an outstanding letter of credit in the amount of $45 against the facility as of March 31, 2008.

3. RELATED-PARTY TRANSACTIONS

BCD Travel, formerly
WorldTravel BTI, is majority-owned by our majority shareholder, BCD. During the three months ended March 31, 2008 and 2007, we recognized transaction and other revenues from BCD Travel totaling $2,009 and $1,867, respectively. At March 31,
2008 and December 31, 2007, respectively, $799 and $1,077 was receivable from BCD Travel.

4. ACQUISITIONS

India Operations

In December
2007, we acquired the assembled workforce and certain property assets used by Siemens Shares Services LLC (Siemens) to provide services to TRX for $815. The assembled workforce and assets acquired constitute a business as defined by EITF
Issue 98-3 Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business and accordingly we accounted for this transaction as a business combination under SFAS No. 141, Business
Combinations.While the employees and related assets migrated from Siemens to us in December 2007, we have not yet finalized the related purchase agreement, nor have we paid consideration for the purchase. This acquisition was accounted
for using the purchase method of



10



---

##### Table of Contents

accounting, which includes an evaluation of the existence of any identifiable intangibles at the date of acquisition. Due to the strategic nature of the
acquisition and low asset base, goodwill of $750 was recorded in connection with the acquisition. The goodwill is expected to be deductible for tax purposes over a period of 15 years. We have reflected the estimated purchase price of $815 within
current liabilities in the accompanying consolidated balance sheet at March 31, 2008, as well as the related property and goodwill balances that are expected to result from the purchase. We expect the agreement to be finalized and consideration
to be paid in the first half of 2008.

The following table summarizes the preliminary purchase price allocation of the fair values of the
assets acquired.



|                            |  |   |    
|--------------------------- |  | - | ---
|Property and equipment, net |  | $ | 65 
|Goodwill                    |  |   | 750
|                            |  |   |    
|Total consideration         |  | $ | 815
|                            |  |   |    



11



---

##### Table of Contents

|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 months ended March 31, 2008 and 2007. Also discussed is our financial
position as of March 31, 2008. You should read this discussion in conjunction with our unaudited consolidated financial statements and the notes to those unaudited consolidated financial statements included elsewhere in this report and in our
Annual Report on Form 10-K for the fiscal year ending December31, 2007. 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 global technology company. We develop and host software applications to automate manual processes and track transaction
data, enabling our clients to optimize performance and control costs. We are a leading provider to the travel industry and expect to eventually include growth in industries beyond travel, such as financial services and health care. For the
foreseeable future, we intend 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 reporting, 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 44% and 41% of our global revenues in the three months ended March 31, 2008 and
2007, respectively. Expedia has been a client since its launch in 1996. In December 2006, we replaced our existing contract with Expedia with a Master Services Agreement (the Agreement). The Agreement continues through 2010. Our scale
and process-reengineering expertise has allowed us to reduce our costs in several areas when measured on a per transaction basis. 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 began to evolve in late 2006 that are putting negative pressure on our revenue per transaction.

On July 13, 2007, TRX Data Services and Citibank executed an amendment to the Master Services Agreement dated February 1, 2002, as amended. The Amendment extends the scheduled expiration date of the Master Services Agreement from
January 13, 2009 to December 31, 2010. The primary purpose of the Amendment is for TRX Data Services to sell a $4.5 million limited perpetual license of certain source code to Citibank in order for Citibank to perform certain services
in-house that have previously been hosted by TRX Data Services. TRX Data Services continues to perform maintenance and project services for Citibank. As a result of the Amendment, recurring revenues from Citibank generated in 2008 are expected to be
significantly less than revenues generated in 2007.

The Amendment also provided that we would continue to provide the hosting services
historically provided to Citibank until such time as the sale of the perpetual license occurred. The sale occurred on April 30, 2008, when the requisite activities to assist Citibank in readying its information technology environment to
support the technology had been performed by us and accepted by Citibank. In addition, Citibank will compensate us approximately $1.4 million for certain assets that we have purchased in the past for Citibanks benefit, which are essential
to the functionality of the technology.

The sale of the license, the compensation for the assets referred to above, and the hosting
services are all elements of the Amendment. Revenue recognition for these elements is governed by SOP 97-2. In accordance with SOP 97-2, as there was no vendor specific objective evidence of the fair value of the perpetual license at the
effective date of the Amendment, revenue associated with the hosting services was deferred until April 30, 2008, when the sale of the perpetual license occurred. The amount of revenue deferred for the hosting services is $10.0 million and
$6.5 million as of March 31, 2008 and December 31, 2007, respectively, and such amounts will be recognized as revenue during the second quarter of 2008. All costs associated with the hosting services are being expensed as incurred.

In December 2007, we acquired the assembled workforce and certain property assets used by Siemens to provide services to TRX for $0.8
million. The assembled workforce and assets acquired constitute a business as defined by EITF Issue 98-3 Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business and accordingly we
accounted for this transaction as a business combination under SFAS No. 141, Business Combinations.While the employees and related assets migrated from Siemens to us in December 2007, we have not yet finalized the related
purchase agreement, nor have we paid consideration for the purchase. We expect the agreement to be finalized and consideration to be paid in the first half of 2008. Since control of the assembled workforce and related assets was transferred to us in
December 2007, we have recorded a liability to Siemens as of March 31, 2008 and December 31, 2007 for the estimated purchase price.

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, airline seat capacity,
changing and increasing access methods to reach supplier inventory, supplier commission rates, GDS 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.



12



---

##### Table of Contents

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. We believe that, of our significant accounting policies described in Note 1 of
the notes to our consolidated financial statements included elsewhere in this Form 10-Q and described in our Form 10-K for the year ended December 31, 2007, the following accounting policies involve a greater degree of judgment and complexity.
Accordingly, these are the policies we believe are the most critical to assist investors in fully understanding and evaluating our consolidated financial condition and results of operations.

Revenue recognition. A significant portion of our revenue is recognized based on objective criteria that do not require significant estimates or
uncertainties. Accordingly, revenues recognized under these methods do not require the use of significant estimates that are susceptible to change.

We recognize revenue in accordance with Emerging Issues Task Force (EITF) Issue 00-21, Accounting for Revenue Arrangements with Multiple Deliverables, when certain other consulting or other services are
combined with our transaction processing revenues and SEC Staff Accounting Bulletin No. 104, Revenue Recognition, 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) collectibility 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 client; 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

With respect to the Citibank amendment discussed above in the Overview section, the sale of the license, the compensation for the assets referred to above, and the hosting services are all elements of the Amendment. Revenue
recognition for these elements is governed by SOP 97-2. In accordance with SOP 97-2, as there was no vendor specific objective evidence of the fair value of the perpetual license at the time of the Amendment, revenue associated with the hosting
services was being deferred until April 30, 2008, when the sale of the perpetual license occurred. The amount of revenue deferred for the hosting services is $10.0 million and $6.5 million as of March 31, 2008 and December 31,
2007, respectively, and such amounts will be recognized as revenue during the second quarter of 2008. All costs associated with the hosting services are being expensed as incurred.

Internal-Use Software Development Costs. We account for internal-use software development costs in accordance with American Institute of Certified
Public Accountants (AICPA) Statement of Position 98-1,Accounting for the Cost of Software Developed or Obtained for Internal Use, or SOP 98-1. SOP 98-1 specifies that software costs, including internal payroll costs,
incurred in connection with the development or acquisition of software for internal use is charged to technology development expense as incurred until the project enters the application development phase. Costs incurred in the application
development phase are capitalized and depreciated over an estimated useful life of three years, beginning when the software is ready for use.

Each of our software products enters the application development phase upon completion of a detailed program in which (1) we have established that the necessary skills, hardware and software technology are available to us to produce
the product, (2) the completeness of the detailed program design has been confirmed by documentation and tracing the design to product specifications, and (3) the detailed program design has been reviewed for high-risk development issues
(for example, novel, unique, unproven function and features or technological innovations), and any uncertainties related to identified high-risk development issues have been resolved through coding and testing. Significant judgment is required in
determining when the application development phase has begun.

Goodwill. We assess the impairment of goodwill in accordance with
SFAS No. 142, Goodwill and Other Intangible Assets. Accordingly, we test our goodwill for impairment annually on September 30, or whenever events or changes in circumstances indicate an impairment may have occurred, by
comparing its fair value to its carrying value. Impairment may result from, among other things, deterioration in the performance of our business, adverse market conditions, adverse changes in applicable laws or regulations, including changes that
restrict the activities of the acquired business, and a variety of other circumstances. If we determine that impairment has occurred, we are required to record an impairment charge for the difference between the carrying value of the goodwill and
the implied fair value of the goodwill in the period the determination is made. Although we believe goodwill is appropriately stated in our consolidated financial statements, changes in strategy or market conditions could significantly impact these
judgments and result in an impairment charge.



13



---

##### Table of Contents

Impairment of long-lived assets. We record our long-lived assets, such as property and equipment
and software development costs, at cost. We review the carrying value of our long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable in accordance with
the provisions of SFAS, No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. We evaluate these assets by examining estimated future cash flows to determine if their current recorded value is impaired. We
evaluate these cash flows by using weighted probability techniques as well as comparisons of past performance against projections. Assets may also be evaluated by identifying independent market values. If we determine that an assets carrying
value is impaired, we will record an impairment of the carrying value of the identified asset as an operating expense in the period in which the determination is made. Although we believe that the carrying values of our long-lived assets are
appropriately stated, changes in strategy or market conditions or significant technological developments could significantly impact these judgments and result in impairments of recorded asset balances.

Transaction processing provisions. We have recorded estimates to account for processing errors made in the ticketing or fareloading process that
result in tickets being issued at incorrect prices or from agency commissions being miscalculated. Our reserve for processing errors is based on several factors including historical trends, average debit memo lag time and timely identification of
errors. Transaction processing provisions were $0.2 million and $0.5 million during the three months ended March 31, 2008 and 2007, respectively, and are included as operating expenses in our consolidated statements of operations.

Results of Operations

Comparison of Three Months Ended
March 31, 2008 and March 31, 2007

Revenues. The following table sets forth comparative revenues by type, in
dollars and as a percentage of transaction and other revenue, for the three months ended March 31, 2008 and 2007, respectively:



|                               |  |                             |        |  |      |   |  |        |        |  |     |   |  |   |        |   |  |     |   
|------------------------------ |  | --------------------------- | ------ |  | ---- | - |  | ------ | ------ |  | --- | - |  | - | ------ | - |  | --- | --
|                               |  | Three Months EndedMarch 31, |       
|                               |  | 2008                        |        |  | 2007 |   |  | Change |       
|                               |  | (dollars in thousands)      |       
|Transaction processing         |  | $                           | 17,647 |  | 81   | % |  | $      | 18,529 |  | 73  | % |  | $ | (882   | ) |  | (5  | )%
|Data reporting                 |  |                             | 4,228  |  | 19   |   |  |        | 6,724  |  | 27  |   |  |   | (2,496 | ) |  | (37 | ) 
|                               |  |                             |        |  |      |   |  |        |        |  |     |   |  |   |        |   |  |     |   
|Transaction and other revenues |  |                             | 21,875 |  | 100  |   |  |        | 25,253 |  | 100 |   |  | $ | (3,378 | ) |  | (13 | )%
|Client reimbursements          |  |                             | 127    |  |      |   |  |        | 622    |  |     |   |  |   |        |   |  |     |   
|                               |  |                             |        |  |      |   |  |        |        |  |     |   |  |   |        |   |  |     |   
|Total                          |  | $                           | 22,002 |  |      |   |  | $      | 25,875 |  |     |   |  |   |        |   |  |     |   
|                               |  |                             |        |  |      |   |  |        |        |  |     |   |  |   |        |   |  |     |   

Transaction processing revenues. Transaction processing revenues were $17.6 million in the
three months ended March 31, 2008, a decrease of 5% compared to $18.5 million in the three months ended March 31, 2007. The decrease in transaction processing revenues was due to a 9% reduction in non-recurring transaction processing
revenues, primarily related to a project in 2007 to expand a clients GDS access, partially offset by growth in our customer care revenues. We expect revenues per transaction to continue to decline in the future because of scale efficiencies,
as well as trends in the travel processing supply chain that began to evolve in late 2006 that are putting negative pressure on our revenue per transaction.

Data reporting revenues. Data reporting revenues were $4.2 million in the three months ended March 31, 2008, compared to $6.7 million in the three months ended March 31, 2007. The decrease in data
reporting revenues was primarily due to the deferral of $3.5 million of routine data reporting revenues from Citibank, as previously discussed. Recurring revenues from Citibank generated in 2008 are expected to be significantly less than revenues
generated in 2007.

Client reimbursement revenues and expenses. Client reimbursement revenues and expenses were $0.1 million in the
three months ended March 31, 2008, a decrease of 80% compared to $0.6 million in the three months ended March 31, 2007. The decrease is primarily due to a non-recurring project in 2007 to expand a clients GDS access.

Operating expenses. Operating expenses were $14.2 million in the three months ended March 31, 2008, a decrease of 4% compared to $14.8
million in the three months ended March 31, 2007. As a percentage of revenue, operating expenses increased from 58% in the three months ended March 31, 2007 to 65% in the three months ended March 31, 2008 primarily due to the deferral
of $3.5 million of routine data reporting revenues from Citibank, without a related deferral of expenses in accordance with U.S. GAAP.

Selling, general and administrative expenses. Selling, general and administrative expenses were $4.5 million in the three months ended March 31, 2008, an increase of $0.2 million compared to the three months ended March 31,
2007.

Technology development expenses. Technology development expenses were $3.9 million in the three months ended March 31,
2008, an increase of 28% compared to $3.0 million in the three months ended March 31, 2007. As a percentage of revenue, technology development expense increased from 12% in the three months ended March 31, 2007 to 18% in the three months
ended March 31, 2008. The increase was primarily due to our increased investment in new product technology related to our data reporting, reservation processing and online booking product offerings.



14



---

##### Table of Contents

Depreciation and amortization. Depreciation and amortization expenses were $2.7 million in the
three months ended March 31, 2008, a decrease of 4% compared to $2.8 million in the three months ended March 31, 2007.

Interest income. We generated $49 of interest income in the three months ended March 31, 2008, a decrease of 68% compared to $0.2 million in the three months ended March 31, 2007. The decrease is primarily due to reduced
cash balances available for investment due to the cash portion of the purchase price paid for the Hi-Mark acquisition in January 2007.

Interest expense. Interest expense remained constant at $0.1 million in the three months ended March 31, 2008 and 2007.

Income tax provision.No income tax benefit was recorded for the three months ended March 31, 2008 as we have recorded a 100% valuation allowance on our net deferred tax assets. No income tax provision was recorded for the three
months ended March 31, 2007, as such income is expected to be offset by net operating loss carryforwards.

Net (loss) income.Due to the factors described above, net loss was $3.4 million in the three months ended March 31, 2008 compared to net income of $0.4 million in the three months ended March 31, 2007.

Liquidity and Capital Resources

We have funded our
operations primarily with cash from operating activities, the private placement of debt and equity securities totaling approximately $30.0 million since 2001, and the public offering of common stock which provided net proceeds of approximately $26.4
million in September 2005. The underlying drivers of cash from operating activities include cash receipts from the sale of our products and 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 March 31, 2008, our principal sources of liquidity were cash and cash equivalents of $5.1 million and $10.0 million of availability under our
revolving credit facility. We had no borrowings outstanding under our credit facility at March 31, 2008. The maximum amount available under our revolving credit facility is $10.0 million, and the monthly availability fluctuates based upon our
last twelve months consolidated senior leverage ratio (as defined in the facility).

Net cash used in operating activities was $1.3
million in the three months ended March 31, 2008 compared to $0.6 million in the three months ended March 31, 2007. The primary driver in 2008 was the decrease in profitability.

Net cash used in investing activities was $2.2 million during the three months ended March 31, 2008, compared to $11.4 million during the three
months ended March 31, 2007. The primary driver in 2007 related to the $10.4 million of cash paid in partial consideration of the acquisition of Hi-Mark in January 2007. The other significant driver of our investing activities is our capital
expenditures, which include costs associated with internally developed software, as well as infrastructure required to support volume expansion, the acquisition of new revenue streams with new and existing clients, investment in business continuity,
and opportunities to reduce costs. As of March 31, 2008, we had no material commitments related to capital expenditures.

Net cash
used by financing activities was $0.6 million during the three months ended March 31, 2008 compared to $40 during the three months ended March 31, 2007. The primary driver in the three months ended March 31, 2008 was debt repayments.

On April 30, 2008, we amended our credit agreement with Bank of America, N.A, effective March 30, 2008, to clarify the treatment
of the Citibank revenues and to delay the effectiveness of the Consolidated Fixed Charge Coverage Ratio from March 31, 2008 to June 30, 2008 and to modify certain other related provisions of the Credit Agreement.

We have a $10.0 million senior secured revolving credit facility that expires in April 2009. The lender holds a senior security interest in all of our
domestic assets and a 66% interest in the stock of our international subsidiaries. Under the facility, we are subject to a maximum consolidated senior leverage ratio (as defined in the facility) of 1 to 1. The facility also requires that we reduce
our borrowings under the facility to $2.0 million or less for 30 days during each calendar quarter. We are restricted in our ability to, among other things, make advances to our European operations, make acquisitions or sell assets, make capital
expenditures, incur additional indebtedness and pay dividends. We are currently in compliance with all covenants. We pay a variable rate of interest on draws, at LIBOR plus 0.5%, and an annual fee of 0.5% of the unused portion of the $10.0 million
commitment. At March 31, 2008, we had no borrowings outstanding against the facility. We have an outstanding letter of credit in the amount of $45 against the facility as of March 31, 2008.

Based on our current level of operations, we believe our cash flow from operations and other available sources of liquidity, including borrowings under
the revolving credit facility until it matures in April 2009, will provide adequate funds for ongoing operations, planned capital expenditures and debt service for the next twelve months.

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.



15



---

##### Table of Contents

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.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS
159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115 (SFAS No. 159). Under SFAS No. 159, companies may elect to measure
specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. This election, called the fair value
option, will enable some companies to reduce volatility in reported earnings caused by measuring related assets and liabilities differently. We did not elect the fair value option for any of our existing financial instruments as of
January 1, 2008, and we have not determined whether or not we will elect this option for financial instruments we may acquire in the future.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 establishes a single authoritative definition of fair value, sets out a framework for
measuring fair value, and expands on required disclosures about fair value measurement. In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157(FSP No. 157-2) which delayed the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). The adoption of SFAS No. 157, effective January 1, 2008, did not have a material effect on our consolidated financial statements. We have not determined the impact
of implementing the provisions of SFAS No. 157 to the items deferred by FSP No. 157-2.

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, will, should, expect,
anticipate, contemplate, estimate, believe, plan, project, predict, potential or continue, or the negative of these, or similar terms.

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 under Risk Factors in
our Annual Report on Form 10-K for the fiscal year ending December 31, 2007 filed with the SEC and as are detailed from time to time in other reports we file with the SEC, 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 our Annual Report. 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 4. | 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 March 31, 2008. 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. Based on our evaluation, as of March 31, 2008, our
management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective.



16



---

##### Table of Contents

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors that occurred during the quarter ended March 31, 2008 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II  OTHER INFORMATION



|Item 5. | Other Information
|------- | -----------------

On April 30, 2008, we entered into the fourth amendment (the
Amendment) to the Amended and Restated Credit Agreement between TRX, Inc. and Bank of America, N.A., dated November 7, 2005 and further amended on January 11, 2007, April 30, 2007 and October 29, 2007 (the
Credit Agreement). The Credit Agreement was amended, effective March 30, 2008, to clarify the treatment of the Citibank revenues and to delay the effectiveness of the Consolidated Fixed Charge Coverage Ratio from March 31, 2008
to June 30, 2008 and to modify certain other related provisions of the Credit Agreement.



|Item 6. | Exhibits
|------- | --------



|            |  |                                                                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                            
|10.1        |  | Amendment 1 to the Amended and Restated Master Agreement by and between TRX Technology Services, L.P. and BCD Travel USA LLC (formerly known as World Travel Partners I, LLC) dated March 20,
2008.  *
|            | 
|31.1        |  | Certification of Norwood H. (Trip) Davis, III, 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.                                                                                                                              



| | 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.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17



---

##### Table of Contents

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: May 2, 2008 |  | By:       |  | /s/ David D. Cathcart                                               
|                   |  |           |  | David D. Cathcart                                                   
|                   |  |           |  | Chief Financial Officer (principal financial and
accounting officer)



18