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##### Index to Financial Statements





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K







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

For the fiscal year ended December 31, 2007

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. EmployerIdentification No.)



|                                           |  |           
|------------------------------------------ |  | ----------
|6 West Druid Hills Drive, Atlanta, Georgia |  | 30329     
|(Address of principal executive offices)   |  | (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:



|                                       |  |                                          
|-------------------------------------- |  | -----------------------------------------
|Title of each class                    |  | Name of each exchange on which registered
|Common Stock, $.01 par value per share |  | NASDAQ Global Market                     

Securities registered pursuant to Section 12(g) of the Act:

None





Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes   ̈    No  x

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 if
disclosure of delinquent filer pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

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 definition of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer   ̈    Accelerated filer   ̈    Non-accelerated filer   ̈    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

As of June 30, 2007, the aggregate market value of the registrants voting stock held by non-affiliates based on the closing price of $3.34 per
share was approximately $25.0 million.

The number of shares of the registrants common stock outstanding at February 1, 2008 was
18,320,383 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Specifically identified portions of the registrants Proxy Statement for the 2008 Annual Meeting of Shareholders are incorporated by reference in Part III of this Annual Report on Form 10-K.









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TRX, INC.

2007 FORM 10-K

TABLE OF CONTENTS



|             |  |                                                                                                              |  |           
|------------ |  | ------------------------------------------------------------------------------------------------------------ |  | ----------
|Item Number  |  |                                                                                                              |  | PageNumber
|             |  |                                                                                                             
|             |  | PART I                                                                                                       |  |           
|             |  |                                                                                                             
|ITEM 1.      |  | BUSINESS                                                                                                     |  | 1         
|             |  |                                                                                                             
|ITEM 1A.     |  | RISK FACTORS                                                                                                 |  | 10        
|             |  |                                                                                                             
|ITEM 1B.     |  | UNRESOLVED STAFF COMMENTS                                                                                    |  | 19        
|             |  |                                                                                                             
|ITEM 2.      |  | PROPERTIES                                                                                                   |  | 19        
|             |  |                                                                                                             
|ITEM 3.      |  | LEGAL PROCEEDINGS                                                                                            |  | 19        
|             |  |                                                                                                             
|ITEM 4.      |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                          |  | 19        
|             |  |                                                                                                             
|             |  | PART II                                                                                                      |  |           
|             |  |                                                                                                             
|ITEM 5.      |  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 19        
|             |  |                                                                                                             
|ITEM 6.      |  | SELECTED FINANCIAL DATA                                                                                      |  | 20        
|             |  |                                                                                                             
|ITEM 7.      |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |  | 22        
|             |  |                                                                                                             
|ITEM 7A.     |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                   |  | 33        
|             |  |                                                                                                             
|ITEM 8.      |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                  |  | 34        
|             |  |                                                                                                             
|ITEM 9.      |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         |  | 57        
|             |  |                                                                                                             
|ITEM 9A (T). |  | CONTROLS AND PROCEDURES                                                                                      |  | 57        
|             |  |                                                                                                             
|ITEM 9B.     |  | OTHER INFORMATION                                                                                            |  | 57        
|             |  |                                                                                                             
|             |  | PART III                                                                                                     |  |           
|             |  |                                                                                                             
|ITEM 10.     |  | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                       |  | 58        
|             |  |                                                                                                             
|ITEM 11.     |  | EXECUTIVE COMPENSATION                                                                                       |  | 58        
|             |  |                                                                                                             
|ITEM 12.     |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS               |  | 58        
|             |  |                                                                                                             
|ITEM 13.     |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                    |  | 58        
|             |  |                                                                                                             
|ITEM 14.     |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                       |  | 58        
|             |  |                                                                                                             
|             |  | PART IV                                                                                                      |  |           
|             |  |                                                                                                             
|ITEM 15.     |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                   |  | 59        
|             | 
|SIGNATURES   |  | 60                                                                                                          



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PART I



|Item 1. | Business
|------- | --------

Cautionary Notice Regarding Forward-Looking Statements

Certain statements in this Annual Report on Form 10-K 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 annual 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 and as are detailed from time to
time in other reports we file with the SEC, which may cause our actual results to differ materially from any forward-looking statement:



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



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



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



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



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

Any subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety
by the cautionary statements set forth or referred to above, as well as the risk factors contained in our Registration Statement. 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.

Company Overview

TRX is a global technology company. We develop and host software applications to automate manual processes and track transaction data, enabling
our clients to optimize performance and control costs. We are a leading provider to the travel industry and expect to eventually include growth in industries beyond travel, such as financial services and health care. For the foreseeable future, we
intend to focus our efforts on the large opportunities within the travel industry. We deliver our technology applications as a service over the Internet to travel agencies, corporations, travel suppliers, government agencies, credit card
associations, credit card issuing banks, and third-party administrators. TRX is headquartered in Atlanta, Georgia with operations and associates in North America, Europe, and Asia.



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Our data reporting technologies allow our clients to use information from multiple and disparate sources
to gain new visibility, and to make better decisions, faster. We collect data for our clients in any format from anywhere in the world, and then normalize, validate, and translate this data into client-requested formats. The ability to view data
from disparate sources in a consistent, useable format on a timely basis is increasingly important to our target market. The increased use of the Internet as a preferred distribution channel and deregulation of GDS (global distribution system) rules
has caused suppliers to shift inventory between different systems and channels, particularly during 2006. We believe this trend has led to a splintering of inventory sources, and the dynamics will continue to evolve toward increasingly fractured
data sources for the foreseeable future. We believe that the importance of our data reporting services to our target market has increased and will continue to do so.

We generate economies of scale in our reservation processing and online booking applications by combining transactions from numerous clients. Our clients leverage our aggregated transaction volume to shift a portion
of their fixed costs to a more flexible, variable structure. Our scale, combined with our focus on process reengineering and automation, helps our clients reduce travel-related costs on an ongoing basis. We believe our scale cannot be achieved
internally by our clients and is not currently available from a single travel supplier, agency, or electronic travel distribution system.

We target clients in four areas: travel agencies, travel suppliers, corporations, and credit card issuers. During the year ended December 31, 2007, we served more than 280 clients. Our client base includes global leaders in the markets
we serve, including American Airlines, Inc., American Express Travel Related Services Company, Inc., Citibank, N.A. (Citibank), and Expedia, Inc. We provide support to the seven largest travel agencies in the world based on 2006 gross
sales as ranked by Travel Weekly.

We provide expertise in redesigning business processes and their associated systems and
resources. We offer our processing capabilities and process reengineering expertise through a comprehensive service offering of hosted technology applications. We provide each of our technology applications individually or as a comprehensive,
integrated end-to-end processing solution. As a result, we can add value and earn compensation at multiple points during the lifecycle of a single data record. Our clients typically pay us on a per-transaction basis. We have multi-year contracts
with minimum volume commitments based on each clients scale and expected growth rate.

During this decade, we have achieved
significant scale and experienced rapid growth as our transaction volumes and data records processed have increased. In 2007, we handled 85.7 million travel processing transactions, up from 9.3 million in 1999, representing a compound
annual growth rate of more than 32% during this time period. The growth in both transactions processed and data managed has helped us generate a 22% compound annual growth rate in revenue in our core transaction processing and data reporting
businesses over the last seven years, from $16.8 million in 1999 to $84.7 million in 2007. During 2007, we recognized revenue of $92.1 million, of which $16.4 million was generated outside the U.S. See Note 2 to our consolidated financial statements
in Item 8 of this Form 10-K for additional information about our geographical areas and business segment.

Corporate Background and History

Prior to January 1997, we conducted our business as a division and subsidiary of BCD Travel, formerly WorldTravel BTI, one of the largest
corporate travel agencies in the U.S. In January 1997, our business was transferred into a separate business organization. In 1999, TRX was incorporated as a Georgia corporation, and we acquired International Software Products, a data integration
provider. In 1999 and 2000, we established European joint ventures with Hogg Robinson International Benefits Ltd. and Kuoni Reisen Holding AG to support travel distribution throughout Europe. In January 2004, we purchased the remaining interests in
our European joint ventures. In addition, through a relationship with Siemens Shared Services, LLC (Siemens), we established operations in Bangalore, India in 2004 to support multiple processing activities and technology



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development functions. In December 2007, we acquired the workforce and certain property assets used by Siemens to provide services to TRX. We closed one
acquisition in August 2006 and a second acquisition in January 2007 to augment our data reporting offerings in the corporate market.

In
2004, we made a strategic decision to gradually transition away from providing call center services, and since then have closed or sold our call centers in France, Switzerland, England and the United States. On a selective basis, we may continue to
provide these services to clients as part of our offering. We work closely with selected partners to offer end-to-end solutions, including our reservation processing and data reporting services, along with call center services.

Industry Background

Overview

We are a leading technology provider to the travel industry, which is among the largest industries globally and is undergoing dramatic and rapid change.
Total annual air, lodging, car, cruise, rail and vacation package travel purchases in North America, Europe and Asia in 2006 were over $600 billion, according to PhoCusWright. The processes in these industries are complex and data-intensive. For
example, the transaction record associated with a single traveler may include 500 or more distinct data fields for each trip.

Rapidly
changing dynamics in the travel industry, including use of the Internet as a delivery mechanism, reduction in supplier commission payments, and deregulation of the GDSs, are driving the industry toward lower costs per transaction. Achieving a lower
per transaction cost is difficult due to the complexities and inefficiencies that exist throughout the travel transaction process (booking through settlement). We believe that automating the travel transaction process is difficult without
substantial scale, access to all processes and technology throughout the travel transaction lifecycle, travel industry knowledge and relationships, and travel process reengineering expertise. In addition, we believe industry participants are
challenged to reengineer their own cost structure while remaining focused on their core competencies and daily business objectives.

Current Trends

The rapid growth of self service online travel options has decreased the need for traditional travel agents functioning as
intermediaries to place orders for travelers with suppliers. Financial pressure on travel suppliers, particularly airlines, has driven investment in automation to decrease the distribution and fulfillment costs associated with travel transactions,
which in the past few years has resulted in market share gains by supplier websites at the expense of other online distribution channels.



| |  |  | Continued migration to online booking. The online travel market provides travelers with a convenient, price-transparent, and cost effective option for
researching and purchasing travel options. We expect the use of online booking technology to continue to grow inside and outside of the U.S. We expect this trend to continue in both of the two main segments of the travel market, leisure and
corporate.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Impact of GDS deregulation. GDS deregulation in the U.S. has given suppliers more flexibility in the distribution of their inventory. New GDS contract
agreements in 2006 resulted in buyers lowering their transaction costs and enabling greater access to both existing and new distribution channels, including supplier direct and GDS-alternatives. This reduction in transaction costs has had and will
have a resulting material effect on compression along the entire supply chain of a travel transaction, and since we derive revenue in this supply chain, we have experienced and expect to continue to experience negative pressure on our revenue earned
per transaction. Similar GDS deregulation may impact non-U.S. markets in the future.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Emphasis on policy compliance and rules management. In an effort to lower travel costs, companies often enter into preferred provider contracts with travel
suppliers and also establish corporate travel policies that require interpretation and enforcement on a real-time basis. The splintering of distribution,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | due in large part to the GDS deregulation and shift to supplier direct bookings noted above, increases the demand for comprehensive data reporting about
corporations travel spend.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Need to improve access to and usefulness of corporate data. Companies are generating data at a more rapid pace from a growing number of internal and external
sources, and managers need access to a consolidated view of this information in order to make timely, informed decisions.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Large sellers of travel, such as travel agencies, represent a significant segment of the travel industry and are a key client segment for us. We believe that industries with travel-related components, such as credit card issuers, are a
natural extension for our product and service offerings. We expect the need for products and services that address automation and data reporting for the travel industry to increase over time due to the trends outlined above, and for similar trends
to be evident in other industries as well.

Our Products and Services

We believe that our suite of products and services facilitates the distribution of travel in a cost-efficient manner and assists our clients in better managing the vast amounts of data generated by travel and
travel-related processes. Our clients are able to use our products and services individually or as a comprehensive, integrated end-to-end processing solution. We develop our products and services as hosted technologies. We believe that by hosting
solutions for our clients we can provide: lower costs per transaction, scalability of solutions, continuity of business, rapid product development, compliance with and adaptability to business rules, and speed to market.

Our hosted technology suite includes the following solutions:

Data Reporting enables the aggregation, enhancement, extraction, and reporting of transaction data. Our data reporting suite consolidates data records from a variety of sources, including credit card issuers, credit
card networks, back office travel systems, hotel suppliers, airlines, and GDSs, and normalizes those records into a common structure in a single data repository. It also enables enhancement of data records with more detailed transaction data from
other sources, increasing the value and utility of the data to our clients. We host the application, warehouse multi-terabytes of client data, deliver information electronically back to clients in any format, and provide Web-based access to our
hosted reporting and analysis tool. Clients include American Express Company, British Airways PLC, Citibank, UAL Corporation, MasterCard Inc., One Mind Connect, Carlson, United States General Services Administration and UBS AG.

Reservation Processing offers a suite of products that processes our clients travel data records in a cost efficient manner. Our CORREX product
enables automated quality control, file finishing, and electronic ticketing, including low fare searches, seat assignments, upgrades, and alternate route and carrier searches. We also handle multiple activities for our clients including exchanges,
refunds, waivers and split payments, commission management, fare loading, document distribution, debit memo processing, and back office hosting and settlement, with our TRANXACT tools. We offer our agency clients software functionality for exception
processing and agent workflow management and tracking with our SELEX tools. We host our Reservation Processing applications for our clients and provide access to them via the Internet. Our Reservation Processing services are in use by large travel
agencies, corporations and suppliers. Clients include American Airlines, Inc., American Express, BCD Travel, Boeing, Expedia, and Travel and Transport, Inc.

Online Booking offers a user-friendly, Web-based interface for business travelers and/or their travel arrangers to book policy-compliant air, car, and hotel reservations and manage their travel preferences. We host
the RESX Online Booking, RESX Profiler and RESX Agent Desktop applications for our clients and their customers and provide access to these applications via the Internet. We sell these tools to customers primarily through our distributor program that
supports corporate travel agencies. Online Booking clients and distributors include Adelman Travel Group, Carlson Travel Group, Inc., BCD Travel, and Travel and Transport, Inc.

See Note 2 to our consolidated financial statements in Item 8 of this Form 10-K for additional information about our products and services.



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Our Competitive Strengths

We believe our competitive strengths have enabled us to become a leading independent provider of data reporting, reservation processing and online booking technologies for the global travel industry and will continue
to enhance our leadership position and contribute to our growth in the future, both in travel and other industry channels. Those strengths include:



| |  |  | Independent, objective, and unbiased technology provider. We provide an objective and unbiased means to access travel inventory and integrate global data.
Our products and services provide quality control, ticketing, exception management, and reporting, whether a booking is generated from a GDS, a supplier, or an alternative travel source. We believe that shifting travel industry dynamics, in
particular GDS ownership or affiliation with online travel agencies and booking engines, have made our clients reluctant to adopt non-independent third-party processing solutions. We believe that independent non-GDS owned booking engines, such as
RESX, have increased their market share over the last several years. Additionally, our independence has allowed us to develop a service offering combining the data associated with corporate credit card transactions from multiple processors, with
travel data, such as hotel folio data and travel agency back office data, in order to deliver a comprehensive report to the issuer. We believe our independence provides clients with confidential and unbiased processing capabilities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expertise in automation and process reengineering. One of our core competencies is our ability to automate and reengineer complicated travel and
travel-related processes. We have multiple, dedicated teams developing products and services that meet the evolving needs of our clients. We continually reengineer our processes and related automation to provide technologically advanced solutions to
meet the complex needs of our clients.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Leading market position in the global travel market. In 2007, we processed 85.7 million travel processing transactions for our clients. We service
travel agencies with locations on six continents. In the U.S., we have contracts with all of the top five travel agencies (traditional and online) based on 2006 gross sales as ranked byTravel Weekly (June 2007). In Europe, we have contracts
with four of the top five online travel agencies based on 2006 gross bookings as ranked by PhoCusWright. We believe our transaction volumes give us a cost advantage and help us deliver cost savings to our clients. As we continue to grow, we expect
to realize additional cost savings and expertise, making us the partner of choice for an increasing number of companies. We also believe that our experience and reputation serving the global travel market enhances our ability to penetrate other
travel-related industries.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Established long-term partnerships. We have long-standing collaborative relationships with many travel industry leaders. Areas of collaboration include
technology, operations, and any other areas that are integral to our clients use of our products and services. By partnering with our clients, we are better able to understand their existing needs and can tailor our product development to
better anticipate future demands. We believe this approach improves the value proposition of our products and services to these clients. Many of our largest clients have a history of contract renewals and business expansion with us. Many of our
clients also commit to long-term contracts with us. For example, we have serviced and expanded our relationship with our largest client, Expedia, since 1996, and our current contract continues through 2010. We believe this is a testimony to our
ability to forge strong, lasting relationships with clients to create joint long-term value.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Core travel processing infrastructure. We offer multiple products and services that allow us to address specific client needs across the complete travel
transaction lifecycle. We believe that automating the travel transaction process is difficult without substantial scale, access to the processes and technology throughout the travel transaction lifecycle, relationships with industry participants,
and the travel reengineering expertise that we possess. Furthermore, we update and refine our products and services on a regular basis, using client and market feedback to develop new improvements. Our ability to offer a flexible end-to-end solution
allows us to provide additional products and services to our existing clients on an individual basis or as part of an integrated solution.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Our Growth Strategy

We aim to capitalize on the broad industry trends, both in the U.S. and abroad, that affect our global travel and travel-related business, as well as act on our own insights to strengthen our global market position,
through the following strategies:



| |  |  | Expand the use of our data reporting technologies. We believe both purchasers and sellers of travel and travel-related products and services have an
increasing desire to consolidate and enhance disparate data in order to make better business decisions. We intend to broadly offer our existing and new technologies to those companies globally that would benefit from our independence and our
expertise in travel combined with our data reporting capabilities. We expect this expansion to eventually include growth in industries beyond travel, such as financial services and health care. For the foreseeable future, we intend to focus our
efforts on the large opportunities within the travel industry.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increase our client base. We believe that our existing and new data reporting technologies enable us to provide valuable services to a very large number of
corporations. We penetrated this large corporate market primarily in the U.S. beginning in 2007, and expect to expand globally as we enter 2008. We believe that increasing the number of users who interact with our technologies will lead to increased
adoption of our other products and services.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Capitalize on the continuing migration to online travel. We believe that there are significant opportunities to increase the number of transactions and our
market share in the online travel agency channel. Our relationships with global online agency market leaders, coupled with our corporate online booking technologies, have positioned us to take advantage of the continued migration of booking to the
online channel.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Grow revenues from traditional travel agencies. A number of large agencies operate on a decentralized basis using legacy systems that require substantial
manual labor. We believe that these companies will increasingly recognize that their decentralized legacy structures put them at a cost disadvantage, and that greater process efficiencies and technology will improve both service levels and margins.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Continue to enhance our technology offerings. We are focused on the early recognition of marketplace changes as well as the process reengineering and
automation of travel distribution to design products and services that meet the discrete needs of our client base. We offer these products and services as extensions to our existing product suite and cross-sell them to our clients. We intend to
continue to enhance and extend our offerings to allow our clients access to evolving travel technologies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pursue strategic relationships and acquisition opportunities. We intend to pursue strategic relationships with leaders in travel and travel-related
industries both in the U.S. and abroad. We believe these relationships will increase the number of users who interact with our technologies and will lead to increased adoption rates of our products and services. Also, we will selectively consider
acquisitions of, and investments in, companies that offer complementary products, services, and technologies that further enhance our business or broaden the scope of our product offerings.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Clients and Partners

During 2007, more than 280
financial institutions, travel agencies, and companies used our products and services. In 2007, we handled 85.7 million travel processing transactions, up from 9.3 million in 1999, representing a compound annual growth rate of 32% during
this time period. Our primary clients and prospects are large online and offline travel agency distributors with an annual gross sales volume of at least $100 million, of which there were more than 50 in the U.S. in 2006, according toTravel
Weekly. Additionally, we are targeting large corporations and credit card issuing banks with our data reporting offerings. Our top five client contracts accounted for approximately 74% of our total revenues in 2007.



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The following alphabetical client list represents our largest clients, each of which generated at least
$500,000 of our revenue during 2007.



|                                         |  |                           
|---------------------------------------- |  | --------------------------
|American Airlines, Inc.                  |  | Intel Corporation         
|American Express Travel Related Services |  | MasterCard Incorporated   
|BCD Travel and affiliates                |  | Opodo Limited             
|Carlson Wagonlit Travel, Inc.            |  | Travel and Transport, Inc.
|Citibank                                 |  |                           
|Expedia, Inc. and its affiliates (1)     |  |                           
|Hogg Robinson plc                        |  |                           



|(1) | Includes expedia.com, expedia.co.uk, expedia.de, expedia.ca, Expedia Corporate Travel, hotels.com and Hotwire, Inc. Expedia, Inc. and its affiliates accounted for approximately 41%
of our revenue in 2007, including Expedia.com, which represented approximately 25% of our revenue in 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our clients
include the global market leaders in each segment that we serve. We consider our client relationships to be a key strength. We have a history of client renewals and signing long-term contracts with our clients. We believe this is a testimony to our
ability to forge strong, lasting relationships with clients to create joint long-term value. Four examples of our deep and long-standing client relationships are below.



| |  |  | American Airlines: American Airlines is the largest airline in the world. Our relationship began in December 2002, and our current contract is effective
through June 2008. We expect to renew the agreement. We provide reservation processing services to American Airlines through TRANXACT, primarily focused on exception handling and document distribution.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | American Express: American Express is the worlds largest travel management company, based on the latest annual figures provided byTravel Weekly
(June 2007). We began our relationship with American Express in July 2000 with a five-year agreement to provide reservation processing through CORREX, subsequently amended to extend through 2010. During the past five years, we have continuously
expanded our relationship. Today, in addition to CORREX, we provide American Express with ticket processing and workflow management aspects of reservation processing, as well as our data reporting and online booking technologies.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Citibank: In 1998, we established a relationship with Citibank, a subsidiary of Citigroup, to provide global travel agency data consolidation. In 2002, we
engaged in a pilot project to consolidate corporate purchasing card and travel data on behalf of Citibank Commercial Cards. Citibank Commercial Cards supports many of the largest corporations in the world, typically those with net revenues in excess
of $1 billion. Following the successful pilot project, we entered into a three-year agreement in January 2003 to provide global transaction and credit card data consolidation and expanded the scope of the relationship to include online business
intelligence and reporting technology to Citibank customers on a private-label basis. That agreement was extended through January 2009 and our data reporting relationship with Citibank has expanded from approximately 12.6 million transactions
in 2002 to more than 95.5 million transactions in 2007.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expedia, Inc.: Expedia, Inc. is the worlds largest online travel agency as ranked by PhoCusWright. We first launched a new service to support
Expedia.com when the company launched its travel service in 1996, and we have been a key strategic partner to Expedia ever since. Our current contract was amended during 2006 to incorporate all of our prior, independent, country-specific contracts
with Expedia under one master agreement with a consistent end date of December 31, 2010. We provide reservation processing technologies and services to Expedias businesses in the U.S., Canada, Germany, Italy, Spain, France, the
Netherlands and the United Kingdom.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Expedia, Inc. and its affiliates and Citibank represent 41% and 13%, respectively,
of our revenues in 2007. Recurring revenues from Citibank generated in 2008 are expected to be significantly less than revenues generated in 2007 because in mid-2007 we agreed to sell a limited perpetual license of certain source code to Citibank in



7



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##### Index to Financial Statements

order for Citibank to perform certain services in-house that have previously been hosted by us. We expect to continue to perform maintenance and project
services for Citibank after the license sale occurs, which is expected to be in 2008. The loss of either or both of these clients or a further decrease in the revenues generated from either of these clients would have a material adverse effect on
our financial condition, results of operations or cash flows.

Competition

We have different competitors in each category of services that we offer. The data reporting technologies we offer are substantially tied to travel and
travel-related processes. We compete against many of the traditional providers in this category. Companies offering such services include IBM, Informatica, and SAS. As the market for data reporting grows, we believe a number of companies will
increase their efforts to develop products and services that will compete with ours. It is also possible that new competitors or alliances among our competitors and potential clients may emerge and rapidly acquire significant market share.

The market for reservation processing for the travel industry continues to evolve as agencies and suppliers make strategic decisions about
whether to outsource or insource these data-intensive and costly processes. Currently, the marketplace for reservation processing services for the travel industry is comprised primarily of in-house solutions and operations residing mostly on legacy
systems at travel agencies. All of the GDSs provide their own booking solution.

Our competition comes from, or is anticipated to come
from, the following sources:



| |  |  | in-house operations of prospective or existing clients;
| | - |  | -------------------------------------------------------



| |  |  | traditional travel service providers including travel agencies;
| | - |  | ---------------------------------------------------------------



| |  |  | operators of reservation systems;
| | - |  | ---------------------------------



| |  |  | information technology service firms building customized solutions;
| | - |  | -------------------------------------------------------------------



| |  |  | teleservice companies introducing online customer support capabilities;
| | - |  | -----------------------------------------------------------------------



| |  |  | enterprise software companies adding travel management functionality to their products; and
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | other outsourced providers, including providers of customer care products and services.
| | - |  | ---------------------------------------------------------------------------------------

Intellectual Property

We are constantly developing
new technology and enhancing existing proprietary technology. We have no issued patents, although we have a small portfolio of pending patent applications which relate to our proprietary technology. Currently, we primarily rely on a
combination of copyrights, trade secrets, confidential procedures and contractual provisions to protect our technology. Despite these protections, it may be possible for unauthorized parties to copy, obtain or use certain portions of our proprietary
technology. Any misappropriation of our intellectual property could have a material adverse effect on our competitive position.

Government Regulation

The laws and regulations applicable to the travel industry affect us and our clients. We must comply with laws and regulations relating
to the sale and fulfillment of travel services. In addition, many of our clients and reservation systems providers are heavily regulated by the U.S. and other governments. Our services are indirectly affected by regulatory and legal uncertainties
affecting the businesses of our clients and reservation systems providers.

We are subject to federal regulations prohibiting unfair and
deceptive practices. In addition, federal regulations concerning the display and presentation of information currently applicable to airline booking services, as well as other laws and regulations aimed at protecting customers accessing online or
other travel



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services, could be extended to us in the future. In certain states, we are required to register as a seller of travel, comply with certain disclosure
requirements and participate in the states restitution fund.

We must also comply with laws and regulations applicable to online
commerce and businesses in general. Currently, few laws and regulations directly apply to the Internet and commercial online services. Moreover, there is currently great uncertainty about whether or how existing laws governing issues such as
property ownership, sales and other taxes, libel and personal privacy apply to the Internet and commercial online services. It is possible that laws and regulations may be adopted to address these and other issues. New laws or different applications
of existing laws would likely impose additional burdens on companies conducting business online and may decrease the growth of the Internet or commercial online services. In turn, this could decrease the demand for our products and services or
increase our cost of operations.

In addition, in the aftermath of the terrorist attacks of September 11, 2001, government agencies
have been contemplating or developing initiatives to enhance national and aviation security, including the Transportation Security Administrations Computer-Assisted Passenger Prescreening System, known as CAPPS II and its successors. These
initiatives may result in conflicting legal requirements with respect to data handling. As privacy and data protection becomes a more sensitive issue, we may also incur legal defense costs and become exposed to potential liabilities as a result of
differing views on the privacy of travel data. Travel businesses have also been subjected to investigations, lawsuits and adverse publicity due to allegedly improper disclosure of passenger information. It is expected that our business will continue
to be affected by privacy and data protection legislation.

Numerous jurisdictions globally have privacy and data protection legislation,
including the European Union (EU) through its Data Protection Directive (and implementing statutes of this Directive in the EU Member States). This legislation is intended to protect the privacy of personal data that is collected,
processed and transmitted in or from the governing jurisdiction. Enforcement takes place under the force of national legislation of the EU Member States.

We may be affected by regulations concerning issues such as exports of technology, telecommunications and electronic commerce. Our business may be affected if regulations are adopted in these areas. Any such
regulations may vary among jurisdictions. We believe that we are capable of addressing these regulatory issues as they arise.

In addition,
we are subject to a broad range of federal, foreign, state, and local laws and regulations relating to the pollution and protection of the environment, health and safety, and labor. Based on continuing internal review and advice from independent
consultants, we believe that we are currently in substantial compliance with applicable environmental requirements and health and safety and labor laws. We do not currently anticipate any material adverse effect on our operations, financial
condition, or competitive position as a result of our efforts to comply with environmental requirements.

Congress, the U.S. Department of
Transportation, and other governmental agencies have under consideration and may consider and adopt new laws, regulations, and policies regarding a variety of matters that could affect our business or operations. We cannot predict what other matters
might be considered in the future by Congress, the U.S. Department of Transportation or such other agencies, nor what the impact of this regulation might be on our business.

Employees

As of December 31, 2007, we had 958 employees, of which 495 were located in North
America, 187 in Europe and 276 in India. None of our employees are represented by a labor union, although our German operations are subject to German laws requiring, among other requirements, a Works Counsel. We have never experienced a work
stoppage and believe our relationship with our employees is good.



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Website Access to U.S. Securities and Exchange Commission Reports

Our Internet address is http://www.trx.com. Through our website, we make available, free of charge, access to all reports filed with the
U.S. Securities and Exchange Commission including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to these reports, as filed with or furnished to the SEC
pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Copies of any materials we file with, or furnish to, the SEC can also be
obtained free of charge through the SECs website at http://www.sec.gov or at the SECs Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330.



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

You should carefully consider the
following risk factors, as well as other information contained in or incorporated by reference in this Annual Report on Form 10-K. If any of the possible adverse events described below actually occur, our business, results of operations, or
financial condition would likely suffer and the market price of our common stock could decline.

Risks Related to Our Business

A substantial portion of our revenue is generated by our key clients; the loss of any of these clients would significantly reduce our revenues and our results of
operations and financial condition could deteriorate due to lower revenue.

Our top five client contracts accounted for
approximately 74% of our total revenues in 2007. Entities affiliated with Expedia, Inc. accounted for approximately 41% of our revenue in 2007. Our clients can generally terminate their agreements with us if we do not meet specified performance or
other criteria. Some clients, including Expedia.com, can terminate these agreements without cause upon notice and payment of specified fees. If agreements with these or other key clients are terminated, or if we are unable to negotiate favorable
renewal terms, our revenues and operating results would be significantly diminished.

On July 13, 2007, TRX Data Services, Inc.
(TRX Data Services), a wholly-owned subsidiary of TRX, Inc., and Citibank executed an amendment to the Master Services Agreement dated February 1, 2002, as amended (the Amendment). The Amendment extends the scheduled
expiration date of the Master Services Agreement from January 13, 2009 to December 31, 2010. The primary purpose of the Amendment is for TRX Data Services to sell a limited perpetual license of certain source code to Citibank in order for
Citibank to perform certain services in-house that have previously been hosted by TRX Data Services. The license sale is expected to occur in 2008. TRX Data Services will continue to perform maintenance and project services for Citibank. Recurring
revenues from Citibank generated in 2008 are expected to be significantly less than revenues generated in 2007 and 2006 as a result of the Amendment.

Additionally, many of our large clients prepay us for our services. Consequently, if we were to lose one or more of such prepayment arrangements, our liquidity and working capital would be affected, which could harm
our ability to grow.

We experience volatility in the volume of transactions we service; such volatility may negatively impact our ability to provide
consistent services and strain our operational capabilities.

We have experienced and expect to continue to experience significant
levels of volatility in the volume of travel transactions we service. This volatility is attributable to a number of factors, including travel industry conditions and promotional programs by our clients. Significant or unanticipated increases in
transaction volume have strained and may continue to strain our operational capabilities, leading to higher costs and lower quality of service. In addition, we may experience significantly lower transaction volume than expected, which would lead to
decreased revenues and underutilization of our resources. Our failure to address unanticipated transaction volume may decrease our profitability and harm our relationships with our clients.



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We also experience volatility in the number and scope of project requests for the customization of our
products and services. There can be no assurance that we will be able to accurately forecast volatility related to project requests and that we will be able to meet all client project delivery mandates in a manner satisfactory to our clients.

We also have experienced and expect to continue to experience seasonal fluctuations in our business. Business and consumer travel bookings
typically decline during the fourth quarter of each calendar year. This seasonality has caused, and will likely continue to cause, quarterly fluctuations in our operating results.

Failures of our software, hardware, and other systems could increase our operating costs, subject us to monetary damages, undermine our clients confidence in our reliability, and cause us to lose clients
or prevent us from gaining new clients.

Delivering our services requires the successful integration and operation of a network of
software, computer hardware, and telecommunications equipment. A failure of any element in this network could partially or completely disrupt our activities, which could materially adversely affect our business, financial condition or results of
operations by causing us to lose clients, prevent us from gaining new clients, or result in our owing monetary damages. Third parties provide some of these elements and, accordingly, they are not within our control. In addition, this network is
vulnerable to interruption from power failures, telecommunications outages, natural disasters, computer viruses, physical or electronic break-ins, and other network service outages and disruptions. The loss of one or more of our facilities or
failures of our software, hardware, and other systems could result in delays, service interruptions, service errors or loss of critical data and, therefore, significantly undermine our clients confidence in our reliability and diminish the TRX
brand name. We cannot guarantee that our back-up systems or disaster recovery plans will adequately protect against such failures. These failures or other interruptions may be costly to remedy as our business interruption or other insurance may not
protect us fully against any losses that may result.

Interruptions in our ability to access third-party computer systems could impair the quality of
our service.

We and our clients rely on third-party computer systems, including the computerized reservation systems serving the
airline industry, to make and complete travel reservations. We also rely on the compatibility of our proprietary software with these computer systems. Interruptions in our ability to access these systems or the failure of our software to interact
with these systems would significantly harm our business and operating results by causing us to lose clients, preventing us from gaining new clients, or resulting in our owing monetary damages.

Failure to meet our clients performance expectations and to provide their customers with high quality customer service could cause us to lose clients or
prevent us from gaining new clients.

Our clients expect us to maintain high levels of service quality for their businesses. In many
cases, specific performance criteria such as service levels, average response time, and timely processing are included in our contracts with clients. Any failure by us to meet specified or otherwise expected performance criteria or to provide the
level of service required by our clients could lead to financial penalties, the deterioration of our relationships with our clients, and a loss of credibility in the marketplace. Dissatisfied clients may choose to terminate or not renew their
contracts with us or seek services from other sources. This could reduce our revenues and harm our operating results, as well as make it more difficult to attract new clients.

Our strategy of sales through distributors may not be successful.

We currently sell our
products and services primarily through a network of distributors, such as American Express Travel Related Services Company, Inc., Expedia, Inc. and BCD Travel. In many cases we must rely on the efforts of our partners to sell and implement our
products and services. Expected growth may not materialize



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as quickly as we are anticipating or at all, or distributors may decide to discontinue this relationship with us. Additionally, poor performance by our
partners could cause harm to our reputation with the end user corporations and travelers.

Our sales and implementation cycle is lengthy and
variable, depends upon factors outside our control, and could cause us to expend significant time and resources prior to earning associated revenues.

The typical sales cycle for our services is lengthy and unpredictable, requires pre-purchase evaluation by a significant number of employees in our clients organizations, and involves a significant operational
decision by our clients. Moreover, a purchase decision by a potential client typically requires the approval of several senior decision makers. Our sales cycle for our larger clients is generally between six and eighteen months. Additionally, the
implementation and testing of our services can take up to one year, and unexpected implementation delays and difficulties can occur. This lengthy and variable sales and implementation cycle may have a negative impact on the timing of our revenues,
causing our revenues and operating results to vary significantly from period to period.

We have a history of net losses, and we cannot assure you
that we will sustain profitability.

We incurred net losses in every year of our operations prior to 2006 and again in 2007. As of
December 31, 2007, we had an accumulated deficit of $56.5 million. We cannot assure you that we will be able to sustain profitability on a quarterly or annual basis. Our results of operations will be harmed if our revenues do not increase or
are insufficient for us to achieve or sustain profitability.

Failure to manage our growth, or to recruit or retain qualified employees, could reduce
our revenues or net income.

Rapid expansion strains our infrastructure, management, internal controls and financial systems. We may
not be able to effectively manage our present growth or any future expansion. New clients and the expansion of services from existing clients may cause rapid increases to our transaction volumes. Rapid increases in transaction volumes can inhibit
our ability to train and integrate our new employees. Inadequate training and integration of our employees may result in inefficiencies in our workforce and may reduce our revenues or net income.

We are also heavily dependent on our employees to provide the high level of service our clients expect. If we cannot recruit and retain enough qualified
and skilled employees, the growth of our business may be limited. Our ability to provide services to clients and grow our business depends, in part, on our ability to attract and retain qualified employees. If our employee turnover rate increases
significantly, our recruiting and training costs could rise, and our operating efficiency and productivity could decline. We may not be able to recruit or retain the caliber of employees required to carry out essential functions at the pace
necessary to sustain or grow our business.

If we are not successful in adapting to changes in technology made by the major GDSs or integrating our
systems with those of alternative GDS providers that have recently emerged, we may lose clients and market share.

Most of our
transaction processing originates from traditional GDSs and, in general, our current solutions are tightly integrated with the four major GDS providers. Unforeseen changes in technologies, standards or procedures at any of the GDS providers could
make it difficult for us to integrate our systems. Also, recent travel industry deregulation has resulted in the emergence of alternative GDS providers. Moreover, significant volumes of travel transactions from our clients may migrate to the
alternative GDS providers over time. We are currently in the process of integrating our solutions into some of the alternative GDS providers. However, there is no guarantee that our integration efforts will be successful, nor is it certain that we
are focusing our integration efforts on the right partners. If we are not successful in integrating our systems with those alternative GDS providers, we may lose clients and market share.



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Our ability to increase our revenues will depend upon introducing new products and services, and if the marketplace
does not accept these new products and services, our revenues may not increase or may decline.

To increase our revenues, we must
enhance and improve existing products and continue to introduce new products and new versions of existing products that satisfy increasingly sophisticated client requirements and achieve market acceptance. Products and services that we plan to
market in the future are in various stages of development or are a result of recent acquisitions, and we are in the process of integrating them into TRX. Significant human and capital investment is often made to develop and launch new products and
services and to discontinue old products and services. We cannot assure you that the marketplace will accept our new products and services. If our current or potential clients are not willing to switch to or adopt our new products and services, our
ability to increase revenues will be significantly impaired.

We may seek to diversify our revenue streams by serving many different industry
segments. If we are not successful in serving industry segments other than the travel and travel-related industries we currently serve, we may not be successful in capturing these potential revenue streams or recapturing expenditures pursuing these
diversified revenue streams.

We may seek to adapt our products and services to industries other than the travel and travel-related
industries upon which we are currently dependent. Our ability to increase our revenues will depend on how effectively we are able to modify and enhance our software, technology and networks in the future to address the various needs of different
industry segments. If we are unable to accurately anticipate the needs of industry segments other than the travel and travel-related industries we currently serve, if costs associated with serving additional industries are higher than expected, or
if we are not successful in marketing our solutions to new industries, we may be unable to profitably grow our revenues.

If we fail to keep up with
rapidly changing technologies, our products and services could become less competitive or obsolete.

In our business, technology
changes rapidly, and there are continuous improvements and changes in computer hardware, software applications, network operating systems, programming tools, programming languages, operating systems, database technology, and communication protocols.
Advances in technology may result in changing client preferences for products and services and delivery formats. If we fail to enhance our current products and develop new products in response to changes in technology, industry standards, or client
preferences, our products and services could rapidly become less competitive or obsolete.

We face significant competition in the markets we serve.

We have different competitors in each category of services that we offer. The market for transaction processing for the travel
industry is new and continues to evolve as more agencies and suppliers look to outsource these processes. Currently, the marketplace for transaction processing services for the travel industry is comprised primarily of in-house solutions and
operations residing mostly on legacy systems at travel agencies. All of the GDSs provide their own booking solutions. Our competition comes from, or is anticipated to come from, the following sources:



| |  |  | in-house operations of prospective or existing clients;
| | - |  | -------------------------------------------------------



| |  |  | traditional travel service providers including travel agencies;
| | - |  | ---------------------------------------------------------------



| |  |  | operators of reservation systems;
| | - |  | ---------------------------------



| |  |  | information technology service firms building customized solutions;
| | - |  | -------------------------------------------------------------------



| |  |  | teleservice companies introducing online customer support capabilities;
| | - |  | -----------------------------------------------------------------------



| |  |  | enterprise software companies adding travel management functionality to their products; and
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | other outsourced providers, including providers of customer care products and services.
| | - |  | ---------------------------------------------------------------------------------------



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Innovations in technology have increased the ability of travel suppliers to distribute their travel
products and services directly to businesses and consumers. As travel suppliers focus increasingly on direct distribution, new travel processing services competitors may emerge that offer greater flexibility, accuracy, reliability, speed of service,
or price. In addition, as travel agencies, travel specific websites and corporate travel management companies expand their size and financial resources through consolidation, they may combine existing businesses or create new businesses that compete
directly with us. Additionally, increased consolidation means that we have fewer new client prospects or could cause us to lose clients.

The data reporting services we offer are substantially tied to travel and travel-related processes. We compete against many of the traditional providers in this category. Companies offering such services include Ascential Software
Corporation, which is owned by International Business Machines Corporation, Informatica Corporation, and SAS Institute Inc.

As the market
for both data processing and data reporting grows, we believe a number of companies will increase their efforts to develop products and services that will compete with ours. It is also possible that new competitors or alliances among our competitors
and potential clients may emerge and rapidly acquire significant market share. Moreover, our current and future competitors may have significantly greater financial, marketing and other resources than we have. If we are unable to effectively respond
to market and competitive pressures, we may lose clients and market share, which could decrease our revenues or margins.

We could be required to pay
damages due to errors, such as errors made in ticketing or fare loading processes.

We depend in part on manual programming, input
of travel policies and restrictions, loading of fares, and other data used in connection with the delivery of our products and services to our clients. Human errors, miscommunication and other factors could lead to errors made in ticketing, fare
loading or other processes that result in tickets being issued at incorrect prices or agency commissions being miscalculated. Such errors on our part have led to, and could lead to, claims against us and payments by us for damages.

Our international operations subject us to additional business risks that may reduce our profitability or revenues.

A significant part of our business is conducted outside of the U.S. During the fiscal year ended December 31, 2007, we received approximately 18% of
our revenue from Europe-based clients. We incur costs in the United Kingdom, Germany and India. We plan to continue to pursue opportunities abroad. As a result, our future operating results could be negatively affected by a variety of factors, many
of which are beyond our control. The risks and potential costs of our international operations include:



| |  |  | political and economic instability;
| | - |  | -----------------------------------



| |  |  | changes in regulatory requirements and policy and the adoption of laws detrimental to our operations, such as legislation relating to trade protection, and
restrictions on pricing and privacy;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | negative impact of currency exchange rate fluctuations;
| | - |  | -------------------------------------------------------



| |  |  | potentially adverse tax consequences;
| | - |  | -------------------------------------



| |  |  | increased restrictions on the repatriation of funds;
| | - |  | ----------------------------------------------------



| |  |  | general economic conditions in international markets;
| | - |  | -----------------------------------------------------



| |  |  | labor laws and restrictions;
| | - |  | ----------------------------



| |  |  | staffing key management positions;
| | - |  | ----------------------------------



| |  |  | cultural differences;
| | - |  | ---------------------



| |  |  | negative impact of wage rate increases and other costs subject to inflation;
| | - |  | ----------------------------------------------------------------------------



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| |  |  | competition;
| | - |  | ------------



| |  |  | nationalization; and
| | - |  | --------------------



| |  |  | foreign tax and other laws.
| | - |  | ---------------------------

These
risks may adversely affect our ability to conduct and grow business internationally, which could cause us to increase expenditures and costs, decrease our revenue growth, or both.

Fluctuations in the exchange rate of the U.S. dollar and other foreign currencies could increase our operating expenses and decrease our operating margins.

A portion of our costs and revenues are denominated in non-U.S. currencies, such as the euro, British pound sterling and Indian rupee. As a result,
changes in the exchange rates of these currencies or any other applicable currencies to the U.S. dollar will affect our operating expenses and operating margins and could result in exchange losses. As it is not cost effective, we currently do not
hedge our exposure to currency fluctuation risks. The impact of future exchange rate fluctuations on our results of operations cannot be accurately predicted.

A significant portion of our assets consists of goodwill, and any changes in strategy or market or other conditions or the continuation of net losses could result in an impairment of our goodwill, which would lead to a decrease in our
assets and shareholders equity and reduction in our net income or increase in our net losses.

Approximately 42% of our assets
consisted of goodwill as of December 31, 2007. We test our goodwill for impairment annually on September 30, or whenever events or changes in circumstances indicate an impairment may have occurred, in accordance with Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). If a test of our goodwill for impairment indicates that impairment has occurred, we are required to record
an impairment charge for the difference between the carrying value of the goodwill and the implied fair value of the goodwill in the period the determination is made. Should changes in our business strategy occur, should market or other conditions
adversely affect our business, should changes in laws or regulations adversely affect our business, or should our net losses continue, we may be forced to record an impairment charge, which would lead to a decrease in our assets and
shareholders equity and reduction in our net income or increase in our net losses.

If we are not able to adequately protect our intellectual
property rights, our competitors may be able to duplicate our services.

We rely in part upon our proprietary technology to conduct
our business. Our failure to adequately protect our intellectual property rights could harm our business by making it easier for our competitors to duplicate our services. We have no issued patents, although we have a small portfolio of pending
patent applications which relate to our proprietary technology. Currently, we primarily rely on a combination of copyrights, trade secrets, confidential procedures and contractual provisions to protect our technology. Despite these protections,
it may be possible for unauthorized parties to copy, obtain or use certain portions of our proprietary technology. Any misappropriation of our intellectual property could have a material adverse effect on our competitive position.

We cannot be certain that third parties will not infringe or misappropriate our proprietary rights or that third parties will not independently develop
similar proprietary information. Any infringement, misappropriation or independent development could harm our future financial results. In addition, effective protection of intellectual property rights may not be available in every country where we
provide services. We may, at times, have to incur significant legal costs and spend time defending our intellectual property rights. Any defensive efforts, whether successful or not, would divert both time and resources from the operation and growth
of our business.



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There is also significant uncertainty regarding the applicability to the Internet of existing laws
regarding matters such as property ownership, copyrights and other intellectual property rights. Legislatures adopted the vast majority of these laws prior to the advent of the Internet, and as a result, these laws do not contemplate or address the
unique issues of the Internet and related technologies. We cannot be sure what laws and regulations may ultimately affect our business or intellectual property rights.

Others may assert that our technology infringes their intellectual property rights.

We may be
subject to infringement claims in the future. The defense of any claims of infringement made against us by third parties could involve significant legal costs and require our management to divert time from our business operations. If we are
unsuccessful in defending any claims of infringement, we may be forced to obtain licenses or to pay royalties to continue to use our technology. We may not be able to obtain any necessary licenses on commercially reasonable terms or at all. If we
fail to obtain necessary licenses or other rights, or if these licenses are too costly, our operating results may suffer either from reductions in revenues through our inability to serve clients or from increases in costs to license third-party
technology.

If any breaches or compromises to the security systems of our databases occur, including theft of our customers personal
information, our reputation could suffer, our customers may not be willing to use our products and services, and we may have difficulty attracting new customers.

If the security systems of our databases are breached or compromised in any way, our business and operations could be harmed. Our collection and processing of travel transactions through our RESX, SELEX, TRANXACT, and
CORREX products, and enhancement of data through our TRAVELTRAX and DATATRAX products, require us to receive and store personally identifiable data, such as names and addresses, credit card information and transaction history records. Any breaches
of the security systems of our databases could result in the theft of personal confidential information of our customers or other modification of our records. We have had incidents of security breaches by former employees which led to the theft of
confidential information. If any breaches or compromises to the security systems of our databases were to occur, customers may be deterred from using our products and services, our reputation may be harmed, we may be exposed to liability, and we may
incur increased costs relating to any liability.

The terms of our senior secured revolving credit facility may limit our ability to grow.

Our senior secured revolving credit facility may restrict our ability to take specific actions, even if such actions may be in our best
interest. These restrictions limit our ability to, among other things, make advances to our European operations, make acquisitions, make capital expenditures, incur additional debt and pay dividends. Under the facility, we are subject to maintenance
of a maximum consolidated senior leverage ratio (as defined in the facility) of 1 to 1. Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in our being required to repay any
borrowings, of which we have none as of December 31, 2007, before their due date. In addition, these covenants and restrictions may limit our future growth opportunities.

We may be unsuccessful in pursuing and integrating business combinations and strategic alliances, which could result in increased expenditures or cause us to fail to achieve anticipated cost savings or revenue
growth.

In August 2006 and January 2007, we acquired Travel Analytics, Inc. (Travel Analytics) and Hi-Mark, LLC
(Hi-Mark), respectively. In December 2007, we acquired the assembled workforce and certain property assets used by Siemens to provide services to TRX, which constitute a business as defined by Emerging Issues Task Force
(EITF) Issue 98-3 Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business.We regularly evaluate potential business combinations and growth opportunities and may
pursue acquisitions of other companies or technologies in the future in order to maintain and grow revenues and increase our market position. We may not be successful in identifying suitable acquisition candidates or may not be able to obtain
financing on acceptable terms for such business combinations or strategic alliances.



16



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##### Index to Financial Statements

Even if we are able to complete these types of business transactions, we may face additional risks,
including:



| |  |  | difficulties in integrating or assimilating acquired operations, technology and personnel;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | diversion of managements attention from other business concerns and market developments;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | loss of key management and technical personnel from acquired businesses;
| | - |  | ------------------------------------------------------------------------



| |  |  | Impairment of relationships with existing clients, employees and business partners; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | expenses associated with amortization of acquired intangible assets and other expenses associated with a change in control.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

If we are unable to successfully pursue and integrate business combinations and strategic alliances, our financial condition and results of operations
may be materially adversely affected due to the increased expenditures or our failure to achieve anticipated cost savings or revenue growth.

Risks
Related to Our Industry

We are currently dependent on the travel industry, and declines or disruptions in the travel industry could reduce our
revenues.

We rely in large part on the health and growth of the travel industry. Travel is highly sensitive to business and
personal discretionary spending levels and tends to decline during general economic downturns. In addition, other adverse trends or events that tend to reduce travel are likely to reduce our revenues. These may include:



| |  |  | price escalation in the airline industry or other travel-related industries due to increased fuel costs or other factors;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | financial instability of clients;
| | - |  | ---------------------------------



| |  |  | occurrence of travel-related accidents and concerns about passenger convenience and safety;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | airline or other travel-related strikes;
| | - |  | ----------------------------------------



| |  |  | advances in business technology and communication, such as videoconferencing and online teleconferencing;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | a slowdown in the growth of the adoption of online travel;
| | - |  | ----------------------------------------------------------



| |  |  | political instability, regional hostilities, terrorism, natural disasters and governmental terror warnings;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | consolidations in the airline industry;
| | - |  | ---------------------------------------



| |  |  | health-related fears; and
| | - |  | -------------------------



| |  |  | bad weather.
| | - |  | ------------

In addition, our
clients may seek reduced prices for our services in response to changing fare and commission structures and other travel industry conditions.

Acts
of terrorism and war could have an adverse effect on the travel industry, which in turn could adversely affect our business due to the possible decrease in new travel bookings.

Travel is sensitive to safety and security concerns, and thus declines after occurrences of and fears of future incidents of terrorism and hostilities
that affect the safety, security and confidence of travelers. For example, the start of the war in Iraq in March 2003 and the terrorist attacks of September 11, 2001 resulted in the cancellation of a significant number of flights and travel
bookings and a decrease in new travel bookings. Future revenues may be reduced by similar and/or other acts of terrorism or war. The effects of these events could include, among other things, a protracted decrease in demand for air travel due to
fears regarding additional acts of terrorism, military and



17



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##### Index to Financial Statements

governmental responses to acts of terrorism and a perceived inconvenience in traveling by air and increased costs and reduced operations by airlines due, in
part, to new safety and security directives adopted by the Federal Aviation Administration, Transportation Security Administration, Homeland Security or other governmental agencies.

Travel industry and travel-related industry participants may choose not to adopt outsourcing or may otherwise be precluded from adopting outsourcing.

Our business depends in significant part on the continued adoption by travel industry participants of the outsourcing of transaction processing and data
reporting services and by travel-related industry participants of the outsourcing of data reporting services as a means to achieve cost savings and enhanced customer service. There is no guarantee that our services will lower the costs of our
clients businesses or improve customer service. If these cost savings or customer service improvements do not occur, we may not be able to retain clients or attract new clients.

Our processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.

Our collection and processing of travel transactions through our RESX, SELEX, TRANXACT, and CORREX products and our consolidation,
extraction, and enhancement of data through our TRAVELTRAX and DATATRAX products require us to receive and store a large volume of personally identifiable data. This type of data is subject to legislation and regulation in various jurisdictions,
including the European Union through the Data Protection Directive, and variations of this directive in legislation enacted by member states of the European Union. Such laws typically protect the privacy of personal data that is collected, processed
and transmitted in or from these jurisdictions. Our business, financial condition and results of operations could be adversely affected if the laws and regulations are expanded, implemented or interpreted to require changes to our business practices
and methods of data collection.

In the U.S., government agencies have recently discussed and developed initiatives to increase airline
security, including the Transportation Security Administrations Computer-Assisted Passenger Prescreening System and its successors. These government initiatives could change the way we handle data and may result in conflicting legal
requirements in the various jurisdictions in which we operate.

As personal and legal issues relating to privacy and data protection become
more sensitive, we may become exposed to potential liabilities with respect to the data we collect, manage and process, and may incur legal costs if our or our vendors established information security policies and procedures are not effective
or if we are required to defend our methods of collection, processing and storage of personal data. Future investigations, lawsuits or adverse publicity relating to our methods of handling personal data could adversely affect our business, financial
condition, and results of operations due to the costs and negative market reaction to such developments.

Regulatory requirements and
regulatory changes may impose burdens on our business.

The laws and regulations applicable to the travel and financial services
industries affect us and our clients. We must comply with laws and regulations relating to the sale and fulfillment of travel services and the financial services industry. Our services are indirectly affected by regulatory and legal uncertainties
affecting the businesses of our clients and reservation systems providers.

We must also comply with laws and regulations applicable to
online commerce and businesses in general. Currently, few laws and regulations directly apply to the Internet and commercial online services. Moreover, there is currently great uncertainty about whether or how existing laws governing issues such as
property ownership, sales and other taxes, libel and personal privacy apply to the Internet and commercial online services. It is possible that laws and regulations may be adopted to address these and other issues. New laws or different applications
of existing laws would likely impose additional burdens on companies conducting business online and may decrease the growth of the Internet or commercial online services. In turn, this could decrease the demand for our products and services or
increase our cost of operations.



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##### Index to Financial Statements

|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

None.



|Item 2. | Properties
|------- | ----------

Our headquarters are located in
Atlanta, Georgia and consist of 80,757 square feet of office space held under a lease that expires in October 2008. We lease a total of approximately 205,000 square feet globally. As of December 31, 2007, the locations of our principal leased
facilities include Dallas, Texas, Milton, Florida, Tysons Corner, Virginia, Bangalore, India, Berlin, Germany, Leicester, United Kingdom and Crawley, United Kingdom. These leases expire at various times between 2008 and
2017.

We believe that our facilities are adequate for our current and near-term needs, and that we will be able to locate additional
facilities as needed.



|Item 3. | Legal Proceedings
|------- | -----------------

We expect to be a party from
time to time to certain routine legal proceedings arising in the ordinary course of our business. Although we are not currently involved in any litigation that we expect will have a material adverse effect on our financial condition and results of
operations, we cannot accurately predict the outcome of any such proceedings in the future.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

No matters were submitted to a vote of our shareholders during our fourth quarter ended December 31, 2007.



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------

Our common stock trades on the NASDAQ Global Market under the symbol TRXI. The following table sets forth, for the period indicated, the range
of high and low sales prices for our common stock.



|                              |  |      |       |     |   |     
|----------------------------- |  | ---- | ----- | --- | - | ----
|                              |  | High |       | Low
|Year Ended December 31, 2007: |  |      |       |     |   |     
|First Quarter                 |  | $    | 7.79  |     | $ | 3.26
|Second Quarter                |  | $    | 4.05  |     | $ | 2.86
|Third Quarter                 |  | $    | 3.54  |     | $ | 1.98
|Fourth Quarter                |  | $    | 2.62  |     | $ | 0.98
|Year Ended December 31, 2006: |  |      |       |     |   |     
|First Quarter                 |  | $    | 10.06 |     | $ | 7.30
|Second Quarter                |  | $    | 11.95 |     | $ | 8.39
|Third Quarter                 |  | $    | 9.20  |     | $ | 4.86
|Fourth Quarter                |  | $    | 7.39  |     | $ | 5.00

As of December 31, 2007, there were approximately 42 holders of our common stock. This number
includes beneficial owners of our common stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.

We have not paid or declared any cash dividends on our common stock. We currently expect to retain all of our earnings for use in developing our business and do not anticipate paying any cash dividends in the
foreseeable future. Future cash dividends, if any, will be paid at the discretion of our board of directors and will depend, among other things, upon our future operations and earnings, capital requirements and surplus, general financial condition,
contractual restrictions and such other factors as our board of directors may deem relevant.



19



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##### Index to Financial Statements

|Item 6. | Selected Financial Data
|------- | -----------------------

The following selected
consolidated financial data should be read together with our consolidated financial statements and the related notes and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in
this Form 10-K. The consolidated statement of operations and other data for the fiscal years ended December 31, 2007, 2006 and 2005 and the consolidated balance sheet data as of December 31, 2007 and 2006 are derived from our audited
consolidated financial statements included elsewhere in this Form 10-K. The consolidated statement of operations and other data for the fiscal years ended December 31, 2004 and 2003 and the consolidated balance sheet data as of
December 31, 2005, 2004 and 2003 are derived from audited consolidated financial statements not included in this Form 10-K.



|                                                                             |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|---------------------------------------------------------------------------- |  | ------------------------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------ | -
|                                                                             |  | Year Ended December 31,               |       
|                                                                             |  | 2007                                  |        |   | 2006 |   |         | 2005 |  |   | 2004    |   |  | 2003 |        
|                                                                             |  | (in thousands, except per share data) |       
|Consolidated Statement of Operations:                                        |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Revenues:                                                                    |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Transaction and other revenues (1)                                           |  | $                                     | 89,532 |   |      | $ | 113,504 |      |  | $ | 115,705 |   |  | $    | 109,398 |   |  | $ | 72,760 |  
|Client reimbursements                                                        |  |                                       | 2,570  |   |      |   | 2,836   |      |  |   | 2,911   |   |  |      | 4,061   |   |  |   | 1,750  |  
|                                                                             |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Total revenues                                                               |  |                                       | 92,102 |   |      |   | 116,340 |      |  |   | 118,616 |   |  |      | 113,459 |   |  |   | 74,510 |  
|                                                                             |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Expenses:                                                                    |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Operating, excluding depreciation and amortization                           |  |                                       | 56,820 |   |      |   | 64,673  |      |  |   | 74,443  |   |  |      | 73,230  |   |  |   | 43,734 |  
|Selling, general and administrative, excluding depreciation and amortization |  |                                       | 16,184 |   |      |   | 20,159  |      |  |   | 19,295  |   |  |      | 19,885  |   |  |   | 16,023 |  
|Technology development                                                       |  |                                       | 13,178 |   |      |   | 11,022  |      |  |   | 11,176  |   |  |      | 13,462  |   |  |   | 6,378  |  
|Client reimbursements                                                        |  |                                       | 2,570  |   |      |   | 2,836   |      |  |   | 2,911   |   |  |      | 4,061   |   |  |   | 1,750  |  
|Restructuring                                                                |  |                                       |       |   |      |   | 691     |      |  |   | 2,327   |   |  |      | 1,732   |   |  |   |       |  
|Depreciation and amortization                                                |  |                                       | 11,217 |   |      |   | 10,121  |      |  |   | 9,984   |   |  |      | 9,943   |   |  |   | 8,250  |  
|                                                                             |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Total expenses                                                               |  |                                       | 99,969 |   |      |   | 109,502 |      |  |   | 120,136 |   |  |      | 122,313 |   |  |   | 76,135 |  
|                                                                             |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Operating (loss) income                                                      |  |                                       | (7,867 | ) |      |   | 6,838   |      |  |   | (1,520  | ) |  |      | (8,854  | ) |  |   | (1,625 | )
|Interest (expense) income, net                                               |  |                                       | (227   | ) |      |   | 675     |      |  |   | (2,246  | ) |  |      | (2,323  | ) |  |   | (1,867 | )
|Debt conversion expense                                                      |  |                                       |       |   |      |   |        |      |  |   | (2,898  | ) |  |      |        |   |  |   |       |  
|Loss from equity method investments                                          |  |                                       |       |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   | (896   | )
|Benefit (provision) for income taxes                                         |  |                                       | 51     |   |      |   | (213    | )    |  |   |        |   |  |      |        |   |  |   |       |  
|                                                                             |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Net (loss) income                                                            |  | $                                     | (8,043 | ) |      | $ | 7,300   |      |  | $ | (6,664  | ) |  | $    | (11,177 | ) |  | $ | (4,388 | )
|                                                                             |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Basic and diluted net (loss) income per share                                |  | $                                     | (0.44  | ) |      | $ | 0.41    |      |  | $ | (0.48   | ) |  | $    | (0.91   | ) |  | $ | (0.38  | )
|                                                                             |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Basic weighted average shares outstanding                                    |  |                                       | 18,272 |   |      |   | 17,711  |      |  |   | 13,817  |   |  |      | 12,248  |   |  |   | 11,482 |  
|Diluted weighted average shares outstanding                                  |  |                                       | 18,272 |   |      |   | 17,745  |      |  |   | 13,817  |   |  |      | 12,248  |   |  |   | 11,482 |  
|                                                                             |  |                                       |        |   |     
|Other Data:                                                                  |  |                                       |        |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        |  
|Non-cash stock compensation                                                  |  | $                                     | 366    |   |      | $ | 1,057   |      |  | $ | 70      |   |  | $    | 374     |   |  | $ | 690    |  
|Cash provided by operating activities                                        |  | $                                     | 4,745  |   |      | $ | 10,815  |      |  | $ | 8,506   |   |  | $    | 2,611   |   |  | $ | 13,054 |  
|Capital expenditures                                                         |  | $                                     | 8,716  |   |      | $ | 9,151   |      |  | $ | 8,675   |   |  | $    | 9,426   |   |  | $ | 7,482  |  
|Transaction processing transactions                                          |  |                                       | 85,654 |   |      |   | 83,788  |      |  |   | 81,437  |   |  |      | 73,474  |   |  |   | 56,017 |  



20



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##### Index to Financial Statements

|                                               |  |                    |         |   |      |   |        |  |   |        |   |  |      |         |   |  |   |        |  
|---------------------------------------------- |  | ------------------ | ------- | - | ---- | - | ------ |  | - | ------ | - |  | ---- | ------- | - |  | - | ------ | -
|                                               |  | As of December 31, |        
|                                               |  | 2007               |         |   | 2006 |   | 2005   |  |   | 2004   |   |  | 2003 |        
|                                               |  | (in thousands)     |        
|Consolidated Balance Sheet Data:               |  |                    |         |   |      |   |        |  |   |        |   |  |      |         |   |  |   |        |  
|Working capital (deficit) (1)                  |  | $                  | (19,312 | ) |      | $ | 1,449  |  | $ | (1,838 | ) |  | $    | (24,894 | ) |  | $ | (1,100 | )
|Total assets                                   |  |                    | 87,789  |   |      |   | 89,713 |  |   | 76,134 |   |  |      | 66,366  |   |  |   | 44,241 |  
|Long-term debt, less current portion           |  |                    | 2,917   |   |      |   |       |  |   | 1,909  |   |  |      | 4,583   |   |  |   | 166    |  
|Convertible notes, net of unamortized discount |  |                    |        |   |      |   |       |  |   | 1,360  |   |  |      | 19,317  |   |  |   | 18,960 |  
|Total shareholders equity (deficit)           |  |                    | 37,019  |   |      |   | 41,132 |  |   | 32,601 |   |  |      | (6,699  | ) |  |   | (1,065 | )



|(1) | In mid-2007, we agreed to sell a limited perpetual license of certain source code to Citibank in order for Citibank to perform certain services in-house that have previously been
hosted by us. We also agreed to continue to provide the hosting services historically provided to Citibank until such time as the sale of the perpetual license occurs. The sale price for the perpetual license is $4.5 million and the sale will
occur once the requisite activities to assist Citibank in readying its information technology environment to support the technology have been performed by us and accepted by Citibank. We expect the license sale to occur in 2008. In
addition, Citibank will compensate us for certain assets that we have purchased in the past for Citibanks benefit, which are essential to the functionality of the technology. The amount of compensation for such assets will ultimately be
determined on the date on which the perpetual license is sold. The sale of the license, the compensation for the assets referred to above, and the hosting services are all elements of the Amendment. Revenue recognition for these elements is governed
by American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2, Software Revenue Recognition(SOP 97-2). In accordance with SOP 97-2, as
there is no vendor specific objective evidence of the fair value of the perpetual license, revenue associated with the hosting services is being deferred until the sale of the perpetual license occurs. The amount of revenue deferred for the
hosting services is $6.5 million as of December 31, 2007. Additionally, the reduction in revenue resulted from a decrease in revenues per transaction from Expedia. The Citibank deferral of revenue has also contributed to the working
capital deficit as of December 31, 2007.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Index to Financial Statements

|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

You should read the following discussion together with our financial statements and the related notes included elsewhere in this annual report. This
discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such
forward-looking statements as a result of a number of factors, including those we discuss under Risk Factors and elsewhere in this annual report.

Overview

TRX is a global technology company. We develop and host software applications to automate manual processes
and track transaction data, enabling our clients to optimize performance and control costs. We are a leading provider to the travel industry and expect to eventually include growth in industries beyond travel, such as financial services and health
care. For the foreseeable future, we intend to focus our efforts on the large opportunities within the travel industry. We deliver our technology applications as a service over the Internet to travel agencies, corporations, travel suppliers,
government agencies, credit card associations, credit card issuing banks, and third-party administrators. TRX is headquartered in Atlanta, Georgia with operations and associates in North America, Europe, and Asia.

We are focused on transaction-based revenue from data reporting, reservation processing and online booking technologies that provide economies of scale
to our clients and 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 41% of our global revenues in fiscal 2007. Expedia has been a client since its launch in 1996. In
December 2006, we replaced our existing contract with Expedia with a Master Services Agreement (the Agreement). The Agreement continues through 2010. Revenues generated in 2007 under the Agreement are 31% less than those generated in
2006. Our scale and process-reengineering expertise has allowed us to reduce our costs in several areas when measured on a per transaction basis. We have established pricing models that provide volume-based discounts to share scale efficiencies with
our clients to ensure long-term, mutually-beneficial relationships. As a result, our average revenue per transaction has generally declined over the last few years. We expect it to continue to decline in the future because of scale efficiencies, as
well as trends in the travel processing supply chain that began to evolve in late 2006 that are putting negative pressure on our revenue per transaction.

Our historical business mix contained significant revenue from call center, or customer care operations, which accounted for approximately 20% of our transaction and other revenues in 2006. In late 2004,
we made a strategic decision to gradually transition away from this type of lower-margin, labor-intensive business and to close some of our customer care facilities. We closed our customer care operations in Paris, France and in Zurich, Switzerland
during 2004; in Orangeburg, South Carolina during 2005; and in the United Kingdom during 2006. In connection with these closures, we recorded charges of $0.7 million, $2.3 million and $1.7 million during 2006, 2005 and 2004, respectively, related to
employee severance, lease abandonment and related charges. We sold our remaining U.S. call center operations in 2006. During fiscal 2007, our customer care revenues decreased by 79% as compared to 2006.

In August 2006, we acquired the assets and assumed certain liabilities of Travel Analytics, which provides procurement and spend management services to
corporations, for $2.3 million. Travel Analytics helps corporations make smart decisions about their travel suppliers and travel policies, with a focus on achieving practical savings. The strategic addition of Travel Analytics expands our growth
opportunities in the global corporate travel marketplace and augments the technology and talent in our data reporting offerings for corporate



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##### Index to Financial Statements

travel clients. In addition to the consideration paid, we agreed to make payments to the previous owner of Travel Analytics equal to 3% of sales related to
Travel Analytics intellectual property through December 31, 2011. Payments are made semi-annually and are recorded as goodwill in our consolidated balance sheet. During fiscal 2007 and fiscal 2006, we recorded $42,000 and $18,000,
respectively, as goodwill in our consolidated balance sheet related to the earnout.

In January 2007, we purchased substantially all of the
assets and assumed certain liabilities of Hi-Mark, a Delaware limited liability company and an Atlanta-based provider of data acquisition and business intelligence technologies. We acquired Hi-Mark for total consideration of approximately $20.9
million, which consisted of 500,000 shares of our common stock (valued at $3.4 million, or $6.81 per share based on the closing price of our common stock on the two trading days preceding through the two trading days following our announcement of
the acquisition on December 7, 2006, in accordance with EITF Issue 99-12), $10.4 million of cash on hand, a promissory note in favor of Hi-Mark in the amount of $7.0 million which amortizes quarterly over three years and bears interest at the
Prime rate, and approximately $0.1 million of our transaction costs. In addition, we may make earnout payments to Hi-Mark of up to $12.0 million dependent on the achievement of defined revenue targets. As of December 31, 2007, we have not made
earnout payments to Hi-Mark because such revenue targets have not yet been met.

On July 13, 2007, TRX Data Services and Citibank
executed an amendment to the Master Services Agreement dated February 1, 2002, as amended. The Amendment extends the scheduled expiration date of the Master Services Agreement from January 13, 2009 to December 31, 2010. The primary
purpose of the Amendment is for TRX Data Services to sell a limited perpetual license of certain source code to Citibank in order for Citibank to perform certain services in-house that have previously been hosted by TRX Data Services. TRX Data
Services will continue to perform maintenance and project services for Citibank. As a result of the Amendment, recurring revenues from Citibank generated in 2008 are expected to be significantly less than revenues generated in 2007 and 2006.

The Amendment also provides that we will continue to provide the hosting services historically provided to Citibank until such time as the
sale of the perpetual license occurs. The sale price for the perpetual license is $4.5 million and the sale will occur once the requisite activities to assist Citibank in readying its information technology environment to support the technology
have been performed by us and accepted by Citibank. We expect the license sale to occur in 2008. In addition, Citibank will compensate us for certain assets that we have purchased in the past for Citibanks benefit, which are
essential to the functionality of the technology. The amount of compensation for such assets will ultimately be determined on the date on which the perpetual license is sold.

The sale of the license, the compensation for the assets referred to above, and the hosting services are all elements of the Amendment. Revenue
recognition for these elements is governed by SOP 97-2. In accordance with SOP 97-2, as there is no vendor specific objective evidence of the fair value of the perpetual license, revenue associated with the hosting services is being deferred
until the sale of the perpetual license occurs. The amount of revenue deferred for the hosting services is $6.5 million as of December 31, 2007. All costs associated with the hosting services are being expensed as incurred.

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



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##### Index to Financial Statements

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

In 2007, we recognized revenue of
$92.1 million, of which $16.4 million was generated outside the U.S. For additional information regarding revenue and long-lived assets related to the geographic areas in which we do business, see Note 2 to the Consolidated Financial Statements
included in Item 8 of this Form 10-K.

Sources of Revenue

We principally operate a transaction-based business model under long-term contracts using hosted technology applications. Transaction and other revenues have historically been derived from three principal service
offerings:



| |  |  | Transaction Processing: We generate transaction processing revenue from service and processing fees based primarily on the number of data records we process.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Data Reporting: We generate data reporting revenue from service and processing fees based primarily on the number of data records we consolidate, the number of
users accessing the data, the number of sources from which we receive data, and the frequency of data submissions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Customer Care: We generate customer care revenue from service fees based primarily on the number or length of telephone calls answered or the number of email
responses delivered. As discussed above, we substantially exited the customer care business prior to 2007.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Transaction-based revenues are recognized when we perform the services. In connection with providing transaction processing and data reporting services, we generate revenues from short-term projects to customize or enhance service delivery.
Revenue generated from short-term project work is recognized as the services are performed, which is generally when billed. Revenue from implementation or set-up fees is recognized over the life of the client contract.

Client reimbursements reflect pass-through items, primarily voice and data costs and items such as ticket envelopes that we bill to our clients at cost.
In the future, if our clients decide to pay these items directly, our client reimbursement revenue and client reimbursement expense will decrease accordingly.

Historically, we have experienced sales cycles of six to eighteen months with respect to several of our larger clients. Additionally, the implementation of our services can take up to one year depending on the size
and complexity of the service offering and the speed at which our clients implement the service offering to their customer base. In 2006, we began offering components of our technology solutions to clients and potential clients. This change has
reduced the length of our sales cycle and has also reduced the average amount of revenue initially earned from each of our clients. Also in late 2006, we began to experience pricing pressure primarily in our reservation processing business as GDS
deregulation placed cost pressure on the supply chain associated with a typical travel reservation. This pricing pressure had a material adverse effect on our revenues and results of operations in 2007 as compared to 2006. Additionally, as a result
of the Citibank amendment previously discussed, revenue associated with the hosting services is being deferred until the sale of the perpetual license occurs. The amount of revenue deferred for the hosting services is approximately $6.5 million as
of December 31, 2007.

Costs

Our
expenses include operating, selling, general and administrative, technology development, restructuring and depreciation and amortization.



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##### Index to Financial Statements

Operating expenses include salaries, benefits, and related overhead of personnel directly and indirectly
supporting service delivery. Personnel indirectly supporting service delivery include information technology, client services, training, and business integration personnel. Operating expenses also include communication costs, technology hosting, and
processing errors. Operating expenses are impacted by our revenue mix, with customer care services generally having higher operating expenses as a percentage of revenue due to the labor-intensive nature of providing customer care services. Our
ability to efficiently manage and utilize our employees along with our ability to provide services from low-cost labor markets also impacts operating expenses.

Selling, general and administrative expenses include salaries, benefits and related overhead associated with the selling and marketing of our products and services, as well as other support functions, including
executive, accounting, legal, centralized human resources and administration. Selling, general and administrative expenses also include professional services and insurance.

Technology development expenses primarily include salaries, benefits and related overhead of personnel focusing on developing and maintaining our
technologies. During 2005, we reduced our technology development expense by replacing amounts spent on some of these higher-cost contract labor personnel and consultants with less-costly personnel in the U.S. and India. In 2007, we increased our
technology development expense due to our increased investment in new product technology related to our data reporting, reservation processing and online booking product offerings. We expect our technology development expenses in 2008 to be
relatively consistent with 2007.

Depreciation and amortization expenses relate to fixed assets, software development costs and other
intangible assets. We currently purchase substantially all of our equipment.

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 2 of
the notes to our consolidated financial statements included elsewhere in this Form 10-K, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to
assist investors in fully understanding and evaluating our consolidated financial condition and results of operations.

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

We recognize revenue in accordance with EITF Issue 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables, when certain other consulting or other services are combined with our transaction processing revenues and SEC Staff Accounting Bulletin No. 104, Revenue Recognition,
when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) services have been performed, (3) the fee for services is fixed or determinable, and (4) collectibility is reasonably assured.
Generally, these criteria are considered to have been met as follows:



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



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



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



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##### Index to Financial Statements

With respect to the Citibank amendment discussed above in the Overview section, the sale of
the license, the compensation for the assets referred to above, and the hosting services are all elements of the Amendment. Revenue recognition for these elements is governed by SOP 97-2. In accordance with SOP 97-2, as there is no vendor
specific objective evidence of the fair value of the perpetual license, revenue associated with the hosting services is being deferred until the sale of the perpetual license occurs. The amount of revenue deferred for the hosting services is
$6.5 million as of December 31, 2007. All costs associated with the hosting services are being expensed as incurred.

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

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

Goodwill. We assess the impairment of goodwill in accordance with SFAS No. 142. Accordingly, we test our goodwill for impairment annually on
September 30, or whenever events or changes in circumstances indicate an impairment may have occurred, by comparing its fair value to its carrying value. Impairment may result from, among other things, deterioration in the performance of our
business, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of the acquired business, and a variety of other circumstances. If we determine that impairment has occurred, we
are required to record an impairment charge for the difference between the carrying value of the goodwill and the implied fair value of the goodwill in the period the determination is made. Although no impairment of goodwill was identified in our
annual goodwill impairment test as of September 30, 2007, 2006 or 2005, given the significant decline in our market capitalization between September 30, 2007 and December 31, 2007, we determined that it was also necessary to test our
goodwill for impairment as of December 31, 2007. As part of this interim test, we utilized the assistance of an independent professional appraisal firm. We considered a market approach utilizing our own stock price, a market approach
utilizing comparable transactions, as well as an income approach using a discounted cash flow model. The results of this interim test as of December 31, 2007 did not indicate an impairment of our goodwill.

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



26



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##### Index to Financial Statements

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 $2.9, $2.1 million and $3.1 million in fiscal 2007, 2006 and 2005, respectively, and are included as operating expenses in our consolidated
statements of operations.

Results of Operations

The following table sets forth selected statement of operations data expressed as a percentage of transaction and other revenues for each of the periods indicated. Both revenue and expenses exclude client
reimbursements. We believe that the inclusion of client reimbursements as revenue in the calculation of our operating loss margin percentage distorts such margin percentage. We evaluate our operating performance based upon operating loss margins
excluding client reimbursements.



|                                                      |  |                         |    |  |      |   |  |      |   
|----------------------------------------------------- |  | ----------------------- | -- |  | ---- | - |  | ---- | --
|                                                      |  | Year Ended December 31, |   
|                                                      |  | 2007                    |    |  | 2006 |   |  | 2005 |   
|Transaction and other revenues                        |  | 100                     | %  |  | 100  | % |  | 100  | % 
|Expenses:                                             |  |                         |    |  |      |   |  |      |   
|Operating                                             |  | 63                      |    |  | 57   |   |  | 64   |   
|Selling, general and administrative                   |  | 18                      |    |  | 18   |   |  | 17   |   
|Technology development                                |  | 15                      |    |  | 10   |   |  | 10   |   
|Restructuring                                         |  |                        |    |  | 1    |   |  | 2    |   
|Depreciation and amortization                         |  | 13                      |    |  | 9    |   |  | 9    |   
|                                                      |  |                         |    |  |      |   |  |      |   
|Total operating expenses before client reimbursements |  | 109                     |    |  | 95   |   |  | 102  |   
|                                                      |  |                         |    |  |      |   |  |      |   
|Operating income (loss)                               |  | (9                      | )% |  | 5    | % |  | (2   | )%
|                                                      |  |                         |    |  |      |   |  |      |   

Comparison of Fiscal Years Ended December 31, 2007 and December 31, 2006

Revenues. The following table sets forth comparative revenues by type, in dollars and as a percentage of transaction and other revenue, for the
fiscal years ended December 31, 2007 and 2006, respectively:



|                               |  |                         |        |  |      |   |  |        |         |  |     |   |  |   |         |   |  |     |   
|------------------------------ |  | ----------------------- | ------ |  | ---- | - |  | ------ | ------- |  | --- | - |  | - | ------- | - |  | --- | --
|                               |  | Year Ended December 31, |       
|                               |  | 2007                    |        |  | 2006 |   |  | Change |        
|                               |  | (dollars in thousands)  |       
|Transaction processing         |  | $                       | 63,844 |  | 71   | % |  | $      | 72,627  |  | 64  | % |  | $ | (8,783  | ) |  | (12 | )%
|Data reporting                 |  |                         | 20,885 |  | 23   |   |  |        | 17,849  |  | 16  |   |  |   | 3,036   |   |  | 17  |   
|Customer care                  |  |                         | 4,803  |  | 5    |   |  |        | 23,028  |  | 20  |   |  |   | (18,225 | ) |  | (79 | ) 
|                               |  |                         |        |  |      |   |  |        |         |  |     |   |  |   |         |   |  |     |   
|Transaction and other revenues |  |                         | 89,532 |  | 100  |   |  |        | 113,504 |  | 100 |   |  | $ | (23,972 | ) |  |     |   
|                               |  |                         |        |  |      |   |  |        |         |  |     |   |  |   |         |   |  |     |   
|Client reimbursements          |  |                         | 2,570  |  |      |   |  |        | 2,836   |  |     |   |  |   |         |   |  |     |   
|                               |  |                         |        |  |      |   |  |        |         |  |     |   |  |   |         |   |  |     |   
|Total                          |  | $                       | 92,102 |  |      |   |  | $      | 116,340 |  |     |   |  |   |         |   |  |     |   
|                               |  |                         |        |  |      |   |  |        |         |  |     |   |  |   |         |   |  |     |   

Transaction processing revenues. Transaction processing revenues were $63.8 million in
fiscal 2007, a decrease of 12% compared to $72.6 million in fiscal 2006. The decrease in transaction processing revenues was primarily due to reduced revenues per transaction from Expedia. We expect revenues per transaction to continue to decline in
the future because of scale efficiencies, as well as trends in the travel processing supply chain that began to evolve in late 2006 that are putting negative pressure on our revenue per transaction.

Data reporting revenues. Data reporting revenues were $20.9 million in fiscal 2007, compared to $17.8 million in fiscal 2006. Our revenues grew by
$3.8 million due to additional penetration and organic growth from



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##### Table of Contents

##### Index to Financial Statements

our existing customers and $5.8 million due to acquisitions made in August 2006 and January 2007, partially offset by $6.5 million reduction in revenue from
Citibank, as discussed above. Recurring revenues from Citibank generated in 2008 are expected to be significantly less than revenues generated in 2007.

Customer care revenues. Customer care revenues were $4.8 million in fiscal 2007, a decrease of 79% compared to $23.0 million in fiscal 2006, primarily due to the sale of our U.S. call center business effective
December 2006, and the closure of our U.K. call center business in May 2006.

Client reimbursement revenues and expenses. Client
reimbursement revenues and expenses were $2.6 million in fiscal 2007, a decrease of 9% compared to $2.8 million in fiscal 2006.

Operating expenses. Operating expenses were $56.8 million in fiscal 2007, a decrease of 12% compared to $64.7 million in fiscal 2006. The decrease was primarily due to the decline in our customer care business and the closure of two
call center facilities in 2006. As a percentage of revenue, operating expenses increased from 57% in fiscal 2006 to 63% in fiscal 2007. The increase was primarily due to the deferral of $6.5 million of routine data reporting revenues from Citibank,
without a related deferral of expenses in accordance with U.S. GAAP.

Selling, general and administrative expenses. Selling, general
and administrative expenses were $16.2 million in fiscal 2007, a decrease of 20% compared to $20.2 million in fiscal 2006. The decrease is primarily due to lower stock compensation expense, lower overhead resulting from our condensed management
structure in fiscal 2007 and lower bad debt expense resulting from our collection efforts.

Technology development expenses.
Technology development expenses were $13.2 million in fiscal 2007, an increase of 20% compared to $11.0 million in fiscal 2006. As a percentage of revenue, technology development expenses increased from 10% in fiscal 2006 to 15% in fiscal 2007. The
increase was primarily due to our increased investment in new product technology related to our data reporting, reservation processing and online booking product offerings.

Restructuring expense. We recorded no restructuring expense in fiscal 2007 as compared to $0.7 million of restructuring expense in fiscal 2006.
The charge in 2006 is due to $1.0 million of severance, asset impairment charges, and other related costs from the closure of our customer care operations in the United Kingdom, partly offset by a credit of $0.3 million due to the reduction of our
estimated remaining lease-termination accrual resulting from a revision to our estimated sublease assumption for the Orangeburg, South Carolina facility.

Depreciation and amortization. Depreciation and amortization expenses were $11.2 million in fiscal 2007, an increase of 11% compared to $10.1 million in fiscal 2006. The increase is primarily due to additional
depreciation and amortization related to assets acquired from our acquisition of Hi-Mark in January 2007.

Interest income. We
generated $0.4 million of interest income in fiscal 2007, a decrease of 64% compared to $1.0 million in fiscal 2006. The decrease is primarily due to reduced cash balances available for investment due to the cash portion of the purchase price paid
for the Hi-Mark acquisition.

Interest expense. Interest expense was $0.6 million in fiscal 2007, an increase of 80% compared to
$0.3 million in fiscal 2006. The increase in interest expense is due to the interest expense on a promissory note issued related to the Hi-Mark acquisition in January 2007.

Income tax provision. We recorded an income tax benefit of $0.1 million for fiscal 2007 related to a refund of a portion of our 2006 alternative
minimum tax. We recorded an income tax provision of $0.2 million for fiscal 2006 related to alternative minimum tax.

Net (loss)
income. Due to the factors described above, we reported a net loss of $8.0 million in fiscal 2007 compared to net income of $7.3 million in fiscal 2006.



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##### Index to Financial Statements

Comparison of Fiscal Years Ended December 31, 2006 and December 31, 2005

Revenues. The following table sets forth comparative revenues by type, in dollars and as a percentage of transaction and other revenue, for the
fiscal years ended December 31, 2006 and 2005, respectively:



|                               |  |                         |         |  |      |   |  |        |         |  |     |   |  |   |        |   |  |     |  
|------------------------------ |  | ----------------------- | ------- |  | ---- | - |  | ------ | ------- |  | --- | - |  | - | ------ | - |  | --- | -
|                               |  | Year Ended December 31, |        
|                               |  | 2006                    |         |  | 2005 |   |  | Change |        
|                               |  | (dollars in thousands)  |        
|Transaction processing         |  | $                       | 72,627  |  | 64   | % |  | $      | 72,083  |  | 62  | % |  | $ | 544    |   |  | 1   | %
|Data reporting                 |  |                         | 17,849  |  | 16   |   |  |        | 16,300  |  | 14  |   |  |   | 1,549  |   |  | 10  |  
|Customer care                  |  |                         | 23,028  |  | 20   |   |  |        | 27,322  |  | 24  |   |  |   | (4,294 | ) |  | (16 | )
|                               |  |                         |         |  |      |   |  |        |         |  |     |   |  |   |        |   |  |     |  
|Transaction and other revenues |  |                         | 113,504 |  | 100  |   |  |        | 115,705 |  | 100 |   |  | $ | (2,201 | ) |  |     |  
|                               |  |                         |         |  |      |   |  |        |         |  |     |   |  |   |        |   |  |     |  
|Client reimbursements          |  |                         | 2,836   |  |      |   |  |        | 2,911   |  |     |   |  |   |        |   |  |     |  
|                               |  |                         |         |  |      |   |  |        |         |  |     |   |  |   |        |   |  |     |  
|Total                          |  | $                       | 116,340 |  |      |   |  | $      | 118,616 |  |     |   |  |   |        |   |  |     |  
|                               |  |                         |         |  |      |   |  |        |         |  |     |   |  |   |        |   |  |     |  

Transaction processing revenues. Transaction processing revenues were $72.6 million in
fiscal 2006, an increase of 1% compared to $72.1 million in fiscal 2005, primarily due to volume growth of approximately 3% from existing clients. We expect our transaction processing revenues to be materially lower in 2007 than in 2006, primarily
due to pricing pressure largely due to GDS deregulation in the U.S. during 2006 and the resulting cost pressure it has placed on our clients and, in turn, on us.

Data reporting revenues. Data reporting revenues were $17.8 million in fiscal 2006, an increase of 10% compared to $16.3 million in fiscal 2005, primarily due to additional penetration and organic growth from
our existing clients.

Customer care revenues. Customer care revenues were $23.0 million in fiscal 2006, a decrease of 16% compared
to $27.3 million in fiscal 2005, primarily due to our planned volume reductions from existing customers as we continue to transition away from this lower-margin, labor intensive business.

Client reimbursement revenues and expenses. Client reimbursement revenues and expenses were $2.8 million in fiscal 2006, consistent with $2.9
million in fiscal 2005.

Operating expenses. Operating expenses were $64.7 million in fiscal 2006, a decrease of 13% compared to
$74.4 million in fiscal 2005. The decrease was primarily due to the decline in our customer care business and the closure of two call center facilities in 2005 and 2006. As a percentage of revenue, operating expenses decreased from 64% in fiscal
2005 to 57% in fiscal 2006. Our margins improved as a result of the reduction in our less profitable customer care business and operating leverage associated with growth in our core transaction processing and data reporting revenue streams.

Selling, general and administrative expenses. Selling, general and administrative expenses were $20.2 million in fiscal 2006, an
increase of 4% compared to $19.3 million in fiscal 2005. The increase is primarily due to $0.8 million of stock compensation expense in fiscal 2006.

Technology development expenses. Technology development expenses were $11.0 million in fiscal 2006, consistent with $11.2 million in fiscal 2005. As a percentage of revenue, technology development expense was
10% in both fiscal 2005 and 2006.

Restructuring expense. We recorded $0.7 million of restructuring expense in fiscal 2006, compared
to $2.3 million of expense in fiscal 2005. The charge in 2006 is due to $1.0 million of severance, asset writedown charges, and other related costs from the closure of our customer care operations in the United Kingdom, partly offset by a
credit of $0.3 million due to the reduction of our estimated remaining lease-termination accrual



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##### Index to Financial Statements

resulting from a revision to our estimated sublease assumption for the Orangeburg, South Carolina facility. The expense in fiscal 2005 consisted of a $2.4
million charge for severance, lease abandonment, operational transition costs and accelerated depreciation related to the closure of our Orangeburg, South Carolina facility effective April 30, 2005, partially offset by a $0.1 million credit to
reflect lower than expected lease termination costs in Europe.

Depreciation and amortization. Depreciation and amortization
expenses were $10.1 million in fiscal 2006, consistent with $10.0 million in fiscal 2005.

Interest income (expense), net. We
generated $0.7 million of net interest income in fiscal 2006, compared to net interest expense of $2.2 million in fiscal 2005. Our interest expense declined significantly due to debt repayments, and our interest income increased due to cash balances
generated primarily from our initial public offering of common stock in September 2005 and increased rates of interest earned on invested cash.

Income tax provision. We recorded an income tax provision of $0.2 million for fiscal 2006 related to alternative minimum tax. No income tax benefit was recorded for fiscal 2005, as we had a current tax loss, and we recorded a 100%
valuation allowance on our net deferred tax assets.

Net income (loss). Due to the factors described above, net income was $7.3
million in fiscal 2006 compared to a net loss of $6.7 million in fiscal 2005.

Liquidity and Capital Resources

We have funded our operations primarily with cash from operating activities, the private placement of debt and equity securities totaling approximately
$30.0 million since 2001, and the public offering of common stock that provided net proceeds of approximately $26.4 million in September 2005. The underlying drivers of cash from operating activities include cash receipts from the sale of our
products and services and cash payments to our employees and service providers. Most of our larger clients remit payment for our services 30 to 90 days in advance of our service delivery. Advance payments from clients are recorded as customer
deposits and deferred revenue until the service is performed.

At December 31, 2007, our principal sources of liquidity were cash and
cash equivalents of $8.9 million and $10.0 million of availability under our revolving credit facility. We had no borrowings outstanding under our credit facility at December 31, 2007. The maximum amount available under our revolving credit
facility is $10.0 million, and the availability fluctuates based upon our last twelve months consolidated senior leverage ratio (as defined in the facility).

Net cash provided by operating activities was $4.7 million in fiscal 2007 compared to $10.8 million in fiscal 2006. The primary driver of the decrease in operating cash flow was reduced revenues per transaction from
Expedia. Net cash provided by operating activities was $10.8 million in fiscal 2006 compared to $8.5 million in fiscal 2005. The primary driver of the increase in operating cash flow in 2006 was improved operating profitability, mostly offset by the
fact that we used working capital of $8.2 million in 2006, compared to generating $1.2 million of working capital in 2005.

Net cash used
in investing activities was $19.1 million in fiscal 2007 compared to $10.4 million in fiscal 2006. The primary driver of the increase in fiscal 2007 related to the $10.4 million of cash paid in partial consideration of the acquisition of Hi-Mark.
The other significant driver of our investing activities is our capital expenditures, which include costs associated with internally developed software, as well as infrastructure required to support volume expansion, the acquisition of new revenue
streams with new and existing clients, investment in business continuity, and opportunities to reduce costs. As of December 31, 2007, we had no material commitments related to capital expenditures. Net cash used in investing activities was
$10.4 million in fiscal 2006 compared to $8.7 million in fiscal 2005. The increase primarily related to the $1.5 million of purchase price paid (net of cash acquired) for the acquisition of substantially all of the assets of Travel Analytics.



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##### Index to Financial Statements

Net cash used in financing activities was $1.8 million in fiscal 2007 compared to $5.2 million in fiscal
2006. The primary driver of financing cash outflow in both 2007 and 2006 was debt repayments. Net cash used in financing activities was $5.2 million in fiscal 2006 compared to net cash provided by financing activities of $18.9 million in fiscal
2005. Cash provided by financing activities during 2005 included $26.4 million of net proceeds from our initial public offering of common stock, the repayment of a note receivable from a shareholder of $1.0 million, and net proceeds of $0.8 million
related to the exercise of stock options and $0.1 million in proceeds from our employee stock purchase plan, partially offset by payments of $4.6 million on long-term debt, $4.5 million for warrant repurchase and debt conversion expenses and $0.3
million to repurchase common stock.

We have a $10.0 million senior secured revolving credit facility that expires in April 2009. The
lender holds a senior security interest in all of our domestic assets and a 66% interest in the stock of our international subsidiaries. Under the facility, we are subject to a maximum consolidated senior leverage ratio (as defined in the facility)
of 1 to 1. The facility also requires that we reduce our borrowings under the facility to $2.0 million or less for 30 days during each calendar quarter. We are restricted in our ability to, among other things, make advances to our European
operations, make acquisitions or sell assets, make capital expenditures, incur additional indebtedness and pay dividends. We are currently in compliance with all covenants. We pay a variable rate of interest on draws, at LIBOR plus 0.5%, and an
annual fee of 0.5% of the unused portion of the $10.0 million commitment. At December 31, 2007, we had no borrowings outstanding against the facility. We have an outstanding letter of credit in the amount of $45,000 against the facility as of
December 31, 2007.

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

Contractual Obligations

The following table
summarizes our future minimum non-cancelable contractual obligations (including interest) at December 31, 2007:



|                              |  |                        |        |                   |   |          |  |          |       |                     |   |       |  |   |    
|----------------------------- |  | ---------------------- | ------ | ----------------- | - | -------- |  | -------- | ----- | ------------------- | - | ----- |  | - | ---
|                              |  | Payments Due by Period
|                              |  | Total                  |        | Less thanone year |   | 1-3years |  | 3-5years |       | More thanfive years
|                              |  | (in thousands)        
|Long-term debt                |  | $                      | 5,250  |                   | $ | 2,333    |  | $        | 2,917 |                     | $ |      |  | $ |   
|Cash interest costs           |  |                        | 476    |                   |   | 317      |  |          | 159   |                     |   |      |  |   |   
|Operating leases              |  |                        | 6,820  |                   |   | 2,779    |  |          | 1,958 |                     |   | 1,521 |  |   | 562
|Employment agreements         |  |                        | 4,235  |                   |   | 1,791    |  |          | 2,444 |                     |   |      |  |   |   
|                              |  |                        |        |                   |   |          |  |          |       |                     |   |       |  |   |    
|Total contractual obligations |  | $                      | 16,781 |                   | $ | 7,220    |  | $        | 7,478 |                     | $ | 1,521 |  | $ | 562
|                              |  |                        |        |                   |   |          |  |          |       |                     |   |       |  |   |    

The above contractual obligations table excludes any amounts due under the earnout provisions
executed as part of the acquisitions of Travel Analytics and Hi-Mark, because such amounts are based on a percentage of future revenues. All such obligations are payable in cash. We may make earnout payments to Hi-Mark of up to $12.0 million
dependent on the achievement of defined revenue targets. The cash interest costs shown above assume that interest rates in effect at December 31, 2007 on variable rate debt remain constant in the future. The long-term commitments under
operating leases shown above consist of facility leases in the U.S. and Europe for our operations. The employment agreements with certain key executives provide for compensation and benefits through the expiration of the individual agreements upon
termination of employment, other than by the employee voluntarily or by us for cause. We have not included our unrecognized tax benefits in the above contractual obligations table because we have not recorded a liability for our unrecognized tax
benefits as they are fully offset by net operating losses.



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##### Index to Financial Statements

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 three years.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board
(FASB) issued SFAS No. 141(R),Business Combinations (SFAS No. 141(R)), which replaces SFAS No. 141. SFAS No. 141(R) retains the fundamental requirements of SFAS
No. 141 that the acquisition method of accounting (which SFAS No. 141 called thepurchase method) be used for all business combinations, but is designed to improve, simplify, and converge internationally the accounting for business
combinations, including enhancing principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the
acquiree. Additionally, the standard establishes disclosure requirements to enable the evaluation of and financial effects of the business combination. SFAS No. 141(R) is effective on a prospective basis for all business combinations
for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008. We do not expect that the adoption of this standard will have a material effect on our consolidated financial position
and results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an Amendment of FASB Statement No. 115 (SFAS No. 159), which becomes effective for fiscal periods beginning after November 15, 2007. Under SFAS No. 159,
companies may elect to measure specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. This election, called
the fair value option, will enable some companies to reduce volatility in reported earnings caused by measuring related assets and liabilities differently. We do not expect that the adoption of this standard will have a material
effect on our consolidated financial position and results of operations.

In January 2007, we adopted the provisions of FASB
Interpretation No. 48,Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109 (FIN 48), with no impact on beginning retained earnings. This statement clarifies the
criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a companys financial statements. FIN 48 prescribes a recognition threshold of more-likely-than-not, and a measurement
attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in financial statements. As of January 1, 2007 and December 31, 2007, we had total unrecognized tax benefits
of $815 and $393, respectively. The unrecognized tax benefits are fully offset by net operating losses. These unrecognized tax benefits relate primarily to the timing for recognition on various deductions or items of income. If recognized, the tax
benefits will have no impact on the effective rate in a future period. We recognize potential accrued interest and penalties related to unrecognized tax benefits within our income tax expense. Due to our net operating loss carryforward position, we
recognized no interest and penalties at January 1, 2007 or during fiscal 2007, associated with our uncertain tax positions.



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##### Index to Financial Statements

Tax years 2005 and 2006 remain subject to examination by U.S. Federal and state taxing authorities. A
U.S. federal audit of the 2004 tax year was concluded in 2007. This resulted in a reduction in the NOL carryforward in the amount of $1,128 on our 2006 federal corporate income tax return. Our primary state tax jurisdictions are Georgia, Florida,
South Carolina, Texas, Virginia, and West Virginia, and our primary international jurisdictions are the United Kingdom, Germany and India. The following table summarizes the open tax years for each major jurisdiction:



|               |  |               
|-------------- |  | --------------
|Jurisdiction   |  | Open Tax Years
|Federal        |  | 2003-2006     
|Georgia        |  | 2003-2006     
|Florida        |  | 2003-2006     
|South Carolina |  | 2003-2006     
|Texas          |  | 2003-2006     
|Virginia       |  | 2003-2006     
|West Virginia  |  | 2003-2006     
|United Kingdom |  | 2004-2006     
|Germany        |  | 2003-2006     

Our Indian operation has not been included in the table above since the acquisition was effective
December 1, 2007 and thus we have not filed a tax return inclusive of this operation.

We do not currently anticipate that the total
amount of unrecognized tax benefits will significantly increase or decrease during the twelve month period ended December 31, 2008.

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements (SFAS No. 157). SFAS No. 157 establishes a single authoritative definition of fair value, sets out a
framework for measuring fair value, and expands on required disclosures about fair value measurement. This standard is effective on January 1, 2008 and will be applied prospectively. We do not expect that the adoption of this standard will have
a material effect on our consolidated financial position and results of operations.



|Item 7A. | Qualitative and Quantitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------

Foreign Currency Exchange Risk. Approximately 18% of our consolidated revenues during fiscal 2007 and 14% of our consolidated assets at December 31, 2007 are associated with operations outside of the U.S. The U.S. dollar
balance sheets and statements of operations for these businesses are subject to currency fluctuations. We are most vulnerable to fluctuations in the British pound sterling, euro and the Indian rupee against the U.S. dollar. Historically, we have not
entered into derivative financial instruments to mitigate this risk, as it has not been cost-effective for us. Through 2007, the impact of currency fluctuations on profitability has not been significant since both revenues and operating costs of
these businesses are denominated in local currency. If the U.S. dollar had a 10 percent greater appreciation against our non-U.S. dollar denominated businesses in 2007, consolidated revenues and operating loss would have been reduced by
approximately $149,000 and $0, respectively. We may use derivative financial instruments in the future if we deem it useful in mitigating an exposure to foreign currency exchange rates. The cumulative translation adjustment was a $0.1 million
increase in shareholders equity at December 31, 2007.

Interest Rate Market Risk. Our interest costs are sensitive to
changes in the general level of interest rates, because our note payable and our revolving credit facility are at a variable interest rate based on the Prime rate and LIBOR, respectively. We had no borrowings under our revolving credit facility at
or during the year ended December 31, 2007. An increase in interest rates of one percentage point during fiscal 2007 would have increased our interest expense by $52,500.



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##### Index to Financial Statements

|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2007 AND 2006 AND
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005



|                                                        |  |     
|------------------------------------------------------- |  | ----
|                                                        |  | Page
|Report of Independent Registered Public Accounting Firm |  | 35  
|Consolidated Balance Sheets                             |  | 36  
|Consolidated Statements of Operations                   |  | 37  
|Consolidated Statements of Shareholders Equity         |  | 38  
|Consolidated Statements of Cash Flows                   |  | 39  
|Notes to Consolidated Financial Statements              |  | 40  



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##### Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

TRX, Inc. and Subsidiaries

Atlanta, Georgia

We have audited the accompanying consolidated balance sheets of TRX, Inc. and subsidiaries (the Company) as of December 31, 2007 and
2006, and the related consolidated statements of operations, shareholders equity, and cash flows for each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted
our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of TRX, Inc. and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 6 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109,, effective January 1, 2007. As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 123(R),
Share-Based Payment, effective January 1, 2006, based on the modified prospective application transition method.

/s/ DELOITTE
& TOUCHE LLP

Atlanta, Georgia

March 7, 2008



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##### Index to Financial Statements

TRX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2007 and 2006

(In thousands, except share data)



|                                                                                                                                                   |  |      |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                                                                                   |  | 2007 |         |   | 2006 |  
|ASSETS                                                                                                                                             |  |      |         |   |      |   |         |  
|CURRENT ASSETS:                                                                                                                                    |  |      |         |   |      |   |         |  
|Cash and cash equivalents                                                                                                                          |  | $    | 8,879   |   |      | $ | 24,444  |  
|Settlement assets (Note 2)                                                                                                                         |  |      | 60      |   |      |   | 13,944  |  
|Trade accounts receivable, net                                                                                                                     |  |      | 16,181  |   |      |   | 8,169   |  
|Prepaids and other                                                                                                                                 |  |      | 2,786   |   |      |   | 2,547   |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|Total current assets                                                                                                                               |  |      | 27,906  |   |      |   | 49,104  |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|NONCURRENT ASSETS:                                                                                                                                 |  |      |         |   |      |   |         |  
|Property and equipment, net                                                                                                                        |  |      | 19,496  |   |      |   | 16,412  |  
|Goodwill                                                                                                                                           |  |      | 36,981  |   |      |   | 23,122  |  
|Other assets, net                                                                                                                                  |  |      | 3,406   |   |      |   | 1,075   |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|Total noncurrent assets                                                                                                                            |  |      | 59,883  |   |      |   | 40,609  |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|Total assets                                                                                                                                       |  | $    | 87,789  |   |      | $ | 89,713  |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                               |  |      |         |   |      |   |         |  
|CURRENT LIABILITIES:                                                                                                                               |  |      |         |   |      |   |         |  
|Accounts payable and accrued liabilities                                                                                                           |  | $    | 22,966  |   |      | $ | 20,151  |  
|Customer deposits and deferred revenue                                                                                                             |  |      | 21,859  |   |      |   | 13,403  |  
|Settlement obligations (Note 2)                                                                                                                    |  |      | 60      |   |      |   | 13,944  |  
|Current portion of long-term debt                                                                                                                  |  |      | 2,333   |   |      |   | 157     |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|Total current liabilities                                                                                                                          |  |      | 47,218  |   |      |   | 47,655  |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|NONCURRENT LIABILITIES:                                                                                                                            |  |      |         |   |      |   |         |  
|Long-term debtless current portion                                                                                                                |  |      | 2,917   |   |      |   |        |  
|Other long-term liabilities                                                                                                                        |  |      | 635     |   |      |   | 926     |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|Total noncurrent liabilities                                                                                                                       |  |      | 3,552   |   |      |   | 926     |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|Total liabilities                                                                                                                                  |  |      | 50,770  |   |      |   | 48,581  |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|COMMITMENTS AND CONTINGENCIES (NOTE 3)                                                                                                             |  |      |         |   |      |   |         |  
|SHAREHOLDERS EQUITY:                                                                                                                              |  |      |         |   |      |   |         |  
|Common stock, $.01 par value; 100,000,000 shares authorized; 18,492,332 and 17,960,301 shares issued; 18,304,801 and 17,772,771 shares
outstanding |  |      | 184     |   |      |   | 179     |  
|Additional paid-in capital                                                                                                                         |  |      | 95,519  |   |      |   | 91,659  |  
|Treasury stock, at cost; 187,531 shares                                                                                                            |  |      | (2,294  | ) |      |   | (2,294  | )
|Cumulative translation adjustment                                                                                                                  |  |      | 142     |   |      |   | 77      |  
|Accumulated deficit                                                                                                                                |  |      | (56,532 | ) |      |   | (48,489 | )
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|Total shareholders equity                                                                                                                         |  |      | 37,019  |   |      |   | 41,132  |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  
|Total liabilities and shareholders equity                                                                                                         |  | $    | 87,789  |   |      | $ | 89,713  |  
|                                                                                                                                                   |  |      |         |   |      |   |         |  

See notes to consolidated financial statements.



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##### Index to Financial Statements

TRX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                              |  | 2007 |        |   | 2006 |   |         | 2005 | 
|REVENUES:                                                                     |  |      |        |   |      |   |         |      |  |   |         |  
|Transaction and other revenues                                                |  | $    | 89,532 |   |      | $ | 113,504 |      |  | $ | 115,705 |  
|Client reimbursements                                                         |  |      | 2,570  |   |      |   | 2,836   |      |  |   | 2,911   |  
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|Total revenues                                                                |  |      | 92,102 |   |      |   | 116,340 |      |  |   | 118,616 |  
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|EXPENSES:                                                                     |  |      |        |   |      |   |         |      |  |   |         |  
|Operating, excluding depreciation and amortization                            |  |      | 56,820 |   |      |   | 64,673  |      |  |   | 74,443  |  
|Selling, general, and administrative, excluding depreciation and amortization |  |      | 16,184 |   |      |   | 20,159  |      |  |   | 19,295  |  
|Technology development                                                        |  |      | 13,178 |   |      |   | 11,022  |      |  |   | 11,176  |  
|Client reimbursements                                                         |  |      | 2,570  |   |      |   | 2,836   |      |  |   | 2,911   |  
|Restructuring                                                                 |  |      |       |   |      |   | 691     |      |  |   | 2,327   |  
|Depreciation and amortization                                                 |  |      | 11,217 |   |      |   | 10,121  |      |  |   | 9,984   |  
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|Total expenses                                                                |  |      | 99.969 |   |      |   | 109,502 |      |  |   | 120,136 |  
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|OPERATING (LOSS) INCOME                                                       |  |      | (7,867 | ) |      |   | 6,838   |      |  |   | (1,520  | )
|INTEREST INCOME (EXPENSE):                                                    |  |      |        |   |      |   |         |      |  |   |         |  
|Interest income                                                               |  |      | 356    |   |      |   | 999     |      |  |   | 351     |  
|Interest expense                                                              |  |      | (583   | ) |      |   | (324    | )    |  |   | (2,597  | )
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|Total interest (expense) income, net                                          |  |      | (227   | ) |      |   | 675     |      |  |   | (2,246  | )
|DEBT CONVERSION EXPENSE                                                       |  |      |       |   |      |   |        |      |  |   | (2,898  | )
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|(LOSS) INCOME BEFORE INCOME TAXES                                             |  |      | (8,094 | ) |      |   | 7,513   |      |  |   | (6,664  | )
|BENEFIT (PROVISION) FOR INCOME TAXES                                          |  |      | 51     |   |      |   | (213    | )    |  |   |        |  
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|NET (LOSS) INCOME                                                             |  | $    | (8,043 | ) |      | $ | 7,300   |      |  | $ | (6,664  | )
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|WEIGHTED AVERAGE NUMBER OF SHARES:                                            |  |      |        |   |      |   |         |      |  |   |         |  
|Basic                                                                         |  |      | 18,272 |   |      |   | 17,711  |      |  |   | 13,817  |  
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|Diluted                                                                       |  |      | 18,272 |   |      |   | 17,745  |      |  |   | 13,817  |  
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  
|BASIC AND DILUTED NET (LOSS) INCOME PER SHARE                                 |  | $    | (0.44  | ) |      | $ | 0.41    |      |  | $ | (0.48   | )
|                                                                              |  |      |        |   |      |   |         |      |  |   |         |  

See notes to consolidated financial statements.



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##### Index to Financial Statements

TRX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(In thousands, except share data)



|                                                                                 |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  
|-------------------------------------------------------------------------------- |  | ------------ | - |  | ------------------------ | --- | - | ------------- | - | ------ | ----------------------------- |  | - | -------------------- | - |  | ------------------------------- | ------ | - | ------------------ | - | ---- | ----- |  | - | ----- | - |  | - | ------- | - |  | - | ------ | -
|                                                                                 |  | Common Stock |   |  | AdditionalPaid-InCapital |     |   | TreasuryStock |   |        | NoteReceivableFromShareholder |  |   | DeferredCompensation |   |  | CumulativeTranslationAdjustment |        |   | AccumulatedDeficit |   |      | Total | 
|                                                                                 |  | Shares       |   |  | Amount                   |     |   |               |   |        |                               |  |  
|BALANCEDecember 31, 2004                                                        |  | 12,461,752   |   |  | $                        | 125 |   |               | $ | 45,001 |                               |  | $ | (1,009               | ) |  | $                               | (1,000 | ) |                    | $ | (113 | )     |  | $ | (578  | ) |  | $ | (49,125 | ) |  | $ | (6,699 | )
|Comprehensive loss:                                                              |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  
|Net loss                                                                         |  |             |   |  |                          |    |   |               |   |       |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   | (6,664  | ) |  |   | (6,664 | )
|Cumulative translation adjustment                                                |  |             |   |  |                          |    |   |               |   |       |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   | 1,121 |   |  |   |        |   |  |   | 1,121  |  
|                                                                                 |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  
|Total comprehensive loss                                                         |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   | (5,543 | )
|Amortization of deferred compensation                                            |  |             |   |  |                          |    |   |               |   |       |                               |  |   |                     |   |  |                                 |       |   |                    |   | 70   |       |  |   |      |   |  |   |        |   |  |   | 70     |  
|Issuance of common stock, net of offering costs                                  |  | 3,400,000    |   |  |                          | 34  |   |               |   | 26,406 |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 26,440 |  
|Conversion of notes                                                              |  | 1,791,830    |   |  |                          | 18  |   |               |   | 19,731 |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 19,749 |  
|Repurchase of warrant                                                            |  |             |   |  |                          |    |   |               |   | (2,016 | )                             |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | (2,016 | )
|Exercise of stock options, net of $0 of taxes                                    |  | 105,000      |   |  |                          | 1   |   |               |   | 808    |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 809    |  
|Employee stock purchase plan                                                     |  | 10,722       |   |  |                          | 1   |   |               |   | 76     |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 77     |  
|Repayment of note receivable from shareholder                                    |  |             |   |  |                          |    |   |               |   |       |                               |  |   |                     |   |  |                                 | 1,000  |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 1,000  |  
|Purchases of treasury stock                                                      |  | (105,000     | ) |  |                          | (1  | ) |               |   |       |                               |  |   | (1,285               | ) |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | (1,286 | )
|                                                                                 |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  
|BALANCEDecember 31, 2005                                                        |  | 17,664,304   |   |  | $                        | 178 |   |               | $ | 90,006 |                               |  | $ | (2,294               | ) |  | $                               |       |   |                    | $ | (43  | )     |  | $ | 543   |   |  | $ | (55,789 | ) |  | $ | 32,601 |  
|Comprehensive income:                                                            |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  
|Net income                                                                       |  |             |   |  |                          |    |   |               |   |       |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   | 7,300   |   |  |   | 7,300  |  
|Cumulative translation adjustment                                                |  |             |   |  |                          |    |   |               |   |       |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   | (466  | ) |  |   |        |   |  |   | (466   | )
|                                                                                 |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  
|Total comprehensive income                                                       |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   | 6,834  |  
|Reclassification of deferred compensation upon adoption of SFAS 123(R) and other |  |             |   |  |                          |    |   |               |   | (152   | )                             |  |   |                     |   |  |                                 |       |   |                    |   | 43   |       |  |   |      |   |  |   |        |   |  |   | (109   | )
|Employee stock purchase plan                                                     |  | 22,597       |   |  |                          |    |   |               |   | 149    |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 149    |  
|Issuance of common stock                                                         |  | 85,870       |   |  |                          | 1   |   |               |   | 599    |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 600    |  
|Share-based payment expense under SFAS 123 (R)                                   |  |             |   |  |                          |    |   |               |   | 1,057  |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 1,057  |  
|                                                                                 |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  
|BALANCEDecember 31, 2006                                                        |  | 17,772,771   |   |  | $                        | 179 |   |               | $ | 91,659 |                               |  | $ | (2,294               | ) |  | $                               |       |   |                    | $ |     |       |  | $ | 77    |   |  | $ | (48,489 | ) |  | $ | 41,132 |  
|Comprehensive loss:                                                              |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  
|Net loss                                                                         |  |             |   |  |                          |    |   |               |   |       |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   | (8.043  | ) |  |   | (8,043 | )
|Cumulative translation adjustment                                                |  |             |   |  |                          |    |   |               |   |       |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   | 65    |   |  |   |        |   |  |   | 65     |  
|                                                                                 |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  
|Total comprehensive loss                                                         |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   | (7,978 | )
|Employee stock purchase plan                                                     |  | 32,030       |   |  |                          |    |   |               |   | 93     |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 93     |  
|Issuance of common stock in connection with business combination                 |  | 500,000      |   |  |                          | 5   |   |               |   | 3,400  |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 3,405  |  
|Share-based payment expense under SFAS 123(R)                                    |  |             |   |  |                          |    |   |               |   | 367    |                               |  |   |                     |   |  |                                 |       |   |                    |   |     |       |  |   |      |   |  |   |        |   |  |   | 367    |  
|                                                                                 |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  
|BALANCEDecember 31, 2007                                                        |  | 18,304,801   |   |  | $                        | 184 |   |               | $ | 95,519 |                               |  | $ | (2,294               | ) |  | $                               |       |   |                    | $ |     |       |  | $ | 142   |   |  | $ | (56,532 | ) |  | $ | 37,019 |  
|                                                                                 |  |              |   |  |                          |     |   |               |   |        |                               |  |   |                      |   |  |                                 |        |   |                    |   |      |       |  |   |       |   |  |   |         |   |  |   |        |  

See notes to consolidated financial statements.



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##### Index to Financial Statements

TRX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(In thousands)



|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|---------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                         |  | 2007 |         |   | 2006 |   |         | 2005 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |      |         |   |      |   |         |      |  |   |        |  
|Net (loss) income                                                                        |  | $    | (8,043  | ) |      | $ | 7,300   |      |  | $ | (6,664 | )
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|Adjustments to reconcile net (loss) income to net cash provided by operating activities: |  |      |         |   |      |   |         |      |  |   |        |  
|Depreciation and amortization                                                            |  |      | 11,217  |   |      |   | 10,121  |      |  |   | 9,984  |  
|Debt conversion expense                                                                  |  |      |        |   |      |   |        |      |  |   | 2,898  |  
|Non-cash restructuring charges                                                           |  |      |        |   |      |   | 193     |      |  |   | 499    |  
|(Reduction to) provision for bad debts                                                   |  |      | (132    | ) |      |   | 324     |      |  |   | 213    |  
|Stock compensation expense                                                               |  |      | 351     |   |      |   | 1,031   |      |  |   | 70     |  
|Amortization of debt discount                                                            |  |      |        |   |      |   |        |      |  |   | 267    |  
|Changes in assets and liabilities, net of effects of acquisitions:                       |  |      |         |   |      |   |         |      |  |   |        |  
|Trade accounts receivable                                                                |  |      | (5,802  | ) |      |   | (2,165  | )    |  |   | 5,135  |  
|Prepaids and other assets                                                                |  |      | (1,021  | ) |      |   | (296    | )    |  |   | 340    |  
|Accounts payable and accrued liabilities                                                 |  |      | 200     |   |      |   | (6,829  | )    |  |   | (2,014 | )
|Customer deposits and deferred revenue                                                   |  |      | 7,975   |   |      |   | 1,136   |      |  |   | (2,222 | )
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|Total adjustments                                                                        |  |      | 12,788  |   |      |   | 3,515   |      |  |   | 15,170 |  
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|Net cash provided by operating activities                                                |  |      | 4,745   |   |      |   | 10,815  |      |  |   | 8,506  |  
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |      |         |   |      |   |         |      |  |   |        |  
|Capital expenditures                                                                     |  |      | (8,716  | ) |      |   | (9,151  | )    |  |   | (8,675 | )
|Acquisitions, net of cash acquired                                                       |  |      | (10,382 | ) |      |   | (1,475  | )    |  |   |       |  
|Sale of assets                                                                           |  |      |        |   |      |   | 250     |      |  |   |       |  
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|Net cash used in investing activities                                                    |  |      | (19,098 | ) |      |   | (10,376 | )    |  |   | (8,675 | )
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |      |         |   |      |   |         |      |  |   |        |  
|Repayment of convertible notes                                                           |  |      |        |   |      |   | (1,360  | )    |  |   |       |  
|Repayments of long-term debt                                                             |  |      | (1,907  | ) |      |   | (4,031  | )    |  |   | (4,583 | )
|Issuance of common stock, net of offering costs                                          |  |      |        |   |      |   |        |      |  |   | 26,440 |  
|Debt conversion expense                                                                  |  |      |        |   |      |   |        |      |  |   | (2,898 | )
|Repurchase of warrant                                                                    |  |      |        |   |      |   |        |      |  |   | (1,600 | )
|Repayment of note receivable from shareholder                                            |  |      |        |   |      |   |        |      |  |   | 1,000  |  
|Purchases of treasury stock                                                              |  |      |        |   |      |   |        |      |  |   | (321   | )
|Proceeds from stock plans                                                                |  |      | 93      |   |      |   | 149     |      |  |   | 886    |  
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|Net cash (used in) provided by financing activities                                      |  |      | (1,814  | ) |      |   | (5,242  | )    |  |   | 18,924 |  
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                             |  |      | 602     |   |      |   | 614     |      |  |   | (717   | )
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     |  |      | (15,565 | ) |      |   | (4,189  | )    |  |   | 18,038 |  
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|CASH AND CASH EQUIVALENTSBeginning of year                                              |  |      | 24,444  |   |      |   | 28,633  |      |  |   | 10,595 |  
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  
|CASH AND CASH EQUIVALENTSEnd of year                                                    |  | $    | 8,879   |   |      | $ | 24,444  |      |  | $ | 28,633 |  
|                                                                                         |  |      |         |   |      |   |         |      |  |   |        |  

See notes to consolidated financial statements.



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##### Index to Financial Statements

TRX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

(In thousands, except share data)

1. ORGANIZATION AND NATURE OF OPERATIONS

TRX, Inc. and its subsidiaries (we, us, our or
TRX) is a global technology company. We develop and host software applications to automate manual processes and track transaction data, enabling our clients to optimize performance and control costs. We are a leading provider to the
travel industry and expect to eventually include growth in industries beyond travel, such as financial services and health care. For the foreseeable future, we intend to focus our efforts on the large opportunities within the travel industry. We
deliver our technology applications as a service over the Internet to travel agencies, corporations, travel suppliers, government agencies, credit card associations, credit card issuing banks, and third-party administrators. TRX is headquartered in
Atlanta, Georgia with operations and associates in North America, Europe, and Asia. We are majority-owned by BCD Technology, S.A. (BCD). The accompanying consolidated financial statements include the accounts of TRX, Inc. and its
subsidiaries for the periods presented.

In February 2006, we entered into a five-year agreement related to global business development
with E2E SerWiz Solutions, Ltd. (SWS), a subsidiary of TATA Sons Ltd. Pursuant to the agreement, the parties market their respective offerings in the global travel marketplace in consideration for specified fees based on new business
referred. Additionally, in February 2006, we entered into a shared services agreement with SWS, effective November 1, 2005, in which we agreed to facilitate SWS establishment of U.S.-based customer care operations during 2006. In
connection with this agreement, we transferred all of our U.S.-based customer care assets and employees, located in Parkersburg, West Virginia and Milton, Florida to SWS on April 1, 2006. We transferred assets with a net book value of
approximately $75 to SWS for $250 and expect to record a gain associated with such sale of approximately $175 when our continuing involvement with SWS concludes (currently expected in 2008). In addition, we retained SWS as a subcontractor from
April 2006 through December 2006, in order to provide customer care services to certain of our clients in the U.S.

2. SUMMARY OF SIGNIFICANT
ACCOUNTING AND REPORTING POLICIES

Cash and Cash EquivalentsWe consider all highly liquid investments with purchased
maturities of three months or less to be cash equivalents. Cash equivalents consisted solely of money market funds and investment grade commercial paper at December 31, 2007 and 2006. Interest income during fiscal 2007, 2006 and 2005 was $356,
$999 and $351, respectively.

Settlement Assets and Settlement LiabilitiesWe provide back office processing services
for a client. We recognize fees associated with such services as revenues when services are rendered. We collect cash relating to the sale of travel on behalf of our client, and remit such cash to the providers of related travel services (such as
airline, hotel, etc.). We have a legal obligation to settle these transactions on behalf of our client each month, and therefore classify both the obligation and related asset as current on the accompanying consolidated balance sheet. During 2007,
our client transitioned the majority of back office processing in-house, which has significantly reduced the recorded amounts of settlement assets and settlement liabilities at December 31, 2007.



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##### Index to Financial Statements

Trade Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable are
recorded at the invoiced amount and are non-interest bearing. We maintain an allowance for doubtful accounts to reserve for receivables that are not probable of collection. Management reviews the accounts receivable by aging category to identify
specific customers with known disputes or collectibility issues. In determining the amount of the reserve, management makes judgments about the creditworthiness of significant customers based on ongoing credit evaluations. The following table shows
our allowance for doubtful accounts, and the associated activity for each of the three years ended December 31, 2007, 2006 and 2005.



|                                       |  |      |      |   |      |   |      |      |  |   |      |  
|-------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                       |  | 2007 |      |   | 2006 |   |      | 2005 | 
|Balance, January 1                     |  | $    | (688 | ) |      | $ | (495 | )    |  | $ | (597 | )
|Reduction to (provision for) bad debts |  |      | 132  |   |      |   | (324 | )    |  |   | (213 | )
|Writeoffs, net of recoveries           |  |      | 327  |   |      |   | 131  |      |  |   | 315  |  
|                                       |  |      |      |   |      |   |      |      |  |   |      |  
|Balance, December 31                   |  | $    | (229 | ) |      | $ | (688 | )    |  | $ | (495 | )
|                                       |  |      |      |   |      |   |      |      |  |   |      |  

Property and EquipmentProperty and equipment are stated at cost. Depreciation
is recorded over the estimated useful lives of the assets using the straight-line method. The useful lives of computers, software, office equipment, and furniture range from three to seven years. Amortization of leasehold improvements is recorded
over the shorter of the terms of the leases or estimated useful lives of five to seven years using the straight-line method.

We have
incurred expenditures for software used to facilitate internal data consolidation processes and to enable transaction processing services for our clients. We follow the guidance set forth in AICPA Statement of Position 98-1,Accounting for the Cost of Software Developed or Obtained for Internal Use. Software costs, including internal payroll costs, incurred in connection with the development or acquisition of software for internal use are
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 the estimated useful life of three years,
beginning when the software is ready for use.

The following details the components of property and equipment (and estimated useful lives)
at December 31, 2007 and 2006:



|                                                         |  |      |         |   |      |   |         |  
|-------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                         |  | 2007 |         |   | 2006 |  
|Computers, purchased software, and equipment (3-5 years) |  | $    | 42,538  |   |      | $ | 35,546  |  
|Internally-developed software costs (3 years)            |  |      | 8,423   |   |      |   | 7,776   |  
|Leasehold improvements (up to 7 years)                   |  |      | 5,234   |   |      |   | 5,448   |  
|Furniture and fixtures (7 years)                         |  |      | 2,937   |   |      |   | 2,886   |  
|                                                         |  |      |         |   |      |   |         |  
|                                                         |  |      | 59,132  |   |      |   | 51,656  |  
|Accumulated depreciation                                 |  |      | (39,636 | ) |      |   | (35,244 | )
|                                                         |  |      |         |   |      |   |         |  
|                                                         |  | $    | 19,496  |   |      | $ | 16,412  |  
|                                                         |  |      |         |   |      |   |         |  

Included in the above table are capital lease assets with costs of $0 and $968 at
December 31, 2007 and 2006, respectively, and accumulated depreciation of $0 and $822, respectively. Depreciation expense was $10,852, $9,944 and $9,779 during fiscal 2007, 2006 and 2005, respectively.

GoodwillGoodwill represents the excess of the purchase price over the fair value of assets acquired. We test goodwill for impairment
annually as of September 30 or more frequently if an event occurs or circumstances change that more likely than not reduce the value of a reporting unit below its carrying value. We have one reporting unit as defined by Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). We use September 30 as our annual impairment testing date for goodwill. For purposes of goodwill
impairment testing, we compare the fair value of the reporting unit with its



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##### Index to Financial Statements

carrying amount, including goodwill. The fair value is determined based on expected discounted future cash flows. If the carrying amount of the reporting
unit exceeds its fair value, goodwill is considered impaired. If goodwill is considered impaired, the impairment loss to be recognized is measured by the amount by which the carrying amount of the goodwill exceeds implied fair value of that
goodwill. Although no impairment of goodwill was identified in our annual goodwill impairment test as of September 30, 2007, 2006 or 2005, given the significant decline in our market capitalization between September 30, 2007 and
December 31, 2007, we determined that it was also necessary to test our goodwill for impairment as of December 31, 2007. As part of this interim test, we utilized the assistance of an independent professional appraisal firm. We
considered a market approach utilizing our own stock price, a market approach utilizing comparable transactions, as well as an income approach using a discounted cash flow model. The results of this interim test as of December 31,
2007 did not indicate an impairment of our goodwill.

Our goodwill was acquired through the 1999 purchase of International Software Products
in the United States, the 2004 purchase of the remaining unowned interests in the United Kingdom and Central Europe equity method investments, the 2006 purchase of Travel Analytics, Inc. (Travel Analytics) (Note 9), the 2007 acquisition
of certain assets and assumption of certain liabilities of Hi-Mark, LLC (Hi-Mark) (Note 9) and the goodwill resulting from the purchase of the assembled workforce and certain property assets used by Siemens Shares Services LLC
(Siemens) to provide services to TRX (Note 9).

The following table discloses the changes in the carrying amount of goodwill
during the years ended December 31, 2007 and 2006:



|                                     |  |      |        |      |   |       
|------------------------------------ |  | ---- | ------ | ---- | - | ------
|                                     |  | 2007 |        | 2006
|Balance, January 1                   |  | $    | 23,122 |      | $ | 21,512
|Goodwill acquired (Note 9)           |  |      | 13,817 |      |   | 1,592 
|Earnout on Travel Analytics (Note 9) |  |      | 42     |      |   | 18    
|                                     |  |      |        |      |   |       
|Balance, December 31                 |  | $    | 36,981 |      | $ | 23,122
|                                     |  |      |        |      |   |       

Other Intangible AssetsWe recorded $1,905 in 2007 to recognize the value of
identifiable intangible assets acquired as part of our purchase of certain assets of Hi-Mark (Note 9), we recorded $539 in 2006 to recognize the value of identifiable intangible assets acquired as part of our purchase of certain assets of Travel
Analytics (Note 9), and we recorded $615 to recognize the value of certain customer relationships as part of our purchase of our European equity method investments in 2004. These amounts are included in other assets, net in the accompanying
consolidated balance sheets. We expect to record approximately $365 of amortization expense related to these intangible assets in each of the next two years, $354 of amortization expense in the third year, $338 of amortization expense in the fourth
year, $206 of amortization expense in the fifth year and $807 in the years thereafter. We recorded related amortization expense of $365, $109 and $62 during fiscal 2007, 2006 and 2005, respectively.

Changes in other intangible assets during fiscal 2007 and 2006 were as follows:



|                                  |  |      |       |   |      |   |      |  
|--------------------------------- |  | ---- | ----- | - | ---- | - | ---- | -
|                                  |  | 2007 |       |   | 2006 |  
|Balance, January 1                |  | $    | 893   |   |      | $ | 463  |  
|Acquisitions (see Note 9)         |  |      | 1,905 |   |      |   | 539  |  
|Amortization of intangible assets |  |      | (365  | ) |      |   | (109 | )
|                                  |  |      |       |   |      |   |      |  
|Balance, December 31              |  | $    | 2,433 |   |      | $ | 893  |  
|                                  |  |      |       |   |      |   |      |  



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##### Index to Financial Statements

A summary of our intangible assets as of December 31, 2007 and 2006 is as follows:



|                       |  |             |  |                    |       |                         |                   |      |                    |  |                         |       |  |   |      |  
|---------------------- |  | ----------- |  | ------------------ | ----- | ----------------------- | ----------------- | ---- | ------------------ |  | ----------------------- | ----- |  | - | ---- | -
|                       |  |             |  | December 31, 2007  |       |                         | December 31, 2006 |     
|                       |  | UsefulLives |  | GrossCarryingValue |       | AccumulatedAmortization |                   |      | GrossCarryingValue |  | AccumulatedAmortization |      
|Customer relationships |  | 6  8 years |  | $                  | 615   |                         | $                 | (309 | )                  |  | $                       | 615   |  | $ | (232 | )
|Trademarks and patents |  | 10 years    |  |                    | 2,062 |                         |                   | (224 | )                  |  |                         | 432   |  |   | (18  | )
|Non-compete agreements |  | 4  5 years |  |                    | 382   |                         |                   | (93  | )                  |  |                         | 107   |  |   | (11  | )
|                       |  |             |  |                    |       |                         |                   |      |                    |  |                         |       |  |   |      |  
|                       |  |             |  | $                  | 3,059 |                         | $                 | (626 | )                  |  | $                       | 1,154 |  |   | (261 | )
|                       |  |             |  |                    |       |                         |                   |      |                    |  |                         |       |  |   |      |  

Impairment of Long-Lived AssetsWe regularly evaluate whether events and
circumstances have occurred that indicate the carrying amount of property and equipment and other intangible assets may warrant revision or may not be recoverable, in accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS No. 144). When factors indicate that these long-lived assets should be evaluated for possible impairment, 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. In managements opinion, the carrying values of long-lived assets, including property and equipment
and other intangible assets are not impaired at December 31, 2007.

Other AssetsAt December 31, 2007 and
2006, other assets include $746 and $28, respectively, of deposits related to our India operations and deferred costs associated with the issuance of our revolving credit facility and debt (Note 4). The deferred costs are being amortized to interest
expense using the straight-line method over the life of the related debt.

Accounts Payable and Accrued LiabilitiesThis
balance consists of the following components at December 31, 2007 and 2006:



|                           |  |      |        |      |   |       
|-------------------------- |  | ---- | ------ | ---- | - | ------
|                           |  | 2007 |        | 2006
|Accounts payable and other |  | $    | 10,086 |      | $ | 8,694 
|Personnel-related accruals |  |      | 5,603  |      |   | 7,837 
|Client-related accruals    |  |      | 6,646  |      |   | 3,043 
|Restructuring accruals     |  |      | 17     |      |   | 219   
|Accrued interest           |  |      | 95     |      |   |      
|Facility-related accruals  |  |      | 519    |      |   | 358   
|                           |  |      |        |      |   |       
|                           |  | $    | 22,966 |      | $ | 20,151
|                           |  |      |        |      |   |       

Customer Deposits and Deferred RevenueSeveral customer agreements require
prepayments to us for transaction revenue. These deposits are recognized as revenue as the service is provided. In addition, deferred revenue primarily represents implementation fees that are prepaid, and recognized as revenue when earned. As a
result of our Citibank amendment discussed in Note 1, revenue associated with the hosting services is being deferred until the sale of the perpetual license occurs. The amount of revenue deferred for the hosting services is $6.5 million as of
December 31, 2007. Customer deposits and deferred revenue consist of the following at December 31, 2007 and 2006:



|                                             |  |      |        |      |   |       
|-------------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                             |  | 2007 |        | 2006
|Customer deposits                            |  | $    | 9,013  |      | $ | 9,891 
|Deferred revenue                             |  |      | 12,846 |      |   | 3,512 
|                                             |  |      |        |      |   |       
|Total customer deposits and deferred revenue |  | $    | 21,859 |      | $ | 13,403
|                                             |  |      |        |      |   |       



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##### Index to Financial Statements

Revenue Recognition and Cost DeferralWe recognize revenue in accordance with Emerging
Issues Task Force (EITF) Issue 00-21, Accounting for Revenue Arrangements with Multiple Deliverables when certain other consulting or other services are combined with our transaction processing revenues and
Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 104, Revenue Recognition, when all of the following have occurred: (1) persuasive evidence of an arrangement exists; (2) services
have been performed; (3) the fee for services is fixed or determinable; and (4) collectibility is reasonably assured. Generally, these criteria are considered to have been met as follows:



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



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



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

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

The Amendment also provides that we will continue to provide the hosting services historically provided to Citibank
until such time as the sale of the perpetual license occurs. The sale price for the perpetual license is $4.5 million and the sale will occur once the requisite activities to assist Citibank in readying its information technology environment to
support the technology have been performed by us and accepted by Citibank. We expect the license sale to occur in 2008. In addition, Citibank will compensate us for certain assets that we have purchased in the past for Citibanks benefit,
which are essential to the functionality of the technology. The amount of compensation for such assets will ultimately be determined on the date on which the perpetual license is sold.

The sale of the license, the compensation for the assets referred to above, and the hosting services are all elements of the Amendment. Revenue
recognition for these elements is governed by American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2,Software Revenue Recognition (SOP
97-2). In accordance with SOP 97-2, as there is no vendor specific objective evidence of the fair value of the perpetual license, revenue associated with the hosting services is being deferred until the sale of the perpetual license
occurs. The amount of revenue deferred for the hosting services is $6.5 million as of December 31, 2007. All costs associated with the hosting services are being expensed as incurred.

We apply EITF Issue 01-14,Income Statement Characterization of Reimbursements Received for Out of Pocket Expenses
Incurred, which requires that client reimbursements received for direct costs paid to third parties and related expenses be characterized as revenue. Client reimbursements represent direct costs paid to third parties primarily for voice
and data and items such as paper tickets.

Concentration of Credit RiskA significant portion of our revenues is derived
from a limited number of clients. Our top five clients accounted for approximately 74%, 81% and 84% of our total revenues in fiscal 2007, fiscal 2006 and fiscal 2005, 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 41% of revenues in fiscal 2007, including Expedia.com, which represented approximately 25% of revenues in fiscal 2007. Expedia, Inc. and its affiliates
accounted for 47% of revenues in fiscal 2006, including Expedia.com, which represented



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##### Index to Financial Statements

approximately 34% of revenues in fiscal 2006. Expedia.com accounted for 35% of revenues during fiscal 2005. Citibank accounted for 13%, 14% and 12% of
revenues during fiscal 2007, fiscal 2006 and fiscal 2005, respectively, and Expedia.co.uk accounted for 10% of revenues during fiscal 2005. At December 31, 2007 and 2006, 15% and 11%, respectively, of our accounts receivable related to
Citibank. We expect a further decline in the concentration of recurring Citibank revenue as a result of our Citibank amendment discussed previously.

Fair Value of Financial InstrumentsThe carrying values of cash and cash equivalents, trade accounts receivable, accounts payable, and other financial instruments approximate their fair values
principally because of the short-term nature of these instruments. The fair value of our long-term debt is estimated based on the current rates offered to us for debt of similar terms and maturities. The fair value of our long-term debt approximates
carrying value as it is variable rate debt.

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

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

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 (loss) income per share:



|                                    |  |          |        |   |                       |        |          |   |       |           |  |                       |       |          |        |          |   |      |                       |   |          |   |  |        |  |   |       |  
|----------------------------------- |  | -------- | ------ | - | --------------------- | ------ | -------- | - | ----- | --------- |  | --------------------- | ----- | -------- | ------ | -------- | - | ---- | --------------------- | - | -------- | - |  | ------ |  | - | ----- | -
|                                    |  | 2007     |        |   | 2006                  |        | 2005     |  
|                                    |  | Net Loss |        |   | WeightedAverageShares |        | PerShare |   |       | NetIncome |  | WeightedAverageShares |       | PerShare |        | Net Loss |   |      | WeightedAverageShares |   | PerShare |  
|Basic net (loss) income per share   |  | $        | (8,043 | ) |                       | 18,272 |          | $ | (0.44 | )         |  | $                     | 7,300 |          | 17,711 |          | $ | 0.41 |                       | $ | (6,664   | ) |  | 13,817 |  | $ | (0.48 | )
|Effect of dilutive securities:      |  |          |        |   |                       |        |          |   |       |           |  |                       |       |          |        |          |   |      |                       |   |          |   |  |        |  |   |       |  
|Options to acquire common stock     |  |          |       |   |                       |       |          |   |      |           |  |                       |      |          | 34     |          |   |     |                       |   |         |   |  |       |  |   |      |  
|                                    |  |          |        |   |                       |        |          |   |       |           |  |                       |       |          |        |          |   |      |                       |   |          |   |  |        |  |   |       |  
|Diluted net (loss) income per share |  | $        | (8,043 | ) |                       | 18,272 |          | $ | (0.44 | )         |  | $                     | 7,300 |          | 17,745 |          | $ | 0.41 |                       | $ | (6,664   | ) |  | 13,817 |  | $ | (0.48 | )
|                                    |  |          |        |   |                       |        |          |   |       |           |  |                       |       |          |        |          |   |      |                       |   |          |   |  |        |  |   |       |  

Because of their anti-dilutive effect on the income per share recorded in each of the periods
presented, the diluted share base excludes incremental shares related to convertible debt, warrants to purchase common stock and employee stock options as follows:



|                                                |  |       |  |       |  |      
|----------------------------------------------- |  | ----- |  | ----- |  | -----
|                                                |  | 2007  |  | 2006  |  | 2005 
|Convertible debt                                |  |      |  | 108   |  | 1,391
|Accrued but unpaid interest on convertible debt |  |      |  | 42    |  | 125  
|Warrants                                        |  |      |  |      |  | 47   
|Stock options                                   |  | 1,599 |  | 1,877 |  | 1,262
|                                                |  |       |  |       |  |      
|Total                                           |  | 1,599 |  | 2,027 |  | 2,825
|                                                |  |       |  |       |  |      

Stock-Based Employee CompensationWe account for stock-based employee
compensation under SFAS No. 123 (revised 2004) entitled,Share-Based Payment (SFAS 123(R)). This standard requires the recognition of compensation expense for the grant-date fair value of all
share-based awards granted to employees. SFAS 123(R) applies to new awards and to awards modified, repurchased, or cancelled after



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##### Index to Financial Statements

January 1, 2006, as well as to the unvested portion of awards outstanding as of January 1, 2006. We adopted SFAS 123(R) by using the modified
prospective transition method, which requires us to value stock options granted prior to our adoption of SFAS 123(R) under the fair value method and expense the unvested portion over the remaining vesting period, for existing unvested options, as
well as shares purchased by employees under our Employee Stock Purchase Plan (ESPP). SFAS 123(R) also requires us to estimate forfeitures in calculating the expense related to stock-based compensation.

As a result of adopting SFAS 123(R) on January 1, 2006, our operating income and net income for fiscal 2006 are $1,057 ($0.06 per basic and diluted
share) lower than if we had continued to account for share-based compensation under APB No. 25. The adoption of SFAS 123(R) had no effect on our statement of cash flows for fiscal 2006. Deferred compensation of $43 was transferred to additional
paid-in capital upon adoption of SFAS 123(R). If we had accounted for our stock-based awards under SFAS No. 123, pro forma net loss for the year ended December 31, 2005 would have been as follows:



|                                                                                  |  |      |        |  
|--------------------------------------------------------------------------------- |  | ---- | ------ | -
|                                                                                  |  | 2005 |       
|Net lossas reported                                                              |  | $    | (6,664 | )
|Add: Stock-based employee compensation expense included in reported net income    |  |      | 70     |  
|Deduct: Stock-based compensation expense determined under fair value-based method |  |      | (567   | )
|                                                                                  |  |      |        |  
|Pro forma net loss                                                                |  | $    | (7,161 | )
|                                                                                  |  |      |        |  
|Basic and diluted loss per shareas reported                                      |  | $    | (0.48  | )
|Pro forma basic and diluted loss per share                                        |  | $    | (0.52  | )

The weighted average grant-date fair value of the options granted during fiscal 2007, calculated
using the Black-Scholes model, ranged from $0.29 to $1.81. The weighted average grant-date fair value of the options granted during fiscal 2006, calculated using the Black-Scholes model, ranged from $1.00 to $3.59. The weighted average grant-date
fair value of the options granted during fiscal 2005, calculated using the Black-Scholes model, ranged from $1.45 to $2.88.

The following
assumptions were used for grants in fiscal 2007: dividend yield of zero, volatility of 22.1% to 27.9%, risk-free interest rate of 3.03% to 4.86%, and an expected life of 2.00 to 4.25 years. The following assumptions were used for stock option grants
in fiscal 2006: dividend yield of zero, volatility of 20.8% to 28.6%, risk-free interest rate of 4.60 to 5.00%, and an expected life of 2.00 to 4.25 years. In fiscal 2005, we issued 1.5 million stock options as part of our initial public
offering, and have computed the value of these stock-based awards using the fair value method, employing the Black-Scholes model. The following assumptions were used for grants in fiscal 2005: dividend yield of zero, volatility of 22.2% to 31.3%,
risk-free interest rate of 4.11%, and an expected life of 2.00 to 4.25 years. Expected volatility is based on the volatility of a group of stocks we view as peer companies, due to the limited history of our stock trading on an exchange. We use
historical data to estimate the expected life and employee termination assumptions in our accounting under SFAS 123(R). The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant over the expected life of
the grant.

At December 31, 2007, options to purchase 941,380 shares of common stock were available for future grant under our stock
plan. The following table summarizes information about stock options outstanding and exercisable at December 31, 2007:



|                         |  |                     |  |                               |  |                               |       |                 |         |                               |   |      
|------------------------ |  | ------------------- |  | ----------------------------- |  | ----------------------------- | ----- | --------------- | ------- | ----------------------------- | - | -----
|                         |  | Options Outstanding |  | Options Exercisable          
|Range of Exercise Prices |  | Number ofShares     |  | WeightedAverageRemaining Life |  | WeightedAverageExercise Price |       | Number ofShares |         | WeightedAverageExercise Price
|$1.58  $9.00            |  | 1,357,000           |  | 8.2                           |  | $                             | 7.71  |                 | 757,000 |                               | $ | 7.10 
|$9.35  $12.24           |  | 241,810             |  | 4.8                           |  | $                             | 10.85 |                 | 210,310 |                               | $ | 10.78
|                         |  |                     |  |                               |  |                               |       |                 |         |                               |   |      
|                         |  | 1,598,810           |  | 7.7                           |  | $                             | 8.18  |                 | 967,310 |                               | $ | 8.87 
|                         |  |                     |  |                               |  |                               |       |                 |         |                               |   |      



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##### Index to Financial Statements

Information regarding activity under our stock plan is summarized as follows:



|                           |  |           |   |      |                               |      |         |           |   |                               |   |         |  |           |                               |  |   |      
|-------------------------- |  | --------- | - | ---- | ----------------------------- | ---- | ------- | --------- | - | ----------------------------- | - | ------- |  | --------- | ----------------------------- |  | - | -----
|                           |  | 2007      |   | 2006 |                               | 2005
|                           |  | Options   |   |      | WeightedAverageExercise Price |      | Options |           |   | WeightedAverageExercise Price |   | Options |  |           | WeightedAverageExercise Price
|Outstanding at January 1   |  | 1,814,810 |   |      | $                             | 8.92 |         | 1,939,810 |   |                               | $ | 9.35    |  | 584,810   |                               |  | $ | 10.06
|Granted                    |  | 273,000   |   |      |                               | 4.93 |         | 316,000   |   |                               |   | 6.93    |  | 1,507,000 |                               |  |   | 9.00 
|Cancelled                  |  | (489,000  | ) |      |                               | 9.11 |         | (441,000  | ) |                               |   | 9.35    |  | (47,000   | )                             |  |   | 10.73
|Exercised                  |  |          |   |      |                               |     |         |          |   |                               |   |        |  | (105,000  | )                             |  |   | 7.69 
|                           |  |           |   |      |                               |      |         |           |   |                               |   |         |  |           |                               |  |   |      
|Outstanding at December 31 |  | 1,598,810 |   |      | $                             | 8.18 |         | 1,814,810 |   |                               | $ | 8.92    |  | 1,939,810 |                               |  | $ | 9.35 
|                           |  |           |   |      |                               |      |         |           |   |                               |   |         |  |           |                               |  |   |      

The intrinsic value of a stock option is the amount by which the market value of the underlying
stock exceeds the exercise price of the option. At December 31, 2007, the aggregate intrinsic value of options outstanding was $0 with a weighted average exercise price of $8.18 and a weighted average remaining contractual term of 7.7 years;
the aggregate intrinsic value of the 967,310 options exercisable was $0 with a weighted average exercise price of $8.87 and a weighted average remaining contractual term of 5.8 years; and the aggregate intrinsic value of the 1,429,336 options vested
or expected to vest was $0 with a weighted average exercise price of $8.18 and a weighted average remaining contractual term of 7.7 years. The intrinsic value for stock options exercised in fiscal 2005 was $477.

The following table summarizes unvested stock options outstanding as of December 31, 2007 as well as activity during the year then ended:



|                           |  |                  |   |  |                                      |     
|-------------------------- |  | ---------------- | - |  | ------------------------------------ | ----
|                           |  | Unvested Options
|                           |  | Options          |   |  | Weighted AverageGrant-Date FairValue
|Outstanding at January 1   |  | 1,026,000        |   |  | $                                    | 8.56
|Granted                    |  | 273,000          |   |  |                                      | 4.93
|Cancelled                  |  | (311,750         | ) |  |                                      | 8.82
|Vested                     |  | (355,750         | ) |  |                                      | 7.84
|                           |  |                  |   |  |                                      |     
|Outstanding at December 31 |  | 631,500          |   |  | $                                    | 7.27
|                           |  |                  |   |  |                                      |     

Compensation cost from nonvested stock granted to employees is recognized as expense using the
straight-line method over the vesting period. As of December 31, 2007, total unrecognized compensation cost related to nonvested stock options was approximately $0.5 million. Approximately half of this cost is expected to be recognized over the
next year, with the remainder primarily over the subsequent two years. For fiscal 2007, 2006 and 2005, our total stock-based compensation expense was approximately $366, $1,057 and $70, respectively.

Income TaxesWe account for income taxes under the liability method, which requires the recognition of deferred tax assets and
liabilities for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. A valuation allowance is recorded when appropriate to reduce
deferred tax assets to amounts expected to be realized.

Statement of Cash FlowsCash paid for interest was $440, $995
and $1,898 for fiscal 2007, 2006 and 2005, respectively. Cash paid for income taxes net of amounts refunded was $172 in fiscal 2007 and $0 in fiscal 2006 and 2005. We had accrued capital expenditures of $5 and $7 at December 31, 2007 and 2006,
respectively. For fiscal 2007, non-cash investing and financing activities related to the acquisition of Hi-Mark in January 2007 include the issuance of a $7,000 promissory note and common stock valued at $3,405 (Note 9). During fiscal 2005, we
settled convertible notes of $18,640 and associated interest payable of $1,109 by issuing 1,795,184 shares of common stock. During fiscal 2005, we issued debt of $964 relating to our purchase of stock associated with options exercised.



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##### Index to Financial Statements

Foreign Currency TranslationWe have subsidiaries operating in the United Kingdom,
Germany and India at December 31, 2007. The functional currency of these operations is the local currency. Gains and losses on transactions denominated in currencies other than the functional currency are included in determining net income
(loss) for the period in which the exchange rates change. Foreign exchange transaction gains or losses were not material for any period presented. Balance sheet accounts of international subsidiaries are translated at the year-end exchange rate, and
income statement accounts are translated at the average rates prevailing during the year. The resulting translation adjustment is recorded as a component of shareholders equity.

Foreign Currency Exchange RiskApproximately 18% of our consolidated revenues during fiscal 2007 and 14% of our consolidated assets at
December 31, 2007 are associated with operations outside of the United States. The U.S. dollar balance sheets and statements of operations for these businesses are subject to currency fluctuations. We are most vulnerable to fluctuations in the
British pound, Euro and Indian rupee against the U.S. dollar. Historically, we have not entered into derivative financial instruments to mitigate this risk, as it has not been cost-effective to do so. Through fiscal 2007, the impact of currency
fluctuations on our results of operations has not been significant since both revenues and operating costs of these businesses are denominated in local currency.

Segment ReportingOperating segments are defined by SFAS No. 131, Disclosure About Segments of an Enterprise and Related Information (SFAS No. 131). Our
chief operating decision maker currently reviews information and makes operating decisions based on 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 for each of the three years ended December 31, 2007, 2006 and
2005:



|                               |  |      |        |      |   |         |  |   |        
|------------------------------ |  | ---- | ------ | ---- | - | ------- |  | - | -------
|                               |  | 2007 |        | 2006 |   | 2005   
|Transaction processing         |  | $    | 63,844 |      | $ | 72,627  |  | $ | 72,083 
|Data reporting                 |  |      | 20,885 |      |   | 17,849  |  |   | 16,300 
|Customer care                  |  |      | 4,803  |      |   | 23,028  |  |   | 27,322 
|                               |  |      |        |      |   |         |  |   |        
|Transaction and other revenues |  |      | 89,532 |      |   | 113,504 |  |   | 115,705
|Client reimbursements          |  |      | 2,570  |      |   | 2,836   |  |   | 2,911  
|                               |  |      |        |      |   |         |  |   |        
|Total                          |  | $    | 92,102 |      | $ | 116,340 |  | $ | 118,616
|                               |  |      |        |      |   |         |  |   |        

The following is a geographic breakdown of revenues for the years ended December 31, 2007,
2006 and 2005, and a geographic breakdown of long-lived assets at December 31, 2007 and 2006:



|                    |  |      |        |      |   |         |  |   |        
|------------------- |  | ---- | ------ | ---- | - | ------- |  | - | -------
|                    |  | 2007 |        | 2006 |   | 2005   
|Revenues:           |  |      |        |      |   |         |  |   |        
|United States       |  | $    | 75,656 |      | $ | 93,161  |  | $ | 88,216 
|United Kingdom      |  |      | 8,925  |      |   | 13,334  |  |   | 19,201 
|Other International |  |      | 7,521  |      |   | 9,845   |  |   | 11,199 
|                    |  |      |        |      |   |         |  |   |        
|                    |  | $    | 92,102 |      | $ | 116,340 |  | $ | 118,616
|                    |  |      |        |      |   |         |  |   |        
|Long-Lived Assets:  |  |      |        |      |   |         |  |   |        
|United States       |  | $    | 18,587 |      | $ | 14,938  |  |   |        
|United Kingdom      |  |      | 275    |      |   | 902     |  |   |        
|Other International |  |      | 634    |      |   | 572     |  |   |        
|                    |  |      |        |      |   |         |  |   |        
|                    |  | $    | 19,496 |      | $ | 16,412  |  |   |        
|                    |  |      |        |      |   |         |  |   |        

Use of EstimatesThe preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results will differ from those estimates.



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##### Index to Financial Statements

Recent Accounting PronouncementsIn December 2007, the Financial Accounting Standards
Board (FASB) issued SFAS No. 141(R),Business Combinations (SFAS No. 141(R)), which replaces SFAS No. 141,Business Combinations (SFAS
No. 141). SFAS No. 141(R) retains the fundamental requirements of SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called thepurchase method) be used for all business combinations, but is
designed to improve, simplify, and converge internationally the accounting for business combinations, including enhancing principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets
acquired, liabilities assumed, and any noncontrolling interest in the acquiree. Additionally, the standard establishes disclosure requirements to enable the evaluation of and financial effects of the business combination. SFAS
No. 141(R) is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008. We do not expect that the adoption of
this standard will have a material effect on our consolidated financial position and results of operations.

In February 2007, the FASB
issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an Amendment of FASB Statement No. 115 (SFAS No. 159), which becomes effective for fiscal
periods beginning after November 15, 2007. Under SFAS No. 159, companies may elect to measure specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair
value recognized in earnings each reporting period. This election, called the fair value option, will enable some companies to reduce volatility in reported earnings caused by measuring related assets and liabilities
differently. We do not expect that the adoption of this standard will have a material effect on our consolidated financial position and results of operations.

In January 2007, we adopted the provisions of FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109(FIN 48),
with no impact on beginning retained earnings. See Note 6.

In September 2006, the FASB issued SFAS No. 157,Fair
Value Measurements (SFAS No. 157). SFAS No. 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and expands on required disclosures about fair value
measurement. This standard is effective on January 1, 2008 and will be applied prospectively. We do not expect that the adoption of this standard will have a material effect on our consolidated financial position and results of operations.

3. COMMITMENTS AND CONTINGENCIES

Lease ObligationsWe lease certain facilities and equipment under noncancelable operating lease agreements which expire at various times through fiscal 2017. Future minimum annual lease payments under the related
noncancelable operating leases at December 31, 2007 are as follows:



|           |  |   |      
|---------- |  | - | -----
|2008       |  | $ | 2,779
|2009       |  |   | 986  
|2010       |  |   | 972  
|2011       |  |   | 978  
|2012       |  |   | 543  
|Thereafter |  |   | 562  
|           |  |   |      
|Total      |  | $ | 6,820
|           |  |   |      

Rental expense for fiscal 2007, 2006 and 2005 was $2,740, $2,753 and $3,742, respectively. The
decrease in rent expense is due to the closure of our customer care facilities.

Employment AgreementsWe have entered
into employment agreements with certain key executives. The agreements provide for compensation and benefits through the expiration of the individual agreement upon termination of employment, other than by the employee voluntarily or by us for
cause. Minimum commitments under these agreements are $1,791 during fiscal 2008 and $1,222 for each of fiscal 2009 and 2010.



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

Savings PlanIn the U.S., we sponsor a 401(k) profit-sharing plan (the Plan) under which substantially all full-time
employees are eligible to participate. Participants are also eligible to receive a discretionary match. Total expense recognized under the Plan was $500, $513 and $520 for fiscal 2007, 2006 and 2005, respectively. Prior to January 1, 2006, the
Plan was sponsored by BCD Travel, an affiliated entity.

In the United Kingdom, Germany and India, we participate in defined-contribution
plans. Total expense recognized under these plans was $122, $130 and $114 in 2007, 2006 and 2005, respectively.

4. DEBT

Debt consists of the following as of December 31, 2007 and 2006:



|                          |  |      |       |      |   |    
|------------------------- |  | ---- | ----- | ---- | - | ---
|                          |  | 2007 |       | 2006
|Note payable              |  | $    | 5,250 |      | $ |   
|Capital lease obligations |  |      |      |      |   | 157
|                          |  |      |       |      |   |    
|Total                     |  |      | 5,250 |      |   | 157
|Less current maturities   |  |      | 2,333 |      |   | 157
|                          |  |      |       |      |   |    
|Long-term debt            |  | $    | 2,917 |      | $ |   
|                          |  |      |       |      |   |    

Our note payable relates to the acquisition of certain assets and assumption of certain
liabilities of Hi-Mark (Note 9), with quarterly principal payments (which began in April 2007 and continue through January 2010) in the amount of $583 together with accrued interest, which accrues at the Prime rate (7.25% at December 31, 2007).
The maturities for the note payable are as follows:



|               |  |   |      
|-------------- |  | - | -----
|2008           |  | $ | 2,333
|2009           |  |   | 2,333
|2010           |  |   | 584  
|               |  |   |      
|Long-term debt |  | $ | 5,250
|               |  |   |      

We have a $10.0 million revolving line of credit facility expiring April 2009. The lender holds a
senior security interest in all of our domestic assets and a 66% interest in the stock of our international subsidiaries. Under the facility, we are subject to certain financial covenants, including maintenance of certain leverage ratios. The
facility also requires that we reduce our borrowings to $2.0 million or less for 30 days during each calendar quarter. Further, we are restricted in our ability to, among other things, make advances to our European operations, make acquisitions,
make capital expenditures, incur additional indebtedness and pay dividends. We pay a variable rate of interest on draws, at LIBOR plus 0.5%, and an annual fee of 0.5% of the unused portion of the $10.0 million commitment. As of December 31,
2007, we are in compliance with all financial covenants, $10.0 million was available for borrowing, and there were no borrowings against the facility. We have an outstanding letter of credit in the amount of $45 against the facility as of
December 31, 2007.

5. CONVERTIBLE NOTES

In November 2001, we issued 7% convertible notes to shareholders of TRX. In December 2004, the notes were amended to subordinate them to the senior secured revolving credit facility and to increase the interest rate to 11%. The majority of
the notes were converted in 2005 in conjunction with our initial public offering, and the remaining $1,360 of outstanding notes were redeemed for cash in 2006.



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Pursuant to agreements we entered into with holders of the convertible notes in July 2005 and September
2005 and in consideration of the payment by us of $700 to certain holders of our convertible notes to effect the conversion of the convertible notes, $18,640 of convertible notes were converted into 1,689,925 shares of common stock and 101,905
shares of common stock were issued to the holders of such convertible notes in satisfaction of accrued interest on such convertible notes immediately prior to the closing of our initial public offering of common stock on September 30, 2005. The
$700 was paid to these noteholders to effect the conversion of the convertible notes held by such noteholders. Accordingly, the $700 payment has been accounted for as a charge to earnings and is included in debt conversion expense in the
accompanying consolidated statements of operations for fiscal 2005. The remaining notes are convertible at any time prior to maturity into shares of common stock at a conversion price of $11.03, subject to adjustments, totaling 123,312 shares of
common stock (plus shares related to accrued and unpaid interest, if any).

A warrant to purchase 640,285 shares of common stock at $11.03
was issued with the November 2001 convertible notes. The value of the warrant, determined to be $1,782 based on the relative fair value of the warrant to the notes, was accounted for as a debt discount and was being amortized to interest expense
over the contractual term of the related notes. On September 30, 2005, pursuant to an agreement we entered into with the holder of the warrant on July 8, 2005, as amended on September 22, 2005, we purchased the warrant at a price of
$3,800. The fair value of the warrant at the date of purchase approximated $1,600 and, to effect the conversion of the convertible note held by the warrant holder, we paid the warrant holder an additional $2,200. Accordingly, the $1,600 has been
accounted for as a reduction of additional paid-in capital and the $2,200 has been accounted for as a charge to earnings and is included in debt conversion expense in the accompanying consolidated statements of operations for fiscal
2005. The remaining unamortized portion of the debt discount of $416 was recorded as a reduction to additional paid-in-capital during fiscal 2005.

6.
INCOME TAXES

Our domestic and foreign loss before income taxes for fiscal 2007 is $8,085 and $9, respectively. Our domestic and foreign
income before income taxes for fiscal 2006 is $7,080 and $433, respectively. Our domestic and foreign loss before income taxes for fiscal 2005 is $1,784 and $4,880, respectively.

Deferred taxes are as follows at December 31, 2007 and 2006:



|                                                    |  |      |         |   |      |   |         |  
|--------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                    |  | 2007 |         |   | 2006 |  
|Deferred tax assets:                                |  |      |         |   |      |   |         |  
|Net operating loss carryforwardsU.S.               |  | $    | 10,908  |   |      | $ | 10,452  |  
|Net operating loss carryforwardsforeign            |  |      | 5,900   |   |      |   | 5,171   |  
|Accruals                                            |  |      | 1,889   |   |      |   | 3,090   |  
|Allowance for doubtful accounts                     |  |      | 59      |   |      |   | 173     |  
|Deferred revenue                                    |  |      | 2,537   |   |      |   |        |  
|Property and equipment                              |  |      |        |   |      |   | 108     |  
|Alternative minimum tax credit (AMT) carryforward |  |      | 168     |   |      |   | 224     |  
|                                                    |  |      |         |   |      |   |         |  
|Total deferred tax assets                           |  |      | 21,461  |   |      |   | 19,218  |  
|                                                    |  |      |         |   |      |   |         |  
|Deferred tax liabilities:                           |  |      |         |   |      |   |         |  
|Goodwill                                            |  |      | 402     |   |      |   |        |  
|Property and equipment                              |  |      | 86      |   |      |   |        |  
|                                                    |  |      |         |   |      |   |         |  
|Total deferred tax liabilities                      |  |      | 488     |   |      |   |        |  
|Net deferred tax assets                             |  |      | 20,973  |   |      |   | 19,218  |  
|Valuation allowance                                 |  |      | (20,973 | ) |      |   | (19,218 | )
|                                                    |  |      |         |   |      |   |         |  
|Net deferred taxes                                  |  | $    |        |   |      | $ |        |  
|                                                    |  |      |         |   |      |   |         |  



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At December 31, 2007 and 2006, U.S. net operating losses of $27,968 and $26,801, respectively, are
available to offset future taxable income, and expire beginning in 2021 through 2025. At December 31, 2007 and 2006, AMT carryforwards of $168 and $224, respectively, are available and can be carried forward indefinitely. Benefits for income
taxes are not presented in the accompanying statements of operations, as the net deferred tax assets have been fully reserved. The valuation allowance was recorded because management is unable to conclude that it is more likely than not that our net
deferred tax assets will be realized. A reconciliation of income taxes at the federal statutory rate to the tax provision recorded by us for fiscal 2007, 2006 and 2005 is as follows:



|                                                 |  |       |   |  |       |   |  |       |  
|------------------------------------------------ |  | ----- | - |  | ----- | - |  | ----- | -
|                                                 |  | 2007  |   |  | 2006  |   |  | 2005  |  
|Federal income tax benefit at statutory rate     |  | 34.0  | % |  | 34.0  | % |  | 34.0  | %
|State income taxesnet of federal benefit        |  | 5.0   |   |  | 5.0   |   |  | 5.0   |  
|Other                                            |  | (1.1  | ) |  | 0.6   |   |  | (1.1  | )
|Change in deferred tax asset valuation allowance |  | (37.3 | ) |  | (36.6 | ) |  | (37.9 | )
|                                                 |  |       |   |  |       |   |  |       |  
|                                                 |  | 0.6   | % |  | 3.0   | % |  | 0.0   | %
|                                                 |  |       |   |  |       |   |  |       |  

A reconciliation of unrecognized tax benefits for fiscal 2007 is presented in the table below. The
unrecognized tax benefits are fully offset by net operating losses.



|                                              |  |      |      |  
|--------------------------------------------- |  | ---- | ---- | -
|                                              |  | 2007 |     
|Unrecognized tax benefits, January 1          |  | $    | 815  |  
|Settlements with taxing authorities           |  |      | (422 | )
|                                              |  |      |      |  
|Unrecognized income tax benefits, December 31 |  | $    | (393 | )
|                                              |  |      |      |  

These unrecognized tax benefits related primarily to the timing for recognition on various
deductions or items of income. If recognized, the tax benefits will have no impact on the effective rate in a future period. We do not currently anticipate that the total amount of unrecognized tax benefits will significantly increase or decrease
during the twelve month period ending December 31, 2008. We recognize potential accrued interest and penalties related to unrecognized tax benefits within our income tax expense. Due to our net operating loss carryforward position, we
recognized no interest and penalties during 2007 associated with our unrecognized tax benefits.

Tax years 2005 and 2006 remain subject to
examination by U.S. Federal and state taxing authorities. A U.S federal audit of the 2004 tax year was concluded in 2007. This resulted in a reduction in the NOL carryforward in the amount of $1,128 on our 2006 federal corporate income tax return.
Our primary state tax jurisdictions are Georgia, Florida, South Carolina, Texas, Virginia, and West Virginia, and our primary international jurisdictions are the United Kingdom, Germany and India. The following table summarizes the open tax years
for each major jurisdiction:



|               |  |               
|-------------- |  | --------------
|Jurisdiction   |  | Open Tax Years
|Federal        |  | 2003-2006     
|Georgia        |  | 2003-2006     
|Florida        |  | 2003-2006     
|South Carolina |  | 2003-2006     
|Texas          |  | 2003-2006     
|Virginia       |  | 2003-2006     
|West Virginia  |  | 2003-2006     
|United Kingdom |  | 2004-2006     
|Germany        |  | 2003-2006     

Our Indian operation has not been included in the table above since the acquisition was effective
December 1, 2007 and thus we have not filed a tax return inclusive of this operation.



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7. SHAREHOLDERS EQUITY

Issuance of Common StockIn 2007, we issued 500,000 shares of our common stock valued at $3.4 million in connection with our acquisition of Hi-Mark (Note 9). In 2006, we issued 85,870 shares of our
common stock valued at $600 in connection with our acquisition of Travel Analytics (Note 9). In 2005, we completed our initial public offering of 3.4 million shares at an offering price of $9.00 per share, which resulted in proceeds to us of
approximately $26,440, net of offering costs. In addition, we issued 1.8 million shares in connection with the conversion of $18,640 face amount of 11% convertible notes plus accrued and unpaid interest on such notes. The proceeds of these
common stock issuances were used for general corporate purposes.

Stock OptionsWe have two stock-based employee
compensation plans. The TRX, Inc. Omnibus Incentive Plan (the Stock Plan) was amended upon our initial public offering in September 2005 to, among other things, increase the number of shares available for issuance to employees from
1.3 million to 3.3 million and to expand the types of awards permitted to be made. The Stock Plan allows the issuance of incentive stock options, nonqualified stock options, and stock purchase rights. Option awards are generally granted
with an exercise price equal to the fair market value of our stock at the date of grant; those option awards generally vest ratably over four years and have 10-year contractual terms. Certain option awards provide for accelerated vesting if there is
a change of control (as defined in the Stock Plan). In addition, in September 2005 we also amended our TRX, Inc. Employee Stock Purchase Plan (ESPP) to reflect our public company status, among other things. 500,000 shares are reserved
for issuance under our ESPP. As of December 31, 2007, 65,349 shares have been issued under our ESPP. See Note 2 for further information about our stock options.

Stock WarrantsIn connection with the issuance of convertible debt in November 2001, we issued warrants to holders of the notes to purchase 640,285 shares of common stock with an exercise price of
$11.03 per share. The warrants were valued at $1,782 and were purchased by us in 2005 (Note 5).

Preferred StockWe are
authorized to issue up to 10,000,000 shares of preferred stock, par value $.01 per share. As of December 31, 2007 and 2006, no preferred stock was outstanding.

Note Receivable from ShareholderIn connection with a July 2001 sale of common stock, we loaned one of our officers $1,000, all of which was repaid in 2005.

8. RELATED-PARTY TRANSACTIONS

BCD Travel, formerly
WorldTravel BTI, is majority-owned by our majority shareholder, BCD. During fiscal 2007, 2006 and 2005, we recognized transaction and other revenues from BCD Travel, totaling $8,651, $9,830 and $8,174, respectively. At December 31, 2007 and
2006, respectively, $1,077 and $1,295 was receivable from BCD Travel.

9. ACQUISITIONS

Travel Analytics

In
August 2006, we acquired certain assets and assumed certain liabilities of Travel Analytics, which provides procurement and spend management services to corporations, for $2,251. In addition to the consideration paid, we agreed to make payments
to the previous owner of Travel Analytics equal to 3% of sales related to Travel Analytics intellectual property through December 31, 2011. Payments are made semi-annually and are recorded as goodwill in our consolidated balance sheet.
During fiscal 2007 and 2006, we recorded $42 and $18, respectively, as goodwill in our consolidated balance sheet related to the earnout. We have included the results of operations of Travel Analytics in our consolidated financial statements from
the date of acquisition.

Hi-Mark

In January 2007, we purchased substantially all of the assets and assumed certain liabilities of Hi-Mark, a Delaware limited liability company and Atlanta-based provider of data acquisition and business
intelligence



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##### Index to Financial Statements

technologies. The strategic addition of Hi-Mark expands our opportunities in global corporate travel data reporting. We acquired Hi-Mark for total
consideration of approximately $20.9 million, which consisted of 500,000 shares of our common stock (valued at $3.4 million, or $6.81 per share based on the closing price of our common stock on the two trading days preceding through the two trading
days following our announcement of the acquisition on December 7, 2006 in accordance with EITF Issue 99-12Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business
Combination), $10.4 million of cash on hand, a promissory note in favor of Hi-Mark in the amount of $7.0 million that amortizes quarterly over three years and bears interest at the Prime rate (Note 4), and approximately $0.1 million
of our transaction costs. In addition, we may make earnout payments to Hi-Mark of up to $12.0 million dependent on the achievement of defined revenue targets. As of December 31, 2007, we have not made or accrued earnout payments to Hi-Mark
because such revenue targets have not been met.

We have included the results of operations of Hi-Mark in our consolidated financial
statements from the date of acquisition. This acquisition was accounted for using the purchase method of accounting, which includes an evaluation of the existence of any identifiable intangibles at the date of acquisition. Goodwill of $13.1 million
was recorded in connection with the acquisition. The goodwill is deductible for tax purposes over a period of 15 years. The following table summarizes the purchase price allocation of the fair values of the assets acquired and liabilities assumed
(in millions).



|                            |  |   |      |  
|--------------------------- |  | - | ---- | -
|Current assets              |  | $ | 2.0  |  
|Property and equipment, net |  |   | 5.1  |  
|Intangible assets           |  |   | 1.9  |  
|Goodwill                    |  |   | 13.1 |  
|                            |  |   |      |  
|Total assets acquired       |  |   | 22.1 |  
|Current liabilities assumed |  |   | (1.2 | )
|                            |  |   |      |  
|Total consideration         |  | $ | 20.9 |  
|                            |  |   |      |  

The intangible assets acquired include non-compete agreements with an estimated value of $0.3
million and a life of five years, and trademarks with an estimated value of $1.6 million and a life of 10 years.

The following unaudited
pro forma financial information presents TRXs combined results as if the acquisition of Hi-Mark had occurred at the beginning of fiscal 2006 and 2005:



|                                            |  |      |         |      |   |         |  
|------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                            |  | 2006 |         | 2005 |  
|Revenue                                     |  | $    | 121,764 |      | $ | 122,626 |  
|Net income                                  |  |      | 8,718   |      |   | (6,737  | )
|Earnings (loss) per sharebasic and diluted |  |      | 0.48    |      |   | (0.47   | )

These pro forma results have been prepared for comparative purposes only and include certain
adjustments such as additional amortization expense as a result of identifiable intangible assets arising from the acquisition, increased interest expense on acquisition debt and decreased interest income due to the use of cash for a portion of the
purchase price. The pro forma results are not necessarily indicative either of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the respective period or of future results. The pro
forma results of this acquisition for fiscal 2007 are not materially different than reported amounts and have therefore not been presented.

India Operations

In December 2007, we acquired the assembled workforce and certain property assets used by Siemens
to provide services to TRX for $815. The assembled workforce and assets acquired constitute a business as defined by EITF Issue 98-3 Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a
Businessand accordingly we accounted for this transaction as a business combination under SFAS No. 141.



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While the employees and related assets migrated from Siemens to us in December 2007, we have not yet finalized the related purchase agreement, nor have we
paid consideration for the purchase. This acquisition was accounted for using the purchase method of accounting, which includes an evaluation of the existence of any identifiable intangibles at the date of acquisition. Due to the strategic nature of
the acquisition and low asset base, goodwill of $750 was recorded in connection with the acquisition. The goodwill is expected to be deductible for tax purposes over a period of 15 years. We have reflected the estimated purchase price of $815 within
current liabilities in the accompanying consolidated balance sheet at December 31, 2007, as well as the related property and goodwill balances that are expected to result from the purchase. We expect the agreement to be finalized and
consideration to be paid in the first half of 2008.

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



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

10. RESTRUCTURING

We did not incur any restructuring charges in 2007. Accruals associated with restructuring activities as of December 31, 2006 have been paid or settled as of December 31, 2007. Accordingly, no summary
disclosure is presented for 2007. In fiscal 2005, we closed our Orangeburg, South Carolina call center, and recorded restructuring charges of $2,327 related to severance, lease abandonment, operational transition costs and accelerated depreciation,
net of a $92 expense reduction recorded to reflect lower expected lease termination costs in Switzerland. During fiscal 2005, we paid all of the employee termination benefits and transition costs related to Orangeburg.

In fiscal 2006, we closed our call center operation in the United Kingdom and expensed and paid severance costs of $670, recorded an asset impairment of
$193, recorded lease termination obligations of $150 and recorded other directly related costs of $109. We also reduced our remaining estimated lease-termination accrual related to our Orangeburg facility by $431 due to a revision to our estimated
sublease assumption. We made related lease termination-related payments of $389 and made payments for human resources and legal consultation services related to closures in Europe of $155. We paid the remaining lease termination in 2007.

A summary of the accruals associated with the above restructuring activities for 2006 and 2005 are as follows:



|                                       |  |                                      |       |   |                          |   |      |                          |  |   |                                      |   |  |   |      |  
|-------------------------------------- |  | ------------------------------------ | ----- | - | ------------------------ | - | ---- | ------------------------ |  | - | ------------------------------------ | - |  | - | ---- | -
|                                       |  | Liability Balanceat December 31,2005 |       |   | Costs ChargedDuring 2006 |   |      | Cash PaymentsDuring 2006 |  |   | Liability Balanceat December 31,2006 |  
|One-time employee termination benefits |  | $                                    |      |   |                          | $ | 670  |                          |  | $ | (670                                 | ) |  | $ |     |  
|Lease termination costs                |  |                                      | 998   |   |                          |   | (281 | )                        |  |   | (389                                 | ) |  |   | 328  |  
|Other related costs                    |  |                                      | 68    |   |                          |   | 109  |                          |  |   | (155                                 | ) |  |   | 22   |  
|                                       |  |                                      |       |   |                          |   |      |                          |  |   |                                      |   |  |   |      |  
|Total accrued                          |  |                                      | 1,066 |   |                          |   |      |                          |  |   |                                      |   |  |   | 350  |  
|Asset impairment                       |  |                                      |       |   |                          |   | 193  |                          |  |   |                                      |   |  |   |      |  
|Current portion                        |  |                                      | (437  | ) |                          |   |      |                          |  |   |                                      |   |  |   | (219 | )
|                                       |  |                                      |       |   |                          |   |      |                          |  |   |                                      |   |  |   |      |  
|Long-term portion                      |  | $                                    | 629   |   |                          |   |      |                          |  |   |                                      |   |  | $ | 131  |  
|                                       |  |                                      |       |   |                          |   |      |                          |  |   |                                      |   |  |   |      |  
|Total restructuring charges            |  |                                      |       |   |                          | $ | 691  |                          |  |   |                                      |   |  |   |      |  
|                                       |  |                                      |       |   |                          |   |      |                          |  |   |                                      |   |  |   |      |  



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|                                       |  |                                      |       |                          |   |                          |  |   |                                      |   |  |   |       |  
|-------------------------------------- |  | ------------------------------------ | ----- | ------------------------ | - | ------------------------ |  | - | ------------------------------------ | - |  | - | ----- | -
|                                       |  | Liability Balanceat December 31,2004 |       | Costs ChargedDuring 2005 |   | Cash PaymentsDuring 2005 |  |   | Liability Balanceat December 31,2005 |  
|One-time employee termination benefits |  | $                                    | 1,020 |                          | $ | 290                      |  | $ | (1,310                               | ) |  | $ |      |  
|Lease termination costs                |  |                                      | 667   |                          |   | 1,325                    |  |   | (994                                 | ) |  |   | 998   |  
|Other related costs                    |  |                                      | 213   |                          |   | 213                      |  |   | (358                                 | ) |  |   | 68    |  
|                                       |  |                                      |       |                          |   |                          |  |   |                                      |   |  |   |       |  
|Total accrued                          |  | $                                    | 1,900 |                          |   |                          |  |   |                                      |   |  | $ | 1,066 |  
|                                       |  |                                      |       |                          |   |                          |  |   |                                      |   |  |   |       |  
|Current portion                        |  |                                      |       |                          |   |                          |  |   |                                      |   |  |   | (437  | )
|                                       |  |                                      |       |                          |   |                          |  |   |                                      |   |  |   |       |  
|Long-term portion                      |  |                                      |       |                          |   |                          |  |   |                                      |   |  | $ | 629   |  
|                                       |  |                                      |       |                          |   |                          |  |   |                                      |   |  |   |       |  
|Non-cash accelerated depreciation      |  |                                      |       |                          |   | 499                      |  |   |                                      |   |  |   |       |  
|                                       |  |                                      |       |                          |   |                          |  |   |                                      |   |  |   |       |  
|Total restructuring charges            |  |                                      |       |                          | $ | 2,327                    |  |   |                                      |   |  |   |       |  
|                                       |  |                                      |       |                          |   |                          |  |   |                                      |   |  |   |       |  

11. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly results for each of the quarters in the two years ended December 31, 2007 and 2006 are as follows:



|                                              |  |               |        |         |   |        |              |  |   |             |   |  |   |        |  
|--------------------------------------------- |  | ------------- | ------ | ------- | - | ------ | ------------ |  | - | ----------- | - |  | - | ------ | -
|                                              |  | Quarter Ended |       
|                                              |  | March 31      |        | June 30 |   |        | September 30 |  |   | December 31 |  
|2007                                          |  |               |        |         |   |        |              |  |   |             |   |  |   |        |  
|Revenue                                       |  | $             | 25,875 |         | $ | 24,600 |              |  | $ | 22,531      |   |  | $ | 19,096 |  
|Operating (loss) income                       |  |               | 411    |         |   | (330   | )            |  |   | (3,898      | ) |  |   | (4,050 | )
|Net (loss) income                             |  |               | 423    |         |   | (405   | )            |  |   | (3,897      | ) |  |   | (4,164 | )
|Basic and diluted net (loss) income per share |  |               | 0.02   |         |   | (0.02  | )            |  |   | (0.21       | ) |  |   | (0.23  | )
|                                              |  |               |        |        
|2006                                          |  |               |        |         |   |        |              |  |   |             |   |  |   |        |  
|Revenue                                       |  | $             | 31,757 |         | $ | 30,018 |              |  | $ | 27,140      |   |  | $ | 27,425 |  
|Operating income                              |  |               | 2,774  |         |   | 1,620  |              |  |   | 1,096       |   |  |   | 1,348  |  
|Net income                                    |  |               | 2,925  |         |   | 1,807  |              |  |   | 1,253       |   |  |   | 1,315  |  
|Basic and diluted net income per share        |  |               | 0.17   |         |   | 0.10   |              |  |   | 0.07        |   |  |   | 0.07   |  



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##### Index to Financial Statements

|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None.



|Item 9A(T). | Controls and Procedures
|----------- | -----------------------

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 December 31, 2007. 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 December 31, 2007, our
management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting
or in other factors that occurred during the quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Managements Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Under the supervision
and with the participation of our management, including our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal ControlIntegrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO Framework). Based on our evaluation under the COSO Framework, our management concluded that our
internal control over financial reporting was effective as of December 31, 2007.



|Item 9B. | Other Information
|-------- | -----------------

None.



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PART III



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------

Information relating to our nominees for director and compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth under the captions Proposal 1Election of Directors and Section 16(a)
Beneficial Ownership Reporting Compliance, and Corporate Governance, respectively, in the Proxy Statement for the 2008 Annual Meeting of Stockholders. Such information is incorporated herein by reference. The definitive Proxy
Statement will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2007. Information relating to our executive officers, pursuant to Instruction 3 of Item 401(b) of Regulation S-K and General
Instruction G(3) of Form 10-K, is set forth at Part I, Item 4A of this report under the caption Executive Officers of the Registrant. Such information is incorporated herein by reference.

Code of Ethics

We have adopted the TRX, Inc. Code of
Business Conduct and Ethics, which applies to all of our employees, officers and directors. The Code of Business Conduct and Ethics meets the requirements of a code of ethics as defined by Item 406 of Regulation S-K, and applies to
our Chief Executive Officer, Chief Financial Officer (who is both our principal financial and principal accounting officer), as well as all other employees, as indicated above. The Code of Business Conduct and Ethics also meets the requirements of a
code of conduct under the NASDAQ listing standards. The Code of Business Conduct and Ethics is posted on our website at www.trx.com under the links Investor CenterCorporate GovernanceConduct. We intend to disclose any
amendments to the Code of Business Conduct and Ethics, as well as any waivers for executive officers or directors, on our website at www.trx.com.



|Item 11. | Executive Compensation
|-------- | ----------------------

Information required by
this Item 11 relating to executive compensation and other matters is set forth under the captions Executive Compensation, Director Compensation, and Compensation, Corporate Governance and Nominating Committee
Interlocks and Insider Participation in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by reference.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------

Information relating to ownership of our common stock is set forth under the caption Security Ownership of Certain Beneficial Owners and
Management in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by reference. Information regarding securities authorized for issuance under our equity compensation plans is set forth under the
caption Equity Compensation Plan Information in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by reference.



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------

Information relating to existing or proposed relationships or transactions between us and any of our affiliates is set forth under the caption Certain Relationships and Related Transactions and
Corporate Governance in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by reference.



|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------

Information
relating to our principal accountants fees and services is set forth under the caption Principal Accountant Fees and Services in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by
reference.



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PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------

(a) Documents filed as
part of this report.

1. Consolidated Financial Statements

Our consolidated financial statements are set forth in Item 8Financial Statements and Supplementary Data of this report.

2. Financial Statement Schedules

All schedules to our consolidated financial statements have been
omitted because they are not required under the related instruction or are inapplicable, or because we have included the required information in our consolidated financial statements or related notes.

3. Exhibits

The exhibits filed as part of the Annual
Report on Form 10-K and listed on the Exhibit Index immediately preceding such exhibits, which Exhibit Index is incorporated in this Item 15 by reference.

(b) Exhibits

See Item 15(a) (3) above.

(c) Financial Statement Schedules

See Item 15(a) (2) above.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.By:

/s/    NORWOOD H. (TRIP)
DAVIS, IIINorwood H. (Trip) Davis, IIIPresident, Chief Executive Officer and DirectorDate:

March 11, 2008


POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Norwood H. (Trip) Davis, III and David D. Cathcart, and each of them his
or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form
10-K for the calendar year ended December 31, 2007, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:



|                                                                       |  |                                                                                   |  |               
|---------------------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | --------------
|Signature                                                              |  | Title                                                                             |  | Date          
|                                                                       |  |                                                                                  
|/s/    NORWOOD H. (TRIP) DAVIS, III Norwood H. (Trip) Davis, III   |  | President, Chief Executive Officer and Director (principal executive officer)     |  | March 11, 2008
|                                                                       |  |                                                                                  
|/s/    DAVID D.
CATHCART David D. Cathcart                             |  | Chief Financial Officer and Treasurer(principal financial and accounting officer) |  | March 11, 2008
|                                                                       |  |                                                                                  
|/s/    JOHAN G. (JOOP)
DRECHSEL Johan G. Drechsel                    |  | Chairman of the Board and Director                                                |  | March 11, 2008
|                                                                       |  |                                                                                  
|/s/    MARK R.
BELL Mark R. Bell                                       |  | Director                                                                          |  | March 11, 2008
|                                                                       |  |                                                                                  
|/s/    JOHN F. DAVIS,
III John F. Davis, III                           |  | Director                                                                          |  | March 11, 2008
|                                                                       |  |                                                                                  
|/s/    JOHN A. FENTENER VAN VLISSINGEN John A. Fentener van Vlissingen |  | Director                                                                          |  | March 11, 2008
|                                                                       |  |                                                                                  
|/s/    HARRY
A. FEUERSTEIN Harry A. Feuerstein                         |  | Director                                                                          |  | March 11, 2008



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TRX, INC.

FORM 10-K

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                       
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                           
|3.1         |  | Amended and Restated Articles of Incorporation of TRX, Inc. (filed as Exhibit 3.3 to Amendment No. 3 to our Registration Statement on Form S-1, filed on July 11, 2005 and incorporated
herein by reference).                                                                                         
|            | 
|3.2         |  | Amended and Restated Bylaws of TRX, Inc. (filed as Exhibit 3.4 to Amendment No. 3 to our Registration Statement on Form S-1, filed on July 11, 2005 and incorporated herein by reference).                                                                                                            
|            | 
|4.1         |  | Specimen Common Stock certificate (filed as Exhibit 4.1 to Amendment No. 4 to our Registration Statement on Form S-1, filed on July 27, 2005 and incorporated herein by
reference).                                                                                                                   
|            | 
|10.1        |  | Letter Agreement, dated December 31, 2004, by and among BCD Technology, S.A. and Norwood H. Davis, III, Davis Family Holdings, LLC and Davis Family Holdings II, LLC (filed as Exhibit 10.5
to our Registration Statement on Form S-1, filed on May 9, 2005 and incorporated herein by reference).    
|            | 
|10.2        |  | Amended and Restated Credit Agreement, dated November 7, 2005, by and between TRX, Inc. and Bank of America, N.A. (filed as Exhibit 10.2 to our Annual Report on Form 10-K, filed on
February 21, 2007 and incorporated herein by reference).                                                         
|            | 
|10.3        |  | Amendment No. 1 to Amended and Restated Credit Agreement among TRX, Inc. and Bank of America, Inc., dated January 11, 2007. (filed as Exhibit 10.3 to our Annual Report on Form 10-K, filed
on February 21, 2007 and incorporated herein by reference).                                               
|            | 
|10.4        |  | Amendment No. 2 to Amended and Restated Credit Agreement between TRX, Inc. and Bank of America, Inc., dated April 30, 2007 (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed
on August 9, 2007 and incorporated herein by reference).                                                
|            | 
|10.5        |  | Amendment No. 3 to Amended and Restated Credit Agreement among TRX, Inc., each of the subsidiaries of TRX, Inc. signatory thereto, and Bank of America, N.A., dated October 29, 2007.                                                                                                                
|            | 
|10.6        |  | Promissory Note made by TRX, Inc. in favor of Hi-Mark, LLC, dated January 11, 2007 (filed as Exhibit 10.4 to our Annual Report on Form 10-K, filed on February 21, 2007 and incorporated
herein by reference).                                                                                        
|            | 
|10.7        |  | Services Agreement, dated December 23, 2002, by and between American Airlines, Inc. and TRX Fulfillment Services, LLC (filed as Exhibit 10.17 to Amendment No.1 to our Registration Statement
on Form S-1, filed on June 17, 2005 and incorporated herein by reference).*                             
|            | 
|10.8        |  | Amendment #1 to Services Agreement between TRX Fulfillment Services, LLC and American Airlines, Inc., dated February 1, 2006. *                                                                                                                                                                      
|            | 
|10.9        |  | Amended and Restated Agreement for the Provision of Services, dated December 1, 2005, by and between TRX, Inc. and American Express Travel Related Services Company, Inc. (filed as Exhibit
10.7 to our Annual Report on Form 10-K, filed on February 22, 2006 and incorporated herein by reference).*
|            | 
|10.10       |  | Amendment #1 to TRX, Inc. Amended and Restated Agreement for the Provision of Services with American Express Travel Related Service Company, Inc. between TRX, Inc. and American Express Travel
Related Service Company, Inc., dated October 23, 2007.*                                              



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##### Index to Financial Statements

|            |  |                                                                                                                                                                                                                                                                                                                                                                                            
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                
|10.11       |  | Master Services Agreement, dated February 1, 2002, as amended January 10, 2003, with Addendums, by and between Citibank, N.A. and TRX Data Services, Inc. (filed as Exhibit 10.47 to
Amendment No.6 to our Registration Statement on Form S-1, filed on August 18, 2005 and incorporated herein by reference).*                                                                            
|            | 
|10.12       |  | Amendment to Exhibit VIII to Master Services Agreement dated December 20, 2005, by and between Citibank, N.A. and TRX Data Services, Inc. (filed as Exhibit 10.25 to our Annual Report on
Form 10-K, filed on February 22, 2006 and incorporated herein by reference).*                                                                                                                    
|            | 
|10.13       |  | Amendment Number 2 to the Master Services Agreement between Citibank, N.A. and TRX Data Services Inc., dated December 6, 2005 (filed as Exhibit 10.40 to our Annual Report on Form 10-K,
filed on February 22, 2006 and incorporated herein by reference).*                                                                                                                                
|            | 
|10.14       |  | Amendment to Work Order for Ongoing TRX Global Data Services and Work Order for TRX Datatrax Ad-Hoc Reporting of the Citi Global Data Repository (GDR) and Master Services Agreement between
CitiBank, N.A. and TRX Data Services, Inc., dated July 13, 2007 (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed on November 8, 2007 and incorporated herein by reference).*
|            | 
|10.15       |  | Shared Services Agreement, dated August 1, 2004, by and between TRX, Inc. and Siemens Shared Services, LLC (filed as Exhibit 10.54 to Amendment No. 1 to our Registration Statement on Form
S-1, filed on June 17, 2005 and incorporated herein by reference).*                                                                                                                            
|            | 
|10.16       |  | Alliance Agreement dated February 9, 2006 by and between TRX, Inc. and E2E SerWiz Solutions Ltd (filed as Exhibit 10.38 to our Annual Report on Form 10-K, filed on February 22, 2006
and incorporated herein by reference)*                                                                                                                                                               
|            | 
|10.17       |  | Shared Services Agreement dated February 10, 2006 by and between TRX, Inc., TRX Fulfillment Services, LLC and E2E SerWiz Solutions Ltd (filed as Exhibit 10.39 to our Annual Report on Form
10-K, filed on February 22, 2006 and incorporated herein by reference).*                                                                                                                       
|            | 
|10.18       |  | Master Services Agreement between Expedia, Inc. and TRX, Inc., dated January 1, 2007 (filed as Exhibit 10.15 to our Annual Report on Form 10-K, filed on February 21, 2007 and
incorporated herein by reference).*                                                                                                                                                                         
|            | 
|10.19       |  | Amendment # 1 to Master Services Agreement between Expedia, Inc. and TRX, Inc., dated March 30, 2007 (filed as Exhibit 10.46 to our Quarterly Report on Form 10-Q, filed on May 10, 2007
and incorporated herein by reference).*                                                                                                                                                           
|            | 
|10.20       |  | Amended and Restated Master Agreement dated January 1, 2006 by and between TRX Technology Services, L.P. and World Travel Partners and LLC (filed as Exhibit 10.1 to our Quarterly Report on
Form 10-Q, filed on May 4, 2006 and incorporated herein by reference).*                                                                                                                       
|            | 
|10.21       |  | Employment Contract, dated December 31, 2004, by and between Norwood H. Davis, III and TRX, Inc. (filed as Exhibit 10.24 to our Registration Statement on Form S-1, filed on May 9, 2005
and incorporated herein by reference).                                                                                                                                                            
|            | 
|10.22       |  | First Amendment to Employment Contract dated August 26, 2005, by and between Norwood H. Davis, III and TRX, Inc. (filed as Exhibit 10.65 to Amendment No. 8 to our Registration Statement on
Form S-1, filed on September 9, 2005 and incorporated herein by reference).                                                                                                                   
|            | 
|10.23       |  | Second Amendment to Employment Contract dated June 30, 2006 between Norwood H. Davis, III and TRX, Inc. (filed as Exhibit 10.1 to our Current Report on Form 8-K, filed June 30, 2006
and incorporated herein by reference).                                                                                                                                                               
|            | 
|10.24       |  | Third Amendment to Employment Contract dated April 5, 2007 between Norwood H. Davis, III and TRX, Inc. (filed as Exhibit 10.1 to our Current Report on Form 8-K, filed April 5, 2007 and
incorporated herein by reference).                                                                                                                                                                



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##### Index to Financial Statements

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                
|10.25       |  | Fourth Amendment to Employment Contract dated January 10, 2008 between Norwood H. Davis, III and TRX, Inc. (filed as Exhibit 10.1 to our Current Report on Form 8-K, filed January 11,
2008 and incorporated herein by reference).                                                                                                                                                                         
|            | 
|10.26       |  | Employment Contract, dated April 5, 2004, as amended April 27, 2005, by and between Victor Pynn and TRX, Inc. (filed as Exhibit 10.27 to our Registration Statement on Form S-1, filed
on May 9, 2005 and incorporated herein by reference).                                                                                                                                                               
|            | 
|10.27       |  | Employment Contract between David Cathcart and TRX, Inc., dated July 1, 2005 (filed as Exhibit 10.27 to our Annual Report on Form 10-K, filed on February 21, 2007 and incorporated
herein by reference).                                                                                                                                                                                                  
|            | 
|10.28       |  | First Amendment to Employment Contract between David Cathcart and TRX, Inc., dated November 15, 2006 (filed as Exhibit 10.28 to our Annual Report on Form 10-K, filed on February 21,
2007 and incorporated herein by reference).                                                                                                                                                                          
|            | 
|10.29       |  | Employment Contract dated January 1, 2004 between Peter Grover and TRX Europe, Ltd. (filed as Exhibit 10.48 to our Quarterly Report on Form 10-Q, filed on May 10, 2007 and incorporated
herein by reference).                                                                                                                                                                                             
|            | 
|10.30       |  | Amendment to Employment Contract dated April 28, 2005 between Peter Grover and TRX Europe, Ltd. (filed as Exhibit 10.49 to our Quarterly Report on Form 10-Q, filed on May 10, 2007 and
incorporated herein by reference).                                                                                                                                                                                 
|            | 
|10.31       |  | Second Amendment to Employment Contract dated November 2, 2005 between Peter Grover and TRX Europe, Ltd. (filed as Exhibit 10.50 to our Quarterly Report on Form 10-Q, filed on May 10,
2007 and incorporated herein by reference).                                                                                                                                                                        
|            | 
|10.32       |  | Release Agreement between Peter Grover and TRX Europe Ltd dated July 13, 2007 (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q, filed on November 8, 2007 and incorporated
herein by reference).                                                                                                                                                                                                
|            | 
|10.33       |  | Lease Agreement, dated September 26, 1995, as amended August 7, 1996, April 8, 1997, December 3, 1997, October 5, 1998, April 22,
1999, August 17, 1999, March 29, 2000, January 1, 2003 and July 26, 2004, by and between WorldTravel Partners, L.P. and Weeks Realty, L.P. (filed as Exhibit 10.28 to our Registration Statement on Form S-1, filed on
May 9, 2005 and incorporated herein by reference).
|            | 
|10.34       |  | TRX, Inc. Omnibus Incentive Plan (filed as Exhibit 10.32 to our Annual Report on Form 10-K, filed February 22, 2006 and incorporated herein by reference).                                                                                                                                                                                                                                                 
|            | 
|10.35       |  | TRX, Inc. Employee Stock Purchase Plan. (filed as Exhibit 10.59 to Amendment No. 3 to our Registration Statement on Form S-1, filed on July 11, 2005 and incorporated herein by reference).                                                                                                                                                                                                                
|            | 
|10.36       |  | TRX, Inc. Executive Annual Incentive Plan (filed as Exhibit 10.37 to our Annual Report on Form 10-K, filed February 22, 2006 and incorporated herein by reference).                                                                                                                                                                                                                                        
|            | 
|10.37       |  | Asset Purchase Agreement by and among TRX, Inc., Hi-Mark, LLC, Hi-Mark Travel Systems, Inc., Integrated Profitmark Corporation, LLC and the Owner Entity Shareholders, dated December 7, 2006
(filed as Exhibit 10.44 to our Annual Report on Form 10-K, filed on February 21, 2007 and incorporated herein by reference).*                                                                                
|            | 
|10.38       |  | Asset Purchase Agreement by and among Travel Analytics, Inc., Scott Gillespie, Kristina O. Gillespie and TRX, Inc., dated August 2, 2006 (filed as Exhibit 10.45 to our Annual Report on Form
10-K, filed on February 21, 2007 and incorporated herein by reference).*                                                                                                                                     
|            | 
|21.2        |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                                                           



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##### Index to Financial Statements

|            |  |                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                         
|23.1        |  | Consent of Deloitte & Touche LLP.                                                                  
|            | 
|24.1        |  | Power of Attorney (included with signature page hereto)                                             
|            | 
|31.1        |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|            | 
|31.2        |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|            | 
|32.1        |  | Section 906 Principal Executive Officer and Principal Financial Officer Certification              



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

| | Furnished herewith.
|- | -------------------

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



4