x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
|
|
EXCHANGE
ACT OF 1934
|
||
For
the quarterly period ended March 31, 2010
|
||
OR
|
||
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
|
|
EXCHANGE
ACT OF 1934
|
||
For
the transition period from ________________ to
________________
|
Delaware
|
13-3475943
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
Three
University Plaza
|
07601
|
|
Hackensack,
New Jersey
|
(Zip
Code)
|
|
(Address
of principal executive offices)
|
Page No.
|
||
Part
I – Financial Information
|
||
Item
1.
|
Condensed
Consolidated Financial Statements (Unaudited):
|
|
Condensed
Consolidated Balance Sheets as of March 31, 2010 and December 31,
2009
|
1
|
|
Condensed
Consolidated Statements of Operations for the three months ended
March 31, 2010 and 2009
|
2
|
|
Condensed
Consolidated Statements of Cash Flows for the three months ended March 31,
2010 and 2009
|
3
|
|
Condensed
Consolidated Statement of Stockholders’ Equity for the three months ended
March 31, 2010 and 2009
|
4
|
|
Notes
to Condensed Consolidated Financial Statements
|
5
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
13
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
19
|
Item
4.
|
Controls
and Procedures
|
20
|
Part
II – Other Information
|
||
Item
1.
|
Legal
Proceedings
|
21
|
Item
1A.
|
Risk
Factors
|
21
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
21
|
Item
3.
|
Defaults
Upon Senior Securities
|
21
|
Item
4.
|
Reserved
|
21
|
Item
5.
|
Other
Information
|
21
|
Item
6.
|
Exhibits
|
22
|
Signatures
|
23
|
March
31,
2010
|
December 31,
2009 |
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 25,830 | $ | 26,480 | ||||
Accounts
receivable, net
|
10,441 | 11,741 | ||||||
Prepaid
expenses and other current assets
|
4,455 | 3,899 | ||||||
Deferred
income taxes
|
1,785 | 1,763 | ||||||
Total
current assets
|
42,511 | 43,883 | ||||||
Property
and equipment, net
|
5,617 | 5,559 | ||||||
Other
assets
|
2,467 | 2,505 | ||||||
Deferred
income taxes
|
950 | 943 | ||||||
Goodwill
|
675 | 675 | ||||||
Total
assets
|
$ | 52,220 | $ | 53,565 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 1,038 | $ | 1,261 | ||||
Accrued
expenses
|
1,832 | 2,293 | ||||||
Accrued
salaries, wages and related benefits
|
4,915 | 5,022 | ||||||
Income
and other taxes
|
1,506 | 1,339 | ||||||
Current
portion of long term obligations
|
721 | 892 | ||||||
Deferred
income taxes
|
631 | 487 | ||||||
Total
current liabilities
|
10,643 | 11,294 | ||||||
Deferred
income taxes
|
87 | 87 | ||||||
Income
and other taxes – long term
|
300 | - | ||||||
Long
term obligations
|
1,286 | 1,199 | ||||||
Commitments
and contingencies
|
||||||||
STOCKHOLDERS’
EQUITY
:
|
||||||||
Serial
preferred stock; 5,000,000 shares authorized, none
outstanding
|
- | - | ||||||
Common
stock, $.01 par value; 75,000,000 shares authorized; 26,207,000 shares
issued and 25,419,000 outstanding at March 31, 2010; and 26,167,000 shares
issued and 25,379,000 outstanding at December 31, 2009
|
262 | 262 | ||||||
Additional
paid-in capital
|
20,288 | 20,267 | ||||||
Retained
earnings
|
19,755 | 21,159 | ||||||
Accumulated
other comprehensive income
|
1,788 | 1,486 | ||||||
42,093 | 43,174 | |||||||
Less:
treasury stock, 788,000 shares at cost
|
(2,189 | ) | (2,189 | ) | ||||
Total
stockholders’ equity
|
39,904 | 40,985 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 52,220 | $ | 53,565 |
Three
Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Revenues
|
$ | 15,474 | $ | 21,112 | ||||
Operating
costs and expenses:
|
||||||||
Direct
operating costs
|
12,272 | 12,407 | ||||||
Selling
and administrative expenses
|
4,135 | 3,607 | ||||||
Interest
income, net
|
(2 | ) | (13 | ) | ||||
Totals
|
16,405 | 16,001 | ||||||
Income
(loss) before provision for income taxes
|
(931 | ) | 5,111 | |||||
Provision
for income taxes
|
473 | 1,530 | ||||||
Net
income (loss)
|
$ | (1,404 | ) | $ | 3,581 | |||
Income
(loss) per share:
|
||||||||
Basic
and diluted
|
$ | (.06 | ) | $ | .15 | |||
Weighted
average shares outstanding:
|
||||||||
Basic
|
25,379 | 24,138 | ||||||
Diluted
|
25,379 | 24,568 |
Three
Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Cash
flow from operating activities:
|
||||||||
Net
income (loss)
|
$ | (1,404 | ) | $ | 3,581 | |||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
956 | 916 | ||||||
Stock-based
compensation
|
21 | 83 | ||||||
Deferred
income taxes
|
(31 | ) | 973 | |||||
Pension
cost
|
101 | 73 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
1,300 | (1,119 | ) | |||||
Prepaid
expenses and other current assets
|
(105 | ) | (112 | ) | ||||
Other
assets
|
(103 | ) | (73 | ) | ||||
Accounts
payable and accrued expenses
|
(684 | ) | (441 | ) | ||||
Accrued
salaries, wages and related benefits
|
(107 | ) | (360 | ) | ||||
Income
and other taxes
|
467 | (224 | ) | |||||
Net
cash provided by operating activities
|
411 | 3,297 | ||||||
Cash
flow from investing activities:
|
||||||||
Capital
expenditures
|
(873 | ) | (349 | ) | ||||
Cash
flow used in financing activities:
|
||||||||
Payment
of long term obligations
|
(188 | ) | (274 | ) | ||||
Proceeds
from exercise of stock options
|
- | 81 | ||||||
Net
cash used in financing activities
|
(188 | ) | (193 | ) | ||||
Increase
(decrease) in cash and cash equivalents
|
(650 | ) | 2,755 | |||||
Cash
and cash equivalents, beginning of period
|
26,480 | 13,875 | ||||||
Cash
and cash equivalents, end of period
|
$ | 25,830 | $ | 16,630 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid for interest
|
$ | 3 | $ | 10 | ||||
Cash
paid for income taxes
|
$ | 107 | $ | 1,027 |
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||
Common
Stock
|
Paid-in
|
Retained
|
Comprehensive
|
Treasury
|
||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Stock
|
Total
|
||||||||||||||||||||||
January
1, 2010
|
25,379 | $ | 262 | $ | 20,267 | $ | 21,159 | $ | 1,486 | $ | (2,189 | ) | $ | 40,985 | ||||||||||||||
Net
loss
|
- | - | - | (1,404 | ) | - | - | (1,404 | ) | |||||||||||||||||||
Stock-based
compensation
|
- | - | 19 | - | - | - | 19 | |||||||||||||||||||||
Issuance
of restricted shares
|
40 | - | 2 | - | - | - | 2 | |||||||||||||||||||||
Pension
liability adjustments, net of taxes
|
- | - | - | - | (3 | ) | - | (3 | ) | |||||||||||||||||||
Change
in fair value of derivatives, net of taxes
|
- | - | - | - | 305 | - | 305 | |||||||||||||||||||||
March
31, 2010
|
25,419 | $ | 262 | $ | 20,288 | $ | 19,755 | $ | 1,788 | $ | (2,189 | ) | $ | 39,904 | ||||||||||||||
January
1, 2009
|
24,119 | $ | 249 | $ | 16,614 | $ | 14,772 | $ | 742 | $ | (2,189 | ) | $ | 30,188 | ||||||||||||||
Net
income
|
- | - | - | 3,581 | - | - | 3,581 | |||||||||||||||||||||
Issuance
of common stock upon exercise of stock options
|
35 | - | 81 | - | - | - | 81 | |||||||||||||||||||||
Stock-based
compensation
|
- | - | 83 | - | - | - | 83 | |||||||||||||||||||||
Pension
liability adjustments, net of taxes
|
- | - | - | - | (10 | ) | - | (10 | ) | |||||||||||||||||||
March
31, 2009
|
24,154 | $ | 249 | $ | 16,778 | $ | 18,353 | $ | 732 | $ | (2,189 | ) | $ | 33,923 |
1.
|
Description
of Business and Summary of Significant Accounting
Policies
|
2.
|
Income
taxes
|
Unrecognized tax
benefits
|
||||
Balance
- January 1, 2010
|
$ | 1,303 | ||
Increases
for tax position in current period
|
300 | |||
Interest
accrual
|
15 | |||
Balance
– March 31, 2010
|
$ | 1,618 |
3.
|
Commitments
and contingencies
|
4.
|
Stock
options
|
Number of Shares
|
Weighted-Average
Exercise Price
|
Weighted-Average Remaining
Contractual Term (years)
|
Aggregate Intrinsic
Value
|
|||||||||||||
Outstanding
at January 1, 2010
|
1,846,780 | $ | 2.63 | |||||||||||||
Granted
|
150,000 | $ | 5.20 | |||||||||||||
Exercised
|
— | — | ||||||||||||||
Forfeited/Expired
|
— | — | ||||||||||||||
Outstanding
at March 31, 2010
|
1,996,780 | $ | 2.82 | 4.46 | $ | 2,681,000 | ||||||||||
Exercisable
at March 31, 2010
|
1,824,280 | $ | 2.62 | 3.98 | $ | 2,671,300 |
Three
months ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
(1)
|
|||||||
Weighted
average fair value of options granted
|
$ | 3.54 | $ | — | ||||
Risk-free
interest rate
|
3.19 | % | — | |||||
Expected
life (years)
|
8.00 | — | ||||||
Expected
volatility factor
|
90 | % | — | |||||
Expected
dividends
|
None
|
— |
Three months ended March
31,
|
||||||||
2010
|
2009
|
|||||||
Direct
operating costs
|
$ | 3 | $ | 3 | ||||
Selling
and adminstrative expenses
|
18 | 80 | ||||||
Total
stock-based compensation
|
$ | 21 | $ | 83 |
5.
|
Comprehensive
income (loss)
|
Three
months ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Net
income (loss)
|
$ | (1,404 | ) | $ | 3,581 | |||
Pension
liability adjustment, net of taxes
|
(3 | ) | (10 | ) | ||||
Unrealized
gain from derivatives, net of taxes
|
305 | — | ||||||
Comprehensive
income (loss)
|
$ | (1,102 | ) | $ | 3,571 |
6.
|
Segment
reporting and concentrations
|
Three
months ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
United
States
|
$ | 10,557 | $ | 17,317 | ||||
United
Kingdom
|
1,947 | $ | 1,232 | |||||
The
Netherlands
|
1,870 | 1,673 | ||||||
Other
- principally Europe
|
1,100 | 890 | ||||||
$ | 15,474 | $ | 21,112 |
2010
|
2009
|
|||||||
United
States
|
$ | 1,160 | $ | 1,152 | ||||
Foreign
countries:
|
||||||||
Philippines
|
3,117 | 2,927 | ||||||
India
|
1,219 | 1,284 | ||||||
Sri
Lanka
|
544 | 592 | ||||||
Israel
|
252 | 279 | ||||||
Total
foreign
|
5,132 | 5,082 | ||||||
$ | 6,292 | $ | 6,234 |
7.
|
Income
(loss)
per
share
|
Three months ended March
31,
|
||||||||
2010
|
2009
|
|||||||
(in
thousands, except per share amounts)
|
||||||||
Net
income (loss)
|
$ | (1,404 | ) | $ | 3,581 | |||
Weighted
average common shares outstanding
|
25,379 | 24,138 | ||||||
Dilutive
effect of outstanding stock awards
|
— | 430 | ||||||
Adjusted
for dilution computation
|
25,379 | 24,568 |
8.
|
Derivatives
|
2010
|
2009
(4)
|
|||||||
Net
gain recognized in OCI
(1)
|
$ | 962 | $ | — | ||||
Net
gain reclassified from accumulated OCI into income
(2)
|
$ | 512 | $ | — | ||||
Net
gain (loss) recognized in income
(3)
|
$ | — | $ | — |
9.
|
Financial
Instruments
|
|
·
|
Level 1
: Unadjusted
quoted price in active market for identical assets and
liabilities.
|
|
·
|
Level 2:
Observable
inputs other than those included in Level
1.
|
|
·
|
Level 3:
Unobservable
inputs reflecting management’s own assumptions about the inputs used in
pricing the asset or liability.
|
Level 1
|
Level 2
|
Level 3
|
||||||||||
Assets
|
||||||||||||
Derivatives
|
$ | — | $ | 1,750 | $ | — |
March 31, 2010
|
December 31, 2009
|
|||||||
Cash
and cash equivalents
|
$ | 25,830 | $ | 26,480 | ||||
Working
capital
|
31,868 | 32,589 |
Payments Due by Period
|
||||||||||||||||||||
Contractual Obligations
|
Total
|
Less
than
1 year
|
1-3 years
|
4-5 years
|
After
5 years
|
|||||||||||||||
Capital
lease obligations
|
$ | 105 | $ | 84 | $ | 21 | $ | - | $ | - | ||||||||||
Non-cancelable
operating leases
|
2,484 | 782 | 1,067 | 635 | - | |||||||||||||||
Long
term vendor obligations
|
412 | 412 | - | - | - | |||||||||||||||
Total
contractual cash obligations
|
$ | 3,001 | $ | 1,278 | $ | 1,088 | $ | 635 | $ | - |
Date:
|
May 3,
2010
|
/s/
Jack Abuhoff
|
|
Jack
Abuhoff
|
|||
Chairman
of the Board,
|
|||
Chief
Executive Officer and President
|
|||
Date:
|
May
3, 2010
|
/s/
O’Neil Nalavadi
|
|
O’Neil
Nalavadi
|
|||
Senior
Vice President
Chief
Financial Officer
and
Principal Accounting
Officer
|
|
·
|
10,000
Restricted Shares on March 15, 2011
|
|
·
|
10,000
Restricted Shares on March 15, 2012
|
|
·
|
10,000
Restricted Shares on November 9,
2012
|
|
·
|
10,000
Restricted Shares on March 15, 2014
|
|
|
By:
Jack Abuhoff
|
|
Its:
Chairman and CEO
|
|
O’Neil
Nalavadi
|
|
Date
|
Very
truly yours,
|
|
Jack
Abuhoff
|
|
Chairman
and CEO
|
|
|
O’Neil
Nalavadi
|
Very
truly yours,
|
|
Jack
Abuhoff
|
|
Chairman
and CEO
|
|
|
O’Neil
Nalavadi
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of Innodata Isogen,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
|
c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such
evaluation; and
|
d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting.
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal controls over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
function):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/
Jack Abuhoff
|
Jack
Abuhoff
|
Chairman
of the Board,
|
Chief
Executive Officer and
President
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of Innodata Isogen,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such
evaluation; and
|
d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting.
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal controls over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
function):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/
O’Neil Nalavadi
|
O’Neil
Nalavadi
|
Senior
Vice President
Chief
Financial Officer
and
Principal Accounting
Officer
|
|
1.
|
the
Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
|
|
2.
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
/s/
Jack Abuhoff
|
Jack
Abuhoff
|
Chairman
of the Board,
|
Chief
Executive Officer and President
|
May
3, 2010
|
|
1.
|
the
Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
|
|
2.
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
/s/
O’Neil Nalavadi
|
O’Neil
Nalavadi
|
Senior
Vice President
Chief
Financial Officer
and
Principal Accounting Officer
|
May
3, 2010
|