Delaware
|
13-3475943
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
|
Three
University Plaza
|
|
Hackensack,
New Jersey
|
07601
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(201)
371-2828
|
|
(Registrant's
telephone number)
|
Title
of Each Class
|
Name
of Each Exchange on Which Registered
|
|
Common
Stock $.01 par value
|
The
Nasdaq Stock Market, LLC
|
Page
|
||
Part
I
|
||
Item
1.
|
Business
|
1
|
Item
1A.
|
Risk
Factors
|
9
|
Item
1B.
|
Unresolved
Staff Comments
|
13
|
Item
2.
|
Properties
|
13
|
Item
3.
|
Legal
Proceedings
|
13
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
14
|
|
Part
II
|
|
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
15
|
Item
6.
|
Selected
Financial Data
|
16
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
18
|
Item
7A.
|
Quantitative
and Qualitative Disclosures about Market Risks
|
30
|
Item
8.
|
Financial
Statements and Supplementary Data
|
31
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
31
|
Item
9A.
|
Controls
and Procedures
|
31
|
Report
of Management on Internal Control over Financial Reporting
|
31
|
|
Item
9B.
|
Other
Information
|
32
|
Part
III
|
||
Item
10.
|
Directors
and Executive Officers and Corporate Governance
|
33
|
Item
11.
|
Executive
Compensation
|
33
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
33
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
33
|
Item
14.
|
Principal
Accountant Fees and Services
|
33
|
Part
IV
|
||
Item
15.
|
Exhibits,
Financial Statement Schedules and Reports on Form 8-K
|
34
|
Signatures
|
35
|
·
|
Media,
publishing and information services, including clients such as EBSCO
and
Reed Elsevier;
|
·
|
Defense
and aerospace, including clients such as Hamilton Sundstrand and
Lockheed
Martin;
|
·
|
Government
and advanced programs, including clients such as the Defense Intelligence
Agency and the Financial Accounting Standards Board;
and
|
·
|
Commercial
and technology, including clients such as Alcatel-Lucent and
Nortel.
|
• |
difficulties
in staffing international projects and managing international operations,
including overcoming logistical and communications challenges;
|
• |
local
competition, particularly in the Philippines, India and Sri Lanka;
|
• |
imposition
of public sector controls;
|
• |
trade
and tariff restrictions;
|
• |
price
or exchange controls;
|
• |
currency
control regulations;
|
• |
foreign
tax consequences;
|
• |
labor
disputes and related litigation and liability;
|
• |
limitations
on repatriation of earnings; and
|
• |
the
burdens of complying with a wide variety of foreign laws and regulations.
|
Common
Stock
|
|||||||
Sale
Prices
|
|||||||
2006
|
High
|
Low
|
|||||
First
Quarter
|
$
|
4.05
|
$
|
2.35
|
|||
Second
Quarter
|
3.06
|
2.06
|
|||||
Third
Quarter
|
2.48
|
1.53
|
|||||
Fourth
Quarter
|
2.41
|
1.61
|
|||||
2007
|
High
|
Low
|
|||||
First
Quarter
|
$
|
3.75
|
$
|
1.95
|
|||
Second
Quarter
|
4.25
|
2.55
|
|||||
Third
Quarter
|
4.30
|
2.56
|
|||||
Fourth
Quarter
|
6.38
|
3.36
|
Number
of
|
||||||||||
Securities to be Issued
|
Weighted-Average
|
Number of Securities
|
||||||||
Upon Exercise of
|
Exercise Price of
|
Remaining Available For
|
||||||||
Outstanding Options,
|
Outstanding Options,
|
Future Issuance Under
|
||||||||
Plan
Category
|
Warrants and Rights
|
Warrants and Rights
|
Equity Compensation Plans
|
|||||||
|
(a)
|
(b)
|
(c)
|
|||||||
Equity
compensation plans approved by security holders (1)
|
3,168,000
|
$
|
2.69
|
2,366,000
|
||||||
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
|||||||
Total
|
3,168,000
|
$
|
2.69
|
2,366,000
|
(1)
|
1998,
2001 and 2002 Stock Option Plans, approved by the stockholders, see
Note 9
to Consolidated Financial Statements, contained herein.
|
Year
Ended December 31,
|
||||||||||||||||
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|||||||
(In
thousands, except per share data)
|
||||||||||||||||
STATEMENT
OF OPERATIONS DATA:
|
||||||||||||||||
Revenues
|
$
|
67,731
|
$
|
40,953
|
$
|
42,052
|
$
|
53,949
|
$
|
36,714
|
||||||
Operating
costs and expenses
|
||||||||||||||||
Direct
operating expenses
|
48,581
|
34,141
|
30,920
|
33,050
|
27,029
|
|||||||||||
Selling
and administrative expenses
|
15,281
|
14,284
|
13,684
|
10,205
|
8,898
|
|||||||||||
Restructuring
costs
|
-
|
604
|
-
|
-
|
-
|
|||||||||||
63,862
|
49,029
|
44,604
|
43,255
|
35,927
|
||||||||||||
Income
(loss) from operations
|
3,869
|
(8,076
|
)
|
(2,552
|
)
|
10,694
|
787
|
|||||||||
Other
(income) expenses
|
||||||||||||||||
Terminated
offering costs
|
-
|
-
|
-
|
625
|
-
|
|||||||||||
Bad
debt recovery, net
|
-
|
-
|
-
|
(963
|
)
|
-
|
||||||||||
Interest
expense
|
33
|
7
|
18
|
25
|
9
|
|||||||||||
Interest
income
|
(678
|
)
|
(683
|
)
|
(457
|
)
|
(87
|
)
|
(30
|
)
|
||||||
Income
(loss) before (benefit from)
|
||||||||||||||||
provision
for income taxes
|
4,514
|
(7,400
|
)
|
(2,113
|
)
|
11,094
|
808
|
|||||||||
(Benefit
from) provision for income taxes
|
(52
|
)
|
(77
|
)
|
(462
|
)
|
3,237
|
333
|
||||||||
Net
income (loss)
|
$
|
4,566
|
$
|
(7,323
|
)
|
$
|
(1,651
|
)
|
$
|
7,857
|
$
|
475
|
||||
Income
(loss) per share:
|
||||||||||||||||
Basic
|
$
|
.19
|
$
|
(.30
|
)
|
$
|
(.07
|
)
|
$
|
.35
|
$
|
.02
|
||||
Diluted
|
$
|
.18
|
$
|
(.30
|
)
|
$
|
(.07
|
)
|
$
|
.32
|
$
|
.02
|
||||
Cash
dividends per share
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
December
31,
|
||||||||||||||||
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|||||||
(In
thousands)
|
||||||||||||||||
BALANCE
SHEET DATA:
|
||||||||||||||||
Working
capital
|
$
|
16,329
|
$
|
14,292
|
$
|
21,432
|
$
|
22,209
|
$
|
11,983
|
||||||
Total
assets
|
$
|
38,449
|
$
|
30,329
|
$
|
37,611
|
$
|
37,211
|
$
|
25,146
|
||||||
Long
term obligations
|
$
|
2,128
|
$
|
1,564
|
$
|
548
|
$
|
150
|
$
|
272
|
||||||
Stockholders’
equity
|
$
|
23,230
|
$
|
19,009
|
$
|
26,814
|
$
|
26,737
|
$
|
17,404
|
Years
Ended December 31,
|
|||||||||||||||||||||
2007
|
% of revenue
|
2006
|
% of revenue
|
2005
|
% of revenue
|
||||||||||||||||
Revenues
|
$
|
67.7
|
100.0
|
%
|
$
|
41.0
|
100.0
|
%
|
$
|
42.1
|
100
|
%
|
|||||||||
Direct
operating costs
|
48.6
|
71.8
|
%
|
34.1
|
83.2
|
%
|
30.9
|
73.4
|
%
|
||||||||||||
Selling
and administrative expenses
|
15.3
|
22.6
|
%
|
14.3
|
34.8
|
%
|
13.7
|
32.5
|
%
|
||||||||||||
Restructuring
costs
|
-
|
-
|
0.6
|
1.5
|
%
|
-
|
-
|
||||||||||||||
Income
(loss) from operations
|
3.8
|
5.6
|
%
|
(8.0
|
)
|
(19.5
|
)%
|
(2.5
|
)
|
(5.9
|
)%
|
||||||||||
Other
(income) expenses
|
(0.7
|
)
|
(0.6
|
)
|
(0.4
|
)
|
|||||||||||||||
Income
(loss) before benefit from income
taxes
|
4.5
|
(7.4
|
)
|
(2.1
|
)
|
||||||||||||||||
Benefit
from income taxes
|
(0.1
|
)
|
(0.1
|
)
|
(0.4
|
)
|
|||||||||||||||
Net
income (loss)
|
$
|
4.6
|
6.8
|
%
|
$
|
(7.3
|
)
|
(17.8
|
)%
|
$
|
(1.7
|
)
|
(4.0
|
)%
|
December
31,
|
||||||||||
2007
|
2006
|
2005
|
||||||||
Cash
and cash equivalents
|
$
|
14,751
|
$
|
13,597
|
$
|
20,059
|
||||
Working
capital
|
16,329
|
14,292
|
21,432
|
Payments
Due by Period
|
||||||||||||||||
Contractual
Obligations
|
Total
|
|
Less
than
1
year
|
|
1-3
years
|
|
4-5
years
|
|
After
5
years
|
|||||||
Capital
lease obligations
|
$
|
659
|
$
|
260
|
$
|
393
|
$
|
6
|
$
|
-
|
||||||
Non-cancelable
operating leases
|
2,554
|
980
|
1,293
|
281
|
-
|
|||||||||||
Long-term
vendor obligations
|
4
|
4
|
-
|
-
|
-
|
|||||||||||
Total
contractual cash obligations
|
$
|
3,217
|
$
|
1,244
|
$
|
1,686
|
$
|
287
|
$
|
-
|
(a) | 1. |
Financial
Statements. See Item 8. Index to Financial
Statements.
|
2. |
Financial
Statement Schedules. Schedule II – Valuation and Qualifying
Accounts.
|
3. |
Exhibits
– See Exhibit Index attached hereto and incorporated by reference
herein.
|
INNODATA ISOGEN, INC. | |
By
|
/s/
Jack Abuhoff
|
Jack
Abuhoff
|
|
Chairman
of the Board of Directors,
|
|
Chief
Executive Officer and
President
|
Signature
|
Title
|
Date
|
||
/s/
Jack Abuhoff
|
Chairman
of the Board of Directors,
|
March
13, 2008
|
||
Jack
Abuhoff
|
Chief
Executive Officer and President
|
|||
/s/
Steven L. Ford
|
Executive
Vice President,
|
March
13, 2008
|
||
Steven
L. Ford
|
Chief
Financial Officer
and
Principal Accounting Officer
|
|||
/s/
Haig S. Bagerdjian
|
Director
|
March
13, 2008
|
||
Haig
S. Bagerdjian
|
||||
/s/
Louise C. Forlenza
|
Director
|
March
13, 2008
|
||
Louise
C. Forlenza
|
||||
/s/
John R. Marozsan
|
Director
|
March
13, 2008
|
||
John
R. Marozsan
|
||||
/s/
Peter H. Woodward
|
Director
|
March
13, 2008
|
||
Peter
H. Woodward
|
||||
PAGE
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
F-3
|
Consolidated
Statements of Operations for the three years ended December
31, 2007
|
F-4
|
Consolidated
Statement of Stockholders’ Equity for the three years ended December
31, 2007
|
F-5
|
Consolidated
Statements of Cash Flows for the three years ended December
31, 2007
|
F-6
|
Notes
to Consolidated Financial Statements
|
F-7
|
2007
|
|
2006
|
|||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
14,751
|
$
|
13,597
|
|||
Accounts
receivable-net of allowance for doubtful accounts of $127 and $70
at
December 31, 2007 and 2006 respectively
|
10,673
|
6,484
|
|||||
Prepaid
expenses and other current assets
|
2,117
|
1,589
|
|||||
Refundable
income taxes
|
453
|
1,062
|
|||||
Deferred
income taxes
|
202
|
190
|
|||||
Total
current assets
|
28,196
|
22,922
|
|||||
Property
and equipment, net
|
7,160
|
4,564
|
|||||
Other
assets
|
2,037
|
1,912
|
|||||
Deferred
income taxes
|
381
|
256
|
|||||
Goodwill
|
675
|
675
|
|||||
Total
assets
|
$
|
38,449
|
$
|
30,329
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
1,973
|
$
|
987
|
|||
Accrued
expenses
|
2,227
|
1,969
|
|||||
Accrued
salaries, wages and related benefits
|
5,244
|
3,554
|
|||||
Income
and other taxes
|
2,053
|
1,295
|
|||||
Current
portion of long term obligations
|
370
|
825
|
|||||
Total
current liabilities
|
11,867
|
8,630
|
|||||
Deferred
income taxes
|
1,224
|
1,126
|
|||||
Long
term obligations
|
2,128
|
1,564
|
|||||
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; 24,881,000
issued and
24,699,000
outstanding at December 31, 2007; and 24,087,000 shares issued
and 23,905,000
outstanding at December 31, 2006
|
249
|
241
|
|||||
Additional
paid-in capital
|
16,323
|
17,225
|
|||||
Retained
earnings
|
7,188
|
2,622
|
|||||
Accumulated
other comprehensive loss
|
(211
|
)
|
(760
|
)
|
|||
23,549
|
19,328
|
||||||
Less:
treasury stock, 182,000 shares at cost
|
(319
|
)
|
(319
|
)
|
|||
Total
stockholders’ equity
|
23,230
|
19,009
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
38,449
|
$
|
30,329
|
2007
|
|
2006
|
|
2005
|
||||||
Revenues
|
$
|
67,731
|
$
|
40,953
|
$
|
42,052
|
||||
Operating
costs and expenses
|
||||||||||
Direct
operating costs
|
48,581
|
34,141
|
30,920
|
|||||||
Selling
and administrative expenses
|
15,281
|
14,284
|
13,684
|
|||||||
Restructuring
costs
|
-
|
604
|
-
|
|||||||
63,862
|
49,029
|
44,604
|
||||||||
Income
(loss) from operations
|
3,869
|
(8,076
|
)
|
(2,552
|
)
|
|||||
Other
(income) expenses
|
||||||||||
Interest
expense
|
33
|
7
|
18
|
|||||||
Interest
income
|
(678
|
)
|
(683
|
)
|
(457
|
)
|
||||
Income
(loss) before benefit from income taxes
|
4,514
|
(7,400
|
)
|
(2,113
|
)
|
|||||
Benefit
from income taxes
|
(52
|
)
|
(77
|
)
|
(462
|
)
|
||||
Net
income (loss)
|
$
|
4,566
|
$
|
(7,323
|
)
|
$
|
(1,651
|
)
|
||
Income
(loss) per share:
|
||||||||||
Basic:
|
$
|
.19
|
$
|
(.30
|
)
|
$
|
(.07
|
)
|
||
Diluted:
|
$
|
.18
|
$
|
(.30
|
)
|
$
|
(.07
|
)
|
||
Weighted
average shares outstanding:
|
||||||||||
Basic:
|
24,142
|
24,021
|
23,009
|
|||||||
Diluted:
|
25,327
|
24,021
|
23,009
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
Additional
|
|
|
|
Other
|
|
|
|
|
|
|||||||
|
|
Common
Stock
|
|
Paid-in
|
|
Retained
|
|
Comprehensive
|
|
Treasury
|
|
|
|
|||||||||
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Earnings
|
|
Loss
|
|
Stock
|
|
Total
|
|
|||||||
January
1, 2005
|
22,679
|
$
|
227
|
$
|
14,914
|
$
|
11,596
|
-
|
-
|
$
|
26,737
|
|||||||||||
Net
loss
|
-
|
-
|
-
|
(1,651
|
)
|
-
|
-
|
(1,651
|
)
|
|||||||||||||
Issuance
of common stock upon exercise of stock options
|
990
|
10
|
1,287
|
-
|
-
|
-
|
1,297
|
|||||||||||||||
Income
tax benefit from exercise of stock options
|
-
|
-
|
334
|
-
|
-
|
-
|
334
|
|||||||||||||||
Non-cash
equity compensation
|
-
|
-
|
97
|
-
|
-
|
-
|
97
|
|||||||||||||||
December
31, 2005
|
23,669
|
237
|
16,632
|
9,945
|
-
|
-
|
26,814
|
|||||||||||||||
Net
loss
|
-
|
-
|
-
|
(7,323
|
)
|
-
|
-
|
(7,323
|
)
|
|||||||||||||
Issuance
of common stock upon exercise of stock options
|
418
|
4
|
352
|
-
|
-
|
-
|
356
|
|||||||||||||||
Purchase
of treasury stock
|
(182
|
)
|
-
|
-
|
-
|
-
|
(319
|
)
|
(319
|
)
|
||||||||||||
Non-cash
equity compensation
|
-
|
-
|
241
|
-
|
-
|
-
|
241
|
|||||||||||||||
Adjustment
to initially apply FASB Statement 158, net of
tax
|
-
|
-
|
-
|
-
|
(760
|
)
|
-
|
(760
|
)
|
|||||||||||||
December
31, 2006
|
23,905
|
241
|
17,225
|
2,622
|
(760
|
)
|
(319
|
)
|
19,009
|
|||||||||||||
Net
income
|
-
|
-
|
-
|
4,566
|
-
|
-
|
4,566
|
|||||||||||||||
Issuance
of common stock upon exercise of stock options
|
794
|
8
|
447
|
-
|
-
|
-
|
455
|
|||||||||||||||
Payment
of minimum withholding taxes on net settlement of stock
options
|
-
|
-
|
(1,523
|
)
|
-
|
-
|
-
|
(1,523
|
)
|
|||||||||||||
Non-cash
equity compensation
|
-
|
-
|
174
|
-
|
-
|
-
|
174
|
|||||||||||||||
Change
in transitional projected benefit obligation, net of
tax
|
-
-
|
-
|
-
|
-
|
549
|
-
|
549
|
|||||||||||||||
December
31, 2007
|
24,699
|
$
|
249
|
$
|
16,323
|
$
|
7,188
|
$
|
(211
|
)
|
$
|
(319
|
)
|
$
|
23,230
|
2007
|
|
2006
|
|
2005
|
||||||
Cash
flow from operating activities:
|
||||||||||
Net
income (loss)
|
$
|
4,566
|
$
|
(7,323
|
)
|
$
|
(1,651
|
)
|
||
Adjustments
to reconcile net income (loss) to net cash
|
||||||||||
provided
by (used in) operating activities:
|
||||||||||
Depreciation
and amortization
|
3,156
|
3,437
|
3,160
|
|||||||
Stock-based
compensation
|
174
|
241
|
97
|
|||||||
Deferred
income taxes
|
(87
|
)
|
(222
|
)
|
215
|
|||||
Pension
cost
|
667
|
313
|
251
|
|||||||
Changes
in operating assets and liabilities, net of acquisitions:
|
||||||||||
Accounts
receivable
|
(4,189
|
)
|
685
|
850
|
||||||
Prepaid
expenses and other current assets
|
(976
|
)
|
(665
|
)
|
167
|
|||||
Refundable
income taxes
|
609
|
153
|
(1,215
|
)
|
||||||
Other
assets
|
(147
|
)
|
(189
|
)
|
(355
|
)
|
||||
Accounts
payable
|
986
|
(542
|
)
|
80
|
||||||
Accrued
expenses
|
258
|
367
|
(211
|
)
|
||||||
Payment
of minimum withholding taxes on net settlement of stock
options
|
(1,523
|
)
|
-
|
-
|
||||||
Accrued
salaries and wages
|
1,745
|
379
|
(663
|
)
|
||||||
Income
and other taxes
|
758
|
(68
|
)
|
393
|
||||||
Net
cash provided by (used in) operating activities
|
5,997
|
(3,434
|
)
|
1,118
|
||||||
Cash
flows from investing activities:
|
||||||||||
Capital
expenditures
|
(4,449
|
)
|
(2,329
|
)
|
(2,335
|
)
|
||||
Net
cash used in investing activities
|
(4,449
|
)
|
(2,329
|
)
|
(2,335
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Payment
of long-term obligations
|
(849
|
)
|
(736
|
)
|
(684
|
)
|
||||
Proceeds
from exercise of stock options
|
455
|
356
|
1,297
|
|||||||
Purchase
of treasury stock
|
-
|
(319
|
)
|
-
|
||||||
Net
cash (used in) provided by financing activities
|
(394
|
)
|
(699
|
)
|
613
|
|||||
Increase
(decrease) in cash and cash equivalents
|
1,154
|
(6,462
|
)
|
(604
|
)
|
|||||
Cash
and cash equivalents, beginning of period
|
13,597
|
20,059
|
20,663
|
|||||||
Cash
and cash equivalents, end of period
|
$
|
14,751
|
$
|
13,597
|
$
|
20,059
|
||||
Supplemental
disclosures of cash flow information:
|
||||||||||
Cash
paid for income taxes
|
$
|
325
|
$
|
340
|
$
|
504
|
||||
Cash
paid for interest
|
$
|
33
|
$
|
7
|
$
|
18
|
||||
Non-cash
investing and financing activities:
|
||||||||||
Acquisition
of equipment utilizing capital leases
|
$
|
770
|
$
|
-
|
$
|
-
|
||||
Vendor
financed software licenses acquired
|
$
|
-
|
$
|
164
|
$
|
1,583
|
1.
|
Description
of Business and Summary of Significant Accounting
Policies
|
Years
Ended December 31,
|
|
||||||
|
|
2007
|
|
2006
|
|||
Cost
of sales
|
$
|
74
|
$
|
80
|
|||
Selling
and adminstrative expenses
|
100
|
101
|
|||||
Restructuring
costs
|
—
|
60
|
|||||
Total
stock-based compensation
|
$
|
174
|
$
|
241
|
Year
Ended
|
||||
December 31, 2005
|
||||
(in thousands, except
|
||||
per share amounts)
|
||||
Net
loss, as reported
|
$
|
(1,651
|
)
|
|
Deduct:
Total stock-based employee compensation determined under the fair
value
method, net of related tax effects
|
(6,731
|
)
|
||
Add:
Stock-based compensation expense included in the determination
of net loss
as reported, net of related tax effects, related to extension of
stock
options
|
79
|
|||
Pro
forma net loss
|
$
|
(8,303
|
)
|
|
Net
loss per share, basic and diluted:
|
||||
As
reported
|
$
|
(0.07
|
)
|
|
Pro
forma
|
$
|
(0.36
|
)
|
2.
|
Property
and equipment
|
December
31,
|
|
||||||
|
|
2007
|
|
2006
|
|||