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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2011

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to

Commission File No. 000-51478





TRX, INC.

(Exact name of registrant as specified in charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-2502748                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                 |  |           
|------------------------------------------------ |  | ----------
|2970 Clairmont Road, Suite 300, Atlanta, Georgia |  | 30329     
|(Address of principal executive offices)         |  | (Zip Code)

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





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    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 May 1, 2011 was 18,470,244 shares.









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##### Table of Contents

TRX, INC.

FORM 10-Q

TABLE OF CONTENTS



|                              |  |                                                                                                              |    |         |    | 
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------ | -- | ------- | -- | 
|                              |  |                                                                                                              |    | PAGENO. |   
|PART I: FINANCIAL INFORMATION |  |                                                                                                              |    |        
|                              |  |                                                                                                             
|Item 1.                       |  | Financial Statements                                                                                         |    |         |    | 
|                              |  | Unaudited Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31,
2010                   |    |         | 1  | 
|                              |  | Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010 |    |         | 2  | 
|                              |  | Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 |    |         | 3  | 
|                              |  | Notes to Unaudited Condensed Consolidated Financial Statements                                               |    |         | 4  | 
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                        |    |         | 10 | 
|Item 4T.                      |  | Controls and Procedures                                                                                      |    |         | 15 | 
|                              | 
|PART II: OTHER INFORMATION    |  |                                                                                                              |    |        
|                              |  |                                                                                                             
|Item 1A.                      |  | Risk Factors                                                                                                 |    |         | 15 | 
|Item 6.                       |  | Exhibits                                                                                                     |    |         | 16 | 
|Signatures                    |  |                                                                                                              | 17 |        



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##### Table of Contents

PART I  FINANCIAL INFORMATION



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

TRX, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                         |  |               |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                         |  | March 31,2011 |         |   | December 31,2010 |  
|                                                                                                                         |  |              
|ASSETS                                                                                                                   |  |               |         |   |                  |   |         |  
|CURRENT ASSETS:                                                                                                          |  |               |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                |  | $             | 2,591   |   |                  | $ | 2,565   |  
|Trade accounts receivable, net                                                                                           |  |               | 4,911   |   |                  |   | 6,127   |  
|Prepaids and other                                                                                                       |  |               | 2,313   |   |                  |   | 3,318   |  
|                                                                                                                         |  |               |         |   |                  |   |         |  
|Total current assets                                                                                                     |  |               | 9,815   |   |                  |   | 12,010  |  
|                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                         |  |              
|NONCURRENT ASSETS:                                                                                                       |  |               |         |   |                  |   |         |  
|Property and equipment, net                                                                                              |  |               | 5,307   |   |                  |   | 5,743   |  
|Deferred income tax                                                                                                      |  |               | 250     |   |                  |   | 264     |  
|Other assets, net                                                                                                        |  |               | 752     |   |                  |   | 795     |  
|                                                                                                                         |  |               |         |   |                  |   |         |  
|Total noncurrent assets                                                                                                  |  |               | 6,309   |   |                  |   | 6,802   |  
|                                                                                                                         |  |               |         |   |                  |   |         |  
|Total assets                                                                                                             |  | $             | 16,124  |   |                  | $ | 18,812  |  
|                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                         |  |              
|LIABILITIES AND SHAREHOLDERS DEFICIT                                                                                    |  |               |         |   |                  |   |         |  
|CURRENT LIABILITIES:                                                                                                     |  |               |         |   |                  |   |         |  
|Accounts payable and accrued liabilities                                                                                 |  | $             | 7,342   |   |                  | $ | 8,275   |  
|Customer deposits and deferred revenue                                                                                   |  |               | 4,443   |   |                  |   | 4,624   |  
|Current portion of long-term debt                                                                                        |  |               | 292     |   |                  |   | 583     |  
|                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                         |  |              
|Total current liabilities                                                                                                |  |               | 12,077  |   |                  |   | 13,482  |  
|                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                         |  |              
|NONCURRENT LIABILITIES:                                                                                                  |  |               |         |   |                  |   |         |  
|Long-term debtless current portion                                                                                      |  |               | 2,500   |   |                  |   | 4,200   |  
|Other long-term liabilities                                                                                              |  |               | 1,815   |   |                  |   | 1,759   |  
|                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                         |  |              
|Total noncurrent liabilities                                                                                             |  |               | 4,315   |   |                  |   | 5,959   |  
|                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                         |  |              
|Total liabilities                                                                                                        |  |               | 16,392  |   |                  |   | 19,441  |  
|                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                         |  |              
|COMMITMENTS AND CONTINGENCIES (NOTE 2)                                                                                   |  |               |         |   |                  |   |         |  
|SHAREHOLDERS DEFICIT:                                                                                                   |  |               |         |   |                  |   |         |  
|Common stock, $.01 par value; 100,000,000 shares authorized; 18,653,802 shares issued; and 18,466,271 shares
outstanding |  |               | 186     |   |                  |   | 186     |  
|Additional paid-in capital                                                                                               |  |               | 95,403  |   |                  |   | 95,416  |  
|Treasury stock, at cost; 187,531 shares                                                                                  |  |               | (2,294  | ) |                  |   | (2,294  | )
|Cumulative translation adjustment                                                                                        |  |               | 384     |   |                  |   | 413     |  
|Accumulated deficit                                                                                                      |  |               | (93,947 | ) |                  |   | (94,350 | )
|                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                         |  |              
|Total shareholders deficit                                                                                              |  |               | (268    | ) |                  |   | (629    | )
|                                                                                                                         |  |               |         |   |                  |   |         |  
|                                                                                                                         |  |              
|Total liabilities and shareholders deficit                                                                              |  | $             | 16,124  |   |                  | $ | 18,812  |  
|                                                                                                                         |  |               |         |   |                  |   |         |  

See notes to unaudited condensed consolidated financial statements.



1



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TRX, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



|                                                                              |  |                              |        |   |      |   |        |  
|----------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                                              |  | Three Months EndingMarch 31, |       
|                                                                              |  | 2011                         |        |   | 2010 |  
|REVENUES:                                                                     |  |                              |        |   |      |   |        |  
|Transaction and other revenues                                                |  | $                            | 12,425 |   |      | $ | 14,594 |  
|Client reimbursements                                                         |  |                              | 173    |   |      |   | 84     |  
|                                                                              |  |                              |        |   |      |   |        |  
|Total revenues                                                                |  |                              | 12,598 |   |      |   | 14,678 |  
|                                                                              |  |                              |        |   |      |   |        |  
|                                                                              |  |                             
|EXPENSES:                                                                     |  |                              |        |   |      |   |        |  
|Operating, excluding depreciation and amortization                            |  |                              | 7,801  |   |      |   | 8,552  |  
|Selling, general, and administrative, excluding depreciation and amortization |  |                              | 2,050  |   |      |   | 3,046  |  
|Technology development                                                        |  |                              | 818    |   |      |   | 951    |  
|Client reimbursements                                                         |  |                              | 173    |   |      |   | 84     |  
|Impairment of goodwill                                                        |  |                              | 64     |   |      |   | 89     |  
|Depreciation and amortization                                                 |  |                              | 995    |   |      |   | 1,030  |  
|                                                                              |  |                              |        |   |      |   |        |  
|Total expenses                                                                |  |                              | 11,901 |   |      |   | 13,752 |  
|                                                                              |  |                              |        |   |      |   |        |  
|                                                                              |  |                             
|OPERATING INCOME                                                              |  |                              | 697    |   |      |   | 926    |  
|INTEREST INCOME (EXPENSE):                                                    |  |                              |        |   |      |   |        |  
|Interest income                                                               |  |                              | 2      |   |      |   | 6      |  
|Interest expense                                                              |  |                              | (133   | ) |      |   | (184   | )
|                                                                              |  |                              |        |   |      |   |        |  
|                                                                              |  |                             
|Total interest expense, net                                                   |  |                              | (131   | ) |      |   | (178   | )
|                                                                              |  |                              |        |   |      |   |        |  
|                                                                              |  |                             
|INCOME BEFORE INCOME TAXES                                                    |  |                              | 566    |   |      |   | 748    |  
|PROVISION FOR INCOME TAXES                                                    |  |                              | 163    |   |      |   | 265    |  
|                                                                              |  |                              |        |   |      |   |        |  
|NET INCOME                                                                    |  | $                            | 403    |   |      | $ | 483    |  
|                                                                              |  |                              |        |   |      |   |        |  
|                                                                              |  |                             
|WEIGHTED AVERAGE NUMBER OF SHARES:                                            |  |                              |        |   |      |   |        |  
|Basic                                                                         |  |                              | 18,466 |   |      |   | 18,465 |  
|                                                                              |  |                              |        |   |      |   |        |  
|Diluted                                                                       |  |                              | 18,613 |   |      |   | 18,643 |  
|                                                                              |  |                              |        |   |      |   |        |  
|BASIC AND DILUTED NET INCOME PER SHARE                                        |  | $                            | 0.02   |   |      | $ | 0.03   |  
|                                                                              |  |                              |        |   |      |   |        |  

See notes to unaudited condensed consolidated financial statements.



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TRX, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                            |  |                             |        |   |      |   |        |  
|------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                            |  | Three Months EndedMarch 31, |       
|                                                                                            |  | 2011                        |        |   | 2010 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                       |  |                             |        |   |      |   |        |  
|Net income                                                                                  |  | $                           | 403    |   |      | $ | 483    |  
|                                                                                            |  |                             |        |   |      |   |        |  
|                                                                                            |  |                            
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                             |        |   |      |   |        |  
|Depreciation and amortization                                                               |  |                             | 995    |   |      |   | 1,030  |  
|Impairment of goodwill                                                                      |  |                             | 64     |   |      |   | 83     |  
|Provision for bad debts                                                                     |  |                             | (159   | ) |      |   | 79     |  
|Stock compensation credit                                                                   |  |                             | (13    | ) |      |   | (56    | )
|Debt issuance cost amortization                                                             |  |                             | 5      |   |      |   | 37     |  
|Changes in assets and liabilities:                                                          |  |                             |        |   |      |   |        |  
|Trade accounts receivable                                                                   |  |                             | 1,394  |   |      |   | (678   | )
|Prepaids and other assets                                                                   |  |                             | 1,051  |   |      |   | (288   | )
|Accounts payable and accrued liabilities                                                    |  |                             | (1,052 | ) |      |   | (948   | )
|Customer deposits and deferred revenue                                                      |  |                             | (194   | ) |      |   | (103   | )
|                                                                                            |  |                             |        |   |      |   |        |  
|Net cash provided by (used in) operating activities                                         |  |                             | 2,494  |   |      |   | (361   | )
|                                                                                            |  |                             |        |   |      |   |        |  
|                                                                                            |  |                            
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                       |  |                             |        |   |      |   |        |  
|Capital expenditures                                                                        |  |                             | (504   | ) |      |   | (980   | )
|Payment of contingent consideration                                                         |  |                             | (87    | ) |      |   | (89    | )
|                                                                                            |  |                             |        |   |      |   |        |  
|                                                                                            |  |                            
|Net cash used in investing activities                                                       |  |                             | (591   | ) |      |   | (1,069 | )
|                                                                                            |  |                             |        |   |      |   |        |  
|                                                                                            |  |                            
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                       |  |                             |        |   |      |   |        |  
|Repayments of long-term debt                                                                |  |                             | (291   | ) |      |   | (291   | )
|Borrowings from credit facility                                                             |  |                             | 3,200  |   |      |   | 6,200  |  
|Payments on credit facility                                                                 |  |                             | (4,900 | ) |      |   | (4,100 | )
|Proceeds from stock plans                                                                   |  |                             |       |   |      |   | 6      |  
|                                                                                            |  |                             |        |   |      |   |        |  
|                                                                                            |  |                            
|Net cash (used in) provided by financing activities                                         |  |                             | (1,991 | ) |      |   | 1,815  |  
|                                                                                            |  |                             |        |   |      |   |        |  
|                                                                                            |  |                            
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                |  |                             | 114    |   |      |   | (235   | )
|                                                                                            |  |                             |        |   |      |   |        |  
|                                                                                            |  |                            
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                                   |  |                             | 26     |   |      |   | 150    |  
|CASH AND CASH EQUIVALENTSBeginning of period                                               |  |                             | 2,565  |   |      |   | 2,897  |  
|                                                                                            |  |                             |        |   |      |   |        |  
|                                                                                            |  |                            
|CASH AND CASH EQUIVALENTSEnd of period                                                     |  | $                           | 2,591  |   |      | $ | 3,047  |  
|                                                                                            |  |                             |        |   |      |   |        |  

See notes to unaudited condensed consolidated financial statements.



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TRX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

(In thousands, except share data)

1. ACCOUNTING AND REPORTING POLICIES

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

Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of TRX, 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 condensed
consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes included in our Form 10-K for the year ended December 31, 2010. Due to the seasonal fluctuations for
the purchase of air travel by leisure and corporate travelers as well as credit card volume related to corporate travel, interim results are not necessarily indicative of results for a full year.

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

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

Allowance
for Doubtful AccountsWe maintain an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The balance was $185 and $426 as of March 31, 2011 and December 31, 2010, respectively.

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

The following table discloses the changes in the carrying amount of goodwill during the three months ended
March 31, 2011:



|                                                     |  |   |         |  
|---------------------------------------------------- |  | - | ------- | -
|Balance, January 1                                   |  | $ | 37,975  |  
|Accumulated impairment losses                        |  |   | (37,975 | )
|                                                     |  |   |         |  
|                                                     |  |   |        |  
|                                                     |  |   |         |  
|Earnout on previous business acquisition transaction |  |   | 64      |  
|Impairment charge                                    |  |   | (64     | )
|                                                     |  |   |         |  
|                                                     | 
|Balance, March 31                                    |  |   | 38,039  |  
|Accumulated impairment losses                        |  |   | (38,039 | )
|                                                     |  |   |         |  
|                                                     | 
|                                                     |  | $ |        |  
|                                                     |  |   |         |  



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



|                       |  |                    |          |  |                         |   |     |                    |  |   |                         |   |  |   |     |  |  |   |      |  
|---------------------- |  | ------------------ | -------- |  | ----------------------- | - | --- | ------------------ |  | - | ----------------------- | - |  | - | --- |  |  | - | ---- | -
|                       |  | UsefulLives        |          |  | March 31, 2011          |   |     | December 31, 2010  | 
|                       |  | GrossCarryingValue |          |  | AccumulatedAmortization |   |     | GrossCarryingValue |  |   | AccumulatedAmortization |  
|Trademarks and patents |  |                    | 10 years |  |                         | $ | 866 |                    |  | $ | (346                    | ) |  | $ | 866 |  |  | $ | (303 | )

We expect to record amortization
expense related to these intangible assets of approximately $131 during the remainder of 2011, $173 in each of the next two years and $43 in the year thereafter. We recorded related amortization expense of $43 during both the three months ended
March 31, 2011 and 2010, respectively.

Changes in other intangible assets during the three months ended March 31,
2011 were as follows:



|                                  |  |   |     |  
|--------------------------------- |  | - | --- | -
|Balance, January 1                |  | $ | 563 |  
|Amortization of intangible assets |  |   | (43 | )
|                                  |  |   |     |  
|                                  | 
|Balance, March 31                 |  | $ | 520 |  
|                                  |  |   |     |  

Impairment of Long-Lived AssetsWe regularly evaluate whether events and circumstances
have occurred that indicate whether the carrying amount of property and equipment and other intangible assets may warrant revision or may not be recoverable. When factors indicate that these long-lived assets should be evaluated for recoverability,
we assess the recoverability by determining whether the carrying value of such long-lived assets will be recovered through the future undiscounted cash flows expected from the use of the asset and its eventual disposition. No such indicator of
impairment existed at March 31, 2011.

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

We currently do not
have financial or non-financial assets and financial or non-financial liabilities that are required to be measured at fair value on a recurring basis. The Financial Accounting Standards Board (FASB) guidance establishes a valuation
hierarchy for disclosure of the inputs used to measure fair value. During the three months ended March 31, 2011, earnout payments of $64 related to a previous business acquisition transaction were impaired based on Level 3 measurements.

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



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



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



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

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

Concentration of Credit Risk A significant portion of our
revenues is derived from a limited number of clients. Our top five clients accounted for approximately 65% and 68% of our total revenues in the three months ended March 31, 2011 and 2010, respectively. Contracts with the major clients may be
terminated by the client if we fail to meet certain performance criteria. Expedia, Inc. and its affiliates accounted for 43% and 44% of our total revenues in the three months ended March 31, 2011 and 2010, respectively. American Express Travel
Related Services Company, Inc. (American Express) accounted for 14% and 15% of our total revenues in the three months ended March 31, 2011 and 2010, respectively. At March 31, 2011 and December 31, 2010, 3% and 5%,
respectively, of our accounts receivable related to American Express.



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

Diluted net income per share is computed by dividing reported 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.

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,
2011 |     |  | Three Months EndedMarch 31,
2010 | 
|                                |  | Net Income                       |     |  | WeightedAverageShares            |  |        | Per Share |  |   | Net Income |  |  | WeightedAverageShares |     |  | Per Share | 
|Basic net income per share      |  | $                                | 403 |  |                                  |  | 18,466 |           |  | $ | 0.02       |  |  | $                     | 483 |  |           |  | 18,465 |  |  | $ | 0.03 | 
|Effect of dilutive securities:  |  |                                  |     |  |                                  |  |        |           |  |   |            |  |  |                       |     |  |           |  |        |  |  |   |      | 
|Options to acquire common stock |  |                                  |    |  |                                  |  | 147    |           |  |   |           |  |  |                       |    |  |           |  | 178    |  |  |   |     | 
|                                |  |                                  |     |  |                                  |  |        |           |  |   |            |  |  |                       |     |  |           |  |        |  |  |   |      | 
|Diluted net income per share    |  | $                                | 403 |  |                                  |  | 18,613 |           |  | $ | 0.02       |  |  | $                     | 483 |  |           |  | 18,643 |  |  | $ | 0.03 | 
|                                |  |                                  |     |  |                                  |  |        |           |  |   |            |  |  |                       |     |  |           |  |        |  |  |   |      | 

All stock options with an exercise price greater than the average market share price for the period are
assumed to have an anti-dilutive effect on net income per share. Because of their anti-dilutive effect on the net income per share recorded in each of the periods presented, the diluted share base excludes incremental shares related to 1,714 and
1,853 employee stock options for the three months ended March 31, 2011 and 2010, respectively.

Stock-Based
Employee Compensation We account for stock-based employee compensation under the CompensationStock Compensation Topic of the FASB Standards Codification. The weighted average grant-date fair value of the options granted during
the three months ended March 31, 2011, calculated using the Black-Scholes model, ranged from $0.47 to $0.58. The weighted average grant-date fair value of the options granted during the three months ended March 31, 2010, calculated using
the Black-Scholes model, ranged from $0.66 to $0.70.

The following assumptions were used for grants in the three months ended
March 31, 2011: dividend yield of zero, volatility of 153.2% to 192.6%, risk-free interest rate of 0.59% to 3.39%, 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, 2010: dividend yield of zero, volatility of 133.5% to 175.8%, risk-free interest rate of 0.82% to 1.96%, and an expected life of 2.00 to 4.25 years. Volatility is based on the volatility of our stock. We use historical data to
estimate the expected life and employee termination assumptions in our accounting under the FASBs guidance. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant over the expected life of the
grant.

The following table summarizes stock options outstanding as of March 31, 2011, as well as activity during the
three months then ended:



|                         |  |         |           |   |                              |   |      | 
|------------------------ |  | ------- | --------- | - | ---------------------------- | - | ---- | 
|                         |  | Options |           |   | WeightedAverageExercisePrice |  
|Outstanding at January 1 |  |         | 2,339,000 |   |                              | $ | 3.04 | 
|Granted                  |  |         | 185,000   |   |                              |   | 0.64 | 
|Cancelled                |  |         | (85,000   | ) |                              |   | 2.05 | 
|                         |  |         |           |   |                              |   |      | 
|Outstanding at March 31  |  |         | 2,439,000 |   |                              | $ | 2.89 | 
|                         |  |         |           |   |                              |   |      | 

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, 2011, the aggregate intrinsic value of options outstanding was $174 with a weighted average remaining contractual term of 7.0 years; the aggregate intrinsic value of the 1,646,250 options
exercisable was $76 with a weighted average exercise price of $3.96 and a weighted average remaining contractual term of 6.3 years; and the aggregate intrinsic value of the 2,180,466 options vested or expected to vest was $155 with a weighted
average exercise price of $2.89 and a weighted average remaining contractual term of 7.0 years.



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##### Table of Contents

The following table summarizes unvested stock options outstanding as of March 31, 2011,
as well as activity during the three months then ended:



|                         |  |         |          |   |                                     |   |      | 
|------------------------ |  | ------- | -------- | - | ----------------------------------- | - | ---- | 
|                         |  | Options |          |   | WeightedAverageGrant-DateFair Price |  
|Outstanding at January 1 |  |         | 835,251  |   |                                     | $ | 0.84 | 
|Granted                  |  |         | 185,000  |   |                                     |   | 0.64 | 
|Cancelled                |  |         | (45,000  | ) |                                     |   | 1.05 | 
|Vested                   |  |         | (182,500 | ) |                                     |   | 1.14 | 
|                         |  |         |          |   |                                     |   |      | 
|Outstanding at March 31  |  |         | 792,751  |   |                                     | $ | 0.71 | 
|                         |  |         |          |   |                                     |   |      | 

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, 2011, total unrecognized compensation cost related to nonvested stock options was approximately $159. 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, 2011 and 2010, our total stock-based compensation credit was $13 and $54, respectively.

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



|                                  |  |                              |     |   |      |   |     | 
|--------------------------------- |  | ---------------------------- | --- | - | ---- | - | --- | 
|                                  |  | Three Months EndedMarch 
31, |    
|                                  |  | 2011                         |     |   | 2010 |  
|Net income                        |  | $                            | 403 |   |      | $ | 483 | 
|Cumulative translation adjustment |  |                              | (29 | ) |      |   | 161 | 
|                                  |  |                              |     |   |      |   |     | 
|                                  |  |                             
|Total comprehensive income        |  | $                            | 374 |   |      | $ | 644 | 
|                                  |  |                              |     |   |      |   |     | 

Statement of Cash FlowsCash paid for interest was $192 and $167 for the three months
ended March 31, 2011 and 2010, respectively. Cash paid for income taxes was $32 and $44 for the three months ended March 31, 2011 and 2010, respectively. We had accrued capital expenditures of $15 and $1 at March 31, 2011 and 2010,
respectively.

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

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



|                               |  |                             |        |  |      |   |        | 
|------------------------------ |  | --------------------------- | ------ |  | ---- | - | ------ | 
|                               |  | Three Months
EndedMarch 31, |       
|                               |  | 2011                        |        |  | 2010 |  
|Transaction processing         |  | $                           | 9,995  |  |      | $ | 11,616 | 
|Data intelligence              |  |                             | 2,430  |  |      |   | 2,978  | 
|                               |  |                             |        |  |      |   |        | 
|Transaction and other revenues |  |                             | 12,425 |  |      |   | 14,594 | 
|Client reimbursements          |  |                             | 173    |  |      |   | 84     | 
|                               |  |                             |        |  |      |   |        | 
|Total                          |  | $                           | 12,598 |  |      | $ | 14,678 | 
|                               |  |                             |        |  |      |   |        | 

The following is a geographic breakdown of revenues for the three months ended March 31, 2011 and 2010,
and a geographic breakdown of property and equipment, net at March 31, 2011 and December 31, 2010:



|                    |  |                             |        |  |      |   |        | 
|------------------- |  | --------------------------- | ------ |  | ---- | - | ------ | 
|                    |  | Three Months
EndedMarch 31, |       
|                    |  | 2011                        |        |  | 2010 |  
|Revenues:           |  |                             |        |  |      |   |        | 
|United States       |  | $                           | 8,488  |  |      | $ | 10,648 | 
|Germany             |  |                             | 3,086  |  |      |   | 2,823  | 
|Other International |  |                             | 1,024  |  |      |   | 1,207  | 
|                    |  |                             |        |  |      |   |        | 
|Total               |  | $                           | 12,598 |  |      | $ | 14,678 | 
|                    |  |                             |        |  |      |   |        | 



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##### Table of Contents

|                             |  |                   |       |  |                      |   |       | 
|---------------------------- |  | ----------------- | ----- |  | -------------------- | - | ----- | 
|                             |  | At March 
31,2011 |       |  | At December 
31,2010 |  
|Property and equipment, net: |  |                   |       |  |                      |   |       | 
|United States                |  | $                 | 4,788 |  |                      | $ | 5,266 | 
|Germany                      |  |                   | 306   |  |                      |   | 277   | 
|Other International          |  |                   | 213   |  |                      |   | 200   | 
|                             |  |                   |       |  |                      |   |       | 
|                             |  | $                 | 5,307 |  |                      | $ | 5,743 | 
|                             |  |                   |       |  |                      |   |       | 

LitigationWe are involved in a few claims incidental to our business. Management
has provided for such legal claims when, in the opinion of management, a loss is probable and estimable. At March 31, 2011, no such legal proceedings, individually or in the aggregate, are material to the condensed consolidated financial
statements.

2. DEBT

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



|                        |  |              |            |  |               |   |       |                  |  |   |       | 
|----------------------- |  | ------------ | ---------- |  | ------------- | - | ----- | ---------------- |  | - | ----- | 
|                        |  | MaturityDate |            |  | March 31,2011 |   |       | December 31,2010 | 
|Note payable            |  |              | April 2011 |  |               | $ | 292   |                  |  | $ | 583   | 
|Revolver                |  |              | June 2012  |  |               |   | 2,500 |                  |  |   | 4,200 | 
|                        |  |              |            |  |               |   |       |                  |  |   |       | 
|Total                   |  |              |            |  |               |   | 2,792 |                  |  |   | 4,783 | 
|Less current maturities |  |              |            |  |               |   | 292   |                  |  |   | 583   | 
|                        |  |              |            |  |               |   |       |                  |  |   |       | 
|Long-term debt          |  |              |            |  |               | $ | 2,500 |                  |  | $ | 4,200 | 
|                        |  |              |            |  |               |   |       |                  |  |   |       | 

Our note payable relates to partial consideration for the acquisition of certain assets and the assumption
of certain liabilities of Hi-Mark, LLC. Hi-Mark was principally owned by Kevin Austin, our Executive Vice President of TRAVELTRAX. Our quarterly principal payments are approximately $300 plus interest at a fixed annual rate of 8.0%. This note
matured and was paid in April 2011. During the three months ended March 31, 2011, we made principal and interest payments of $292 and $12, respectively, compared to $292 and $35, respectively, during the three months ended March, 31,
2010.

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

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

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

Our financial
statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Our ability to
continue as a going concern is dependent on having sufficient liquidity for our operations. We are currently in compliance with all financial covenants in the credit agreement. As of March 31, 2011, we have borrowed $2,500 against the facility
and there was a $1,500 letter of credit against this facility relating to the lease of our Atlanta office, leaving $6,000 that is currently available for borrowing. As of March 31, 2011, the interest rate on our outstanding borrowings was
4.25%. We expect to remain in compliance with all financial covenants over the remaining term of our revolving credit facility with ACB, however, we acknowledge that market conditions remain uncertain, and, as such, can provide no assurances that we
will remain in compliance. We monitor our expected



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##### Table of Contents

debt compliance and believe we would have time to further reduce our expenses and/or capital expenditures if needed to remain in compliance. If we are not successful in maintaining our debt
compliance, ACB as lender is entitled to enforce the guarantee under our credit facility. Management believes that the existing cash on hand, availability under the credit agreement and cash flow from operations will provide the needed liquidity to
fund operations sufficient to continue as a going concern.

3. RELATED-PARTY TRANSACTIONS

BCD Travel is majority-owned by the parent of our majority shareholder, BCD Holdings. Effective January 1, 2009, the existing Amended
and Restated Master Agreement between TRX Technology Services, L.P. (TRX Technology) and BCD Travel was extended for the period January 1, 2009 through August 31, 2009 for reservation processing services only. A separate three
year agreement (the BCD Agreement) with an effective date of January 1, 2009 was entered into between the parties for online booking services. Effective January 1, 2011, the BCD Agreement was extended to January 1, 2015
and updated certain pricing and other terms under the BCD Agreement. During the three months ended March 31, 2011 and 2010, we recognized transaction and other revenues from BCD Travel, totaling $316 and $353, respectively. At March 31,
2011 and December 31, 2010, respectively, $103 and $107 was receivable from BCD Travel.

Airtrade International, Inc.
(Vayama) is majority-owned by the parent of our majority shareholder, BCD Holdings. The agreement between TRX Technologies India PVT Ltd. and Vayama, dated February 15, 2009 and amended on February 17, 2010, was entered into
between the parties for travel management services and was effective January 28, 2010 through November 19, 2010. During the three months ended March 31, 2011 and 2010, we recognized transaction and other revenues from Vayama totaling
$15 and $203, respectively. At March 31, 2011 and December 31, 2010, respectively, $4 and $278 was receivable from Vayama.



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##### 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, 2011 and 2010. Also discussed is our financial position as of March 31, 2011. You should read this discussion in conjunction with our unaudited condensed consolidated financial statements and the notes to those
unaudited condensed consolidated financial statements included elsewhere in this report and the audited consolidated financial statements in our Annual Report on Form 10-K. This Managements Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements. See Cautionary Notice Regarding Forward-Looking Statements for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

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

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

A significant portion of our revenue is derived
from long-term contracts with several large clients. Our largest client, Expedia and its affiliates, accounted for 43% and 44% of our total revenues in the three months ended March 31, 2011 and 2010, respectively.

Expedia has been a client since its launch in 1996. In 2006, we replaced our existing contracts with Expedia with a Master Services
Agreement (the Expedia Agreement). The Expedia Agreement is amended from time to time and now continues through December, 31 2012. We expect that 2011 revenues from Expedia will be approximately $10 million less than their 2010 level. We
can give no assurance that we will retain any business from Expedia during the current contract term or beyond.

In general,
reduced airline capacity results in lower transaction volumes for us. Based on our expectation of reduced revenues from Expedia and from lower transaction volumes generally, it is likely that our revenues, operating results and cash flows
will be adversely impacted and the impact will be material, unless sufficiently offset by new revenue growth, further cost reductions, or a combination of the two.

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

Effective January 1, 2009, the agreement between TRX Technology and BCD Travel (the BCD
Agreement) was entered into between the parties for online booking services. Effective January 1, 2011, the BCD Agreement was extended to January 1, 2015 and updated certain pricing and other terms under the BCD Agreement.

Industry factors impacting our operating results include the channel shifts toward online bookings and direct distribution,
cost compression in the travel processing supply chain, use of corporate credit cards, reduction in airline seat capacity, changing and increasing access methods to reach supplier inventory, reduction in supplier commission rates, global
distribution system (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.



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##### 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 unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q and described in our Form 10-K for the year ended December 31, 2010, 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 when certain other consulting or other services are combined with our transaction processing revenues and when all of the following have occurred: (1) persuasive evidence of an
arrangement exists, (2) services have been performed, (3) the fee for services is fixed or determinable, and (4) collectability is reasonably assured. Generally, these criteria are considered to have been met as follows:



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



| |  |  | for short-term client-specific customizations, which do not generate direct on-going incremental transaction revenue, when the customization has been
delivered to our 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Internal-Use Software Development Costs. We account for internal-use software development costs in accordance with the applicable guidance which 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 and other intangible assets. Goodwill represents the excess of the purchase price over the fair value of assets acquired.
We record goodwill related to earnout payments on a previous business acquisition transaction. Since there was no improvement in our financial outlook subsequent to our full goodwill impairment in March 2009, such goodwill related to those earnout
payments was also impaired in that same period, and is included in Impairment of goodwill in our unaudited condensed consolidated statements of operations. We expect to record additional goodwill impairment charges through
December 31, 2011 for future earnout payments associated with this business acquisition transaction, until our financial outlook sufficiently improves to justify the recording of a goodwill asset.

Impairment of long-lived assets. We regularly evaluate whether events and circumstances have occurred that indicate whether the
carrying amount of property and equipment and other intangible assets may warrant revision or may not be recoverable. When factors indicate that such long-lived assets should be evaluated for recoverability, we assess the recoverability by
determining whether the carrying value of such long-lived assets will be recovered through the future undiscounted cash flows expected from the use of the asset and its eventual disposition. We assessed indicators to determine whether the carrying
values of long-lived assets, including property and equipment and other intangible assets should be impaired and determined that no impairment was required at December 31, 2010.

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 approximately $24 and $25 during the three months ended March 31, 2011 and 2010, respectively, and are included as operating expenses in our unaudited condensed
consolidated statements of operations. We expect transaction processing provisions to continue to decrease as we reduce our volume associated with this activity.



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##### Table of Contents

Results of Operations

Comparison of Three Months Ended March 31, 2011 and March 31, 2010

The following tables set forth comparative revenue and expense items by type, in dollars and as a percentage of transaction and other revenue, for the three months ended March 31, 2011 and 2010,
respectively:



|                                     |  |                              |        |   |      |  |     |        |  |   |        |   |  |  |     |   |  |   |        |   |  |  |     |   
|------------------------------------ |  | ---------------------------- | ------ | - | ---- |  | --- | ------ |  | - | ------ | - |  |  | --- | - |  | - | ------ | - |  |  | --- | --
|                                     |  | Three Months Ended March 31, |       
|                                     |  | 2011                         |        |   | 2010 |  |     | Change | 
|                                     |  | (dollars in thousands)       |       
|Revenue:                             |  |                              |        |   |      |  |     |        |  |   |        |   |  |  |     |   |  |   |        |   |  |  |     |   
|Transaction processing               |  | $                            | 9,995  |   |      |  | 80  | %      |  | $ | 11,616 |   |  |  | 80  | % |  | $ | (1,621 | ) |  |  | (14 | )%
|Data intelligence                    |  |                              | 2,430  |   |      |  | 20  |        |  |   | 2,978  |   |  |  | 20  |   |  |   | (548   | ) |  |  | (18 | ) 
|                                     |  |                              |        |   |      |  |     |        |  |   |        |   |  |  |     |   |  |   |        |   |  |  |     |   
|Transaction and other revenues       |  |                              | 12,425 |   |      |  | 100 | %      |  |   | 14,594 |   |  |  | 100 | % |  |   | (2,169 | ) |  |  | (15 | )%
|Client reimbursements                |  |                              | 173    |   |      |  |     |        |  |   | 84     |   |  |  |     |   |  |   |        |   |  |  |     |   
|                                     |  |                              |        |   |      |  |     |        |  |   |        |   |  |  |     |   |  |   |        |   |  |  |     |   
|Total revenues                       |  |                              | 12,598 |   |      |  |     |        |  |   | 14,678 |   |  |  |     |   |  |   |        |   |  |  |     |   
|Expenses:                            |  |                              |        |   |      |  |     |        |  |   |        |   |  |  |     |   |  |   |        |   |  |  |     |   
|Operating                            |  |                              | 7,801  |   |      |  |     |        |  |   | 8,552  |   |  |  |     |   |  |   | (751   | ) |  |  | (9  | ) 
|Selling, general, and administrative |  |                              | 2,050  |   |      |  |     |        |  |   | 3,046  |   |  |  |     |   |  |   | (996   | ) |  |  | (33 | ) 
|Technology development               |  |                              | 818    |   |      |  |     |        |  |   | 951    |   |  |  |     |   |  |   | (133   | ) |  |  | (14 | ) 
|Client reimbursements                |  |                              | 173    |   |      |  |     |        |  |   | 84     |   |  |  |     |   |  |   | 89     |   |  |  | 106 |   
|Impairment of goodwill               |  |                              | 64     |   |      |  |     |        |  |   | 89     |   |  |  |     |   |  |   | (25    | ) |  |  | (28 | ) 
|Depreciation and amortization        |  |                              | 995    |   |      |  |     |        |  |   | 1,030  |   |  |  |     |   |  |   | (35    | ) |  |  | (3  | ) 
|Interest (expense) income:           |  |                              |        |   |      |  |     |        |  |   |        |   |  |  |     |   |  |   |        |   |  |  |     |   
|Interest income                      |  |                              | 2      |   |      |  |     |        |  |   | 6      |   |  |  |     |   |  |   | (4     | ) |  |  | (67 | ) 
|Interest expense                     |  |                              | (133   | ) |      |  |     |        |  |   | (184   | ) |  |  |     |   |  |   | (51    | ) |  |  | (28 | ) 
|Income tax provision                 |  |                              | 163    |   |      |  |     |        |  |   | 265    |   |  |  |     |   |  |   | (102   | ) |  |  | (38 | ) 
|                                     |  |                              |        |   |      |  |     |        |  |   |        |   |  |  |     |   |  |   |        |   |  |  |     |   
|                                     |  |                              |        |   |      | 
|Net income                           |  | $                            | 403    |   |      |  |     |        |  | $ | 483    |   |  |  |     |   |  |   |        |   |  |  |     |   
|                                     |  |                              |        |   |      |  |     |        |  |   |        |   |  |  |     |   |  |   |        |   |  |  |     |   

Transaction processing revenues. The decrease for the three months ended March 31,
2011 compared to the same period in the prior year was primarily due to the decreased scope of services and/or pricing provided to Expedia and American Express. We expect revenues per transaction to continue to decline in the future because of
scaled pricing we offer to clients for increased volume, as well as trends in the travel processing supply chain that are putting negative pressure on our revenue per transaction.

Data intelligence revenues. The decrease in data intelligence revenues for the three months ended March 31, 2011 compared to
the same period in the prior year was primarily due to lower consulting and other nonrecurring activities, partially offset by growth with new and existing recurring clients. We expect growth in data intelligence revenues based on recent sales
activity and market interest in these products and services.

Operating expenses. The decrease in operating expenses
for the three months ended March 31, 2011 compared to the same period in the prior year was primarily due to personnel-related reductions.

Selling, general and administrative expenses. The decrease in selling, general and administrative expenses for the three months ended March 31, 2011 compared to the same period in the prior
year was primarily due to reduced personnel-related costs and a credit to the bad debt provision in 2011 as a result of improved collections.

Technology development expenses. The decrease in technology development expense for the three months ended March 31, 2011 compared to the same period in the prior year was primarily due to
personnel-related reductions.

Depreciation and amortization. The depreciation and amortization expense remained
relatively constant for the three months ended March 31, 2011 and 2010.

Interest income. The decrease for the
three months ended March 31, 2011 compared to the same period in the prior year was primarily due to reduced average cash balances available for investment.

Interest expense.The decrease for the three months ended March 31, 2011 compared to the same period in the prior year was primarily due to lower principal balance related to our Hi-Mark note
payable as we pay down the principal balance of the note.



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Income tax provision. The decrease in the income tax provision for the three months
ended March 31, 2011 compared to the same period in the prior year was primarily due to a change in the mix of pretax income between our US and international operations.

Liquidity and Capital Resources

We fund our ongoing operations primarily
with cash from operating activities. The underlying drivers of cash from operating activities include cash receipts from the sale of our 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, 2011, our principal sources of liquidity were cash and cash equivalents of $2.6 million and $6.0 million of
availability under our revolving credit facility with Atlantic Capital Bank (ACB). We had $2.5 million of borrowings outstanding under our credit facility at March 31, 2011. Neither our access to nor the value of our cash
equivalents have been negatively affected by the liquidity problems of financial institutions. Although we have been prudent in our strategy for our anticipated near-term liquidity needs, it is not possible to accurately predict how macroeconomic
conditions may affect our financial position, results of operations or cash flows. Additional failures of financial and other institutions could impact our customers ability to pay us, reduce amounts available under our credit facility, cause
losses to the extent cash amounts or the value of securities exceed government deposit insurance limits, and restrict our access to the equity and debt markets. A continuation of the turmoil in the capital and credit markets and the general economic
downturn could adversely impact the availability, terms and/or pricing of financing if we need additional liquidity. We will experience liquidity problems if we are unable to obtain sufficient additional financing as our debt becomes
due. Adverse economic conditions, increased competition, or other unfavorable events also could affect our liquidity.

Our credit agreement with ACB matures June 30, 2012. We plan to begin negotiations on an extension of our credit agreement prior to
its maturity.

Net cash provided by operating activities was $2.5 million during the three months ended March 31, 2011,
compared to net cash used in operating activities of $0.4 million during the three months ended March 31, 2010. The increase in cash provided was primarily due to improved collections and the return of a deposit related to relocating our
Bangalore, India operations center.

Net cash used in investing activities was $0.6 million during the three months ended
March 31, 2011, compared to $1.1 million during the three months ended March 31, 2010. The driver of our investing activities is our capital expenditures, which include costs associated with internally developed software, as well as
infrastructure required to support and maintain our existing systems and opportunities to reduce costs. As of March 31, 2011, we had no material commitments related to capital expenditures. We expect our 2011 capital expenditures will be
approximately five percent of revenues, or $2.5 million.

Net cash used in financing activities was $2.0 million during the
three months ended March 31, 2011, compared to net cash provided by financing activities of $1.8 million during the three months ended March 31, 2010. The primary driver for 2011 was less borrowings under our credit facility.

We believe that we will be able to meet our current and long-term liquidity and capital requirements, including fixed charges, through
our cash flow from operations and other available sources of liquidity, including borrowings under the credit agreement and through our ability to obtain future external financing. We expect to continue to use a portion of our cash flows to fund our
strategic capital expenditures, to invest in business opportunities and to meet our debt repayment obligations. Our financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Our ability to continue as a going concern is dependent on having sufficient liquidity for our operations. We are currently in compliance
with all financial covenants in the credit agreement. As of March 31, 2011, we have borrowed $2.5 million against the facility and there was a $1.5 million letter of credit against this facility relating to the lease of our Atlanta office,
leaving $6.0 million that is currently available for borrowing. As of March 31, 2011, the interest rate on our outstanding borrowings was 4.25%. We expect to remain in compliance with all financial covenants over the remaining term of our
revolving credit facility with ACB, however, we acknowledge that market conditions remain uncertain, and, as such, can provide no assurances that we will remain in compliance. We monitor our expected debt compliance and believe we would have time to
further reduce our expenses and/or capital expenditures if needed to remain in compliance. If we are not successful in maintaining our debt compliance, ACB as lender is entitled to enforce the guarantee under our credit facility. Management believes
that the existing cash on hand, availability under the credit agreement and cash flow from operations will provide the needed liquidity to fund operations sufficient to continue as a going concern. The credit agreement requires us to maintain
(i) a ratio of consolidated funded indebtedness to consolidated EBITDA (as defined in the credit agreement, which may not be comparable to consolidated total debt or measures of GAAP profitability presented elsewhere in this document) of not
more than 1.75 to 1.00 and (ii) a ratio of the remainder of consolidated EBITDA minus capital expenditures to the sum of interest expense for the period and debt principal payments required to be made in the next twelve months of not more than
1.40 to 1.00. The credit agreement also contains additional covenants which, among other things, require us to deliver to ACB specified financial information, including annual and quarterly financial information, and limit our ability to (or to
permit any subsidiaries to), subject to various exceptions and limitations, (i) merge with other companies, (ii) create liens on our property, (iii) incur debt obligations, (iv) enter into transactions with affiliates, except on
an arms-length basis, (v) dispose of property, or (vi) pay dividends.



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Seasonality

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

Inflation and Changing Prices

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

Cautionary Notice Regarding Forward-Looking Statements

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

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

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



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



| |  |  | volatility in the number of transactions we service;
| | - |  | ----------------------------------------------------



| |  |  | failure or interruptions of our software, hardware or other systems;
| | - |  | --------------------------------------------------------------------



| |  |  | industry declines and other competitive pressures; and
| | - |  | ------------------------------------------------------



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

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



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|Item 4T. | Controls and Procedures
|-------- | -----------------------

(a)
Evaluation of Disclosure Controls and Procedures

Our management, including our principal executive officer and principal
financial officer, concluded an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2011. Our evaluation tested controls and other procedures designed to ensure that information required to be disclosed by
us in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Based on
our evaluation, as of March 31, 2011, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective.

(b) Changes in Internal Control over Financial Reporting

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

PART II  OTHER INFORMATION



|Item 1A. | Risk Factors
|-------- | ------------

The risk
factors that could have a negative impact on our business, revenues and performance results remain the same as presented in our annual report on Form 10-K, filed on March 1, 2011, under Item 1A, Risk Factors.



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



|            |  |                                                                                                                                                                                                                                                    
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
No. |  | Description                                                                                                                                                                                                                                        
|            | 
|10.1        |  | Fourth Letter of Amendment to the Master Services Agreement between TRX, Inc. and Expedia, Inc., effective January 1, 2011(filed as Exhibit 10.30 to our Annual Report on Form 10-K,
filed on March 1, 2011 and incorporated herein by reference).*
|            | 
|10.2        |  | Amended and Restated Statement of Work for Contact Center Services pursuant to the Master Services Agreement between TRX, Inc. and Expedia, Inc., effective January 1, 2008.
*                                                                    
|            | 
|10.3        |  | Amendment #1 to the Amended and Restated Statement of Work for Contact Center Services pursuant to the Master Services Agreement between TRX, Inc. and Expedia, Inc., effective
January 1, 2011. *                                                
|            | 
|10.4        |  | RESX Distributor Agreement between TRX Technology Services, L.P. and BCD Travel USA LLC, effective as of January 1, 2009. *                                                                                                                       
|            | 
|10.5        |  | Amendment #1 to the RESX Distributor Agreement between TRX Technology Services, L.P. and BCD Travel USA LLC, effective as of January 1, 2011. *                                                                                                   
|            | 
|10.6        |  | Statement of Work #7 to the Amended and Restated Master Service Agreement for Application Service Provider between TRX, Inc. and American Express Travel Related Services Company,
Inc., effective February 18, 2011.*                            
|            | 
|31.1        |  | Certification of H. Shane Hammond, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                            
|            | 
|31.2        |  | Certification of David D. Cathcart, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                           
|            | 
|32.1        |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                          



| | Filed herewith.
|- | ---------------

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



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



|                    |  |           |  |                                                                     
|------------------- |  | --------- |  | --------------------------------------------------------------------
|                    |  | TRX, INC.
|                    |  |          
|Dated: May 16, 2011 |  | By:       |  | /s/ David D. Cathcart                                               
|                    |  |           |  | David D. Cathcart                                                   
|                    |  |           |  | Chief Financial Officer
(principal financial and accounting officer)



17