Innodata Inc 10-Q for FY2021 Q3

Innodata Inc (INOD)

10-Q 2021-11-04 For: 2021-09-30

Added on April 06, 2026

About this 10-Q

Innodata Inc filed this 10-Q on November 4, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).

Headline figures

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

Revenue: $17.45M; up 19.9% from $14.55M a year earlier
Net loss: $800K; compared with net income of $206K a year earlier
Diluted EPS: -$0.03; compared with $0.01 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 September 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


	Part I – Financial Information
		Page No.
Item 1.	Financial Statements
	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	2
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended September 30, 2021 and 2020	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the nine months ended September 30, 2021 and 2020	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 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	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

	Part II – Other Information

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		33


	September 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	20,943	$	17,573
Accounts receivable, net of allowance for doubtful accounts of $780 and $670, respectively		9,016		10,048
Prepaid expenses and other current assets		3,853		4,240
Total current assets		33,812		31,861
Property and equipment, net		2,414		1,852
Right-of-use-asset, net		5,876		6,610
Other assets		2,344		2,563
Deferred income taxes, net		1,999		2,187
Intangibles, net		10,245		10,031
Goodwill		2,143		2,150
Total assets	$	58,833	$	57,254
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,763	$	1,435
Accrued expenses and other		6,240		3,490
Accrued salaries, wages and related benefits		6,692		5,719
Income and other taxes		3,415		5,000
Long-term obligations - current portion		1,130		1,712
Operating lease liability - current portion		1,056		990
Total current liabilities		20,296		18,346

Deferred income taxes		60		44
Long-term obligations, net of current portion		5,700		6,282
Operating lease liability, net of current portion		5,507		6,332
Total liabilities		31,563		31,004

Commitments and contingencies
Non-controlling interests		(3,453)		(3,390)

STOCKHOLDERS’ EQUITY:
Serial preferred stock; 4,998,000 shares authorized, none outstanding		-		-
Common stock, $.01 par value; 75,000,000 shares authorized; 30,337,000 shares issued and 27,153,000 outstanding at September 30, 2021 and 28,984,000 shares issued and 25,800,000 outstanding at December 31, 2020;		303		289
Additional paid-in capital		34,475		31,921
Retained earnings		4,328		4,833
Accumulated other comprehensive loss		(1,918)		(938)
		37,188		36,105
Less: treasury stock, 3,184,000 shares at cost		(6,465)		(6,465)
Total stockholders’ equity		30,723		29,640
Total liabilities and stockholders’ equity	$	58,833	$	57,254


	Three Months Ended
	September 30,
	2021		2020
Revenues	$	17,450	$	14,553
Operating costs and expenses:
Direct operating costs		10,703		9,784
Selling and administrative expenses		7,262		4,582
Interest expense, net		4		44
		17,969		14,410
Income (loss) before provision for income taxes		(519)		143
Provision for income taxes		328		(70)
Consolidated net income (loss)		(847)		213
Income (loss) attributable to non-controlling interests		(47)		7
Net income (loss) attributable to Innodata Inc. and Subsidiaries	$	(800)	$	206
Income (loss) per share attributable to Innodata Inc. and Subsidiaries:
Basic	$	(0.03)	$	0.01
Diluted	$	(0.03)	$	0.01
Weighted average shares outstanding:
Basic		26,971		24,470
Diluted		26,971		25,260
Comprehensive income (loss):
Consolidated net income (loss)	$	(847)	$	213
Pension liability adjustment, net of taxes		10		(1)
Foreign currency translation adjustment		(594)		216
Change in fair value of derivatives, net of taxes		(265)		51
Other comprehensive income (loss)		(849)		266
Total comprehensive income (loss)		(1,696)		479
Less: Comprehensive income (loss) attributable to non-controlling interests		(47)		7
Comprehensive income (loss) attributable to Innodata Inc. and Subsidiaries	$	(1,649)	$	472


	Nine Months Ended
	September 30,
	2021		2020
Revenues	$	50,466	$	42,946
Operating costs and expenses:
Direct operating costs		31,208		29,209
Selling and administrative expenses		19,767		13,663
Interest expense, net		18		113
		50,993		42,985
Loss from operations		(527)		(39)
Gain on loan forgiveness		580		-
Income (loss) before provision for income taxes		53		(39)
Provision for income taxes		621		504
Consolidated net loss		(568)		(543)
Income (loss) attributable to non-controlling interests		(63)		25
Net loss attributable to Innodata Inc. and Subsidiaries	$	(505)	$	(568)
Loss per share attributable to Innodata Inc. and Subsidiaries:
Basic	$	(0.02)	$	(0.02)
Diluted	$	(0.02)	$	(0.02)
Weighted average shares outstanding:
Basic		26,459		24,427
Diluted		26,459		24,427
Comprehensive loss:
Consolidated net loss	$	(568)	$	(543)
Pension liability adjustment, net of taxes		32		24
Foreign currency translation adjustment		(480)		(281)
Change in fair value of derivatives, net of taxes		(532)		(33)
Other comprehensive loss		(980)		(290)
Total comprehensive loss		(1,548)		(833)
Less: Comprehensive income (loss) attributable to non-controlling interests		(63)		25
Comprehensive loss attributable to Innodata Inc. and Subsidiaries	$	(1,485)	$	(858)


								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
Stock option exercises	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	-		-		-		-		(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
Stock option exercises	556		5		1,136		-		-	-		-		1,141
Pension liability adjustments, net of taxes	-		-		-		-		11	-		-		11
Foreign currency translation adjustment	-		-		-		-		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
Net loss attributable to Innodata Inc. and subsidiaries	-		-		-		(800)		-	-		-		(800)
Stock-based compensation	-		-		503		-		-	-		-		503
Stock option exercises	300		4		460		-		-	-		-		464
Pension liability adjustments, net of taxes	-		-		-		-		10	-		-		10
Foreign currency translation adjustment	-		-		-		-		(594)	-		-		(594)
Change in fair value of derivatives, net of taxes	-		-		-		-		(265)	-		-		(265)
September 30, 2021	30,337	$	303	$	34,475	$	4,328	$	(1,918)	3,184	$	(6,465)	$	30,723

January 1, 2020	27,643	$	275	$	28,426	$	4,216	$	(920)	3,184	$	(6,465)	$	25,532
Net loss attributable to Innodata Inc. and Subsidiaries	-		-		-		(365)		-	-		-		(365)
Stock-based compensation	-		-		170		-		-	-		-		170
Pension liability adjustments, net of taxes	-		-		-		-		14	-		-		14
Foreign currency translation adjustment	-		-		-		-		(718)	-		-		(718)
Change in fair value of derivatives, net of taxes	-		-		-		-		(171)	-		-		(171)
March 31, 2020	27,643		275		28,596		3,851		(1,795)	3,184		(6,465)		24,462
Net loss attributable to Innodata Inc. and Subsidiaries	-		-		-		(557)		-	-		-		(557)
Stock-based compensation	-		-		298		-		-	-		-		298
Pension liability adjustments, net of taxes	-		-		-		-		11	-		-		11
Foreign currency translation adjustment	-		-		-		-		221	-		-		221
Change in fair value of derivatives, net of taxes	-		-		-		-		87	-		-		87
June 30, 2020	27,643		275		28,894		3,294		(1,476)	3,184		(6,465)		24,522
Revision adjustments	-		-		-		148		-	-		-		148
Net income attributable to Innodata Inc. and Subsidiaries	-		-		-		206		-	-		-		206
Stock option exercises	278		3		312		-		-	-		-		315
Stock-based compensation	-		-		232		-		-	-		-		232
Pension liability adjustments, net of taxes	-		-		-		-		(1)	-		-		(1)
Foreign currency translation adjustment	-		-		-		-		216	-		-		216
Change in fair value of derivatives, net of taxes	-		-		-		-		51	-		-		51
September 30, 2020	27,921	$	278	$	29,438	$	3,648	$	(1,210)	3,184	$	(6,465)	$	25,689


Balance as of January 1, 2021	$	2,150
Foreign currency translation adjustment		(7)
Balance as of September 30, 2021	$	2,143


	Company Acquired Intangible Assets										Capitalized Developed Software
													Capitalized
											Capitalized		Software
Balance as of September 30, 2021					Trademarks				Media		Software		Development
	Developed		Customer		and				Contact		Development		Cost - Work in
	technology		relationships		tradenames		Patents		Database		Cost		Progress		Total
Gross carrying amounts:
Balance as of January 1, 2021	$	3,175	$	2,228	$	882	$	45	$	3,670	$	5,507	$	1,360	$	16,867
Additions		-		-		-		-		-		376		1,357		1,733
Transfers		-		-		-		-		-		2,323		(2,323)		-
Foreign currency translation		(6)		-		(2)		-		(23)		(54)		24		(61)
Balance as of September 30, 2021	$	3,169	$	2,228	$	880	$	45	$	3,647	$	8,152	$	418	$	18,539

Accumulated amortization:
Balance as of January 1, 2021	$	1,844	$	1,192	$	629	$	29	$	1,650	$	1,492	$	-	$	6,836
Amortization expense		233		138		41		3		261		778		-		1,454
Foreign currency translation		2		1		-		1		2		(2)		-		4
Balance as of September 30, 2021	$	2,079	$	1,331	$	670	$	33	$	1,913	$	2,268	$	-	$	8,294

Net carrying values - September 30, 2021	$	1,090	$	897	$	210	$	12	$	1,734	$	5,884	$	418	$	10,245


Year	Amortization
2021	$	532
2022		2,203
2023		2,018
2024		1,590
2025		1,215
Thereafter		2,687
	$	10,245


	For the Nine Months Ended September 30,
	2021		2020
Federal income tax expense at statutory rate	21.0	%	(21.0)	%
Effect of:
Change in valuation allowance	2,468.8		(660.0)
Effect of Section 162 (m)	549.9		-
Foreign operations permanent difference - foreign exchange gains and losses	271.9		90.3
Change in tax rates	225.0		-
Tax effects of foreign operations	79.8		1,610.6
State income tax net of federal benefit	43.2		(120.1)
Return to provision true up	31.6		(14.8)
Foreign rate differential	(478.8)		(295.9)
Increase (decrease) in unrecognized tax benefits (ASC 740)	(490.0)		410.5
Effect of stock-based compensation	(1,573.2)		263.7
Other	22.5		29.0
Effective tax rate	1,171.7	%	1,292.3	%


	Unrecognized
	tax benefits
Balance - January 1, 2021	$	3,231
Tax settlement matters – prior periods		(1,713)
Change in tax position		149
Interest accrual		84
Foreign currency remeasurement		(32)
Balance - September 30, 2021	$	1,719


		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	750,000		6.76
Exercised	(1,546,288)		2.01
Forfeited/Expired	(20,000)		1.38
Outstanding at September 30, 2021	5,090,596	$	2.05	7.49	$	37,037,015

Exercisable at September 30, 2021	3,468,912	$	1.73	7.03	$	27,069,483

Vested and Expected to Vest at September 30, 2021	5,090,596	$	2.05	7.49	$	37,037,015


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


	For the Nine Months Ended September 30,
	2021			2020
Weighted average fair value of options granted	$	3.56		$	0.61
Risk-free interest rate		0.22% - 0.82	%		0.29% - 0.56	%
Expected term (years)		3-6			5-6
Expected volatility factor		58% - 68	%		47% - 50	%
Expected dividends		None			None


Weighted-average lease term remaining	56 months
Weighted-average discount rate	8.68	%


	September 30,		December 31,
	2021		2020
Pension obligations - accrued pension liability	$	6,124	$	5,940
Settlement agreement		326		518
Capital lease obligations		-		209
Microsoft licenses		380		747
Bank loans payable		-		580
		6,830		7,994
Less: Current portion of long-term obligations		1,130		1,712
Totals	$	5,700	$	6,282


					Foreign Currency
	Pension Liability		Fair Value of		Translation		Accumulated Other
	Adjustment		Derivatives		Adjustment		Comprehensive Loss
Balance at July 1, 2021	$	(422)	$	(267)	$	(380)	$	(1,069)
Other comprehensive loss before reclassifications, net of taxes		-		(302)		(594)		(896)
Total other comprehensive loss before reclassifications, net of taxes		(422)		(569)		(974)		(1,965)
Net amount reclassified to earnings		10		37		-		47
Balance at September 30, 2021	$	(412)	$	(532)	$	(974)	$	(1,918)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Direct operating costs	$	21	$	40	$	96	$	119
Selling and administrative expenses		482		192		1,021		581
Total stock-based compensation	$	503	$	232	$	1,117	$	700


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
DDS	$	13,237	$	10,526	$	37,997	$	30,793
Synodex		983		1,197		2,888		3,680
Agility		3,230		2,830		9,581		8,473
Total Consolidated	$	17,450	$	14,553	$	50,466	$	42,946

Income (loss) before provision for income taxes⁽¹⁾:
DDS	$	1,608	$	4	$	3,988	$	226
Synodex		(657)		79		(878)		356
Agility		(1,470)		60		(3,057)		(621)
Total Consolidated	$	(519)	$	143	$	53	$	(39)

Income (loss) before provision for income taxes⁽²⁾:
DDS	$	1,509	$	(64)	$	3,740	$	27
Synodex		(584)		124		(711)		487
Agility		(1,444)		83		(2,976)		(553)
Total Consolidated	$	(519)	$	143	$	53	$	(39)


	September 30, 2021		December 31, 2020
Total assets:
DDS	$	29,640	$	27,767
Synodex		714		457
Agility		28,479		29,030
Total Consolidated	$	58,833	$	57,254


	September 30, 2021		December 31, 2020
Goodwill:
Agility	$	2,143	$	2,150
Total Consolidated	$	2,143	$	2,150


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

Foreign currency forward contracts	Accrued expenses	$	532	$	-

Derivatives not designated as hedging instruments:

Foreign currency forward contracts	Prepaid expenses and other current assets	$	-	$	48

Exhibit No.		Description

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 September 30, 2021, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of September 30, 2021(unaudited) and December 31, 2020; (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2021 and 2020 (unaudited); (iii) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited); (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 and (v) Notes to Condensed Consolidated Financial Statements (unaudited).

104		Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.

Date:	November 4, 2021	/s/ Jack S. Abuhoff
		Jack S. Abuhoff
		Chief Executive Officer and President


Date:	November 4, 2021	/s/ Mark A. Spelker
		Mark A. Spelker
		Chief Financial Officer and Principal Accounting Officer