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EXCEL - IDEA: XBRL DOCUMENT - TRX INC/GAFinancial_Report.xls
EX-10.1 - AGREEMENT TO MODIFY CREDIT, SECURITY AND APPLICATION & REIMBURSEMENT AGREEMENTS - TRX INC/GAdex101.htm
EX-10.2 - STAEMENT OF WORK #8 TO THE AMENDED AND RESTATED MASTER SERVICE AGREEMENT - TRX INC/GAdex102.htm
EX-10.4 - AMENDMENT #3 TO SERVICES AGREEMENT - TRX INC/GAdex104.htm
EX-32.1 - SECTION 906 CERTIFICATIONS - TRX INC/GAdex321.htm
EX-31.2 - SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER - TRX INC/GAdex312.htm
EX-10.3 - SECOND AMENDMENT TO CORREX SERVICES AGREEMENT - TRX INC/GAdex103.htm
EX-31.1 - SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - TRX INC/GAdex311.htm
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the quarterly period ended June 30, 2011

OR

 

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

For the transition period from                 to                

Commission File No. 000-51478

 

 

TRX, INC.

(Exact name of registrant as specified in charter)

 

 

 

Georgia   58-2502748

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

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

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

 

 

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

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

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

 

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

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

The number of shares of the registrant’s common stock, $0.01 par value, outstanding at August 2, 2011 was 18,478,580 shares.

 

 

 


Table of Contents

TRX, INC.

FORM 10-Q

TABLE OF CONTENTS

 

          PAGE
NO.
 
PART I: FINANCIAL INFORMATION   
Item 1.   

Financial Statements

  
  

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010

     1   
  

Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010

     2   
  

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010

     3   
  

Notes to Unaudited Condensed Consolidated Financial Statements

     4   
Item 2.   

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

     10   
Item 4T.   

Controls and Procedures

     14   
PART II: OTHER INFORMATION   
Item 1A.   

Risk Factors

     14   
Item 6.   

Exhibits

     15   
Signatures      16   


Table of Contents

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

TRX, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

     June 30,
2011
    December 31,
2010
 

ASSETS

    

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 2,130      $ 2,565   

Trade accounts receivable, net

     4,519        6,127   

Prepaids and other

     2,243        3,318   
  

 

 

   

 

 

 

Total current assets

     8,892        12,010   
  

 

 

   

 

 

 

NONCURRENT ASSETS:

    

Property and equipment, net

     4,744        5,743   

Deferred income tax

     266        264   

Other assets, net

     708        795   
  

 

 

   

 

 

 

Total noncurrent assets

     5,718        6,802   
  

 

 

   

 

 

 

Total assets

   $ 14,610      $ 18,812   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ DEFICIT

    

CURRENT LIABILITIES:

    

Accounts payable and accrued liabilities

   $ 6,684      $ 8,275   

Customer deposits and deferred revenue

     4,027        4,624   

Current portion of long-term debt

     2,800        583   
  

 

 

   

 

 

 

Total current liabilities

     13,511        13,482   
  

 

 

   

 

 

 

NONCURRENT LIABILITIES:

    

Long-term debt—less current portion

     —          4,200   

Other long-term liabilities

     1,756        1,759   
  

 

 

   

 

 

 

Total noncurrent liabilities

     1,756        5,959   
  

 

 

   

 

 

 

Total liabilities

     15,267        19,441   
  

 

 

   

 

 

 

COMMITMENTS AND CONTINGENCIES (NOTE 1)

    

SHAREHOLDERS’ DEFICIT:

    

Common stock, $.01 par value; 100,000,000 shares authorized; 18,657,775 and 18,653,802 shares issued; and 18,470,244 and 18,466,271 shares outstanding at June 30, 2011 and December 31, 2010, respectively.

     186        186   

Additional paid-in capital

     95,408        95,416   

Treasury stock, at cost; 187,531 shares

     (2,294     (2,294

Cumulative translation adjustment

     468        413   

Accumulated deficit

     (94,425     (94,350
  

 

 

   

 

 

 

Total shareholders’ deficit

     (657     (629
  

 

 

   

 

 

 

Total liabilities and shareholders’ deficit

   $ 14,610      $ 18,812   
  

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

1


Table of Contents

TRX, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

REVENUES:

        

Transaction and other revenues

   $ 12,377      $ 14,005      $ 24,802      $ 28,599   

Client reimbursements

     32        147        205        231   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     12,409        14,152        25,007        28,830   
  

 

 

   

 

 

   

 

 

   

 

 

 

EXPENSES:

        

Operating, excluding depreciation and amortization

     8,033        8,267        15,834        16,819   

Selling, general, and administrative, excluding depreciation and amortization

     2,690        2,946        4,740        5,992   

Technology development

     855        829        1,673        1,780   

Client reimbursements

     32        147        205        231   

Impairment of goodwill

     88        76        152        165   

Depreciation and amortization

     1,002        1,050        1,997        2,080   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     12,700        13,315        24,601        27,067   
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING (LOSS) INCOME

     (291     837        406        1,763   

INTEREST (EXPENSE) INCOME:

        

Interest income

     8       —          10        6   

Interest expense

     (119     (169     (252     (353
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense, net

     (111     (169     (242     (347
  

 

 

   

 

 

   

 

 

   

 

 

 

(LOSS) INCOME BEFORE INCOME TAXES

     (402     668        164        1,416   

INCOME TAX EXPENSE

     76        265        239        530   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET (LOSS) INCOME

   $ (478   $ 403      $ (75   $ 886   
  

 

 

   

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES:

        

Basic

     18,470        18,466        18,468        18,466   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     18,470        18,569        18,468        18,608   
  

 

 

   

 

 

   

 

 

   

 

 

 

BASIC AND DILUTED NET (LOSS) INCOME PER SHARE

   $ (0.03   $ 0.02      $ (0.00   $ 0.05   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

2


Table of Contents

TRX, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     Six Months Ended
June 30,
 
     2011     2010  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net (loss) income

   $ (75   $ 886   
  

 

 

   

 

 

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

    

Depreciation and amortization

     1,997        2,080   

Impairment of goodwill

     152        165   

Provision for bad debts

     (162     161   

Stock compensation credit

     (11     (75

Debt issuance cost amortization

     10        52   

Changes in assets and liabilities:

    

Trade accounts receivable

     1,792        (166

Prepaids and other assets

     1,132        (103

Deferred taxes

     (6     19   

Accounts payable and accrued liabilities

     (1,750     (1,373

Customer deposits and deferred revenue

     (630     (1,315
  

 

 

   

 

 

 

Total adjustments

     2,524        (555
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,449        331   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Capital expenditures

     (889     (1,662

Payment of contingent consideration

     (152     (177
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,041     (1,839
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Repayments of long-term debt

     (583     (584

Borrowings from credit facility

     5,500        9,800   

Payments on credit facility

     (6,900     (7,400

Proceeds from stock plans

     3        7   
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (1,980     1,823   
  

 

 

   

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

     137        (446
  

 

 

   

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

     (435     (131

CASH AND CASH EQUIVALENTS—Beginning of period

     2,565        2,897   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS—End of period

   $ 2,130      $ 2,766   
  

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

3


Table of Contents

TRX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In thousands, except share and per share data)

1. ACCOUNTING AND REPORTING POLICIES

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

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

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

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

Allowance for Doubtful Accounts—We maintain an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The balance was $142 and $426 as of June 30, 2011 and December 31, 2010, respectively.

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

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

 

Balance, January 1

   $ 37,975   

Accumulated impairment losses

     (37,975
  

 

 

 
     —     
  

 

 

 

Earnout on previous business acquisition transaction

     151   

Impairment charge

     (151
  

 

 

 

Balance, June 30

     38,126   

Accumulated impairment losses

     (38,126
  

 

 

 
   $ —     
  

 

 

 

 

4


Table of Contents

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

 

     Useful
Lives
     June 30, 2011     December 31, 2010  
      Gross
Carrying
Value
     Accumulated
Amortization
    Gross
Carrying
Value
     Accumulated
Amortization
 

Trademarks and patents

     10 years       $ 866       $ (390   $ 866       $ (303

We expect to record amortization expense related to these intangible assets of approximately $86 during the remainder of 2011, $173 in each of the next two years and $43 in the year thereafter. We recorded related amortization expense of $43 and $87 during the three and six months ended June 30, 2011, respectively, and $44 and $87 during the three and six months ended June 30, 2010, respectively.

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

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

We currently do not have financial or non-financial assets and liabilities that are required to be measured at fair value on a recurring basis. Our goodwill is measured at fair value on a non-recurring basis. The Financial Accounting Standards Board (“FASB”) guidance establishes a valuation hierarchy for disclosure of the inputs used to measure fair value. During the three months ended June 30, 2011 and 2010, earnout payments of $88 and $76, respectively, and during the six months ended June 30, 2011 and 2010, earnout payments of $152 and $165, respectively, related to a previous business acquisition transaction were impaired based on Level 3 measurements.

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

 

   

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

 

   

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

 

   

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

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

Concentration of Credit Risk—A significant portion of our revenues is derived from a limited number of clients. Our top five clients accounted for approximately 63% and 68% of our total revenues in the three months ended June 30, 2011 and 2010, respectively, and approximately 64% and 67% of our total revenues in the six months ended June 30, 2011 and 2010, respectively. Contracts with the major clients may be terminated by the client if we fail to meet certain performance criteria. Expedia, Inc. and its affiliates accounted for 37% and 44% of our total revenues in the three months ended June 30, 2011 and 2010, respectively, and approximately 40% and 43% in the six months ended June 30, 2011 and 2010, respectively. American Express Travel Related Services Company, Inc. (“American Express”) accounted for 13% and 16% of our total revenues in the three months ended June 30, 2011 and 2010, respectively, and approximately 14% and 16% of our total revenues in the six months ended June 30, 2011 and 2010, respectively. Mastercard Inc. accounted for 6% of our total revenues in the three months ended June 30, 2011. Most of our larger clients remit payments for our services 30 to 90 days in advance of our service delivery. Advance payments from our clients are recorded as customer deposits and deferred revenue until the service is performed. At December 31, 2010, 5% of our accounts receivable related to American Express.

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

 

5


Table of Contents

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

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

 

     Three Months Ended
June 30, 2011
    Three Months Ended
June 30, 2010
 
     Net Loss     Weighted
Average
Shares
     Per Share     Net Income      Weighted
Average
Shares
     Per Share  

Basic net (loss) income per share

   $ (478     18,470       $ (0.03   $ 403         18,466       $ 0.02   

Effect of dilutive securities:

               

Options to acquire common stock

     —          —           —          —           103         —     
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Diluted net (loss) income per share

   $ (478     18,470       $ (0.03   $ 403         18,569       $ 0.02   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 
    
     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 
     Net Income     Weighted
Average
Shares
     Per Share     Net Income      Weighted
Average
Shares
     Per Share  

Basic net (loss) income per share

   $ (75     18,468       $ (0.00   $ 886         18,466       $ 0.05   

Effect of dilutive securities:

               

Options to acquire common stock

     —          —           —          —           142         —     
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Diluted net (loss) income per share

   $ (75     18,468       $ (0.00   $ 886         18,608       $ 0.05   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

All outstanding stock options with an exercise price greater than the average market share price for the period are assumed to have an anti-dilutive effect on net income per share. Because of their anti-dilutive effect on the net income per share recorded in each of the periods presented, the diluted share base excludes incremental shares related to all outstanding employee stock options for the three and six months ended June 30, 2011 and 1,801 employee stock options for the three and six months ended June 30, 2010.

Stock-Based Employee Compensation—We account for stock-based employee compensation under the Compensation—Stock Compensation Topic of the FASB Standards Codification. There were no stock options granted during the three months ended June 30, 2011. The weighted average grant-date fair value of the options granted during the six months ended June 30, 2011, calculated using the Black-Scholes model, ranged from $0.47 to $0.58. The weighted average grant-date fair value of the options granted during the three and six months ended June 30, 2010, calculated using the Black-Scholes model, ranged from $0.41 to $0.70.

The following assumptions were used for grants in the six months ended June 30, 2011: dividend yield of zero, volatility of 153.2% to 192.6%, risk-free interest rate of 0.59% to 3.39%, and an expected life of 2.00 to 4.25 years. The following assumptions were used for grants in the three and six months ended June 30, 2010: dividend yield of zero, volatility of 133.5% to 181.8%, risk-free interest rate of 0.81% to 1.96%, and an expected life of 2.00 to 4.25 years. Volatility is based on the volatility of our stock. We use historical data to estimate the expected life and employee termination assumptions in our accounting under the FASB’s guidance. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant over the expected life of the grant.

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

 

     Options     Weighted
Average
Exercise
Price
 

Outstanding at January 1

     2,339,000      $ 3.04   

Granted

     185,000        0.64   

Cancelled

     (117,000     3.06   
  

 

 

   

 

 

 

Outstanding at June 30

     2,407,000      $ 2.85   
  

 

 

   

 

 

 

 

6


Table of Contents

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 June 30, 2011, the aggregate intrinsic value of options outstanding was $171 with a weighted average remaining contractual term of 6.8 years; the aggregate intrinsic value of the 1,729,250 options exercisable was $86 with a weighted average exercise price of $3.73 and a weighted average remaining contractual term of 6.1 years; and the aggregate intrinsic value of the 2,151,858 options vested or expected to vest was $153 with a weighted average exercise price of $2.85 and a weighted average remaining contractual term of 6.8 years.

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

 

     Options     Weighted
Average
Grant-Date
Fair Price
 

Outstanding at January 1

     835,251      $ 0.84   

Granted

     185,000        0.64   

Cancelled

     (51,250     0.99   

Vested

     (291,250     1.05   
  

 

 

   

 

 

 

Outstanding at June 30

     677,751      $ 0.68   
  

 

 

   

 

 

 

Compensation cost from nonvested stock granted to employees is recognized as expense using the straight-line method over the vesting period. As of June 30, 2011, total unrecognized compensation cost related to nonvested stock options was approximately $131. Approximately half of this cost is expected to be recognized over the next year, with the remainder primarily over the subsequent two years. For the three and six months ended June 30, 2011, our total stock-based compensation expense (credit) was $2 and $(11), respectively. For the three and six months ended June 30, 2010, our total stock-based compensation credit was $20 and $75, respectively.

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

 

     Three Months Ended
June  30,
    Six Months Ended
June  30,
 
     2011     2010     2011     2010  

Net (loss) income

   $ (509   $ 403      $ (106   $ 886   

Cumulative translation adjustment

     85        (264     56        (103
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive (loss) income

   $ (424   $ 139      $ (50   $ 783   
  

 

 

   

 

 

   

 

 

   

 

 

 

Statement of Cash Flows—Cash paid for interest was $268 and $333 for the six months ended June 30, 2011 and 2010, respectively. Cash paid for income taxes was $237 and $62 for the six months ended June 30, 2011 and 2010, respectively. We had accrued capital expenditures of $4 and $0 at June 30, 2011 and 2010, respectively.

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

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

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
      2011      2010      2011      2010  

Transaction processing

   $ 9,179       $ 11,270       $ 19,174       $ 22,886   

Data reporting

     3,198         2,735         5,628         5,713   
  

 

 

    

 

 

    

 

 

    

 

 

 

Transaction and other revenues

     12,377         14,005         24,802         28,599   

Client reimbursements

     32         147         205         231   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 12,409       $ 14,152       $ 25,007       $ 28,830   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

Revenues:

           

United States

   $ 8,299       $ 10,137       $ 16,787       $ 20,785   

Germany

     3,131         2,849         6,217         5,672   

Other International

     979         1,166         2,003         2,373   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 12,409       $ 14,152       $ 25,007       $ 28,830   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     At June 30,
2011
     At December 31,
2010
 

Property and equipment, net:

     

United States

   $ 4,235       $ 5,266   

Germany

     318         277   

Other International

     191         200   
  

 

 

    

 

 

 
   $ 4,744       $ 5,743   
  

 

 

    

 

 

 

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

Recent Accounting Pronouncements—In June 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-05, which revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in Accounting Standards Codification (“ASC”) 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We do not expect the adoption of this guidance will have a material effect on our financial position, cash flows or results of operations.

In May 2011, the FASB issued ASU No. 2011-04. The provisions of ASU 2011-04 amend FASB ASC Topic 820, clarify the Board’s intent regarding application of existing fair value measurement guidance, and revise certain measurement and disclosure requirements to achieve convergence of U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments clarify the FASB’s intent about the application of the highest-and-best-use and also expand the information required to be disclosed with respect to fair value measurements categorized in Level 3 as well as items not measured at fair value but for which fair value must be disclosed. For public entities, the ASU is effective for interim and annual periods beginning after December 15, 2011. We do not expect the adoption of this guidance will have a material effect on our financial position, cash flows or results of operations.

2. DEBT

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

 

     Maturity
Date
     June 30,
2011
     December 31,
2010
 

Note payable

     April 2011       $ —         $ 583   

Revolver

     June 2012         2,800         4,200   
     

 

 

    

 

 

 

Total

        2,800         4,783   

Less current maturities

        2,800         583   
     

 

 

    

 

 

 

Long-term debt

      $ —         $ 4,200   
     

 

 

    

 

 

 

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

Our credit agreement with Atlantic Capital Bank (“ACB”) provides for a senior secured revolving credit facility with aggregate principal commitments not to exceed $10,000, which includes a $2,000 letter of credit subfacility limit. Any outstanding letters of

 

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credit on this subfacility reduce the borrowing capacity of the credit agreement. A loan under the credit agreement may be a Base Rate loan or a LIBOR loan, at the option of TRX. Interest under the credit agreement accrues at an interest rate indexed to the prime rate as announced publicly by ACB from time to time (the “Base Rate”) or LIBOR (plus 1.75% for Base Rate loans and 3.00% for LIBOR loans) for the revolving credit facility, with a minimum borrowing rate of 4.25%. For letters of credit, the letter of credit fee is equal to the Applicable Rate (as defined in the credit agreement) times the daily amount available to be drawn under the letter of credit. Overdue amounts bear a fee of 2% per annum above the rate applicable to these amounts. We capitalized $215 of issuance cost related to this facility and our letter of credit, which is amortized as interest expense over the specific terms of the facility and letter of credit.

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

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

Our financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Our ability to continue as a going concern is dependent on having sufficient liquidity for our operations. We are currently in compliance with all financial covenants in the credit agreement. As of June 30, 2011, we have borrowed $2,800 against the facility and there was a $1,500 letter of credit against this facility relating to the lease of our Atlanta office, leaving $5,700 that is currently available for borrowing. As of June 30, 2011, the interest rate on our outstanding borrowings was 4.25%. We expect to remain in compliance with all financial covenants over the remaining term of our revolving credit facility with ACB, however, we acknowledge that market conditions remain uncertain, and, as such, can provide no assurances that we will remain in compliance. We monitor our expected debt compliance and believe we would have time to further reduce our expenses and/or capital expenditures if needed to remain in compliance. If we are not successful in maintaining our debt compliance, ACB as lender is entitled to enforce the guarantee under our credit facility. Management believes that the existing cash on hand, cash flow from operations, availability under the credit agreement and through our ability to obtain future external financing will provide the needed liquidity to fund operations sufficient to continue as a going concern.

3. RELATED-PARTY TRANSACTIONS

BCD Travel USA, LLC (“BCD Travel”) is majority-owned by the parent of our majority shareholder, BCD Holdings. Effective January 1, 2011, the existing online booking services agreement between TRX Technology Services, L.P. (“TRX Technology”) and BCD Travel was extended to January 1, 2015 and updated certain pricing and other terms under agreement. During the three and six months ended June 30, 2011, we recognized transaction and other revenues from BCD Travel totaling $304 and $620, respectively. During the three and six months ended June 30, 2010, we recognized transaction and other revenues from BCD Travel totaling $368 and $726, respectively. At June 30, 2011 and December 31, 2010, respectively, $162 and $107 was receivable from BCD Travel.

Airtrade International, Inc. (“Vayama”) is majority-owned by the parent of our majority shareholder, BCD Holdings. The agreement between TRX Technologies India PVT Ltd. and Vayama, dated February 15, 2009 and amended on February 17, 2010, was entered into between the parties for travel management services and was effective January 28, 2010 through November 19, 2010. Effective June 1, 2011 the existing reservation processing services agreement between TRX Technology and Vayama automatically renewed for one year to May 31, 2012. During the three and six months ended June 30, 2011, we recognized transaction and other revenues from Vayama totaling $16 and $31, respectively. During the three and six months ended June 30, 2010, we recognized transaction and other revenues from Vayama totaling $235 and $438, respectively. At June 30, 2011 and December 31, 2010, respectively, $14 and $278 was receivable from Vayama.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

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

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

A significant portion of our revenue is derived from long-term contracts with several large clients. Our largest client, Expedia and its affiliates, accounted for 37% and 44% of our total revenues in the three months ended June 30, 2011 and 2010, respectively, and 40% and 43% of our total revenues in the six months ended June 30, 2011 and 2010, respectively.

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

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

Effective January 1, 2009, the BCD Agreement was entered into between the parties for online booking services. Effective January 1, 2011, the BCD Agreement was extended to January 1, 2015 and updated certain pricing and other terms under the BCD Agreement.

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

Critical Accounting Policies and Estimates

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

 

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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.

Comparison of Three and Six Months Ended June 30, 2011 and June 30, 2010

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

 

     Three Months Ended June 30,  
     2011     2010     Change  
     (dollars in thousands)  

Revenue:

            

Transaction processing

   $ 9,179        74   $ 11,270        80   $ (2,091     (19 )% 

Data intelligence

     3,198        26        2,735        20        463        17   
  

 

 

     

 

 

     

 

 

   

Transaction and other revenues

     12,377        100     14,005        100     (1,628     (12 )% 

Client reimbursements

     32          147         
  

 

 

     

 

 

       

Total revenues

     12,409          14,152         

Expenses:

            

Operating

     8,033          8,267          (234     (3

Selling, general, and administrative

     2,690          2,946          (256     (9

Technology development

     855          829          26        3   

Client reimbursements

     32          147          (115     (78

Impairment of goodwill

     88          76          12        16   

Depreciation and amortization

     1,002          1,050          (48     (5

Interest (expense) income:

            

Interest income

     8          —            8        —     

Interest expense

     (119       (169       (50     (30

Income tax provision

     (76       (265       (189     (71
  

 

 

     

 

 

       

Net (loss) income

   $ (478     $ 403         
  

 

 

     

 

 

       
  
     Six Months Ended June 30,  
     2011     2010     Change  
     (dollars in thousands)  

Revenue:

            

Transaction processing

   $ 19,174        77   $ 22,886        80   $ (3,712     (16 )% 

Data intelligence

     5,628        23        5,713        20        (85     (1
  

 

 

     

 

 

     

 

 

   

Transaction and other revenues

     24,802        100     28,599        100     (3,797     (13 )% 

Client reimbursements

     205          231         
  

 

 

     

 

 

       

Total revenues

     25,007          28,830         

Expenses:

            

Operating

     15,834          16,819          (985     (6

Selling, general, and administrative

     4,740          5,992          (1,252     (21

Technology development

     1,673          1,780          (107     (6

Client reimbursements

     205          231          (26     (11

Impairment of goodwill

     152          165          (13     (8

Depreciation and amortization

     1,997          2,080          (83     (4

Interest (expense) income:

            

Interest income

     10          6          4        67   

Interest expense

     (252       (353       (101     (29

Income tax provision

     (239       (530       (291     (55
  

 

 

     

 

 

       

Net (loss) income

   $ (75     $ 886         
  

 

 

     

 

 

       

 

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

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

Operating expenses. The decrease in operating expenses for the three and six months ended June 30, 2011 compared to the same periods in the prior year was primarily due to reduced personnel-related costs.

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

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

Depreciation and amortization. The depreciation and amortization expense remained relatively constant for the three and six months ended June 30, 2011 and 2010.

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

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

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

Liquidity and Capital Resources

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

At June 30, 2011, our principal sources of liquidity were cash and cash equivalents of $2.1 million and $5.7 million of availability under our revolving credit facility with ACB. We had $2.8 million of borrowings outstanding under our credit facility at June 30, 2011. Neither our access to nor the value of our cash equivalents has been negatively affected by the liquidity problems of financial institutions. Although we have been prudent in our strategy for our anticipated near-term liquidity needs, it is not possible to accurately predict how macroeconomic conditions may affect our financial position, results of operations or cash flows. Additional failures of financial and other institutions could impact our customers’ ability to pay us, reduce amounts available under our credit facility, cause losses to the extent cash amounts or the value of securities exceed government deposit insurance limits, and restrict our access to the equity and debt markets. A continuation of the turmoil in the capital and credit markets and the general economic downturn could adversely impact the availability, terms and/or pricing of financing if we need additional liquidity. We will experience liquidity problems if we are unable to obtain sufficient additional financing as our debt becomes due. Adverse economic conditions, increased competition, or other unfavorable events also could affect our liquidity.

Our credit agreement with ACB matures June 30, 2012. We plan to begin negotiations on an extension of our credit agreement prior to its maturity and based on our favorable history of renewals and expected capital needs, we expect to renew the facility prior to its maturity.

Net cash provided by operating activities was $2.4 million during the six months ended June 30, 2011, compared to $0.3 million during the six months ended June 30, 2010. The increase in cash provided was primarily due to improved collections and the return of a deposit related to relocating our Bangalore, India operations center.

 

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Net cash used in investing activities was $1.0 million during the six months ended June 30, 2011, compared to $1.8 million during the six months ended June 30, 2010. The driver of our investing activities is our capital expenditures, which include costs associated with internally developed software, as well as infrastructure required to support and maintain our existing systems and opportunities to reduce costs. As of June 30, 2011, we had no material commitments related to capital expenditures. We expect our 2011 capital expenditures will be approximately five percent of revenues.

Net cash used in financing activities was $2.0 million during the six months ended June 30, 2011, compared to net cash provided by financing activities of $1.8 million during the six months ended June 30, 2010. The primary driver for 2011 was less borrowings under our credit facility.

We believe that we will be able to meet our current and long-term liquidity and capital requirements, including fixed charges, through our cash flow from operations and other available sources of liquidity, including borrowings under the credit agreement and through our ability to obtain future external financing. We expect to continue to use a portion of our cash flows to fund our strategic capital expenditures, to invest in business opportunities and to meet our debt repayment obligations. Our financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Our ability to continue as a going concern is dependent on having sufficient liquidity for our operations. We are currently in compliance with all financial covenants in the credit agreement. As of June 30, 2011, we have borrowed $2.8 million against the facility and there was a $1.5 million letter of credit against this facility relating to the lease of our Atlanta office, leaving $5.7 million that is currently available for borrowing. As of June 30, 2011, the interest rate on our outstanding borrowings was 4.25%. We expect to remain in compliance with all financial covenants over the remaining term of our revolving credit facility with ACB, however, we acknowledge that market conditions remain uncertain, and, as such, can provide no assurances that we will remain in compliance. We monitor our expected debt compliance and believe we would have time to further reduce our expenses and/or capital expenditures if needed to remain in compliance. If we are not successful in maintaining our debt compliance, ACB as lender is entitled to enforce the guarantee under our credit facility. Management believes that the existing cash on hand, availability under the credit agreement and cash flow from operations will provide the needed liquidity to fund operations sufficient to continue as a going concern. The credit agreement requires us to maintain (i) a ratio of consolidated funded indebtedness to consolidated EBITDA (as defined in the credit agreement, which may not be comparable to consolidated total debt or measures of GAAP profitability presented elsewhere in this document) of not more than 1.75 to 1.00 and (ii) a ratio of the remainder of consolidated EBITDA minus capital expenditures to the sum of interest expense for the period and debt principal payments required to be made in the next twelve months of not more than 1.40 to 1.00. The credit agreement also contains additional covenants which, among other things, require us to deliver to ACB specified financial information, including annual and quarterly financial information, and limit our ability to (or to permit any subsidiaries to), subject to various exceptions and limitations, (i) merge with other companies, (ii) create liens on our property, (iii) incur debt obligations, (iv) enter into transactions with affiliates, except on an arms-length basis, (v) dispose of property, or (vi) pay dividends.

Seasonality

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

Inflation and Changing Prices

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

Cautionary Notice Regarding Forward-Looking Statements

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

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

 

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achievements expressed or implied by such forward-looking statements. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. We caution investors that any forward-looking statements we make are not guarantees or indicative of future performance.

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

 

   

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

 

   

volatility in the number of transactions we service;

 

   

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

 

   

industry declines and other competitive pressures; and

 

   

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

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

 

Item 4T. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

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

(b) Changes in Internal Control over Financial Reporting

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

PART II – OTHER INFORMATION

 

Item 1A. Risk Factors

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

 

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Item 6. Exhibits

 

Exhibit

No.

  

Description

10.1    Agreement to Modify Credit Agreement, Security Agreement and Application and Reimbursement Agreement for Irrevocable Standby Letter of Credit by and between TRX, Inc. and Atlantic Capital Bank effective June 9, 2011 †
10.2    Statement of Work #8 to the Amended and Restated Master Service Agreement for Application Service Provider between TRX, Inc. and American Express Travel Related Services Company, Inc., effective January 1, 2011. †*
10.3    Second Amendment to CORREX Services Agreement between Hogg Robinson plc and TRX Europe, Ltd., effective May 19, 2011 †*
10.4    Amendment #3 to Services Agreement between TRX Fulfillment Services, LLC and American Airlines, Inc., effective June 29, 2011 †
31.1    Certification of H. Shane Hammond, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †
31.2    Certification of David D. Cathcart, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. †
32.1    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †
101    The following financial information from TRX, Inc’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2011 (Unaudited) and December 31, 2010, (ii) Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2011 and 2011, (iii) Condensed Consolidated Cash Flows Statements (Unaudited) for the six months ended June 30, 2011 and 2010, and (iv) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. †

 

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

 

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SIGNATURE

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

 

  TRX, INC.
Dated: August 11, 2011   By:   /s/ David D. Cathcart
    David D. Cathcart
   

Chief Financial Officer

(principal financial and accounting officer)

 

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