Innodata Inc 10-Q for FY2021 Q2

Innodata Inc (INOD)

10-Q 2021-08-05 For: 2021-06-30

Added on April 06, 2026

About this 10-Q

Innodata Inc filed this 10-Q on August 5, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $17.05M; up 23.0% from $13.86M a year earlier
Net loss: $103K; compared with a net loss of $484K a year earlier

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

	For the quarterly period ended June 30, 2021

	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.)

55 Challenger Road	07660
Ridgefield Park, New Jersey	(Zip Code)
(Address of principal executive offices)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	INOD	The NASDAQ Stock Market LLC
Preferred Stock Purchase Right	N/A	N/A

		Page No.
	Part I – Financial Information

Item 1.	Financial Statements
	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended June 30, 2021 and 2020	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the six months ended June 30, 2021 and 2020	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020	6
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33

	Part II – Other Information

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33

Item 6.	Exhibits	34

Signatures		35


	June 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	22,059	$	17,573
Accounts receivable, net of allowance for doubtful accounts of $780 and $670, respectively		9,686		10,048
Prepaid expenses and other current assets		3,971		4,240
Total current assets		35,716		31,861
Property and equipment, net		7,892		7,227
Right-of-use-asset, net		6,146		6,610
Other assets		2,391		2,563
Deferred income taxes, net		2,358		2,187
Intangibles, net		4,247		4,656
Goodwill		2,179		2,150
Total assets	$	60,929	$	57,254
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,269	$	1,435
Accrued expenses and other		7,273		3,490
Accrued salaries, wages and related benefits		5,719		5,719
Income and other taxes		3,678		5,000
Long-term obligations - current portion		1,245		1,712
Operating lease liability - current portion		1,048		990
Total current liabilities		21,232		18,346

Deferred income taxes		129		44
Long-term obligations, net of current portion		5,773		6,282
Operating lease liability, net of current portion		5,796		6,332
Total liabilities		32,930		31,004

Commitments and contingencies
Non-controlling interests		(3,406)		(3,390)

STOCKHOLDERS’ EQUITY:
Serial preferred stock; 4,998,000 shares authorized, none outstanding		-		-
Common stock, $.01 par value; 75,000,000 shares authorized; 30,037,000 shares issued and 26,853,000 outstanding at June 30, 2021 and 28,984,000 shares issued and 25,800,000 outstanding at December 31, 2020;		299		289
Additional paid-in capital		33,512		31,921
Retained earnings		5,128		4,833
Accumulated other comprehensive loss		(1,069)		(938)
		37,870		36,105
Less: treasury stock, 3,184,000 shares at cost		(6,465)		(6,465)
Total stockholders’ equity		31,405		29,640
Total liabilities and stockholders’ equity	$	60,929	$	57,254


	Three Months Ended
	June 30,
	2021		2020
Revenues	$	17,049	$	13,863
Operating costs and expenses:
Direct operating costs		10,409		9,682
Selling and administrative expenses		6,980		4,461
Interest expense, net		4		28
		17,393		14,171
Loss from operations		(344)		(308)
Gain from loan forgiveness		580		-
Income (loss) before provision for income taxes		236		(308)
Provision for income taxes		366		169
Consolidated net loss		(130)		(477)
Income (loss) attributable to non-controlling interests		(27)		7
Loss attributable to Innodata Inc. and Subsidiaries	$	(103)	$	(484)
Loss per share attributable to Innodata Inc. and Subsidiaries:
Basic and diluted	$	0.00	$	(0.02)
Weighted average shares outstanding:
Basic and diluted		26,522		24,409
Comprehensive loss:
Consolidated net loss	$	(130)	$	(477)
Pension liability adjustment, net of taxes		11		11
Foreign currency translation adjustment, net of taxes		135		221
Change in fair value of derivatives, net of taxes		(267)		87
Other comprehensive income (loss)		(121)		319
Total comprehensive loss		(251)		(158)
Less: Comprehensive income (loss) attributable to non-controlling interests		(27)		7
Comprehensive loss attributable to Innodata Inc. and Subsidiaries	$	(224)	$	(165)


	Six Months Ended
	June 30,
	2021		2020
Revenues	$	33,016	$	28,393
Operating costs and expenses:
Direct operating costs		20,505		19,425
Selling and administrative expenses		12,505		9,081
Interest expense, net		14		70
		33,024		28,576
Loss from operations		(8)		(183)
Gain from loan forgiveness		580		-
Income (loss) before provision for income taxes		572		(183)

Provision for income taxes		293		574

Consolidated net income (loss)		279		(757)

Income (loss) attributable to non-controlling interests		(16)		18

Net income (loss) attributable to Innodata Inc. and Subsidiaries	$	295	$	(775)

Income (loss) per share attributable to Innodata Inc. and Subsidiaries:
Basic	$	0.01	$	(0.03)
Diluted	$	0.01	$	(0.03)

Weighted average shares outstanding:
Basic		26,199		24,405
Diluted		29,194		24,405

Comprehensive income (loss):
Consolidated net income (loss)	$	279	$	(757)
Pension liability adjustment, net of taxes		22		25
Foreign currency translation adjustment, net of taxes		114		(497)
Change in fair value of derivatives, net of taxes		(267)		(84)
Other comprehensive loss		(131)		(556)
Total comprehensive income (loss)		148		(1,313)
Less: Comprehensive income (loss) attributable to non-controlling interests		(16)		18
Comprehensive income (loss) attributable to Innodata Inc. and Subsidiaries	$	164	$	(1,331)


								Accumulated
				Additional				Other
	Common Stock			Paid-in		Retained		Comprehensive		Treasury Stock
	Shares	Amount		Capital		Earnings		Loss		Shares		Amount	Total
January 1, 2021	28,984	$	289	$	31,921	$	4,833	$	(938)	3,184	$	(6,465)	$	29,640
Net income attributable to Innodata Inc. and subsidiaries	-		-		-		398		-	-		-		398
Stock-based compensation	-		-		278		-		-	-		-		278
Exercise of stock options	690		4		605		-		-	-		-		609
Shares withheld for exercise settlement and taxes	(193)		1		(764)		-		-	-		-		(763)
Pension liability adjustments, net of taxes	-		-		-		-		11	-		-		11
Foreign currency translation adjustment, net of taxes	-		-		-		-		(21)	-		-		(21)
March 31,2021	29,481	$	294	$	32,040	$	5,231	$	(948)	3,184	$	(6,465)	$	30,152
Net loss attributable to Innodata Inc. and subsidiaries	-		-		-		(103)		-	-		-		(103)
Stock-based compensation	-		-		336		-		-	-		-		336
Exercise of stock options	556		5		1,136		-		-	-		-		1,141
Pension liability adjustments, net of taxes	-		-		-		-		11	-		-		11
Foreign currency translation adjustment, net of taxes	-		-		-		-		135	-		-		135
Change in fair value of derivatives, net of taxes	-		-		-		-		(267)	-		-		(267)
June 30, 2021	30,037	$	299	$	33,512	$	5,128	$	(1,069)	3,184	$	(6,465)	$	31,405

January 1, 2020	27,643	$	275	$	28,426	$	4,993	$	(920)	3,184	$	(6,465)	$	26,309
Net loss attributable to Innodata Inc. and subsidiaries	-		-		-		(291)		-	-		-		(291)
Stock-based compensation	-		-		170		-		-	-		-		170
Pension liability adjustments, net of taxes	-		-		-		-		14	-		-		14
Foreign currency translation adjustment,net of taxes	-		-		-		-		(718)	-		-		(718)
Change in fair value of derivatives, net of taxes	-		-		-		-		(171)	-		-		(171)
March 31,2020	27,643	$	275	$	28,596	$	4,702	$	(1,795)	3,184	$	(6,465)	$	25,313
Net loss attributable to Innodata Inc. and subsidiaries	-		-		-		(484)		-	-		-		(484)
Stock-based compensation	-		-		298		-		-	-		-		298
Pension liability adjustments, net of taxes	-		-		-		-		11	-		-		11
Foreign currency translation adjustment, net of taxes	-		-		-		-		221	-		-		221
Change in fair value of derivatives, net of taxes	-		-		-		-		87	-		-		87
June 30, 2020	27,643	$	275	$	28,894	$	4,218	$	(1,476)	3,184	$	(6,465)	$	25,446


Balance as of January 1, 2021	$	2,150
Foreign currency translation adjustment		29
Balance as of June 30, 2021	$	2,179


					Trademarks				Media
	Developed		Customer		and				Contact
	technology		relationships		tradenames		Patents		Database		Total
Gross carrying amounts:
Balance as of January 1, 2021	$	3,175	$	2,228	$	882	$	45	$	3,670	$	10,000
Foreign currency translation		59		54		8		1		22		144
Balance as of June 30, 2021	$	3,234	$	2,282	$	890	$	46	$	3,692	$	10,144


Year	Amortization
2021	$	472
2022		945
2023		945
2024		840
2025		691
Thereafter		354
	$	4,247


	For the Three Months Ended June 30,
	2021		2020
Federal income tax expense at statutory rate	21.0	%	21.0	%
Effect of:
Change in valuation allowance	101.1		(78.5)
Tax effects of foreign operations	35.4		242.7
Change in tax rates	20.6		-
Foreign operations permanent difference - foreign exchange gains and losses	9.1		144.3
Return to provision true up	3.2		(50.6)
State income tax net of federal benefit	1.5		16.2
Withholding tax	-		9.3
Foreign rate differential	(19.6)		(34.7)
Effect of stock-based compensation	(62.1)		-
Increase (decrease) in unrecognized tax benefits (ASC 740)	(64.4)		67.1
Other	5.4		(23.1)
Effective tax rate	51.2	%	313.7	%


	Unrecognized
	tax benefits
Balance - January 1, 2021	$	3,231
Tax settlement matters – prior periods		(1,476)
Change in tax position		(174)
Interest accrual		57
Foreign currency remeasurement		(27)
Balance - June 30, 2021	$	1,611


		Weighted -		Weighted-Average
	Number of	Average Exercise		Remaining Contractual	Aggregate
	Options	Price		Term (years)	Intrinsic Value
Outstanding at January 1, 2021	5,906,884	$	1.61
Granted	360,000		6.40
Exercised	(1,245,182)		2.12
Forfeited/Expired	(20,000)		1.38
Outstanding at June 30, 2021	5,001,702	$	1.83	7.60	$	25,837,675

Exercisable at June 30, 2021	3,425,983	$	1.62	7.12	$	18,426,406

Vested and Expected to Vest at June 30, 2021	5,001,702	$	1.83	7.60	$	25,837,675


	For the Six Months Ended June 30,
	2021			2020
Weighted average fair value of options granted	$	3.33		$	0.61
Risk-free interest rate		0.22%-0.82	%		0.47% - 0.56	%
Expected term (years)		3-6			5-6
Expected volatility factor		59.62	%		46.75% - 50.01	%
Expected dividends		None			None


Weighted-average lease term remaining	59 months
Weighted-average discount rate	8.68	%


	June 30,		December 31,
	2021		2020
Pension obligations - accrued pension liability	$	6,166	$	5,940
Settlement agreement ⁽¹⁾		398		518
Capital lease obligations		-		209
Microsoft licenses ⁽²⁾		454		747
Bank loans payable ⁽³⁾		-		580
		7,018		7,994
Less: Current portion of long-term obligations		1,245		1,712
Totals	$	5,773	$	6,282


					Foreign Currency
	Pension Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at April 1, 2021	$	(433)	$	-	$	(515)	$	(948)
Other comprehensive loss before reclassifications, net of taxes		-		(301)		135		(166)
Total other comprehensive loss before reclassifications, net of taxes		(433)		(301)		(380)		(1,114)
Net amount reclassified to earnings		11		34		-		45
Balance at June 30, 2021	$	(422)	$	(267)	$	(380)	$	(1,069)


					Foreign Currency
	Pension Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at April 1, 2020	$	(39)	$	(138)	$	(1,618)	$	(1,795)
Other comprehensive income before reclassifications, net of taxes		-		-		221		221
Total other comprehensive loss before reclassifications, net of taxes		(39)		(138)		(1,397)		(1,574)
Net amount reclassified to earnings		11		87		-		98
Balance at June 30, 2020	$	(28)	$	(51)	$	(1,397)	$	(1,476)


		Weighted-Average Grant
	Number of Shares	Date Fair Value
Unvested at December 31, 2020	50,000		-
Granted	-		-
Vested	(25,000)		-
Forfeited/Expired	-		-
Unvested at June 30, 2021	25,000	$	1.38


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Direct operating costs	$	37	$	39	$	75	$	79
Selling and administrative expenses		299		259		539		389
Total stock-based compensation	$	336	$	298	$	614	$	468


	June 30, 2021		December 31, 2020
Total assets:
DDS	$	32,039	$	27,767
Synodex		132		457
Agility		28,758		29,030
Total Consolidated	$	60,929	$	57,254


	June 30, 2021		December 31, 2020
Goodwill:
Agility	$	2,179	$	2,150
Total	$	2,179	$	2,150


	Balance Sheet Location	Fair Value
		2021		2020
Derivatives designated as hedging instruments:

Foreign currency forward contracts	Accrued expenses	$	338	$	-

Derivatives not designated as hedging instruments:

Foreign currency forward contracts	Accrued expenses	$	13	$	-

	Prepaid expenses and other current assets	$	-	$	48

Exhibit No.		Description

10.1		Innodata Inc. 2021 Equity Compensation Plan (incorporated herein by reference to Appendix A to the Company’s Definitive Proxy Statement, filed with the Securities and Exchange Commission on April 22, 2021.)

10.2		Form of Innodata Inc. 2021 Equity Compensation Plan Nonqualified Stock Option Award Agreement for Employees (incorporated herein by reference to Exhibit 10.1 to the Company’s S-8 Registration Statement, filed with the Securities and Exchange Commission on June 16, 2021).

10.3		Form of Innodata Inc. 2021 Equity Compensation Plan Nonqualified Stock Option Award Agreement for Directors (incorporated herein by reference to Exhibit 10.2 to the Company’s S-8 Registration Statement, filed with the Securities and Exchange Commission on June 16, 2021).

31.1*		Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certificate of Chief Financial Officer 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.

32.2**		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from Innodata Inc.’s Quarterly Report on Form 10-Q for the three months ended June 30, 2021, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of June 30, 2021(unaudited) and December 31, 2020; (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020 (unaudited); (iii) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited); (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020 and (v) Notes to Condensed Consolidated Financial Statements (unaudited).

Date:	August 5, 2021	/s/ Jack S. Abuhoff
		Jack S. Abuhoff
		Chief Executive Officer and President


Date:	August 5, 2021	/s/ Mark A. Spelker
		Mark A. Spelker
		Chief Financial Officer and Principal Accounting Officer