UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2012
	For the quarterly period ended March 31, 2013
	or
£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ______________ to
	For the transition period from ________________ to

Commission file number: 333-167650

GXS Worldwide, Inc.

(Exact name of registrant as specified in its charter)

Delaware	35-2181508
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9711 Washingtonian Boulevard, Gaithersburg, MD	20878
(Address of principal executive offices)	(Zip Code)

301-340-4000

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

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 £ No R

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 R 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 R Smaller reporting company £

(Do not check if a smaller reporting company)

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

As of ~~November~~May 910, ~~2012~~2013, the registrant had 1,000 outstanding shares of common stock, all of which was held by an affiliate of the registrant.

GXS WORLDWIDE, INC.

QUARTERLY REPORT FOR THE QUARTER ENDED ~~SEPTEMBER~~MARCH 3031, ~~2012~~2013

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011	4
	Condensed Consolidated Balance Sheets as of March 31, 2013 (Unaudited) and
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011	5
	December 31, 2012	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2012 and 2011	6
	Unaudited Condensed Consolidated Statements of Operations for the three months ended
	Unaudited Condensed Consolidated Statement of Changes in Stockholder’s Deficit for the nine months ended September 30, 2012	7
	March 31, 2013 and 2012	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011	8
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the
	three months ended March 31, 2013 and 2012	6
	Unaudited Condensed Consolidated Statement of Changes in Stockholder’s Deficit for the
	three months ended March 31, 2013	7
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended
	March 31, 2013 and 2012	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3128
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4540
Item 4.	Controls and Procedures	4641
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	4742
Item 1A.	Risk Factors	4843
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4843
Item 3.	Defaults Upon Senior Securities	4843
Item 4.	Mine Safety Disclosures	4843
Item 5.	Other Information	4843
Item 6.	Exhibits	4944
SIGNATURES		5045

In this Quarterly Report on Form 10-Q, all references to “our,” “us,” “we,” “the Company” and “GXS” refer to GXS Worldwide, Inc. and its subsidiaries as a consolidated entity, unless the context otherwise requires or where otherwise indicated. All references to “Interchange” refer to Interchange Serviços S.A., which the Company acquired on December 30, 2008. All references to “Inovis” refer to Inovis International, Inc., which the Company acquired on June 2, 2010, the “Inovis Merger” or the “Merger”. All references to “RollStream” refer to RollStream, Inc., which the Company acquired on March 28, 2011.

The common stock of GXS, Inc., GXS Worldwide, Inc.’s only direct subsidiary, is collateral for the Company’s 9.75% Senior Secured Notes due 2015 (the “Senior Secured Notes” or “notes”). Securities and Exchange Commission Rule 3-16 of Regulation S-X (“Rule 3-16”) requires financial statements for each of the registrant’s affiliates whose securities constitute a substantial portion of the collateral for registered securities. The common stock of GXS, Inc. is considered to constitute a substantial portion of the collateral for the registered notes. Accordingly, the financial statements of GXS, Inc. would be required by Rule 3-16. Management does not believe the GXS, Inc. financial statements would add meaningful disclosure and has not included those financial statements herein, because they are substantially identical to the GXS Worldwide, Inc. financial statements and the total assets, revenues, operating income, net income (loss) and cash flows of GXS, Inc. are expected to continue to constitute substantially all of the corresponding amounts for GXS Worldwide, Inc. and its subsidiaries.

PART I. FINANCIAL INFORMATION

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

	September 30, 2012			December 31, 2011
	March 31, 2013			December 31, 2012
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4049,~~818~~230		$	1235,~~968~~030
Receivables, net		~~103~~95,~~650~~438			~~106~~99,~~799~~094
Prepaid expenses and other assets		27,~~439~~053			28,~~881~~326
Total current assets		171,~~907~~721			~~148~~162,~~648~~450
Property and equipment, net		~~108~~109,~~658~~600			~~105~~109,~~049~~307
Goodwill		~~269~~267,~~082~~829			~~268~~269,~~767~~046
Intangible assets, net		~~105~~95,~~642~~856			~~120~~100,~~483~~838
Deferred financing costs		129,~~109~~865			1510,~~018~~988
Other assets		2021,~~929~~110			2320,~~112~~103
Total Assets	$	~~688~~675,~~327~~981		$	~~681~~672,~~077~~732
Liabilities and Stockholder's Deficit
Current liabilities:
Borrowings under revolving credit facility	$	––		$	3,000
Trade payables	$	16,902		$	20,025
Trade payables		14,861			19,640
Deferred income		42,320			41,492
Deferred income		39,888			46,622
Accrued expenses and other current liabilities		62,829			46,029
Accrued expenses and other current liabilities		68,366			47,369
Total current liabilities		122,051			107,546
Total current liabilities		123,115			116,631
Long-term debt		776,210			775,334
Long-term debt		774,493			772,068
Deferred income tax liabilities		10,394			10,753
Deferred income tax liabilities		11,122			9,961
Other liabilities		52,108			56,541
Other liabilities		51,560			46,743
Total liabilities		960,763			950,174
Total liabilities		960,290			945,403
GXS Worldwide, Inc. stockholder's deficit:
Common stock $1.00 par value, 1,000 shares authorized, issued and outstanding		1			1
Additional paid-in capital		~~429~~430,~~654~~242			429,~~045~~952
Accumulated deficit		(~~697~~704,~~950~~949	)		(~~687~~697,~~446~~659	)
Accumulated other comprehensive loss		(310,~~982~~407	)		(610,~~208~~082	)
Total GXS Worldwide, Inc. stockholder's deficit		(~~272~~285,~~277~~113	)		(~~264~~277,~~608~~788	)
Non-controlling interest		~~314~~331			~~282~~346
Total stockholder’s deficit		(~~271~~284,~~963~~782	)		(~~264~~277,~~326~~442	)
Total Liabilities and Stockholder’s Deficit	$	~~688~~675,~~327~~981		$	~~681~~672,~~077~~732

See accompanying notes to condensed consolidated financial statements (unaudited)

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands)

(Unaudited)

	Three Months ended September 30,						Nine Months ended September 30,
	Three Months Ended March 31,
	2012			2011			2012			2011
	2013			2012
Revenues	$	~~121~~118,~~279~~746		$	~~122~~118,~~716~~912		$	~~361,000~~		$	~~355,639~~
Costs and operating expenses:
Cost of revenues		6766,~~201~~047			64,~~394~~750			~~198,809~~			~~190,883~~
Sales and marketing		17,~~117~~883			17,~~049~~150			~~50,797~~			~~48,632~~
General and administrative		1517,~~033~~693			1518,~~365~~828			~~49,862~~			~~49,819~~
Restructuring charges		402			709			1,360			2,328
Operating income		17,123			18,184
Operating income		21,526			25,199			60,172			63,977
Other income (expense):
Other income (expense):
Interest expense, net		(21,109	)		(21,339	)
Interest expense, net		(21,093	)		(21,109	)		(63,562	)		(61,689	)
Other income (expense), net		(2,485	)		(718	)
Other income (expense), net		697			(2,755	)		(3,679	)		(3,358	)
Loss before income taxes		(6,471	)		(3,873	)
Income (loss) before income taxes		1,130			1,335			(7,069	)		(1,070	)
Income tax expense		834			749
Income tax expense		1,276			1,295			3,403			2,626
Net loss		(7,305	)		(4,622	)
Net income (loss)		(146	)		40			(10,472	)		(3,696	)
Less: Net income (loss) attributable to non-controlling interest		(15	)		5
Less: Net income (loss) attributable to non-controlling interest		47			(35	)		32			(3	)
Net loss attributable to GXS Worldwide, Inc.	$	(7,290	)	$	(4,627	)
Net income (loss) attributable to GXS Worldwide, Inc.	$	(193	)	$	75		$	(10,504	)	$	(3,693	)

See accompanying notes to condensed consolidated financial statements (unaudited)

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

	Three Months ended September 30,						Nine Months ended September 30,
	Three Months Ended March 31,
	2012			2011			2012			2011
	2013			2012
Net income (loss)	$	(146	)	$	40		$	(10,472	)	$	(3,696	)
Net loss	$	(7,305	)	$	(4,622	)
Foreign currency translation adjustments		~~1,077~~(325	)		~~(944~~1,320	)		~~2,226~~			~~2,167~~
Comprehensive income (loss)		931			(904	)		(8,246	)		(1,529	)
Comprehensive loss		(7,630	)		(3,302	)
Less: Comprehensive income (loss) attributable to non-controlling interest		47(15	)		~~(35~~5	)		32			(3	)
Comprehensive income (loss) attributable to GXS Worldwide, Inc.	$	884		$	(869	)	$	(8,278	)	$	(1,526	)
Comprehensive loss attributable to GXS Worldwide, Inc.	$	(7,615	)	$	(3,307	)

See accompanying notes to condensed consolidated financial statements (unaudited)

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Changes in Stockholder’s Deficit

(In thousands)

(Unaudited)

	Common stock		Additional paid-in capital		Accumulated deficit			Accumulated other comprehensive loss			Non- controlling interest			Total
Balance at December 31, 2011	$	1	$	429,045	$	(687,446	)	$	(6,208	)	$	282		$	(264,326	)
Balance at December 31, 2012	$	1	$	429,952	$	(697,659	)	$	(10,082	)	$	346		$	(277,442	)
Net income (loss)		––		––		(10,504	)		––			32			(10,472	)
Net loss		––		––		(7,290	)		––			(15	)		(7,305	)
Stock compensation expense		––		~~609~~290		––			––			––			~~609~~290
Foreign currency translation adjustments		––		––		––			~~2,226~~(325	)		––			~~2,226~~(325	)
Balance at September 30, 2012	$	1	$	429,654	$	(697,950	)	$	(3,982	)	$	314		$	(271,963	)
Balance at March 31, 2013	$	1	$	430,242	$	(704,949	)	$	(10,407	)	$	331		$	(284,782	)

See accompanying notes to condensed consolidated financial statements (unaudited)

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months ended September 30,
	Three Months Ended March 31,
	2012			2011
	2013			2012
Cash flows from operations:
Net loss	$	(107,~~472~~305	)	$	(34,~~696~~622	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		4213,~~294~~408			4013,~~165~~863
Deferred income taxes		~~956~~355			~~(726~~202	)
Amortization of deferred financing costs and debt discount		62,~~029~~118			51,~~546~~978
Unrealized gain on interest rate swap		––			(2,365	)
Stock compensation expense		290			197
Settlement of interest rate swap		––			(2,318	)
Stock compensation expense		609			787
Changes in operating assets and liabilities, net of effect of business acquisitions:
(Increase) decrease in receivables		3,149			(4,974	)
Decrease in receivables		3,656			6,071
(Increase) decrease in prepaid expenses and other assets		3,901			(6,466	)
Increase in prepaid expenses and other assets		(508	)		(1,521	)
Increase (decrease) in trade payables		(4,745	)		306
Decrease in trade payables		(1,810	)		(2,980	)
Increase (decrease) in deferred income		~~(6,734~~828	)		~~320~~(2,757	)
Increase in accrued expenses and other liabilities		2512,~~541~~248			2219,~~761~~373
Other		21,~~302~~766			~~2,837~~383
Net cash provided by operating activities		6225,~~830~~046			5230,~~177~~187
Cash flows from investing activities:
Purchases of property and equipment (including capitalized interest)		(3110,~~405~~421	)		(3411,~~270~~107	)
Business acquisition, net of cash acquired ($4 for nine months ended September 30, 2011)		––			(1,125	)
Net cash used in investing activities		(10,421	)		(11,107	)
Net cash used in investing activities		(31,405	)		(35,395	)
Cash flows from financing activities:
Borrowings under revolving credit facility		~~20,000~~––			347,000
Repayments under revolving credit facility		~~(23,000~~––	)		(4210,000	)
Payment of financing costs		~~(421~~––	)		(2400	)
Net cash used in financing activities		~~(3,421~~––	)		(83,~~002~~400	)
Effect of exchange rate changes on cash		(~~154~~425	)		8488
Increase in cash and cash equivalents		2714,~~850~~200			815,~~864~~768
Cash and cash equivalents, beginning of period		1235,~~968~~030			1612,~~326~~968
Cash and cash equivalents, end of period	$	4049,~~818~~230		$	2528,~~190~~736
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	~~39,144~~215		$	~~39,285~~311
Cash paid for interest rate swap	$	––		$	4,683
Cash paid for income taxes	$	404		$	659
Cash paid for income taxes	$	2,343		$	2,215
Noncash investing and financing activities:
Fair value of equity securities issued in business acquisition	$	––		$	420

See accompanying notes to condensed consolidated financial statements (unaudited)

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

(1)	Business and Basis of Presentation

GXS Worldwide, Inc. and its subsidiaries (“GXS Worldwide” or the “Company”) is a leading global provider of business-to-business (“B2B”) cloud-based integration services and solutions that simplify and enhance business process integration, data quality and compliance, and collaboration among businesses. The Company’s services and solutions enable customers to manage and improve mission critical supply chain functions, securely process financial transactions related to the exchange of goods and services, and automate and control other critical cross-enterprise business processes. By utilizing these services and solutions the Company’s customers realize a number of key benefits such as lower total cost of ownership, accelerated time to market and enhanced reliability and security. Customers and their trading partners do business together primarily via GXS Trading Grid®, a ~~multi~~cloud-~~tenant~~based integration ~~cloud~~ platform. The Company’s “Managed Services ~~offering compliments GXS Trading Grid® with shared processes and built-in industry expertise. The Company is a wholly-owned subsidiary of GXS Holdings, Inc. (“GXS Holdings~~”), ~~its~~are ~~direct~~hosted ~~parent~~services ~~company,~~to ~~and~~customers ison an ~~indirect~~outsourced ~~wholly-owned~~basis, ~~subsidiary~~primarily ofon GXS ~~Group,~~Trading ~~Inc~~Grid®. ~~(“GXS Group”), the ultimate parent company.~~

OnThe ~~June~~Company 2,is ~~2010, GXS Holdings acquired Inovis International, Inc. (“Inovis”),~~ a ~~provider~~wholly-owned ofsubsidiary ~~integrated B2B services and solutions that manage the flow~~ of ~~e-commerce~~GXS ~~information for global trading communities. Following the transaction~~Holdings, ~~Inovis was merged with and into GXS,~~ Inc. (“~~GXSI~~GXS Holdings”), anits ~~indirect~~direct ~~wholly-owned~~parent ~~subsidiary and a guarantor of the Company’s notes~~company, and ~~the~~is ~~Company became~~ an indirect wholly-owned subsidiary of GXS Group~~. Certain~~, ~~foreign subsidiaries of Inovis became wholly-owned subsidiaries of GXSI~~Inc. ~~The~~ ~~results~~(“GXS ofGroup”), ~~operations for Inovis are included in~~ the ~~Company’s~~ultimate ~~condensed~~parent ~~consolidated results of operations since its acquisition on June 2, 2010~~company.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, these financial statements do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments considered necessary for fair presentation of the financial position and results of operations.

Interim results for the three ~~and nine~~ month ~~periods~~period ended ~~September~~March 3031, ~~2012~~2013 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and notes thereto for the year ended December 31, ~~2011~~2012, which are included in the Company’s Annual Report on Form 10-K, filed under the Securities Exchange Act of 1934 with the Securities and Exchange Commission (“SEC”) on March 1928, ~~2012~~2013.

(2)	Summary of Significant Accounting Policies

(a)	Consolidation

The condensed consolidated financial statements represent the consolidation of all companies in which the Company directly or indirectly has a majority ownership interest and controls the operations. All significant intercompany transactions and balances have been eliminated in consolidation. Investments in companies in which the Company has an ownership interest of 50 percent or less but can exercise significant influence over the investee’s operations and policies are accounted for under the equity method of accounting. The Company uses the cost method to account for investments where it holds less than a 20 percent ownership interest and where it cannot exercise significant influence over the investee’s operations and policies. At the end of each reporting period, the Company assesses the fair value of its investments to determine if any impairment has occurred. To the extent the Company’s carrying value exceeds the estimated fair value and the loss is considered to be other than a temporary decline, the Company records an impairment charge.

(b)	Acquisition Accounting

Acquisitions are accounted for using the purchase method of accounting prescribed in Financial Accounting Standards (“FAS”) Codification 805 – Business Combinations. Under this standard, assets and liabilities acquired are recorded at their fair values on the date of acquisition. Certain long-lived assets recorded at their fair values including property and equipment, trade names, customer contracts and relationships or other identifiable intangible assets will result in additional depreciation and amortization expense after the acquisition. The amount of depreciation and amortization will be based upon the assets’ fair values at date of acquisition and the estimated useful lives of the respective assets. Following the acquisition, revenue and operating income are typically affected by a reduction of deferred revenue over its remaining term to reflect estimated fair value of the obligation which includes the estimated cost to deliver and ~~the~~ associated margin.

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

The financial statements of most subsidiaries located outside of the United States (“U.S.”) are measured using the local currency as the functional currency. Assets and liabilities are translated into U.S. dollars at rates of exchange that approximate those at the balance sheet date. Income and expense items are translated into U.S. dollars at average monthly rates of exchange. The resulting translation gains and losses are included as a separate component of “accumulated other comprehensive loss” included in stockholder’s deficit. Gains and losses from transactions in foreign currency are included in the condensed consolidated statements of operations within “other income (expense), net.”

(d) Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Cash equivalents consist primarily of overnight interest bearing deposits.

(e) Revenue Recognition

The Company has ~~various~~five service lines, specifically including: Messaging Services, Managed Services, B2B Software and Services, Data Synchronization, and Custom Outsourcing Services. The Company’s service lines generate revenues from three principal sources, as described in detail below. Regardless of the service line or source, the Company records revenues net of any taxes (e.g., sales, local, value-added) that are collected from customers and remitted to governmental authorities.

Transaction Processing — The Company earns recurring transaction processing revenue from facilitating the exchange of business documents among its customers’ computer systems and those of their trading partners. Such revenues are generally based on a per-transaction fee or monthly minimum charge and are recognized in the period in which the related transactions are processed. Revenue on contracts with monthly, quarterly or annual minimum transaction levels are recognized based on the greater of actual transactions or the specified contract minimum amounts.

Professional Services — The Company earns professional services revenue generally pursuant to time and material contracts and in most instances revenue is recognized as the related services are provided, except when such services are associated with a new project implementation, in which case the associated revenue is deferred over the estimated customer life which approximates the initial contract term as outlined below.

Software Licensing and Maintenance — The Company earns revenue from the licensing of software applications that facilitate and automate the exchange of information among disparate business systems and applications. Such revenue is recognized when the license agreement is signed, the license fee is fixed and determinable, delivery has occurred, and collection is considered probable. Revenue from licensing software that requires significant customization and modification or where services are otherwise considered essential to the functionality of the software are recognized using the percentage of completion method, based on the costs incurred in relation to the total estimated costs of the contract. Revenue from hosted software applications is recognized ratably over the hosting period unless the customer has the contractual right to take possession of the software without significant penalty and it is feasible for the customer to use the software with its own hardware or contract with another party unrelated to the Company to host the software. Software maintenance revenue is deferred and recognized on a straight-line basis over the life of the related maintenance period, which is typically one year.

~~Effective~~In ~~January~~accordance 1,with ~~2011,~~ the ~~Company adopted the~~ provisions of Accounting Standards Update (“ASU”) 2009-13 – Revenue Arrangements with Multiple Deliverables, ~~which~~the ~~requires~~Company ~~companies~~allocates ~~to allocate~~ the overall arrangement consideration to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of vendor specific objective evidence (“VSOE”) or other third-party evidence of the selling price. ~~The~~ ~~Company identified no significant impact on its condensed consolidated results of operations and financial condition of adopting ASU 2009-13.~~ For non-software arrangements with more than one element of revenue with stand-alone value, the Company allocates revenue to each component based on VSOE, or third party evidence of selling price when available, or estimated selling price. VSOE for software maintenance is based on contractual renewal rates. Professional services are separately priced and are based on standard hourly rates determined by the nature of the service and the experience of the professional performing the service.

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

In certain arrangements, the Company sells transaction processing along with implementation and start-up services. The implementation and start-up services typically do not have stand-alone value and, therefore, they do not qualify as separate units of accounting and are not separated. These implementation and start-up services do not have stand-alone value outside of ongoing managed services arrangements, the services are not provided by any other vendor, the Company does not generally sell implementation and start-up services separately, and the results of such services cannot be re-sold by the Company’s customers. Revenues related to implementation and start-up services are recognized over the estimated customer life which, based on the Company’s current estimate, approximates the term of the related transaction processing arrangement. In some arrangements, the Company also sells professional services which do have stand-alone value and can be separated from other elements in the arrangement. The revenue related to these services is recognized as the service is performed.

The Company ~~also~~ defers all direct and relevant costs associated with implementation of long-term customer contracts to the extent such costs can be recovered through guaranteed contract revenues. The unamortized balance of these costs as of ~~September~~March 3031, ~~2012~~2013 and December 31, ~~2011~~2012 was $29,~~116~~159 and $2628,~~445~~681, respectively, and are recorded in either “prepaid expenses and other assets” (see Note 4) or “other assets” (see Note 7) in the condensed consolidated balance sheets, depending on the remaining duration of the underlying contracts.

(f) Receivables and Concentration of Credit Risk

The Company provides products and services and extends credit to numerous customers in the B2B e-commerce and cloud integration service markets. To the extent that the credit quality of customers deteriorates, the Company may have exposure to credit losses. The Company monitors its exposure to credit losses and maintains allowances for anticipated losses. ~~The Company believes it has adequate allowances to cover its exposure.~~

The Company’s allowance for doubtful accounts is determined through specific identification of customers known to be doubtful of collection and an overall evaluation of the aging of its accounts receivable,. ~~and~~The Company considers such factors as the likelihood of collection based upon an evaluation of the customer’s creditworthiness, historical credits issued, the demand and acceptance of our products and services, the customer’s payment history, and other conditions or circumstances that may affect the likelihood of payment, such as political and economic conditions in the country in which the customer is located. The Company believes it has adequate allowances to cover its exposure to potential uncollectible amounts and credits.

(g) Property and Equipment

Property and equipment are stated at cost. Depreciation on computer equipment and software is calculated on straight-line and accelerated methods over the estimated useful lives of the assets of three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. Property and equipment includes costs related to the development of internal-use software.

(h) Capitalized Software Costs

The Company capitalizes software development costs in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-40 – Accounting for the Costs of Computer Software Developed or Obtained for Internal-Use. The Company begins to capitalize costs for software to be used internally when it enters the application development stage. This occurs when the Company completes the preliminary project stage, management authorizes and commits to funding the project, and it is feasible that the project will be completed and the software will perform the intended function. The Company stops capitalizing costs related to a software project when it enters the post implementation and operation stage. If different determinations are made with respect to the state of development that a software project had achieved, then the amount capitalized and the amount charged to expense for that project could differ materially.

Costs capitalized during the application development stage consist of payroll and related costs for employees who are directly associated with, and who devote time directly to, a project to develop software for internal-use. The Company also capitalizes the direct costs of materials and services, which generally includes outside contractors, and interest. The Company does not capitalize any general and administrative or overhead costs or costs incurred during the application development stage related to training or data conversion costs. Costs related to upgrades and enhancements to internal-use software, if those upgrades and enhancements result in additional functionality, are capitalized. If upgrades and enhancements do not result in additional functionality, those costs are expensed as incurred. If different determinations are made with respect to whether upgrades or enhancements to software projects would result in additional functionality, then the amount capitalized and the amount charged to expense for that project could differ materially.

The Company begins to amortize capitalized costs with respect to development projects for internal-use software when the software is ready for use. The capitalized software development costs are generally amortized using the straight-line method over a five-year period. In determining and reassessing the estimated useful life over which the cost incurred for the software should be amortized, the Company considers the effects of obsolescence, technology, competition and other economic factors. If different determinations are made with respect to the estimated useful lives of the software, the amount of amortization charged in a particular period could differ materially.

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

~~The~~During ~~Company~~the ~~begins~~three tomonths ~~amortize~~ended ~~capitalized~~March ~~costs~~31, ~~with~~2013 ~~respect~~and to2012, ~~development projects for internal-use software when~~ the ~~software~~Company ~~is ready for use. The~~ capitalized ~~software development~~ costs ~~are~~related ~~generally~~to ~~amortized using~~ the ~~straight-line~~development ~~method~~of ~~over a five~~internal-~~year~~use ~~period. In determining and reassessing the estimated useful life over which the cost incurred for the~~ software ~~should~~of ~~be amortized~~$7,251 ~~the~~and ~~Company considers the effects of obsolescence~~$6, ~~technology~~067, ~~competition~~respectively. ~~and~~Such ~~other~~amounts ~~economic~~include ~~factors. If~~capitalized ~~different~~interest ~~determinations~~of ~~are~~$336 ~~made~~and ~~with~~$150 ~~respect~~for to the ~~estimated~~three ~~useful~~months ~~lives~~ended ofMarch ~~the software~~31, ~~the~~2013 ~~amount~~and of2012, ~~amortization charged in a particular period could differ materially~~respectively.

~~The~~In ~~Company~~accordance ~~capitalized~~with ~~costs~~FASB ~~related~~ASC to985-20 – Accounting for the ~~development~~Costs of ~~internal-use~~Computer ~~software~~Software ofto $6Be Sold,~~475~~ ~~and $18~~Leased,~~564~~ ~~during~~or Otherwise Marketed, the ~~three~~Company ~~and~~expenses ~~nine~~costs ~~months~~incurred ~~ended~~in ~~September~~the ~~30,~~development ~~2012,~~of ~~respectively,~~software ~~and~~sold ~~$6,305~~externally ~~and~~or ~~$19,404~~developed ~~during~~for ~~the~~license ~~three~~to ~~and~~customers ~~nine~~until ~~months~~technological ~~ended~~feasibility ~~September~~has ~~30,~~been ~~2011,~~established ~~respectively~~under the working model method. ~~Such~~ ~~amounts~~The ~~include~~Company ~~capitalized~~does ~~interest~~not ofcapitalize ~~$291~~these ~~and~~costs ~~$640~~since ~~for~~there ~~the~~is ~~three~~generally ~~and~~a ~~nine~~short ~~months~~period ~~ended~~of ~~September~~time ~~30,~~between ~~2012,~~the ~~respectively,~~date ~~and~~technological ~~$410~~feasibility is achieved and ~~$1,035~~the ~~for~~date when the ~~three~~product ~~and~~is ~~nine~~available ~~months~~for ~~ended~~general ~~September~~release ~~30,~~to ~~2011~~customers, ~~respectively~~thus any costs incurred have not been material to date.

In accordance with FASB ASC 985-20 – Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, the Company expenses costs incurred in the development of software sold externally or developed for license to customers until technological feasibility has been established under the working model method. The Company does not capitalize costs since there is generally a short period of time between the date technological feasibility is achieved and the date when the product is available for general release to customers, thus any costs incurred have not been material to date.

(i)

Goodwill

As of ~~September~~March 3031, ~~2012~~2013 and December 31, ~~2011~~2012, the Company had goodwill in the amount of $~~269~~267,~~082~~829 and $~~268~~269,~~767~~046, respectively. The Company tests goodwill and intangible assets with indefinite useful lives for impairment at least annually or whenever there is a change in events or circumstances which may indicate impairment. ~~The~~ In accordance with ASU 2011-08 – Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment, the Company first assesses various qualitative factors (defined in the guidance) to determine whether it is necessary to perform a quantitative goodwill impairment test. ~~involves~~Should ~~two~~it ~~steps. In~~be ~~the~~necessary ~~first~~to perform the two-step quantitative goodwill impairment test, the Company first compares the carrying value of the reporting unit which holds the goodwill with the fair value of the reporting unit. If the carrying value is less than the fair value, there is no impairment. If the carrying value exceeds the fair value of the reporting unit, ~~step~~an ~~two~~additional test is performed to measure the impairment loss.

InAs ~~September~~of ~~2011~~March 31, 2013, the ~~FASB~~Company ~~issued~~assessed ~~ASU~~the ~~2011-08~~qualitative –factors ~~Intangibles~~and –determined ~~Goodwill~~that ~~and~~goodwill ~~Other~~was ~~(Topic~~not ~~350): Testing~~impaired; ~~Goodwill~~as ~~for~~it ~~Impairment,~~was ~~which~~more islikely ~~intended~~than tonot ~~simplify~~that ~~how~~the anfair ~~entity~~value iswas ~~required~~greater tothan ~~test~~the ~~goodwill~~carrying ~~for~~amount. ~~impairment~~As ~~under~~of ~~ASU~~December ~~2010-28~~31, ~~(issued~~2012, inthe ~~December~~Company ~~2010)~~completed bythe ~~allowing~~required animpairment ~~entity~~testing toand ~~first~~determined ~~assess~~that ~~qualitative~~goodwill ~~factors~~was ~~(which~~not impaired. The Company’s assessment and impairment test are ~~defined~~based inon ~~the~~a ~~new~~single ~~guidance)~~operating tosegment ~~determine~~and ~~whether~~reporting itunit isstructure. ~~necessary~~The tofair ~~perform~~value of the ~~two-step~~reporting ~~quantitative~~unit ~~goodwill~~exceeded ~~impairment~~the ~~test. The~~carrying ~~Company~~value ~~adopted~~at ~~ASU~~March ~~2011-08~~31, on2013 ~~January~~and 1,December ~~2012~~31, ~~as required~~2012.

As of December 31, 2011, the Company completed goodwill impairment testing in accordance with ASU 2010-28 (including performing the required step-two test) and determined that goodwill was not impaired. The Company’s impairment test was based on a single operating segment and reporting unit structure. The fair value of the reporting unit significantly exceeded the carrying value at December 31, 2011. As of September 30, 2012, the Company assessed the qualitative factors (as defined in ASU 2011-08) and determined that goodwill was not impaired; as it was more likely than not that the fair value was greater than the carrying amount.

(j) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of

The Company reviews long-lived assets and ~~certain~~ identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of an asset is not deemed to be recoverable, the impairment to be recognized is the extent by which the carrying amount of the asset exceeds the fair value of the asset less selling costs. Assets to be disposed of are reported at the lower of the carrying amount or fair value less selling costs.

(k) Restructuring

The Company calculates any facility-related costs included in restructuring charges by discounting the net future cash obligation of the existing leases less anticipated rental receipts to be received from existing and potential subleases. This requires significant judgment about the length of time the space will remain vacant, anticipated cost escalators and operating costs associated with the leases, the market rate at which the space will be subleased, and broker fees or other costs necessary to market the space. These judgments are based upon independent market analysis and assessment from experienced real estate advisors. Most of the Company’s vacant space has been sublet with the long-term sublease of the Company’s former corporate headquarters that commenced in 2009. If the Company were to make different determinations with respect to these factors, the amounts of restructuring charges could differ materially.

Restructuring charges also include severance expense (payroll and direct benefits) provided to employees who are involuntarily terminated under the terms of a severance arrangement that has been approved by management, has been communicated to the affected employees, and is not an ongoing benefit arrangement or an individual deferred compensation contract. The Company recognizes the severance liability when all conditions for earning the severance amounts have been fulfilled.

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

(k) Restructuring

The Company calculates the facility charge included in the restructuring charges by discounting the net future cash obligation of the existing leases less anticipated rental receipts to be received from existing and potential subleases. This requires significant judgment about the length of time the space will remain vacant, anticipated cost escalators and operating costs associated with the leases, the market rate at which the space will be subleased, and broker fees or other costs necessary to market the space. These judgments are based upon independent market analysis and assessment from experienced real estate brokers. If the Company were to make different determinations with respect to these factors the amounts of restructuring charges could differ materially, although most of the vacant space has been sublet with the sublease of the Company’s former corporate headquarters.

(l) Contingencies

The Company periodically records the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. These events are called contingencies, and the accounting for these events is prescribed by FASB ASC 450 – Accounting for Contingencies. This standard defines a contingency as an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur. Contingent losses must be accrued if:

information is available that indicates it is probable that the loss has been incurred, given the likelihood of the uncertain future events; and

the amount of the loss can be reasonably estimated.

The accrual of a contingency involves considerable judgment on the part of management. Legal proceedings have elements of uncertainty, and in order to determine the amount of accrued liabilities required, if any, the Company assesses the likelihood of any adverse judgments or outcomes to pending and threatened legal matters, as well as the best estimate of or potential ranges of amounts of probable losses. The Company uses internal expertise and outside ~~experts~~advisors, as necessary, to help estimate the probability that a loss has been incurred and the amount or range of the loss. A determination of the amount of accrued liabilities required for these contingencies is made after analysis of each individual issue. The required accrued liabilities may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy.

(m) Comprehensive Loss

Comprehensive loss consists of net income (loss) adjusted for increases and decreases affecting “accumulated other comprehensive loss” in stockholder’s deficit that are excluded from the determination of net income (loss).

Accumulated other comprehensive loss was comprised of the following:

	September 30, 2012			December 31, 2011
	March 31, 2013			December 31, 2012
Additional minimum pension liability	$	(~~461~~6,788	)	$	(~~461~~6,788	)
Foreign currency translation adjustments		(3,~~521~~619	)		(53,~~747~~294	)
Accumulated other comprehensive loss	$	(310,~~982~~407	)	$	(610,~~208~~082	)

There were no reclassifications out of accumulated other comprehensive loss that impacted net income (loss) during the three months ended March 31, 2013 and 2012, respectively.

(n) Research and Development

Research and development costs are expensed as incurred. Research and development costs are reflected within “cost of revenues” in the condensed consolidated ~~results~~statements of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012~~2013 and ~~2011~~2012.

(o) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates at the time they are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Income tax liabilities are recorded for the impact of positions taken on income tax returns which management believes are not more likely than not to be sustained on tax audit. Interest expense accrued on such unrecognized tax benefits and income tax penalties are recognized through income tax expense.

The effective income tax rate for the three months ended March 31, 2013 and 2012 differs from the federal statutory rate of 35.0% principally as a result of state income taxes, differing rates in foreign jurisdictions, and the effect of expected losses in the U.S. and foreign jurisdictions for which no income tax benefit has been recognized.

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

~~(o)~~The ~~Income~~Company ~~Taxes~~considers the scheduled reversal of deferred tax liabilities, projected future income and tax planning strategies in assessing the realization of deferred tax assets. The Company believes it will achieve profitable operations in future years that will enable recovery of the benefit of its deferred tax assets. However, The Company presently does not have sufficient objective evidence that it is more likely than not that it will realize the benefits from the deferred tax assets and, accordingly, has established a full valuation allowance for its U.S. and selected foreign net deferred tax assets as required by U.S. GAAP.

~~Income~~(p) Fair ~~taxes~~Value are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of ~~existing~~Financial assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates at the time they are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Income tax liabilities are recorded for the impact of positions taken on income tax returns which management believes are not more likely than not to be sustained on tax audit. Interest expense accrued on such unrecognized tax benefits and income tax penalties are recognized through income tax expense.Instruments

The ~~expected~~Company’s ~~effective~~financial ~~income~~instruments ~~tax~~consist ~~rate~~principally ~~for~~of ~~the~~cash ~~three~~ and ~~nine~~cash ~~months~~equivalents, ~~ended~~receivables ~~September~~and 30long-term debt. Generally, ~~2012~~the carrying amounts of current assets and ~~2011~~liabilities ~~differs~~approximate ~~from~~fair ~~the~~value ~~federal~~because ~~statutory~~of ~~rate~~the short-term maturity of ~~35%~~these ~~principally~~instruments. asAt aMarch ~~result~~31, 2013, the Company’s long-term debt was valued at 103.75% of ~~state~~its ~~income~~face ~~taxes~~value, ~~differing~~so ~~rates~~the inCompany ~~foreign~~considered ~~jurisdictions~~the ~~and~~fair ~~the~~value ~~effect~~to ofbe ~~expected~~$814,438 ~~losses~~at inthat date. At December 31, 2012, the UCompany’s long-term debt was valued at 104.S.75% ~~and~~of ~~foreign~~its ~~jurisdictions~~face ~~for~~value, ~~which~~so nothe ~~income~~Company ~~tax~~considered ~~benefit~~the ~~has~~fair ~~been~~value ~~recognized~~to be $822,288 at that date.

(p) Derivative Instruments

Derivative instruments are recognized in the condensed consolidated balance sheets at their fair value and changes in the fair value are recognized in income, unless the derivatives qualify as hedges of future cash flows. For derivatives qualifying as hedges of future cash flows, the effective portion of any changes in fair value is recorded temporarily in equity, and then recognized in income along with the related effects of the hedged items. Any ineffective portion of hedges is reported in income as it occurs.

The Company considered the interest rate swap, which expired and was settled on April 26, 2011, to be included within Level 2 of the fair value hierarchy established by U.S. GAAP, as its fair value is measured primarily utilizing observable market-based inputs.

(q) Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, receivables and long-term debt. Generally, the carrying amounts of current assets and liabilities approximate fair value because of the short-term maturity of these instruments. At September 30, 2012, the Company’s long-term debt was valued at 103.50% of its face value, so the Company considered the fair value to be $812,475 at that date. At December 31, 2011, the Company’s long-term debt was valued at 92.63% of its face value, so the Company considered the fair value to be $727,146 at that date.

The Company considered the long-term debt to be included within Level 2 of the fair value hierarchy established by U.S. GAAP, as its fair value is measured primarily utilizing observable market-based inputs, such as quotes of recent market trades of its debt.

(rq) Stock Option Plans

The GXS Holdings, Inc. Stock Incentive Plan (or “Holdings Plan”) provided for the grant of stock options and certain other types of stock-based compensation awards to employees, directors and consultants of the Company. The Holdings Plan provided for the grant of awards to acquire up to 18,836 shares of GXS Holdings common stock. On June 2, 2010, GXS Holdings acquired Inovis International, Inc. (“Inovis”) in a transaction referred to as the “Inovis Merger” or the “Merger”. Effective with the Inovis Merger, shares reserved and granted under the Holdings Plan were subject to a conversion into shares and grants in GXS Group at a conversion rate of approximately 18 to 1 and remain outstanding with their existing vesting schedules, expiration dates and subject to other terms of the Holdings Plan, which GXS Group assumed upon the Inovis Merger. The conversion reduced the total authorized number of Holdings Plan options that could be awarded from 18,836 shares to 1,055 shares. However, no additional award grants will be made from this plan; therefore the maximum number of plan options in the pool will equal the number of options outstanding at the end of a measurement period.

Following the Inovis Merger, the Company established the 2010 GXS Group, Inc. Long-Term Incentive Plan (“Group LTIP”) in July 2010 that provides for the grant of stock options and certain other types of stock-based compensation awards to employees, directors and consultants of the Company. The Group LTIP, as amended in May 2012, provides for the grant of awards to acquire up to 17,500 shares of GXS Group common stock and all of the Company’s stock option awards subsequent to July 2010 are being granted through the Group LTIP. In June 2012, the Company’s stockholders further amended the Group LTIP to lower the option exercise price from $1.26 per share to $0.81 per share on 8,944 shares previously granted.

Compensation costs relating to share-based payment transactions are recognized in the condensed consolidated statements of operations over the applicable service period based upon the fair value of the award at the grant date. Fair value is determined in accordance with FASB ASC Topic 718 – Accounting for Stock Options and Other Stock-Based Compensation.

~~The GXS Holdings, Inc. Stock Incentive Plan~~ (~~or “Holdings Plan”~~r) Use ~~provides for the grant~~ of stock options and certain other types of stock-based compensation awards to employees, directors and consultants of the Company. The Holdings Plan provided for the grant of awards to acquire up to 18,836 shares of GXS Holdings common stock. Effective with the Inovis Merger in June 2010, shares reserved and granted under the Holdings Plan were subject to a conversion into shares and grants in GXS Group at a conversion rate of approximately 18 to 1 and remain outstanding with their existing vesting schedules, expiration dates and subject to other terms of the Holdings Plan, which GXS Group assumed upon the Merger. The conversion reduced the total authorized number of Holdings Plan options that could be awarded from 18,836 shares to 1,055 shares. However, no additional award grants will be made from this plan; therefore the maximum number of plan options in the pool will equal the number of options outstanding at the end of a measurement period.Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management of the Company to make estimates and assumptions that affect the amounts reported and related disclosures. Additionally, estimates were used when recording the fair value of assets acquired and liabilities assumed in acquisitions. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates.

Significant estimates used in preparing the condensed consolidated financial statements include: recovery of long-lived assets; useful lives of long-lived assets and amortizable intangible assets; valuation of goodwill, deferred tax assets and receivables; and determination of amounts of cost deferrals, tax reserves, deferred tax assets and liabilities, accrued liabilities, and pension liabilities. In addition, estimates are required to recognize revenue arrangements with multiple deliverables or software, and to assess the stage at which software development costs should be capitalized.

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

~~Following the Inovis Merger, the Company established the 2010 GXS Group, Inc. Long-Term Incentive Plan~~ (“Group LTIP”) in July 2010 that provides for the grant of stock options and certain other types of stock-based compensation awards to employees, directors and consultants of the Company. The Group LTIP, as amended in May 2012, provides for the grant of awards to acquire up to 17,500 shares of GXS Group common stock and all of the Company’s stock option awards subsequent to July 2010 are being granted through the Group LTIP. In June 2012, the Company’s stockholders approved an amendment to the Group LTIP to lower the option exercise price from $1.26 per share to $0.81 per share on 8,944 shares previously granted. This amendment resulted in no material changes to stock compensation expense in 2012 to date and none are expected for the remainder of the year.) Reclassifications

~~(s)~~Certain ~~Use~~reclassifications have been made to the condensed consolidated financial statements as of ~~Estimates~~December 31, 2012 and for the three months ended March 31, 2012 to conform to the presentation at March 31, 2013 and for the three months then ended.

~~The~~(t) Recently ~~preparation~~Released ofAccounting condensed consolidated financial statements in conformity with U.S. GAAP requires management of the Company to make estimates and assumptions that affect the amounts reported and related disclosures. Additionally, estimates were used when recording the fair value of assets acquired and liabilities assumed in acquisitions. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates.Standard

~~Significant~~In ~~estimates~~February ~~used~~2013, inthe ~~preparing~~FASB ~~the~~issued ~~condensed~~ASU ~~consolidated~~2013-02 ~~financial~~– ~~statements~~Comprehensive ~~include~~Income (Topic 220): ~~recovery~~ Reporting Amounts Reclassified Out of ~~long-lived~~Accumulated ~~assets;~~Other ~~useful~~Comprehensive ~~lives~~Income. ofThis ~~long-lived~~ASU ~~assets~~requires ~~and~~an ~~amortizable~~entity ~~intangible~~to ~~assets;~~provide ~~valuation~~additional details regarding any amounts reclassified out of ~~goodwill,~~accumulated ~~deferred~~other ~~tax~~comprehensive ~~assets~~income ~~and~~by ~~receivables;~~component, and ~~determination~~present, ofeither ~~amounts~~on the face of ~~cost~~the ~~deferrals~~statement where net income (loss) is presented, ~~tax~~or ~~reserves~~in the notes, ~~deferred~~significant ~~tax~~amounts ~~assets~~reclassified ~~and~~out ~~liabilities,~~of ~~accrued~~accumulated ~~liabilities,~~other ~~and~~comprehensive ~~pension~~income ~~liabilities~~by the respective line items of net income (loss). In ~~addition,~~For ~~estimates~~public ~~are~~entities, ~~required~~the toASU ~~recognize~~is ~~revenue~~effective prospectively for ~~software~~reporting ~~and~~periods ~~other~~after ~~arrangements~~December ~~with~~15, ~~multiple~~2012. ~~deliverables~~The ~~and~~Company tohas ~~assess~~evaluated the ~~stage~~impact atof ~~which~~adopting ~~software~~ASU ~~development~~2013-02 ~~costs~~and ~~should~~concluded bethere ~~capitalized~~is no significant impact on its condensed consolidated financial statements presentation.

(t3) ~~Reclassifications~~Revenue and Receivables

~~Certain~~The ~~reclassifications~~Company ~~have~~operates ~~been made to the condensed consolidated financial statements~~ as ofa ~~December~~single ~~31,~~operating ~~2011~~segment and ~~for~~provides ~~the~~products ~~three~~ and ~~nine~~services ~~months ended September 30, 2011~~ to ~~conform~~its tocustomers around the ~~presentation~~world ~~at September 30~~directly, ~~2012~~through ~~and~~its ~~for~~foreign ~~the~~subsidiaries, ~~three~~ and ~~nine~~indirectly ~~months~~through ~~then ended~~resellers.

(3) Revenues and Receivables

The Company operates as a single operating segment and provides products and services to its business customers around the world, both directly, through its foreign subsidiaries, and indirectly through resellers.

Receivables, net were comprised of the following:

	September 30, 2012			December 31, 2011
	March 31, 2013			December 31, 2012
Trade accounts receivable	$	~~101~~95,~~307~~930		$	~~108~~99,~~289~~575
Unbilled receivables		7,261			5,434
Unbilled trade receivables		8,068			8,407
Other receivables		84,~~441~~933			76,~~827~~150
Subtotal		~~117~~108,~~009~~931			~~121~~114,~~550~~132
Less: allowance for doubtful accounts		(13,~~359~~493	)		(1415,~~751~~038	)
Total receivables, net	$	~~103~~95,~~650~~438		$	~~106~~99,~~799~~094

Unbilled trade receivables represent amounts earned and accrued as receivables from customers prior to the end of the period. Unbilled trade receivables are expected to be billed and collected within twelve months of the respective balance sheet date. Other receivables ~~include~~primarily includes various value -added tax receivables ~~and the indemnification receivable associated with the Interchange tax contingency of $1,944 and $2,116 as of September 30, 2012 and December 31, 2011, respectively~~. ~~See Note 8 for further discussion of the Interchange tax contingency.~~

At(4) ~~September~~Prepaid ~~30,~~Expenses ~~2012, the Company~~ and ~~one~~Other of its large customers are engaged in a commercial dispute concerning certain invoices totaling approximately $2,500 presented by the Company for an on-going project for the period covering December 2010 to September 2012. The parties are actively working to reconcile their differences but it is possible that the Company could settle the dispute by accepting less than the amount previously recognized. However, the Company is unable to estimate the likelihood or amount of a potential loss, if any, and has not accrued for any potential exposure. Assets

Prepaid expenses and other assets (a current asset) were comprised of the following:

	March 31, 2013		December 31, 2012
Deferred direct and relevant costs on implementations of contracts, current	$	11,913	$	11,707
Prepaid expenses		9,964		10,083
Deferred income tax assets, current		4,151		4,925
Other		1,025		1,611
Total	$	27,053	$	28,326

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

(4) Prepaid Expenses and Other Assets

Prepaid expenses and other assets (a current asset) were comprised of the following:

	September 30, 2012		December 31, 2011
Deferred direct and relevant costs on implementations of contracts, current	$	11,550	$	9,085
Prepaid expenses		9,123		13,886
Deferred income tax assets, current		5,570		5,294
Other		1,196		616
Total	$	27,439	$	28,881

(5)	Property and Equipment

Property and equipment, net were comprised of the following:

	September 30, 2012			December 31, 2011
	March 31, 2013			December 31, 2012
Computer equipment and furniture	$	208,444		$	200,542
Computer software	$	355,401		$	347,893
Computer software		355,792			327,388
Computer equipment and furniture		209,879			208,958
Leasehold improvements		1813,~~357~~687			1713,~~533~~832
Gross property and equipment		~~582~~578,~~593~~967			~~545~~570,~~463~~683
Less: accumulated depreciation and amortization		(~~473~~469,~~935~~367	)		(~~440~~461,~~414~~376	)
Property and equipment, net	$	~~108~~109,~~658~~600		$	~~105~~109,~~049~~307

Depreciation and amortization expense related to property and equipment was $98,~~256~~711 and $278,~~555~~874 for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012,~~2013 ~~respectively,~~ and $82012,~~696~~ ~~and $24,143 for the three and nine months ended September 30, 2011,~~ respectively.

(6)	Goodwill and Other Acquired Intangible Assets

The following represents a summary of changes in goodwill for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013:

Balance as of December 31, 2011	$	268,767
Balance as of December 31, 2012	$	269,046
Foreign currency translation		~~315~~(1,217	)
Balance as of September 30, 2012	$	269,082
Balance as of March 31, 2013	$	267,829

Other acquired intangible assets were comprised of the following:

September 30, 2012	Gross Carrying Amount		Accumulated Amortization			Net
March 31, 2013	Gross Carrying Amount		Accumulated Amortization			Net
Amortizable intangible assets:
Customer relationships	$	220,~~652~~323	$	(~~132~~140,~~899~~638	)	$	8779,~~753~~685
Product technology		18,~~507~~394		(45,~~866~~888	)		1312,~~641~~506
Trade names and trademarks		4,368		(2,~~027~~464	)		21,~~341~~904
Other acquired intangible assets		3,~~306~~317		(23,~~963~~109	)		~~343~~208
Subtotal		246,~~833~~402		(~~142~~152,~~755~~099	)		~~104~~94,~~078~~303
Non-amortizable intangible assets:
Trade names and trademarks		1,~~564~~553		––			1,~~564~~553
Total	$	~~248~~247,~~397~~955	$	(~~142~~152,~~755~~099	)	$	~~105~~95,~~642~~856
December 31, 2012	Gross Carrying Amount		Accumulated Amortization			Net
Amortizable intangible assets:
Customer relationships	$	220,583	$	(136,802	)	$	83,781
Product technology		18,503		(5,392	)		13,111
Trade names and trademarks		4,368		(2,246	)		2,122
Other acquired intangible assets		3,294		(3,022	)		272
Subtotal		246,748		(147,462	)		99,286
Non-amortizable intangible assets:
Trade names and trademarks		1,552		––			1,552
Total	$	248,300	$	(147,462	)	$	100,838

The gross carrying amounts of certain intangible assets are impacted by certain balances being denominated in foreign currencies. These balances are translated into U.S. dollars at exchange rates that approximate those at the balance sheet date.

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

December 31, 2011	Gross Carrying Amount		Accumulated Amortization			Net
Amortizable intangible assets:
Customer relationships	$	221,001	$	(120,944	)	$	100,057
Product technology		18,445		(3,273	)		15,172
Trade names and trademarks		4,368		(1,372	)		2,996
Other acquired intangible assets		3,428		(2,833	)		595
Subtotal		247,242		(128,422	)		118,820
Non-amortizable intangible assets:
Trade names and trademarks		1,663		––			1,663
Total	$	248,905	$	(128,422	)	$	120,483

Intangible assets, except for those with an indefinite life (certain trade names and trademarks), are amortized over their estimated useful lives using a method that reflects the pattern in which the economic benefits of the intangible assets are expected to be consumed or on a straight-line basis. Amortization expense related to intangible assets was $4,697 and $4,989 for the three months ended March 31, 2013 and 2012, respectively.

The gross carrying amounts of certain intangible assets are impacted by certain balances being denominated in foreign currencies. These balances are translated into U.S. dollars at the exchange rate in effect at the balance sheet date.

Intangible assets, except for those with an indefinite life, are amortized over their estimated useful lives using a method that reflects the pattern in which the economic benefits of the intangible assets are expected to be consumed or on a straight-line basis. Amortization expense related to intangible assets was $4,825 and $14,739 for the three and nine months ended September 30, 2012, respectively, and $5,230 and $16,022 for the three and nine months ended September 30, 2011, respectively.

(7)	Other Assets

Other assets (a non-current asset) were comprised of the following:

	September 30, 2012		December 31, 2011
	March 31, 2013		December 31, 2012
Deferred direct and relevant costs on implementations of long-term contracts, net	$	17,~~566~~246	$	1716,~~360~~974
Refundable deposits		12,~~913~~535		21,~~709~~914
Other		1,~~450~~329		31,~~043~~215
Total	$	2021,~~929~~110	$	2320,~~112~~103

(8) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were comprised of the following:

	September 30, 2012		December 31, 2011
	March 31, 2013		December 31, 2012
Accrued interest	$	22,~~544~~522	$	3,~~499~~402
Employee compensation and benefits		2117,~~667~~466		1821,~~577~~856
Other non-income taxes accrued		87,~~918~~586		108,~~496~~191
Restructuring		2,773		3,394
Rebates due to stockholders of Interchange, net of discount		3,440		––
Estimated Interchange pre-acquisition tax contingency		1,944		2,116
Restructuring		3,015		3,142
Other		108,~~520~~800		9,~~287~~438
Total	$	6862,~~366~~829	$	4746,~~369~~029

~~When the Company’s wholly owned subsidiary in Brazil GXS Tecnologia da Informação~~ (~~Brasil~~9) ~~Ltda.,~~Other performed due diligence associated with its 2008 acquisition of Interchange Serviços S.A. (“Interchange”), it identified a pre-acquisition tax contingency for which the sellers have provided a full indemnification and which the Company believes can be enforced and recovered if needed. The Company originally accrued an estimated liability of $11,278 upon acquisition and recorded an equal amount as a receivable from the seller, which was classified as an “other receivable” within receivables, net. The amount of the accrued liability and corresponding indemnification receivable are adjusted each period to reflect the current exchange rates and the periodic expiration of the statute of limitations with respect to certain tax years within the contingency. As of September 30, 2012 and December 31, 2011, the remaining estimated liability and corresponding indemnification receivable were $1,944 and $2,116, respectively, and continue to be reflected in both “accrued expenses and other current liabilities” and “other receivables” (see Note 3) in the condensed consolidated balance sheets.Liabilities

Other liabilities (a non-current liability) were comprised of the following:

	March 31, 2013		December 31, 2012
Pension and related benefits	$	26,622	$	26,650
Deferred income – non-current		13,165		13,120
Deferred rent – non-current		10,761		10,757
Rebates due to stockholders of Interchange, net of discount		––		3,407
Restructuring – non-current		190		767
Other		1,370		1,840
Total	$	52,108	$	56,541

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

(9) Other Liabilities

Other liabilities (a non-current liability) were comprised of the following:

	September 30, 2012		December 31, 2011
Pension and related benefits	$	20,015	$	18,524
Deferred income – non-current		14,522		9,840
Deferred rent – non-current		10,722		10,520
Rebates due to stockholders of Interchange, net of discount		3,275		3,082
Restructuring – non-current		1,541		3,186
Other		1,485		1,591
Total	$	51,560	$	46,743

(10)

Debt

Debt was comprised of the following:

	September 30, 2012					December 31, 2011
	March 31, 2013					December 31, 2012
	Book Value			Fair Value		Book Value			Fair Value
Revolving credit facility	$	––		$	––	$	3,000		$	3,000
Senior secured notes	$	785,000		$	814,438	$	785,000		$	822,288
Senior secured notes		785,000			812,475		785,000			727,146
Less: unamortized original issue discount		(8,790	)		––		(9,666	)		––
Less: unamortized original issue discount		(10,507	)		––		(12,932	)		––
Total long-term debt	$	776,210		$	814,438	$	775,334		$	822,288
Total debt		774,493			812,475		775,068			730,146
Less: current maturities of long-term debt		––			––		(3,000	)		(3,000	)
Total long-term debt	$	774,493		$	812,475	$	772,068		$	727,146

The Company had no outstanding borrowings on its revolving credit facility at March 31, 2013 and December 31, 2012, respectively.

Senior Secured Notes

On December 23, 2009, the Company issued $785,000 of senior secured notes (the “Senior Secured Notes”) with an original issue discount of $18,608. The Senior Secured Notes bear interest at an annual rate of 9.75%, with interest payable on June 15 and December 15 each year. The Senior Secured Notes mature on June 15, 2015 and are guaranteed on a senior secured basis by all of the Company’s existing and future wholly-owned domestic subsidiaries and all other domestic subsidiaries that guarantee the Company’s other indebtedness; and in certain circumstances are secured by an interest granted on substantially all of the Company’s properties and assets. The Senior Secured Notes contain covenants that, among other things, restrict the Company’s ability to pay dividends, redeem stock, make certain distributions, payments or investments, incur indebtedness, create liens on the collateral, merge, consolidate or sell assets, and enter into transactions with affiliates.

The common stock of GXS, Inc., the Company’s only direct subsidiary, is collateral for the Company’s ~~9.75%~~ Senior Secured Notes ~~due 2015~~. SEC Rule 3-16 of Regulation S-X (“Rule 3-16”) requires financial statements for each of the registrant’s affiliates whose securities constitute a substantial portion of the collateral for registered securities. The common stock of GXS, Inc. is considered to constitute a substantial portion of the collateral for the registered notes. Accordingly, the financial statements of GXS, Inc. would be required by Rule 3-16. The Company does not believe the GXS, Inc. financial statements would add meaningful disclosure and has not included those financial statements herein, because they are substantially identical to the Company’s financial statements and the total assets, revenues, cost of revenues, operating income, net income (loss) and cash flows of GXS, Inc. are expected to continue to constitute substantially all of the corresponding amounts for the Company and its subsidiaries.

Revolving Credit Facility

On December 23, 2009, the Company entered into a Credit and Guaranty Agreement which provides the Company with a $50,000 revolving credit facility (the “Revolver”). The Revolver is guaranteed by the guarantors that guarantee the Senior Secured Notes and secured by collateral that secures the Senior Secured Notes. The Revolver is used by the Company to, among other things, fund its working capital needs, support its issued letters of credit and for general corporate purposes. The Company’s ability to borrow additional monies in the future under the Revolver is subject to certain conditions, including compliance with certain covenants.

On February 29, 2012, the Revolver was amended. As amended, the Revolver has the following key terms, among others: (i) an expiration date of March 15, 2015; (ii) at the Company’s option, an interest rate at 4.50% above the London Interbank Offered Rate (“LIBOR”), or a rate that is 3.50% above the administrative agent’s “base rate” per annum; (iii) an interest rate of 0.50% per annum on unused Revolver borrowing capacity; (iv) a minimum interest coverage ratio covenant, as defined in the Revolver, of 1.75; and (v) a maximum net leverage ratio covenant, as defined in the Revolver, of 5.75. No other covenants or conditions were changed by the amendment. The Company paid a closing fee of $375 and professional fees of $46 in connection with the amendment which are being deferred and amortized over the new term of the agreement, along with the existing unamortized deferred costs from the original agreement.

As of March 31, 2013, the Company had outstanding letters of credit of $10,939, no outstanding borrowings, and additional available borrowings of $39,061 under the Revolver. Any outstanding borrowings against the Revolver shall be repaid in full on March 15, 2015 and the commitments shall terminate on that date. The Revolver requires the Company to maintain certain financial and non-financial covenants. Noncompliance with any covenant specified in the Revolver would qualify as an event of default whereby the lenders would have rights to call all outstanding borrowings due and payable. At March 31, 2013, the Company was in compliance with all of the Revolver’s financial and non-financial covenants.

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

Revolving Credit Facility

On December 23, 2009, the Company entered into a Credit and Guaranty Agreement which provides the Company with a $50,000 revolving credit facility (“the Revolver”). Prior to the amendment of the Credit and Guaranty Agreement described below, the interest rate for the Revolver was a predetermined amount above the LIBOR, subject to a floor of 2.0%, or at a predetermined amount above the administrative agent’s “base rate”, subject to a floor of 3.0%, at the Company’s option. The Revolver is guaranteed by the guarantors that guarantee the Senior Secured Notes and secured by collateral that secures the Senior Secured Notes. The Revolver is used by the Company to, among other things, fund its working capital needs, support its letters of credit and for general corporate purposes. The Company’s ability to borrow additional monies in the future under the Revolver is subject to certain conditions, including compliance with certain covenants.

On February 29, 2012, the Credit and Guaranty Agreement was amended as follows: (i) the expiration date of the Revolver was extended from December 23, 2012 to March 15, 2015; (ii) the minimum interest rate “floor” associated with the “base rate” and LIBOR was eliminated; (iii) the applicable margin was reduced with respect to Eurodollar rate loans to 4.50% per annum and with respect to “base rate” loans to 3.50% per annum; (iv) the revolving commitment fee percentage was lowered to 0.50% per annum; and (v) the net leverage ratio covenant was increased to a maximum of 5.75:1 commencing with the fiscal quarter ending March 31, 2012 and for each fiscal quarter ending thereafter. All other covenants and conditions are unchanged. The Company paid a closing fee of $375 and professional fees of $46 in connection with this amendment which are being deferred and amortized over the new term of the agreement, along with the existing unamortized deferred costs from the original agreement.

As of September 30, 2012, the Company had outstanding letters of credit of $11,661, no outstanding borrowings, and additional available borrowings of $38,339 under the Revolver. Any outstanding borrowings against the Revolver shall be repaid in full on March 15, 2015 and the commitments shall terminate on that date. The Revolver requires the Company to maintain certain financial and nonfinancial covenants. Noncompliance with any covenant specified in the Credit and Guaranty Agreement would qualify as an event of default whereby the lenders would have rights to call all outstanding borrowings due and payable. At September 30, 2012, the Company was in compliance with all financial and non-financial covenants.

Other Information

The Company expects that cash flows from foreign operations will be required to meet its domestic debt service requirements. There is no assurance that the foreign subsidiaries will generate sufficient cash flow or that the laws in foreign jurisdictions will not change to limit the Company’s ability to repatriate these cash flows or increase the tax burden on the collections. However, the Company has not had, nor does it have any knowledge of, any such limitations currently, nor in the near-term that could impact its ability to meet its operating requirements over the next twelve months.

Deferred financing costs are being amortized over the life of the debt using ~~a method that approximates~~ the effective interest method. Amortization expense related to the deferred financing costs on the Senior Secured Notes and Revolver was $1,~~121~~123 and $31,~~331~~091 for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012,~~2013 ~~respectively,~~ and $12012,~~073~~ ~~and $3,172 for the three and nine months ended September 30, 2011,~~ respectively.

(11) ~~Financial~~Restructuring ~~Instruments~~Charges

~~Until~~During ~~April~~the ~~2011~~past several years, the Company ~~had~~has anundertaken ~~interest rate swap agreement with~~ a ~~commercial~~series ~~bank with a notional amount~~ of ~~$255~~restructuring activities,~~000. The~~ ~~interest~~which ~~rate~~included ~~swap~~closing ~~agreement~~or ~~expired~~consolidating oncertain ~~April~~office ~~26,~~facilities ~~2011~~ and ~~was~~terminating ~~settled with the commercial bank with a final payment of $2~~employees,~~318~~ ~~having~~in ~~been~~order ~~made~~to onreduce ~~that~~expenses ~~date. The change~~ in ~~fair~~response ~~value~~to ofchanging ~~the~~business ~~interest~~requirements. ~~rate~~The ~~swap~~restructuring ofcharges ~~$4,683~~reflect ~~for~~ the ~~period~~total ~~from~~estimated ~~January~~net 1,costs ~~2011~~of ~~until~~these ~~the~~activities ~~settlement~~ and ~~final~~current ~~payment~~period inadjustments ~~April~~of ~~2011~~revised ~~was~~estimates ~~recorded~~associated aswith athese ~~reduction~~restructuring ~~to interest expense for the nine months ended September 30, 2011~~plans.

During the three months ended March 31, 2013, the Company incurred approximately $78 in restructuring charges, which included charges associated with the further consolidation of office space and the involuntary termination of four employees. These charges are recorded within “general and administrative” expenses in the condensed consolidated statements of operations for the three months ended March 31, 2013 and 2012.

The restructuring accrual amounts recorded are net of amounts the Company expects to receive from subleasing vacated space, primarily at its previous corporate headquarters through April 2014, when the underlying lease obligation ends. The facility charge was determined by discounting the net future cash obligation of the existing lease less anticipated rental receipts to be received from existing and potential subleases. As of March 31, 2013, approximately $2,895 of the facilities restructuring obligations are associated with the Company’s previous global headquarters. The Company relocated to its current global headquarters facility in March 2010.

The changes in the Company’s restructuring accrual for the three months ended March 31, 2013 are as follows:

	Severance			Facilities			Total

Balance as of December 31, 2012	$	147		$	3,762		$	3,909
Restructuring charges		161			(83	)		78
Payments and other adjustments		(89	)		(693	)		(782	)
Balance as of March 31, 2013	$	219		$	2,986		$	3,205

The current portion of the above obligations totaled $3,015 and $3,142 at March 31, 2013 and December 31, 2012, respectively, and are included in “accrued expenses and other current liabilities” on the condensed consolidated balance sheets (see Note 8). The long-term portion of the above obligations totaled $190 and $767 at March 31, 2013 and December 31, 2012, respectively, and are included in “other liabilities” on the condensed consolidated balance sheets (see Note 9).

(12) Contingencies

The Company is subject to various legal proceedings and claims in the United States and other foreign jurisdictions, which arise in the ordinary course of its business, none of which management believes are likely to have a material adverse effect on the Company’s condensed consolidated financial position or results of operations.

In March 2013, the Company settled a patent infringement allegation made in 2006 by a third party against certain customers of one of Inovis’ software technology products for a nominal amount. The settlement of this previously disclosed matter did not have a material impact on the Company’s condensed consolidated financial position or results of operations.

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

A bank guarantee totaling $3,325 was made in May 2012 for a disputed tax matter in Brazil by the Company’s subsidiary, GXS Tecnologia da Informacao (12Brasil) ~~Restructuring~~Ltda. ~~Charges~~(“GXS Brazil”), in connection with GXS Brazil’s judicial appeal of a tax claim by the municipality of Sao Paulo, Brazil in the approximate amount of $2,500 as of March 31, 2013. The bank guarantee is collateralized by a deposit of cash with the issuing bank. In April 2013, GXS Brazil made an additional deposit of $353 to the bank guarantee. The Company may replace the bank guarantee with a letter of credit, likely under the Revolver, upon negotiation of commercially acceptable terms and conditions, if any, which would result in a return of the cash deposit. The Company can terminate the bank guarantee or replace the cash with a letter of credit at its option at any time and, therefore, have unrestricted access to the cash. However, terminating the bank guarantee without replacing it with a letter of credit would be expected to have detrimental legal and tax consequences that could prevent it from conducting business as usual in Brazil. The Company believes that the position of the Brazilian tax authorities is not consistent with the relevant facts. However, there can be no assurance that the Company will ultimately prevail and it is likely that the bank guarantee and supporting cash collateral, or the substituted letter of credit, could remain in place for several years while GXS Brazil pursues the appeal of the tax claim in the courts. While based on information available on the case and other similar matters provided by local counsel, the Company believes the facts support its position that an unfavorable outcome is not probable and no tax is owed, the ultimate outcome of this matter could result in a loss of up to the claim amount discussed above plus any future interest or penalties that may accrue.

~~During~~The Company’s Indian subsidiary, GXS India Technology Centre Private Limited (“GXS India”), is subject to potential assessments by Indian tax authorities in the ~~past~~district ~~several~~of ~~years~~Bangalore. Both U.S. and Indian transfer pricing regulations require that any international transaction involving associated enterprises be at arms-length prices. Accordingly, the Company ~~has~~determines ~~undertaken~~the apricing ~~series~~for such transactions on the basis of ~~restructuring~~detailed ~~activities~~functional and economic analysis involving benchmarking against similar transactions among entities that are not under common control. If the applicable tax authorities determine that the transfer price applied was not appropriate, ~~which~~the ~~included~~Company ~~closing~~may orincur ~~consolidating~~an ~~certain~~increased ~~office~~tax ~~facilities~~liability, including accrued interest and ~~terminating~~penalties. ~~employees,~~GXS inIndia ~~order~~has received assessment orders from the Indian tax authorities alleging that the transfer price applied to ~~reduce~~intercompany ~~expenses~~transactions inwas ~~response~~not appropriate. Based on advice from its tax advisors, the Company believes that the facts the Indian tax authorities are using to ~~changing~~support ~~business~~their ~~requirements~~assessment are incorrect. The ~~restructuring~~Company ~~charges~~has ~~reflect~~started appeal procedures and anticipates an eventual settlement with the ~~total~~Indian ~~estimated~~tax ~~net~~authorities. ~~costs~~The ofCompany ~~these~~has ~~activities~~accrued ~~and~~$1,494 ~~current~~to ~~period~~cover ~~adjustments~~its ofanticipated ~~revised~~financial ~~estimates~~exposure ~~associated~~in ~~with~~this matter. There can be no assurance that appeals will be successful or that these ~~restructuring~~appeals ~~plans~~will be finally resolved in the near future. There is a possibility that the Company may receive similar orders for other years until the above disputes are resolved.

During the ~~three~~third quarter of 2012, the Company was notified by the landlord of one of its leased offices in the U.K. (the “Guildford office”) that the landlord was objecting to the Company’s written notice (the “Notice”) given in the first quarter of 2012 to allow the Company to terminate the Guildford office lease in October 2012. The lease termination provision allowed the Company to cease all rights and ~~nine~~obligations ~~months~~of ~~ended~~the ~~September~~lease ~~30,~~in October 2012, instead of the ~~Company~~October ~~recorded~~2017 ~~restructuring~~scheduled ~~charges~~lease end date provided for in the lease. The Guildford office was one of ~~approximately~~the ~~$402~~office ~~and~~locations $1closed,~~360,~~ ~~respectively~~as further described in Note 11 – Restructuring Charges. If the Notice is determined to be invalid, ~~which~~the ~~included~~Company ~~charges~~would ~~associated~~be ~~with~~subject to paying the ~~further~~facility ~~consolidation~~costs of the Guildford office ~~space~~through October 2017. The Company is contesting the landlord’s assertion that the termination notice was invalid, and ~~involuntary~~is currently assessing what legal rights it has while engaging in discussions with the landlord and ascertaining the potential for mitigating its obligations through subleasing the Guildford office. If the Company is unsuccessful in its contention that the lease termination is valid, it is possible that it could incur a loss of 6up ~~and~~to 22approximately ~~employees~~$1,000. ~~respectively~~A loss, if any, would be recorded as a “restructuring charge.” However, the Company has concluded that a loss is not probable at this time and has not accrued for any potential exposure.

~~The~~At ~~restructuring~~March ~~accrual~~31, ~~amounts~~2013, ~~recorded~~the ~~are~~State ~~net~~ of ~~amounts~~Michigan ~~the~~is ~~Company~~conducting ~~expects~~an toaudit ~~receive~~of ~~from~~certain ~~subleasing~~tax ~~vacated~~returns ~~space,~~for ~~primarily~~seller’s atuse ~~its~~tax, ~~previous~~and ~~corporate~~single ~~headquarters~~business ~~through~~tax, ~~April~~filed ~~2014. The~~by ~~facility~~Inovis ~~charge~~for ~~was~~various ~~determined~~tax byfiling ~~discounting~~periods ~~the~~from ~~net~~2004 ~~future~~through ~~cash~~2009. ~~obligation~~Although ofpreliminary ~~the~~audit ~~existing~~determinations ~~lease~~have ~~less~~been ~~anticipated~~received ~~rental~~from ~~receipts~~the toState beof ~~received~~Michigan ~~from~~for ~~existing~~a ~~and~~total ~~potential~~alleged ~~subleases. As~~liability of ~~September~~approximately 30$800, ~~2012,~~including ~~approximately~~penalties $3and interest,~~687~~ of the ~~facilities~~Company ~~restructuring~~is ~~obligations~~contesting ~~are~~such ~~associated~~preliminary ~~with~~determinations ~~the~~and ~~Company’s~~at ~~previous~~this ~~global~~time ~~headquarters. The~~has ~~Company~~concluded ~~relocated~~that toa ~~its~~loss ~~current~~is ~~global~~not ~~headquarters~~probable ~~facility~~and therefore has not accrued for any potential exposure in ~~March~~these ~~2010~~matters.

The ~~changes~~Company is also subject to income and other taxes in the ~~restructuring~~United ~~accrual~~States ~~for~~and other foreign jurisdictions and is regularly under audit by tax authorities. Although the ~~nine~~Company ~~months~~believes ~~ended~~its ~~September~~tax 30estimates are reasonable, ~~2012~~the ~~are~~final determination of any tax audits and related litigation or other proceedings could be materially different than that which is reflected in the Company’s tax provisions and accruals. In certain foreign jurisdictions, the Company may be required to place on deposit or provide a bank guarantee for amounts claimed by tax authorities while it challenges such amounts. Should additional taxes be assessed as ~~follows:~~a result of an audit or following an unsuccessful challenge by the Company through litigation, it could have a material effect on the Company’s condensed consolidated financial position and results of operations in the period or periods for which that determination is made.

	Severance			Facilities			Total
Balance as of December 31, 2011	$	488		$	6,092		$	6,580
Restructuring charges		890			470			1,360
Payments and other adjustments		(1,154	)		(2,472	)		(3,626	)
Balance as of September 30, 2012	$	224		$	4,090		$	4,314

The current portion of the above obligations totaled $2,773 and $3,394 at September 30, 2012 and December 31, 2011, respectively, and are included in “accrued expenses and other current liabilities” on the condensed consolidated balance sheets (see Note 8). The long-term portion of the above obligations totaled $1,541 and $3,186 at September 30, 2012 and December 31, 2011, respectively, and are included in “other liabilities” on the condensed consolidated balance sheets (see Note 9).

(13) Contingencies

The Company is subject to various legal proceedings and claims in the U.S. and other foreign jurisdictions, which arise in the ordinary course of its business, none of which management believes are likely to have a material adverse effect on the Company’s condensed consolidated financial position or results of operations.

In 2006, Inovis became aware of patent infringement allegations by a third party against certain customers of one of Inovis’ software technology products. In July 2007, Inovis filed a complaint for declaratory judgment against the third party in the U.S. District Court of Delaware, seeking a judgment and declaration that neither Inovis nor any of its customers have infringed on the patent at issue. Inovis filed a Request for Reexamination of such patent with the U.S. Patent and Trademark Office (“the USPTO”), which was accepted in May 2008, resulting in the amendment and/or cancellation of certain of the patent claims. In September 2009, the USPTO granted a second Request for Reexamination of the patent filed by Inovis, finding a substantial new question of patentability with respect to all claims. In March 2010, the USPTO issued an initial ruling rejecting all of the claims in the patent, in response to which the patent holder filed amended claims. In December 2010, the USPTO issued a final ruling cancelling certain of the patent claims and leaving only one amended claim and its dependent claims. The litigation is currently stayed, but may resume later in 2012, or in 2013. Although the Company believes that the third party’s patent infringement allegations are without merit, there can be no assurance that the Company will prevail in the litigation. An amount of potential loss, if any, cannot be determined at this time.

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements ~~(Unaudited)~~

(In thousands, except per share amounts)

The Company is also subject to income and other taxes in the U.S. and other foreign jurisdictions and is regularly under audit by tax authorities. Although the Company believes its tax estimates are reasonable, the final determination of any tax audits and related litigation or other proceedings could be materially different than that which is reflected in the Company’s tax provisions and accruals. In certain foreign jurisdictions, the Company may be required to place on deposit or provide a bank guarantee for amounts claimed by tax authorities while it challenges such amounts. Should additional taxes be assessed as a result of an audit or following an unsuccessful challenge by the Company through litigation, it could have a material effect on the Company’s financial position and results of operations in the period or periods for which that determination is made. A bank guarantee totaling $3,325 was made in May 2012 for a disputed tax matter in Brazil by the Company’s subsidiary, GXS Tecnologia da Informacao (~~Brasil~~13) Related ~~Ltda.~~Party (“GXS Brazil”), in connection with GXS Brazil’s judicial appeal of a tax claim by the municipality of Sao Paulo, Brazil in the approximate amount of $2,500 as of September 30, 2012. The bank guarantee is collateralized by a deposit of cash with the issuing bank. The Company intends to replace the bank guarantee with a letter of credit under the Revolver in the near future upon negotiation of commercially acceptable terms and conditions, which would result in a return of the cash deposit. The Company can terminate the bank guarantee at its option at any time and, therefore, have unrestricted access to the cash. However, terminating the bank guarantee would be expected to have detrimental legal and tax consequences that could prevent it from conducting business as usual in Brazil. The Company believes that the position of the Brazilian tax authorities is not consistent with the relevant facts. However, there can be no assurance that the Company will ultimately prevail and it is likely that the bank guarantee and supporting cash collateral, or the substituted letter of credit, could remain in place for several years while GXS Brazil pursues the appeal of the tax claim in the courts. While based on information available on the case and other similar matters provided by local counsel, the Company believes the facts support its position that an unfavorable outcome is not probable and no tax is owed, the ultimate outcome of this matter could result in a loss of up to the claim amount discussed above plus any future interest or penalties that may accrue.Transactions

~~The~~In ~~Company’s~~conjunction ~~Indian~~with ~~subsidiary,~~the ~~GXS~~Inovis ~~India~~Merger ~~Technology~~in ~~Centre~~June ~~Private Limited (“GXS India”)~~2010, ~~is subject to potential assessments by Indian tax authorities in~~ the ~~district~~Company ofentered ~~Bangalore. U.S.~~into ~~and~~a ~~Indian~~new ~~transfer~~management ~~pricing~~agreement ~~regulations~~pursuant ~~require~~to ~~that~~which ~~any international transaction involving associated enterprises be at arms-length prices. Accordingly,~~ the Company ~~determines~~agreed ~~the~~to ~~pricing~~pay ~~for~~in ~~such~~the ~~transactions~~aggregate onan ~~the~~annual ~~basis~~fee of ~~detailed~~$4,000 ~~functional~~to ~~and~~Francisco ~~economic~~Partners ~~analysis~~and ~~involving~~certain ~~benchmarking~~former ~~against~~stockholders ~~similar~~of ~~transactions~~Inovis, ~~among~~Golden ~~entities~~Gate ~~that~~Capital ~~are~~(“Golden ~~not~~Gate”) ~~under~~and ~~common~~Cerberus ~~control. If~~Partners ~~the~~(“Cerberus”), ~~applicable~~in ~~tax~~exchange ~~authorities~~for ~~determine~~financial ~~that~~advisory ~~the~~and ~~transfer~~consulting ~~price~~services ~~applied was not appropriate,~~ (the ~~Company~~“Management ~~may~~Agreement”). ~~incur~~The anManagement ~~increased~~Agreement ~~tax liability, including accrued interest and penalties. GXS India~~ has ~~received~~a ~~assessment~~term ~~orders~~of ~~from~~ten ~~the~~years ~~Indian~~and ~~tax authorities alleging that~~ the ~~transfer~~annual ~~price~~fee ~~applied~~is allocated to ~~intercompany~~Francisco ~~transactions was not appropriate. Based on advice from its tax advisors~~Partners, ~~the~~Golden ~~Company~~Gate ~~believes~~and ~~that~~Cerberus ~~the~~in ~~facts~~ the ~~Indian~~annual ~~tax~~amounts ~~authorities~~of ~~are~~$2,868, ~~using~~$566, toand ~~support~~$566, ~~their assessment are incorrect~~respectively. The ~~Company~~Management ~~has~~Agreement ~~started~~provides ~~appeal~~for ~~procedures and anticipates~~ a ~~settlement~~re-calculation ~~with~~of the ~~tax~~annual ~~authorities. The~~fee ~~Company~~allocation ~~has~~upon ~~accrued~~changes ~~$1,494 to cover its anticipated financial exposure~~ in ~~this~~the ~~matter. There~~stock ~~can~~ownership bepercentages noof ~~assurance~~Francisco ~~that~~Partners, ~~appeals~~Golden ~~will~~Gate beand ~~successful~~Cerberus, orif ~~that~~any. ~~these~~Changes ~~appeals~~in ~~will~~stock beownership ~~finally~~percentages ~~resolved~~have inbeen ~~the~~nominal ~~near~~to ~~future. There~~date isand ~~a possibility that~~ the ~~Company~~allocation ~~may~~methodology ~~receive~~has ~~similar~~not ~~orders~~been ~~for other years until the above disputes are resolved~~changed.

InThe ~~the~~expense ~~third~~accrued ~~quarter~~for ofin ~~2012,~~each ~~the Company was notified by the landlord~~ of ~~one of its leased offices (~~the ~~“Guildford~~three ~~office”)~~month inperiods ~~the~~ended ~~United~~March ~~Kingdom~~31, ~~(“U.K.”)~~2013 ~~that~~and ~~the~~2012 ~~landlord~~ was ~~objecting~~$1,000. toThe ~~the~~ Company’s ~~written~~made ~~notice~~aggregate ~~(the~~management ~~“Notice”)~~fee ~~given~~payments ~~in the first quarter~~ of ~~2012~~$3,415 toduring ~~allow~~ the ~~Company~~three tomonths ~~break~~ended ~~the~~March ~~Guildford~~31, ~~office~~2013 ~~lease in October 2012. The lease break provision allowed the Company to cease all rights~~ and ~~obligations~~no ofsuch ~~the~~management ~~lease~~fee inpayments ~~October~~were ~~2012,~~made ~~instead~~during of the ~~October~~three ~~2017~~months ~~scheduled~~ended ~~lease~~March ~~end~~31, ~~provided for in the lease~~2012. ~~The~~ ~~Guildford~~As ~~office was one~~ of ~~the~~March ~~office~~31, ~~locations~~2013 ~~closed~~and asDecember ~~further~~31, ~~described~~2012, ~~in Note 12 – Restructuring Charges. If~~ the ~~Notice~~Company isowed ~~determined~~an toaggregate beof ~~invalid~~$1,142 ~~the~~and ~~Company~~$3,557, ~~would~~respectively, befor ~~subject~~unpaid tomanagement ~~paying~~fees ~~the~~earned ~~facility~~under ~~costs of~~ the ~~Guildford~~Management ~~office~~Agreement through ~~October~~those ~~2017~~dates. ~~The~~ ~~Company~~These isunpaid ~~contesting~~fees ~~the~~are ~~landlord’s~~included ~~assertion that the break notice was invalid, and is currently assessing what legal rights it has while engaging~~ in ~~discussions~~“accrued ~~with~~expenses ~~the landlord~~ and ~~ascertaining~~other ~~the~~current ~~potential~~liabilities” ~~for mitigating its obligations through subleasing the Guildford office. If the Company is unsuccessful~~ in ~~its contention that~~ the ~~lease~~condensed ~~break~~consolidated isbalance ~~valid,~~sheets itas ~~is possible that it could incur a loss~~ of ~~up to $1,000. A loss, if any, would be recorded as a “restructuring charge”. However,~~ the ~~Company~~respective ~~has concluded that a loss is not probable at this time and has not accrued for any potential exposure~~dates.

(14) Supplemental Condensed Consolidated Financial Information

The Senior Secured Notes are guaranteed by each of the Company’s U.S. subsidiaries (the “Subsidiary Guarantors”). The guarantees are full, unconditional and joint and several. The Subsidiary Guarantors are each wholly-owned by the Company, either directly or indirectly. The ability of the Company’s subsidiaries to make cash distributions and loans to the Company and its Subsidiary Guarantors is not expected to be significantly restricted. The following supplemental financial information sets forth, on a consolidating basis, balance sheets, statements of operations and comprehensive income (loss), and statements of cash flows for the Company, its Subsidiary Guarantors and the Company’s non-guarantor subsidiaries. (Also see Note 10 for further discussion of Rule 3-16 and the financial statements of GXS, Inc., the Company’s only direct subsidiary and a guarantor.)

GXS WORLDWIDE, INC. AND SUBSIDIARIES

~~Notes to the~~ Condensed ~~Consolidated~~Consolidating ~~Financial~~Balance ~~Statements (Unaudited)~~Sheets

~~(In~~March ~~thousands~~31, ~~except per share amounts)~~2013

(~~14) Related~~In ~~Party Transactions~~thousands)

In conjunction with the Inovis Merger on June 2, 2010, the Company entered into an amended management agreement pursuant to which the Company agreed to pay in the aggregate an annual fee of $4,000 to Francisco Partners, the controlling shareholder of GXS Holdings, and certain former stockholders of Inovis, Golden Gate Capital (“Golden Gate”) and Cerberus Partners (“Cerberus”), in exchange for financial advisory and consulting services (the “Management Agreement”). The Management Agreement has a term of ten years and the annual fee is allocated to Francisco Partners, Golden Gate and Cerberus in the annual amounts of $2,868, $566, and $566, respectively.

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	––		$	28,635		$	20,595		$	––		$	49,230
Receivables, net		––			55,597			39,841			––			95,438
Prepaid expenses and other assets		153			16,230			10,670			––			27,053
Advances to subsidiaries		––			689,925			102,823			(792,748	)		––
Total current assets		153			790,387			173,929			(792,748	)		171,721

Investments in subsidiaries		503,602			(1,943	)		––			(501,659	)		––
Property and equipment, net		––			100,961			8,639			––			109,600
Goodwill		––			242,257			25,572			––			267,829
Intangible assets, net		––			85,872			9,984			––			95,856
Deferred financing costs		9,865			––			––			––			9,865
Other noncurrent assets		––			8,994			12,116			––			21,110

Total Assets	$	513,620		$	1,226,528		$	230,240		$	(1,294,407	)	$	675,981

Liabilities and Stockholder’s Equity (Deficit)
Current liabilities:
Trade payables	$	––		$	11,966		$	4,936		$	––		$	16,902
Other current liabilities		22,523			46,726			35,900			––			105,149
Advances from affiliates		––			627,762			164,986			(792,748	)		––
Total current liabilities		22,523			686,454			205,822			(792,748	)		122,051

Long-term debt less current maturities		776,210			––			––			––			776,210
Other liabilities		––			36,472			26,030			––			62,502
Total liabilities		798,733			722,926			231,852			(792,748	)		960,763
Stockholder’s equity (deficit):
Stockholder’s equity (deficit) GXS Worldwide, Inc.		(285,113	)		503,602			(1,943	)		(501,659	)		(285,113	)
Non-controlling interest		––			––			331			––			331
Total stockholder’s equity (deficit)		(285,113	)		503,602			(1,612	)		(501,659	)		(284,782	)

Total Liabilities and Stockholder’s Equity (Deficit)	$	513,620		$	1,226,528		$	230,240		$	(1,294,407	)	$	675,981

The expense accrued for in each of the three month periods ended September 30, 2012 and 2011 was $1,000 and the expense accrued for in each of the nine months periods ended September 30, 2012 and 2011 was $3,000. As of September 30, 2012 and December 31, 2011, the Company owed an aggregate of $2,557 and $1,415, respectively, for unpaid management fees earned under the Management Agreement through those dates. These unpaid fees are included in “accrued expenses and other current liabilities” in the condensed consolidated balance sheets as of the respective dates.

In November 2011, the Company entered into an agreement with a director of the Company to provide consulting services for operational and technology reviews and assessments, as requested by the Company. The Company considered the director’s experience as a former chief information officer of several public companies to be invaluable in providing useful analysis and feedback. The agreement ended on February 28, 2012; therefore, no expenses for services under this agreement were recorded during the three months ended September 30, 2012. During the nine months ended September 30, 2012, the Company recorded $54 for services provided and expenses incurred under this agreement.

(15) Supplemental Condensed Consolidated Financial Information

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidating Balance Sheets

December 31, ~~2011~~2012

(In thousands)

Parent

Guarantors

Non-Guarantors

Eliminations

Consolidated

Assets

Current assets:

Cash and cash equivalents

––

214,~~836~~854

1020,~~132~~176

––

1235,~~968~~030

Receivables, net

––

5753,~~294~~699

4945,~~505~~395

––

~~106~~99,~~799~~094

Prepaid expenses and other assets

––152

1617,~~887~~292

1110,~~994~~882

––

28,~~881~~326

Advances to subsidiaries

––

~~644~~687,~~162~~956

81104,~~680~~109

(~~725~~792,~~842~~065

)

––

Total current assets

––152

~~721~~773,~~179~~801

~~153~~180,~~311~~562

(~~725~~792,~~842~~065

)

~~148~~162,~~648~~450

Investments in subsidiaries

~~499~~489,~~003~~808

183,~~098~~222

––

(~~517~~493,~~101~~030

)

––

Property and equipment, net

––

97100,~~204~~695

78,~~845~~612

––

~~105~~109,~~049~~307

Goodwill

––

242,~~198~~758

26,~~569~~288

––

~~268~~269,~~767~~046

Intangible assets, net

––

~~106~~89,~~404~~856

1410,~~079~~982

––

~~120~~100,~~483~~838

Deferred financing costs

1510,~~018~~988

––

1510,~~018~~988

Other noncurrent assets

––

139,~~081~~051

1011,~~031~~052

––

2320,~~112~~103

Total Assets

~~514~~500,~~021~~948

1,~~198~~219,~~164~~383

~~211~~237,~~835~~496

(1,~~242~~285,~~943~~095

)

~~681~~672,~~077~~732

Liabilities and Stockholder’s Equity (Deficit)

Current liabilities:

Current maturities of long-term debt

3,000

––

3,000

Trade payables

––

14,453

5,572

––

20,025

Trade payables

13,910

5,669

––

19,640

Other current liabilities

3,402

49,398

34,721

––

87,521

Other current liabilities

3,500

50,165

40,326

––

93,991

Advances from affiliates

––

628,601

163,464

(792,065

)

––

Advances from affiliates

––

602,517

123,325

(725,842

)

––

Total current liabilities

3,402

692,452

203,757

(792,065

)

107,546

Total current liabilities

6,561

666,592

169,320

(725,842

)

116,631

Long-term debt less current maturities

775,334

––

775,334

Long-term debt less current maturities

772,068

––

772,068

Other liabilities

––

37,123

30,171

––

67,294

Other liabilities

––

32,569

24,135

––

56,704

Total liabilities

778,736

729,575

233,928

(792,065

)

950,174

Total liabilities

778,629

699,161

193,455

(725,842

)

945,403

Stockholder’s equity (deficit):

Stockholder’s equity (deficit) GXS Worldwide, Inc.

(~~264~~277,~~608~~788

)

~~499~~489,~~003~~808

183,~~098~~222

(~~517~~493,~~101~~030

)

(~~264~~277,~~608~~788

)

Non-controlling interest

––

~~282~~346

––

~~282~~346

Total stockholder’s equity (deficit)

(~~264~~277,~~608~~788

)

~~499~~489,~~003~~808

183,~~380~~568

(~~517~~493,~~101~~030

)

(~~264~~277,~~326~~442

)

Total Liabilities and Stockholder’s Equity (Deficit)

~~514~~500,~~021~~948

1,~~198~~219,~~164~~383

~~211~~237,~~835~~496

(1,~~242~~285,~~943~~095

)

~~681~~672,~~077~~732

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidating ~~Balance~~Statements ~~Sheets~~of Operations and Comprehensive Income (Loss)

~~September~~Three 30Months Ended March 31, ~~2012~~2013

(In thousands)

(Unaudited)

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated

Revenues	$	––		$	101,196		$	54,827		$	(37,277	)	$	118,746

Costs and operating expenses		––			80,587			58,313			(37,277	)		101,623
Operating income (loss)		––			20,609			(3,486	)		––			17,123
Other income (expense), net		(21,369	)		1,250			(3,475	)		––			(23,594	)
Income (loss) before income taxes		(21,369	)		21,859			(6,961	)		––			(6,471	)
Income tax expense		––			455			379			––			834
Income (loss) before equity in income (loss) of subsidiaries		(21,369	)		21,404			(7,340	)		––			(7,305	)
Equity in income (loss) of subsidiaries		14,064			(7,340	)		––			(6,724	)		––
Net income (loss)		(7,305	)		14,064			(7,340	)		(6,724	)		(7,305	)
Foreign currency translation adjustments		––			––			(325	)		––			(325	)
Comprehensive income (loss)		(7,305	)		14,064			(7,665	)		(6,724	)		(7,630	)
Less: Comprehensive loss attributable to non-controlling interest		––			––			(15	)		––			(15	)
Comprehensive income (loss) attributable to GXS Worldwide, Inc.	$	(7,305	)	$	14,064		$	(7,650	)	$	(6,724	)	$	(7,615	)

	Parent			Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	––		$	22,300	$	18,518	$	––		$	40,818
Receivables, net		––			58,985		44,665		––			103,650
Prepaid expenses and other assets		35			18,711		8,693		––			27,439
Advances to subsidiaries		––			626,061		86,502		(712,563	)		––
Total current assets		35			726,057		158,378		(712,563	)		171,907
Investments in subsidiaries		512,622			3,682		––		(516,304	)		––
Property and equipment, net		––			99,890		8,768		––			108,658
Goodwill		––			242,199		26,883		––			269,082
Intangible assets, net		––			93,901		11,741		––			105,642
Deferred financing costs		12,109			––		––		––			12,109
Other noncurrent assets		––			9,767		11,162		––			20,929
Total Assets	$	524,766		$	1,175,496	$	216,932	$	(1,228,867	)	$	688,327
Liabilities and Stockholder’s Equity (Deficit)
Current liabilities:
Trade payables	$	5		$	10,175	$	4,681		––		$	14,861
Other current liabilities		22,545			48,985		36,724		––			108,254
Advances from affiliates		––			569,221		143,342		(712,563	)		––
Total current liabilities		22,550			628,381		184,747		(712,563	)		123,115
Long-term debt less current maturities		774,493			––		––		––			774,493
Other liabilities		––			34,493		28,189		––			62,682
Total liabilities		797,043			662,874		212,936		(712,563	)		960,290
Stockholder’s equity (deficit) GXS Worldwide, Inc.		(272,277	)		512,622		3,682		(516,304	)		(272,277	)
Non-controlling interest		––			––		314		––			314
Total stockholder’s equity (deficit)		(272,277	)		512,622		3,996		(516,304	)		(271,963	)
Total Liabilities and Stockholder’s Equity (Deficit)	$	524,766		$	1,175,496	$	216,932	$	(1,228,867	)	$	688,327

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

Three Months Ended ~~September~~March 3031, ~~2011~~2012

(In thousands)

(Unaudited)

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated

Revenues	$	––		$	101,751		$	53,242		$	(36,081	)	$	118,912

Costs and operating expenses		34			80,400			56,375			(36,081	)		100,728
Operating income (loss)		(34	)		21,351			(3,133	)		––			18,184
Other income (expense), net		(21,377	)		3			(683	)		––			(22,057	)
Income (loss) before income taxes		(21,411	)		21,354			(3,816	)		––			(3,873	)
Income tax expense		––			352			397			––			749
Income (loss) before equity in income (loss) of subsidiaries		(21,411	)		21,002			(4,213	)		––			(4,622	)
Equity in income (loss) of subsidiaries		16,789			(4,213	)		––			(12,576	)		––
Net income (loss)		(4,622	)		16,789			(4,213	)		(12,576	)		(4,622	)
Foreign currency translation adjustments		––			––			1,320			––			1,320
Comprehensive income (loss)		(4,622	)		16,789			(2,893	)		(12,576	)		(3,302	)
Less: Comprehensive income attributable to non-controlling interest		––			––			5			––			5
Comprehensive income (loss) attributable to GXS Worldwide, Inc.	$	(4,622	)	$	16,789		$	(2,898	)	$	(12,576	)	$	(3,307	)

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenues	$	––		$	105,170		$	58,458		$	(40,912	)	$	122,716
Costs and operating expenses		62			79,285			58,373			(40,912	)		96,808
Restructuring charges		––			579			130			––			709
Operating income (loss)		(62	)		25,306			(45	)		––			25,199
Other income (expense), net		(21,466	)		2,060			(4,458	)		––			(23,864	)
Income (loss) before income taxes		(21,528	)		27,366			(4,503	)		––			1,335
Provision for income taxes		––			307			988			––			1,295
Income (loss) before equity in income (loss) of subsidiaries		(21,528	)		27,059			(5,491	)		––			40
Equity in income (loss) of subsidiaries		21,568			(5,491	)		––			(16,077	)		––
Net income (loss)		40			21,568			(5,491	)		(16,077	)		40
Foreign currency translation adjustments		––			––			(944	)		––			(944	)
Dividends from subsidiaries		––			1,784			––			(1,784	)		––
Comprehensive income (loss)		40			23,352			(6,435	)		(17,861	)		(904	)
Less: Comprehensive loss attributable to non-controlling interest		––			––			(35	)		––			(35	)
Comprehensive income (loss) attributable to GXS Worldwide, Inc.	$	40		$	23,352		$	(6,400	)	$	(17,861	)	$	(869	)

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of ~~Operations~~Cash ~~and Comprehensive Income (Loss)~~Flows

~~Nine~~Three Months Ended ~~September~~March 3031, ~~2011~~2013

(In thousands)

(Unaudited)

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(7,305	)	$	14,064		$	(7,340	)	$	(6,724	)	$	(7,305	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		––			11,924			1,484			––			13,408
Deferred income taxes		––			209			146			––			355
Amortization of deferred financing fees and debt discount		2,000			––			118			––			2,118
Stock compensation expense		––			290			––			––			290
Equity in net (income) loss of subsidiaries		(14,064	)		7,340			––			6,724			––
Changes in operating assets and liabilities, net		19,369			(10,404	)		7,215			––			16,180
Net cash provided by operating activities		––			23,423			1,623			––			25,046

Cash flows from investing activities:
Purchases of property and equipment (including capitalized interest)		––			(9,642	)		(779	)		––			(10,421	)
Net cash used in investing activities		––			(9,642	)		(779	)		––			(10,421	)

Cash flows from financing activities:
Borrowings under revolving credit facility		––			––			––			––			––
Repayments under revolving credit facility		––			––			––			––			––
Payment of financing costs		––			––			––			––			––
Net cash used in financing activities		––			––			––			––			––

Effect of exchange rate changes on cash		––			––			(425	)		––			(425	)

Increase in cash and cash equivalents		––			13,781			419			––			14,200
Cash and cash equivalents, beginning of period		––			14,854			20,176			––			35,030

Cash and cash equivalents, end of period	$	––		$	28,635		$	20,595		$	––		$	49,230

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenues	$	––		$	297,679		$	166,652		$	(108,692	)	$	355,639
Costs and operating expenses		227			230,328			167,471			(108,692	)		289,334
Restructuring charges		––			1,700			628			––			2,328
Operating income (loss)		(227	)		65,651			(1,447	)		––			63,977
Other income (expense), net		(62,300	)		1,424			(4,171	)		––			(65,047	)
Income (loss) before income taxes		(62,527	)		67,075			(5,618	)		––			(1,070	)
Provision for income taxes		––			622			2,004			––			2,626
Income (loss) before equity in income (loss) of subsidiaries		(62,527	)		66,453			(7,622	)		––			(3,696	)
Equity in income (loss) of subsidiaries		58,831			(7,622	)		––			(51,209	)		––
Net income (loss)		(3,696	)		58,831			(7,622	)		(51,209	)		(3,696	)
Foreign currency translation adjustments		––			––			2,167			––			2,167
Dividends from subsidiaries		––			2,219			––			(2,219	)		––
Comprehensive income (loss)		(3,696	)		61,050			(5,455	)		(53,428	)		(1,529	)
Less: Comprehensive loss attributable to non-controlling interest		––			––			(3	)		––			(3	)
Comprehensive income (loss) attributable to GXS Worldwide, Inc.	$	(3,696	)	$	61,050		$	(5,452	)	$	(52,428	)	$	(1,526	)

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

Three Months Ended September 30, 2012

(In thousands)

(Unaudited)

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenues	$	––		$	101,257		$	55,133		$	(35,111	)	$	121,279
Costs and operating expenses		––			78,696			55,766			(35,111	)		99,351
Restructuring charges		––			328			74			––			402
Operating income (loss)		––			22,233			(707	)		––			21,526
Other income (expense), net		(21,347	)		538			413			––			(20,396	)
Income (loss) before income taxes		(21,347	)		22,771			(294	)		––			1,130
Provision for income taxes		––			659			617			––			1,276
Income (loss) before equity in income (loss) of subsidiaries		(21,347	)		22,112			(911	)		––			(146	)
Equity in income (loss) of subsidiaries		21,201			(911	)		––			(20,290	)		––
Net income (loss)		(146	)		21,201			(911	)		(20,290	)		(146	)
Foreign currency translation adjustments		––			––			1,077			––			1,077
Dividends from subsidiaries		––			469			––			(469	)		––
Comprehensive income (loss)		(146	)		21,670			166			(20,759	)		931
Less: Comprehensive income attributable to non-controlling interest		––			––			47			––			47
Comprehensive income (loss) attributable to GXS Worldwide, Inc.	$	(146	)	$	21,670		$	119		$	(20,759	)	$	884

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

Nine Months Ended September 30, 2012

(In thousands)

(Unaudited)

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenues	$	––		$	306,318		$	163,590		$	(108,908	)	$	361,000
Costs and operating expenses		48			237,747			170,581			(108,908	)		299,468
Restructuring charges		––			855			505			––			1,360
Operating income (loss)		(48	)		67,716			(7,496	)		––			60,172
Other income (expense), net		(64,053	)		1,970			(5,158	)		––			(67,241	)
Income (loss) before income taxes		(64,101	)		69,686			(12,654	)		––			(7,069	)
Provision for income taxes		––			1,790			1,613			––			3,403
Income (loss) before equity in income (loss) of subsidiaries		(64,101	)		67,896			(14,267	)		––			(10,472	)
Equity in income (loss) of subsidiaries		53,629			(14,267	)		––			(39,362	)		––
Net income (loss)		(10,472	)		53,629			(14,267	)		(39,362	)		(10,472	)
Foreign currency translation adjustments		––			––			2,226			––			2,226
Dividends from subsidiaries		––			1,062			––			(1,062	)		––
Comprehensive income (loss)		(10,472	)		54,691			(12,041	)		(40,424	)		(8,246	)
Less: Comprehensive income attributable to non-controlling interest		––			––			32			––			32
Comprehensive income (loss) attributable to GXS Worldwide, Inc.	$	(10,472	)	$	54,691		$	(12,073	)	$	(40,424	)	$	(8,278	)

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

~~Nine~~Three Months Ended ~~September~~March 3031, ~~2011~~2012

(In thousands)

(Unaudited)

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(4,622	)	$	16,789		$	(4,213	)	$	(12,576	)	$	(4,622	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		––			12,173			1,690			––			13,863
Deferred income taxes		––			188			14			––			202
Amortization of deferred financing fees and debt discount		1,881			––			97			––			1,978
Stock compensation expense		––			197			––			––			197
Equity in net (income) loss of subsidiaries		(16,789	)		4,213			––			12,576			––
Changes in operating assets and liabilities, net		22,930			(11,690	)		7,329			––			18,569
Net cash provided by operating activities		3,400			21,870			4,917			––			30,187

Cash flows from investing activities:
Purchases of property and equipment (including capitalized interest)		––			(9,959	)		(1,148	)		––			(11,107	)
Net cash used in investing activities		––			(9,959	)		(1,148	)		––			(11,107	)

Cash flows from financing activities:
Borrowings under revolving credit facility		7,000			––			––			––			7,000
Repayments under revolving credit facility		(10,000	)		––			––			––			(10,000	)
Payment of financing costs		(400	)		––			––			––			(400	)
Net cash used in financing activities		(3,400	)		––			––			––			(3,400	)

Effect of exchange rate changes on cash		––			––			88			––			88

Increase in cash and cash equivalents		––			11,911			3,857			––			15,768
Cash and cash equivalents, beginning of period		––			2,836			10,132			––			12,968

Cash and cash equivalents, end of period	$	––		$	14,747		$	13,989		$	––		$	28,736

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(3,696	)	$	58,831		$	(7,622	)	$	(51,209	)	$	(3,696	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		––			35,088			5,077			––			40,165
Deferred income taxes		––			––			(726	)		––			(726	)
Amortization of deferred financing fees and debt discount		5,365			––			181			––			5,546
Unrealized gain on interest rate swap		(2,365	)		––			––			––			(2,365	)
Settlement of interest rate swap		(2,318	)		––			––			––			(2,318	)
Stock compensation expense		––			787			––			––			787
Equity in net (income) loss of subsidiaries		(58,831	)		7,622			––			51,209			––
Changes in operating assets and liabilities, net		69,847			(65,779	)		10,716			––			14,784
Net cash provided by operating activities		8,002			36,549			7,626			––			52,177
Cash flows from investing activities:
Purchases of property and equipment (including capitalized interest)		––			(30,918	)		(3,352	)		––			(34,270	)
RollStream acquisition, net of cash acquired of $4		––			(1,125	)		––			––			(1,125	)
Net cash used in investing activities		––			(32,043	)		(3,352	)		––			(35,395	)
Cash flows from financing activities:
Borrowings under revolving credit facility		34,000			––			––			––			34,000
Repayments under revolving credit facility		(42,000	)		––			––			––			(42,000	)
Payment of financing costs		(2	)		––			––			––			(2	)
Net cash used in financing activities		(8,002	)		––			––			––			(8,002	)
Effect of exchange rate changes on cash		––			––			84			––			84
Increase in cash and cash equivalents		––			4,506			4,358			––			8,864
Cash and cash equivalents, beginning of period		––			6,358			9,968			––			16,326
Cash and cash equivalents, end of period	$	––		$	10,864		$	14,326		$	––		$	25,190

GXS WORLDWIDE, INC. AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

Nine Months Ended September 30, 2012

(In thousands)

(Unaudited)

	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(10,472	)	$	53,629		$	(14,267	)	$	(39,362	)	$	(10,472	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		––			37,589			4,705			––			42,294
Deferred income taxes		––			481			475			––			956
Amortization of deferred financing fees and debt discount		5,756			––			273			––			6,029
Stock compensation expense		––			609			––			––			609
Equity in net (income) loss of subsidiaries		(53,629	)		14,267			––			39,362			––
Changes in operating assets and liabilities, net		61,766			(59,041	)		20,689			––			23,414
Net cash provided by operating activities		3,421			47,534			11,875			––			62,830
Cash flows from investing activities:
Purchases of property and equipment (including capitalized interest)		––			(28,070	)		(3,335	)		––			(31,405	)
Net cash used in investing activities		––			(28,070	)		(3,335	)		––			(31,405	)
Cash flows from financing activities:
Borrowings under revolving credit facility		20,000			––			––			––			20,000
Repayments under revolving credit facility		(23,000	)		––			––			––			(23,000	)
Payment of financing costs		(421	)		––			––			––			(421	)
Net cash used in financing activities		(3,421	)		––			––			––			(3,421	)
Effect of exchange rate changes on cash		––			––			(154	)		––			(154	)
Increase in cash and cash equivalents		––			19,464			8,386			––			27,850
Cash and cash equivalents, beginning of period		––			2,836			10,132			––			12,968
Cash and cash equivalents, end of period	$	––		$	22,300		$	18,518		$	––		$	40,818

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risk and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed under “Risk Factors” in this Quarterly Report on Form 10-Q. The following discussion should also be read in conjunction with our audited consolidated financial statements and related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 included in our ~~2011~~2012 Annual Report on Form 10-K.

Overview

We are a leading global provider of business-to-business (“B2B”) ~~cloud~~ integration ~~services~~solutions. ~~and~~Our solutions ~~that~~enable ~~simplify~~our ~~and~~customers ~~enhance~~to ~~business~~effectively ~~process~~manage ~~integration,~~the ~~data~~flow ~~quality~~of ~~and~~electronic ~~compliance,~~transaction ~~and~~information ~~collaboration~~with ~~among~~their ~~businesses~~trading partners. ~~Our~~ ~~services~~We ~~and~~combine ~~solutions enable~~ our ~~customers~~global tocommunity ~~manage~~of ~~and~~approximately ~~improve~~550,000 ~~mission~~business ~~critical supply chain functions~~partners, ~~securely~~information ~~process~~technology ~~financial~~(“IT”) ~~transactions~~infrastructure, ~~related~~software-as-a-service to(“SaaS”) ~~the~~applications ~~exchange of goods~~ and ~~services,~~broad ~~and~~expertise ~~automate~~to ~~and~~address ~~control~~the ~~other~~ critical ~~cross-enterprise~~B2B ~~business~~challenges ~~processes~~of our customers. By utilizing ~~these~~our ~~services~~B2B ~~and~~integration solutions, our customers realize a number of key benefits such as lower total cost of ownership, accelerated time to market and enhanced reliability and security. Our approximately 40,000 customers and their approximately 360,000 trading partners – a combined trading community of over 400,000 businesses – conduct business together via GXS Trading Grid®, our integration cloud that includes specialized capabilities for automating, assembling, monitoring, and improving multi-enterprise business processes.

AsWe operated as a division of General Electric Company (“GE”), ~~from~~prior ~~the 1960’s through 2001, our historical focus was primarily on providing customized information technology solutions~~ to ~~our~~the ~~customers. As~~2002 aacquisition ~~result, in 2000, 50% of our revenues were generated~~ by ~~custom outsourcing services. Following~~ Francisco Partners and its co-investors’. ~~acquisition~~We ofsubsequently ~~us from GE in 2002, we~~ began investing in GXS Trading Grid®, aour ~~multi~~cloud-~~tenant~~based integration ~~cloud~~ platform, and launched our Managed Services ~~offering~~solution. Over the course of the past several years, ~~which~~we ~~compliments~~also ~~GXS~~acquired ~~Trading~~several ~~Grid®~~companies ~~with~~to ~~shared~~expand ~~processes~~the number of customers and ~~built-in~~functional ~~industry~~capabilities ~~expertise~~of GXS Trading Grid®. These acquisitions included:

In· ~~2005, we expanded the reach and number of integrated businesses on GXS Trading Grid® through the acquisition of~~ IBM’s ~~Business~~global ~~Exchange~~electronic ~~Services~~data ~~business,~~interchange ~~thereby further increasing our customer base, expanding our geographic presence and extending our reach into a number of verticals~~ (~~such as financial services and the automotive sector~~“EDI”). business;

In· ~~2008, we purchased~~ Interchange Serviços S.A. (“Interchange”), ~~located~~a inprovider ~~Brazil, which served to broaden the number~~ of ~~integrated~~B2B ~~businesses~~integrations services in Brazil ~~on GXS Trading Grid®.~~;

On· ~~June 2, 2010, GXS Holdings, Inc. (“GXS Holdings”), our direct parent company, which directly owns 100% of our issued and outstanding common stock, acquired~~ Inovis International, Inc. (“Inovis”), a ~~leading~~ provider of ~~fully integrated~~ B2B ~~services~~integration and solutions that manage the flow of critical e-commerce information for global trading communities, which we refer to as the “Inovis Merger” or the “Merger”. Inovis’ core business had historically been the provisioning of messaging services,; ~~catalog~~ and ~~managed services to approximately 16,000 customers worldwide with approximately two billion transactions per year, primarily on a fee-per-transaction basis.~~

In· ~~March 2011, we purchased~~ RollStream, Inc. (“RollStream”), a ~~software-as-a-service (“~~SaaS”) provider of enterprise community management solutions. ~~The acquisition advanced our objective of simplifying the integration of global business communities for customers by combining data flows across systems, applications and people.~~

WeGXS ~~intend~~Trading toGrid® ~~continue~~is tothe ~~selectively~~foundation ~~pursue acquisitions~~ of ~~companies with complementary products and technologies to enhance~~ our ~~ability~~B2B ~~to provide~~integration ~~comprehensive~~solution ~~services and solutions to our customers and to expand our business~~suite. ~~Any~~ ~~such~~GXS ~~acquisitions~~Trading ~~could~~Grid® ~~affect~~consists ~~our results~~ of ~~operations for~~ the ~~period in~~IT ~~which~~platform, ~~the~~software ~~acquisition~~applications ~~is completed~~ and ~~future~~a ~~periods~~global ~~and,~~community ~~depending on the size~~ of ~~the~~over ~~acquisition~~550,000 ~~could~~business ~~affect~~partners ~~the comparability of period-to-period results. There can be no assurance~~ that weenable ~~will~~the besecure ~~successful~~and inreliable ~~consummating~~flow ~~future~~of ~~acquisitions~~transactions orbetween ~~that~~business ~~we will be able to locate adequate financing or successfully integrate future acquisitions~~partners.

AsThrough aGXS ~~result~~Trading ofGrid®, ~~new~~we ~~investments~~provide ~~and~~our ~~repositioning~~core ~~away~~B2B ~~from~~integration ~~customized~~ solutions, Messaging Services and Managed Services. Messaging Services allows for the ~~majority~~automated and reliable exchange of ~~our~~electronic ~~revenue~~transaction isinformation ~~generated~~such ~~through~~as ~~data~~purchase ~~integration~~orders, ~~fees~~invoices, shipment notices and ~~subscription~~other ~~services~~files, onamongst businesses worldwide. Managed Services, our ~~platform~~fastest growing solution, ~~frequently~~provides ~~wrapped~~an ~~with~~end-to-end fully outsourced B2B integration solution to our ~~Managed~~customers, ~~Services~~including ~~capabilities. Currently~~program implementation, operational management, customer support and a suite of value-added SaaS applications, which we ~~manage~~refer ~~approximately~~to ~~twelve~~as ~~billion~~GXS ~~electronic~~ActiveSM ~~transactions~~Applications. onGXS anActiveSM ~~annual~~Applications ~~basis~~are offered to customers across anall ~~estimated~~our ~~six~~service ~~million~~lines ~~integration~~and ~~pairs,~~enhance orour ~~trading~~customers’ ~~partner~~visibility ~~relationships~~into, ~~creating~~and acontrol ~~combined~~of, ~~trading~~their ~~community~~supply ofchains ~~over~~and ~~400,000~~supporting ~~businesses~~business processes. We ~~have~~In ~~substantial~~addition, ~~vertical~~we ~~expertise~~have inthe aB2B ~~variety~~integration ofexpertise ~~key~~and ~~industries~~process ~~such~~experience asto ~~retail,~~best ~~consumer~~serve ~~products,~~our ~~financial~~customers’ needs.

31We also provide B2B Software and Services solutions, which allow our customers to deploy B2B integration gateways on their premises in order to connect their internal systems and processes to their partners through an external network, such as our GXS Trading Grid®; Data Synchronization services, which enable the exchange of product and price information between the suppliers of consumer products and the retailers that sell them; and Custom Outsourcing Services, which allows our customers to outsource activities not directly related to supply chain activities but for which our outsourcing capabilities and expertise can provide greater value to our customers than they could otherwise realize by managing these applications themselves.

~~services,~~We ~~automotive and high technology. Today, we~~ have ~~customers~~deep invertical ~~over~~expertise ~~60 countries, which we support~~ in 15a ~~different~~variety ~~languages. We~~of ~~believe~~key ~~customers~~industries ~~view~~such ~~our services and solutions~~ as ~~essential~~retail, toconsumer ~~their~~products, ~~day-to-day~~financial ~~supply~~services, ~~chain~~automotive, ~~operations~~manufacturing, and ~~they~~information ~~typically enter into long-term contracts with us. Our recurring revenues~~technology, ~~which~~and ~~are~~serve ~~primarily~~a ~~attributable~~broad tobase ~~transaction~~of ~~processing and software maintenance fees~~large, ~~represented~~multi-national ~~approximately 84~~enterprises.5% ~~and~~As ~~85.5%~~ of ~~our~~December ~~total revenue for the three and nine months ended September 30~~31, 2012, ~~respectively. Additionally,~~we ~~96.0%~~had ofover ~~our~~40,000 ~~top~~direct-billed, 50active customers, ~~based~~ on ~~annual~~our ~~revenue~~platform inacross ~~fiscal~~59 ~~2011~~countries, ~~have~~including ~~been~~more ~~our~~than ~~customers~~56.0% ~~for~~of ~~five~~the orForbes ~~more~~Global ~~years~~1000.

~~Factors Affecting our Business~~28

WeThe ~~have~~majority ~~various~~of ~~service~~our ~~lines,~~revenue ~~with~~is ~~each~~generated through transaction processing and subscription service ~~line~~fees ~~deriving~~from both Managed Services and Messaging Services. Managed Services revenue grew at a three year compounded annual growth rate (“CAGR”) of 29.8% from 2009 to 2012 and represented approximately 37.0% of our total revenue for the year ended December 31, 2012 and approximately 38.0% of our total revenue for the three ~~principal~~months ~~sources~~ended March 31, 2013. We believe customers view our solutions as essential to their day-to-day supply chain operations and they typically enter into long-term contracts with us. Our ~~service~~transaction ~~lines~~processing and software maintenance fees, which are: recurring in nature, represented approximately 86.1% of our total revenue for the three months ended March 31, 2013. Additionally, approximately 92.0% of our top 50 customers, based on annual revenue in fiscal 2012, have been our customers for five or more years.

·Factors ~~Messaging Services, which comprised approximately 43.1%~~ and ~~44.4%~~Trends ofAffecting ~~revenues~~Our for the three and nine months ended September 30, 2012, automates the exchange of electronic documents between businesses and eliminates the complexities of disparate standards and communication protocols;Business

·We ~~Managed~~have ~~Services,~~five ~~which~~service ~~comprised~~lines, ~~approximately~~with ~~37.2%~~each ~~and~~service ~~36.1%~~line ofderiving ~~revenues~~revenue ~~for~~from ~~the~~ three ~~and~~principal ~~nine~~sources. ~~months~~Our ~~ended~~service ~~September~~lines 30, 2012, allows our customers to offload complex integration functions or outsource supply chain management activities to improve speed-to-market, drive higher customer satisfaction, or reduce overall costs from data integration;are:

· ~~B2B~~Messaging ~~Software and~~ Services, which comprised ~~approximately 10~~43.13% ~~and 9.5%~~ of revenues for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012~~2013, ~~provides~~automates ~~software~~the ~~and~~exchange ~~services~~of ~~that~~electronic ~~allow~~documents ~~our~~between ~~customers~~businesses toand ~~manage~~eliminates ~~their~~the ~~day-to-day~~complexities ~~supply chain activities internally. The majority~~ of ~~our~~disparate ~~software~~standards ~~customers~~and ~~also~~communication ~~access GXS Trading Grid® to extend their ability to serve new markets or geographies~~protocols;

· ~~Data~~Managed ~~Synchronization~~Services, which comprised ~~approximately 6~~37.59% ~~and 6.8%~~ of revenues for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012~~2013, ~~provides~~allows ~~tools and services that enhance~~ our customers’ ~~abilities~~ to ~~improve~~offload ~~the~~complex ~~quality~~integration ~~and~~functions ~~accuracy~~or ofoutsource ~~data exchanged with their trading partners. Primarily designed for the retail~~ supply chain, ~~our~~management ~~solution~~activities ~~improves~~to ~~the~~us ~~ability~~in order to ~~ensure~~improve ~~the correct product~~speed-to-market, ~~price~~drive ~~and~~higher ~~promotion~~customer ~~information~~satisfaction, ~~are~~or ~~synchronized~~reduce ~~throughout~~overall acosts ~~supply~~from ~~chain;~~data ~~and~~integration;

· ~~Custom~~B2B ~~Outsourcing~~Software and Services, which comprised ~~approximately 3~~9.1% ~~and 3.2%~~ of revenues for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012~~2013, ~~relates~~provides ~~primarily~~software ~~to products~~ and services ~~which~~that doallow ~~not~~our ~~fit~~customers ~~within~~to ~~the~~manage ~~definitions~~their ofday-to-day ~~our~~supply ~~other~~chain ~~service~~activities ~~lines~~internally. ~~Custom~~The ~~outsourcing~~majority ~~allows~~of our software customers toalso ~~outsource~~access ~~activities~~GXS ~~not~~Trading ~~directly~~Grid® ~~related~~ to ~~supply~~extend ~~chain~~their ~~activities~~ability ~~but~~ to ~~which~~serve ~~our~~new ~~technical~~markets ~~solutions~~or ~~and related services can provide value.~~geographies;

~~Across~~· ~~these~~Data ~~service~~Synchronization, ~~lines~~which comprised 6.8% of revenues for the three months ended March 31, we2013, ~~derive~~provides tools and services that enhance our ~~revenues~~customers’ ~~from:~~abilities to improve the quality and accuracy of data exchanged with their trading partners. Primarily designed for the retail supply chain, our solution improves the ability to ensure the correct product, price and promotion information are synchronized throughout a supply chain; and

Custom Outsourcing Services, which comprised 2.9% of revenues for the three months ended March 31, 2013, relates primarily to products and services which do not fit within the definitions of our other service lines. Custom outsourcing allows our customers to outsource activities not directly related to supply chain activities but for which our outsourcing capabilities and expertise can provide greater value to our customers than they could otherwise realize by managing these applications themselves.

Across each of these service lines, we derive our revenues from:

transaction processing fees;

professional service fees earned in connection with implementing or supporting our products and services; and

software licensing and maintenance fees for software we develop or procure from others.

Over the past several years, our transaction processing revenues in our Messaging Services ~~business~~solutions have been adversely impacted ~~primarily~~ by ~~the~~pricing ~~commoditization~~pressure ofeven ~~the~~as ~~technology~~our ~~and~~transaction ~~communications~~volumes ~~required~~have toincreased. We ~~send~~are ~~and~~investing ~~receive~~in ~~business~~new ~~documents. Competitive~~functionality ~~pricing~~and ~~dynamics~~value-added ~~across~~capabilities ~~the~~that ~~industry~~can ~~have~~be ~~also~~used ~~adversely~~by ~~affected pricing in~~ our Messaging Services ~~business. We~~customers, ~~believe~~such ~~that~~as ~~our~~near ~~Messaging~~real-time ~~Services~~disaster ~~business~~recovery ~~will~~and ~~continue~~the ability to ~~face~~monitor ~~pricing~~data ~~pressure~~quality asand quarantine data that does not adhere to select business rules. As a result of ~~commoditization~~these investments and ~~contribute~~the aincrease ~~lower~~in ~~percentage~~volume we have seen in this service line, the rate of decline in our ~~revenues~~Messaging ~~over~~Services ~~time~~revenue has decreased in recent periods.

InWe ~~order~~believe tothe ~~drive~~growing ~~revenue~~complexity ~~growth~~of business processes, wethe ~~have~~acceptance ~~focused~~of onSaaS ~~investing~~and incloud-based ~~Managed~~delivery ~~Services,~~models ~~where~~and wethe ~~see~~importance ~~significant~~of ~~opportunities~~real-time ~~which~~information weand ~~believe~~analytics ~~will~~are ~~offset~~driving the ~~planned~~need ~~declining~~for ~~revenues~~robust ~~from~~B2B ~~Messaging~~integration ~~Services. As~~services, ~~part~~and ofin ~~our~~particular, ~~strategy~~the adoption of ~~growing~~GXS’ Managed Services, wesolutions ~~have~~in ~~focused~~the onmarketplace. ~~building~~GXS’ ~~and~~Managed ~~delivering~~Services aoffers ~~portfolio~~an ofalternative ~~capabilities~~delivery onmodel ~~GXS~~designed ~~Trading~~for ~~Grid®~~companies that ~~add~~may ~~value~~be struggling to ~~our~~achieve ~~customers~~returns ~~transactions~~from ~~flows,~~B2B ~~such~~integration assoftware ~~data~~investments ~~transformation,~~or ~~transaction~~are ~~monitoring,~~unable ~~process~~to ~~visibility~~handle ~~and~~the ~~trading~~considerable ~~partner~~tasks ~~on-boarding. As~~associated awith ~~result,~~managing weworldwide ~~will~~B2B ~~continue~~programs. toIn ~~offer~~our ~~these~~model, ~~higher~~there ~~value~~is ~~integration~~no ~~services~~need for our customers to ~~offset~~purchase ~~pricing~~or ~~pressure~~manage asB2B itintegration ~~relates~~software, tohardware ~~this~~or ~~trend~~people. In ~~addition~~Instead, ascompanies ~~business~~leverage ~~processes~~GXS ~~that~~Trading ~~utilize~~Grid® aby ~~transaction~~outsourcing the management ~~infrastructure~~of ~~have~~the ~~become~~underlying ~~increasingly~~server ~~complex~~hardware, storage platforms and ~~expensive~~B2B ~~for~~translation ~~our~~technology. ~~customers~~Through this model, companies are able to ~~maintain~~achieve ~~in-house,~~their weB2B ~~have~~integration ~~seen~~goals anfaster ~~increased~~and ~~demand~~at ~~for~~a ~~our~~lower ~~Managed~~cost ~~Services~~than through in-house and software-based approaches.

3229

~~Additionally,~~Representing innearly ~~order~~37.0% ~~to further enhance the value~~ of our ~~solutions,~~revenues wein ~~offer~~2012 ~~specialized~~and ~~industry~~nearly ~~applications~~38.0% ~~which~~of ~~provide~~our ~~improved~~revenues ~~visibility~~for ~~and~~the ~~control~~three ~~over~~months ~~multi-enterprise~~ended ~~processes. These~~March ~~services~~31, ~~which~~2013, we ~~brand~~believe asManaged ~~our~~Services ~~ActiveSM~~will ~~Applications,~~become ~~allow~~an ~~our~~increasing ~~customers~~percentage toof ~~gain~~our ~~additional~~total ~~advantages~~revenues ~~around~~over ~~global~~time, ~~transaction~~and ~~flows or multi-enterprise business processes~~represent, ~~such~~along aswith ~~identifying~~our ~~exceptions~~Messaging ~~and errors~~Services, ~~uncovering~~the ~~inefficiencies,~~largest ~~and~~portion ~~highlighting~~of ~~opportunities~~our ~~for~~total ~~performance improvement~~revenues. ~~Our~~ ~~ActiveSM~~We ~~Applications,~~also ~~which~~believe ~~are~~that ~~delivered~~our inother ~~the~~service ~~cloud as SaaS~~lines, ~~complement and improve the performance of internal systems~~ such as ~~Enterprise~~B2B ~~Resource~~Software ~~Planning~~and ~~(“ERP”) or Customer Relationship Management (“CRM”) applications~~Services, ~~while~~Data ~~allowing~~Synchronization usand toCustomer ~~enhance~~Outsourcing ~~the~~Services ~~value~~will itrepresent ~~provides~~a tosmaller ~~its~~portion ~~customers,~~of ~~lock-in~~our ~~longer~~total ~~term~~revenues ~~contracts,~~over ~~and improve margins~~time.

We will continue to target large and mid-sized enterprises, for which our value-add Managed Services on GXS Trading Grid® could significantly reduce costs and enable staff to offload non-core functions, as well as increase the performance of our customers’ multi-enterprise business processes, such as order-to-cash, global shipping, new customer enablement, and cash management. We believe this approach will increase our revenues and enhance profitability over the long-term. While Managed Services tends to have lower margins than Messaging Services, particularly as we build out our Managed Services platform and capabilities, we expect productivity enhancements, such as increased use of automation tools to implement new customers and monitor ongoing processing activities, to improve our Managed Services margins over time.

As a result of our significant international operations, the translation of our foreign revenues generated in foreign currencies into U.S. dollars impacts the comparison of our revenues from period to period. Our revenues have been affected by a fluctuating U.S. dollar relative to the foreign currencies in which we transact business. The relative strengthening of the U.S. dollar during the three and nine months ended September 30, 2012, as compared to the three and nine months ended September 30, 2011, resulted in a $4.2 million and $7.2 million decrease in our revenues for the three and nine months ended September 30, 2012, respectively, from translating revenues generated in foreign currencies into U.S. dollars.

Our Revenues and Expenses

Revenues

~~For~~We ~~transaction~~charge ~~processing,~~our wecustomers ~~usually charge~~ a ~~transaction processing~~ fee tofor ~~both~~processing ~~the sending and the receiving party~~transactions. Such revenues are generally recognized on a per transaction basis in the period in which the related transactions are processed. Revenues on contracts with monthly, quarterly or annual minimum transaction levels are recognized based on the greater of the actual transactions or the specified contract minimum amounts during the relevant period. Because the transactions we process, such as the exchange of invoices and purchase orders, are routine and essential to the day-to-day operations of our customers, the revenues generated from these fees tend to be recurring in nature. Customers who are not committed to multi-year contracts generally are under contracts for transaction processing solutions that automatically renew every month or year, depending on the terms of the specific contracts.

Professional services are usually associated with new project implementation, in which case the associated professional services revenue is deferred over the estimated customer life which, based on our current estimates, approximates the initial contract term. When ~~done~~professional services are performed under time and material contracts, revenue is recognized as the related services are provided.

We earn revenue from the licensing of software applications that facilitate and automate the exchange of information among disparate business systems and applications. Such revenues are recognized when the license agreement is signed, the license fee is fixed and determinable, delivery has occurred and collection is considered probable. Revenue from licensing software that requires significant customization and modification or where services are otherwise considered essential to the functionality of the software are recognized using the percentage of completion method based on the costs incurred in relation to the total estimated costs of the contract. Revenue from hosted software applications is recognized ratably over the hosting period unless the customer has the contractual right to take possession of the software without significant penalty and it is feasible for the customer to use the software with its own hardware or contract with another party unrelated to us to host the software. Software maintenance revenues are deferred and recognized on a straight-line basis over the life of the related contract, which is typically one year.

33For the three months ended March 31, 2013 and 2012, the breakdown of revenue by service line, along with each service line’s percentage of total revenue, appears below (in thousands, except for percentages):

For the three and nine months ended September 30, 2012 and 2011, the breakdown of revenue by service line, along with each service line’s percentage of total revenue, appears below (in thousands of dollars, except for percentages):

	Three Months Ended March 31,
	2013					2012
Service Line	Amount		%			Amount		%

Messaging Services	$	51,480		43.3	%	$	54,274		45.6	%
Managed Services		45,060		37.9	%		41,538		34.9	%
B2B Software and Services		10,767		9.1	%		10,706		9.0	%
Data Synchronization		8,034		6.8	%		8,510		7.2	%
Custom Outsourcing Services		3,405		2.9	%		3,884		3.3	%

Total revenue / percentage	$	118,746		100.0	%	$	118,912		100.0	%

	Three Months Ended September 30,										Nine Months Ended September 30,
	2012					2011					2012					2011
Service Line	Amount		%			Amount		%			Amount		%			Amount		%
Messaging Services	$	52,332		43.1	%	$	58,725		47.9	%	$	160,281		44.4	%	$	174,541		49.1	%
Managed Services		45,102		37.2	%		39,313		32.0	%		130,505		36.1	%		107,611		30.2	%
B2B Software and Services		12,191		10.1	%		11,661		9.5	%		34,406		9.5	%		34,366		9.7	%
Data Synchronization		7,916		6.5	%		8,515		6.9	%		24,425		6.8	%		24,907		7.0	%
Custom Outsourcing Services		3,738		3.1	%		4,502		3.7	%		11,383		3.2	%		14,214		4.0	%
Total revenue / percentage	$	121,279		100.0	%	$	122,716		100.0	%	$	361,000		100.0	%	$	355,639		100.0	%

Each service line includes revenue from transaction processing, professional services, software licensing and software maintenance.

As a result of our significant international operations, the translation of our foreign revenues generated in foreign currencies into U.S. dollars impacts the comparison of our revenues from period to period. Our revenues have been affected by a fluctuating U.S. dollar relative to the foreign currencies in which we transact business. The relative strengthening of the U.S. dollar during the three months ended March 31, 2013, as compared to the three months ended March 31, 2012, resulted in a $1.4 million decrease in our revenues for the three months ended March 31, 2013 from translating revenues generated in foreign currencies into U.S. dollars. (See “Item 3—Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk.”)

Cost of Revenues

Cost of revenues primarily consists of:

compensation and related allocated benefit expenses associated with our workforce engaged in service delivery, technical operations and research and development;

computer, network and facility operating expenses;

· royalty payments associated with resale of third -party software licenses; and

depreciation and amortization expense, including the amortization of our capitalized software costs, deferred implementation costs and acquired intangibles.

We defer all direct and relevant costs associated with implementation of certain long-term customer contracts to the extent such costs can be recovered through guaranteed minimum revenues. The unamortized balances of these costs as of ~~September~~March 3031, ~~2012~~2013 and December 31, ~~2011~~2012 were $29.12 million and $2628.47 million, respectively, and are recorded in either “prepaid expenses and other assets” or “other assets” in the condensed consolidated balance sheets, depending on the remaining duration of the underlying contracts.

Operating Expenses

Operating expenses ~~consist~~primarily consists of sales and marketing expenses, and general and administrative expenses ~~and restructuring charges~~.

Sales and marketing expenses primarily consist of compensation and related allocated benefit expenses associated with our employees engaged in sales and marketing, including sales commissions, advertising costs, meetings, travel and entertainment expenses and facility costs. Certain sales commissions are considered to be direct and relevant costs of contracts and are deferred over the customer contract period. General and administrative expenses consist of compensation and related allocated benefit expenses associated with our employees engaged in senior management, finance, legal, and human resources, information technology management and costs, as well as other general business expenses such as accounting and legal fees, outside services and business insurance. ~~Restructuring~~ General and administrative expenses also includes restructuring charges ~~include~~consisting of severance costs associated with workforce reduction efforts and net lease costs related to darkened facilities.

As a result of our significant international operations, the translation of our foreign costs of revenues and operating expenses into U.S. dollars impacts the comparison of our costs of revenues and operating expenses from period to period. Our costs of revenues and operating expenses have been affected by a fluctuating U.S. dollar. The relative strengthening of the U.S. dollar during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012~~2013, as compared to the three ~~and nine~~ months ended ~~September~~March 3031, ~~2011,~~2012 resulted in a ~~decrease of~~ $3.1 ~~million and $5~~.70 million decrease in our costs of revenues and operating expenses for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012~~2013, ~~respectively,~~ from translation of our expenses incurred in foreign currencies into U.S. dollars. (See “Item 3—Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk.”)

34The following is a summary of our costs and operating expenses for the three months ended March 31, 2013 and 2012 (in thousands):

The following is a summary of our costs and operating expenses for the three and nine months ended September 30, 2012 and 2011 (in thousands of dollars):

	Three Months Ended March 31,
Costs and Operating Expenses	2013		2012

Cost of revenues	$	66,047	$	64,750
Sales and marketing		17,883		17,150
General and administrative		17,693		18,828

Total costs and operating expenses	$	101,623	$	100,728

	Three Months Ended September 30,				Nine Months Ended September 30,
Costs and Operating Expenses	2012		2011		2012		2011
Cost of revenues	$	67,201	$	64,394	$	198,809	$	190,883
Sales and marketing		17,117		17,049		50,797		48,632
General and administrative		15,033		15,365		49,862		49,819
Restructuring charges		402		709		1,360		2,328
Total costs and operating expenses	$	99,753	$	97,517	$	300,828	$	291,662

Other Primary Operating Measures

Adjusted EBITDA

Management relies upon adjusted earnings before interest, taxes, depreciation and amortization, and certain other charges (“Adjusted EBITDA”) as a primary measure to review and assess operating performance of its business and management team. Adjusted EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles (“U.S. GAAP”) and should not be considered as: (i) an alternative to net income (loss); (ii) a measure of operating income or cash flows from operating, investing and financing activities; or (iii) a measure of liquidity. Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures presented by other companies.

The table below reconciles ~~our~~ net ~~income (~~loss) to Adjusted EBITDA for the periods presented (in thousands ~~of dollars~~):

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2012			2011			2012			2011
	2013			2012
Net income (loss)	$	(146	)	$	40		$	(10,472	)	$	(3,696	)
Net loss	$	(7,305	)	$	(4,622	)
Adjustments:
Income tax expense		~~1,276~~834			~~1,295~~749			~~3,403~~			~~2,626~~
Interest expense, net		21,~~093~~109			21,~~109~~339			~~63,562~~			~~61,689~~
Depreciation and amortization		1413,~~081~~408			13,~~926~~863			~~42,294~~			~~40,165~~
Stock compensation expense		~~230~~290			~~301~~197			~~609~~			~~787~~
Other (income) expense, net		~~(697~~2,485	)		~~2,755~~718			~~3,679~~			~~3,358~~
Restructuring charges		~~402~~78			~~709~~381			~~1,360~~			~~2,328~~
Merger and acquisition fees		––			623			3			~~227~~
Integration costs (1)		––			––			––			154
Deferred income adjustment (1)		––			25
Deferred income adjustment (2)		––			67			25			1,353
Management fees		1,000			1,000
Management fees		1,000			1,000			3,000			3,000
Total adjustments		39,204			38,275
Total adjustments		37,385			41,224			117,935			115,687
Adjusted EBITDA	$	31,899		$	33,653
Adjusted EBITDA	$	37,239		$	41,264		$	107,463		$	111,991

____________

(1) ~~Integration~~Purchase ~~costs~~accounting ~~represented~~requires ~~certain~~that ~~incremental~~deferred ~~operating~~income ~~expenses~~of ~~associated~~an ~~with~~acquired ~~the~~business ~~integration~~be written down to fair value of the ~~Inovis~~underlying obligations plus associated margin at the date of acquisition.

~~business~~Adjusted EBITDA for the three months ended March 31, 2013 and 2012 was $31.9 million and $33.7 million, respectively. The $1.8 million, or 5.2%, decrease in Adjusted EBITDA for three months ended March 31, 2013 compared to the three months ended March 31, 2012, is driven by slightly decreased revenue along with increased cost of revenues and operating expenses which together resulted in decreased operating income being generated (which is consistent with our planned investment strategy) and the net unfavorable impact of translating foreign currencies into U.S. dollars.

(2) Purchase accounting requires that deferred income of an acquired business be written-down to fair value of the

underlying obligations plus associated margin at the date of acquisition.

Adjusted EBITDA for the three months ended September 30, 2012 and 2011 was $37.2 million and $41.3 million, respectively. Adjusted EBITDA for the nine months ended September 30, 2012 and 2011 was $107.5 million and $112.0 million, respectively. The decreases in Adjusted EBITDA of $4.1 million (or 9.8%) and $4.5 million (or 4.0%) for the three and nine months ended September 30, 2012, respectively, compared to the three and nine months ended September 30, 2011, are driven by the decreased operating income generated (which is consistent with our planned long-term investment strategy) and the net unfavorable impact of translating foreign currencies into U.S. dollars.

Minimum Contract Value

Management monitors sales performance based on a measure referred to by management as Minimum Contract Value (“MCV”). MCV is the incremental future minimum committed revenue of new sales agreements signed in the current period by our customers. If the new contract signed is to replace an existing revenue stream, the MCV is adjusted to reflect only the incremental value from the sale.

MCV for the three ~~and nine~~ months ended ~~September~~March 3031, 2013 and 2012 was $5047.1 million and $~~155~~38.46 million, respectively~~, which are increases of $5~~.4 ~~million~~The ~~(or 12.1%) and~~ $358.75 million, (or 2922.80%), ~~respectively,~~increase ~~when~~in ~~compared to an~~ MCV ~~of $44.7 million and $119.7 million~~ for ~~the~~ three ~~and nine~~ months ended ~~September~~March 3031, ~~2011. The~~2013 ~~MCV~~compared ~~increase~~to ~~for~~ the three months ended ~~September~~March 3031, 2012, iswas primarily due to the effect of ~~both Messaging and~~ Managed Services deals signed in the ~~Europe-Middle~~first ~~East-Africa~~quarter ~~(“EMEA”)~~of ~~and~~2013 ~~Asia-Pacific~~ (~~“ASPAC”)~~specifically ~~regions~~within ~~and Brazil. The MCV increase for~~ the ~~nine~~Commercial ~~months~~sector ~~ended September 30, 2012 is primarily due to the effect of Managed Services deals~~ in North America ~~(specifically~~and ~~within~~ the ~~Financial Services sector)~~Europe, ~~EMEA,~~Middle-East ~~Japan~~ and ~~Brazil~~Africa (“EMEA”) region).

The MCV calculations are not reflected or recorded within the condensed consolidated financial statements. MCV is not a measure of financial condition or financial performance under U.S. GAAP and should not be considered as an alternative to revenues, deferred income ~~or revenues~~, as a measure of financial condition, or operating performance.

Results of Operations

Three months ended ~~September~~March 3031, ~~2012~~2013 compared to three months ended ~~September~~March 3031, ~~2011~~2012

Revenues. Revenues decreased by $10.42 million, or 10.21%, to $~~121~~118.37 million for the three months ended ~~September~~March 3031, ~~2012~~2013 from $~~122~~118.79 million for the three months ended ~~September~~March 3031, ~~2011~~2012. The decrease was principally ~~due~~a toresult of expected competitive pricing pressure and customer attrition in our Messaging Services and Data Synchronization revenue, the planned de-emphasis of our Custom Outsourcing Services line of business, and the unfavorable impact of translating revenues generated in foreign currencies to U.S. dollars. The decrease was partially offset by continued growth of our Managed Services revenues in ~~each~~all ~~of our~~ regions, ~~with~~but particularly in the ~~exception~~North ofAmerica, EMEA and Japan regions. The relatively stronger U.S. dollar during the three months ended ~~September~~March 3031, ~~2012~~2013, as compared to the three months ended ~~September~~March 3031, ~~2011~~2012, resulted in a $41.24 million decrease in our revenues from translating revenues generated in foreign currencies into U.S. dollars. A comparison of our revenues by service line is as follows:

· Messaging Services revenues decreased by $62.48 million, or 105.91%, to $5251.35 million for the three months ended ~~September~~March 3031, ~~2012~~2013 from $5854.73 million for the three months ended ~~September~~March 3031, ~~2011~~2012. The decrease resulted principally from $31.7 million in ~~aggregate~~net decreases ~~resulting~~on ~~from~~Messaging Services projects due to price reductions and customer attrition for the three months ended ~~September~~March 3031, ~~2012~~2013, along with the $21.71 million unfavorable impact of translating revenues generated in foreign currencies into U.S. dollars for the respective three month periods.

· Managed Services revenues increased by $53.85 million, or 148.75%, to $45.10 million for the three months ended ~~September~~March 3031, ~~2012~~2013 from $3941.35 million for the three months ended ~~September~~March 3031, ~~2011~~2012. The increase was principally due to $63.78 million of revenue generated by new Managed Services projects for the three months ended ~~September~~March 3031, ~~2012~~2013, partially offset by the $0.93 million unfavorable ~~impact~~impacts of translating revenues generated in foreign currencies into U.S. dollars for the respective three month periods.

· B2B Software and Services, ~~Data Synchronization and Custom Outsourcing Services~~ revenues ~~decreased~~increased ~~in the aggregate~~ by $0.81 million, or 30.46%, to ~~nearly~~ $2310.98 million for the three months ended ~~September~~March 3031, ~~2012~~2013 from $2410.7 million for the three months ended ~~September~~March 3031, ~~2011~~2012. The ~~aggregate~~increase ~~decrease~~was ~~includes~~principally ~~$0.2~~due ~~million~~to ~~resulting from price reductions and customer attrition, along with~~ $0.61 million of ~~unfavorable~~revenue ~~impact of translating revenues~~ generated inby ~~foreign~~new ~~currencies~~B2B ~~into~~Software ~~U.S.~~Services ~~dollars~~projects for the ~~respective~~ three ~~month~~months ~~periods~~ended March 31, 2013.

~~Cost~~· ofData ~~revenues. Cost~~Synchronization of revenues ~~increased~~decreased by $20.85 million, or 45.46%, to $678.20 million for the three months ended ~~September~~March 3031, ~~2012~~2013 from $648.45 million for the three months ended ~~September~~March 3031, ~~2011~~2012. The ~~increase~~decrease inresulted ~~cost~~principally offrom ~~revenues~~$0.5 ~~for~~million ~~the three months ended September 30, 2012 was consistent with the overall revenue generation activities and costs associated with the planned investments~~ in ~~our~~net ~~business~~decreases ~~including: data~~on ~~center~~Data ~~upgrades,~~Synchronization ~~hardware/software~~projects ~~maintenance~~due ~~contracts, enhancements~~ to ~~applications~~price ~~hosting~~reductions and ~~networking~~customer ~~services,~~attrition ~~and increased travel costs associated with the Customer Support organization. Cost of revenues represents 55.4% of revenues~~ for the three months ended ~~September~~March 3031, ~~2012, as compared to 52~~2013.~~5% for the three months ended September 30, 2011.~~

36· Custom Outsourcing Services revenues decreased by $0.5 million, or 12.3%, to $3.4 million for the three months ended March 31, 2013 from $3.9 million for the three months ended March 31, 2012. The decrease resulted principally from $0.5 million in net decreases on Custom Outsourcing Services projects due to price reductions, customer attrition and our planned de-emphasis for the three months ended March 31, 2013.

~~Sales~~Cost ~~and~~of ~~marketing~~revenues. ~~Sales~~ ~~and~~Cost ~~marketing~~of ~~expenses~~revenues ~~were~~increased ~~essentially~~by ~~unchanged~~$1.3 atmillion, or 2.0%, to $1766.10 million for ~~both~~the ofthree months ended March 31, 2013 from $64.7 million for the three months ~~periods~~ ended ~~September~~March 3031, 2012 ~~and 2011~~. The ~~increases~~increase ~~for~~in ~~higher~~cost ~~salary~~of ~~and~~revenues ~~benefit~~for ~~costs~~the ~~plus~~three ~~higher~~months ~~sales~~ended ~~commissions~~March ~~were~~31, ~~largely~~2013 was primarily driven by higher salary and benefit costs associated with planned increases in headcount, ~~but~~partially ~~were~~ offset by alower ~~reduction~~contractor costs associated with the conversion of certain contractors to employees in ~~consulting~~the second half of 2012, higher capitalization of internal use software for work on planned applications enhancements, and ~~professional~~increased ~~services~~deferral ~~fees. Sales~~of direct and ~~marketing~~relevant ~~expenses~~costs ~~represent~~associated 14with implementation of long-term customer contracts in 2013.1 Cost of revenues represented 55.6% of revenues for the three months ended ~~September~~March 3031, ~~2012~~2013, as compared to 1354.95% ~~of revenues~~ for the three months ended ~~September~~March 3031, ~~2011~~2012.

~~General~~Sales and ~~administrative~~marketing. ~~General~~ Sales and ~~administrative~~marketing expenses ~~decreased~~increased by $0.47 million, or 24.23%, to $1517.09 million for the three months ended ~~September~~March 3031, ~~2012~~2013 from $1517.42 million for the three months ended ~~September~~March 3031, ~~2011~~2012. The ~~decrease~~increase was primarily due to ~~lower consulting and professional services fees, lower benefit rate utilization in the U.S. and the impact of translating foreign currencies into U.S. dollars. The decrease was partially offset by~~ higher salary and benefit costs ~~associated~~largely ~~with~~driven ~~increased~~by ~~headcount~~planned increases in ~~the~~headcount, ~~U.K.~~along ~~and~~with ~~increased~~higher ~~employee relocation costs within the Customer Support organization~~commissions. ~~General~~ Sales and ~~administrative~~marketing ~~expenses~~expense ~~represent~~represented 1215.41% of revenues for the three months ended ~~September~~March 3031, ~~2012~~2013, as compared to 1214.54% of revenues for the three months ended ~~September~~March 3031, ~~2011~~2012.

~~The~~General ~~impact~~and ofadministrative. ~~translating~~General ~~foreign~~and ~~currencies~~administrative ~~into~~expenses Udecreased by $1.S1 million, or 6.0%, ~~dollars~~to ~~caused~~$17.7 ~~cost~~million offor ~~revenues~~the three months ended March 31, ~~sales~~2013 ~~and~~from ~~marketing~~$18.8 million for the three months ended March 31, ~~and~~2012. However, the total general and administrative expenses toincluded be$0.1 ~~approximately~~million and $30.14 million ~~lower~~of inrestructuring ~~aggregate~~charges for the three months ended ~~September~~March 3031, 2013 and 2012, asrespectively, ~~compared~~which towere presented separately in the ~~three~~prior ~~months~~year ~~ended~~but ~~September~~have ~~30,~~been ~~2011~~reclassified to general and administrative expense for current year presentation purposes. Restructuring charges include employee severance related

Restructuring charges. Restructuring charges were $0.4 million for the three months ended September 30, 2012, compared to $0.7 million for the three months ended September 30, 2011. For the three months ended September 30, 2012, the restructuring charges include $0.3 million of severance related costs for six employees and $0.1 million for facilities. For the three months ended September 30, 2011, the restructuring charges include $0.5 million of severance related costs for eight employees and $0.2 million for facilities.33

~~Operating~~costs ~~income. Operating~~and ~~income~~the ~~decreased~~costs byassociated ~~$3.7~~with ~~million~~the todarkening ~~$21.5~~of ~~million~~facilities ~~for~~in the ~~three~~respective ~~months~~periods. ~~ended~~The ~~September~~decrease ~~30,~~was ~~2012~~primarily ~~compared~~due to ~~$25.2~~lower ~~million~~facilities ~~for~~occupancy ~~the~~costs, ~~three~~lower ~~months~~benefit ~~ended~~costs, ~~September~~lower 30restructuring charges, ~~2011. The~~and ~~14.6%~~the ~~decrease~~March in2013 ~~operating~~favorable ~~income~~settlement ~~for~~of ~~the~~a ~~three~~patent ~~months~~infringement ~~ended~~allegation. ~~September~~The ~~30,~~decrease ~~2012,~~was ispartially ~~primarily~~offset ~~attributable~~by tohigher ~~the~~salary ~~$2.8~~costs ~~million~~associated ~~increase~~with planned increases in ~~our~~headcount. ~~cost~~General and administrative expense represented 14.9% of revenues ~~and~~for the ~~$1.1~~three ~~million~~months ~~net~~ended ~~unfavorable~~March ~~impact~~31, of2013, ~~translating~~as ~~foreign~~compared ~~currencies~~to ~~into U~~15.S.8% ~~dollars~~of revenues for the ~~respective~~ three ~~month~~months ~~periods~~ended March 31, 2012.

~~Interest~~The ~~expense,~~impact ~~net. Interest~~of ~~expense,~~translating ~~net~~foreign ~~decreased~~currencies byinto $0U.1S. ~~million~~dollars tocaused ~~$21.0~~cost ~~million~~of ~~for~~revenues, ~~the~~sales ~~three~~and ~~months~~marketing, ~~ended~~and ~~September~~general ~~30,~~and ~~2012~~administrative ~~compared~~expenses to be approximately $~~21.~~1.0 million lower in aggregate for the three months ended ~~September~~March 3031, ~~2011. The decrease in interest expense~~2013, ~~net~~as ~~between~~compared ~~the respective periods is primarily attributable~~ to ~~lower~~the ~~interest~~three ~~costs~~months ~~associated~~ended ~~with~~March ~~Revolver~~31, ~~borrowings~~2012.

~~Other~~Operating income ~~(expense), net~~. ~~Other~~ Operating income ~~(expense),~~decreased ~~net~~by is$1.1 ~~primarily~~million ~~comprised~~to of$17.1 ~~gains~~million ~~and~~for ~~losses~~the onthree ~~foreign~~months ~~currency~~ended ~~transactions. Other~~March ~~income (expense)~~31, ~~net~~2013 ~~was~~compared to $018.72 million ~~income~~for ~~and~~the $2three months ended March 31, 2012. The 5.8% ~~million~~decrease ~~expense~~in operating income for the three months ended ~~September~~March 3031, ~~2012~~2013, is primarily attributable to the $1.5 million net increase of our cost of revenues over our revenue decrease and ~~2011~~the $0.7 million increase in sales and marketing expenses, ~~respectively~~partially offset by the $1.1 million decrease in general and administrative expenses.

~~Income~~Interest ~~tax~~ expense, net. ~~Income~~ Interest ~~tax~~ expense, ~~was~~net decreased by $10.32 million to $21.1 million for the three months ended ~~September~~March 3031, ~~2012~~2013 compared to $121.3 million for the three months ended ~~September~~March 3031, ~~2011~~2012. The ~~income~~decrease ~~tax~~in ~~expenses~~interest ~~for~~expense, ~~the~~net ~~three~~between ~~months~~the ~~ended~~respective ~~September~~periods ~~30,~~is ~~2012~~primarily ~~and~~attributable ~~2011,~~to ~~respectively,~~having ~~are~~no ~~related~~outstanding ~~primarily~~borrowings tounder ~~taxes~~the ~~for~~Revolver ~~foreign~~during ~~jurisdictions~~the inthree ~~which~~months weended ~~have~~March ~~net~~31, ~~taxable income~~2013.

~~Net~~Other income (~~loss~~expense)~~. Net~~, ~~income (loss) was $0~~net.1 ~~million~~Other ~~net loss for the three months ended September 30~~expense, ~~2012~~net ~~compared~~was to $02.15 million ~~net~~and ~~income for the three months ended September 30, 2011. The~~ $0.27 million ~~decrease in net income~~ for the three months ended ~~September~~March 3031, ~~2012~~2013 ~~compared~~and to2012, ~~the~~respectively. ~~three~~Other ~~months~~income ~~ended September 30~~(expense), ~~2011~~net is ~~principally~~primarily ~~due~~comprised toof ~~the~~gains ~~decrease~~and inlosses ~~operating income, partially offset by the increased gains~~ on foreign currency transactions ~~between the comparative periods~~.

~~Nine~~Income tax expense. Income tax expense was $0.8 million for the three months ended ~~September~~March 3031, ~~2012~~2013, which was a slight increase compared to ~~nine~~$0.7 million for the three months ended ~~September~~March 3031, ~~2011~~2012. The income tax expense for the three months ended March 31, 2013 and 2012, respectively, are related primarily to taxes for foreign jurisdictions in which we have net taxable income.

~~Revenues. Revenues~~Net ~~increased~~income ~~by $5~~(loss).4 ~~million,~~Net orloss ~~1.5%,~~was to $~~361~~7.03 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013 ~~from~~compared to a $~~355~~4.6 million net loss for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012. The ~~increase was principally due to continued growth of our Managed Services revenues, particularly in the North America, EMEA and ASPAC regions~~$2. ~~The~~7 million increase ~~was partially offset by competitive pricing pressure and customer attrition~~ in ~~our~~net ~~Messaging~~loss ~~Services~~for ~~revenue,~~ the ~~planned~~three de-emphasis of our Custom Outsourcing Services line of business, and the unfavorable impact of translating revenues generated in foreign currencies to U.S. dollars. The relatively stronger U.S. dollar during the nine months ended ~~September~~March 3031, ~~2012,~~2013 as compared to the ~~nine~~three months ended ~~September~~March 3031, ~~2011,~~2012 ~~resulted~~is inprincipally adue ~~$7.2~~to ~~million~~the decrease in ~~our~~operating ~~revenues~~income ~~from~~and ~~translating~~the ~~revenues~~increase ~~generated~~ in foreign ~~currencies~~currency ~~into~~transaction ~~U.S.~~losses, ~~dollars. A~~partially ~~comparison~~offset ofby ~~our~~the ~~revenues~~decrease byin ~~service~~interest ~~line~~expense isbetween asthe ~~follows:~~comparative periods.

· Messaging Services revenues decreased by $14.2 million, or 8.1%, to $160.3 million for the nine months ended September 30, 2012 from $174.5 million for the nine months ended September 30, 2011. The decrease resulted principally from $9.7 million in aggregate decreases resulting from price reductions and customer attrition for the nine months ended September 30, 2012, along with the $4.5 million unfavorable impact of translating revenues generated in foreign currencies into U.S. dollars for the respective nine month periods.

· Managed Services revenues increased by $22.9 million, or 21.2%, to $130.5 million for the nine months ended September 30, 2012 from $107.6 million for the nine months ended September 30, 2011. The increase was principally due to $24.3 million of revenue generated by new Managed Services projects for the nine months ended September 30, 2012, partially offset by the $1.4 million unfavorable impacts of translating revenues generated in foreign currencies into U.S. dollars for the respective nine month periods.

· B2B Software and Services, Data Synchronization and Custom Outsourcing Services revenues decreased in the aggregate by $3.3 million, or 4.5%, to $70.2 million for the nine months ended September 30, 2012 from $73.5 million for the nine months ended September 30, 2011. The aggregate decrease includes $2.0 million resulting from price reductions and customer attrition, along with $1.3 million of unfavorable impact of translating revenues generated in foreign currencies into U.S. dollars for the respective nine month periods.

Cost of revenues. Cost of revenues increased by $7.9 million, or 4.2%, to $198.8 million for the nine months ended September 30, 2012 from $190.9 million for the nine months ended September 30, 2011. The increases in cost of revenues for the nine months ended September 30, 2012 was consistent with the overall increases in revenues and was driven by increased costs associated with the planned investments in our business including: data center upgrades, hardware/software maintenance contracts, enhancements to applications hosting and networking services, and higher salary and benefit costs associated with increased headcount. Cost of revenues represents 55.1% of revenues for the nine months ended September 30, 2012, as compared to 53.7% for the nine months ended September 30, 2011.

Sales and marketing. Sales and marketing expenses increased by $2.2 million, or 4.5%, to $50.8 million for the nine months ended September 30, 2012 from $48.6 million for the nine months ended September 30, 2011. The increase was primarily due to higher salary and benefit costs along with higher sales commissions largely driven by planned increases in headcount. Sales and marketing expenses represent 14.1% of revenues for the nine months ended September 30, 2012, as compared to 13.7% of revenues for the nine months ended September 30, 2011.

General and administrative. General and administrative expenses increased by $0.1 million, or 0.2%, to $49.9 million for the nine months ended September 30, 2012 from $49.8 million for the nine months ended September 30, 2011. The increase was primarily due to higher salary and benefit costs driven by: increased headcount in the U.K., Japan and Brazil; increased bad debt provisions in the U.K. and Brazil; higher depreciation costs in Brazil resulting from their recently completed office facilities upgrade; and the unfavorable impact of translating foreign currencies into U.S. dollars. The increase was partially offset by lower audit, professional services and contractor fees. General and administrative expenses represent 13.8% of revenues for the nine months ended September 30, 2012, as compared to 14.0% for the nine months ended September 30, 2011.

The impact of translating foreign currencies into U.S. dollars caused cost of revenues, sales and marketing, and general and administrative expenses to be approximately $5.7 million lower in aggregate for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011.

Restructuring charges. Restructuring charges were $1.4 million for the nine months ended September 30, 2012, compared to $2.3 million for the nine months ended September 30, 2011. For the nine months ended September 30, 2012, the restructuring charges include $0.9 million of severance related costs for 22 employees and $0.5 million for facilities. For the nine months ended September 30, 2011, the restructuring charges include $1.5 million of severance related costs for 57 employees and $0.8 million for facilities.

Operating income. Operating income decreased by $3.8 million to $60.2 million for the nine months ended September 30, 2012 compared to $64.0 million for the nine months ended September 30, 2011. The 5.9% decrease in operating income for the nine months ended September 30, 2012, is primarily attributable to the $2.5 million net increase of our cost of revenues over our revenue increase and the $1.5 million net unfavorable impact of translating foreign currencies into U.S. dollars for the respective nine month periods.

Interest expense, net. Interest expense, net increased by $1.9 million to $63.6 million for the nine months ended September 30, 2012 compared to $61.7 million for the nine months ended September 30, 2011. The increase in interest expense, net between the respective periods is primarily attributable to the combined net effect of interest on the swap and the changes in the fair value of the interest rate swap (which was settled in April 2011 and was reflected as a component of interest expense) of $1.8 million, net for the nine months ended September 30, 2011.

Other income (expense), net. Other income (expense), net is primarily comprised of gains and losses on foreign currency transactions. Other income (expense), net was $3.7 million expense and $3.4 million expense for the nine months ended September 30, 2012 and 2011, respectively.

Income tax expense. Income tax expense was $3.4 million for the nine months ended September 30, 2012 compared to $2.6 million for the nine months ended September 30, 2011. The income tax expenses for the nine months ended September 30, 2012 and 2011, respectively, are related primarily to taxes for foreign jurisdictions in which we have net taxable income.

Net income (loss). Net income (loss) was $10.5 million net loss for the nine months ended September 30, 2012 compared to a $3.7 million net loss for the nine months ended September 30, 2011. The $6.8 million increase in net loss for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 is principally due to the decrease in operating income, the increase in interest expense and the increase in income tax expense between the comparative periods.

Sources and Uses of Cash

The following table is a summary of sources and uses of cash during the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013 and ~~2011~~2012 (in thousands):

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2012			2011
	2013			2012
Cash flows provided by operating activities	$	6225,~~830~~046		$	5230,~~177~~187
Cash flows used in investing activities		(3110,~~405~~421	)		(3511,~~395~~107	)
Cash flows used in financing activities		~~(3,421~~––	)		(83,~~002~~400	)
Effect of exchange rate changes on cash		(~~154~~425	)		8488
Net increase in cash and cash equivalents	$	2714,~~850~~200		$	815,~~864~~768
Cash and cash equivalents, end of period	$	4049,~~818~~230		$	2528,~~190~~736

~~Nine~~Three months ended ~~September~~March 3031, ~~2012~~2013 compared to ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012

Net cash provided by operating activities was $6225.80 million compared to $5230.2 million provided by operating activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013 and ~~2011~~2012, respectively. The ~~increase~~$5.2 million decrease in net cash provided by operating activities ofwas ~~$10.6~~attributable ~~million~~to ~~was~~the ~~mainly~~increase ~~attributable~~in tonet ~~managing~~loss ~~trade~~during ~~payables~~the comparable periods and ~~improved~~the ~~collections~~timing of payments on certain trade payables, specifically management fees, partially offset by continued improvement in collecting trade accounts receivable.

Net cash used in investing activities was $31.4 million for the nine months ended September 30, 2012 compared to $35.4 million for the nine months ended September 30, 2011. Net cash used in investing activities for the nine months ended September 30, 2012 consisted of capital expenditures of $31.4 million for software and equipment primarily related to continued enhancements of our service platform. Net cash used in investing activities for the nine months ended September 30, 2011 included $1.1 million for the acquisition of RollStream and capital expenditures of $34.3 million for software and equipment primarily related to continued enhancements of our service platform. Capital expenditures for the nine months ended September 30, 2012 and 2011 included $18.6 million and $19.4 million, respectively, of labor costs capitalized for the development of internal-use software.

Net cash used in ~~financing~~investing activities was $310.4 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013 compared to $811.01 million ~~used in financing activities~~ for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012. Net cash used in ~~financing~~investing activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013 ~~was~~and ~~from~~2012 ~~$3.0~~consisted ~~million~~entirely inof ~~net~~capital ~~repayments~~expenditures ~~under~~for ~~the~~software ~~Revolver~~ and ~~$0.4~~equipment ~~million~~primarily inrelated ~~deferred~~to ~~financing~~continued ~~costs~~enhancements ~~associated~~of ~~with~~our ~~amending~~service ~~the~~platform ~~Revolver. Net~~for ~~cash~~both ~~used~~periods. inCapital ~~financing~~expenditures ~~activities~~ for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2013 ~~was~~and ~~largely~~2012 ~~from~~included $87.03 million inand ~~net~~$6.1 ~~repayments~~million, ~~under~~respectively, of labor costs capitalized for the ~~Revolver~~development of internal-use software.

39No cash was provided by or used in financing activities during the three months ended March 31, 2013 compared to $3.4 million net cash used in financing activities for the three months ended March 31, 2012. Net cash used in financing activities for the three months ended March 31, 2012 was from $3.0 million in net repayments under the Revolver and $0.4 million in deferred financing costs associated with amending the Revolver.

Liquidity and Capital Resources

OnCash ~~December~~and 23cash equivalents were approximately $49.2 million and $28.7 million at March 31, ~~2009~~2013 and 2012, werespectively. ~~completed~~At March 31, 2013 and 2012, there were no borrowings outstanding under the ~~refinancing~~revolving credit facility of our ~~then~~Credit ~~outstanding~~and ~~indebtedness~~Guaranty byAgreement ~~issuing~~(the “Revolver”). At March 31, 2013 and 2012, approximately $~~785~~10.09 million inand ~~aggregate~~$11.7 ~~principal~~million, ~~amount~~respectively, of ~~senior~~the ~~secured~~$50.0 ~~notes~~million (of Revolver capacity was pledged as security for certain letters of credit. Therefore, the ~~“Senior~~total ~~Secured~~available ~~Notes”)~~cash ~~with~~liquidity, anincluding ~~original~~cash ~~issue~~and ~~discount~~cash equivalents and total Revolver capacity, less outstanding borrowings and letters of credit secured by the Revolver, was approximately $1888.63 million and $67.0 million at March 31, 2013 and 2012, respectively.

~~The~~Our ~~Senior~~primary ~~Secured~~liquidity ~~Notes~~needs ~~carry~~have anbeen ~~interest~~to ~~rate~~service ofour ~~9.75%~~debt ~~with~~and ~~interest~~finance ~~payable~~our onworking ~~June~~capital 15 and ~~December~~capital 15expenditures, ~~each~~which ~~year. The~~we ~~Senior~~have ~~Secured~~historically ~~Notes~~satisfied ~~will~~with ~~mature~~our oncurrent ~~June~~cash 15balances, ~~2015. The~~cash ~~optional~~flows ~~redemption~~from ~~features~~operations onand ~~the~~borrowings ~~Senior~~under ~~Secured~~our ~~Notes that are remaining as of September 30, 2012, are summarized as follows:~~Revolver.

·In WeMay ~~may~~2012, atwe ~~any~~deposited ~~time~~approximately on$3.3 ormillion ~~after~~as ~~June~~collateral ~~15,~~for ~~2012~~a bank guarantee in Brazil required in connection with a long-standing tax dispute with a municipality in Brazil. In April 2013, ~~and~~we ~~from~~deposited ~~time~~an additional $0.4 million as collateral. The terms of the bank guarantee require the cash collateral or a letter of credit to ~~time~~remain ~~redeem~~on deposit as long as the ~~Senior~~bank ~~Secured~~guarantee ~~Notes,~~is in ~~whole~~place. We can terminate the bank guarantee or inreplace ~~part,~~the cash collateral with a letter of credit at our option at any time and, therefore, have unrestricted access to the ~~redemption~~cash. ~~prices~~However, ~~defined~~terminating the bank guarantee would be expected to have detrimental legal and tax consequences that could prevent us from conducting business as usual in ~~the~~Brazil. ~~indenture~~We ~~governing~~may replace the ~~Senior~~bank ~~Secured~~guarantee ~~Notes~~and related cash collateral with a letter of credit, likely under our Revolver, upon negotiation of commercially acceptable terms and conditions, if any.

We expect that cash flows from foreign operations will be required to meet our domestic debt service requirements. There is no assurance that the foreign subsidiaries will generate sufficient cash flow or that the laws in foreign jurisdictions will not change to limit our ability to repatriate these cash flows or increase the tax burden on the collections. However, we have not had, nor do we have any knowledge of, any such limitations currently, nor in the near-term, that could impact our ability to meet our operating requirements over the next twelve months.

GXS Worldwide, Inc. is a holding company that conducts its operations through its wholly-owned subsidiary GXS, Inc. and its domestic and foreign subsidiaries. The financial statements of GXS, Inc. are substantially identical to the GXS Worldwide, Inc. financial statements and the total assets, revenues, operating income, net income (loss) and cash flows of GXS, Inc. are expected to continue to constitute substantially all of the corresponding amounts for GXS Worldwide, Inc. and its subsidiaries. All equity interests pledged as collateral for the Senior Secured Notes, other than those of GXS, Inc., are wholly-owned consolidated subsidiaries of GXS, Inc.

Senior Secured Notes

On December 23, 2009, we completed the refinancing of our then outstanding indebtedness by issuing $785.0 million in aggregate principal amount of Senior Secured Notes with an original issue discount of $18.6 million.

The Senior Secured Notes carry an interest rate of 9.75% with interest payable on June 15 and December 15 each year. The Senior Secured Notes will mature on June 15, 2015. The optional redemption features on the Senior Secured Notes that are remaining as of December 31, 2012, are summarized as follows:

We may at any time on or after June 15, 2012, and from time to time, redeem the Senior Secured Notes, in whole or in part, at the redemption prices defined in the indenture governing the Senior Secured Notes. None have been redeemed to date.

In each case, we must also pay accrued and unpaid interest, if any, to the redemption date.

· In the event of a change in control, we must offer to repurchase any outstanding Senior Secured Notes at a price equal to 101.0% of the principal amount, plus accrued and unpaid interest, if any.

~~Following~~The ~~the~~agreements ~~December~~governing ~~23,~~our ~~2009~~Senior ~~debt~~Secured ~~refinancing,~~Notes impose limitations of our ~~principal~~ability ~~sources~~to, ofamong ~~liquidity~~other ~~have~~things, ~~been~~incur additional indebtedness, ~~and~~incur ~~are~~liens, ~~expected~~consummate tocertain ~~continue~~asset tosales, bemake certain restricted payments, ~~our~~enter ~~current~~into ~~cash~~certain ~~balances~~transactions with affiliates, ~~cash~~issue ~~flow~~capital ~~from~~stock, ~~operations~~merge ~~and~~or ~~borrowings~~consolidate ~~under~~with ~~the~~any ~~revolving~~other ~~credit~~person ~~facility~~or ofsell, ~~our~~transfer ~~Credit~~or ~~and~~otherwise ~~Guaranty~~dispose ~~Agreement~~of any assets.

The agreements governing our Senior Secured Notes impose limitations of our ability, to among other things, incur additional indebtedness, incur liens, consummate certain asset sales, make certain restricted payments, enter into certain transactions with affiliates, issue capital stock, merge or consolidate with any other person or sell, transfer or otherwise dispose of any assets.Revolver

The Credit and Guaranty Agreement entered into on December 23, 2009 with various lenders ~~provides~~provided us with a Revolver with an aggregate principal amount of $50.0 million, the proceeds of which ~~shall~~are be used for working capital, supporting letters of credit and general corporate purposes. On February 29, 2012, the Revolver was amended. As amended, the Revolver has the following key terms, among others:

Expiration date of March 15, 2015, any outstanding borrowings must be repaid in full by this date, and all commitments will terminate on this date;

At our option, an interest rate at 4.50% above the London Interbank Offered Rate (“LIBOR”), or a rate that is 3.50% above the administrative agent’s “base rate” per annum;

Interest of 0.50% per annum on unused Revolver borrowing capacity;

Minimum interest coverage ratio, as defined in the Revolver, of 1.75; and

Maximum net leverage ratio, as defined in the Revolver, of 5.75.

No other covenants or conditions were changed by the amendment. We paid a closing fee of approximately $0.4 million in connection with this amendment.

The Revolver also requires that we meet and maintain certain financial ratios and tests, including those described above. Our ability to comply with these covenants and to meet and maintain the financial ratios is material to the success of our business and may be affected by events beyond our control. Our failure to comply with these covenants could result in a default under the Revolver and the ~~Indenture~~indenture governing our Senior Secured Notes. At ~~September~~March 3031, ~~2012~~2013, we had an interest coverage ratio of 1.9386 and a net leverage ratio of 5.0116, calculated as defined in the Revolver, and we were in compliance with all financial and ~~nonfinancial~~non-financial covenants.

Cash and cash equivalents were approximately $40.8 million and $13.0 million at September 30, 2012 and December 31, 2011, respectively. At September 30, 2012, there were no borrowings outstanding under the Revolver and at December 31, 2011, there were $3.0 million of outstanding borrowings under the Revolver. At both September 30, 2012 and December 31, 2011, approximately $11.7 million of the $50.0 million of Revolver capacity was pledged as security for certain letters of credit. Therefore, the total available cash liquidity, including cash and cash equivalents and total Revolver capacity, less outstanding borrowings and letters of credit secured by the Revolver, was approximately $79.1 million and $48.3 million at September 30, 2012 and December 31, 2011, respectively.

In May 2012, we deposited approximately $3.3 million as collateral for a bank guarantee in Brazil required in connection with a long-standing tax dispute with a municipality in Brazil. The terms of the bank guarantee require the cash collateral or a letter of credit to remain on deposit as long as the bank guarantee is in place. We can terminate the bank guarantee or replace the cash collateral with a letter of credit at our option at any time and, therefore, have unrestricted access to the cash. However, terminating the bank guarantee would be expected to have detrimental legal and tax consequences that could prevent us from conducting business as usual in Brazil. We intend to replace the bank guarantee and related cash collateral with a letter of credit under our Revolver in the near future upon negotiation of commercially acceptable terms and conditions.

In September 2012, we received approximately $1.1 million, as trustee, from a death benefit insurance policy for a recently deceased employee. We recorded the cash receipt along with a corresponding current liability. We are awaiting distribution instructions from the insurance company which we anticipate receiving before the end of 2012. While the cash is not restricted, we do not intend to use it for Company purposes at any time prior to distribution.

GXS Worldwide, Inc. is a holding company that conducts its operations through its wholly owned subsidiary GXS, Inc. and its domestic and foreign subsidiaries. The financial statements of GXS, Inc. are substantially identical to the GXS Worldwide, Inc. financial statements and the total assets, revenues, operating income, net income (loss) and cash flows of GXS, Inc. are expected to continue to constitute substantially all of the corresponding amounts for GXS Worldwide, Inc. and its subsidiaries. All equity interests pledged as collateral for the Senior Secured Notes, other than those of GXS, Inc., are wholly owned consolidated subsidiaries of GXS, Inc.

We expect that cash flows from foreign operations will be required to meet our domestic debt service requirements. There is no assurance that the foreign subsidiaries will generate sufficient cash flow or that the laws in foreign jurisdictions will not change to limit our ability to repatriate these cash flows or increase the tax burden on the collections. However, we have not had, nor do we have any knowledge of, any such limitations currently, nor in the near-term that could impact our ability to meet our operating requirements over the next twelve months.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which are prepared in accordance with ~~accounting principles generally accepted in the~~ U.S. GAAP. Some accounting policies require us to make estimates and assumptions about future events that affect the amounts reported in our condensed consolidated financial statements and the accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any differences may be material to our condensed consolidated financial statements. A description of all of our significant accounting policies used is included in Note 2 to our condensed consolidated financial statements, included herein. Some of these policies involve a higher degree of judgment and complexity in their application and represent the critical accounting policies used in the preparation of our condensed consolidated financial statements.

These critical accounting policies, in management’s judgment, are those described below. If different assumptions or conditions were to prevail, or if our estimates and assumptions prove to be incorrect, actual results could be materially different from those reported.

Acquisition Accounting

Revenue Recognition

We have ~~various~~five service lines, specifically including: Messaging Services, Managed Services, B2B Software and Services, Data Synchronization, and Custom Outsourcing Services. Our service lines generate revenues from three principal sources, as described in detail below. Regardless of the service line or source, we record revenues net of any taxes (e.g., sales, local, value-added) that are collected from customers and remitted to governmental authorities.

Transaction Processing — We earn recurring transaction processing revenue from facilitating the exchange of business documents among ~~its~~our customers’ computer systems and those of ~~their~~our trading partners. Such revenues are generally based on a per-transaction fee or monthly minimum charge and are recognized in the period in which the related transactions are processed. Revenue on contracts with monthly, quarterly or annual minimum transaction levels are recognized based on the greater of actual transactions or the specified contract minimum amounts.

Professional Services — We earn professional service revenue generally pursuant to time and material contracts and in most instances revenue is recognized as the related services are provided, except when such services are associated with a new project implementation, in which case the associated revenue is deferred over the estimated customer life which approximates the initial contract term as outlined below.

Software Licensing and Maintenance — We earn revenue from the licensing of software applications that facilitate and automate the exchange of information among disparate business systems and applications. Such revenue is recognized when the license agreement is signed, the license fee is fixed and determinable, delivery has occurred, and collection is considered probable. Revenue from licensing software that requires significant customization and modification or where services are otherwise considered essential to the functionality of the software are recognized using the percentage of completion method, based on the costs incurred in relation to the total estimated costs of the contract. Revenue from hosted software applications is recognized ratably over the hosting period unless the customer has the contractual right to take possession of the software without significant penalty and it is feasible for the customer to use the software with its own hardware or contract with another party unrelated to us to host the software. Software maintenance revenue is deferred and recognized on a straight-line basis over the life of the related maintenance period, which is typically one year.

~~Effective~~In ~~January~~accordance 1,with ~~2011, we adopted~~ the provisions of Accounting Standards Update (“ASU”) 2009-13 – Revenue Arrangements with Multiple Deliverables, ~~which~~we ~~requires companies to~~ allocate the overall arrangement consideration to each deliverable by using a best estimate of the selling price of individual deliverables in the arrangement in the absence of vendor specific objective evidence (“VSOE”) or other third-party evidence of the selling price. We ~~identified no significant impact on our condensed consolidated results of operations and financial condition of adopting ASU 2009-13.~~ For non-software arrangements with more than one element of revenue with stand-alone value, we allocate revenue to each component based on VSOE, or third -party evidence of selling price when available, or estimated selling price. VSOE for software maintenance is based on contractual renewal rates. Professional services are separately priced and are based on standard hourly rates determined by the nature of the service and the experience of the professional performing the service.

In certain arrangements, we sell transaction processing along with implementation and start-up services. The implementation and start-up services typically do not have stand-alone value and, therefore, they do not qualify as separate units of accounting and are not separated. ~~These~~ implementation and start-up services do not have stand-alone value outside of our ongoing managed services arrangements, the services are not provided by any other vendor, we do not generally sell implementation and start-up services separately, and the results of such services cannot be re-sold by our customers. Revenues related to implementation and start-up services are recognized over the estimated customer life which, based on our current estimate, approximates the term of the related transaction processing arrangement. In some arrangements, we also sell professional services which do have stand-alone value and can be separated from other elements in the arrangement. The revenue related to these services is recognized as the service is performed.

We defer all direct and relevant costs associated with implementation of long-term customer contracts to the extent such costs can be recovered through guaranteed contract revenues. The unamortized balance of these deferred costs as of September 30, 2012 and December 31, 2011 was $29.1 million and $26.4 million, respectively.37

We defer all direct and relevant costs associated with implementation of long-term customer contracts to the extent such costs can be recovered through guaranteed contract revenues. The unamortized balance of these deferred costs as of March 31, 2013 and December 31, 2012 was $29.2 million and $28.7 million, respectively.

Valuation of Accounts Receivable

We must make estimates of potential uncollectible amounts and credits to be issued in valuing our accounts receivable. We analyze historical credits issued, current economic trends and changes in customer demand and acceptance of our products and services when evaluating the overall adequacy of the provision for sales ~~returns~~credits and allowances. We analyze historical bad debts, customer concentrations, customer credit-worthiness, and current economic trends when evaluating the overall adequacy of the allowance for doubtful accounts. However, if the financial condition of our customers were to deteriorate, their ability to make required payments may become impaired, and increases in these allowances may be required.

Capitalization of Software

We capitalize software development costs in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-40 – Accounting for the Costs of Computer Software Developed or Obtained for Internal-Use. We begin to capitalize costs for software to be used internally when we enter the application development stage. This occurs when we have completed the preliminary project stage, our management authorizes and commits to funding the project, and we believe it is feasible that the project will be completed and the software will perform the intended function. We stop capitalizing costs related to a software project when we believe we have entered the post implementation and operation stage. If we were to make different determinations with respect to the state of development that a software project had achieved, then the amount we capitalize and the amount we charge to expense for that project could differ materially.

The costs we capitalize during the application development stage consist of payroll and related costs for our employees who are directly associated with, and who devote time directly to, a project to develop software for internal- use. We also capitalize the direct costs of materials and services, which generally includes outside contractors, and interest. We do not capitalize any general and administrative or overhead costs or costs incurred during the application development stage related to training or data conversion costs. We capitalize costs related to upgrades and enhancements to internal-use software if those upgrades and enhancements result in additional functionality. If upgrades and enhancements do not result in additional functionality we expense those costs as incurred. If we were to make different determinations with respect to whether upgrades or enhancements to software projects would result in additional functionality, then the amount we capitalize and the amount we charge to expense for that project could differ materially.

We begin to amortize capitalized costs with respect to development projects for internal-use software when the software is ready for use. We generally amortize the capitalized software development costs using the straight-line method over a five-year period. In determining and reassessing the estimated useful life over which the cost incurred for the software should be amortized, we consider the effects of obsolescence, technology, competition and other economic factors. If we were to make different determinations with respect to the estimated useful lives of the software, the amount of amortization we charge in a particular period could differ materially.

In accordance with FASB ASC 985-20 – Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, we expense costs incurred in the development of software sold externally or developed for license to customers until technological feasibility has been established under the working model method. However, we have not capitalized costs since there is generally a short period of time between the date technological feasibility is achieved and the date when the product is available for general release to customers, thus any costs incurred have not been material to date.

Valuation of Long-lived Assets

We periodically evaluate the estimated useful life of property and equipment and, when appropriate, adjust the useful life thereby increasing or decreasing the depreciation expense recorded in the current and in future reporting periods. We also assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

significant underperformance relative to historical or projected future operating results;

significant changes in technology or in the manner of our use of the assets or the strategy for our overall business; and

significant negative industry or economic trends.

When we determine that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment and our analysis of undiscounted cash flow, we measure any impairment based on the fair value of the asset less selling costs. Fair value is typically estimated based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our business. This process is subjective, as it requires management to make estimates and assumptions about future cash flows and discount rates.

Goodwill

We test goodwill and intangible assets with indefinite useful lives for impairment at least annually or whenever there is a change in events or circumstances which may indicate impairment. ~~The~~ In accordance with ASU 2011-08 – Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment, we first assesses various qualitative factors (defined in the guidance) to determine whether it is necessary to perform a quantitative goodwill impairment test. ~~involves~~Should ~~two~~it ~~steps. In~~be ~~the~~necessary ~~first~~to perform the two-step quantitative goodwill impairment test, we first compare the carrying value of the reporting unit which holds the goodwill with the fair value of the reporting unit. If the carrying value is less than the fair value, there is no impairment. If the carrying value exceeds the fair value of the reporting unit, ~~step~~an ~~two~~additional test is performed to measure the impairment loss.

In September 2011, the FASB issued ASU 2011-08 – Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment, which is intended to simplify how an entity is required to test goodwill for impairment under ASU 2010-28 (issued in December 2010) by allowing an entity to first assess qualitative factors (which are defined in the new guidance) to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. We adopted ASU 2011-08 on January 1, 2012, as required.

As of December 31, 2011, we completed goodwill impairment testing in accordance with ASU 2010-28 (including performing the required step-two test) and determined that goodwill was not impaired. Our impairment test was based on a single operating segment and reporting unit structure. The fair value of the reporting unit significantly exceeded the carrying value at December 31, 2011. As of September 30, 2012, we assessed the qualitative factors (as defined in ASU 2011-08) and determined that goodwill was not impaired; as it was more likely than not that the fair value of the entity was greater than the carrying amount.

Restructuring

We calculate ~~the~~any facility-related ~~charge~~costs included in ~~the~~ restructuring charges by discounting the net future cash obligation of the existing leases less anticipated rental receipts to be received from existing and potential subleases. This requires significant judgment about the length of time the space will remain vacant, anticipated cost escalators and operating costs associated with the leases, the market rate at which the space will be subleased, and broker fees or other costs necessary to market the space. These judgments are based upon independent market analysis and assessment from experienced real estate ~~brokers~~advisors. If weMost ~~were~~of toour ~~make~~vacant ~~different~~space ~~determinations~~has ~~with~~been ~~respect~~sublet towith ~~these factors~~ the ~~amounts~~long-term sublease of our ~~restructuring~~former ~~charges~~corporate ~~could~~headquarters ~~differ~~that ~~materially,~~commenced ~~although~~in ~~most~~2009. ofIf ~~our~~we ~~vacant~~were ~~space~~to ~~has~~make ~~been~~different ~~sublet~~determinations with respect to these factors, the ~~sublease~~amounts of our ~~former~~restructuring ~~corporate~~charges ~~headquarters~~could differ materially.

Restructuring charges also include severance expense (payroll and direct benefits) provided to employees who are involuntarily terminated under the terms of a severance arrangement that has been approved by management, has been communicated to the affected employees, and is not an ongoing benefit arrangement or an individual deferred compensation contract. We recognize the severance liability when all conditions for earning the severance amounts have been fulfilled.

Deferred Taxes

We consider the scheduled reversal of deferred tax liabilities, projected future income and tax planning strategies in assessing the realization of deferred tax assets. Management believes we will achieve profitable operations in future years that will enable us to recover the benefit of our deferred tax assets. However, we presently do not have sufficient objective evidence that it is more likely than not that we will realize the benefits from our deferred tax assets and, accordingly, have established a full valuation allowance for our U.S. and selected foreign net deferred tax assets as required by U.S. GAAP.

Contingencies

We periodically record the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. These events are called contingencies, and our accounting for these events is prescribed by FASB ASC 450 – Accounting for Contingencies. This standard defines a contingency as an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur. Contingent losses must be accrued if:

information is available that indicates it is probable that the loss has been incurred, given the likelihood of the uncertain future events; and

the amount of the loss can be reasonably estimated.

The accrual of a contingency involves considerable judgment on the part of management. Legal proceedings have elements of uncertainty, and in order to determine the amount of accrued liabilities required, if any, we assess the likelihood of any adverse judgments or outcomes to pending and threatened legal matters, as well as the best estimate of or potential ranges of amounts of probable losses. We use internal expertise and outside experts, as necessary, to help estimate the probability that a loss has been incurred and the amount or range of the loss. A determination of the amount of accrued liabilities required for these contingencies is made after analysis of each individual issue. The required accrued liabilities may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy.

4439

Recently Issued Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-02 – Comprehensive Income (Topic 220): Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income. This ASU requires an entity to provide additional details regarding any amounts reclassified out of accumulated other comprehensive income by component and present, either on the face of the statement where net income (loss) is presented, or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income (loss). For public entities, the ASU is effective prospectively for reporting periods after December 15, 2012. We have evaluated the impact of adopting ASU 2013-02 and concluded it will have no significant impact on our condensed consolidated financial statements presentation.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Our primary market risk exposures include the effect of foreign currency fluctuations and interest rate changes.

Foreign Currency Risk

The foreign currency financial statements of our international operations are translated into U.S. dollars at current exchange rates, except revenues and expenses, which are translated at average exchange rates during each reporting period. Net exchange gains or losses resulting from the translation of assets and liabilities are accumulated in a separate section of stockholder's deficit titled “accumulated other comprehensive loss.” Therefore, our exposure to foreign currency exchange rate risk occurs when translating the financial results of our international operations to U.S. dollars in consolidation. Our foreign currency risk is primarily for transactions denominated in the Euro, British pound, ~~European euro,~~ Japanese yen, Brazilian real, ~~Australian~~Indian ~~dollar~~rupee, Philippine peso and Canadian dollar.

Although much of our revenues are generated in U.S. dollars, approximately $47.~~7 million, or 39.4%, and $143.~~2 million, or 39.7%, of our total revenues for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012~~2013, ~~respectively,~~ were generated in non-U.S. dollar denominated currencies. Our revenues generated in non-U.S. dollar denominated currencies for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2011~~2012 were also $5247.12 million, or 4239.47%, ~~and 148.0 million, or 41.6%,~~ of our total revenue~~, respectively~~.

Our operating expenses are also generally denominated in U.S. dollars; however, approximately $34.15 million, or 3433.29%, ~~and $102.4 million, or 34.0%,~~ of our total operating expenses for ~~the~~ three ~~and nine~~ months ended ~~September~~March 3031, ~~2012~~2013, ~~respectively,~~ were denominated in foreign currencies. Our operating expenses generated in foreign currencies for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2011~~2012 were $3332.46 million, or 3432.3%, ~~and $96.9 million or 33.2%,~~ of our total operating expenses~~, respectively~~.

Due to the relatively stronger U.S. dollar during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012 and the fact that impact on revenues was greater than the impact on operating expenses~~2013, our operating income was ~~unfavorably~~negatively affected by $10.14 million ~~and $1.5 million~~ when compared to the three ~~and nine~~ months ended ~~September~~March 3031, ~~2011, respectively~~2012.

From a sensitivity analysis viewpoint, based on our financial results for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012~~2013, a hypothetical overall 10.0% change in the U.S. dollar from the average foreign exchange rates during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2012~~2013 would have impacted our revenue and operating income by approximately $4.87 million and $1.43 million, respectively, for the three months ended ~~September~~March 3031, ~~2012 and by approximately $14~~2013.~~3 million and $4.1 million, respectively, for the nine months ended September 30, 2012.~~

Interest Rate Risk

For fixed rate debt, interest rate changes affect the fair value of financial instruments but do not impact earnings or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held constant. Because our Senior Secured Notes bear interest at a fixed rate of 9.75%, our exposure to market risk for changes in interest rates relates primarily to our Revolver ~~and previously to our interest rate swap agreement prior to its expiration in April 2011~~.

On December 23, 2009, we entered into a Credit and Guaranty Agreement which provides us with a $50.0 million revolving credit facility, or “Revolver.” The Revolver was amended on February 29, 2012 and now provides for an interest rate at 4.50% above the LIBOR, or a rate that is 3.50% above the administrative agent’s “base rate”,” at our option~~. Prior to the amendment~~, ~~the~~and ~~actual impact of any change in~~ the ~~applicable~~elimination ~~interest rate on our results~~ of ~~operations~~all ~~could be affected by the existence of~~ interest rate floors ~~established for the LIBOR and the administrative agent’s “base rate”~~.

4540

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and timely reported as provided in Securities and Exchange Commission rules and forms. We periodically review the design and effectiveness of our disclosure controls and procedures worldwide, including compliance with various laws and regulations that apply to our operations. We make modifications to improve the design and effectiveness of our disclosure controls and procedures, and may take other corrective action, if our reviews identify a need for such modifications or actions. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

We have carried out an evaluation, under the supervision and the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~September~~March 3031, ~~2012~~2013. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of ~~September~~March 3031, ~~2012~~2013.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended ~~September~~March 3031, ~~2012~~2013, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4641

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

We are subject to various legal proceedings and claims in the United States and other foreign jurisdictions which arise in the ordinary course of our business. Although we cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, we make provision for potential liabilities when we deem them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments. In some cases, we may be indemnified under various agreements for all or part of certain potential liabilities, additional legal action may be required to recover any potential liability under such indemnity.

InWe ~~2006,~~are ~~Inovis~~also ~~became~~subject ~~aware~~to ofincome ~~patent~~and ~~infringement~~other ~~allegations~~taxes byin athe ~~third~~United ~~party~~States ~~against~~and ~~certain~~other ~~customers~~foreign ofjurisdictions ~~one~~and ofwe ~~Inovis’~~are ~~software~~regularly ~~technology~~under ~~products. In~~audit ~~July~~by ~~2007,~~tax ~~Inovis~~authorities. ~~filed~~Although awe ~~complaint~~believe ~~for~~our ~~declaratory~~tax ~~judgment~~estimates ~~against~~are ~~the~~reasonable, ~~third party in~~ the ~~U.S.~~final ~~District~~determination ~~Court~~ of ~~Delaware,~~tax ~~seeking~~audits ~~a judgment~~ and ~~declaration that neither Inovis nor~~ any ofrelated ~~its~~litigation ~~customers~~or ~~have~~other ~~infringed~~proceedings oncould ~~the~~be ~~patent~~materially atdifferent ~~issue. Inovis~~than ~~filed~~that awhich ~~Request~~is ~~for~~reflected ~~Reexamination~~in ofour ~~such~~tax ~~patent~~provisions ~~with~~and ~~the U~~accruals.S. ~~Patent~~In ~~and~~certain ~~Trademark~~foreign ~~Office (the “USPTO”)~~jurisdictions, ~~which~~we ~~was~~may ~~accepted~~be inrequired ~~May~~to ~~2008,~~place ~~resulting~~on indeposit ~~the amendment and/~~or ~~cancellation~~provide ~~of certain of the patent claims. In September 2009, the USPTO granted~~ a ~~second~~bank ~~Request~~guarantee for ~~Reexamination~~amounts ofclaimed ~~the patent filed~~ by ~~Inovis,~~tax ~~finding~~authorities awhile ~~substantial~~we ~~new~~challenge ~~question~~such ofamounts ~~patentability~~through ~~with respect to all claims~~litigation. In ~~March~~Should ~~2010,~~additional ~~the~~taxes ~~USPTO~~be ~~issued~~assessed anas ~~initial~~a ~~ruling~~result ~~rejecting all~~ of ~~the~~an ~~claims~~audit inor ~~the patent~~litigation, init ~~response~~could tohave ~~which the patent holder filed amended claims. In December 2010, the USPTO issued~~ a ~~final~~material ~~ruling~~effect ~~cancelling~~on ~~certain~~our ofincome ~~the~~tax ~~patent~~provision ~~claims~~ and ~~leaving~~net ~~only~~income ~~one amended claim and its dependent claims. The litigation is currently stayed, but may resume later~~ in ~~2012, or in 2013. Although we believe that~~ the ~~third~~period ~~party’s~~or ~~patent~~periods ~~infringement~~for ~~allegations~~which ~~are without merit, there can be no assurance~~ that wedetermination ~~will~~is ~~prevail in the litigation~~made. ~~An amount of potential loss, if any, cannot be determined at this time.~~

We are also subject to income and other taxes in the U.S. and other foreign jurisdictions and are regularly under audit by tax authorities. Although we believe our tax estimates are reasonable, the final determination of any tax audits and related litigation or other proceedings could be materially different than that which is reflected in our tax provisions and accruals. In ~~certain~~March ~~foreign jurisdictions~~2013, we ~~may~~settled ~~be required to place on deposit or provide~~ a ~~bank~~patent ~~guarantee~~infringement ~~for~~allegation ~~amounts~~made ~~claimed~~in by2006 ~~tax authorities while we challenge such amounts. Should additional taxes be assessed as a result of an audit or following an unsuccessful challenge~~ by ~~us through litigation, it could have~~ a ~~material~~third ~~effect~~party onagainst ~~our~~certain ~~financial~~customers ~~position~~of ~~and~~one ~~results~~ of ~~operations~~Inovis’ insoftware ~~the~~technology ~~period~~products ~~or periods~~ for ~~which that determination is made. A bank guarantee totaling approximately $3.3 million was made in May 2012 for~~ a ~~disputed~~nominal tax matter in Brazil by our subsidiary, GXS Tecnologia da Informacao (Brasil) Ltda. (“GXS Brazil”), in connection with GXS Brazil’s judicial appeal of a tax claim by the municipality of Sao Paulo, Brazil in the approximate amount ~~of $2~~.5 ~~million as of September 30, 2012.~~ The ~~bank~~settlement ~~guarantee is collateralized by a deposit~~ of ~~cash~~this ~~with~~previously ~~the~~disclosed ~~issuing~~matter ~~bank. We~~did ~~intend~~not tohave ~~replace the bank guarantee with~~ a ~~letter~~material ofimpact ~~credit~~on ~~under~~ our ~~Revolver~~condensed inconsolidated ~~the~~financial near future upon negotiation of commercially acceptable terms and conditions, which would result in a return of the cash deposit. We can terminate the bank guarantee at our option at any time and, therefore, have unrestricted access to the cash. However, terminating the bank guarantee would be expected to have detrimental legal and tax consequences that could prevent us from conducting business as usual in Brazil. We believe that the position of the Brazilian tax authorities is not consistent with the relevant facts. However, there can be no assurance that we will ultimately prevail and it is likely that the bank guarantee and supporting cash collateral, or ~~substituted~~results ~~letter~~ of ~~credit, will remain in place for several years while GXS Brazil pursues the appeal of the tax claim in the courts~~operations. While based on information available on the case and other similar matters provided by local counsel, we believe the facts support our position that an unfavorable outcome is not probable and no tax is owed, the ultimate outcome of this matter could result in a loss of up to the claim amount discussed above plus any interest or penalties that may accrue.

~~GXS~~A ~~Brazil~~bank ~~also~~guarantee istotaling ~~subject~~approximately to$3.3 ~~potential~~million was made in May 2012 for a disputed tax ~~claims~~matter in Brazil by ~~Brazilian~~our ~~tax~~subsidiary, ~~authorities~~GXS ~~relating~~Tecnologia toda ~~value-added-tax~~Informacao (Brasil) Ltda. (“~~VAT~~GXS Brazil”), ~~exposure~~in ~~that~~connection wewith ~~identified~~GXS inBrazil’s ~~the~~judicial ~~course~~appeal of ~~conducting~~a ~~due~~tax ~~diligence~~claim inby ~~connection~~the ~~with~~municipality of Sao Paulo, Brazil in the ~~acquisition~~approximate amount of ~~Interchange~~$2. We5 ~~believe~~million ~~that~~as ~~VAT~~of ~~may~~March ~~have~~31, ~~been~~2013. ~~underpaid~~The bank guarantee is collateralized by ~~Interchange~~a ~~during~~deposit of cash with the ~~period~~issuing ~~from~~bank. In ~~January~~April ~~2004~~2013, GXS Brazil made an additional deposit of $0.4 million to ~~June~~the ~~2006~~bank guarantee. We ~~have~~may ~~recorded~~replace the bank guarantee with a ~~reserve~~letter of ~~approximately~~credit, ~~$1.9~~likely ~~million~~under asour Revolver, upon negotiation of ~~September~~commercially 30acceptable terms and conditions, ~~2012~~if any, inwhich ~~respect~~would ofresult ~~these~~in ~~claims,~~a atreturn of the ~~then~~cash ~~current~~deposit. ~~exchange~~We ~~rate~~can ~~(reflecting~~terminate the ~~expiration~~bank ofguarantee or replace the ~~statute~~cash with a letter of ~~limitations~~credit ~~with~~at ~~respect~~our tooption ~~the~~at ~~2004~~any time and, ~~2005~~therefore, ~~tax~~have ~~years~~unrestricted ~~and~~access to the ~~consequent~~cash. ~~reversal~~However, ofterminating athe ~~previous~~bank ~~accrual~~guarantee ~~and~~without ~~reduction~~replacing ofit with a ~~corresponding~~letter ~~receivable~~of ~~for~~credit ~~those~~would ~~years). Although~~be ~~the~~expected ~~sellers~~to ofhave ~~Interchange~~detrimental ~~are~~legal ~~contractually~~and ~~obligated~~tax toconsequences ~~indemnify~~that could prevent us ~~pursuant~~from toconducting business as usual in Brazil. We believe that the ~~stock~~position ~~purchase~~of ~~agreement~~the ~~executed~~Brazilian intax ~~connection~~authorities is not consistent with the ~~acquisition~~relevant ~~and~~facts. However, there can be no assurance that we ~~have~~will ~~recorded~~ultimately aprevail ~~corresponding~~and ~~receivable~~it ofis ~~approximately~~likely ~~$1.9~~that ~~million~~the asbank ofguarantee ~~September~~and 30supporting cash collateral, ~~2012~~or substituted letter of credit, will remain in place for several years while GXS Brazil pursues the ~~indemnity~~appeal toof ~~offset~~the tax claim in the ~~potential~~courts. ~~liability~~While based on information available on the case and other similar matters provided by local counsel, ~~additional~~we ~~legal~~believe ~~action~~the ~~may~~facts besupport ~~required~~our position that an unfavorable outcome is not probable and no tax is owed, the ultimate outcome of this matter could result in a loss of up to ~~recover~~the claim amount discussed above plus any ~~potential~~interest ~~liability~~or ~~under~~penalties ~~such~~that ~~indemnity~~may accrue.

47In addition, our Indian subsidiary, GXS India Technology Centre Private Limited (“GXS India”), is subject to potential assessments by Indian tax authorities in the district of Bangalore. Both U.S. and Indian transfer pricing regulations require that any international transaction involving associated enterprises be at arms-length prices. Accordingly, GXS India determines the pricing for such transactions on the basis of detailed functional and economic analysis involving benchmarking against similar transactions among entities that are not under common control. If the applicable tax authorities determine that the transfer price applied was not appropriate, GXS India may incur an increased tax liability, including accrued interest and penalties. GXS India has received assessment orders from the Indian tax authorities alleging that the transfer price applied to intercompany transactions was not appropriate. Based on advice from our tax advisors, we continue to believe that the facts the Indian tax authorities are using to support their assessment are incorrect. GXS India has started appeal procedures and anticipates an eventual settlement with the Indian tax authorities. We have accrued approximately $1.5 million to cover our anticipated financial exposure in this matter. There can be no assurance that our appeals will be successful or that these appeals will be finally resolved in the near future. There is a possibility that we may receive similar orders for other years until the above disputes are resolved.

In addition, our Indian subsidiary, GXS India Technology Centre Private Limited (“GXS India”), is subject to potential assessments by Indian tax authorities in the district of Bangalore. U.S. and Indian transfer pricing regulations require that any international transaction involving associated enterprises be at arms-length prices. Accordingly, GXS India determines the pricing for such transactions on the basis of detailed functional and economic analysis involving benchmarking against similar transactions among entities that are not under common control. If the applicable tax authorities determine that the transfer price applied was not appropriate, GXS India may incur an increased tax liability, including accrued interest and penalties. GXS India has received assessment orders from the Indian tax authorities alleging that the transfer price applied to intercompany transactions was not appropriate. Based on advice from our tax advisors, we continue to believe that the facts the Indian tax authorities are using to support their assessment are incorrect. GXS India has started appeal procedures and anticipates a settlement with the tax authorities. We have accrued approximately $1.5 million to cover our anticipated financial exposure in this matter. There can be no assurance that our appeals will be successful or that these appeals will be finally resolved in the near future. There is a possibility that we may receive similar orders for other years until the above disputes are resolved.42

In the third quarter of 2012, we were notified by the landlord of one of our leased offices (the “Guildford office”) in the U.K. that the landlord was objecting to our written notice (the “Notice”) given in the first quarter of 2012 to allow us to ~~break~~terminate the Guildford office lease in October 2012. The lease ~~break~~termination provision allows us to cease all rights and obligations of the lease in October 2012, instead of the October 2017 scheduled lease end date provided for in the lease. ~~The~~ ~~Guildford office was one of the office locations closed as further described in Note 12 – Restructuring Charges.~~ If the Notice is determined to be invalid, we would be subject to paying the facility costs of the Guildford office through October 2017. We are contesting the landlord’s assertion that the ~~break~~termination notice was invalid, and are currently assessing what legal rights we have while engaging in discussions with the landlord and ascertaining the potential for mitigating its obligations through subleasing the Guildford office. If we are unsuccessful in our contention that the lease ~~break~~termination is valid, it is possible that we could incur a loss of up to $1~~,000~~. 0 million. A loss, if any, would be recorded as a “restructuring charge”. ” However, we have concluded a loss is not probable at this time and have not accrued for any potential exposure.

~~There~~At March 31, 2013, the State of Michigan is conducting an audit of certain tax returns for seller’s use tax, and single business tax, filed by Inovis for various tax filing periods from 2004 through 2009. Although preliminary audit determinations have been noreceived ~~other~~from ~~material~~the ~~changes~~State inof ~~legal~~Michigan ~~proceedings~~for ~~from~~a ~~those~~total ~~described~~alleged inliability ~~Part~~of Iapproximately $0.8 million, ~~Item~~including 3penalties ~~included~~and ininterest, ~~our~~we ~~2011~~are ~~Annual~~contesting ~~Report~~such onpreliminary ~~Form~~determinations ~~10-K~~and at this time conclude that a loss is not probable and therefore have not accrued for any potential exposure in these matters.

There have been no other material changes in legal proceedings from those described in Part I, Item 3 included in our 2012 Annual Report on Form 10-K.

Item 1A.

Risk Factors

There have been no material changes in the risk factors affecting us from those described in Part I, Item 1A of our ~~2011~~2012 Annual Report on Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not Applicable.

Item 5.

Other Information

~~None~~On May 10, 2013, Gary Greenfield resigned from the boards of directors of the Company, GXS Holdings, Inc. and GXS Group, Inc.

4843

Item 6.

Exhibits

Exhibit No.		Description
*31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**101.INS		Instance Document
**101.SCH		Taxonomy Extension Schema
**101.CAL		Taxonomy Extension Calculation Linkbase
**101.DEF		Taxonomy Extension Definition Linkbase
**101.LAB		Taxonomy Extension Label Linkbase
**101.PRE		Taxonomy Extension Presentation Linkbase

____________

*	Filed herewith

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

4944

SIGNATURES

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.

Dated: ~~November~~ 9May 10, ~~2012~~2013

GXS WORLDWIDE, INC.


By:	/s/ Robert Segert
	Name:	Robert Segert
	Title:	Director, President and Chief Executive Officer

By: /s/ Gregg Clevenger Name: Gregg Clevenger Title: Executive Vice President, Chief Financial ~~Officerand~~Officer and Principal Financial Officer

5045

EXHIBIT INDEX

Exhibit No.		Description
*31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**101.INS		Instance Document
**101.SCH		Taxonomy Extension Schema
**101.CAL		Taxonomy Extension Calculation Linkbase
**101.DEF		Taxonomy Extension Definition Linkbase
**101.LAB		Taxonomy Extension Label Linkbase
**101.PRE		Taxonomy Extension Presentation Linkbase

____________

*	Filed herewith

Filing Compare · GXS Worldwide, Inc.