10-K

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TABLE OF CONTENTS
Item 15. Exhibits and Financial Statement Schedule

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                    to

Commission File Number 001-33287

Information Services Group, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation) 20-5261587
(I.R.S. Employer Identification Number)

Two Stamford Plaza
281 Tresser Boulevard
Stamford, CT 06901
(Address of principal executive offices and zip code)

Registrant's telephone number, including area code: (203) 517-3100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Shares of Common Stock, $0.001 par value	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

          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 ý    No o

          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 ý    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

          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. (Check one):

Large accelerated filer o Accelerated filer ý Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

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

          The aggregate market value of the voting common stock, par value $0.001 per share, held by non-affiliates of the registrant computed by reference to the closing sales price for the registrant's common stock on June 30, 2011, as reported on the NASDAQ Stock Market was approximately $58,011,635.

          In determining the market value of the voting stock held by any non-affiliates, shares of common stock of the registrant beneficially owned by directors, officers and other holders of non-publicly traded shares of common stock of the registrant have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

          As of February 24, 2012, the registrant had outstanding 36,315,638 shares of common stock, par value $0.001 per share.

Documents Incorporated by Reference

Document Description	10-K Part
Portions of the Proxy Statement for the 2012 Annual Meeting of Stockholders (the "Proxy Statement"), to be filed within 120 days of the end of the fiscal year ended December 31, 2011, are incorporated by reference in Part III hereof. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part hereof.	III (Items 10, 11, 12, 13, 14)

TABLE OF CONTENTS

SAFE HARBOR STATEMENT

PART I
Item 1.	Business	5
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	18
Item 3.	Legal Proceedings	18
Item 4.	Mine Safety Disclosures	18
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6.	Selected Financial Data	23
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 8.	Financial Statements and Supplementary Data.	42
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	42
Item 9A.	Controls and Procedures	42
Item 9B.	Other Information	43
PART III
Item 10.	Directors and Executive Officers of the Registrant	44
Item 11.	Executive Compensation	44
Item 12.	Security Ownership and Certain Beneficial Owners and Management and Related Stockholder Matters	44
Item 13.	Certain Relationships, Related Transactions and Director Independence	44
Item 14.	Principal Accountant Fees and Services	44
PART IV
Item 15.	Exhibits and Financial Statement Schedule	45
SIGNATURES PAGE

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SAFE HARBOR STATEMENT

        Information Services Group ("ISG") believes that some of the information in this Annual Report on Form 10-K constitutes forward-looking statements. You can identify these statements by forward-looking words such as "may," "expect," "anticipate," "contemplate," "believe," "estimate," "intends" and "continue" or similar words. You should read statements that contain these words carefully because they:

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discuss future expectations;

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contain projections of future results of operations or financial condition; or

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state other "forward-looking" information.

        These forward-looking statements include, but are not limited to, statements relating to:

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ability to retain existing clients and contracts;

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ability to win new clients and engagements;

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ability to implement cost reductions and productivity improvements;

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beliefs about future trends in the sourcing industry;

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expected spending on sourcing services by clients;

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foreign currency exchange rates;

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effective tax rate; and

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competition in the sourcing industry.

        ISG believes it is important to communicate its expectations to its stockholders. However, there may be events in the future that ISG is not able to predict accurately or over which it has no control. The risk factors and cautionary language discussed in this Annual Report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations in such forward-looking statements, including among other things:

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the amount of cash on hand;

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business strategy;

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cost reductions and productivity improvements may not be fully realized or realized within the expected time frame;

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continued compliance with government regulations;

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legislation or regulatory environments, requirements or changes adversely affecting the business in which ISG is engaged;

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fluctuations in client demand;

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management of growth;

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ability to grow the business and effectively manage growth and international operations while maintaining effective internal controls;

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ISG's relative dependence on clients which operate in the financial services, manufacturing, automotive and public services sectors;

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ability to hire and retain enough qualified employees to support operations;

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increases in wages in locations in which ISG has operations;

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ability to retain senior management;

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fluctuations in exchange rates between the U.S. dollar and foreign currencies;

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ability to attract and retain clients and the ability to develop and maintain client relationships based on attractive terms;

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legislation in the United States or elsewhere that adversely affects the performance of sourcing services offshore;

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increased competition;

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telecommunications or technology disruptions or breaches, or natural or other disasters;

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ability to protect ISG intellectual property and the intellectual property of others;

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the international nature of ISG's business;

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political or economic instability in countries where ISG has operations;

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worldwide political, economic and business conditions; and

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ability to successfully consummate or integrate strategic acquisitions.

        You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report.

        All forward-looking statements included herein attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. This Annual Report also contains forward-looking statements attributed to estimates of the growth of our markets. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except to the extent required by applicable laws and regulations, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events.

        You should, however, review the risks and uncertainties we describe in the reports we will file from time to time with the SEC after the date of this Annual Report.

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PART I

Item 1.    Business

        As used herein, unless the context otherwise requires, ISG, the registrant, is referred to in this Form 10-K annual report ("Form 10-K") as the "Company," "we," "us" and "our."

Our Company

        Information Services Group, Inc. (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory services company serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, our deep data source, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Connecticut, the company has approximately 700 employees and operates in 21 countries.

        Our company was founded in 2006 with the strategic vision to become a high-growth, leading provider of information-based advisory services. In 2007, ISG consummated its initial public offering and completed the acquisition of TPI Advisory Services Americas, Inc. ("TPI").

        On January 4, 2011, we acquired Compass, a premier independent global provider of business and information technology benchmarking, performance improvement, data and analytics services. It was founded in 1980 and headquartered in the United Kingdom and had approximately 180 employees in 16 countries serving nearly 250 clients.

        On February 10, 2011, we acquired Austin, Texas-based STA Consulting, a premier independent information technology advisor serving the public sector. STA Consulting advises clients on information technology strategic planning and the acquisition and implementation of new Enterprise Resource Planning (ERP) and other enterprise administration and management systems. STA Consulting was founded in 1997 and had approximately 40 professionals.

        We continue to believe that our vision will be realized through the acquisition, integration, and successful operation of market-leading brands within the data, analytics and advisory industry. Including our most recent acquisitions, we operate in 21 countries and employ approximately 700 professionals globally, delivering advisory, benchmarking and analytical insight to large, multinational corporations and governments in North America, Europe and Asia Pacific.

        There are important cyclical and secular challenges faced by our private and public sector clients which will continue to fuel demand for the professional services we provide. In the private sector, for example, we believe that companies will continue to face significant challenges associated with globalization, including the need to decrease operating costs, increase efficiencies and deal with increasing numbers of emerging and transformational technologies such as cloud computing. Similarly, public sector organizations at the national, regional and local levels increasingly must deal with the complex and converging issues of outdated technology systems, significantly impaired revenue sources and an aging workforce.

        Overall, we believe that the environmental dynamics at work in both the private and public sectors mitigate decisively in favor of the professional services, analytics and advice ISG can provide. In this dynamic environment, the strength of our client relationships greatly depends on the quality of our advice and insight, the independence of our thought leadership and the effectiveness of our people in assisting our clients to implement strategies that successfully address their most pressing operational challenges.

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        We are organized as a corporation under the laws of the State of Delaware. The current mailing address of the Company's principal executive office is:

        Information Services Group, Inc.

        Two Stamford Plaza, 281 Tresser Boulevard, Stamford, CT 06901, and our telephone number is (203) 517-3100.

Our Services

        During periods of expansion or contraction, for enterprises large or small, public or private, in North America or Europe and Asia Pacific, our services have helped organizations address their most complex operational issues. The functional domain experience of our experts and deep empirical data help clients better understand their strategic options. We provide four key lines of service:

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Research.  We utilize our extensive experience and proprietary data assets to provide subscription and custom research services to both buyers and service providers active in the outsourcing and managed services industries. Our views into the buying behaviors, needs and objectives of global corporations examining transformation of their operations provide unique insight for industry participants.

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Benchmarking and Analytics.  Our combined data sources, compiled over 30 years of servicing global corporations provide a rich source of benchmark data into the comparative cost and quality of operational alternatives. We use these data sources to provide clients with in-depth analysis into the implications of different service strategies allowing them to compare and contrast and make informed decision regarding strategic change.

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Strategic Consulting.  We assist clients with envisioning, designing and implementing change in their operational environments. We evaluate existing practices and operating costs of public and private enterprises, identifying potential improvement opportunities to enhance service delivery, optimize operations or reduce costs. Solutions are customized by client situation and may include internal transformation, the adoption of external strategies, or some combination of both. In all cases, we assist with the selection, implementation and ongoing support for these strategic initiatives.

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Managed Services.  Our managed service offerings provide best in class operational governance services and bring these to our clients as a seamless end-to-end service. This offering assists clients with monitoring and managing their supplier relationships, providing them with real-time accurate market intelligence and insights into all aspects of provider performance and cost, allowing them to focus on the more strategic aspects of supplier management.

Recent Developments

        On January 10, 2012, we announced the merging of our individual corporate brands into one globally integrated go-to-market business under the ISG brand. TPI, the world's leading independent sourcing data and advisory firm; Compass, a premier independent provider of business and IT benchmarking; and STA Consulting, a premier independent technology advisory serving the North America public sector, have combined under the ISG brand. This merger offers clients one source of support to drive operational excellence in their organizations. The legacy brands of TPI and Compass will remain as product and service descriptors, such as "TPI Sourcing" and "Compass Benchmarks".

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Our Competitive Advantages

        We believe that the following strengths differentiate us from our competition:

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Independence and objectivity.  We are not a service provider. We are an independent, fact-based data, analytics and advisory firm with no material conflicting financial or other interests. This enables us to maintain a trusted advisor relationship with our clients through our unbiased focus and ability to align our interests with those of our clients.

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Domain expertise.  Averaging over 20 years of experience, our strategic consulting teams bring a wealth of industry and domain-specific knowledge and expertise to address our clients' most complex transformational needs.

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Strong brand recognition.—We are transitioning to the ISG brand with TPI, Compass and STA Consulting positioned as product and service descriptors which have legally registered trademarks in certain appropriate jurisdictions. ISG now offers a complete product and service offering for our clients via the acquisitions of TPI, Compass and STA Consulting. We have retained our legacy brands to identify specific products and services we are known for including "The TPI Index", "TPI Sourcing" and "Compass benchmarks".

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Proprietary data assets and market intelligence.  We have assembled a comprehensive and unique set of data, analytics and market intelligence built through thirty years of data collection and analysis, providing insight into the comparative cost and quality of a variety of operational alternatives.

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Global reach.  We possess practical experience in global business operations, and we understand the significance of interconnected economies and companies. Our resources in the Americas, Europe, Asia Pacific, China and India make us a truly global advisory firm able to consistently serve the strategic and implementation needs of our clients.

        We believe that the strengths disclosed above are central to our ability to deal successfully with the challenges that we face.

Our Strategy

        We intend to use our competitive strengths to develop new services and products, sustain our growth and strengthen our existing market position by pursuing the following strategies:

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Preserve and expand our leading market share positions.  We expect the trend toward globalization and greater operating efficiency and technological innovation to play an increasing role in the growth of demand for our services. We plan to leverage our combined operating platform to serve the growing number of private and public enterprises utilizing outside advisors when undertaking transformational projects. In addition, we will seek to continue to expand our products and services and the geographic markets we serve opportunistically as global competition spurs demand for cost savings and value creation.

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Strengthen our Industry expertise.  We have strengthened our market facing organization to drive increased revenue around five key areas—BFSI (Banking, Financial Services and Insurance); Manufacturing/Auto; Energy, Life Sciences and Healthcare; Technology, Retail and Enterprise Businesses; and Public Sector/Government.

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Expand geographically.  Historically, we generated the majority of our revenues in North America. Over the past several years, we have made significant investments in Europe and Asia Pacific to capitalize on emerging demand for advisory, benchmarking and analytical insight in these geographic regions. We intend to continue to expand in Europe and Asia Pacific and maintain our revenue growth and market leading positions in those markets. The acquisition of Compass

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expanded our geographic reach, particularly in Europe, and increased the amount of our revenues we generated internationally versus in North America.

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Aggressively expand our Market focus.  We are seeking to drive our service portfolio and relationships with clients further into white spaces—Business Advisory Services, Cloud Solutions, Project Management Services, Strategy, Transition and Organization & Operations are all areas where we are investing additional focus to drive increased revenues and expanded relationships with clients.

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Expand "annuity-like" products and services.  As companies begin to recognize the importance of managing the post-sourcing-transaction period, managed services has emerged as a potential revenue driver for us where our offerings are delivered through multi-year managed services contracts. We believe that our experience with outsourcing transactions and software implementation initiatives make us uniquely equipped to provide research insights and direct support to help our clients manage their transformational projects or act as a third-party administrator. We will continue to pursue opportunities to leverage our experience to make research and managed services an even greater revenue generator for us.

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Consider acquisition and other growth opportunities.  The business services, information and advisory market is highly fragmented. We believe we are well-positioned to leverage our leading market positions and strong brand recognition to expand through acquisitions. Acquiring firms with complementary services and products will allow us to further develop and broaden our service offerings and domain expertise. We will consider and may pursue opportunities to enter into joint ventures and to buy or combine with other businesses.

Our Proprietary Data Assets and Market Intelligence

        One of our core assets is the information, data, analytics, methodologies and other intellectual capital the Company possesses. This intellectual property underpins the independent nature of our operational assessments, strategy development, deal-structuring, negotiation and other consulting services we provide our clients.

        With each engagement we conduct, we enhance both the quantity and quality of the intellectual property we can employ on behalf of our clients, thus providing a continuous, evolving and unique source of information, data and analytics.

        This intellectual property is proprietary and we rely on multiple legal and contractual provisions and devices to protect our intellectual property rights. We recognize the value of our intellectual property and vigorously defend it. As a result, the Company maintains strict policies and procedures regarding ownership, use and protection with all parties, including our employees.

Clients

        We operate in 21 countries and across numerous industries. Our private sector clients operate in the financial services, telecommunications, healthcare and pharmaceuticals, manufacturing, transportation and travel and energy and utilities industries. Our private sector clients are primarily large businesses and ranked in the Forbes Global 2000 companies annually. Our public sector clients are primarily state and local governments (cities and counties) and authorities (airport and transit) in the United States and national and provincial government units in the United Kingdom, Canada and Australia.

Competition

        Competition in the sourcing, data, information and advisory market is primarily driven by independence and objectivity, expertise, possession of relevant benchmarking data, breadth of service

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capabilities, reputation and price. We compete with other sourcing advisors, research firms, strategy consultants and sourcing service providers. A significant number of independent sourcing and advisory firms offer similar services. In our view, however, these firms generally lack the benchmarking data, scale and diversity of expertise that we possess. In addition, most research firms do not possess the data repository of recent, comparable transactions and benchmarking data. Strategy consultants bring strategy services capabilities to the sourcing and advisory market. However, since they do not focus exclusively on the sourcing market, they lack the depth of experience that sourcing, data and advisory firms such as ISG possess. In addition, strategy consultants do not possess the sourcing and technology implementation expertise or the benchmarking data capabilities that are critical to implementing and managing successful transformational projects for businesses and governments. Other service providers often lack the depth of experience, competitive benchmarking data and independence critical to playing the role of "trusted advisor" to clients.

Employees

        As of December 31, 2011, we employed 699 people worldwide.

        Our employee base includes executive management, service leads, partners, directors, advisors, analysts, technical specialists and functional support staff.

        We recruit advisors from service providers, consulting firms and clients with direct operational experience. These advisors leverage extensive practical expertise derived from experiences in corporate leadership, consulting, research, financial analysis, contract negotiations and operational service delivery.

        All employees are required to execute confidentiality, conflict of interest and intellectual property agreements as a condition of employment. There are no collective bargaining agreements covering any of our employees.

        Our voluntary advisor turnover rate ranged between 9% and 17% over the last three years.

Available Information

        Our Internet address is www.isg-one.com. The content on our website is available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K. We make available through our Internet website under the heading "Investor Relations," our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K after we electronically file any such materials with the Securities and Exchange Commission. Copies of our key corporate governance documents, including our Code of Ethics for Directors, Officers and Employees and charters for our Audit Committee, our Nominating and Corporate Governance Committee and our Compensation Committee are also on our website. Stockholders may request free copies of these documents including our Annual Report to Stockholders by writing to Information Services Group, Inc., Two Stamford Plaza, 281 Tresser Boulevard, Stamford CT 06901, Attention: David E. Berger, or by calling (203) 517-3100.

        Our annual and quarterly reports and other information statements are available to the public through the SEC's website at www.sec.gov. In addition, the Notice of Annual Meeting of Stockholders, Proxy Statement and 2011 Annual Report to Stockholders are available free of charge at www.isg-one.com.

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Item 1A.    Risk Factors

         The loss of key executives could adversely affect our business.

        The success of our business is dependent upon the continued service of a relatively small group of key executives, including Mr. Connors, Chairman and Chief Executive Officer; Mr. Berger, Executive Vice President, Chief Financial Officer; Mr. Somerdyk, Executive Vice President and Chief Human Resources and Communications Officer, and Mr. Whitmore, Vice Chairman and President, ISG Americas, among others.

        Although we currently intend to retain our existing management, we cannot assure you that such individuals will remain with us for the immediate or foreseeable future. The unexpected loss of the services of one or more of these executives could adversely affect our business.

         We have outstanding a substantial amount of debt, which may limit our ability to fund general corporate requirements and obtain additional financing, limit our flexibility in responding to business opportunities and competitive developments and increase our vulnerability to adverse economic and industry conditions.

        We incurred a substantial amount of indebtedness to finance the acquisition of TPI, including transaction costs and deferred underwriting fees. On November 16, 2007, our wholly-owned subsidiary International Consulting Acquisition Corp. ("ICAC") entered into a senior secured credit facility comprised of a $95.0 million term loan facility and a $10.0 million revolving credit facility. On November 16, 2007, ICAC borrowed $95.0 million under the term loan facility to finance the purchase price for our acquisition of TPI and to pay transaction costs. As a result of the substantial fixed costs associated with the debt obligations, we expect that:

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a decrease in revenues will result in a disproportionately greater percentage decrease in earnings;

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we may not have sufficient liquidity to fund all of these fixed costs if our revenues decline or costs increase;

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we may have to use our working capital to fund these fixed costs instead of funding general corporate requirements, including capital expenditures;

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we may not have sufficient liquidity to respond to business opportunities, competitive developments and adverse economic conditions; and

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our results of operations will be adversely affected if interest rates increase because, based on our current outstanding term loan borrowings in the amount of $63.8 million, a 1% increase in interest rates would result in a pre-tax impact on earnings of approximately $0.6 million per year.

        These debt obligations may also impair our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business. Our indebtedness under the senior secured revolving credit facility is secured by substantially all of our assets, leaving us with limited collateral for additional financing. Moreover, the terms of our indebtedness under the senior secured revolving credit facility restrict our ability to take certain actions, including the incurrence of additional indebtedness, mergers and acquisitions, investments and asset sales. Our ability to pay the fixed costs associated with our debt obligations will depend on our operating performance and cash flow, which in turn depend on general economic conditions and the advisory services market. A failure to pay interest or indebtedness when due could result in a variety of adverse consequences, including the acceleration of our indebtedness. In such a situation, it is unlikely that we would be able to fulfill our obligations under or repay the accelerated indebtedness or otherwise cover our fixed costs. As of December 31, 2011, the total principal outstanding under the term loan facility was $63.8 million. There were no borrowings under the revolving credit facility during fiscal 2011.

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         Failure to maintain effective internal controls over financial reporting could adversely affect our business and the market price of our Common Stock.

        Pursuant to rules adopted by the SEC implementing Section 404 of the Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal controls over financial reporting and provide a management report on our internal controls over financial reporting in all annual reports. This report contains, among other matters, a statement as to whether or not our internal controls over financial reporting are effective and the disclosure of any material weaknesses in our internal controls over financial reporting identified by management.

        The Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides a framework for companies to assess and improve their internal control systems. Auditing Standard No. 5 provides the professional standards and related performance guidance for auditors to attest to, and report on, management's assessment of the effectiveness of internal control over financial reporting under Section 404. Management's assessment of internal controls over financial reporting requires management to make subjective judgments and, some of the judgments will be in areas that may be open to interpretation. Therefore, our management's report on our internal controls over financial reporting may be difficult to prepare, and our auditors may not agree with our management's assessment.

        While we currently believe our internal controls over financial reporting are effective, we are required to comply with Section 404 on an annual basis. If, in the future, we identify one or more material weaknesses in our internal controls over financial reporting during this continuous evaluation process, our management will be unable to assert such internal controls are effective. Although we currently anticipate being able to continue to satisfy the requirements of Section 404 in a timely fashion, we cannot be certain as to the timing of completion for our future evaluation, testing and any required remediation due in large part to the fact that there are limited precedents available by which to measure compliance with these requirements. Therefore, if we are unable to assert that our internal controls over financial reporting are effective in the future, or if our auditors are unable to express an opinion on the effectiveness of our internal controls, our investors could lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our business and the market price of our Common Stock.

         Our operating results have been, and may in the future be, adversely impacted by the worldwide economic crisis and credit tightening.

        Our results of operations are affected by the level of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve. A decline in the level of business activity of our clients could have a material adverse effect on our revenue and profit margin. In particular, our exposure to certain industries currently experiencing financial difficulties, including the transportation and financial services industries, could have an adverse effect on our results of operations. Future economic conditions could cause some clients to reduce or defer their expenditures for consulting services. We have implemented and will continue to implement cost-savings initiatives to manage our expenses as a percentage of revenue. However, current and future cost-management initiatives may not be sufficient to maintain our margins if the economic environment should weaken for a prolonged period.

         The rate of growth in the broadly defined business information services & advisory sector and/or the use of technology in business may fall significantly below the levels that we currently anticipate.

        Our business is dependent upon continued growth in sourcing activity, the use of technology in business by our clients and prospective clients and the continued trend towards sourcing of complex information technology and business process tasks by large and small organizations. If sourcing

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diminishes as a management and operational tool, the growth in the use of technology slows down or the cost of sourcing alternatives rises, our business could suffer. Companies that have already invested substantial resources in developing in-house information technology and business process functions may be particularly reluctant or slow to move to a sourcing solution that may make some of their existing personnel and infrastructure obsolete.

         Our engagements may be terminated, delayed or reduced in scope by clients at any time.

        Our clients may decide at any time to abandon, postpone and/or to reduce our involvement in an engagement. Our engagements can therefore terminate, or the scope of our responsibilities may diminish, with limited advance notice. If an engagement is terminated, delayed or reduced unexpectedly, the professionals working on the engagement could be underutilized until we assign them to other projects. Accordingly, the termination or significant reduction in the scope of a single large engagement, or multiple smaller engagements, could harm our business results.

         Our operating results may fluctuate significantly from period to period as a result of factors outside of our control.

        We expect our revenues and operating results to vary significantly from accounting period to accounting period due to factors including:

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fluctuations in revenues earned on contracts;

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commencement, completion or termination of contracts during any particular period;

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additions and departures of key advisors;

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transitioning of advisors from completed projects to new engagements;

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seasonal trends;

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the introduction of new services by us or our competitors;

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changes in fees, pricing policies or compensation arrangements by us or our competitors;

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strategic decisions by us, our clients or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;

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global economic and political conditions and related risks, including acts of terrorism; and

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conditions in the travel industry that could prevent our advisors from traveling to client sites.

         We depend on project-based advisory engagements, and our failure to secure new engagements could lead to a decrease in our revenues.

        Advisory engagements typically are project-based. Our ability to attract advisory engagements is subject to numerous factors, including the following:

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delivering consistent, high-quality advisory services to our clients;

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tailoring our advisory services to the changing needs of our clients;

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matching the skills and competencies of our advisory staff to the skills required for the fulfillment of existing or potential advisory engagements; and

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maintaining a global business operation.

        Any material decline in our ability to secure new advisory arrangements could have an adverse impact on our revenues and financial condition.

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         We may not be able to maintain our existing services and products.

        We operate in a rapidly evolving market, and our success depends upon our ability to deliver high quality advice and analysis to our clients. Any failure to continue to provide credible and reliable information and advice that is useful to our clients could have a significant adverse effect on future business and operating results. Further, if our advice proves to be materially incorrect and the quality of service is diminished, our reputation may suffer and demand for our services and products may decline. In addition, we must continue to improve our methods for delivering our products and services in a cost-effective manner.

         We may not have the ability to develop and offer the new services and products that we need to remain competitive.

        Our future success will depend in part on our ability to offer new services and products. To maintain our competitive position, we must continue to enhance and improve our services and products, develop or acquire new services and products in a timely manner, and appropriately position and price new services and products relative to the marketplace and our costs of producing them. These new services and products must successfully gain market acceptance by addressing specific industry and business sectors and by anticipating and identifying changes in client requirements. The process of researching, developing, launching and gaining client acceptance of a new service or product, or assimilating and marketing an acquired service or product is risky and costly. We may not be able to introduce new, or assimilate acquired, services and products successfully. Any failure to achieve successful client acceptance of new services and products could have an adverse effect on our business results.

         We may fail to anticipate and respond to market trends.

        Our success depends in part upon our ability to anticipate rapidly changing technologies and market trends and to adapt our advice, services and products to meet the changing sourcing advisory needs of our clients. Our clients regularly undergo frequent and often dramatic changes. That environment of rapid and continuous change presents significant challenges to our ability to provide our clients with current and timely analysis, strategies and advice on issues of importance to them. Meeting these challenges requires the commitment of substantial resources. Any failure to continue to respond to developments, technologies, and trends in a manner that meets market needs could have an adverse effect on our business results.

         We may be unable to protect important intellectual property rights.

        We rely on copyright and trademark laws, as well as nondisclosure and confidentiality arrangements, to protect our proprietary rights in our methods of performing our services and our tools for analyzing financial and other information. There can be no assurance that the steps we have taken to protect our intellectual property rights will be adequate to deter misappropriation of our rights or that we will be able to detect unauthorized use and take timely and effective steps to enforce our rights. If substantial and material unauthorized uses of our proprietary methodologies and analytical tools were to occur, we may be required to engage in costly and time-consuming litigation to enforce our rights. There can be no assurance that we would prevail in such litigation. If others were able to use our intellectual property or were to independently develop our methodologies or analytical tools, our ability to compete effectively and to charge appropriate fees for our services may be adversely affected.

13

         We face competition and our failure to compete successfully could materially adversely affect our results of operations and financial condition.

        The business information services and advisory sector is competitive, highly fragmented and subject to rapid change. We face competition from many other providers ranging from large organizations to small firms and independent contractors that provide specialized services. Our competitors include any firm that provides sourcing or benchmarking advisory services, IT strategy or business process consulting, which may include a variety of consulting firms, service providers, niche advisors and, potentially, advisors currently or formerly employed by us. Some of our competitors have significantly more financial and marketing resources, larger professional staffs, closer client relationships, broader geographic presence or more widespread recognition than us.

        In addition, limited barriers to entry exist in the markets in which we do business. As a result, additional new competitors may emerge and existing competitors may start to provide additional or complementary services. Additionally, technological advances may provide increased competition from a variety of sources. There can be no assurance that we will be able to successfully compete against current and future competitors and our failure to do so could result in loss of market share, diminished value in our products and services, reduced pricing and increased marketing expenditures. Furthermore, we may not be successful if we cannot compete effectively on quality of advice and analysis, timely delivery of information, client service or the ability to offer services and products to meet changing market needs for information, analysis or price.

         We rely heavily on key members of our management team.

        We are dependent on our management team. We have entered into subscription and non-competition agreements with a number of these key management personnel. If any of the covenants contained in the subscription and non-competition agreements are violated, the key management personnel will forfeit their shares (or the after-tax proceeds if the shares have been sold). We issued restricted stock units ("RSUs") and stock appreciation rights ("SARs") to key employees. Vesting rights in the RSUs and SARs are subject to compliance with restrictive covenant agreements. Vested and unvested RSUs and SARs will be forfeited upon any violation of the restrictive covenant agreements. Despite the non-competition and restrictive covenant agreements, we may not be able to retain these managers and may not be able to enforce the non-competition and restrictive covenants. If we were to lose a number of key members of our management team and were unable to replace these people quickly, we could have difficulty maintaining our growth and certain key relationships with large clients.

         We depend upon our ability to attract, retain and train skilled advisors and other professionals.

        Our business involves the delivery of advisory and consulting services. Therefore, our continued success depends in large part upon our ability to attract, develop, motivate, retain and train skilled advisors and other professionals who have advanced information technology and business processing domain expertise, financial analysis skills, project management experience and other similar abilities. We do not have non-competition agreements with many non-executive advisors. Consequently, these advisors could resign and join one of our competitors or provide sourcing advisory services to our clients through their own ventures.

        We must also recruit staff globally to support our services and products. We face competition for the limited pool of these qualified professionals from, among others, technology companies, market research firms, consulting firms, financial services companies and electronic and print media companies, some of which have a greater ability to attract and compensate these professionals. Some of the personnel that we attempt to hire may be subject to non-compete agreements that could impede our short-term recruitment efforts. Any failure to retain key personnel or hire and train additional qualified

14

personnel as required supporting the evolving needs of clients or growth in our business could adversely affect the quality of our products and services, and our future business and operating results.

         We may have agreements with certain clients that limit the ability of particular advisors to work on some engagements for a period of time.

        We provide services primarily in connection with significant or complex sourcing transactions and other matters that provide potential competitive advantage and/or involve sensitive client information. Our engagement by a client occasionally precludes us from staffing certain advisors on new engagements because the advisors have received confidential information from a client who is a competitor of the new client. Furthermore, it is possible that our engagement by a client could preclude us from accepting engagements with such client's competitors because of confidentiality concerns.

         In many industries in which we provide advisory services, there has been a trend toward business consolidations and strategic alliances that could limit the pool of potential clients.

        Consolidations and alliances reduce the number of potential clients for our services and products and may increase the chances that we will be unable to continue some of our ongoing engagements or secure new engagements.

         We derive a significant portion of our revenues from our largest clients and could materially and adversely be affected if we lose one or more of our large clients.

        Our 20 largest clients accounted for approximately 33% of revenue in 2011 and 45% in 2010. If one or more of our large clients terminate or significantly reduce their engagements or fail to remain a viable business, then our revenues could be materially and adversely affected. In addition, sizable receivable balances could be jeopardized if large clients fail to remain viable.

         Our international operations expose us to a variety of risks which could negatively impact our future revenue and growth.

        Approximately 53% and 42% of our revenues for 2011 and 2010 were derived from sales outside of the Americas, respectively. Our operating results are subject to the risks inherent in international business activities, including:

•

tariffs and trade barriers;

•

regulations related to customs and import/export matters;

•

restrictions on entry visas required for our advisors to travel and provide services;

•

tax issues, such as tax law changes and variations in tax laws as compared to the United States;

•

cultural and language differences;

•

an inadequate banking system;

•

foreign exchange controls;

•

restrictions on the repatriation of profits or payment of dividends;

•

crime, strikes, riots, civil disturbances, terrorist attacks and wars;

•

nationalization or expropriation of property;

•

law enforcement authorities and courts that are inexperienced in commercial matters; and

•

deterioration of political relations with the United States.

15

        Air travel, telecommunications and entry through international borders are all vital components of our business. If a terrorist attack similar to ⁹/11 were to occur, our business could be disproportionately impacted because of the disruption a terrorist attack causes on these vital components.

        We intend to continue to expand our global footprint in order to meet our clients' needs. This may involve expanding into countries beyond those in which we currently operate. We may involve expanding into less developed countries, which may have less political, social or economic stability and less developed infrastructure and legal systems. As we expand our business into new countries, regulatory, personnel, technological and other difficulties may increase our expenses or delay our ability to start up operations or become profitable in such countries. This may affect our relationships with our clients and could have an adverse effect on our business.

         We operate in a number of international areas which exposes us to significant foreign currency exchange rate risk.

        We have significant international revenue, which is generally collected in local currency. We currently hold or issue forward exchange contracts for hedging purposes. We do enter into forward contracts for hedging of specific transactions. All are settled prior to quarter end. The percentage of total revenues generated outside the Americas increased from 45% in 2008 to 53% in 2011. It is expected that our international revenues will continue to grow as European and Asian markets adopt sourcing solutions and through the acquisition of Compass. The translation of our revenues into U.S. dollars, as well as our costs of operating internationally, may adversely affect our business, results of operations and financial condition.

         We may be subject to claims for substantial damages by our clients arising out of disruptions to their businesses or inadequate service and our insurance coverage may be inadequate.

        Most of our service contracts with clients contain service level and performance requirements, including requirements relating to the quality of our services. Failure to consistently meet service requirements of a client or errors made by our employees in the course of delivering services to our clients could disrupt the client's business and result in a reduction in revenues or a claim for damages against us. Additionally, we could incur liability if a process we manage for a client were to result in internal control failures or impair our client's ability to comply with our own internal control requirements.

        Under our service agreements with our clients, our liability for breach of our obligations is generally limited to actual damages suffered by the client and is typically capped at the greater of an agreed amount or the fees paid or payable to us under the relevant agreement. These limitations and caps on liability may be unenforceable or otherwise may not protect us from liability for damages. In addition, certain liabilities, such as claims of third parties for which we may be required to indemnify our clients or liability for breaches of confidentiality, are generally not limited under those agreements. Although we have commercial general liability insurance coverage, the coverage may not continue to be available on acceptable terms or in sufficient amounts to cover one or more large claims. The successful assertion of one or more large claims against us that exceed available insurance coverage or changes in our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements) could have a material adverse effect on our business.

         We could be liable to our clients for damages and subject to liability and our reputation could be damaged if our client data is compromised.

        We may be liable to our clients for damages caused by disclosure of confidential information. We are often required to collect and store sensitive or confidential client data in order to perform the services we provide under our contracts. Many of our contracts do not limit our potential liability for

16

breaches of confidentiality. If any person, including any of our current or former employees, penetrates our network security or misappropriates sensitive data or if we do not adapt to changes in data protection legislation, we could be subject to significant liabilities to our clients or to our clients' customers for breaching contractual confidentiality provisions or privacy laws. Unauthorized disclosure of sensitive or confidential client data, whether through breach of our processes, systems or otherwise, could also damage our reputation and cause us to lose existing and potential clients. We may also be subject to civil actions and criminal prosecution by government or government agencies for breaches relating to such data. Our insurance coverage for breaches or mismanagement of such data may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims against us.

         Client restrictions on the use of client data could adversely affect our activities.

        The majority of the data we use to populate our databases comes from our client engagements. The insight sought by clients from us relates to the contractual data and terms, including pricing and costs, to which we have access in the course of assisting our clients in the negotiation of our sourcing agreements. Data is obtained through the course of our engagements with clients who agree to contractual provisions permitting us to consolidate and utilize on an aggregate basis such information. If we were unable to utilize key data from previous client engagements, our business, financial condition and results of operations could be adversely affected.

         We may not be able to maintain the equity in our brand name.

        We are transitioning to the ISG brand with TPI, Compass and STA Consulting positioned as product and service descriptors which have legally registered trademarks in certain appropriate jurisdictions. There may be other entities providing similar services that use these names for their business. There can be no assurance that the resulting confusion and lack of brand-recognition in the marketplace created by this transition will not adversely affect our business.

        We believe that the ISG brand and the related subsidiary brands including "TPI", "Compass" and "STA Consulting" remain critical to our efforts to attract and retain clients and staff and that the importance of brand recognition will increase as competition increases. We may expand our marketing activities to promote and strengthen our brands and may need to increase our marketing budget, hire additional marketing and public relations personnel, expend additional sums to protect the brands and otherwise increase expenditures to create and maintain client brand loyalty. If we fail to effectively promote and maintain the brands or incur excessive expenses in doing so, our future business and operating results could be adversely impacted.

         Our outstanding warrants may be exercised in the future, which would increase the number of shares eligible for future resale in the public market and would result in dilution to our stockholders. This might have an adverse effect on the market price of the common stock.

        As part of the purchase consideration paid to MCP-TPI Holdings, LLC, a Texas limited liability company ("MCP-TPI"), ISG issued warrants exercisable beginning on November 16, 2008 into 5 million shares of ISG common stock at an exercise price of $9.18 per share. To the extent these warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to our stockholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our shares.

Item 1B.    Unresolved Staff Comments

        None.

17

Item 2.    Properties

        We maintain our executive offices in Stamford, Connecticut. The majority of our business activities are performed on client sites. We do not own offices or properties. We have leased offices in the United States, Australia, Canada, China, France, Germany, India, Italy, Japan, Netherlands, Singapore, Spain, Sweden and the United Kingdom.

Item 3.    Legal Proceedings

        We are not aware of any asserted or unasserted legal proceedings or claims that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 4.    Mine Safety Disclosures

        Not applicable.

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

        On February 1, 2007, our units began trading on the American Stock Exchange under the symbol "III.U". Each of our units consisted of one share of common stock and one warrant. On February 12, 2007, the common stock and warrants underlying our units began to trade separately on the American Stock Exchange under the symbols "III" and "III.WS", respectively. Our securities were traded on the American Stock Exchange until January 31, 2008.

        On February 1, 2008, our common stock, warrants and units began trading on The Nasdaq Stock Market LLC under the symbols "III", "IIIW" and "IIIIU", respectively. On January 31, 2011, our warrants and units expired pursuant to their terms and are no longer traded on The Nasdaq Stock Market. The following sets forth the high and low closing sales price of our common stock, warrants and units, as reported on The Nasdaq Stock Market LLC for the periods shown:

	Common Stock
	High		Low
March 31, 2011	$	2.40	$	1.90
June 30, 2011		2.37		1.68
September 30, 2011		1.77		0.95
December 31, 2011		1.32		0.95

	Common Stock				Warrants				Units
	High		Low		High		Low		High		Low
March 31, 2010	$	3.72	$	2.97	$	0.08	$	0.04	$	3.00	$	2.61
June 30, 2010		3.55		2.00		0.07		0.00		3.00		3.00
September 30, 2010		2.19		1.34		0.02		0.00		3.00		1.38
December 31, 2010		2.25		1.75		0.02		0.00		8.73		1.38

        On February 24, 2012, the last reported sale price for our common stock on The Nasdaq Stock Market was $1.21 per share.

        As of December 31, 2011, there were 378 holders of record of ISG common stock.

Dividend Policy

        We have not paid any dividends on our common stock to date. It is the current intention of our Board of Directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future. Moreover, our Credit Agreement restricts our ability to pay dividends. The payment of dividends in the future will be within the discretion of our then Board of Directors and will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition.

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Issuer Purchases of Equity Securities

        The following table details the repurchases that were made during the three months ended December 31, 2011.

Period	Total Number of Securities Purchased (In thousands)		Average Price per Securities		Total Numbers of Securities Purchased as Part of Publicly Announced Plan (In thousands)		Approximate Dollar Value of Securities That May Yet Be Purchased Under The Plan (In thousands)
October 1 – October 31		—	$	—		—	$	9,508
November 1 – November 30		214 shares	$	1.26		214	$	9,237
December 1 – December 31		294 shares	$	1.08		294	$	8,921

        The Company's Board Of Directors has approved common share repurchase authorizations under which repurchases may be made from time to time in the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, in private transactions or otherwise. The authorizations do not have a stated expiration date. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company's financial position, earnings, capital requirements of the Company's operating subsidiaries, legal requirements, regulatory constraints, share price, catastrophe losses, funding of the Company's qualified pension plan, other investment opportunities (including mergers and acquisitions), market conditions and other factors.

Securities Authorized for Issuance under Equity Compensation Plan

        At the special meeting of stockholders held on November 13, 2007, the 2007 Equity Incentive Plan was approved by our stockholders. On May 11, 2010, our stockholders approved an amendment for an additional 4.5 million shares authorized for issuance under the 2007 Equity Incentive Plan, except that each share of our common stock issued under a "full value" award (awards other than stock options or stock appreciation rights) will reduce the number of shares available for issuance by 1.44 shares. The following table lists information regarding outstanding options and shares reserved for future issuance under our Amended and Restated 2007 Equity Incentive Plan as of December 31, 2011. We have not issued any shares of our common stock to employees as compensation under a plan that has not been approved by our stockholders.

Plan Category	Number of Shares of Common Stock to be Issued upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights(1)		Number of Shares of Common Stock Remaining Available for Future Issuance under our Stock Option Plans (Excluding Shares Reflected in Column 1)(2)
Approved by Stockholders		3,053,906	$	5.04		4,099,872
Not Approved by Stockholders		—		—		—
Total		3,053,906	$	5.04		4,099,872

(1)

The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding stock awards which have no exercise price.

(2)

Includes 606,417 shares available for future issuance under our Employee Stock Purchase Plan.

20

STOCK PERFORMANCE GRAPH

        The following graph compares the cumulative 4 years total stockholder return on our Common Stock from February 12, 2007 (the day our common stock began publicly trading) through December 31, 2011, with the cumulative total return for the same period of (i) the NASDAQ Composite Index, (ii) the Russell 2000 Index and (iii) the Peer Group described below. The comparison assumes for the same period the investment of $100 on February 12, 2007 in our Common Stock and in each of the indices and, in each case, assumes reinvestment of all dividends.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Information Services Group Inc, the NASDAQ Composite Index,
the Russell 2000 Index, and a Peer Group

*

$100 invested on 2/12/07 in stock or 1/31/07 in index, including reinvestment of dividends.
Fiscal year ending December 31.

Measurement Periods	ISG		NASDAQ		Russell 2000		Peer Group(a)
February 2007	$	100.14	$	97.76	$	99.21	$	106.47
March 2007	$	101.08	$	97.93	$	100.27	$	111.41
April 2007	$	103.39	$	102.30	$	102.07	$	114.87
May 2007	$	104.34	$	105.39	$	106.25	$	122.77
June 2007	$	103.66	$	105.88	$	104.70	$	119.11
July 2007	$	103.39	$	103.26	$	97.54	$	111.59
August 2007	$	102.71	$	105.49	$	99.75	$	122.04
September 2007	$	103.66	$	110.33	$	101.46	$	125.75
October 2007	$	102.17	$	116.53	$	104.37	$	124.57
November 2007	$	91.19	$	108.26	$	96.87	$	122.83
December 2007	$	92.82	$	107.83	$	96.81	$	127.68
January 2008	$	78.46	$	97.00	$	90.21	$	111.89
February 2008	$	72.49	$	92.33	$	86.87	$	119.81
March 2008	$	69.92	$	92.52	$	87.23	$	121.92
April 2008	$	70.19	$	98.11	$	90.88	$	123.47
May 2008	$	65.99	$	102.58	$	95.06	$	123.57

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Measurement Periods	ISG		NASDAQ		Russell 2000		Peer Group(a)
June 2008	$	65.04	$	93.08	$	87.74	$	127.07
July 2008	$	57.72	$	93.27	$	90.99	$	139.08
August 2008	$	66.80	$	94.81	$	94.28	$	148.90
September 2008	$	66.40	$	83.37	$	86.76	$	134.73
October 2008	$	37.26	$	69.15	$	68.71	$	113.30
November 2008	$	41.73	$	62.21	$	60.59	$	103.36
December 2008	$	46.07	$	64.20	$	64.10	$	102.07
January 2009	$	43.36	$	60.10	$	56.97	$	86.89
February 2009	$	43.09	$	56.37	$	50.05	$	72.92
March 2009	$	41.60	$	62.20	$	54.52	$	85.47
April 2009	$	40.24	$	69.66	$	62.95	$	98.52
May 2009	$	37.26	$	72.10	$	64.84	$	96.47
June 2009	$	40.79	$	74.76	$	65.80	$	97.64
July 2009	$	47.29	$	80.67	$	72.13	$	102.48
August 2009	$	53.93	$	82.27	$	74.20	$	84.01
September 2009	$	54.07	$	86.72	$	78.48	$	89.36
October 2009	$	48.78	$	83.96	$	73.15	$	86.67
November 2009	$	43.63	$	88.17	$	75.45	$	91.20
December 2009	$	42.95	$	93.10	$	81.52	$	91.39
January 2010	$	49.19	$	88.02	$	78.52	$	92.10
February 2010	$	40.24	$	91.78	$	82.06	$	93.22
March 2010	$	46.21	$	98.47	$	88.74	$	91.22
April 2010	$	46.61	$	100.85	$	93.76	$	97.56
May 2010	$	34.69	$	92.48	$	86.65	$	99.83
June 2010	$	27.10	$	86.97	$	79.93	$	95.18
July 2010	$	29.13	$	93.01	$	85.42	$	93.28
August 2010	$	20.33	$	87.42	$	79.10	$	95.48
September 2010	$	24.25	$	97.89	$	88.96	$	100.91
October 2010	$	25.07	$	103.76	$	92.60	$	104.28
November 2010	$	29.95	$	103.09	$	95.81	$	107.17
December 2010	$	28.05	$	109.63	$	103.41	$	113.20
January 2011	$	25.88	$	111.78	$	103.15	$	116.12
February 2011	$	30.35	$	115.21	$	108.80	$	118.53
March 2011	$	29.67	$	115.18	$	111.62	$	130.58
April 2011	$	31.57	$	119.15	$	114.57	$	134.98
May 2011	$	27.24	$	117.46	$	112.42	$	127.60
June 2011	$	23.98	$	115.01	$	109.83	$	127.47
July 2011	$	22.09	$	114.28	$	105.86	$	120.39
August 2011	$	17.62	$	106.98	$	96.65	$	117.88
September 2011	$	14.36	$	100.09	$	85.82	$	115.51
October 2011	$	14.23	$	111.13	$	98.81	$	126.79
November 2011	$	16.94	$	108.83	$	98.45	$	126.25
December 2011	$	13.96	$	108.37	$	99.10	$	122.92

(a)

The Peer Group consists of the following companies: CRA International Inc., Forrester Research Inc., FTI Consulting Inc., Gartner Group, Inc., Huron Consulting Group, Inc. and The Hackett Group, Inc. The Peer Group is weighted by market capitalization.

22

Item 6.    Selected Financial Data

        The following historical information was derived from our audited consolidated financial statements for the years ended December 31, 2011, 2010, 2009, 2008 and 2007. Our information for the year ended December 31, 2007 includes operations for TPI from November 17, 2007 through December 31, 2007. The information is only a summary and should be read in conjunction with the historical consolidated financial statements and related notes. The historical results included below are not indicative of our future performance.

	Years Ended December 31,
	2011			2010			2009			2008			2007
	(dollars in thousands, except per share data)
Statement of Operations Data:
Revenues	$	184,426		$	132,013		$	132,744		$	174,795		$	18,901
Depreciation and amortization		11,034			9,846			9,562			10,000			910
Operating (loss) income		(60,842	)(1)		(51,741	)(2)		814	(3)		(57,642	)(4)		(1,664	)
Interest expense		(3,458	)		(3,241	)		(4,550	)		(6,928	)		(1,174	)
Interest income		75			159			262			1,300			10,453
Foreign currency transaction (loss) gain		(38	)		(268	)		(140	)		578			84
Income tax (benefit) provision		(8,326	)		(1,926	)		(778	)		(4,783	)		3,226
Net (loss) income		(55,937	)		(53,165	)		(2,836	)		(57,909	)		4,473
Basic weighted average common shares		36,258			32,050			31,491			31,282			36,465
Net (loss) income per common share—basic		(1.54	)		(1.66	)		(0.09	)		(1.85	)		0.12
Diluted weighted average common shares		36,258			32,050			31,491			31,282			38,376
Net (loss) income per common share—diluted		(1.54	)		(1.66	)		(0.09	)		(1.85	)		0.12
Cash Flow Data:
Cash provided by (used in):
Operating activities	$	871		$	5,747		$	4,056		$	20,481		$	5,921
Investing activities	$	(9,655	)	$	(6,707	)	$	(1,239	)	$	(1,634	)	$	(203,630	)
Financing activities	$	(6,903	)	$	(1,698	)	$	(22,080	)	$	(3,939	)	$	244,367
Balance Sheet Data (at period end)
Total assets	$	146,479		$	184,564		$	241,973		$	279,588		$	357,290
Debt	$	70,063		$	69,813		$	71,813		$	94,050		$	95,000
Shareholders' equity	$	35,884		$	81,817		$	131,625		$	130,581		$	190,788

(1)

As a result of our goodwill and intangible asset impairment assessments, we recorded an impairment charge of $34.3 million during the fourth quarter of 2011 associated with goodwill and $27.4 million related to intangible assets.

(2)

As a result of our goodwill and intangible asset impairment assessments, we recorded an impairment charge of $46.6 million during the third quarter of 2010 associated with goodwill and $5.9 million related to intangible assets.

(3)

As a result of our intangible asset impairment assessments, we recorded an impairment charge of $6.8 million during the third quarter of 2009 associated with intangible assets.

(4)

As a result of our goodwill and intangible asset impairment assessments, we recorded an impairment charge of $49.4 million during the fourth quarter of 2008 associated with goodwill and $24.8 million related to intangible assets.

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        The following historical information was derived from the audited consolidated financial statements of TPI and its subsidiaries for the period from January 1, 2007 through November 16, 2007. The historical results included below are not indicative of the future performance of TPI.

	Period From January 1, 2007 to November 16, 2007
Statement of Operations Data:
Revenues	$	153,751
Operating expenses:
Direct costs and expenses for advisors		91,368
Selling, general, and administrative		45,287
Profit shares program compensation(1)		58,175
Depreciation and amortization		1,969
Operating (loss) income		(43,048	)
Interest income		204
Interest expense		(3,200	)
Loss on extinguishment of debt		—
Foreign currency transaction gain (loss)		335
Income (loss) before taxes		(45,709	)
Income tax provision		(4,948	)
Net (loss) income		(50,657	)
Cash Flow Data:
Cash provided by (used in):
Operating activities	$	3,248
Investing activities	$	(1,157	)
Financing activities	$	(613	)
Balance Sheet Data: (end of period)
Cash and cash equivalents
Total assets
Total stockholders' equity (deficit)

(1)

Concurrent with the ISG's acquisition of TPI on November 16, 2007, TPI recorded $58.2 million in non-cash compensation charges related to their Management Share Unit and A2 Profit Participation Share programs.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        You should read the following discussion together with Item 6 "Selected Financial Data" and our audited consolidated financial statements and the related notes included in Item 8 "Financial Statements and Supplementary Data". In addition to historical consolidated financial information, this discussion contains forward-looking statements that reflect our plans, estimates and beliefs. These forward-looking statements are subject to numerous risks and uncertainties. Statements, other than those based on historical facts, which address activities, events or developments that we expect or anticipate may occur in the future are forward-looking statements. Such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to our operations and business environment that may cause actual results to be materially different from any future results, express or implied, by such forward-looking statements. These forward-looking statements must be understood in the context of numerous risks and uncertainties, including, but not limited to, those described previously in section 1A "Risk Factors."

BUSINESS OVERVIEW

        Information Services Group, Inc. (ISG) (NASDAQ: III) is a leading technology insights, market intelligence and advisory services company serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, our deep data source, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Connecticut, the company has approximately 700 employees and operates in 21 countries.

        Our strategy is to strengthen our existing market position and develop new services and products to support future growth plans. As a result, we are focused on growing our existing service model, expanding geographically, developing new industry sectors, productizing market data assets, expanding our managed services offering and growing via acquisition. Although we do not expect any adverse conditions that will impact our ability to execute against our strategy over the next twelve months, the more significant factors that could limit our ability to grow in these areas include global macro-economic conditions and the impact on the overall sourcing market, competition, our ability to retain advisors and reductions in discretionary spending with our top strategic accounts or other significant client events. Other areas that could impact the business would also include natural disasters, legislative and regulatory changes and capital market disruptions.

        We derive our revenues from fees and reimbursable expenses for professional services. A majority of our revenues are generated under hourly or daily rates billed on a time and expense basis. Clients are typically invoiced on a monthly basis, with revenue recognized as the services are provided. There are also client engagements in which we are paid a fixed amount for our services, often referred to as fixed fee billings. This may be one single amount covering the whole engagement or several amounts for various phases or functions. From time to time, we earn incremental revenues, in addition to hourly or fixed fee billings, which are contingent on the attainment of certain contractual milestones or objectives. Such revenues may cause unusual variations in quarterly revenues and operating results.

        Our results are impacted principally by our full-time consultants' utilization rate, the number of business days in each quarter and the number of our revenue-generating professionals who are available to work. Our utilization rate can be negatively affected by increased hiring because there is generally a transition period for new professionals that result in a temporary drop in our utilization rate. Our utilization rate can also be affected by seasonal variations in the demand for our services from our clients. The number of business work days is also affected by the number of vacation days

25

taken by our consultants and holidays in each quarter. We typically have fewer business work days available in the fourth quarter of the year, which can impact revenues during that period. Time-and-expense engagements do not provide us with a high degree of predictability as to performance in future periods. Unexpected changes in the demand for our services can result in significant variations in utilization and revenues and present a challenge to optimal hiring and staffing. The volume of work performed for any particular client can vary widely from period to period.

EXECUTIVE SUMMARY

        In 2011, we generated strong business momentum as we emerged from the recessionary conditions of the previous three years. We significantly increased the number of our blue-chip clients we are serving in 2011. We served more than 500 clients globally.

        2011 was a year of progress for us as we enhanced and expanded our operations and built a strong platform upon which to create increased value for all of our stakeholders. We began 2011 with the acquisitions of Compass, a premier independent global provider of business and information technology benchmarking, performance improvement, data and analytics services, and STA Consulting, a premier independent information technology advisor serving the public sector. During the fourth quarter of 2011, we decided to merge our individual brands into one entity, ISG.

        Around the globe, all ISG brands are now guided by the same vision, mission and values. Our strategy has been embraced by the marketplace, our clients are increasingly demanding our products and services, and our employees have never been better equipped to serve them. We call this "The Power of One," and it is the driving force behind ISG in 2012 and beyond.

        We gained synergies in 2011 through the launch of a global shared services organization, which we call the ISG One Platform. Uniting our operations in IT, Finance, Legal, Marketing, Communications Human Resources and Information Services has enabled us to better serve our clients and positioned us to improve our value to shareholders and increase the opportunities available to our employees. And during 2011 we continued to build upon our three decades of leadership and innovation in IT and business consulting to meet client demand and market opportunities and further distance ourselves from competitors, including:

•

We expanded recurring revenue from Governance Services, our post-contract managed services offering, and launched GS Essentials, specifically designed for clients with smaller outsourcing portfolios, which we have implemented with Southwest Airlines, Origin Energy and others.

•

Our India operations, which provide client services and support globally, surpassed a major milestone by crossing the 100-employee mark and moving into new facilities in Bangalore.

        Since the end of 2008, the United States and global economies have been experiencing a period of substantial economic uncertainty with wide-ranging effects, including contraction of overall economic activity in various parts of the world. Our outlook is subject to significant risks and uncertainties in this environment, including possible declines in demand for our services, pricing pressure, fluctuations in foreign currency exchange rates, risks relating to the financial condition of our clients and local legislative changes.

        For 2012, we see continued demand for our services, and estimate that we are in the second year of a multiple year recovery. Overall, our focus will be on profit improvement and cash generation. Against the backdrop of our new go-to-market approach, organization and strategy, we have identified five strategic initiatives that we plan to execute:

•

Preserve and expand our leading market share positions and legacy services that we are known for—Compass Benchmarking and TPI Sourcing Transaction Services.

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•

Strengthen our Industry expertise and expand revenue around five key industries: BFSI (Banking, Financial Services & Insurance); Manufacturing/Auto; Energy, Life Sciences and Healthcare; Technology, Retail and Enterprise Businesses; and Public Sector/Government.

•

Expand "annuity-like" products and service offerings to create a larger percentage of firm-wide revenues that are recurring revenue streams, including Managed Services and Research.

•

Aggressively expand our Market focus further into white spaces, including Business Advisory Services, Cloud Solutions, Project Management Services, Strategy, Transition and Organization & Operations.

•

Re-tool our resourcing model for better "value for money," including increased leverage, improved assessments on matching people skills with evolving market needs, and furthering our talent development to meet growth aspirations.

        These initiatives will drive growth in 2012 and beyond and continue to support our clients around the world.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2011 AND DECEMBER 31, 2010

        The results for the year ended December 31, 2011 discussed below include the operations of Compass from January 4, 2011 to December 31, 2011 and STA Consulting from February 10, 2011 to December 31, 2011.

Revenues

        Revenues are generally derived from engagements priced on a time and materials basis and are recorded based on actual time worked as the services are performed. Revenues related to materials (mainly out-of-pocket expenses such as airfare, lodging and meals) required during an engagement generally do not include a profit mark-up and can be charged and reimbursed discretely or as part of the overall fee arrangement. Invoices are issued to clients monthly, semimonthly or in accordance with the specific contractual terms of each project.

        We operate in one segment, fact-based sourcing advisory services. We operate principally in the Americas, Europe, and Asia Pacific. Our foreign operations are subject to local government regulations and to the uncertainties of the economic and political conditions of those areas.

        Geographical information for the segment is as follows:

	Years Ended December 31,
Geographic Area	2011		2010		Change		Percent Change
	(in thousands)
Americas	$	86,735	$	76,123	$	10,612		13.9	%
Europe		74,383		39,400		34,983		88.8	%
Asia Pacific		23,308		16,490		6,818		41.3	%
Total revenues	$	184,426	$	132,013	$	52,413		39.7	%

        The net increase in revenues of $52.4 million or 40% in 2011 was attributable principally to an 89% increase in Europe revenues to $74.4 million and a 41% increase in Asia Pacific revenues to $23.3 million. The increase in revenues is primarily due to the acquisitions of Compass and STA Consulting and higher levels of sourcing activity in the Asia Pacific and Americas regions, attributable to increases in post contract governance services. The translation of foreign currency revenues into US

27

dollars also favorably impacted performance compared to the prior year. Billable staff at December 31, 2011 totaled 516, as compared to 323 at December 31, 2010.

Operating Expenses

        The following table presents a breakdown of our operating expenses by functional category:

	Years Ended December 31,
Operating Expenses	2011		2010		Change			Percent Change
	(in thousands)
Direct costs and expenses for advisors	$	104,823	$	71,528	$	33,295			46.5	%
Selling, general and administrative		67,717		49,889		17,828			35.7	%
Goodwill impairment charge		34,314		46,591		(12,277	)		(26.4	)%
Intangible asset impairment charge		27,380		5,900		21,480			364.1	%
Depreciation and amortization		11,034		9,846		1,188			12.1	%
Total operating expenses	$	245,268	$	183,754	$	61,514			33.5	%

        Total operating expenses increased by $61.5 million in 2011 with increases in direct expenses (47%) and selling, general and administrative ("SG&A") expenses (36%) due primarily to the acquisitions of Compass and STA Consulting, higher compensation, contract labor, restructuring costs, conferences, bad debt and travel expenses. These cost increases were only partially offset by lower deal-related costs, professional fees, marketing and computer expenses. The impact of foreign currency translation into US dollars drove costs higher compared to the same prior 2010 period.

        During 2011, we recorded restructuring costs of $2.7 million associated with a program focused on implementing selected cost savings and productivity improvements. The workforce reduction is focused on integration-related cost synergies including selling, general and administrative support, elimination of unnecessary sales and advisory positions and real estate consolidations. Restructuring costs primarily related to employee severance and benefit costs. The $2.7 million of restructuring costs was recorded in selling, general and administrative expenses. We expect that the remaining actions in our workforce reduction will be completed over the next three months. We also recorded $1.1 million of restructuring costs during 2010.

        Compensation costs consist of a mix of fixed and variable salaries, annual bonuses, benefits and pension plan contributions. Bonus compensation is determined based on achievement against our financial and individual targets, and is accrued monthly throughout the year based on management estimates of target achievement. Statutory and elective pension plans are offered to employees as appropriate. Direct costs also include employee taxes, health insurance, workers compensation and disability insurance.

        A portion of compensation expenses for certain billable employees are allocated between direct costs and selling, general and administrative costs based on relative time spent between billable and non-billable activities.

        Selling costs consist principally of compensation expense related to business development, proposal preparation and delivery, and negotiation of new client contracts. Costs also include travel expenses relating to the pursuit of sales opportunities, expenses for hosting periodic client conferences, public relations activities, participation in industry conferences, industry relations, website maintenance and business intelligence activities. Additionally, we maintain a dedicated global marketing function responsible for developing and managing sales campaigns, brand promotion, the TPI Index and assembling proposals.

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        We maintain a comprehensive program for training and professional development. Related expenses include product training, updates on new service offerings or methodologies and development of client project management skills. Also included in training and professional development are expenses associated with the development, enhancement and maintenance of our proprietary methodologies and tools and the systems that support them.

        General and administrative expenses consist principally of executive management compensation, allocations of billable employee compensation related to general management activities, IT infrastructure, and costs for the finance, accounting, information technology and human resource functions. General and administrative costs also reflect continued investment associated with implementing and operating client and employee management systems. Because our billable personnel operate primarily on client premises, all occupancy expenses are recorded as general and administrative.

Depreciation and Amortization Expense

        The increase of $1.2 million in depreciation and amortization expense was primarily due to a $1.1 million increase in amortization as a result of the acquisitions of Compass and STA Consulting. Our fixed assets consist of furniture, fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives of assets. We also capitalize some costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are amortized over the estimated useful life of the software or system.

        We amortize our intangible assets (e.g. client relationships and databases) over their estimated useful lives. Goodwill, trademark and trade names related to acquisitions are not amortized but are subject to annual impairment testing. As of November 1, 2011, trademark and trade names acquired in our acquisitions were reclassified to definite lived assets and will be amortized over their estimated useful lives.

Impairment of goodwill and intangible assets

        Due to a decline in our stock price for a prolonged period of time, and the timing of our annual impairment test in the fourth quarter of 2011, we recorded a non-cash impairment charge of $34.3 million associated with goodwill and $27.4 million associated with indefinite lived intangible assets. The goodwill impairment is attributable to historical revenues, projected revenue run rate, actual and projected revenue generated per billable hour, driven by a global recession which has impacted and reduced sourcing industry activity. The impairment to our indefinite lived intangible assets relates to the Company's fourth quarter 2011 decision to phase out the use of the Compass, STA Consulting and TPI trade names and migrate to the ISG brand name. As a result of this decision, the Company reduced the amount of revenue projected to be attributable to these specific brand names and the related royalty rate resulting in a reduced fair value of such acquired trademark and trade names. Additionally, these trademark and trade names were reclassified to definite lived assets and will be amortized over their estimated useful lives of seven years. During the third quarter of 2010, we also recorded non-cash impairment charges of $46.6 million associated with goodwill and $5.9 million associated with indefinite-lived intangible assets as a result of our impairment testing.

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Other (Expense), Net

        The following table presents a breakdown of other (expense), net:

	Years Ended December 31,
	2011			2010			Change			Percent Change
	(in thousands)
Interest income	$	75		$	159		$	(84	)		(52.8	)%
Interest expense		(3,458	)		(3,241	)		(217	)		(6.7	)%
Foreign currency loss		(38	)		(268	)		230			85.8	%
Total other (expense), net	$	(3,421	)	$	(3,350	)	$	(71	)		(2.1	)%

        The increase was primarily the result of higher interest expense as a result of the convertible notes issued in connection with the acquisition of Compass, the time value of money related to the contingent consideration related to the acquisition of STA Consulting and lower interest income that was partially offset by a reduction in foreign currency related losses.

Income Tax Expense

        Our effective tax rate varies from period to period based on the mix of earnings among the various state and foreign tax jurisdictions in which business is conducted and the level of non-deductible expenses incurred in any given period. We recorded an income tax benefit for 2011 of $8.3 million as compared to $1.9 million for 2010. Our effective tax rate for the year ended December 31, 2011 was 13.0% compared to 3.5% for the year ended December 31, 2010. The increase in the effective tax rate was primarily due to impairment charges recorded on goodwill and indefinite lived intangible assets and due to valuation allowance booked against the Company's foreign tax credits.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2010 AND DECEMBER 31, 2009

Revenues

        Geographical information for the segment is as follows:

	Years Ended December 31,
Geographic Area	2010		2009		Change			Percent Change
	(in thousands)
Americas	$	76,123	$	77,007	$	(884	)		(1.1	)%
Europe		39,400		44,696		(5,296	)		(11.8	)%
Asia Pacific		16,490		11,041		5,449			49.4	%
Total revenues	$	132,013	$	132,744	$	(731	)		(0.6	)%

        The net decrease in revenues of $0.7 million or 1% in 2010 was attributable principally to a 12% decrease in Europe revenues to $39.4 million and a 1% decrease in Americas revenues to $76.1 million. The decrease in revenues is primarily due to lower levels of sourcing activity, particularly in Europe, attributable to lower volumes in information technology related sourcing activity. This decrease was partially offset by a 49% increase in revenues from Asia Pacific primarily due to increase in business process outsourcing and information technology related sourcing activity. The translation of foreign currency revenues into US dollars also favorably impacted performance compared to the prior year. Billable staff at December 31, 2010 totaled 323, as compared to 328 at December 31, 2009.

30

Operating Expenses

        The following table presents a breakdown of our operating expenses by functional category:

	Years Ended December 31,
Operating Expenses	2010		2009		Change			Percent Change
	(in thousands)
Direct costs and expenses for advisors	$	71,528	$	67,674	$	3,854			5.7	%
Selling, general and administrative		49,889		47,894		1,995			4.2	%
Goodwill impairment charge		46,591		—		46,591			100.0	%
Intangible asset impairment charge		5,900		6,800		(900	)		(13.2	)%
Depreciation and amortization		9,846		9,562		284			3.0	%
Total operating expenses	$	183,754	$	131,930	$	51,824			39.3	%

        The increase in direct costs of $3.9 million or 6% was principally attributable to the greater use of outside contractors to meet skill set and language requirements of various engagements and higher compensation levels. Foreign currency translation also increased costs in 2010 compared with the same 2009 period.

        The increase of $2.0 million or 4% in selling and general and administrative ("SG&A") expenses was principally attributable to an increase of $3.0 million related to spending for outside professional services including $2.4 million for acquisition related deal costs, $1.8 million related to client related events and travel expenses, and $0.3 million in share-based compensation. This increase was partially offset by decrease of $2.2 million reduction related to the greater allocation of advisor time to billable activities, $0.6 million in bad debt reserves and $0.3 million related to insurance and occupancy expenses.

Depreciation and Amortization Expense

        The increase of $0.3 million was primarily due to higher amortization expense for amortizable intangible assets as a result of an assessment of future revenue attributable to customer relationships as part of our intangible assets impairment testing conducted in 2010.

Impairment of goodwill and intangible assets

        As a result of declining revenue, driven by a global recession which has impacted and reduced sourcing industry activity, we determined a triggering event had occurred requiring a goodwill and indefinite-lived intangibles impairment test be performed in the third quarter of 2010. We recorded a non-cash impairment charge of $46.6 million associated with goodwill and $5.9 million associated with indefinite-lived intangible assets. During the third quarter of 2009, we also recorded non-cash impairment charges of $6.8 million associated with intangible assets as a result of its impairment testing.

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Other Income (Expense), Net

        The following table presents a breakdown of other (expense), net:

	Years Ended December 31,
	2010			2009			Change			Percent Change
	(in thousands)
Interest income	$	159		$	262		$	(103	)		(39.3	)%
Interest expense		(3,241	)		(4,550	)		1,309			28.8	%
Foreign currency loss		(268	)		(140	)		(128	)		(91.4	)%
Total other (expense), net	$	(3,350	)	$	(4,428	)	$	1,078			24.3	%

        The decrease of $1.1 million was primarily the result of lower interest expense due to reduced debt levels partially offset by foreign currency related losses and lower interest income.

Income Tax Expense

        Our effective tax rate varies from period to period based on the mix of earnings among the various state and foreign tax jurisdictions in which business is conducted and the level of non-deductible expenses incurred in any given period. We recorded an income tax benefit for 2010 of $1.9 million as compared to $0.8 million for 2009. Our effective tax rate for the year ended December 31, 2010 was 3.5% compared to 21.5% for the year ended December 31, 2009. The decrease in the effective rate was primarily due to the impact of the goodwill impairment recorded in 2010 and the write down of a deferred tax asset previously recorded on stock awards and booking of valuation allowance on foreign net operating losses in 2009.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

        Our primary sources of liquidity are cash flows from operations and existing cash and cash equivalents. Operating assets and liabilities consist primarily of receivables from billed and unbilled services, accounts payable, accrued expenses, and accrued payroll and related benefits. The volume of billings and timing of collections and payments affect these account balances.

        The following table summarizes our cash flows for the years ended December 31, 2011, 2010 and 2009:

	Years Ended December 31,
	2011			2010			2009
	(in thousands)
Net cash provided by (used in):
Operating activities	$	871		$	5,747		$	4,056
Investing activities, including acquisitions		(9,655	)		(6,707	)		(1,239	)
Financing activities		(6,903	)		(1,698	)		(22,080	)
Effect of exchange rate changes on cash		(145	)		173			903
Net decrease in cash and cash equivalents	$	(15,832	)	$	(2,485	)	$	(18,360	)

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        As of December 31, 2011, our liquidity and capital resources included cash and cash equivalents of $24.5 million compared to $40.3 million as of December 31, 2010, a net decrease of $15.8 million, which was primarily attributable to the following:

•

Our operating activities provided net cash of $0.9 million for the year ended December 31, 2011. Net cash provided from operations is primarily attributable to a net loss, adjusted for non-cash charges totaling approximately $9.9 million that were offset by $9.0 million of changes in working capital primarily attributable to $6.2 million changes in accounts receivables and $4.5 million changes in accrued expenses primarily attributable to acquisition related costs;

•

acquisitions, net of cash acquired of $13.7 million;

•

capital expenditures for property, plant and equipment of $1.7 million;

•

equity securities repurchased of $1.2 million; and

•

payment of principal on the our term loan debt of $6.0 million.

Capital Resources

        We have outstanding a substantial amount of debt, which may limit our ability to fund general corporate requirements and obtain additional financing, limit our flexibility in responding to business opportunities and competitive developments and increase our vulnerability to adverse economic and industry conditions.

        We incurred a substantial amount of indebtedness to finance the acquisition of TPI, including transaction costs and deferred underwriting fees. On November 16, 2007, our wholly-owned subsidiary International Consulting Acquisition Corp. ("ICAC") entered into a senior secured credit facility comprised of a $95.0 million term loan facility and a $10.0 million revolving credit facility. On November 16, 2007, ICAC borrowed $95.0 million under the term loan facility to finance the purchase price for our acquisition of TPI and to pay transaction costs. As a result of the substantial fixed costs associated with the debt obligations, we expect that:

•

a decrease in revenues will result in a disproportionately greater percentage decrease in earnings;

•

we may not have sufficient liquidity to fund all of these fixed costs if our revenues decline or costs increase;

•

we may have to use our working capital to fund these fixed costs instead of funding general corporate requirements, including capital expenditures;

•

we may not have sufficient liquidity to respond to business opportunities, competitive developments and adverse economic conditions; and

•

our results of operations will be adversely affected if interest rates increase because, based on our current outstanding term loan borrowings in the amount of $63.8 million, a 1% increase in interest rates would result in a pre-tax impact on earnings of approximately $0.6 million per year.

        These debt obligations may also impair our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business. Our indebtedness under the senior secured revolving credit facility is secured by substantially all of our assets, leaving us with limited collateral for additional financing. Moreover, the terms of our indebtedness under the senior secured revolving credit facility restrict our ability to take certain actions, including the incurrence of additional indebtedness, mergers and acquisitions, investments and asset sales. Our ability to pay the fixed costs associated with our debt obligations will depend on our operating performance and cash flow, which in turn depend on general

33

economic conditions and the advisory services market. A failure to pay interest or indebtedness when due could result in a variety of adverse consequences, including the acceleration of our indebtedness. In such a situation, it is unlikely that we would be able to fulfill our obligations under or repay the accelerated indebtedness or otherwise cover our fixed costs. As of December 31, 2011, the total principal outstanding under the term loan facility was $63.8 million. There were no borrowings under the revolving credit facility during fiscal 2011.

        The material terms of the 2007 Credit Agreement are as follows:

•

The 2007 Credit Agreement has a maturity date of November 14, 2014.

•

The 2007 Credit Agreement is secured by all of the equity interests owned by the newly formed holding company of the Borrower, International Advisory Holdings Corp. ("Holdings") and its direct and indirect domestic subsidiaries and, subject to agreed exceptions, its direct and indirect "first-tier" foreign subsidiaries and a perfected first priority security interest in all of Holdings' and its direct and indirect domestic subsidiaries' tangible and intangible assets.

•

Holdings and the Borrower's existing direct and indirect subsidiaries and future wholly-owned domestic subsidiaries serve as guarantors to the Borrower's obligations under the 2007 Credit Agreement.

•

At the Borrower's option, the 2007 Credit Agreement bears interest at a rate per annum equal to either (i) the "Base Rate" (which is the higher of (a) the rate publicly announced from time to time by the administrative agent as its "prime rate" and (b) the Federal Funds Rate plus 0.5% per annum), plus the applicable margin (as defined below) or (ii) Eurodollar Rate (adjusted for maximum reserves) as determined by the Administrative Agent, plus the applicable margin. The applicable margin shall be a percentage per annum equal to 2.5% for the term loans and the revolving loans maintained as Base Rate loans or 3.5% for the term loans and revolving loans maintained as Eurodollar loans.

•

Mandatory repayments of term loans shall be required from (subject to agreed exceptions) (i) 100% of the proceeds from asset sales by Holdings and its subsidiaries, (ii) 100% of the net proceeds from issuances of debt by Holdings and its subsidiaries, (iii) so long as the total leverage ratio is 3.0 to 1.0 or higher, 50% of annual excess cash flow of Holdings and its subsidiaries and (iv) 100% of the net proceeds from insurance recovery and condemnation events of Holdings and its subsidiaries.

•

The 2007 Credit Agreement contains a number of covenants that, among other things, place restrictions on matters customarily restricted in senior secured credit facilities, including restrictions on indebtedness (including guarantee obligations), liens, fundamental changes, sales or disposition of property or assets, investments (including loans, advances, guarantees and acquisitions), transaction with affiliates, dividends and other payments in respect of capital stock, optional payments and modifications of other material debt instruments, negative pledges and agreements restricting subsidiary distributions and changes in line of business. In addition, the Borrower is required to comply with a total leverage ratio as defined in the 2007 Credit Agreement. The total leverage ratio is defined as the ratio of consolidated indebtedness to consolidated Earnings before Interest, Taxes, Depreciation, and Amortization ("EBITDA").

•

The 2007 Credit Agreement contains customary events of default, including cross-default to other material agreements, judgment default and change of control.

        On June 29, 2009, we made a voluntary principal prepayment of $12.0 million against its outstanding term loan balance of $93.8 million. In conjunction with this prepayment, our lenders consented to the following conditions: (1) agreement to execute our UK tax planning strategy to reduce future potential cash taxes, (2) exclusion of the impact in the calculation of EBITDA of up to

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$5.0 million of restructuring charges relating to the Borrower's previously announced 2009 restructuring plan through December 31, 2009 and (3) exclusion of the impact in the calculation of EBITDA of establishing, if necessary, a reserve in respect of certain accounts receivable and work in progress due from General Motors Corporation for worked performed on or before June 1, 2009.

        On September 11, 2009, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) for the remaining life of the 2007 Credit Agreement to provide us with greater financing flexibility in return for additional debt repayments. In accordance with the terms of the amended 2007 Credit Agreement, we made $5.0 million of principal repayments on September 30, 2009 and December 31, 2009 to reduce the outstanding term loan balance to $71.8 million. The principal repayments were made from excess cash balances generated through our normal business operations. In accordance with the terms of the 2007 Credit Agreement, we made a $2.0 million principal repayment on March 31, 2010 to reduce the outstanding term loan balance to $69.8 million.

        On September 27, 2010, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) from September 30, 2010 to December 30, 2010 and to restore the exclusion of the impact in the calculation of earnings before interest, taxes, depreciation, and amortization EBITDA of up to $5.0 million of restructuring charges through December 31, 2011 in order to provide us with greater financing flexibility. We also received approval to complete the acquisition of STA Consulting subject to certain conditions.

        On December 23, 2010, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) from December 31, 2010 to March 30, 2011 in order to provide us with greater financing flexibility. Our lenders also agreed to allow us to extend the date to complete the acquisition of STA Consulting to March 31, 2011. On February 10, 2011 the acquisition of STA Consulting was completed.

        On March 16, 2011, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) for the remaining life of the 2007 Credit Agreement to provide us with greater financing flexibility in return for additional quarterly term loan principal repayments. In accordance with the terms of the amended 2007 Credit Agreement, we made mandatory principal repayments of $3.0 million on March 31, 2011 and $1.0 million on June 30, 2011, September 30, 2011 and December 31, 2011, respectively, to reduce the outstanding term loan balance to $63.8 million. The principal repayments will be made from cash generated through our normal business operations.

        On March 13, 2012, our lenders agreed to allow International Consulting Acquisition Corp., a wholly-owned indirect subsidiary of ISG (the "Borrower"), to include the results of operations of Compass in the calculation of our leverage ratio. The Borrower also received approval to increase the annual cash dividend payable to ISG to $2.0 million.

        Additional mandatory principal repayments totaling $7.0 million and $10.0 million will be due in 2012 and 2013 respectively with the remaining principal repayments due in 2014. The final mandatory term loan principal repayment will be due on November 16, 2014, which is the maturity date for the term loan.

        As of December 31, 2011 and 2010, the total principal outstanding under the term loan facility was $63.8 million and $69.8 million, respectively. There were no borrowings under the revolving credit facility during 2011 or 2010. The carrying amount of long-term debt owed to banks approximates fair value based on interest rates that are currently available to us for issuance of debt with similar terms and maturities.

        On January 4, 2011, as part of the consideration for the Share Purchase, we issued an aggregate of $6.3 million in convertible notes to Compass (the "Notes"). The Notes mature on January 4, 2018 and interest is payable on the outstanding principal amount, computed daily, at the rate of 3.875% per annum on January 31 of each calendar year and on the seventh anniversary of the date of the Notes.

35

The Notes are subject to transfer restrictions until January 31, 2013. If the price of our common stock on the Nasdaq Global Market exceeds $4 per share for 60 consecutive trading days (the "Trigger Event"), the holder of the Notes may convert all (but not less than all) of the outstanding principal amount of the Notes into shares of our common stock at the rate of 1 share for every $4 in principal amount outstanding. After the Trigger Event, we may prepay all or any portion of the outstanding principal amount of the Notes by giving the holder 30 days written notice.

        The 2007 Credit Agreement includes quarterly financial covenants that require us to maintain a maximum total leverage ratio (as defined in the 2007 Credit Agreement). As of December 31, 2011, our maximum total leverage ratio was 3.50 to 1.00 and we were in compliance with all covenants contained in the 2007 Credit Agreement. The maximum total leverage ratio for 2012 is 3.25 for the quarter ending March 31, 2012 and 3.0 through the period ending December 31, 2012 and will continue to decline thereafter. We currently expect to be in compliance with the covenants contained within the 2007 Credit Agreement. In the event we are unable to remain in compliance with the debt covenants associated with the 2007 Credit Agreement we have alternative options available to us including, but not limited to, the ability to make a prepayment on our debt without penalty to bring the actual leverage ratio into compliance. In addition, should our revenues not meet our forecast, we have the ability to reduce various expenditures to minimize the impact to the leverage ratio. Such actions may include reductions to headcount, variable compensation, marketing expenses, conferences and non-billable travel. Should we be required to make additional cash payment, our available cash balances and liquidity will be negatively impacted. During 2012, we intend to use our surplus operating cash flows to make required principal payments on our outstanding debt. If, in future filings, it becomes reasonably likely that we may not comply with any material covenant, we intend to disclose additional information describing the impact on our financial condition.

        We anticipate that our current cash and the ongoing cash flows from our operations will be adequate to meet our working capital and capital expenditure needs for at least the next twelve months. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated, or if other unexpected circumstances arise that may have a material effect on the cash flow or profitability of our business. If we require additional capital resources to grow our business, either internally or through acquisition, we may seek to sell additional equity securities or to secure debt financing. The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders. We may not be able to obtain financing arrangements in amounts or on terms acceptable to us in the future.

Contractual Obligations

        The following table summarizes our contractual obligations as of December 31, 2011, and the timing and effect that such obligations are expected to have on our liquidity and capital requirements in future periods.

Payments Due by Period

Contractual Obligations	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years
	(In Thousands)
Debt obligations, principal and interest	$	78,323	$	9,778	$	61,586	$	485	$	6,474
Operating lease obligations		6,977		2,017		2,675		1,324		961
Total	$	85,300	$	11,795	$	64,261	$	1,809	$	7,435

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        We believe that cash flows generated from operations, existing cash and cash equivalents and borrowing capacity under our senior secured credit facility are sufficient to finance the requirements of our business during future periods.

Off-Balance Sheet Arrangements

        We do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity.

Employee Retirement Plans

        We maintain a qualified defined contribution profit-sharing plan (the "Plan") for U.S.-based employees. Prior to January 1, 2008, contributions to the Plan were made by us up to a maximum per eligible employee of 12.75% of total cash compensation or $25,500, whichever was less. Post January 1, 2008, the annual contribution was adjusted to be 3% of total cash compensation or $7,350, whichever is less. Employees are generally eligible to participate in the Plan after six months of service, and are 100% vested upon entering the Plan. For the fiscal years ended December 31, 2011, 2010 and 2009, we contributed $1.3 million, $1.2 million and $1.6 million, respectively, to the Plan. These amounts were invested by the participants in a variety of investment options under an arrangement with a third party asset manager. All current and future financial risks associated with the gains and losses on investments are borne by Plan participants.

Seasonality and Quarterly Results

        The negotiation of sourcing transactions and, as a result, our revenue and earnings are subject to seasonal fluctuations. As a result of year-end holidays, macro-economic factors and client budget and spending patterns, our revenues have historically been weighted toward the second half of each year. Our earnings track this revenue seasonality and are also impacted by the timing of the adoption of annual price increases and certain costs and, as a result, have historically been higher in the second half of each year. Due to the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.

Critical Accounting Policies and Estimates

        The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires the appropriate application of certain accounting policies, many of which require management to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results may differ from estimates. Such differences may be material to the consolidated financial statements.

        We believe the application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are periodically reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, we have found the application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

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        Our accounting policies are more fully described in Note 2 "Summary of Significant Accounting Policies" in the "Notes to the Consolidated Financial Statements." We have identified the following critical accounting policies:

Revenue Recognition

        We recognize our revenues for the sale of services and products when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, the fee is fixed or determinable and the collectability of the related revenue is reasonably assured.

        We principally derive revenues from fees for services generated on a project-by-project basis. Prior to the commencement of a project, we reach agreement with the client on rates for services based upon the scope of the project, staffing requirements and the level of client involvement. It is our policy to obtain written agreements from new clients prior to performing services. In these agreements, the clients acknowledge that they will pay based upon the amount of time spent on the project or an agreed upon fee structure. Revenues for services rendered are recognized on a time and materials basis or on a fixed-fee or capped-fee basis in accordance with accounting and disclosure requirements for revenue recognition.

        Fees for services that have been performed, but for which we have not invoiced the customers are recorded as unbilled receivables in the accompanying consolidated balance sheets. Invoices issued before the related services have been performed are recorded as deferred revenue in the accompanying consolidated balance sheets.

        Revenues for time and materials contracts are recognized based on the number of hours worked by our advisors at an agreed upon rate per hour and are recognized in the period in which services are performed. Revenues for time and materials contracts are billed monthly, semimonthly or in accordance with the specific contractual terms of each project.

        Revenues related to fixed-fee or capped-fee contracts are recognized into revenue as value is delivered to the customer. The pattern of revenue recognition for these contracts varies depending on the terms of the individual contracts, and may be recognized proportionally over the term of the contract or deferred until the end of the contract term and recognized when our obligations have been fulfilled with the customer. In instances where substantive acceptance provisions are specified in customer contracts, revenues are deferred until all acceptance criteria have been met. The pattern of revenue recognition for contracts where revenues are recognized proportionally over the term of the contact is based on the proportional performance method of accounting using the ratio of labor hours incurred to estimated total labor hours, which we consider to be the best available indicator of the pattern and timing in which contract obligations are fulfilled. This percentage is multiplied by the contracted dollar amount of the project to determine the amount of revenue to recognize in an accounting period. The contracted amount used in this calculation typically excludes the amount the client pays for reimbursable expenses. There are situations where the number of hours to complete projects may exceed our original estimate as a result of an increase in project scope or unforeseen events. On a regular basis, we review the hours incurred and estimated total labor hours to complete. The results of any revisions in these estimates are reflected in the period in which they become known. We believe we have demonstrated a history of successfully estimating the total labor hours to complete a project.

        The agreements entered into in connection with a project, whether on a time and materials basis or fixed-fee or capped-fee basis, typically allow our clients to terminate early due to breach or for convenience with 30 days' notice. In the event of termination, the client is contractually required to pay for all time, materials and expenses incurred by us through the effective date of the termination. In addition, from time to time, we enter into agreements with clients that limit our right to enter into business relationships with specific competitors of that client for a specific time period. These

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provisions typically prohibit us from performing a defined range of services that it might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team.

Accounts and Unbilled Receivables and Allowance for Doubtful Accounts

        Our trade receivables primarily consist of amounts due for services already performed via fixed fee or time and materials arrangements. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of clients to pay fees or for disputes that affect its ability to fully collect billed accounts receivable. The allowance for these risks is prepared by reviewing the status of all accounts and recording reserves on a specific identification method based on previous experiences and historical bad debts. However, our actual experience may vary significantly from these estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay their invoices, we may need to record additional allowances or write-offs in future periods. To the extent the provision relates to a client's inability or unwillingness to make required payments, the provision is recorded as bad debt expense, which is classified within selling, general and administrative expense in the accompanying consolidated statement of operations.

        The provision for unbilled services is recorded as a reduction to revenues to the extent the provision relates to fee adjustments and other discretionary pricing adjustments.

Income Taxes

        We use the asset and liability method to account for income taxes, including recognition of deferred tax assets and liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. We review our deferred tax assets for recovery. A valuation allowance is established when we believe that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in the valuation allowance from period to period are included in our tax provision in the period of change.

        For uncertain tax positions, we use a prescribed model for assessing the financial recognition and measurement of all tax positions taken or expected to be taken in its tax returns. This guidance provides clarification on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. Our provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well as the related interest.

Goodwill and Indefinite Lived Intangible Assets

        Our goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired at the date of acquisition. The primary other identifiable intangible assets with indefinite lives are trademarks of the business acquired. These assets are not amortized but rather tested for impairment at least annually by applying a fair-value based test in accordance with accounting and disclosure requirements for goodwill and other indefinite-lived intangible assets. This test is performed by us during our fourth fiscal quarter or more frequently if we believe impairment indicators are present. At October 31, 2011, our annual impairment testing date, we maintain a single operating segment and reporting unit.

        Our indefinite-lived intangible asset impairment tests involve estimates and management's judgment. The fair value of trademarks and trade name assets were determined using the relief from royalty method by discounting the cash flows that represent a savings over having to pay a royalty fee for use of the trademarks and trade names. The discounted cash flow valuation uses the same projections used under the income approach described below. The cash flow projections used were primarily attributable to revenue and royalty rates associated with the legacy brands which are projected to decline as value shifts to the ISG brand.

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        In the fourth quarter of 2011, we reclassified our acquired trademarks and trade names to definite lived assets which will be amortized over a remaining useful of approximately seven years. We decided to merge our individual corporate brands into one global integrate go-to-market business under the ISG brand. As a result of this transition, during our annual impairment test, we concluded that the indefinite lived trademarks and trade names were impaired by $27.4 million which is included in the loss from operations in the accompanying consolidated statement of operations for 2011. This impairment charge was measured as the excess of the carrying value over the fair value of the asset.

        We perform a two-step impairment test on goodwill. In the first step, we compare the fair value of the reporting unit to its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test whereby the carrying value of the reporting unit's goodwill is compared to its implied fair value. If the carrying value of the goodwill exceeds the implied fair value, an impairment loss equal to the difference is recorded.

        In performing the first step of the impairment test on goodwill, we determined the fair value of the reporting unit using both a market and income approach. The income approach utilizes a discounted cash flow model and is based on projections of future operations of the reporting unit as of the valuation date. The market approach is based on our stock price and provides a direct indication of fair value. Under the market approach, we determined the fair value of the reporting unit utilizing a relevant average of our common stock price for the October 31 measurement period, as quoted on the Nasdaq Global Market plus a 35% control premium based upon recent transactions of comparable companies. The discounted cash flow model assumed revenue growth rates of approximately 3% per year. We employed a rate of 13% to discount future excess cash flows. The goodwill impairment is attributable to historical revenues, projected revenue run rate, actual and projected revenue generated per billable hour, driven by a global recession which has impacted and reduced sourcing industry activity.

        We failed the first step and proceeded to the second step in which we determined the implied fair value of goodwill by allocating the fair value of our reporting unit to the reporting unit's assets and liabilities using purchase price allocation guidance in order to determine the implied value of goodwill. Our assets in this valuation included the trade names for the ISG brand as well as declining values in the old legacy trade names. We concluded that the implied fair value is $34.7 million, resulting in an impairment of $34.3 million, which is included in loss from operations in the accompanying consolidated statement of operations for 2011.

        We will continue to monitor our market capitalization for evidence of further impairment. Future downturn in our business, continued deterioration of economic conditions, or continued further decline in our market capitalization may result in an additional impairment charge or charges in future periods, which could adversely affect our results of operations for those periods.

        The goodwill and intangible assets impairment charge is non-cash in nature and does not affect our liquidity, cash flows from operations and debt covenants.

Long-Lived Assets

        Long-lived assets, excluding goodwill and indefinite-lived intangibles, to be held and used by the Company are reviewed to determine whether any significant change in the long-lived asset's physical condition, a change in industry conditions or a reduction in cash flows associated with the use of the long-lived asset. If these or other factors indicate the carrying amount of the asset may not be recoverable, the Company determines whether impairment has occurred through the use of an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset. The fair value of the asset is measured using market prices or,

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in the absence of market prices, an estimate of discounted cash flows. Cash flows are generally discounted at an interest rate commensurate with our weighted average cost of capital for a similar asset. Assets are classified as held for sale when the Company has a plan for disposal of certain assets and those assets meet the held for sale criteria of accounting and disclosure requirement for the impairment or disposal of long-lived assets.

        Due to a decline in our stock price for a prolonged period of time and the timing of our annual impairment test, we determined that it was necessary to review our long-lived assets for impairment. We have performed the impairment test during the fourth quarter of 2011 using the undiscounted cash flow analysis and did not record an impairment based upon such analysis.

Stock-Based Compensation

        Stock Appreciation Rights ("SARs") for a fixed number of shares are granted to certain employees with an exercise price based on the closing trading price of our common stock on the grant date. We use the Black-Scholes option pricing model to determine the fair value of each option award on the date of grant. Prior to December 31, 2009, the volatility calculation was based on the most recent trading day average volatility of a representative sample of seven companies with market capitalizations of approximately $197 million to $3.7 billion that management believed to be engaged in the business of information services (the "Sample Companies"). We referred to the average volatility of the Sample Companies because management believes that the average volatility of such companies is a reasonable benchmark to use in estimating the expected volatility of our common stock as we had a limited history as a public company. The risk-free interest rate is determined based upon the interest rate on a U.S. Treasury Bill with a term equal to the expected life of the option at the time the option was granted. An expected life of five years was taken into account for purposes of assigning a fair value to the option. The expected life represents the period of time the awards granted are expected to be outstanding. There were no grants of SARs during the years ended December 31, 2011 or 2010.

        We also grant restricted stock with a fair value that is determined based on the closing price of our common stock on the date of grant. SARs and restricted stock generally vest over a four-year period. Stock-based compensation expense is recognized ratably over the applicable service period.

        We follow the provisions of accounting and disclosures requirement for share-based payments, requiring the measurement and recognition of all share-based compensation under the fair value method.

Recent Accounting Pronouncements

        See Note 2 to our consolidated financial statements included elsewhere in this report.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

        We are exposed to financial market risks primarily related to changes in interest rates and manage these risks by employing a variety of debt instruments. A 100 basis point change in interest rates would result in an annual change in the results of operations of $0.6 million pre-tax. Although we do not believe a change in interest rates will materially affect our financial position or results of financial operations, it has purchased an interest rate cap to limit our exposure for forty percent of the total term loan value to an increase in LIBOR rates beyond seven percent. The expense related to this interest rate cap was nominal. This agreement expired in January 2011 and is not required going forward.

        We operate in a number of international areas which exposes us to significant foreign currency exchange rate risk. We have significant international revenue, which is generally collected in local currency. As of December 31, 2011, we have no outstanding forward exchange contracts or other

41

derivative instruments for hedging or speculative purposes. The percentage of total revenues generated outside the Americas increased from 45% in 2008 to 53% in 2011. It is expected that our international revenues will continue to grow as European, Asian and other markets adopt sourcing solutions and as a result of our acquisition of Compass. We recorded a foreign exchange transaction loss of $0.04 million for the year ended December 31, 2011. The translation of our revenues into U.S. dollars, as well as our costs of operating internationally, may adversely affect our business, results of operations and financial condition.

        We have not invested in foreign operations in highly inflationary economies; however, we may do so in future periods.

        Concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. All cash and cash equivalents are on deposit in fully liquid form in high quality financial institutions. We extend credit to our clients based on an evaluation of each client's financial condition.

        Our 20 largest clients accounted for approximately 33% of revenue in 2011 and 45% in 2010. If one or more of our large clients terminate or significantly reduce their engagements or fail to remain a viable business, then our revenues could be materially and adversely affected. In addition, our large clients generally maintain sizable receivable balances at any given time and our ability to collect such receivables could be jeopardized if such client fails to remain a viable business.

Item 8.    Financial Statements and Supplementary Data.

        Reference is made to our financial statements beginning on page F-2 of this report.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None

Item 9A.    Controls and Procedures

Disclosure Controls and Procedures

        Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2011, as required by the Rule 13a-15(b) under the Exchange Act. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2011.

Management's Report on Internal Control Over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with US generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may

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become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2011, as required by Rule 13a-15(c) under the Exchange Act. In making this assessment, we used the criteria set forth in the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under the framework in Internal Control—Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2011.

        The effectiveness of the our internal control over financial reporting as of December 31, 2011, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Control Over Financial Reporting

        There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

        None.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance

(a)

Identification of Director's and Executive Officers.

        The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with our 2012 Annual Meeting of Stockholders under the caption "Management."

(b)

Compliance with Section 16(a) of the Exchange Act.

        The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with our 2012 Annual Meeting of Stockholders under the caption "Section 16(a) Beneficial Ownership Reporting Compliance."

(c)

Code of Ethics.

        The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with our 2012 Annual Meeting of Stockholders under the caption "Corporate Governance."

(d)

Nominating Committee, Audit Committee, Audit Committee Financial Expert.

        The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with our 2012 Annual Meeting of Stockholders under the caption "Corporate Governance."

Item 11.    Executive Compensation

        The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with our 2012 Annual Meeting of Stockholders under the caption "Compensation of Officers and Directors."

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with our 2012 Annual Meeting of Stockholders under the caption "Security Ownership of Certain Beneficial Owners."

Item 13.    Certain Relationships and Related Transactions and Director Independence

        The information required hereunder is incorporated by reference from the sections in our Proxy Statement filed in connection with our 2012 Annual Meeting of the Stockholders under the caption "Corporate Governance."

Item 14.    Principal Accounting Fees and Services

        The information required hereunder is incorporated by reference from the sections in our Proxy Statement filed in connection with our 2012 Annual Meeting of the Stockholders under the caption "Proposal No. 2 Ratification of Engagement of Independent Registered Public Accounting Firm."

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PART IV

Item 15.    Exhibits and Financial Statement Schedule

(a)(1)    Documents filed as a part of this report:

Financial Statements of Information Services Group,  Inc.:
Reports of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets	F-2
Consolidated Statement of Operations	F-3
Consolidated Statement of Stockholders' Equity	F-4
Consolidated Statement of Cash Flows	F-5
Notes to Consolidated Financial Statements	F-6

(a)(2)    Financial Statement Schedule

        Schedule II—Valuation and Qualifying Accounts

(a)(3)    Exhibits:

        We hereby file as part of this Annual Report on Form 10-K the Exhibits listed in the attached Exhibit Index.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Information Services Group, Inc:

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and cash flows present fairly, in all material respects, the financial position of Information Services Group, Inc. and its subsidiaries at December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15 (a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Houston, Texas
March 15, 2012

F-1

INFORMATION SERVICES GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

	December 31, 2011			December 31, 2010
ASSETS
Current assets
Cash and cash equivalents	$	24,469		$	40,301
Accounts and unbilled receivables, net of allowance of $549 and $195, respectively		42,851			26,603
Deferred tax asset		3,330			2,852
Prepaid expense and other current assets		2,118			1,281
Total current assets		72,768			71,037
Restricted cash		51			5,750
Furniture, fixtures and equipment, net of accumulated depreciation of $4,730 and $3,950, respectively		2,954			2,113
Goodwill		34,691			48,474
Intangible assets, net		35,070			55,746
Other assets		945			1,444
Total assets	$	146,479		$	184,564
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	4,089		$	1,656
Current maturities of long-term debt		7,000			—
Deferred revenue		4,604			1,175
Accrued expenses		16,748			10,701
Total current liabilities		32,441			13,532
Long-term debt, net of current maturities		63,063			69,813
Deferred tax liability		10,305			19,336
Other liabilities		4,786			66
Total liabilities		110,595			102,747
Commitments and contingencies (Note 14)
Stockholders' equity
Preferred stock, $.001 par value; 10,000 shares authorized; none issued		—			—
Common stock, $.001 par value, 100,000 shares authorized; 36,675 shares issued and 36,276 outstanding at December 31, 2011 and 32,617 shares issued and 32,601 outstanding at December 31, 2010		37			33
Additional paid-in capital		204,076			192,989
Treasury stock (399 and 16 common shares, respectively, at cost)		(450	)		(57	)
Accumulated other comprehensive loss		(2,247	)		(1,553	)
Accumulated deficit		(165,532	)		(109,595	)
Total stockholders' equity		35,884			81,817
Total liabilities and shareholders' equity	$	146,479		$	184,564

The accompanying notes are an integral part of these consolidated financial statements.

F-2

INFORMATION SERVICES GROUP, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands, except per share data)

	Years Ended December 31,
	2011			2010			2009
Revenues	$	184,426		$	132,013		$	132,744
Operating expenses
Direct costs and expenses for advisors		104,823			71,528			67,674
Selling, general and administrative		67,717			49,889			47,894
Goodwill impairment charge		34,314			46,591			—
Intangible assets impairment charge		27,380			5,900			6,800
Depreciation and amortization		11,034			9,846			9,562
Operating (loss) income		(60,842	)		(51,741	)		814
Interest income		75			159			262
Interest expense		(3,458	)		(3,241	)		(4,550	)
Foreign currency transaction loss		(38	)		(268	)		(140	)
Loss before taxes		(64,263	)		(55,091	)		(3,614	)
Income tax benefit		(8,326	)		(1,926	)		(778	)
Net loss	$	(55,937	)	$	(53,165	)	$	(2,836	)
Weighted average shares outstanding:
Basic		36,258			32,050			31,491
Diluted		36,258			32,050			31,491
Loss per share:
Basic	$	(1.54	)	$	(1.66	)	$	(0.09	)
Diluted	$	(1.54	)	$	(1.66	)	$	(0.09	)
Comprehensive loss:
Net loss	$	(55,937	)	$	(53,165	)	$	(2,836	)
Foreign currency translation		(694	)		(32	)		891
Comprehensive loss	$	(56,631	)	$	(53,197	)	$	(1,945	)

The accompanying notes are an integral part of these consolidated financial statements.

F-3

INFORMATION SERVICES GROUP, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(in thousands)

	Common Stock										Accumulated Other Comprehensive Loss
					Additional Paid-in- Capital			Treasury Stock						Retained (Accumulated Deficit)			Total Stockholders' Equity
	Shares		Amount
Balance, December 31, 2008		31,358		31		186,716			(249	)		(2,412	)		(53,505	)		130,581
Net loss		—		—		—			—			—			(2,836	)		(2,836	)
Other comprehensive income		—		—		—			—			891			—			891
Issuance of common stock		458		1		81			—			—			—			82
Equity securities repurchased		—		—		—			(86	)		—			—			(86	)
Issuance of treasury shares		—		—		(27	)		278			—			(89	)		162
Stock based compensation		—		—		2,831			—			—			—			2,831
Balance December 31, 2009		31,816		32		189,601			(57	)		(1,521	)		(56,430	)		131,625
Net loss		—		—		—			—			—			(53,165	)		(53,165	)
Other comprehensive loss		—		—		—			—			(32	)		—			(32	)
Issuance of common stock		801		1		301			—			—			—			302
Stock based compensation		—		—		3,087			—			—			—			3,087
Balance December 31, 2010		32,617		33		192,989			(57	)		(1,553	)		(109,595	)		81,817
Net loss		—		—		—			—			—			(55,937	)		(55,937	)
Other comprehensive loss		—		—		—			—			(694	)		—			(694	)
Equity securities repurchased		—		—		—			(1,225	)		—			—			(1,225	)
Issuance of common stock		558		—		322			—			—			—			322
Issuance of treasury shares		—		—		(832	)		832			—			—			—
Issuance of common stock for acquisition		3,500		4		8,454			—			—			—			8,458
Stock based compensation		—		—		3,143			—			—			—			3,143
Balance December 31, 2011		36,675	$	37	$	204,076		$	(450	)	$	(2,247	)	$	(165,532	)	$	35,884

The accompanying notes are an integral part of these consolidated financial statements.

F-4

INFORMATION SERVICES GROUP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2011			2010			2009
Cash flows from operating activities
Net loss	$	(55,937	)	$	(53,165	)	$	(2,836	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense		1,483			1,420			1,419
Goodwill impairment charge		34,314			46,591			—
Intangible assets impairment charge		27,380			5,900			6,800
Amortization of intangible assets		9,551			8,426			8,143
Amortization of deferred financing costs		360			359			784
Stock-based compensation		3,143			3,087			2,831
Bad debt expense		588			(51	)		510
Deferred tax benefit		(11,003	)		(6,763	)		(5,653	)
Loss on disposal of fixed assets		3			11			5
Changes in operating assets and liabilities:
Accounts receivable		(6,238	)		(675	)		2,856
Prepaid expense and other current assets		1,401			(31	)		(112	)
Accounts payable		(236	)		(202	)		(776	)
Deferred revenue		593			(497	)		200
Accrued expenses		(4,531	)		1,337			(10,115	)
Net cash provided by operating activities		871			5,747			4,056
Cash flows from investing activities
Acquisitions, net of cash acquired		(13,684	)		—			—
Restricted cash		5,699			(5,750	)		—
Proceeds from sale of furniture, fixtures and equipment		20			—			—
Purchase of furniture, fixtures and equipment		(1,690	)		(957	)		(1,239	)
Net cash used in investing activities		(9,655	)		(6,707	)		(1,239	)
Cash flows from financing activities
Principal payments on borrowings		(6,000	)		(2,000	)		(22,238	)
Proceeds from issuance of ESPP shares		322			302			82
Issuance of treasury stock		—			—			162
Equity securities repurchased		(1,225	)		—			(86	)
Net cash used in financing activities		(6,903	)		(1,698	)		(22,080	)
Effect of exchange rate changes on cash		(145	)		173			903
Net decrease in cash and cash equivalents		(15,832	)		(2,485	)		(18,360	)
Cash and cash equivalents, beginning of period		40,301			42,786			61,146
Cash and cash equivalents, end of period	$	24,469		$	40,301		$	42,786
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	2,914		$	2,910		$	4,157
Taxes	$	3,904		$	7,712		$	5,205
Noncash investing and financing activities:
Issuance of common stock for acquisition	$	7,980		$	—		$	—
Issuance of convertible debt for acquisition	$	6,250		$	—		$	—
Purchase price adjustments	$	—		$	—		$	240
Issuance of treasury stock for ESPP and vested restricted stock awards	$	832		$	—		$	117

The accompanying notes are an integral part of these consolidated financial statements.

F-5

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tabular amounts in thousands, except per share data)

NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

        Information Services Group, Inc. (the "Company") was incorporated in Delaware on July 20, 2006. The Company was formed to acquire, through a merger, capital stock exchange, asset or stock acquisition or other similar business combination one or more domestic or international operating businesses.

        The registration statement for the Company's initial public offering (the "Offering") was declared effective on January 31, 2007. The Company consummated the Offering on February 6, 2007. The Company's management had broad discretion with respect to the specific application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering were to be applied toward consummating a business combination with (or acquisition of) an operating business in the information services industry. This operating company was subsequently identified as TPI Advisory Services Americas, Inc., a Texas corporation ("TPI").

        On November 16, 2007 (the "TPI Acquisition Date"), we consummated the acquisition of TPI, pursuant to a Purchase Agreement dated April 24, 2007, as amended on September 30, 2007, by and between MCP-TPI Holdings, LLC, a Texas limited liability company ("MCP-TPI"), and the Company. For accounting purposes, the TPI acquisition has been treated as a business combination. The results of TPI are included in the consolidated financial statements subsequent to the TPI Acquisition Date. During the periods prior to the TPI Acquisition Date, the Company was in the development stage.

        On January 4, 2011, the Company completed the acquisition of Compass. Compass is a premier independent global provider of business and information technology benchmarking, performance improvement, data and analytics services. It was founded in 1980 and headquartered in the United Kingdom and has 180 employees in 16 countries serving nearly 250 clients worldwide. The company pioneered the aggregation and application of sophisticated metrics to understand root causes of organizational performance issues. In addition, their Fact-Based Consulting unit generates tangible improvements in client businesses through sourcing advisory programs, recommendations in operational excellence and support in implementing transformational change in business operations. Compass uses benchmarking to support fact-based decision making, analysis to optimize cost reduction, and tools and techniques to manage business performance. For accounting purposes, the acquisition of Compass has been treated as a business combination.

        On February 10, 2011 the Company completed the acquisition of STA Consulting (Salvaggio, Teal & Associates) a premier independent information technology advisor serving the public sector. STA Consulting advises clients on information technology strategic planning and the acquisition and implementation of new Enterprise Resource Planning (ERP) and other enterprise administration and management systems. STA Consulting was founded in 1997 and is based in Austin, Texas with approximately 40 professionals experienced in information systems consulting in public sector areas such as government operations, IT and project management, contract negotiations, financial management, procurement, human resources and payroll. STA Consulting works with such states as Alaska, Kansas, Kentucky, Louisiana, Mississippi and West Virginia. STA Consulting and TPI have worked together in the past on engagements for such states as Georgia and Texas. For accounting purposes, the acquisition of STA Consulting has been treated as a business combination.

        During the fourth quarter of 2011, we decided to merge our individual corporate brands into one globally integrated business under the ISG brand. TPI, the world's leading sourcing data and advisory

F-6

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (Continued)

firm; Compass, a premier independent provider of business and IT benchmarking; and STA Consulting, a premier independent technology advisory serving the North America public sector, will be marketed together under the ISG brand. The merger is designed to offer clients one source to drive operational excellence in their organizations. We have retained our legacy brands to identify specific products and services we are known for including "The TPI Index", "TPI Sourcing" and "Compass Benchmarks".

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

        The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, references to the Company include ISG and its consolidated subsidiaries.

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the proportional performance method of accounting affect the amounts of revenues, expenses, unbilled receivables and deferred revenue. Numerous internal and external factors can affect estimates. Estimates are also used for but not limited to: allowance for doubtful accounts, useful lives of furniture, fixtures and equipment, depreciation expense, fair value assumptions in analyzing goodwill and intangible asset impairments, income taxes and deferred tax asset valuation, and the valuation of stock based compensation.

Business Combinations

        We have acquired businesses critical to the Company's long-term growth strategy. Results of operations for acquisitions are included in the accompanying consolidated statement of operations from the date of acquisition. Acquisitions are accounted for using the purchase method of accounting and the purchase price is allocated to the net assets acquired based upon their estimated fair values at the date of acquisition. The excess of the purchase price over the net assets was recorded as goodwill. Final valuations of assets and liabilities are obtained and recorded within one year from the date of the acquisition.

Cash and Cash Equivalents

        The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents, including certain money market accounts. The Company principally maintains its cash in money market and bank deposit accounts in the United States of America which typically exceed applicable insurance limits. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

F-7

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Restricted Cash

        Restricted cash consists of cash and cash equivalents which the Company has pledged to fulfill certain obligations and are not available for general corporate purposes.

        In December 2010, the Company funded the escrow for the closing of the acquisition of Compass in the amount of $5.8 million. The $5.8 million was classified as restricted cash at December 31, 2010. This amount was paid in January 2011 and no longer held in escrow.

Accounts and Unbilled Receivables and Allowance for Doubtful Accounts

        Our trade receivables primarily consist of amounts due for services already performed via fixed fee or time and materials arrangements. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of clients to pay fees or for disputes that affect its ability to fully collect billed accounts receivable. The allowance for these risks is prepared by reviewing the status of all accounts and recording reserves on a specific identification method based on previous experiences and historical bad debts. However, our actual experience may vary significantly from these estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay their invoices, we may need to record additional allowances or write-offs in future periods. To the extent the provision relates to a client's inability or unwillingness to make required payments, the provision is recorded as bad debt expense, which is classified within selling, general and administrative expense in the accompanying consolidated statement of operations.

        The provision for unbilled services is recorded as a reduction to revenues to the extent the provision relates to fee adjustments and other discretionary pricing adjustments.

Prepaid Expenses and Other Assets

        Prepaid expenses and other assets consist primarily of prepaid expenses for insurance, conferences as well as deposits for facilities, programs and promotion items.

Furniture, Fixtures and Equipment, net

        Furniture, fixtures and equipment is recorded at cost. Depreciation is computed by applying the straight-line method over the estimated useful life of the assets, which ranges from three to five years. Leasehold improvements are depreciated over the lesser of the useful life of the underlying asset or the lease term, which generally range from three to five years. Expenditures for renewals and betterments are capitalized. Repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and any associated gain or loss thereon is reflected in the accompanying consolidated statement of operations.

Internal-Use Software and Website Development Costs

        The Company capitalizes internal-use software and website development costs and records these amounts within furniture, fixtures and equipment. Accounting standards require that certain costs related to the development or purchase of internal-use software and systems as well as the costs

F-8

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

incurred in the application development stage related to its website be capitalized and amortized over the estimated useful life of the software or system. They also require that costs related to the preliminary project stage, data conversion and post implementation/operation stage of an internal-use software development project be expensed as incurred.

        During each of the years ended December 31, 2011 and 2010, the Company capitalized $0.5 million of costs associated with the system conversion and website development.

Goodwill and Indefinite Lived Intangible Assets

        Our goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired at the date of acquisition. The primary other identifiable intangible assets with indefinite lives are trademarks of the acquired businesses. These assets are not amortized but rather tested for impairment at least annually by applying a fair-value based test in accordance with accounting and disclosure requirements for goodwill and other indefinite-lived intangible assets. This test is performed by us during our fourth fiscal quarter or more frequently if we believe impairment indicators are present. At October 31, 2011, our annual impairment testing date, we maintain a single operating segment and reporting unit.

        Our indefinite-lived intangible asset impairment tests involve estimates and management's judgment. The fair value of trademarks and trade name assets were determined using the relief from royalty method by discounting the cash flows that represent a savings over having to pay a royalty fee for use of the trademarks and trade names. The discounted cash flow valuation uses the same projections used under the income approach described below. The cash flow projections used were primarily attributable to revenue and royalty rates associated with the legacy brands which are projected to decline as value shifts to the ISG brand.

        In the fourth quarter of 2011, we reclassified our acquired trademarks and trade names to definite lived assets which will be amortized over a remaining useful life of approximately seven years. We decided to merge our individual corporate brands into one global integrate go-to-market business under the ISG brand. As a result of this transition, during our annual impairment test, we concluded that the indefinite lived trademarks and trade names were impaired by $27.4 million which is included in the loss from operations in the accompanying consolidated statement of operations for 2011. This impairment charge was measured as the excess of the carrying value over the fair value of the asset.

        We perform a two-step impairment test on goodwill. In the first step, we compare the fair value of the reporting unit to its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test whereby the carrying value of the reporting unit's goodwill is compared to its implied fair value. If the carrying value of the goodwill exceeds the implied fair value, an impairment loss equal to the difference is recorded.

        In performing the first step of the impairment test on goodwill, we determined the fair value of the reporting unit using both a market and income approach. The income approach utilizes a discounted cash flow model and is based on projections of future operations of the reporting unit as of the valuation date. The market approach is based on our stock price and provides a direct indication of fair value. Under the market approach, we determined the fair value of the reporting unit utilizing a

F-9

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

relevant average of our common stock price for the October 31 measurement period, as quoted on the Nasdaq Global Market plus a 35% control premium based upon recent transactions of comparable companies. The discounted cash flow model assumed revenue growth rates of approximately 3% per year. We employed a rate of 13% to discount future excess cash flows. The goodwill impairment is attributable to historical revenues, projected revenue run rate, actual and projected revenue generated per billable hour, driven by a global recession which has impacted and reduced sourcing industry activity.

        We failed the first step and proceeded to the second step in which we determined the implied fair value of goodwill by allocating the fair value of our reporting unit to the reporting unit's assets and liabilities using purchase price allocation guidance in order to determine the implied value of goodwill. Our assets in this valuation included the trade names for the ISG brand as well as declining values in the old legacy trade names. We concluded that the implied fair value is $34.7 million, resulting in an impairment of $34.3 million, which is included in loss from operations in the accompanying consolidated statement of operations for 2011.

        We will continue to monitor our market capitalization for evidence of further impairment. Future downturn in our business, continued deterioration of economic conditions, or continued further decline in our market capitalization may result in an additional impairment charge or charges in future periods, which could adversely affect our results of operations for those periods.

        The goodwill and intangible assets impairment charge is non-cash in nature and does not affect our liquidity, cash flows from operations and debt covenants.

Long-Lived Assets

        Long-lived assets, excluding goodwill and indefinite-lived intangibles, to be held and used by the Company are reviewed to determine whether any significant change in the long-lived asset's physical condition, a change in industry conditions or a reduction in cash flows associated with the use of the long-lived asset. If these or other factors indicate the carrying amount of the asset may not be recoverable, the Company determines whether impairment has occurred through the use of an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset. The fair value of the asset is measured using market prices or, in the absence of market prices, an estimate of discounted cash flows. Cash flows are generally discounted at an interest rate commensurate with our weighted average cost of capital for a similar asset. Assets are classified as held for sale when the Company has a plan for disposal of certain assets and those assets meet the held for sale criteria of accounting and disclosure requirement for the impairment or disposal of long-lived assets.

        Due to a decline in our stock price for a prolonged period of time and the timing of our annual impairment test, we determined that it was necessary to review our long-lived assets for impairment. We have performed the impairment test during the fourth quarter of 2011 using the undiscounted cash flow analysis and did not record an impairment based upon such analysis.

F-10

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Debt Issuance Costs

        Costs directly incurred in obtaining long-term financing, typically bank and attorney fees, are deferred and are amortized over the life of the related loan using the effective interest method. Deferred issuance costs are classified as other assets in the accompanying consolidated balance sheet. Amortization of debt issuance costs is included in interest expense and totaled $0.4 million for each of the years ended December 31, 2011 and 2010.

Revenue Recognition

        We recognize our revenues for the sale of services and products when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, the fee is fixed or determinable and the collectability of the related revenue is reasonably assured.

        We principally derive revenues from fees for services generated on a project-by-project basis. Prior to the commencement of a project, we reach agreement with the client on rates for services based upon the scope of the project, staffing requirements and the level of client involvement. It is our policy to obtain written agreements from new clients prior to performing services. In these agreements, the clients acknowledge that they will pay based upon the amount of time spent on the project or an agreed upon fee structure. Revenues for services rendered are recognized on a time and materials basis or on a fixed-fee or capped-fee basis in accordance with accounting and disclosure requirements for revenue recognition.

        Fees for services that have been performed, but for which we have not invoiced the customers are recorded as unbilled receivables in the accompanying consolidated balance sheets. Invoices issued before the related services have been performed are recorded as deferred revenue in the accompanying consolidated balance sheets.

        Revenues for time and materials contracts are recognized based on the number of hours worked by our advisors at an agreed upon rate per hour and are recognized in the period in which services are performed. Revenues for time and materials contracts are billed monthly, semimonthly or in accordance with the specific contractual terms of each project.

        Revenues related to fixed-fee or capped-fee contracts are recognized into revenue as value is delivered to the customer. The pattern of revenue recognition for these contracts varies depending on the terms of the individual contracts, and may be recognized proportionally over the term of the contract or deferred until the end of the contract term and recognized when our obligations have been fulfilled with the customer. In instances where substantive acceptance provisions are specified in customer contracts, revenues are deferred until all acceptance criteria have been met. The pattern of revenue recognition for contracts where revenues are recognized proportionally over the term of the contact is based on the proportional performance method of accounting using the ratio of labor hours incurred to estimated total labor hours, which we consider to be the best available indicator of the pattern and timing in which contract obligations are fulfilled. This percentage is multiplied by the contracted dollar amount of the project to determine the amount of revenue to recognize in an accounting period. The contracted amount used in this calculation typically excludes the amount the client pays for reimbursable expenses. There are situations where the number of hours to complete projects may exceed our original estimate as a result of an increase in project scope or unforeseen

F-11

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

events. On a regular basis, we review the hours incurred and estimated total labor hours to complete. The results of any revisions in these estimates are reflected in the period in which they become known. We believe we have demonstrated a history of successfully estimating the total labor hours to complete a project.

        The agreements entered into in connection with a project, whether on a time and materials basis or fixed-fee or capped-fee basis, typically allow our clients to terminate early due to breach or for convenience with 30 days' notice. In the event of termination, the client is contractually required to pay for all time, materials and expenses incurred by us through the effective date of the termination. In addition, from time to time, we enter into agreements with clients that limit our right to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit us from performing a defined range of services that it might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team.

Reimbursable Expenditures

        Amounts billed to customers for reimbursable expenditures are included in revenues and the associated costs incurred by the Company are included in direct costs and expenses for advisors in the accompanying consolidated statement of operations. Non-reimbursable amounts are expensed as incurred. Reimbursable expenditures totaled $9.5 million and $9.6 million for the years ended December 31, 2011 and 2010, respectively.

Direct Costs and Expenses for Advisors

        Direct costs and expenses for advisors include payroll expenses and advisory fees directly associated with the generation of revenues and other program expenses. Direct costs and expenses for advisors are expensed as incurred.

        Direct costs and expenses for advisors also include expense accruals for discretionary bonus payments. Bonus accrual levels are adjusted throughout the year based on actual and projected individual and Company performance.

Stock-Based Compensation

        Stock Appreciation Rights ("SARs") for a fixed number of shares are granted to certain employees with an exercise price based on the closing trading price of our common stock on the grant date. We use the Black-Scholes option pricing model to determine the fair value of each option award on the date of grant. Prior to December 31, 2009, the volatility calculation was based on the most recent trading day average volatility of a representative sample of seven companies with market capitalizations of approximately $197 million to $3.7 billion that management believed to be engaged in the business of information services (the "Sample Companies"). We referred to the average volatility of the Sample Companies because management believes that the average volatility of such companies is a reasonable benchmark to use in estimating the expected volatility of our common stock as we had a limited history as a public company. The risk-free interest rate is determined based upon the interest rate on a U.S. Treasury Bill with a term equal to the expected life of the option at the time the option was granted.

F-12

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

An expected life of five years was taken into account for purposes of assigning a fair value to the option. The expected life represents the period of time the awards granted are expected to be outstanding. There were no grants of SARS during the years ended December 31, 2011 or 2010.

        We also grant restricted stock with a fair value that is determined based on the closing price of our common stock on the date of grant. SARs and restricted stock generally vest over a four-year period. Stock-based compensation expense is recognized ratably over the applicable service period.

        We follow the provisions of accounting and disclosures requirement for share-based payments, requiring the measurement and recognition of all share-based compensation under the fair value method.

Concentration of Credit Risk

        Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable. The Company places its cash investments with high quality financial institutions. The Company extends credit to its customers based upon an evaluation of the customer's financial condition and credit history and generally does not require collateral.

Treasury Stock

        The Company makes treasury stock purchases in the open market pursuant to the share repurchase program, which was approved by the Board of Directors on November 14, 2007.

        Treasury stock is recorded on the consolidated balance sheet at cost as a reduction of stockholders' equity. Shares are released from Treasury at original cost on a first-in, first-out basis, with any gain on the sale reflected as an adjustment to additional paid-in capital. Losses are reflected as an adjustment to additional paid-in capital to the extent of gains previously recognized, otherwise as an adjustment to retained earnings.

Foreign Currency Translation

        The assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the end of the reporting period. Revenue and expense items are translated at average exchange rates for the reporting period. Resulting translation adjustments are included in the accompanying statement of stockholders' equity as a component of Accumulated Other Comprehensive Loss.

        The functional currency of the Company and its subsidiaries is the respective local currency. The Company has contracts denominated in foreign currencies and therefore, a portion of the Company's revenues are subject to foreign currency risks. Transactional currency gains and losses that arise from transactions denominated in currencies other than the functional currencies of our operations are recorded in Foreign Currency Transaction (Loss) Gain in the accompanying consolidated statement of operations.

Fair Value of Financial Instruments

        The carrying value of the Company's cash and cash equivalents, receivables, accounts payable, long-term debt, other current liabilities, and accrued interest approximate fair value.

F-13

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        Fair value is the price that would be received upon a sale of an asset or paid upon a transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). Market participants can use market data or assumptions in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable. The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. Under the fair-value hierarchy

•

Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market;

•

Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and

•

Level 3 measurements include those that are unobservable and of a highly subjective measure.

Income Taxes

        We use the asset and liability method to account for income taxes, including recognition of deferred tax assets and liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. We review our deferred tax assets for recovery. A valuation allowance is established when we believe that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in the valuation allowance from period to period are included in our tax provision in the period of change.

        For uncertain tax positions, we use a prescribed model for assessing the financial recognition and measurement of all tax positions taken or expected to be taken in its tax returns. The guidance provides clarification on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. Our provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well as the related interest.

Loss Per Share

        Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would share in the net income of the Company. As of December 31, 2011, 30.6 million warrants and 1.4 million Units (each Unit comprising one common share and one warrant) have expired. For the year ended December 31, 2011, the effect of 1.6 million shares related to the Company's convertible debt, 5.0 million warrants, 0.4 million stock appreciation rights ("SARs") and 2.7 million restricted shares have not been considered in the diluted earnings per share calculation for the year ended December 31, 2011, as the effect would be anti-dilutive. In addition, 250,000 contingent restricted shares related to the acquisition of STA were excluded from basic and diluted earnings per share as the contingency was not met as of the reporting period. For the year ended December 31,

F-14

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2010, the effect of 35.6 million warrants, 0.4 million SARs and 1.4 million Units associated with the Company's IPO underwriters purchase option have not been considered in the diluted earnings per share calculation, since the market price of the Company's common stock was less than the exercise price during the period in the computation. Also, 2.0 million restricted shares have not been considered in the diluted earnings per share calculation for the year ended December 31, 2010, as the effect would be anti-dilutive. For the year ended December 31, 2009, the effect of 35.6 million warrants, 0.3 million SARs and 1.4 million Units associated with the Company's IPO underwriters purchase option have not been considered in the diluted earnings per share calculation, since the market price of the Company's common stock was less than the exercise price during the period in the computation. Also, 0.8 million restricted shares have not been considered in the diluted earnings per share calculation for the year ended December 31, 2009, as the effect would be anti-dilutive.

        The following tables set forth the computation of basic and diluted earnings per share:

	Years Ended December 31,
	2011			2010			2009
Numerator:
Net loss	$	(55,937	)	$	(53,165	)	$	(2,836	)
Denominator:
Basic weighted average common shares outstanding		36,258			32,050			31,491
Diluted effects of SARs, restricted shares, Employee Stock Purchase Plan shares and warrants		—			—			—
		36,258			32,050			31,491
Loss per share:
Basic	$	(1.54	)	$	(1.66	)	$	(0.09	)
Diluted	$	(1.54	)	$	(1.66	)	$	(0.09	)

Recently Issued Accounting Pronouncements

        In April 2011, the Financial Accounting Standards Board ("FASB") issued accounting guidance that clarifies which debt restructurings are considered troubled debt restructurings. Debt, which includes receivables, restructured in a troubled debt restructuring is classified as impaired for calculation of the allowance for doubtful accounts and is subject to additional disclosures detailing the modifications of the debt. The guidance is effective for interim or annual periods beginning on or after June 15, 2011. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

        In June 2011, the FASB issued accounting guidance related to the presentation of comprehensive income. This guidance presents an entity with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both

F-15

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

choices, an entity is required to present each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This guidance relates only to the presentation of comprehensive income. The provisions of this new guidance are effective for fiscal years and interim periods beginning after December 15, 2011 and are applied retrospectively for all periods presented. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

        In September 2011, the FASB amended the guidance on the annual testing of goodwill for impairment. The amended guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This guidance will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity's financial statements for the most recent annual or interim period have not yet been issued. We do not anticipate the adoption of this guidance will materially impact the Company's consolidated financial statements

NOTE 3—ACQUISITIONS

Compass Acquisition

        On January 4, 2011 (the "Compass Acquisition Date"), the Company executed an Agreement for the Sale and Purchase of the Entire Issued Share Capital of CCGH Limited (the "Agreement") and consummated the acquisition of the entire issued share capital CCGH Limited, an English corporation ("Compass").

        Under the terms of the Agreement, each of the holders of the issued share capital of Compass (the "Compass Sellers") agreed to sell and transfer, and the Company agreed to buy, the entire share capital of Compass (the "Share Purchase"). The Share Purchase was consummated on January 4, 2011.

        The final allocable purchase price consists of the following:

Cash	$	5,750
Common Stock*		7,980
Convertible Notes**		6,250
Stamp Tax		98
Total allocable purchase price	$	20,078

*

3,500,000 shares issued at $2.28 per share as part of the acquisition.

**

The Convertible Notes (the "Notes") mature on January 4, 2018 and interest is payable on the outstanding principal amount, computed daily, at the rate of 3.875% per annum on January 31 of each calendar year and on the seventh anniversary of the date of the

F-16

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 3—ACQUISITIONS (Continued)

Notes. The Notes are subject to transfer restrictions until January 31, 2013. If the price of the Company's common stock on the Nasdaq Global Market exceeds $4 per share for 60 consecutive trading days (the "Trigger Event"), the holder of the Notes may convert all (but not less than all) of the outstanding principal amount of the Notes into shares of the Company's common stock at the rate of 1 share for every $4 in principal amount outstanding. After the Trigger Event, the Company may prepay all or any portion of the outstanding principal amount of the Notes by giving the holder 30 days written notice.

        The purchase price has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the Compass Acquisition Date. The purchase price allocation was based upon a valuation completed by third-party valuation specialists using an income approach and estimates and assumptions provided by management. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill. Goodwill of $16.3 million acquired in the acquisition is not deductible for tax purposes.

        The following table summarizes the final allocation of the aggregate purchase price to the fair value of the assets acquired and liabilities assumed as of the Compass Acquisition Date:

Allocation of Purchase Price:
Cash	$	1,091
Accounts receivable		9,449
Prepaid expenses and other assets		2,042
Furniture, fixtures and equipment		685
Goodwill		16,295
Intangible assets		5,045
Accounts payable		(1,603	)
Accrued expenses and other(1)		(11,009	)
Deferred income tax liability		(1,917	)
Net assets acquired	$	20,078

(1)

The fair value of contingent liabilities related to uncertain tax positions recognized at the acquisition date is $1.5 million.

        The intangible assets acquired include database, trademark and trade name, customer relationships, covenant not-to-compete and goodwill. Some of these assets, such as goodwill and the trademark and trade name are not subject to amortization but rather an annual test for possible impairment; other intangible assets that are amortized over their useful lives are reviewed when events or changes or circumstances indicate the carrying amount of the asset may not be recoverable.

        Under the purchase method of accounting, the total purchase price of approximately $20.1 million was allocated to Compass's net tangible and intangible assets based on their estimated fair values as of the Compass Acquisition Date. Intangible assets are amortized utilizing the estimated pattern of the consumption of the economic benefit over their estimated lives, ranging from one to ten weighted

F-17

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 3—ACQUISITIONS (Continued)

average years. Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows:

	Purchase Price Allocation		Asset Life
Amortizable intangible assets:
Customer relationships	$	1,150	10 years
Covenants not-to-compete		15	2 years
Databases—Financial Data Repository		1,840	7 years
Non-amortizable intangible assets:
Trademark and trade name		2,040	Indefinite
Total intangible assets	$	5,045

STA Acquisition

        On February 10, 2011 (the "STA Acquisition Date"), the Company executed an Asset Purchase Agreement (the "STA Agreement") with Salvaggio & Teal Ltd. (d/b/a Salvaggio, Teal & Associates, "STA Consulting"), Salvaggio & Teal II, LLC, Mitt Salvaggio, Kirk Teal, Nathan Frey and International Consulting Acquisition Corp., a wholly-owned subsidiary of ISG, and consummated the acquisition of substantially all of the assets and assumption of certain specified liabilities of STA (collectively, the "Asset Purchase").

        Under the terms of the STA Agreement, ISG acquired the specified assets for cash consideration of $9.0 million subject to certain adjustments. In addition, the sellers under the Agreement (the "STA Sellers") are eligible to receive a minimum of $0 and a maximum up to $7.75 million of earn-out payments for fiscal years 2011 – 2015 if certain revenue and earnings targets are met. Finally, the STA Sellers were granted 250,000 ISG Restricted Shares that will vest if the target commercial enterprise resource planning revenue of ISG and its affiliates is met.

        As of the STA Acquisition Date, we have recorded a liability of $6.6 million representing the present fair value of the contingent consideration. This amount was estimated through a valuation model that incorporated industry-based, probability-weighted assumptions related to the achievement of these milestones and thus the likelihood of us making payments. These cash outflow projections have been discounted using a rate of 2.3%, which is the cost of debt financing for market participants.

        The final allocable purchase price consists of the following:

Cash	$	8,927
Contingent consideration*		7,107
Total allocable purchase price	$	16,034

*

Included cash earn-out of $6.6 million and 250,000 shares of equity contingent consideration at $1.91 per share, the closing stock price of the Company on February 10, 2011. Changes in the contingent liability as a result of operations will be recorded in selling, general and administrative expense whereas changes due to the time value of money will be recorded as interest expense.

F-18

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 3—ACQUISITIONS (Continued)

        The following table summarizes the final allocation of the aggregate purchase price to the fair value of the assets acquired and liabilities assumed as of the STA Acquisition Date:

Allocation of Purchase Price:
Accounts receivable	$	2,093
Other assets		57
Goodwill(1)		4,236
Intangible assets		11,210
Accounts payable		(1,067	)
Accrued expenses and other		(495	)
Net assets acquired	$	16,034

(1)

Goodwill of $4.2 million acquired in the acquisition is deductible for tax purposes.

        The acquisition of STA Consulting is being treated as a business combination for accounting purposes while it is legally an asset purchase. Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows:

	Purchase Price Allocation		Asset Life
Amortizable intangible assets:
Customer relationships	$	8,490	10 years
Backlog		1,880	2 years
Covenants not-to-compete		150	5 years
Non-amortizable intangible assets:
Trademark and trade name		690	Indefinite
Total intangible assets	$	11,210

        In the fourth quarter of 2011, we reclassified our acquired trademarks and trade names to definite lived assets which will be amortized over a remaining useful of approximately seven years. We decided to merge our individual corporate brands into one global integrate go-to-market business under the ISG brand.

        Compass' results of operations have been included in the Company's financial statement for periods subsequent to the effective date of the acquisition. Compass contributed revenues of $37.4 million and net income of $0.6 million for the period from January 4, 2011 through December 31, 2011. STA Consulting's results of operations have been included in the Company's financial statements for periods subsequent to the effective date of the acquisition. STA Consulting contributed revenues of $12.2 million and net loss of $1.1 million for the period from February 10, 2011 through December 31, 2011.

        The following unaudited pro forma financial information for the years ended December 31, 2011 and 2010, assumes that the acquisitions of Compass and STA Consulting occurred at the beginning of the period presented. The unaudited proforma financial information is presented for information purposes only. Such information is based upon the stand alone historical results of each company and

F-19

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 3—ACQUISITIONS (Continued)

does not reflect the actual results that would have been reported had the acquisitions been completed when assumed, nor is it indicative of the future results of operations for the combined enterprise.

	Years Ended December 31,
Proforma	2011			2010
	(unaudited)
Revenues	$	185,948		$	186,754
Direct costs and expenses for advisors		106,256			108,079
Selling, general and administrative		67,762			63,821
Impairment of intangible assets		61,694			52,491
Depreciation and amortization		11,186			12,385
Operating loss		(60,950	)		(50,022	)
Other expense, net		(3,420	)		(5,508	)
Net loss before taxes		(64,370	)		(55,530	)
Income tax benefit		8,397			1,208
Net loss	$	(55,973	)	$	(54,322	)
Basic loss per share	$	(1.54	)	$	(1.53	)
Diluted loss per share	$	(1.54	)	$	(1.53	)

NOTE 4—ACCOUNTS AND UNBILLED RECEIVABLES

        Accounts and unbilled receivables consisted of the following:

	December 31, 2011		December 31, 2010
Accounts receivable	$	32,242	$	16,372
Unbilled revenue		10,563		10,179
Receivables from related parties		46		52
	$	42,851	$	26,603

NOTE 5—PREPAID EXPENSE AND OTHER CURRENT ASSETS

        Prepaid expense and other current assets consisted of the following:

	December 31, 2011		December 31, 2010
Prepaid rent	$	290	$	39
Prepaid insurance		285		171
Security deposits		506		181
Deferred costs		286		200
Other		751		690
	$	2,118	$	1,281

F-20

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 6—FURNITURE, FIXTURES AND EQUIPMENT

        Furniture, fixtures and equipment consisted of the following:

	Estimated Useful Lives	December 31, 2011			December 31, 2010
Computer hardware, software and other office equipment	2 to 5 years	$	3,797		$	3,158
Furniture, fixtures and leasehold improvements	2 to 5 years		1,161			660
Internal-use software and development costs	3 to 5 years		2,726			2,245
Accumulated depreciation			(4,730	)		(3,950	)
		$	2,954		$	2,113

        Depreciation expense was $1.5 million, $1.4 million and $1.4 million for the years ended December 31, 2011, 2010 and 2009, respectively.

NOTE 7—GOODWILL

        The changes in the carrying amount of goodwill for the years ended December 31, 2011 and 2010 are as follows:

	2011			2010
Balance as of January 1
Goodwill	$	144,428		$	144,428
Accumulated impairment losses		(95,954	)		(49,363	)
		48,474			95,065
Acquisitions		20,531			—
Impairment losses		(34,314	)		(46,591	)
		(13,783	)		(46,591	)
Balance as of December 31
Goodwill		164,959			144,428
Accumulated impairment losses		(130,268	)		(95,954	)
	$	34,691		$	48,474

        As a result of the Company's annual impairment test performed during the fourth quarter of 2011, the Company recorded pre-tax non-cash impairment charge of $34.3 million associated with goodwill. During the third quarter of 2010, the Company also recorded a pre-tax non-cash impairment charge of $46.6 million associated with goodwill.

F-21

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 8—INTANGIBLE ASSETS

        The carrying amount of intangible assets, net of accumulated amortization and impairment charges, as of December 31, 2011 and 2010 consisted of the following:

	2011
	Gross Carrying Amount		Acquisitions		Accumulated Amortization			Impairment Losses(1)			Net Book Value
Amortizable intangibles:
Customer relationships	$	42,500	$	9,640	$	(21,056	)	$	—		$	31,084
Noncompete agreements		5,500		165		(5,535	)		—			130
Software		1,500		—		(1,500	)		—			—
Backlog		3,000		1,880		(3,862	)		—			1,018
Databases(1)		9,500		1,840		(3,331	)		(6,391	)		1,618
Trademark and trade names(2)		57,000		2,730		(30	)		(58,480	)		1,220
Intangibles	$	119,000	$	16,255	$	(35,314	)	$	(64,871	)	$	35,070

(1)

Included impairment of $6.4 million recorded during the fourth quarter of 2008.

(2)

Included impairment of $27.4 million recorded during the fourth quarter of 2011.

	2010
	Gross Carrying Amount		Accumulated Amortization			Impairment Losses			Net Book Value
Amortizable intangibles:
Customer relationships	$	42,500	$	(14,842	)	$	—		$	27,658
Noncompete agreements		5,500		(4,297	)		—			1,203
Software		1,500		(1,172	)		—			328
Backlog		3,000		(3,000	)		—			—
Databases(1)		9,500		(2,452	)		(6,391	)		657
		62,000		(25,763	)		(6,391	)		29,846
Indefinite-lived:
Trademark and trade names		57,000		—			(31,100	)		25,900
Intangibles	$	119,000	$	(25,763	)	$	(37,491	)	$	55,746

(1)

Included impairment of $6.4 million recorded during the fourth quarter of 2008.

        Amortization expense was $9.5 million, $8.4 million and $8.1 million for the years ended December 31, 2011, 2010 and 2009, respectively. The estimated future amortization expense subsequent to December 31, 2011, is as follows:

2012	$	7,150
2013		5,827
2014		5,191
2015		4,988
2016		4,673
Thereafter		7,241
	$	35,070

F-22

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 8—INTANGIBLE ASSETS (Continued)

        In the fourth quarter of 2011, we reclassified our acquired trademarks and trade names to definite lived assets which will be amortized over a remaining useful of approximately seven years. We decided to merge our individual corporate brands into one global integrate go-to-market business under the ISG brand. As a result of this transition, during our annual impairment test, we concluded that the indefinite lived trademarks and trade names were impaired by $27.4 million.

        During the third quarter of 2010, the Company also recorded pre-tax non-cash impairment charges of $5.9 million associated with intangible assets.

NOTE 9—ACCRUED LIABILITIES

        The components of accrued liabilities at December 31, 2011 and 2010 are as follows:

	December 31, 2011		December 31, 2010
Accrued payroll and vacation	$	5,170	$	2,587
Accrued corporate and payroll related taxes		5,513		2,241
Accrued acquisition costs		—		2,135
Contingent consideration—current		2,000		—
Other		4,065		3,738
	$	16,748	$	10,701

NOTE 10—RESTRUCTURING ACCRUAL

        Concurrent with the closing of the Compass acquisition, the Company initiated a workforce reduction focused on implementing selected cost savings and productivity improvements. The workforce reduction is focused on integration-related cost synergies including selling, general and administrative support, elimination of unnecessary sales and advisory positions and real estate consolidations.

        A summary of the activity affecting the Company's accrued contractual termination benefit liability for the year ended December 31, 2011 is as follows:

	Workforce Reductions
Balance at December 31, 2010	$	—
Amounts accrued		2,683
Amounts paid/incurred		(2,071	)
Balance at December 31, 2011	$	612

        The $2.7 million of net restructuring charges was primarily related to contractual termination benefits, and was recorded in selling, general and administrative expenses. We expect that the remaining actions of our workforce reduction will be completed over the next three months.

F-23

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 11—OTHER LIABILITIES

        The components of other liabilities at December 31, 2011 and 2010 are as follows:

	December 31, 2011		December 31, 2010
Contingent consideration—noncurrent	$	4,786	$	—
Other		—		66
	$	4,786	$	66

NOTE 12—SHARE REPURCHASE PROGRAM

        Under a stock repurchase plan approved by the Board of Directors on October 16, 2007, the Company repurchased 12.1 million shares of common stock since that date. This program includes the repurchase of common shares, units and/or warrants. On November 14, 2007, the Board of Directors authorized an additional repurchase program of up to $15.0 million. As of December 31, 2011, there was $8.9 million available under this repurchase program.

NOTE 13—FINANCING ARRANGEMENTS AND LONG-TERM DEBT

        Long-term debt consists of the following:

	December 31, 2011		December 31, 2010
Senior secured credit facility	$	63,813	$	69,813
Compass convertible notes		6,250		—
		70,063		69,813
Less current installments on long term debt		7,000		—
Long-term debt	$	63,063	$	69,813

        Aggregate annual maturities of debt obligations by calendar year, are as follows:

	Debt
2012	$	7,000
2013		10,000
2014		46,813
2015		—
2016		—
Thereafter		6,250
	$	70,063

F-24

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 13—FINANCING ARRANGEMENTS AND LONG-TERM DEBT (Continued)

        We have outstanding a substantial amount of debt, which may limit our ability to fund general corporate requirements and obtain additional financing, limit our flexibility in responding to business opportunities and competitive developments and increase our vulnerability to adverse economic and industry conditions.

        We incurred a substantial amount of indebtedness to finance the acquisition of TPI, including transaction costs and deferred underwriting fees. On November 16, 2007, our wholly-owned subsidiary International Consulting Acquisition Corp. ("ICAC") entered into a senior secured credit facility comprised of a $95.0 million term loan facility and a $10.0 million revolving credit facility. On November 16, 2007, ICAC borrowed $95.0 million under the term loan facility to finance the purchase price for our acquisition of TPI and to pay transaction costs. As a result of the substantial fixed costs associated with the debt obligations, we expect that:

•

a decrease in revenues will result in a disproportionately greater percentage decrease in earnings;

•

we may not have sufficient liquidity to fund all of these fixed costs if our revenues decline or costs increase;

•

we may have to use our working capital to fund these fixed costs instead of funding general corporate requirements, including capital expenditures;

•

we may not have sufficient liquidity to respond to business opportunities, competitive developments and adverse economic conditions; and

•

our results of operations will be adversely affected if interest rates increase because, based on our current outstanding term loan borrowings in the amount of $63.8 million, a 1% increase in interest rates would result in a pre-tax impact on earnings of approximately $0.6 million per year.

        These debt obligations may also impair our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business. Our indebtedness under the senior secured revolving credit facility is secured by substantially all of our assets, leaving us with limited collateral for additional financing. Moreover, the terms of our indebtedness under the senior secured revolving credit facility restrict our ability to take certain actions, including the incurrence of additional indebtedness, mergers and acquisitions, investments and asset sales. Our ability to pay the fixed costs associated with our debt obligations will depend on our operating performance and cash flow, which in turn depend on general economic conditions and the advisory services market. A failure to pay interest or indebtedness when due could result in a variety of adverse consequences, including the acceleration of our indebtedness. In such a situation, it is unlikely that we would be able to fulfill our obligations under or repay the accelerated indebtedness or otherwise cover our fixed costs. As of December 31, 2011, the total principal outstanding under the term loan facility was $63.8 million. There were no borrowings under the revolving credit facility during fiscal 2011.

        The material terms of the 2007 Credit Agreement are as follows:

•

The 2007 Credit Agreement has a maturity date of November 14, 2014.

•

The 2007 Credit Agreement is secured by all of the equity interests owned by the newly formed holding company of the Borrower, International Advisory Holdings Corp. ("Holdings") and its

F-25

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 13—FINANCING ARRANGEMENTS AND LONG-TERM DEBT (Continued)

direct and indirect domestic subsidiaries and, subject to agreed exceptions, its direct and indirect "first-tier" foreign subsidiaries and a perfected first priority security interest in all of Holdings' and its direct and indirect domestic subsidiaries' tangible and intangible assets.

•

Holdings and the Borrower's existing direct and indirect subsidiaries and future wholly-owned domestic subsidiaries serve as guarantors to the Borrower's obligations under the 2007 Credit Agreement.

•

At the Borrower's option, the 2007 Credit Agreement bears interest at a rate per annum equal to either (i) the "Base Rate" (which is the higher of (a) the rate publicly announced from time to time by the administrative agent as its "prime rate" and (b) the Federal Funds Rate plus 0.5% per annum), plus the applicable margin (as defined below) or (ii) Eurodollar Rate (adjusted for maximum reserves) as determined by the Administrative Agent, plus the applicable margin. The applicable margin shall be a percentage per annum equal to 2.5% for the term loans and the revolving loans maintained as Base Rate loans or 3.5% for the term loans and revolving loans maintained as Eurodollar loans.

•

Mandatory repayments of term loans shall be required from (subject to agreed exceptions) (i) 100% of the proceeds from asset sales by Holdings and its subsidiaries, (ii) 100% of the net proceeds from issuances of debt by Holdings and its subsidiaries, (iii) so long as the total leverage ratio is 3.0 to 1.0 or higher, 50% of annual excess cash flow of Holdings and its subsidiaries and (iv) 100% of the net proceeds from insurance recovery and condemnation events of Holdings and its subsidiaries.

•

The 2007 Credit Agreement contains a number of covenants that, among other things, place restrictions on matters customarily restricted in senior secured credit facilities, including restrictions on indebtedness (including guarantee obligations), liens, fundamental changes, sales or disposition of property or assets, investments (including loans, advances, guarantees and acquisitions), transaction with affiliates, dividends and other payments in respect of capital stock, optional payments and modifications of other material debt instruments, negative pledges and agreements restricting subsidiary distributions and changes in line of business. In addition, the Borrower is required to comply with a total leverage ratio as defined in the 2007 Credit Agreement. The total leverage ratio is defined as the ratio of consolidated indebtedness to consolidated Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA".)

•

The 2007 Credit Agreement contains customary events of default, including cross-default to other material agreements, judgment default and change of control.

        On June 29, 2009, the Company made a voluntary principal prepayment of $12.0 million against its outstanding term loan balance of $93.8 million. In conjunction with this prepayment, our lenders consented to the following conditions: (1) agreement to execute the Company's UK tax planning strategy to reduce future potential cash taxes, (2) exclusion of the impact in the calculation of EBITDA of up to $5.0 million of restructuring charges relating to the Borrower's previously announced 2009 restructuring plan through December 31, 2009 and (3) exclusion of the impact in the calculation of EBITDA of establishing, if necessary, a reserve in respect of certain accounts receivable and work in progress due from General Motors Corporation for worked performed on or before June 1, 2009.

F-26

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 13—FINANCING ARRANGEMENTS AND LONG-TERM DEBT (Continued)

        On September 11, 2009, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) for the remaining life of the 2007 Credit Agreement to provide the Company with greater financing flexibility in return for additional debt repayments. In accordance with the terms of the amended 2007 Credit Agreement, the Company made $5.0 million of principal repayments on September 30, 2009 and December 31, 2009 to reduce the outstanding term loan balance to $71.8 million. The principal repayments were made from excess cash balances generated through the Company's normal business operations. In accordance with the terms of the 2007 Credit Agreement, the Company made a $2.0 million principal repayment on March 31, 2010 to reduce the outstanding term loan balance to $69.8 million.

        On September 27, 2010, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) from September 30, 2010 to December 30, 2010 and to restore the exclusion of the impact in the calculation of earnings before interest, taxes, depreciation, and amortization EBITDA of up to $5.0 million of restructuring charges through December 31, 2011 in order to provide the Company with greater financing flexibility. The Company also received approval to complete the acquisition of STA Consulting subject to certain conditions.

        On December 23, 2010, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) from December 31, 2010 to March 30, 2011 in order to provide the Company with greater financing flexibility. Our lenders also agreed to allow the Company to extend the date to complete the acquisition of STA Consulting to March 31, 2011. On February 10, 2011, the acquisition of STA Consulting was completed.

        On March 16, 2011, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) for the remaining life of the 2007 Credit Agreement to provide us with greater financing flexibility in return for additional quarterly term loan principal repayments. In accordance with the terms of the amended 2007 Credit Agreement, we made mandatory principal repayments of $3.0 million on March 31, 2011 and $1.0 million on June 30, 2011, September 30, 2011 and December 31, 2011, respectively, to reduce the outstanding term loan balance to $63.8 million. The principal repayments will be made from cash generated through our normal business operations.

        On March 13, 2012, our lenders agreed to allow International Consulting Acquisition Corp., a wholly-owned indirect subsidiary of ISG (the "Borrower"), to include the results of operations of Compass in the calculation of our leverage ratio. The Borrower also received approval to increase the annual cash dividend payable to ISG to $2.0 million.

        Additional mandatory principal repayments totaling $7.0 million and $10.0 million will be due in 2012 and 2013 respectively with the remaining principal repayments due in 2014. The final mandatory term loan principal repayment will be due on November 16, 2014, which is the maturity date for the term loan.

        As of December 31, 2011 and 2010, the total principal outstanding under the term loan facility was $63.8 million and $69.8 million, respectively. There were no borrowings under the revolving credit facility during 2011 or 2010. The carrying amount of long-term debt owed to banks approximates fair value based on interest rates that are currently available to us for issuance of debt with similar terms and maturities. The 2007 Credit Agreement includes quarterly financial covenants that require us to maintain a maximum total leverage ratio (as defined in the 2007 Credit Agreement). As of December 31, 2011, our maximum total leverage ratio was 3.50 to 1.00 and we were in compliance with

F-27

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 13—FINANCING ARRANGEMENTS AND LONG-TERM DEBT (Continued)

all covenants contained in the 2007 Credit Agreement. The maximum total leverage ratio will continue to decline over the life of the 2007 Credit Agreement. The maximum total leverage ratio for 2012 is 3.25 for the quarter ending March 31, 2012 and 3.0 through the period ending December 31, 2012 and will continue to decline thereafter. We currently expect to be in compliance with the covenants contained within the 2007 Credit Agreement. In the event we are unable to remain in compliance with the debt covenants associated with the 2007 Credit Agreement we have alternative options available to us including, but not limited to, the ability to make a prepayment on our debt without penalty to bring the actual leverage ratio into compliance. In addition, should the Company's revenues not meet our forecast, the Company has the ability to reduce various expenditures to minimize the impact to the leverage ratio. Such actions may include reductions to headcount, variable compensation, marketing expenses, conferences and non-billable travel. Our available cash balances and liquidity will be negative impacted should such prepayment be necessary.

        We anticipate that our current cash and the ongoing cash flows from our operations will be adequate to meet our working capital and capital expenditure needs for at least the next twelve months. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated, or if other unexpected circumstances arise that may have a material effect on the cash flow or profitability of our business. If we require additional capital resources to grow our business, either internally or through acquisition, we may seek to sell additional equity securities or to secure debt financing. The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders. We may not be able to obtain financing arrangements in amounts or on terms acceptable to us in the future.

Compass Convertible Notes

        On January 4, 2011, as part of the consideration for the Share Purchase, we issued an aggregate of $6.3 million in convertible notes to Compass. The Notes mature on January 4, 2018 and interest is payable on the outstanding principal amount, computed daily, at the rate of 3.875% per annum on January 31 of each calendar year and on the seventh anniversary of the date of the Notes. The Notes are subject to transfer restrictions until January 31, 2013. If the price of our common stock on the Nasdaq Global Market exceeds $4 per share for 60 consecutive trading days (the "Trigger Event"), the holder of the Notes may convert all (but not less than all) of the outstanding principal amount of the Notes into shares of our common stock at the rate of 1 share for every $4 in principal amount outstanding. After the Trigger Event, we may prepay all or any portion of the outstanding principal amount of the Notes by giving the holder 30 days written notice.

NOTE 14—COMMITMENTS AND CONTINGENCIES

Employee Retirement Plans

        The Company's TPI subsidiary maintains a qualified profit-sharing plan (the "Plan"). Prior to January 1, 2008, the provisions of the Plan provide for a maximum employer contribution per eligible employee of the lesser of 12.75% of compensation or $25,500. Effective January 1, 2008, the contribution was adjusted to 3% of total cash compensation or $7,350, whichever is less. Employees are generally eligible to participate in the Plan after six months of service and are 100% vested upon entering the Plan. For the years ended December 31, 2011, 2010 and 2009, $1.3 million, $1.2 million and $1.6 million were contributed to the Plan by the Company, respectively.

F-28

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 14—COMMITMENTS AND CONTINGENCIES (Continued)

Leases

        The Company leases its office space under long-term operating lease agreements which expire at various dates through December 2021. Under the operating leases, the Company pays certain operating expenses relating to the leased property and monthly base rent.

        Aggregate future minimum payments under noncancelable leases with initial or remaining terms of one year or more consist of the following at December 31, 2011:

	Operating Leases
2012	$	2,017
2013		1,436
2014		1,239
2015		903
2016		421
Thereafter		961
Total minimum lease payments	$	6,977

        The Company's rental expense for operating leases was $3.9 million, $1.4 million and $1.5 million, in 2011, 2010 and 2009, respectively.

STA Consulting Contingent Consideration

        As of December 31, 2011, we have recorded a liability of $6.8 million representing the estimated fair value of contingent consideration related to the acquisition of STA Consulting, of which $2.0 million is classified as current and is expected to be paid in the first quarter of 2012 and $4.8 million is classified as noncurrent.

NOTE 15—RELATED PARTY TRANSACTIONS

        From time to time, the Company may have receivables and payables with employees and shareholders. All related party transactions have been conducted in the normal course of business as if the parties were unrelated. As of December 31, 2011 and December 31, 2010, the Company had outstanding receivables from related parties, including shareholders, totaling $46,419 and $52,270, respectively, and no outstanding payables.

NOTE 16—INCOME TAXES

        The components of income (loss) before income taxes for the years ended December 31, 2011, 2010 and 2009 consists of the following:

	Years Ended December 31,
	2011			2010			2009
Domestic	$	(69,932	)	$	(56,919	)	$	(8,290	)
Foreign		5,669			1,828			4,676
Total loss before income taxes	$	(64,263	)	$	(55,091	)	$	(3,614	)

F-29

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 16—INCOME TAXES (Continued)

        The components of the 2011, 2010 and 2009 income tax (benefit) provision are as follows:

	Years Ended December 31,
	2011			2010			2009
Current:
Federal	$	1,195		$	3,191		$	2,715
State		291			722			566
Foreign		1,191			924			1,594
Total current provision		2,677			4,837			4,875
Deferred:
Federal		(9,307	)		(6,000	)		(5,360	)
State		(1,091	)		(337	)		(233	)
Foreign		(605	)		(426	)		(60	)
Total deferred benefit		(11,003	)		(6,763	)		(5,653	)
Total	$	(8,326	)	$	(1,926	)	$	(778	)

        The differences between the effective tax rates reflected in the total provision for income taxes and the U.S. federal statutory rate of 35% for the year ended December 31, 2011, 2010 and 2009 were as follows:

	Years Ended December 31,
	2011			2010			2009
Tax benefit computed at 35%	$	(22,492	)	$	(19,281	)	$	(1,265	)
Nondeductible goodwill impairment		12,010			16,307			—
Nondeductible expenses		193			743			107
State income taxes, net of federal benefit		(899	)		148			151
Derecognition of stock compensation deferred tax asset		1,255			68			117
Valuation allowance		1,607			85			118
Other		—			4			(6	)
Income tax benefit	$	(8,326	)	$	(1,926	)	$	(778	)
Effective income tax rates		13.0	%		3.5	%		21.5	%

F-30

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 16—INCOME TAXES (Continued)

        The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows:

	December 31, 2011			December 31, 2010
Current deferred tax asset
Compensation related expenses	$	923		$	1,418
Foreign currency translation		1,445			952
Other		1,376			806
Total current deferred tax asset		3,744			3,176
Current deferred tax liability
Prepaids		(414	)		(324	)
Total current deferred tax liability		(414	)		(324	)
Net current deferred tax asset	$	3,330		$	2,852
Noncurrent deferred tax asset
Compensation related expenses	$	573		$	980
Foreign tax credit carryovers		922			869
Foreign net operating loss carryovers		3,641			880
U.S. net operating loss carryovers of non-consolidated entity		5,465			—
Valuation allowance for deferred tax assets		(9,026	)		(203	)
Total noncurrent deferred tax asset		1,575			2,526
Noncurrent deferred tax liability
Depreciable assets		(329	)		(217	)
Intangible assets		(10,119	)		(20,951	)
Investment in foreign subsidiaries		(1,432	)		(694	)
Total noncurrent deferred tax liability		(11,880	)		(21,862	)
Net noncurrent deferred tax liability		(10,305	)		(19,336	)
Net deferred tax liability	$	(6,975	)	$	(16,484	)

        A valuation allowance was established at December 31, 2011 and 2010 due to estimates of future utilization of net operating loss carryovers in the U.S. and certain foreign jurisdictions, derived primarily from the acquisitions and recorded through purchase accounting. The valuation allowance at December 31, 2011 also includes a full valuation for the Company's foreign tax credit carryovers and foreign taxes on its controlled foreign corporation unremitted earnings.

        Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed

F-31

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 16—INCOME TAXES (Continued)

to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. It is the Company's policy to accrue for interest and penalties related to its uncertain tax positions within income tax expense.

        For the years ended December 31, 2011, 2010 and 2009, the Company updated its assessment of its tax positions in the taxing jurisdictions where it has operations and determined that additional accruals were required for the year ended December 31, 2011.

        A tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period is as follows:

	December 31,
	2011		2010		2009
Balance, beginning of year	$	665	$	323	$	282
Additions as a result of tax positions taken during the current period		4		292		2
Additions as a result of acquisitions		1,537		—		—
Reductions relating to tax settlements with taxing authorities		—		—		(36	)
Total unrecognized tax benefit		2,206		615		248
Interest and penalties associated with uncertain tax positions		80		50		75
Balance, end of year	$	2,286	$	665	$	323

        The amount of unrecognized tax benefit, if recognized, that would affect the effective tax rate is $0.4 million. With few exceptions, the Company is no longer subject to U.S. federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2004.

NOTE 17—STOCK-BASED COMPENSATION PLANS

        At the special meeting of stockholders held on November 13, 2007, the 2007 Equity Incentive Plan ("Incentive Plan") and 2007 Employee Stock Purchase Plan ("ESPP") were approved by the Company's stockholders. The Incentive Plan authorizes the grant of awards to participants with respect to a maximum of 4.0 million shares of the Company's common stock, subject to adjustment to avoid dilution or enlargement of intended benefits in the event of certain significant corporate events, which awards may be made in the form of (i) nonqualified stock options; (ii) stock options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code (stock options described in clause (i) and (ii), "options"); (iii) stock appreciation rights ("SARs"); (iv) restricted stock and/or restricted stock units; (v) performance awards; and (vi) other stock based awards; provided that the maximum number of shares with respect to which stock options and stock appreciation rights may be granted in the equity incentive plan to any one participant in any given calendar year may not exceed $0.8 million, and the maximum amount payable to a participant in the equity plan in connection with the settlement of any of any award(s) designated as a "performance compensation awards" in respect of a single performance period shall be: (x) with respect to performance compensation awards that are

F-32

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 17—STOCK-BASED COMPENSATION PLANS (Continued)

paid in shares, 500,000 shares and (y) with respect to performance compensation awards that are paid in cash, $5.0 million. The issuance of shares or the payment of cash upon the exercise of an award or in consideration of the cancellation or termination of an award shall reduce the total number of shares available under the equity incentive plan, as applicable. The provisions of each award will vary based on the type of award granted and will be specified by the Compensation Committee of the Board of Directors. Those awards which are based on a specific contractual term will be granted with a term not to exceed ten years. The SARs granted under the Incentive Plan are granted with an exercise price equal to the fair market value of the Common Shares at the time the SARs are granted.

        On May 11, 2010, the ISG stockholders approved an amendment for an additional 4.5 million shares authorized for issuance under the 2007 Equity Incentive Plan, except that each share of the Company's common stock issued under a "full value" award (awards other than stock options or stock appreciation rights) will reduce the number of shares available for issuance by 1.44 shares.

        As of December 31, 2011, there were 3,493,455 and 606,417 shares available for grant under the amended and restated Incentive Plan and ESPP, respectively.

        The Company recognized $3.1 million, $3.1 million and $2.8 million in employee stock-based compensation expense during the years ended December 31, 2011, 2010 and 2009, respectively. This expense was recorded in selling, general and administrative in the consolidated statement of operations.

Stock Appreciation Rights

        The Compensation Committee may grant (i) a stock appreciation right independent of an option or (ii) a stock appreciation right in connection with an option, or a portion thereof. A stock appreciation right granted pursuant to clause (ii) of the preceding sentence (A) may be granted at the time the related option is granted or at any time prior to the exercise or cancellation of the related option, (B) shall cover the same number of shares covered by an option (or such lesser number of shares as the Compensation Committee may determine) and (C) shall be subject to the same terms and conditions as such option except for such additional limitations as are contemplated above (or such additional limitations as may be included in an award agreement).

        SARs granted pursuant to the Incentive Plan are granted with an exercise price equal to the fair market value of the Common Shares at the time the SARs are granted. Pursuant to the applicable award agreements, the SARs vest and become exercisable with respect to 25% of the shares subject to the SARs on the first four anniversaries of the grant date, so long as the employee remains employed with the Company on each such date. If the employee's employment with the Company is terminated as a result of the employee's death or disability, all unvested SARs will be fully vested. If the employee retires, the SARs will continue to vest on the same schedule as if the employee had remained employed with the Company. Any vested SARs will expire upon the earliest to occur of the following: (i) the tenth anniversary of the grant date; (ii) one year following the date of the employee's termination of services as a result of death or permanent disability; (iii) 90 days following the fourth anniversary of the grant date, following the participant's retirement; (iv) 30 days following the date of the participant's termination of employment for any reason (other than as a result of death, disability or retirement); and (v) immediately upon a termination for cause. SARs will be settled in the form of shares of the Company's common stock upon exercise.

F-33

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 17—STOCK-BASED COMPENSATION PLANS (Continued)

        A summary of the status of the Company's SARs issued under its Incentive Plan is presented below:

	SARs			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life		Aggregate Intrinsic Value
						(in years)
Outstanding at December 31, 2008		641		$	5.19		6.4	$	70
Granted		12		$	3.15
Exercised		—		$	—
Forfeited		(59	)	$	5.51
Outstanding at December 31, 2009		594		$	5.12		8.4	$	—
Granted		—		$	—
Exercised		—		$	—
Forfeited		(105	)	$	4.94
Outstanding at December 31, 2010		489		$	5.16		7.2	$	—
Granted		—		$	—
Exercised		—		$	—
Forfeited		(93	)	$	5.64
Outstanding at December 31, 2011		396		$	5.04		6.5	$	—
Vested and expected to vest at December 31, 2011		396		$	5.04		6.5	$	—
Exercisable at December 31, 2011		340		$	5.35		6.4	$	—

        The weighted-average grant date fair value for SARs granted during the years ended December 31, 2011, 2010 and 2009 was $0, $0 and $1.90, respectively. The total fair value of the SARs vested during the years ended December 31, 2011, 2010 and 2009 was $0.2 million, $0.3 million and $0.4, respectively. As of December 31, 2011, there was $0.1 million of total unrecognized compensation cost related to the Company's unvested SARs and that cost is expected to be recognized over a weighted-average period of 0.95 years.

        The Company uses the Black-Scholes option pricing model to determine the fair value of each SAR award on the date of grant. The estimated fair value of the SARs is amortized to expense on a straight-line basis over the vesting period. The Company did not grant any SAR during the years end December 31, 2011. The specific assumptions used in determining the fair values for the SARs granted during the years ended December 31, 2011, 2010 and 2009 are discussed in more detail below and are noted in the following table.

        Prior to December 31, 2009, the volatility calculation was based on the most recent trading day average volatility of a representative sample of seven companies with market capitalizations of approximately $197 million to $3.7 billion that management believes to be engaged in the business of information services (the "Sample Companies"). The Company referred to the average volatility of the Sample Companies because management believed that the average volatility of such companies is a reasonable benchmark to use in estimating the expected volatility of the Company's common stock

F-34

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 17—STOCK-BASED COMPENSATION PLANS (Continued)

post-business combination and as a public company. The risk-free interest rate is determined based upon the interest rate on a U.S. Treasury Bill with a term equal to the expected life of the SARs at the time the SARs was granted. An expected life of five years was taken into account for purposes of assigning a fair value to the SARs. The expected life represents the period of time the awards granted are expected to be outstanding. There were no SARs issued during the years ended December 31, 2011 and 2010.

	Years Ended December 31,
	2011		2010		2009
Expected stock volatility		—		—		73.2	%
Risk-free interest rate		—		—		1.7	%
Expected term (in years)		—		—		5.0
Dividend yield		—		—		0.0	%

        The Company has not issued any stock options from the offering date through December 31, 2011.

Restricted Share Awards/Units

        The Incentive Plan provides for the granting of restricted share awards ("RSA") or restricted share units ("RSU"), the vesting of which is subject to conditions and limitations established at the time of the grant. Upon the grant of an RSA, the participant has the rights of a shareholder, including but not limited to the right to vote such shares and the right to receive any dividends paid on such shares. Recipients of RSU awards will not have the rights of a shareholder of the Company until such date as the Common Shares are issued or transferred to the recipient. The Company granted 175,932 RSAs valued at $3,500 for each employee worldwide employed as of November 16, 2007 and otherwise receiving RSU under existing programs. Subject to the employee's continued employment, the restricted shares vested with respect to 25% of the shares on each of the first four anniversaries of the grant date. If the employee retires (at the normal retirement age stated in the applicable retirement plan or applicable law, if there is a mandatory retirement age), the restricted shares will continue to vest on the same schedule as if the employee remained employed with the Company. Upon a change in control, or upon a termination of employment due to employee's death or permanent disability, the restricted shares become 100% vested. Dividends accrue and will be paid if and when the restricted shares vest.

        The Company also granted RSUs to specific employees which have the following characteristics:

•

Performance-Based RSU Vesting:  The RSUs have been forfeited as the 2010 EBITDA target was not achieved.

•

Time-Based RSU Vesting:  So long as the employee continues to be employed through the fourth anniversary of the grant date, the RSUs will become 100% vested on such date.

        If the employee's employment is terminated (i) at any time during the vesting period due to the employee's death, disability or retirement prior to the applicable vesting date or (ii) without cause by the Company after 50% of the relevant period has elapsed, then the RSUs will vest prorata based on the period of time worked relative to such period. However, no shares will be distributed until the applicable pro rata vesting date (and, in the case of the Performance-Based RSUs, only if and to the

F-35

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 17—STOCK-BASED COMPENSATION PLANS (Continued)

extent that the EBITDA target is achieved). In all other terminations occurring prior to the applicable vesting date, the RSUs will expire. All RSUs will be payable in shares of the Company's common stock immediately upon vesting. No dividend equivalents will be paid with respect to any RSUs.

        The fair value of RSAs and RSUs is determined based on the closing price of the Company's shares on the grant date. The total fair value is amortized to expense on a straight-line basis over the vesting period.

        A summary of the status of the Company's RSAs and RSUs issued under its Incentive Plan as of December 31, 2011 and changes during the year then ended, is presented below:

	RSA			Weighted- Average Grant Date Fair Value		RSU			Weighted- Average Grant Date Fair Value
Non-vested at December 31, 2008		103		$	7.20		1,996		$	4.20
Granted		—		$	—		1,165		$	3.13
Vested		(30	)	$	7.20		(406	)	$	4.29
Forfeited		(14	)	$	7.20		(210	)	$	4.36
Non-vested at December 31, 2009		59		$	7.20		2,545		$	4.21
Granted		—		$	—		350		$	2.07
Vested		(26	)	$	7.20		(637	)	$	3.64
Forfeited		(8	)	$	7.20		(260	)	$	4.53
Non-vested at December 31, 2010		25		$	7.20		1,998		$	3.96
Granted		—		$	—		1,986		$	1.98
Vested		(22	)	$	7.20		(931	)	$	4.29
Forfeited		(3	)	$	7.20		(395	)	$	4.68
Non-vested at December 31, 2011		—		$	—		2,658		$	2.26

        The total fair value of RSAs and RSUs vested during the years ended December 31, 2011, 2010 and 2009 was $4.1 million, $2.4 million and $2.0 million, respectively. As of December 31, 2011, there was $0 million and $4.6 million of unrecognized compensation cost related to RSAs and RSUs, which is expected to be recognized over a weighted-average period of 0 years and 2.3 years, respectively.

Employee Stock Purchase Plan

        The ESPP provides that a total of 1.2 million shares of Common Stock are reserved for issuance under the plan. The ESPP, which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code, is implemented utilizing three-month offerings with purchases occurring at three-month intervals. The ESPP administration is overseen by the Company's Compensation Committee. Employees are eligible to participate if they are employed by the Company for at least 20 hours per week and more than five months in a calendar year. The ESPP permits eligible employees to purchase Common Stock through payroll deductions, ranging from one to ten percent of their eligible earnings subject to IRS regulated cap of $25,000. The price of Common Stock purchased under the ESPP is 90% of the fair market value of the Common Stock on the applicable

F-36

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 17—STOCK-BASED COMPENSATION PLANS (Continued)

purchase date. Employees may end their participation in an offering at any time during the offering period, and participation ends automatically upon termination of employment. The Compensation Committee may at any time amend or terminate the ESPP, except that no such amendment or termination may adversely affect shares previously granted under the ESPP. The Company may issue new shares for ESPP using treasury shares or newly issued shares. For the year ended December 31, 2011, the Company issued 276,902 shares for ESPP. There were 606,417 shares available for purchase at December 31, 2011 under the ESPP.

NOTE 18—WARRANTS

        The Company issued 28,125,000 units at a price of $8.00 per unit and the underwriters for the Company's initial public offering exercised their over-allotment option and purchased an additional 4,218,750 units. Each unit included one share of common stock and a warrant to purchase one share of common stock at an exercise price of $6.00.

        On February 6, 2007, Oenoke Partners, LLC purchased, in a Private Placement, 6,500,000 warrants at $1 per warrant. The warrants were exercisable on a cashless basis and had terms and provisions that were identical to those of the warrants sold in the Offering, except that these warrants would not be subject to redemption. Oenoke Partners, LLC also agreed that it would not sell or otherwise transfer the warrants until one year after the Company consummated a business combination, which occurred on November 16, 2007. Oenoke LLC was dissolved on December 17, 2008 and the shares and warrants were transferred to ISG's Executive Officers. The 30,647,000 warrants described above expired on January 31, 2011.

        The Company also sold to the underwriters, for $100, a four-year option to purchase up to a total of 1,406,250 units at a per-unit price of $9.60. The units issuable upon exercise of this option were also identical to those offered in the Offering except that warrants included in the option have an exercise price of $7.50. The option expired on February 6, 2011.

        In connection with the acquisition of TPI, the Company issued 5,000,000 warrants valued at $13.6 million ($2.72 per warrant) at an exercise price of $9.18 per share (the "MCP-TPI Warrants"). The MCP-TPI Warrants are currently exercisable and expire on November 16, 2012.

        A summary of the warrant activity as of December 31, 2011, 2010 and 2009 and changes during the years then ended, is presented below:

	Number of Warrants			Weighted- Average Exercise Price
Warrants outstanding as of December 31, 2008		37,053		$	6.49
Warrants repurchased		—			—
Warrants outstanding as of December 31, 2009		37,053		$	6.49
Warrants repurchased		—			—
Warrants outstanding as of December 31, 2010		37,053		$	6.49
Warrants expired		(32,053	)		6.07
Warrants outstanding as of December 31, 2011		5,000		$	9.18

F-37

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 19—SEGMENT AND GEOGRAPHICAL INFORMATION

        The Company operates in one segment, fact-based sourcing advisory services. The Company operates principally in the Americas, Europe, and Asia Pacific. The Company's foreign operations are subject to local government regulations and to the economic and political uncertainties of those areas.

        Geographical information for the segment is as follows:

	Years Ended December 31,
	2011		2010		2009
Revenues
Americas(1)	$	86,735	$	76,123	$	77,007
Europe(2)		74,383		39,400		44,696
Asia Pacific		23,308		16,490		11,041
	$	184,426	$	132,013	$	132,744
Identifiable long-lived assets
Americas	$	1,989	$	1,919	$	2,359
Europe		770		111		118
Asia Pacific		195		83		109
	$	2,954	$	2,113	$	2,586

(1)

Substantially all relates to operations in the United States.

(2)

Includes revenues from operations in Germany of $31.5 million, $20.1 million and $16.3 million in 2011, 2010 and 2009, respectively. Includes revenues from operations in the United Kingdom of $19.5 million, $9.3 million and $16.3 million in 2011, 2010 and 2009, respectively.

        The segregation of revenues by geographic region is based upon the location of the legal entity performing the services. The Company does not measure or monitor gross profit or operating income by geography or any other measure or metric, other than consolidated, for the purposes of making operating decisions or allocating resources.

F-38

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 20—UNAUDITED QUARTERLY INFORMATION

	Quarters Ended
	March 31, 2011			June 30, 2011			September 30, 2011			December 31, 2011
Fiscal 2011:
Net sales	$	40,658		$	50,253		$	48,901		$	44,614
Gross profit	$	16,428		$	22,535		$	20,896		$	19,744
Operating (loss) income(1)	$	(5,187	)	$	2,513		$	1,777		$	(59,945	)
Other expense, net	$	(815	)	$	(625	)	$	(980	)	$	(1,001	)
(Loss) income from operations	$	(6,002	)	$	1,888		$	797		$	(60,946	)
Net (loss) income	$	(2,045	)	$	687		$	(2,593	)	$	(51,986	)
Basic (loss) earnings per share	$	(0.06	)	$	0.02		$	(0.07	)	$	(1.44	)
Diluted earnings (loss) per share	$	(0.06	)	$	0.02		$	(0.07	)	$	(1.44	)
Basic weighted average common shares		36,104			36,376			36,337			36,213
Diluted weighted average common shares		36,104			38,379			36,337			36,213

	Quarters Ended
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010
Fiscal 2010:
Net sales	$	34,844		$	33,372		$	32,190		$	31,607
Gross profit	$	16,363		$	15,593		$	13,548		$	14,981
Operating income (loss)(2)	$	1,666		$	1,027		$	(51,915	)	$	(2,519	)
Other income, net	$	(864	)	$	(710	)	$	(891	)	$	(885	)
Income (loss) from operations	$	802		$	317		$	(52,806	)	$	(3,404	)
Net income (loss)	$	460		$	186		$	(51,747	)	$	(2,064	)
Basic earnings (loss) per share	$	0.01		$	0.01		$	(1.61	)	$	(0.06	)
Diluted earnings (loss) per share	$	0.01		$	0.01		$	(1.61	)	$	(0.06	)
Basic weighted average common shares		31,922			31,981			32,044			32,255
Diluted weighted average common shares		32,134			32,219			32,044			32,255

(1)

As a result of its goodwill and intangible asset impairment assessments, ISG recorded an impairment charge of $34.3 million during the fourth quarter of 2011 associated with goodwill and $27.4 million related to intangible assets.

(2)

As a result of its goodwill and intangible asset impairment assessments, ISG recorded an impairment charge of $46.6 million during the third quarter of 2010 associated with goodwill and $5.9 million related to intangible assets.

F-39

EXHIBIT INDEX

Exhibit Number			Description
	2.0		Purchase Agreement, dated as of April 24, 2007, as amended, by and between Registrant and MCP-TPI Holdings, LLC (previously filed as Annex A to the Registrant's Definitive Proxy Statement filed with the SEC on October 17, 2007 (Commission File Number: 001-33287), and incorporated herein by reference).
	2.1		Agreement for the Sale and Purchase of the Entire Issued Share Capital of CCGH Limited, dated as of January 4, 2011, between Registrant and the persons named therein (previously filed as Exhibit 2.1 to the Registrant's Form 8-K filed with the SEC on January 4, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).
	2.2		Asset Purchase Agreement, dated as of February 10, 2011, among Registrant (for specific section only), and Salvaggio & Teal Ltd. (d/b/a Salvaggio, Teal & Associates), Salvaggio & Teal II, LLC, Mitt Salvaggio, Kirk Teal, Nathan Frey, International Consulting Acquisition Corp., (previously filed as Exhibit 2.1to the Registrant's Form 8-K filed with the SEC on February 11, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).
	3.1		Amended and Restated Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to Amendment No. 5 to the Registrant's Registration Statement on Form S-1 filed with the SEC on January 29, 2007 (Commission File Number: 333-136536), and incorporated herein by reference).
	3.2		Amended and Restated By-Laws, dated as of December 10, 2008 (previously filed as Exhibit 3.2 to the Registrant's Form 8-K filed with the SEC on December 10, 2008 (Commission File Number: 001-33287), and incorporated herein by reference).
	4.1		Specimen Common Stock Certificate (previously filed as Exhibit 4.2 to Amendment No. 3 to the Registrant's Registration Statement on Form S-1 filed with the SEC on December 22, 2006 (Commission File Number: 333-136536), and incorporated herein by reference).
	4.2		Common Stock Purchase Warrant, dated as of November 16, 2007, issued to MCP-TPI Holdings, LLC (previously filed as Exhibit 4.8 to the Registrant's Form 8-K filed with the SEC on November 27, 2007 (Commission File Number: 001-33287), and incorporated herein by reference).
	4.3		Form of Subordinated Convertible Note, dated as of January 4, 2011, between Registrant and the persons named therein (previously filed as Exhibit 4.1 to the Registrant's Form 8-K filed with the SEC on January 4, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.1		Registration Rights Agreement between the Registrant and the existing Stockholders dated as of February 6, 2007 (previously filed as Exhibit 10.9 to Amendment No. 3 to the Registrant's Registration Statement on Form S-1 filed with the SEC on December 22, 2006 (Commission File Number: 333-136536), and incorporated herein by reference).
	10.2	#	Amended and Restated 2007 Equity Incentive Plan (previously filed as Annex A to the Registrant's Definitive Proxy Statement filed with the SEC on April 7, 2010 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.3	#	2007 Employee Stock Purchase Plan (previously filed as Annex C to the Registrant's Definitive Proxy Statement filed with the SEC on October 17, 2007 (Commission File Number: 001-33287), and incorporated herein by reference).

Exhibit Number			Description
	10.4		Credit Agreement, dated as of November 16, 2007, among International Advisory Holdings Corp., International Consulting Acquisition Corp., various lenders and Deutsche Bank Trust Company Americas, as Administrative Agent (previously filed as Exhibit 10.30 to the Registrant's Form 8-K filed with the SEC on November 27, 2007 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.5		First Amendment to Credit Agreement dated September 11, 2009 (previously filed as Exhibit 10.1 to the Registrant's Form 10-Q filed with the SEC on November 6, 2009 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.6		Second Amendment to Credit Agreement dated October 29, 2010 (previously filed as Exhibit 10.1 to the Registrant's Form 10-Q filed with the SEC on November 9, 2010 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.7		Third Amendment to Credit Agreement dated December 23, 2010 (previously filed as Exhibit 10.8 to the Registrant's Form 10-K filed with the SEC on March 16, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.8		Fourth Amendment to Credit Agreement dated March 16, 2011 (previously filed as Exhibit 10.9 to the Registrant's Form 10-K filed with the SEC on March 16, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.9	*	Fifth Amendment to Credit Agreement dated March 13, 2012.
	10.10	#	Employment Letter dated as of September 24, 2009, between the Company and David E. Berger (previously filed as Exhibit 10.1 to the Registrant's Form 8-K filed with the SEC on September 29, 2009 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.11	#	Form of Restricted Stock Unit Award Agreement (Time-Based), (previously filed as Exhibit 10.2 to the Registrant's Form 8-K filed with the SEC on September 29, 2009 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.12	#	Form of Restricted Covenant Agreement, (previously filed as Exhibit 10.3 to the Registrant's Form 8-K filed with the SEC on September 29, 2009 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.13	#	Severance Agreement dated as of October 5, 2009, between the Company and David E. Berger (previously filed as Exhibit 10.4 to the Registrant's Form 8-K filed with the SEC on September 29, 2009 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.14	#	Change in Control Agreement dated as of January 7, 2011, between the Company and Michael P. Connors (previously filed as Exhibit 10.2 to the Registrant's Form 8-K filed with the SEC on January 7, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.15	*#	Form of Change in Control Agreement for officers.
	10.16	#	Employment Letter dated as of January 4, 2011 between the Company and David Whitmore (previously filed as Exhibit 10.1 to the Registrant's Form 8-K filed with the SEC on January 7, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.16.1	#	Employment Letter for David Whitmore, dated December 16, 2011 (previously filed as Exhibit 10.1 to the Registrant's Form 8-K filed with the SEC on December 21, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).
	10.17	*#	Employment Letter for Harold K. Somerdyk, dated June 21, 2010.

Exhibit Number			Description
	10.18	#	Employment Agreement for Michael P. Connors, dated December 16, 2011 (previously filed as Exhibit 10.1 to the Registrant's Form 8-K filed with the SEC on December 21, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).
	11.0	*	Computation of Earnings Per Share (included in Consolidated Statement of Operations to the Consolidated Financial Statements included in Part II—Item 8 herein).
	14.0		Code of Ethics (previously filed as Exhibit 14.0 to the Registrant's Form 10-K filed with the SEC on March 27, 2008 (Commission File Number: 001-33287), and incorporated herein by reference).
	21.1		Subsidiaries of the Company (previously filed as Exhibit 21.1 to the Registrant's Form 10-K filed with the SEC on March 16, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).
	23.1	*	Consent of Independent Registered Public Accounting Firm.
	24.1	*	Power of Attorney.
	31.1	*	Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a).
	31.2	*	Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a).
	32.1	*	Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.
	32.2	*	Certification of Chief Financial Officer Pursuant to 18 U.S.C. §1350.
	101	*	The following financial statements from ISG's Annual Report on Form 10-K for the year ended December 31, 2011, filed on March 15, 2012, formatted in XBRL (Extensible Business Reporting Language); (i) Consolidated Balance Sheet, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Shareholders' Equity, (iv) Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements. In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

*

Filed herewith.

#

Indicates Item 15(a)(3) exhibit (management contract or compensation plan or arrangement).

SIGNATURES

        Pursuant to the requirements of the Section 13 or 15(d) 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, in the city of Stamford, in the State of Connecticut on March 15, 2012.

INFORMATION SERVICES GROUP, INC.
By:	/s/ MICHAEL P. CONNORS
	Michael P. Connors Chairman and Chief Executive Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf and in the capacities and on the dates indicated.

Name		Position	Date
/s/ MICHAEL P. CONNORS Michael P. Connors		Chairman and Chief Executive Officer (Principal Executive Officer)	March 15, 2012
/s/ DAVID E. BERGER David E. Berger		Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 15, 2012
*NEIL G. BUDNICK Neil G. Budnick		Director	March 15, 2012
*GERALD S. HOBBS Gerald S. Hobbs		Director	March 15, 2012
*KALPANA RAINA Kalpana Raina		Director	March 15, 2012
*DONALD C. WAITE III Donald C. Waite III		Director	March 15, 2012
*ROBERT E. WEISSMAN Robert E. Weissman		Director	March 15, 2012
*By:	/s/ MICHAEL P. CONNORS Michael P. Connors**

**

By authority of the power of attorney filed as Exhibit 24.1 hereto

INFORMATION SERVICES GROUP, INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

Description	Balance at Beginning of Period		Balance Assumed in Acquisitions		Charges to Costs and Expenses		Deductions			Balance at End of Period
Year ended December 31, 2011:
Allowance for doubtful accounts	$	195		327		588		(561	)	$	549
Allowance for tax valuation	$	203		8,159		1,103		(439	)	$	9,026
Year ended December 31, 2010:
Allowance for doubtful accounts	$	206		—		40		(51	)	$	195
Allowance for tax valuation	$	118		—		85		—		$	203
Year ended December 31, 2009:
Allowance for doubtful accounts	$	132		—		510		(436	)	$	206
Allowance for tax valuation	$	—		—		118		—		$	118

EX-10.9

Exhibit 10.9

EXECUTION COPY

FIFTH AMENDMENT TO CREDIT AGREEMENT

FIFTH AMENDMENT TO CREDIT AGREEMENT (this “Fifth Amendment”), dated as of March 13, 2012, by and among INTERNATIONAL ADVISORY HOLDINGS CORP., a Delaware corporation (“Holdings”), INTERNATIONAL CONSULTING ACQUISITION CORP., a Delaware corporation (the “Borrower”), the lenders party to the Credit Agreement referred to below (the “Lenders”) and DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent (in such capacity, the “Administrative Agent”).  Unless otherwise indicated, all capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement.

W I T N E S S E T H :

WHEREAS, Holdings, the Borrower, the Lenders and the Administrative Agent are parties to a Credit Agreement, dated as of November 16, 2007 (as amended, modified or supplemented through, but not including, the date hereof, the “Credit Agreement”); and

WHEREAS, subject to the terms and conditions of this Fifth Amendment, the parties hereto wish to amend to certain provisions of the Credit Agreement as herein provided;

NOW, THEREFORE, it is agreed:

I.Amendments to Credit Agreement.

1.             Section 1.01 of the Credit Agreement is hereby amended by adding the following new definitions in correct alphabetical order:

““CCGH Acquisition” shall mean the acquisition by TPI from the Sponsor of all of the outstanding Equity Interests of CCGH Limited so long as (i) no cash or other consideration is paid by Holdings or any of its Subsidiaries in connection therewith other than additional shares of Equity Interests of Holdings, (ii) at the time of such acquisition and immediately after giving effect thereto, (x) CCGH Limited and its Subsidiaries have at least $4,000,000 of unrestricted cash and Cash Equivalents on its balance sheet and (y) CCGH Limited and its Subsidiaries have no material liabilities (contingent or otherwise) other than liabilities incurred in the ordinary course of business and which would not give rise to a Default or an Event of Default under this Agreement and (iii) the documentation for such acquisition shall be in form and substance reasonably satisfactory to the Administrative Agent.”

““CCGH Limited” shall mean CCGH Limited, a company organized under the laws of the United Kingdom.”

““Fifth Amendment” shall mean the Fifth Amendment to this Agreement, dated as of March 13, 2012, among Holdings, the Borrower, Deutsche Bank Trust Company Americas, as Administrative Agent and the Lenders party thereto.”

““Fifth Amendment Effective Date” shall mean March 13, 2012.”

2.             Section 9.01(b) of the Credit Agreement is hereby further amended by inserting the text “(which management, discussion and analysis shall also include quarterly utilization rates, average billing rates and headcount for the Borrower and its Subsidiaries for such quarterly accounting period and any other information reasonably requested by the Administrative Agent)” immediately preceding the period appearing at the end of said Section.

3.             Section 9.01(c) of the Credit Agreement is hereby amended by inserting the text “(which management, discussion and analysis shall also include quarterly utilization rates, average billing rates and headcount for the Borrower and its Subsidiaries for such fiscal year and any other information reasonably requested by the Administrative Agent)” immediately preceding the period appearing at the end of said Section.

4.             Section 9.01 of the Credit Agreement is hereby further amended by deleting clause (i) thereof and inserting the following new clauses (i) and (j) in lieu thereof:

“(i)          Board Presentations.  To the extent not otherwise provided hereunder, within five Business Days after the date of any presentation by Holdings or any of its Subsidiaries to the board of directors of the Sponsor, a copy of the financial information with respect to Holdings or any of its Subsidiaries then presented except to the extent (w) Holdings or any of its Subsidiaries is prohibited from providing such information by such Person’s organizational documents, (x) such information pertains to the Credit Agreement, any refinancing thereof or any amendment, supplement or waiver to the Credit Documents, (y) sharing such information would be reasonably likely to cause the loss of any legal privilege or (z) the delivery of any such information to the Lenders hereunder would breach, in the reasonable business judgment of the Sponsor, any fiduciary duty of the Sponsor to its shareholders.

(j)            Other Information.  From time to time, such other information or documents (financial or otherwise) with respect to Holdings or any of its Subsidiaries as the Administrative Agent or any Lender may reasonably request.”

5.             Section 10.03(vii) of the Credit Agreement is hereby amended by deleting the text “$250,000 in any fiscal year of Holdings” and inserting the text “(i) $250,000 in any fiscal year of Holdings ended on or prior to December 31, 2011 and (ii) $4,000,000 in the aggregate from and after the Fifth Amendment Effective Date or $2,000,000 in any fiscal year of Holdings ending after December 31, 2011”.

6.             Section 10.05 of the Credit Agreement is hereby amended by (i) deleting the text “and” appearing at the end of clause (xvi) thereof, (ii) deleting the period appearing at the end of clause (xvii) thereof and inserting the text “; and” in lieu thereof, (iii) inserting the text “and succeeding clause (xviii) of this Section 10.05” immediately after the text “clauses (i) through (xvi) of this Section 10.05” appearing in clause (xvii) thereof, and (iv) inserting the following new clause (xviii) immediately following clause (xvii) thereof:

“(xviii) TPI may consummate the CCGH Acquisition.”.

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II.            Miscellaneous Provisions.

1.             In order to induce the Lenders to enter into this Fifth Amendment, each of Holdings and the Borrower hereby represents and warrants that (i) no Default or Event of Default exists as of the Fifth Amendment Effective Date (as hereinafter defined), both immediately before and after giving effect to this Fifth Amendment and (ii) all of the representations and warranties contained in the Credit Agreement and in the other Credit Documents, are true and correct in all material respects on the Fifth Amendment Effective Date, both immediately before and after giving effect to this Fifth Amendment, with the same effect as though such representations and warranties had been made on and as of the Fifth Amendment Effective Date (it being understood that any representation or warranty which by its terms is made as of a specific date shall be true and correct in all material respects only as of such specific date).

2.             The Credit Agreement is modified only by the express provisions of this Fifth Amendment and this Fifth Amendment shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document.

3.             This Fifth Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  A complete set of counterparts shall be lodged with the Borrower and the Administrative Agent.

4.             THIS FIFTH AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

5.             This Fifth Amendment shall become effective on the date (the “Fifth Amendment Effective Date”) when (i) Holdings, the Borrower, the Administrative Agent and the Required Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile or other electronic transmission) the same to White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036; Attention: May Yip-Daniels (facsimile number: 212-354-8113 / email: myip@whitecase.com) and (ii) the Borrower shall have paid the outstanding fees and expenses of White & Case LLP in connection with the Credit Agreement.

6.             From and after the Fifth Amendment Effective Date, all references in the Credit Agreement and each of the other Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby.

*        *        *

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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Fifth Amendment as of the date first above written.

INTERNATIONAL ADVISORY HOLDINGS CORP.
By:
	Name:	Randy Scheller
	Title:	Vice President & Treasurer
INTERNATIONAL CONSULTING ACQUISITION CORP.
By:
	Name:	Randy Scheller
	Title:	Vice President & Treasurer

Signature page to Fifth Amendment to TPI Credit Agreement

DEUTSCHE BANK TRUST COMPANY AMERICAS,
	Individually and as Administrative Agent
By:
	Name:	Erin Morrissey
	Title:	Director
By:
	Name:	Benjamin Souh
	Title:	Vice President

Signature page to Fifth Amendment to TPI Credit Agreement

EX-10.15

Exhibit 10.15

Michael P. Connors

Chairman and

Chief Executive Officer

CHANGE-IN-CONTROL AGREEMENT

Dated [        ]

PERSONAL AND CONFIDENTIAL

Dear                  :

Information Services Group, Inc. (the “Company”) considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel.  Our Board of Directors (the “Board”) recognizes that the possibility of a change in ownership or control of the Company at some future date may result in the departure or distraction of key personnel to the detriment of the Company and our stockholders.  Therefore, the Board has determined to enter into this agreement with you (i) to encourage and reinforce your attention and dedication to your assigned duties without distraction in the face of the disruptive circumstances that can arise from a possible change in control of the Company, (ii) to enhance our ability to retain you in those circumstances, and (iii) to provide you with fair and reasonable protection from the risks of a change in ownership and control so that you will be in a position to help the Company complete a transaction that would be beneficial to stockholders.

You and the Company agree as follows:

1.Term of Agreement and Protected Period.

(a)          Term of Agreement. The period during which this Agreement shall be in effect (the “Term”) shall be the period from [        ] (the “Effective Date”) through the close of business on the second anniversary of the Effective Date; provided, however, that the Term shall be automatically extended for successive one-year periods unless either party hereto gives written notice of non-renewal to the other party not later than the anniversary of the Effective Date that is one year before the then scheduled expiration of the Term; and provided further, that if a Change in Control has occurred prior to expiration of the then current Term, the Term shall continue until the date that is at least 24 months after such occurrence of a Change in Control.

(b)          Protected Period. The “Protected Period” is the period from the time of occurrence of a Change in Control until the date that is 24 months after such occurrence of a Change in Control.  Notwithstanding the preceding sentence, the introductory text to Section 3 provides that certain events occurring before a Change in Control shall be deemed to have occurred during the Protected Period.

2.Change in Control.

“Change in Control” shall mean the occurrence, during the Term, of a Change in Control as defined in the Amended and Restated 2007 Information Services Group, Inc. Equity Incentive Plan (Section 2(f) and related provisions), as in effect at the date hereof.  For purposes of the definition of “Change in Control,” it is understood that a person will not be deemed the beneficial owner of shares such person has a right to acquire in connection with a merger, consolidation, tender or exchange offer until the consummation of such transaction.

3.Termination and Resulting Compensation.

The Agreement provides no compensation or benefits in connection with Terminations which occur prior to a Change in Control, except that, if you are Terminated within 60 days prior to a Change in Control by the Company without Cause at the direction of a Person who has entered into an agreement with the Company the consummation of which will constitute a Change in Control, or if you Terminate with Good Reason within 60 days prior to a Change in Control (treating the entry by such a Person into such an agreement as a Change in Control in applying the definition of Good Reason) if the circumstance or event which constitutes Good Reason occurs at the direction of such Person, then your Termination shall be deemed to have been during the Protected Period and following a Change in Control and shall qualify for the compensation specified in Section 3(b).

(a)          Termination by the Company for Cause, by You Without Good Reason, or by Reason of Death, and Failure to Perform Duties Due to Disability. If during the Protected Period you are Terminated by the Company for Cause, you voluntarily Terminate without Good Reason, Termination occurs due to your death, or Termination results from your failure to perform your duties with the Company due to a disability, the Company will have no obligation to pay any compensation or benefits to you under this Agreement.

(b)          Terminations Triggering Severance Compensation. In lieu of any other severance compensation to which you may otherwise be entitled upon a termination by the Company not for Cause or a Termination by you for Good Reason under any plan, program, policy, agreement or arrangement of the Company or any subsidiary or affiliate (including any severance agreement or employment agreement), entitlement to which you hereby expressly waive, the Company will pay you the payments described in this Section 3(b) (the “Severance Payments”) upon Termination during the Protected Period and during the Term, unless such termination is (A) by the Company for Cause, (B) by reason of death, (C) due to your failure to perform your duties with the Company due to disability (for which you qualify for disability benefits), or (D) by you without Good Reason.  The compensation provided under this Section 3(b) is as follows:

(i)  The Company will pay you a lump sum severance payment, in cash, equal to one times your Annual Compensation.  For this purpose, your “Annual Compensation” will be the sum of (A) plus (B), where (A) is the greater of your annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based (the “Notice Event”) or your annual base salary in effect immediately prior to the Change in Control, and (B) is the amount equal to the greater of your target annual incentive award (i.e., bonus) for the year in which the Notice Event occurred or the year in which the Change in Control occurred (if no target annual incentive was set at the relevant date, the target annual incentive at such date shall be the target annual incentive in effect for the preceding year increased by the same percentage as the percentage increase (if any) in salary over such preceding year).

(ii)  Other provisions of any plan or annual incentive award authorization notwithstanding, with respect to your annual incentive award for the fiscal year in progress at your Date of Termination (the “Current Annual Incentive”) and your annual incentive award for any previously completed year (the “Prior Year Annual Incentive”) for which your final annual incentive award has not yet been determined by the Board committee or other authorized decision maker with authority to make such determination (the “Committee”):

(A)With regard to the Current Annual Incentive you will be paid an annual incentive equal to your target annual incentive for that year (or, if no target has been set for that year, your target annual incentive in effect in the preceding fiscal year) multiplied by a fraction the numerator of which is the number of days from the beginning of the year through your Date of Termination and the denominator of which is 365.  Any portion of your Current Annual Incentive opportunity not payable under this provision will be canceled and forfeited.

(B)With regard to the Prior Year Annual Incentive, you will be paid the annual incentive that you would have received under the Company’s Annual Incentive Plan if you had remained employed by the Company through the date of determination of annual incentives by the Committee, with the determination of the amount, if any, of such annual incentive based on the Company’s

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performance in relation to the applicable performance targets previously established by the Company for such fiscal year, as determined in good faith by the Committee and with negative discretion exercised only in a manner consistent with such exercise for other senior executives who remain employed through the determination date.

(C)If the terms of any plan, program, policy, agreement or arrangement of the Company or any subsidiary or affiliate would provide for payment of the Current Annual Incentive or the Prior Year Annual Incentive more favorable to you than under (A) and (B) above, you shall remain entitled to the additional benefit of such terms but taking into account and not duplicating the payments hereunder.

(iii) You will be entitled to coverage during the applicable COBRA health care continuation coverage period under Code Section 4980B, or any replacement or successor provision of United States tax law to the extent you so elect.  Accordingly, if you so elect, you will receive cash payments equal on an after-tax basis to the net monthly premium cost to you to purchase such COBRA continuation coverage for yourself, your spouse and your eligible dependents (subtracting any portion of such monthly premium (adjusted to be tax neutral to you) which you would have been required to contribute had you remained employed, to determine the net monthly premium cost), on or about the fifth day of each month for the duration of your COBRA continuation period, subject to Section 7(a).

(iv)  The Company will pay to you all earned and unpaid and/or vested, non-forfeitable amounts owing or accrued at your Date of Termination (including any earned but unpaid base salary and vacation) under any compensation and benefit plans, programs, and arrangements of the Company and subsidiaries or affiliates in which you theretofore participated, payable in accordance with the terms and conditions of the plans, programs, and arrangements (and agreements and documents thereunder) pursuant to which such compensation and benefits were granted or accrued, but without duplication of payments or benefits hereunder; and

(v)  You will be reimbursed for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the Date of Termination, at the time specified in accordance with such policy.

(c)            Time of Payment.

(i)The Company’s obligation to make the payments provided for in Section 3(b)(i) and (ii) (the “Termination Payments”) shall be subject to your execution of a release, in the form attached as Exhibit A (modified to reflect any enhanced legal rights you may have in light of the circumstances of your Termination), which you have not revoked by the end of any applicable revocation period.  The end of such revocation period (not later than 52 days after your Termination) shall be the “Designated Payment Date.”

(ii)The following rules will apply to the Termination Payments:

(A)Separate Payments.  The amounts payable under Sections 3(b)(i), 3(b)(ii)(A) and 3(b)(ii)(B) shall each be deemed a separate payment under Code Section 409A, subject to the additional provisions in this Section 3(c)(ii)(A).  If under any other severance, employment or similar agreement you have a right to payments that constitute the same “payment” as any portion of the Termination Payment for purposes of Section 409A (a “Corresponding Payment”), if such Corresponding Payment is payable in installments, each installment shall be deemed a separate payment for purposes of Section 409A (unless otherwise provided under such separate agreement), and if such Corresponding Payment is not payable in installments, then the aggregate amount of each identifiable Corresponding Payment shall be deemed a separate payment for purposes of Section 409A.  For any given separate Termination Payment, the portion of such Termination Payment that equals the maximum aggregate amount of the Corresponding Payments to which you had a legally binding right apart from this Agreement (i.e., payable in some circumstances in the absence of a Change in Control), or the present value thereof, if such present valuing is required to comply with Section 409A, is referred to herein as the “Base Payment.”  The portion of such Termination Payment that

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exceeds the Base Payment is referred to herein as the “Additional Payment.”  Such Additional Payment in each case shall be deemed to be a separate payment for purposes of Section 409A (applied separately for each of Section 3(b)(i), (ii)(A) and (ii)(B).

(B)Termination Payment Treatment Rules.  If a Corresponding Payment was potentially payable in installments, each such installment and the corresponding amount of the Base Payment, to the extent qualifying as separate payments under Code Section 409A, shall be treated as follows for purposes of Section 409A:

(1)  Installments payable during the year of termination and by the “2 ½ Month Deadline” (as hereinafter defined) shall, to the maximum extent possible, be deemed to constitute a short-term deferral under Treasury Regulation § 1.409A-1(b)(4).  The “2 ½ Month Deadline” means, for a termination in a given calendar year, March 15 of the following year;

(2)  Installments payable during the period within six months after termination, to the extent not covered by Section 3(c)(ii)(B)(1), shall, to the maximum extent possible, be deemed to constitute amounts payable under the “two-year/two-times” exclusion from being a deferral of compensation under Treasury Regulation § 1.409A-1(b)(9)(iii);

(3)  To the extent that the “two-year/two-times” exclusion from being a deferral of compensation under Treasury Regulation § 1.409A-1(b)(9)(iii) has not been fully applied by virtue of Section 3(c)(ii)(B)(2) to payments within six months after termination, installments payable beyond six months after termination shall be excluded, to the maximum extent possible, by such “two-years/two-times” exclusion (applied in the reverse order of payment of the installments — that is, first to the latest installments (payable not later than the end of the second calendar year following the year of termination) and then to earlier installments); and

(4)  All installments not covered by Section 3(c)(B)(1), (2) and (3) shall be paid at the applicable installment payment date in compliance with Section 409A, except that any such payment shall be subject to the six-month delay rule of Section 3(c)(iii) to the extent applicable.

If a Corresponding Payment was potentially payable as a lump sum and not in installments, such Corresponding Payment (i.e., the corresponding amount of the Base Payment), to the extent qualifying as separate payments under Code Section 409A, shall be treated as follows for purposes of Section 409A:

(5)  If the Corresponding Payment constituted a short-term deferral under Treasury Regulation § 1.409A-1(b)(4) or, to the extent that the “two-year/two-times” exclusion from being a deferral of compensation under Treasury Regulation § 1.409A-1(b)(9)(iii) has not been fully applied by virtue of Section 3(c)(ii)(B)(2) and (3), constituted amounts payable under such “two-year/two-times” exclusion, the corresponding amount of the Base Payment shall be excluded from being a deferral of compensation under Code Section 409A;

(6)  If the Corresponding Payment constituted a deferral of compensation under Code Section 409A, then the corresponding amount of the Base Payment shall constitute a deferral of compensation under Section 409A;

Portions of any Base Payment covered by Section 3(c)(ii)(B)(1), (2), (3) and/or (5) above shall be payable as a lump sum at the Designated Payment Date, and portions of the Base Payment covered by Section 3(c)(ii)(B)(4) and/or (6) above shall be payable, subject to Section 3(c)(iii) (the six-month delay rule), in a lump sum at the Designated Payment Date if such Termination has occurred within two years following a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company as defined in Treasury Regulation § 1.409A-3(i)(10) (a “409A Change in Control”), and in any other case shall be payable at the applicable time the Corresponding Payment would have been payable, subject to Section 3(c)(iii) (the six-month delay rule).

If a Termination Payment not constituting a Base Payment (including any Additional Payment) is payable, such payment shall be treated as follows for purposes of Section 409A:

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(7)  The Termination Payment, to the maximum extent possible, shall be deemed to constitute a short-term deferral under Treasury Regulation § 1.409A-1(b)(4);

(8)  To the extent that the “two-year/two-times” exclusion from being a deferral of compensation under Treasury Regulation § 1.409A-1(b)(9)(iii) has not been fully applied by virtue of Section 3(c)(ii)(B)(2), (3) and/or (5), the Termination Payment, to the extent not covered by Section 3(c)(ii)(B)(7), shall, to the maximum extent possible, be deemed to constitute an amount payable under the “two-year/two-times” exclusion; and

(9)  Any portion of such Termination Payment not covered by Section 3(c)(ii)(B)(7) and (8) shall be deemed to be a deferral of compensation for purposes of Section 409A

A Termination Payment not constituting a Base Payment (including any Additional Payment) shall be paid at the Designated Payment Date, provided that any such Termination Payment specified in Section 3(c)(ii)(B)(9) shall be subject to Section 3(c)(iii) (the six-month delay rule).

(iii)Six-Month Delay Rule.

(A)General Rule.  Other provisions of this Agreement notwithstanding, the six-month delay rule will apply to any payments and benefits under the Agreement if all of the following conditions are met:

(1)You are a “specified employee” for purposes of Code Section 409A.

(2)The payment or benefit in question is a deferral of compensation and not excepted, exempted or excluded from being such by the short-term deferral rule, or the “two-years/two-times” rule in Treasury Regulation § 1.409A-1(b)(9)(iii), or any other exception, exemption or exclusion; provided, however, that the exclusion under Treasury Regulation § 1.409A-1(b)(9)(v)(D) shall apply only if and to the extent that it is not necessary to apply to any other payment or benefit payable within six months after your termination.

(B)Effect of Rule.  If it applies, the six-month delay rule will delay a payment or benefit which otherwise would be payable under this Agreement within six months after your Termination.

(1)Any delayed payment or benefit shall be payable on the date six months after your Termination, without interest on any delayed cash payment.

(2)During the six-month delay period, accelerated payment will occur in the event of your death but not for any other reason, except for accelerations expressly permitted under Treasury Regulation § 1.409A-1 — A-6.

(3)Any payment that is not triggered by a Termination, or is triggered by a Termination but would be made more than six months after the Termination (without applying this six-month delay rule), or would be payable at a fixed date not tied to Termination that is earlier than the expiration of the six-month delay period, shall be unaffected by the six-month delay rule.

(iv)  Other Provisions.

(A)  Good Reason.  The definition of “Good Reason” under this Agreement was intended to qualify as an “involuntary separation” within the meaning of Treasury Regulation § 1.409A-1(n)(2)(i), and it shall be so construed and interpreted.

(B)  Non-transferability.  No right to any payment or benefit under this Agreement shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by your creditors or the creditors of any of your beneficiaries.

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(C)  No Acceleration.  The timing of payments and benefits under this Agreement which constitute a deferral of compensation under Code Section 409A may not be accelerated to occur before the time specified for payment hereunder, except to the extent permitted under Treasury Regulation § 1.409A-3(j)(4) or as otherwise permitted under Code Section 409A without your incurring a tax penalty.

(D)  Influence Over Timing of Payments.  You shall not be entitled to exercise any influence over the time of payment of any amount payable hereunder if the permitted payment period would include portions of two different tax years.

(E)  References to Other Plans.  References in this Agreement to the obligation of the Company to pay amounts under other plans, including your vested portion of any deferred compensation or other benefit plan, shall not be construed to modify the timing of payment, which shall be governed by such other plans.

(F)  Setoff Timing Rule.  Any amount that may be retained by the Company and applied to repay an obligation to the Company under this Agreement may only be so applied at the time it otherwise would have been payable to you, and cannot operate to relieve you of any obligation to repay at any time prior to the time such amount becomes payable.

(d)                Notice. During the Protected Period, any purported Termination of your employment by the Company or by you shall be communicated by written Notice of Termination to the other party hereto.

(e)                Certain Definitions. Except as otherwise indicated in this Agreement, all definitions in this Section 3(e) shall be applicable during the Protected Period only.

(i)Cause. “Cause” for Termination by the Company of your employment, for purposes of this Agreement, shall mean (A) your willful misconduct, dishonesty, misappropriation, breach of fiduciary duty or act involving fraud or material dishonesty by you with regard to the Company and its affiliates or any of its or their assets or businesses; (B) your conviction or your pleading of nolo contendere with regard to any felony or crime (for the purpose hereof, traffic violations and misdemeanors shall not be deemed to be a crime); or (C) any material breach by you of the provisions of this Agreement or material violation of the Company’s code of conduct or other policy which is not cured within 30 days after written notice to you of such breach or violation from the Board of Directors of the Company.

(ii)Date of Termination. “Date of Termination” shall mean the date of employment termination specified in the Notice of Termination which, in the case of a Termination by the Company (other than a Termination for Cause), shall not be less than 30 days from the date such Notice of Termination is given and, in the case of a Termination by you, shall not be less than 30 nor more than 60 days from the date such Notice of Termination is given.

(iii)Good Reason. “Good Reason” for Termination of your employment will mean the occurrence, without your written consent, of any one of the following, provided that you have given Notice of Termination to the Company within 90 days after the initial existence of the condition giving rise to your asserted Good Reason, and the Company has failed to fully correct the Good Reason by your Date of Termination (which must be at least 30 days after the Notice is given) specified in the Notice of Termination (such correction by the Company having the effect of canceling such Notice and the resulting Termination), and your separation from service occurs within one year after the initial existence of circumstances constituting Good Reason:

(A)The assignment to you of any duties inconsistent in any material respect with your position, authority or responsibilities immediately prior to the occurrence of the Change in Control and materially adverse to you, or any other material adverse change in such position, including authority or responsibilities; for this purpose, it shall constitute “Good Reason” if you shall be required to report primarily to any person or body other than the Board of Directors of the ultimate parent company or, if you reported to the Chief Executive Officer of the Company during the 60-day period prior to the Change in Control, to a person other than the Chief

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Executive Officer of the Company or an equal or higher ranking senior executive officer of the ultimate parent company.

(B)A material reduction by the Company in either (i) your annual base salary in effect immediately prior to the Change in Control and as such base salary thereafter may have been increased, (ii) your annual incentive opportunity as a percentage of base salary, or (iii) your annual equity award (as specified below).  For this purpose, a reduction of $20,000 in amount or value, on an annualized basis, of any of these elements of compensation or of these elements in the aggregate will be deemed “material” (other changes may be material in the particular circumstances).  The annual equity award shall be deemed to have a value determined in a manner consistent with the Company’s internal valuation method for such awards used at the time of grant.  It shall not constitute a material reduction in the annual equity grant for the Company to change the form of such award to either equity of the surviving parent corporation or cash, provided the value thereof is not materially reduced; or

(C)The relocation of the principal place of your employment to a location more than thirty (30) miles from the location of such place of employment on the date of this Agreement (or other location at which you previously had agreed to work); except for required travel on the Company’s business to an extent substantially consistent with your business travel obligations prior to the Change in Control.

(vi)Notice of Termination. “Notice of Termination” shall mean notice indicating the specific termination provision in this Agreement relied upon and setting forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination of your employment under the provision so indicated.

(vii)Termination.  “Termination” means an event by which your employment relationship with the Company and all subsidiaries has ended, provided that, with respect to any payment hereunder which is deemed to be a non-excluded deferral of compensation under Treasury Regulation § 1.409A-1(b), a Termination will occur at the time at which you have had a “separation from service” within the meaning of Treasury Regulation § 1.409A-1(h).

4.         Provisions Relating to Possible Excise Tax.

(a)           Cut-Back to Maximize Retained After-Tax Amounts.  The Company will reduce any payment relating to a Change in Control (with a “payment” including, without limitation, the vesting of an option or other non-cash benefit or property) pursuant to any plan, agreement or arrangement of the Company (together, “Severance Payments”) to the Reduced Amount (as defined below) if but only if reducing the Severance Payment would provide to you a greater net after-tax amount of Severance Payments than would be the case if no such reduction took place.  The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of the Severance Payments without causing any Severance Payment to be subject to the excise tax under Section 4999 (and related Section 280G) of the Code, determined in accordance with Section 280G(d)(4) of the Code.  Any reduction in Severance Payments shall be implemented in accordance with Section 4(b).

(b)           Implementation Rules.  Any reduction in payments under Section 4(a) shall apply to cash payments and/or vesting of equity awards so as to minimize the amount of compensation that is reduced (i.e., it applies to payments or vesting that to the greatest extent represent parachute payments), with the amount of compensation based on vesting to be measured (to be minimally reduced, for purposes of this provision) by the intrinsic value of the equity award at the date of such vesting.  You will be advised of the determination as to which compensation will be reduced and the reasons therefor, and you and your advisors will be entitled to present information that may be relevant to this determination.  No reduction shall be applied to an amount that constitutes a deferral of compensation under Code Section 409A except for amounts that have become payable at the time of the reduction and as to which the reduction will not result in a non-reduction in a corresponding amount that is a deferral of compensation under Code Section 409A that is not currently payable.

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For purposes of determining whether any of the Severance Payments will be subject to the Excise Tax and the amount of such Excise Tax:

(i)            The Severance Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the written opinion of independent compensation consultants, counsel or auditors of nationally recognized standing (“Independent Advisors”) selected by the Company and reasonably acceptable to a majority of the employees who have Change in Control Agreements, the Severance Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax.

(ii)           The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

For purposes of determining reductions in compensation under Section 4(b), if any, you will be deemed (A) to pay federal income taxes at the applicable rates of federal income taxation for the calendar year in which the compensation would be payable; and (B) to pay any applicable state and local income taxes at the applicable rates of taxation for the calendar year in which the compensation would be payable, taking into account any affect on federal income taxes from payment of state and local income taxes.  Compensation will be adjusted not later than the applicable deadline under Code Section 409A to provide for accurate payments under the cut-back provision of Section 4(b), but after any such deadline no further adjustment will be made if it would result in a tax penalty under Section 409A.

(c)           Internal Revenue Service Proceedings.  The Company shall have the right to control all proceedings with the Internal Revenue Service (or relating thereto) that may arise in connection with the determination and assessment of any Excise Tax and, at its sole option, the Company may pursue or forego any and all administrative appeals, proceedings, hearings, and conferences with any taxing authority in respect of such Excise Tax (including any interest or penalties thereon); provided, however, that the Company’s control over any such proceedings shall be limited to issues with respect to which compensation may be reduced hereunder, and you will be entitled to settle or contest any other issue raised by the Internal Revenue Service or any other taxing authority.  You agree to cooperate with the Company in any proceedings relating to the determination and assessment of any Excise Tax.

5.Mitigation.

You will not be required to mitigate the amount of payments provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of payments provided for under this Agreement be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise.

6.         Covenants for Protection of Company’s Business.

In consideration for the payments and benefits provided by the Company under this Agreement, by your execution of this agreement you agree as follows:

(i)You agree that you will not (except on behalf of the Company) during your employment with the Company and during the period of 12 months thereafter (the “Restrictive Period”; this applies whether or not Termination occurs in the Protected Period) employ or retain, solicit the employment or retention of, or knowingly cause or encourage any entity to retain or solicit the employment or retention of, any person who is an employee of the Company or was an employee of the Company at any time during the period commencing 12 months prior to the Date of Termination.  After Termination of your employment, except as required by law: (A) You will refrain from disparaging,

8

whether orally, in writing or in other media, the Company, its affiliates, the officers, directors and employees of each of them, and the products and services of each of them, and (B) the Company will not disparage you or otherwise comment upon your employment performance other than as may be requested by you.

(ii)You will not at any time, directly or indirectly, without the Company’s prior written consent, disclose to any third party or use (except as authorized in the regular course of the Company’s business or in your performance of your responsibilities for the Company) any confidential, proprietary or trade secret information that was either acquired by you during your employment with the Company or thereafter, including, without limitation, sales and marketing information, information relating to existing or prospective customers and markets, business opportunities, and financial, technical and other data (collectively, the “Confidential Information”), except for disclosure required by law.  After Termination of your employment with the Company for any reason and upon the written request of the Company, you shall promptly return to the Company all originals and/or copies of written or recorded material (regardless of the medium, including digital files and documents without retaining copies thereof) containing or reflecting any Confidential Information and shall promptly confirm in writing to the Company that such action has been taken.  The foregoing notwithstanding, the following shall not constitute Confidential Information:  (A) Information that is already in the public domain at the time of its disclosure to you; (B) Information that, after its disclosure to you, becomes part of the public domain by publication or otherwise other than through your act; and (C) Information that you received from a third party having the right to make such disclosure without restriction on disclosure or use thereof.

7.         Miscellaneous.

(a)           Timing Rules for Reimbursements. Any reimbursements made or in-kind benefits provided under this Agreement shall be subject to the following conditions:

(i)  the amount of expenses eligible for reimbursement or in-kind benefits provided in any one of your taxable years shall not affect the amount of expenses eligible for reimbursement or in-kind benefits provided in any other of your taxable years;

(ii)  the reimbursement of any expense shall be made each calendar quarter and not later than the last day of your taxable year following the taxable year in which the expense was incurred (unless this Agreement specifically provides for reimbursement by an earlier date);

(iii)  the right to reimbursement of an expense or payment of an in-kind benefit shall not be subject to liquidation or exchange for another benefit.

Executive’s right to reimbursements under this Agreement shall be treated as a right to a series of separate payments under Treasury Regulation § 1.409A-2(b)(2)(iii) of the Regulations.

(b)               Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

(c)              Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. In the event of your death, all amounts otherwise payable to you hereunder shall, unless otherwise provided herein, be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.

9

(d)               Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when (i) personally delivered or (ii) mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement; provided that all notice to the Company shall be directed to the attention of the Board with a copy to the Chief Executive Officer of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

(e)               Modifications. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed on behalf of the Company by an authorized officer and, if adverse to you, is signed by you.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time.

(f)                Governing Law. THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CONNECTICUT WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES.

(g)               Tax Withholding. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law.

(h)               Surviving Obligations. The obligations of the Company and your obligations under this Agreement (including under Section 6) shall survive the expiration of this Agreement to the extent necessary to give effect to this Agreement.

(i)                Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

(j)                Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

(k)               Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and during the Term supersedes the provisions of all prior agreements (including any prior Change in Control Agreement between the parties), promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereof with respect to the subject matter contained herein; provided, however, that any agreement providing for severance or post-termination benefits for specified terminations not within the Protected Period is not superseded by this Agreement, except insofar as such other agreement provided for severance and other post-termination benefits for a termination which, under this Agreement, would trigger payments of severance and other post-termination benefits (and subject to any provision herein providing you with any benefit under such other Agreement in excess of the level of benefit hereunder). No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.  Anything to the contrary in this Agreement notwithstanding, the procedural provisions of this Agreement shall apply to all payments and benefits payable as a result of a Change in Control (or other change in control) under any employee benefit plan, agreement, program, policy or arrangement of the Company.

If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter, which will then constitute our agreement on this subject.

INFORMATION SERVICES GROUP, INC.
By:
	Michael Connors
	COB & CEO

10

Agreed to this  [    ] day

of [        ].

[            ]

11

EXHIBIT A

Form of Release

, (the “Executive”) agrees for the Executive, the Executive’s spouse and child or children (if any), the Executive’s heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, hereby forever to release, discharge, and covenant not to sue Information Services Group Inc. (the “Company”), the Company’s past, present, or future parent, affiliated, related, and/or subsidiary entities, and all of their past and present directors, shareholders, officers, general or limited partners, employees, agents, insurers and attorneys, and agents and representatives of such entities, in such capacities, and employee benefit plans in which the Executive is or has been a participant by virtue of his employment with the Company and benefit plan administrators, and the successors of the Company or any of the foregoing entities (collectively, the “Releasees”), from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys’ fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected, which the Executive has or may have had against the Company or the Releasees based on any events or circumstances arising or occurring on or prior to the date this Release is executed, arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever the Executive’s employment with the Company or the termination thereof, the Executive’s status at any time as a holder of any securities of the Company, or otherwise.  This includes, but is not limited to, a release of any and all claims arising under the laws of the United States, any other country, or any state, or locality relating to employment, or securities, including, without limitation, claims of wrongful discharge, breach of express or implied contract (whether oral or written), fraud, misrepresentation, defamation, or liability in tort, common law or public policy, claims of any kind that may be brought in any court or administrative agency, any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Executive Retirement Income Security Act, the Family and Medical Leave Act, the Delaware Discrimination in Employment Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act, and similar statutes, ordinances, and regulations of the United States, any other country, or any state or locality.  This release of claims further includes, but is not limited to, Executive’s waiver of any right or claim to compensation, wages, back pay, reinstatement or re-employment, bonuses, or benefits of any kind or any nature arising or derivative from Executive’s employment with the Company, the termination thereof, or otherwise; provided, however, notwithstanding anything to the contrary set forth herein, that this general release shall not extend to (x) amounts owed to or rights available for the Executive under that certain Change-in-Control Agreement dated [        ], by and between the Company and the Executive (the “Change-in-Control Agreement”) and (y) benefit claims under employee pension benefit plans in which the Executive is a participant by virtue of his employment with the Company or benefit claims under employee welfare benefit plans for covered occurrences (e.g., medical care, death, or onset of disability) arising after the execution of this Release by the Executive.  This Release does not waive any rights to indemnification the Executive has under any insurance policy, by laws or other documents or agreements to which Executive may be entitled for actions taken in good faith during the term of his employment.

The Executive hereby represents and warrants to the Company and the Releasees that he has not filed any action, complaint, charge, grievance, arbitration or similar proceeding against the Company or the other Releasees.

The Executive understands that this Release includes a release of claims arising under the Age Discrimination in Employment Act (ADEA).  The Executive understands and warrants that he has been given a period of 21 days to review and consider this Release.  The Executive further acknowledges that the consideration given for this Release is in addition to anything of value to which he is already entitled.  The Executive is hereby advised to consult with an attorney prior to executing the Release.  By his signature below, the Executive warrants that he has had the opportunity to do so and to be fully and fairly advised by that legal counsel as to the terms of this Release and that this waiver and release is knowing and voluntary.  The Executive further warrants that he understands that he may use as much or all of his 21-day period as he wishes before signing, and warrants that he has done so.

12

The Executive further warrants that he understands that he has seven days after signing this Release to revoke the Release by notice in writing to the Company’s General Counsel delivered by hand, certified mail or courier service.  This Release shall be binding, effective, and enforceable upon both parties upon the expiration of this seven-day revocation period without the Company’s General Counsel having received such revocation, but if the Executive revokes the Release during such time, the Executive understands that the Executive will forfeit any rights he may have to any termination payments otherwise due under the Change-in-Control Agreement.

By signing this Release, the Executive acknowledges that:  he has relied entirely upon his own judgment, and that he has had the opportunity to consult with legal, financial and other personal advisors of his own choosing in assessing whether to execute this Release; no representation, statement, promise, inducement, threat or suggestion has been made by the Company or any other Releasee to influence Executive to sign this Release except such statements as are expressly set forth herein; Executive understands that by signing this Agreement he is releasing the Company and the Releasees of all claims against them; Executive has read this Release and understands its terms; Executive has been given a reasonable period of time to consider its terms and effect; and Executive voluntarily agree to the terms of this Release.

Executed this        day of                                   , 201

Print Name:

13

EX-10.17

Exhibit 10.17

Michael P. Connors Chairman and Chief Executive Officer

Personal & Confidential

June 21, 2010 (revised)

Harry Somerdyk

381 Sturges Ridge Road

Wilton, CT.  06897

Dear Harry:

As we have discussed for the past several months, we believe that your background in talent leadership, development, board work, marketing, communications and brand development at Spencer Stuart, McGraw Hill, Fortune and your entrepreneurial business ventures is a terrific combination to help us build ISG into a billion dollar valued company.

Accordingly, I am pleased to formally extend the following offer of employment to you subject to the following terms:

Title and Reporting Relationship:

Your title will be Chief Human Resources and Communications Officer, reporting directly to me as Chairman and Chief Executive Officer.  In addition, you will be named as a member of our Executive Board (the operating board of the company).  You will be based at the company’s headquarters location in Stamford, Connecticut.

Base Salary:

Thru December 31, 2011, your annualized base salary will be $300,000. You will be reviewed with other key officers by our Board of Directors for adjustments again after that time.

Annual Incentive Plan Bonus:

You will be eligible to participate in the company’s Annual Incentive Plan (“AIP”). Your 2011 AIP target bonus will be $150,000.

Equity Participation:

The company will provide you with an initial grant of up to 75,000 Restricted Stock Units.  Shares of the initial grant will vest ratably over four years on the anniversary of your grant date. The total amount of the initial grant will equal the number of shares you agree to purchase (up to 75,000 ISG shares) in the open market during the appropriate “window periods” for company officers. You will agree to hold the ISG shares purchased in the open market during your tenure at ISG as an officer of the firm.

Employee Benefits

Your employee benefits, subject to change, include health, life, AD&D, vision, short term disability, long term disability, flexible spending account, a (401(k)/Profit Sharing Plan where we contribute 3% of your salary up to an established maximum on an annual basis and Paid Time Off (PTO) of four weeks annually beginning in 2011; (description of benefits attached).

Information Services Group, Inc.	t: 203 517 3100
Two Stamford Plaza	f: 203 517 3199
281 Tresser Boulevard, Stamford, CT 06901	www.informationsg.com

Start Date:

Your start date will be October 1, 2010.  As we also discussed, you will plan to be in Houston the week of August 30th; and in Leesburg, VA. for our GLC and Executive Board meetings September 12-15.

Background Check

As is our standard operating procedure, this offer is contingent upon receipt of information satisfactory to ISG, in its sole discretion, in response to a background & verification check of your background.  Once open to do so, I will have Martha Preston contact you to complete this work ahead of your start date.

Ownership of Work Product; Confidentiality and Conflict of Interest; Other Matters

Ownership of Work Product

a)Any and all inventions, discoveries, improvements, or creations which you may conceive or make during the course of employment directly connected with ISG’s business (collectively “Creations”) shall be the sole and exclusive property of ISG.  Unless otherwise agreed upon in writing with regard to a specific project or work, you agree that all copyrightable works created by you during your employment under ISG’s direction or in connection with ISG’s business are “works made for hire” and shall be the sole and complete property of ISG and that any and all copyrights to such works shall belong to ISG.  To the extent such works are not deemed to be “works made for hire,” you hereby assign all proprietary rights, including copyright, in these works to ISG without further compensation.

b)You further agree to (a) disclose promptly to ISG all such Creations which the you have made or may make solely, jointly, or commonly with others (b) assign all such Creations to ISG, and (c) execute and sign any and all applications, assignments, or other instruments which ISG may deem necessary in order to enable it, at its expense, to apply for, prosecute, and obtain copyrights, patents or other proprietary rights in the United States and foreign countries or in order to transfer to ISG all right, title, and interest in said Creations.

Confidentiality and Conflict of Interest; Other Matters

c)ISG is sometimes required to sign non-disclosure or confidentially agreements with our clients. You are responsible for reading, understanding and adhering to these agreements. You are also responsible for avoiding any actual or perceived conflicts of interest. If you have any questions, these should be referred to our General Counsel or his designee.

d)You will also need to sign and abide by the attached Confidentiality, Non-Disclosure and Non-Solicitation Agreement.

e)Either party may terminate this Agreement at any time with or without cause.  The obligations contained in the attached Confidentiality, Non-Disclosure and Non-Solicitation Agreement shall survive the termination of employment.

2

Harry, I am very excited to have you part of our executive team. You will bring a great new dimension to the ISG and TPI team and I am confident you will add great value to our future acquisitions as well. This is a very “hands-on” executive team so come prepared!

Please sign and return a copy of this letter. We look forward to you joining the team.

Sincerely,

	I hereby agree to be bound by the above arrangements:
	Accepted and Agreed:
		Harry Somerdyk
	Date:

3

EX-23.1

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-149950 and 333-168848) of Information Services Group, Inc. of our report dated March 15, 2012 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

March 15, 2012
Houston, Texas

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

EX-24.1

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Exhibit 24.1

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael P. Connors as true and lawful attorney-in-fact and agent, with full power (including the full power of substitution and resubstitution) to sign for him and in his name, place and stead, in the capacity or capacities set forth below, (1) the Annual Report on Form 10-K for the fiscal year ended December 31, 2011 to be filed by Information Services Group, Inc. (the "Company") with the Securities and Exchange Commission (the "Commission") pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, and (2) any amendments to the foregoing Annual Report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Signature	Title	Date
/s/ NEIL G. BUDNICK Neil G. Budnick	Director	March 7, 2012
/s/ GERALD S. HOBBS Gerald S. Hobbs	Director	March 7, 2012
/s/ KALPANA RAINA Kalpana Raina	Director	March 7, 2012
/s/ DONALD C. WAITE III Donald C. Waite III	Director	March 7, 2012
/s/ ROBERT E. WEISSMAN Robert E. Weissman	Director	March 7, 2012

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Exhibit 24.1

POWER OF ATTORNEY

EX-31.1

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Exhibit 31.1

CERTIFICATE PURSUANT TO
RULES 13a-14(a) and 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael P. Connors, certify that:

1.

I have reviewed this annual report on Form 10-K of Information Services Group, 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.

I am 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 I 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 (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):



(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.

March 15, 2012	/s/ MICHAEL P. CONNORS
	Michael P. Connors Chairman and Chief Executive Officer (Principal Executive Officer)

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Exhibit 31.1

CERTIFICATE PURSUANT TO RULES 13a-14(a) and 15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-31.2

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Exhibit 31.2

CERTIFICATE PURSUANT TO
RULES 13a-14(a) and 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David E. Berger, certify that:

1.

I have reviewed this annual report on Form 10-K of Information Services Group, 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.

I am 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 I 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 (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):



(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.

March 15, 2012 /s/ DAVID E. BERGER
David E. Berger
Executive Vice President, Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)

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Exhibit 31.2

CERTIFICATE PURSUANT TO RULES 13a-14(a) and 15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.1

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Exhibit 32.1

CERTIFICATION PURSUANT TO
18 USC. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the annual report on Form 10-K of Information Services Group, Inc. (the "Company") for the year ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael P. Connors, Chairman and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(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.

March 15, 2012	/s/ MICHAEL P. CONNORS
	Michael P. Connors Chairman and Chief Executive Officer (Principal Executive Officer)

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Exhibit 32.1

CERTIFICATION PURSUANT TO 18 USC. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

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Exhibit 32.2

CERTIFICATION PURSUANT TO
18 USC. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the annual report on Form 10-K of Information Services Group, Inc. (the "Company") for the year ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David E. Berger, Executive Vice President, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(3)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(4)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 15, 2012	/s/ DAVID E. BERGER
	David E. Berger Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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Exhibit 32.2

CERTIFICATION PURSUANT TO 18 USC. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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SEGMENT AND GEOGRAPHICAL INFORMATION

12 Months Ended

Dec. 31, 2011

SEGMENT AND GEOGRAPHICAL INFORMATION

SEGMENT AND GEOGRAPHICAL INFORMATION

NOTE 19—SEGMENT AND GEOGRAPHICAL INFORMATION

          The Company operates in one segment, fact-based sourcing advisory services. The Company operates principally in the Americas, Europe, and Asia Pacific. The Company's foreign operations are subject to local government regulations and to the economic and political uncertainties of those areas.

          Geographical information for the segment is as follows:

	Years Ended December 31,
	2011		2010		2009
Revenues
Americas(1)	$	86,735	$	76,123	$	77,007
Europe(2)		74,383		39,400		44,696
Asia Pacific		23,308		16,490		11,041
	$	184,426	$	132,013	$	132,744
Identifiable long-lived assets
Americas	$	1,989	$	1,919	$	2,359
Europe		770		111		118
Asia Pacific		195		83		109
	$	2,954	$	2,113	$	2,586

(1)

Substantially all relates to operations in the United States.

(2)

Includes revenues from operations in Germany of $31.5 million, $20.1 million and $16.3 million in 2011, 2010 and 2009, respectively. Includes revenues from operations in the United Kingdom of $19.5 million, $9.3 million and $16.3 million in 2011, 2010 and 2009, respectively.

          The segregation of revenues by geographic region is based upon the location of the legal entity performing the services. The Company does not measure or monitor gross profit or operating income by geography or any other measure or metric, other than consolidated, for the purposes of making operating decisions or allocating resources.

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ACQUISITIONS

12 Months Ended

Dec. 31, 2011

ACQUISITIONS

ACQUISITIONS

NOTE 3—ACQUISITIONS

Compass Acquisition

          On January 4, 2011 (the "Compass Acquisition Date"), the Company executed an Agreement for the Sale and Purchase of the Entire Issued Share Capital of CCGH Limited (the "Agreement") and consummated the acquisition of the entire issued share capital CCGH Limited, an English corporation ("Compass").

          Under the terms of the Agreement, each of the holders of the issued share capital of Compass (the "Compass Sellers") agreed to sell and transfer, and the Company agreed to buy, the entire share capital of Compass (the "Share Purchase"). The Share Purchase was consummated on January 4, 2011.

          The final allocable purchase price consists of the following:

Cash	$	5,750
Common Stock*		7,980
Convertible Notes**		6,250
Stamp Tax		98
Total allocable purchase price	$	20,078

*

3,500,000 shares issued at $2.28 per share as part of the acquisition.

**

The Convertible Notes (the "Notes") mature on January 4, 2018 and interest is payable on the outstanding principal amount, computed daily, at the rate of 3.875% per annum on January 31 of each calendar year and on the seventh anniversary of the date of the Notes. The Notes are subject to transfer restrictions until January 31, 2013. If the price of the Company's common stock on the Nasdaq Global Market exceeds $4 per share for 60 consecutive trading days (the "Trigger Event"), the holder of the Notes may convert all (but not less than all) of the outstanding principal amount of the Notes into shares of the Company's common stock at the rate of 1 share for every $4 in principal amount outstanding. After the Trigger Event, the Company may prepay all or any portion of the outstanding principal amount of the Notes by giving the holder 30 days written notice.

          The purchase price has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the Compass Acquisition Date. The purchase price allocation was based upon a valuation completed by third-party valuation specialists using an income approach and estimates and assumptions provided by management. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill. Goodwill of $16.3 million acquired in the acquisition is not deductible for tax purposes.

          The following table summarizes the final allocation of the aggregate purchase price to the fair value of the assets acquired and liabilities assumed as of the Compass Acquisition Date:

Allocation of Purchase Price:
Cash	$	1,091
Accounts receivable		9,449
Prepaid expenses and other assets		2,042
Furniture, fixtures and equipment		685
Goodwill		16,295
Intangible assets		5,045
Accounts payable		(1,603	)
Accrued expenses and other(1)		(11,009	)
Deferred income tax liability		(1,917	)
Net assets acquired	$	20,078

(1)

The fair value of contingent liabilities related to uncertain tax positions recognized at the acquisition date is $1.5 million.

          The intangible assets acquired include database, trademark and trade name, customer relationships, covenant not-to-compete and goodwill. Some of these assets, such as goodwill and the trademark and trade name are not subject to amortization but rather an annual test for possible impairment; other intangible assets that are amortized over their useful lives are reviewed when events or changes or circumstances indicate the carrying amount of the asset may not be recoverable.

          Under the purchase method of accounting, the total purchase price of approximately $20.1 million was allocated to Compass's net tangible and intangible assets based on their estimated fair values as of the Compass Acquisition Date. Intangible assets are amortized utilizing the estimated pattern of the consumption of the economic benefit over their estimated lives, ranging from one to ten weighted average years. Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows:

	Purchase Price Allocation		Asset Life
Amortizable intangible assets:
Customer relationships	$	1,150	10 years
Covenants not-to-compete		15	2 years
Databases—Financial Data Repository		1,840	7 years
Non-amortizable intangible assets:
Trademark and trade name		2,040	Indefinite
Total intangible assets	$	5,045

STA Acquisition

          On February 10, 2011 (the "STA Acquisition Date"), the Company executed an Asset Purchase Agreement (the "STA Agreement") with Salvaggio & Teal Ltd. (d/b/a Salvaggio, Teal & Associates, "STA Consulting"), Salvaggio & Teal II, LLC, Mitt Salvaggio, Kirk Teal, Nathan Frey and International Consulting Acquisition Corp., a wholly-owned subsidiary of ISG, and consummated the acquisition of substantially all of the assets and assumption of certain specified liabilities of STA (collectively, the "Asset Purchase").

          Under the terms of the STA Agreement, ISG acquired the specified assets for cash consideration of $9.0 million subject to certain adjustments. In addition, the sellers under the Agreement (the "STA Sellers") are eligible to receive a minimum of $0 and a maximum up to $7.75 million of earn-out payments for fiscal years 2011 – 2015 if certain revenue and earnings targets are met. Finally, the STA Sellers were granted 250,000 ISG Restricted Shares that will vest if the target commercial enterprise resource planning revenue of ISG and its affiliates is met.

          As of the STA Acquisition Date, we have recorded a liability of $6.6 million representing the present fair value of the contingent consideration. This amount was estimated through a valuation model that incorporated industry-based, probability-weighted assumptions related to the achievement of these milestones and thus the likelihood of us making payments. These cash outflow projections have been discounted using a rate of 2.3%, which is the cost of debt financing for market participants.

          The final allocable purchase price consists of the following:

Cash	$	8,927
Contingent consideration*		7,107
Total allocable purchase price	$	16,034

*

Included cash earn-out of $6.6 million and 250,000 shares of equity contingent consideration at $1.91 per share, the closing stock price of the Company on February 10, 2011. Changes in the contingent liability as a result of operations will be recorded in selling, general and administrative expense whereas changes due to the time value of money will be recorded as interest expense.

          The following table summarizes the final allocation of the aggregate purchase price to the fair value of the assets acquired and liabilities assumed as of the STA Acquisition Date:

Allocation of Purchase Price:
Accounts receivable	$	2,093
Other assets		57
Goodwill(1)		4,236
Intangible assets		11,210
Accounts payable		(1,067	)
Accrued expenses and other		(495	)
Net assets acquired	$	16,034

(1)

Goodwill of $4.2 million acquired in the acquisition is deductible for tax purposes.

          The acquisition of STA Consulting is being treated as a business combination for accounting purposes while it is legally an asset purchase. Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows:

	Purchase Price Allocation		Asset Life
Amortizable intangible assets:
Customer relationships	$	8,490	10 years
Backlog		1,880	2 years
Covenants not-to-compete		150	5 years
Non-amortizable intangible assets:
Trademark and trade name		690	Indefinite
Total intangible assets	$	11,210

          In the fourth quarter of 2011, we reclassified our acquired trademarks and trade names to definite lived assets which will be amortized over a remaining useful of approximately seven years. We decided to merge our individual corporate brands into one global integrate go-to-market business under the ISG brand.

          Compass' results of operations have been included in the Company's financial statement for periods subsequent to the effective date of the acquisition. Compass contributed revenues of $37.4 million and net income of $0.6 million for the period from January 4, 2011 through December 31, 2011. STA Consulting's results of operations have been included in the Company's financial statements for periods subsequent to the effective date of the acquisition. STA Consulting contributed revenues of $12.2 million and net loss of $1.1 million for the period from February 10, 2011 through December 31, 2011.

          The following unaudited pro forma financial information for the years ended December 31, 2011 and 2010, assumes that the acquisitions of Compass and STA Consulting occurred at the beginning of the period presented. The unaudited proforma financial information is presented for information purposes only. Such information is based upon the stand alone historical results of each company and does not reflect the actual results that would have been reported had the acquisitions been completed when assumed, nor is it indicative of the future results of operations for the combined enterprise.

	Years Ended December 31,
Proforma	2011			2010
	(unaudited)
Revenues	$	185,948		$	186,754
Direct costs and expenses for advisors		106,256			108,079
Selling, general and administrative		67,762			63,821
Impairment of intangible assets		61,694			52,491
Depreciation and amortization		11,186			12,385
Operating loss		(60,950	)		(50,022	)
Other expense, net		(3,420	)		(5,508	)
Net loss before taxes		(64,370	)		(55,530	)
Income tax benefit		8,397			1,208
Net loss	$	(55,973	)	$	(54,322	)
Basic loss per share	$	(1.54	)	$	(1.53	)
Diluted loss per share	$	(1.54	)	$	(1.53	)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2011

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

          The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, references to the Company include ISG and its consolidated subsidiaries.

Use of Estimates

          The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the proportional performance method of accounting affect the amounts of revenues, expenses, unbilled receivables and deferred revenue. Numerous internal and external factors can affect estimates. Estimates are also used for but not limited to: allowance for doubtful accounts, useful lives of furniture, fixtures and equipment, depreciation expense, fair value assumptions in analyzing goodwill and intangible asset impairments, income taxes and deferred tax asset valuation, and the valuation of stock based compensation.

Business Combinations

          We have acquired businesses critical to the Company's long-term growth strategy. Results of operations for acquisitions are included in the accompanying consolidated statement of operations from the date of acquisition. Acquisitions are accounted for using the purchase method of accounting and the purchase price is allocated to the net assets acquired based upon their estimated fair values at the date of acquisition. The excess of the purchase price over the net assets was recorded as goodwill. Final valuations of assets and liabilities are obtained and recorded within one year from the date of the acquisition.

Cash and Cash Equivalents

          The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents, including certain money market accounts. The Company principally maintains its cash in money market and bank deposit accounts in the United States of America which typically exceed applicable insurance limits. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

Restricted Cash

          Restricted cash consists of cash and cash equivalents which the Company has pledged to fulfill certain obligations and are not available for general corporate purposes.

          In December 2010, the Company funded the escrow for the closing of the acquisition of Compass in the amount of $5.8 million. The $5.8 million was classified as restricted cash at December 31, 2010. This amount was paid in January 2011 and no longer held in escrow.

Accounts and Unbilled Receivables and Allowance for Doubtful Accounts

          Our trade receivables primarily consist of amounts due for services already performed via fixed fee or time and materials arrangements. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of clients to pay fees or for disputes that affect its ability to fully collect billed accounts receivable. The allowance for these risks is prepared by reviewing the status of all accounts and recording reserves on a specific identification method based on previous experiences and historical bad debts. However, our actual experience may vary significantly from these estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay their invoices, we may need to record additional allowances or write-offs in future periods. To the extent the provision relates to a client's inability or unwillingness to make required payments, the provision is recorded as bad debt expense, which is classified within selling, general and administrative expense in the accompanying consolidated statement of operations.

          The provision for unbilled services is recorded as a reduction to revenues to the extent the provision relates to fee adjustments and other discretionary pricing adjustments.

Prepaid Expenses and Other Assets

          Prepaid expenses and other assets consist primarily of prepaid expenses for insurance, conferences as well as deposits for facilities, programs and promotion items.

Furniture, Fixtures and Equipment, net

          Furniture, fixtures and equipment is recorded at cost. Depreciation is computed by applying the straight-line method over the estimated useful life of the assets, which ranges from three to five years. Leasehold improvements are depreciated over the lesser of the useful life of the underlying asset or the lease term, which generally range from three to five years. Expenditures for renewals and betterments are capitalized. Repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and any associated gain or loss thereon is reflected in the accompanying consolidated statement of operations.

Internal-Use Software and Website Development Costs

          The Company capitalizes internal-use software and website development costs and records these amounts within furniture, fixtures and equipment. Accounting standards require that certain costs related to the development or purchase of internal-use software and systems as well as the costs incurred in the application development stage related to its website be capitalized and amortized over the estimated useful life of the software or system. They also require that costs related to the preliminary project stage, data conversion and post implementation/operation stage of an internal-use software development project be expensed as incurred.

          During each of the years ended December 31, 2011 and 2010, the Company capitalized $0.5 million of costs associated with the system conversion and website development.

Goodwill and Indefinite Lived Intangible Assets

          Our goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired at the date of acquisition. The primary other identifiable intangible assets with indefinite lives are trademarks of the acquired businesses. These assets are not amortized but rather tested for impairment at least annually by applying a fair-value based test in accordance with accounting and disclosure requirements for goodwill and other indefinite-lived intangible assets. This test is performed by us during our fourth fiscal quarter or more frequently if we believe impairment indicators are present. At October 31, 2011, our annual impairment testing date, we maintain a single operating segment and reporting unit.

          Our indefinite-lived intangible asset impairment tests involve estimates and management's judgment. The fair value of trademarks and trade name assets were determined using the relief from royalty method by discounting the cash flows that represent a savings over having to pay a royalty fee for use of the trademarks and trade names. The discounted cash flow valuation uses the same projections used under the income approach described below. The cash flow projections used were primarily attributable to revenue and royalty rates associated with the legacy brands which are projected to decline as value shifts to the ISG brand.

          In the fourth quarter of 2011, we reclassified our acquired trademarks and trade names to definite lived assets which will be amortized over a remaining useful life of approximately seven years. We decided to merge our individual corporate brands into one global integrate go-to-market business under the ISG brand. As a result of this transition, during our annual impairment test, we concluded that the indefinite lived trademarks and trade names were impaired by $27.4 million which is included in the loss from operations in the accompanying consolidated statement of operations for 2011. This impairment charge was measured as the excess of the carrying value over the fair value of the asset.

          We perform a two-step impairment test on goodwill. In the first step, we compare the fair value of the reporting unit to its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test whereby the carrying value of the reporting unit's goodwill is compared to its implied fair value. If the carrying value of the goodwill exceeds the implied fair value, an impairment loss equal to the difference is recorded.

          In performing the first step of the impairment test on goodwill, we determined the fair value of the reporting unit using both a market and income approach. The income approach utilizes a discounted cash flow model and is based on projections of future operations of the reporting unit as of the valuation date. The market approach is based on our stock price and provides a direct indication of fair value. Under the market approach, we determined the fair value of the reporting unit utilizing a relevant average of our common stock price for the October 31 measurement period, as quoted on the Nasdaq Global Market plus a 35% control premium based upon recent transactions of comparable companies. The discounted cash flow model assumed revenue growth rates of approximately 3% per year. We employed a rate of 13% to discount future excess cash flows. The goodwill impairment is attributable to historical revenues, projected revenue run rate, actual and projected revenue generated per billable hour, driven by a global recession which has impacted and reduced sourcing industry activity.

          We failed the first step and proceeded to the second step in which we determined the implied fair value of goodwill by allocating the fair value of our reporting unit to the reporting unit's assets and liabilities using purchase price allocation guidance in order to determine the implied value of goodwill. Our assets in this valuation included the trade names for the ISG brand as well as declining values in the old legacy trade names. We concluded that the implied fair value is $34.7 million, resulting in an impairment of $34.3 million, which is included in loss from operations in the accompanying consolidated statement of operations for 2011.

          We will continue to monitor our market capitalization for evidence of further impairment. Future downturn in our business, continued deterioration of economic conditions, or continued further decline in our market capitalization may result in an additional impairment charge or charges in future periods, which could adversely affect our results of operations for those periods.

          The goodwill and intangible assets impairment charge is non-cash in nature and does not affect our liquidity, cash flows from operations and debt covenants.

Long-Lived Assets

          Long-lived assets, excluding goodwill and indefinite-lived intangibles, to be held and used by the Company are reviewed to determine whether any significant change in the long-lived asset's physical condition, a change in industry conditions or a reduction in cash flows associated with the use of the long-lived asset. If these or other factors indicate the carrying amount of the asset may not be recoverable, the Company determines whether impairment has occurred through the use of an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset. The fair value of the asset is measured using market prices or, in the absence of market prices, an estimate of discounted cash flows. Cash flows are generally discounted at an interest rate commensurate with our weighted average cost of capital for a similar asset. Assets are classified as held for sale when the Company has a plan for disposal of certain assets and those assets meet the held for sale criteria of accounting and disclosure requirement for the impairment or disposal of long-lived assets.

          Due to a decline in our stock price for a prolonged period of time and the timing of our annual impairment test, we determined that it was necessary to review our long-lived assets for impairment. We have performed the impairment test during the fourth quarter of 2011 using the undiscounted cash flow analysis and did not record an impairment based upon such analysis.

Debt Issuance Costs

          Costs directly incurred in obtaining long-term financing, typically bank and attorney fees, are deferred and are amortized over the life of the related loan using the effective interest method. Deferred issuance costs are classified as other assets in the accompanying consolidated balance sheet. Amortization of debt issuance costs is included in interest expense and totaled $0.4 million for each of the years ended December 31, 2011 and 2010.

Revenue Recognition

          We recognize our revenues for the sale of services and products when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, the fee is fixed or determinable and the collectability of the related revenue is reasonably assured.

          We principally derive revenues from fees for services generated on a project-by-project basis. Prior to the commencement of a project, we reach agreement with the client on rates for services based upon the scope of the project, staffing requirements and the level of client involvement. It is our policy to obtain written agreements from new clients prior to performing services. In these agreements, the clients acknowledge that they will pay based upon the amount of time spent on the project or an agreed upon fee structure. Revenues for services rendered are recognized on a time and materials basis or on a fixed-fee or capped-fee basis in accordance with accounting and disclosure requirements for revenue recognition.

          Fees for services that have been performed, but for which we have not invoiced the customers are recorded as unbilled receivables in the accompanying consolidated balance sheets. Invoices issued before the related services have been performed are recorded as deferred revenue in the accompanying consolidated balance sheets.

          Revenues for time and materials contracts are recognized based on the number of hours worked by our advisors at an agreed upon rate per hour and are recognized in the period in which services are performed. Revenues for time and materials contracts are billed monthly, semimonthly or in accordance with the specific contractual terms of each project.

          Revenues related to fixed-fee or capped-fee contracts are recognized into revenue as value is delivered to the customer. The pattern of revenue recognition for these contracts varies depending on the terms of the individual contracts, and may be recognized proportionally over the term of the contract or deferred until the end of the contract term and recognized when our obligations have been fulfilled with the customer. In instances where substantive acceptance provisions are specified in customer contracts, revenues are deferred until all acceptance criteria have been met. The pattern of revenue recognition for contracts where revenues are recognized proportionally over the term of the contact is based on the proportional performance method of accounting using the ratio of labor hours incurred to estimated total labor hours, which we consider to be the best available indicator of the pattern and timing in which contract obligations are fulfilled. This percentage is multiplied by the contracted dollar amount of the project to determine the amount of revenue to recognize in an accounting period. The contracted amount used in this calculation typically excludes the amount the client pays for reimbursable expenses. There are situations where the number of hours to complete projects may exceed our original estimate as a result of an increase in project scope or unforeseen events. On a regular basis, we review the hours incurred and estimated total labor hours to complete. The results of any revisions in these estimates are reflected in the period in which they become known. We believe we have demonstrated a history of successfully estimating the total labor hours to complete a project.

          The agreements entered into in connection with a project, whether on a time and materials basis or fixed-fee or capped-fee basis, typically allow our clients to terminate early due to breach or for convenience with 30 days' notice. In the event of termination, the client is contractually required to pay for all time, materials and expenses incurred by us through the effective date of the termination. In addition, from time to time, we enter into agreements with clients that limit our right to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit us from performing a defined range of services that it might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team.

Reimbursable Expenditures

          Amounts billed to customers for reimbursable expenditures are included in revenues and the associated costs incurred by the Company are included in direct costs and expenses for advisors in the accompanying consolidated statement of operations. Non-reimbursable amounts are expensed as incurred. Reimbursable expenditures totaled $9.5 million and $9.6 million for the years ended December 31, 2011 and 2010, respectively.

Direct Costs and Expenses for Advisors

          Direct costs and expenses for advisors include payroll expenses and advisory fees directly associated with the generation of revenues and other program expenses. Direct costs and expenses for advisors are expensed as incurred.

          Direct costs and expenses for advisors also include expense accruals for discretionary bonus payments. Bonus accrual levels are adjusted throughout the year based on actual and projected individual and Company performance.

Stock-Based Compensation

          Stock Appreciation Rights ("SARs") for a fixed number of shares are granted to certain employees with an exercise price based on the closing trading price of our common stock on the grant date. We use the Black-Scholes option pricing model to determine the fair value of each option award on the date of grant. Prior to December 31, 2009, the volatility calculation was based on the most recent trading day average volatility of a representative sample of seven companies with market capitalizations of approximately $197 million to $3.7 billion that management believed to be engaged in the business of information services (the "Sample Companies"). We referred to the average volatility of the Sample Companies because management believes that the average volatility of such companies is a reasonable benchmark to use in estimating the expected volatility of our common stock as we had a limited history as a public company. The risk-free interest rate is determined based upon the interest rate on a U.S. Treasury Bill with a term equal to the expected life of the option at the time the option was granted. An expected life of five years was taken into account for purposes of assigning a fair value to the option. The expected life represents the period of time the awards granted are expected to be outstanding. There were no grants of SARS during the years ended December 31, 2011 or 2010.

          We also grant restricted stock with a fair value that is determined based on the closing price of our common stock on the date of grant. SARs and restricted stock generally vest over a four-year period. Stock-based compensation expense is recognized ratably over the applicable service period.

          We follow the provisions of accounting and disclosures requirement for share-based payments, requiring the measurement and recognition of all share-based compensation under the fair value method.

Concentration of Credit Risk

          Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable. The Company places its cash investments with high quality financial institutions. The Company extends credit to its customers based upon an evaluation of the customer's financial condition and credit history and generally does not require collateral.

Treasury Stock

          The Company makes treasury stock purchases in the open market pursuant to the share repurchase program, which was approved by the Board of Directors on November 14, 2007.

          Treasury stock is recorded on the consolidated balance sheet at cost as a reduction of stockholders' equity. Shares are released from Treasury at original cost on a first-in, first-out basis, with any gain on the sale reflected as an adjustment to additional paid-in capital. Losses are reflected as an adjustment to additional paid-in capital to the extent of gains previously recognized, otherwise as an adjustment to retained earnings.

Foreign Currency Translation

          The assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the end of the reporting period. Revenue and expense items are translated at average exchange rates for the reporting period. Resulting translation adjustments are included in the accompanying statement of stockholders' equity as a component of Accumulated Other Comprehensive Loss.

          The functional currency of the Company and its subsidiaries is the respective local currency. The Company has contracts denominated in foreign currencies and therefore, a portion of the Company's revenues are subject to foreign currency risks. Transactional currency gains and losses that arise from transactions denominated in currencies other than the functional currencies of our operations are recorded in Foreign Currency Transaction (Loss) Gain in the accompanying consolidated statement of operations.

Fair Value of Financial Instruments

          The carrying value of the Company's cash and cash equivalents, receivables, accounts payable, long-term debt, other current liabilities, and accrued interest approximate fair value.

          Fair value is the price that would be received upon a sale of an asset or paid upon a transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). Market participants can use market data or assumptions in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable. The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. Under the fair-value hierarchy

• •

  Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market;

  •

  Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and

  •

  Level 3 measurements include those that are unobservable and of a highly subjective measure.

Income Taxes

          We use the asset and liability method to account for income taxes, including recognition of deferred tax assets and liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. We review our deferred tax assets for recovery. A valuation allowance is established when we believe that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in the valuation allowance from period to period are included in our tax provision in the period of change.

          For uncertain tax positions, we use a prescribed model for assessing the financial recognition and measurement of all tax positions taken or expected to be taken in its tax returns. The guidance provides clarification on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. Our provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well as the related interest.

Loss Per Share

          Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would share in the net income of the Company. As of December 31, 2011, 30.6 million warrants and 1.4 million Units (each Unit comprising one common share and one warrant) have expired. For the year ended December 31, 2011, the effect of 1.6 million shares related to the Company's convertible debt, 5.0 million warrants, 0.4 million stock appreciation rights ("SARs") and 2.7 million restricted shares have not been considered in the diluted earnings per share calculation for the year ended December 31, 2011, as the effect would be anti-dilutive. In addition, 250,000 contingent restricted shares related to the acquisition of STA were excluded from basic and diluted earnings per share as the contingency was not met as of the reporting period. For the year ended December 31, 2010, the effect of 35.6 million warrants, 0.4 million SARs and 1.4 million Units associated with the Company's IPO underwriters purchase option have not been considered in the diluted earnings per share calculation, since the market price of the Company's common stock was less than the exercise price during the period in the computation. Also, 2.0 million restricted shares have not been considered in the diluted earnings per share calculation for the year ended December 31, 2010, as the effect would be anti-dilutive. For the year ended December 31, 2009, the effect of 35.6 million warrants, 0.3 million SARs and 1.4 million Units associated with the Company's IPO underwriters purchase option have not been considered in the diluted earnings per share calculation, since the market price of the Company's common stock was less than the exercise price during the period in the computation. Also, 0.8 million restricted shares have not been considered in the diluted earnings per share calculation for the year ended December 31, 2009, as the effect would be anti-dilutive.

          The following tables set forth the computation of basic and diluted earnings per share:

	Years Ended December 31,
	2011			2010			2009
Numerator:
Net loss	$	(55,937	)	$	(53,165	)	$	(2,836	)
Denominator:
Basic weighted average common shares outstanding		36,258			32,050			31,491
Diluted effects of SARs, restricted shares, Employee Stock Purchase Plan shares and warrants		—			—			—
		36,258			32,050			31,491
Loss per share:
Basic	$	(1.54	)	$	(1.66	)	$	(0.09	)
Diluted	$	(1.54	)	$	(1.66	)	$	(0.09	)

Recently Issued Accounting Pronouncements

          In April 2011, the Financial Accounting Standards Board ("FASB") issued accounting guidance that clarifies which debt restructurings are considered troubled debt restructurings. Debt, which includes receivables, restructured in a troubled debt restructuring is classified as impaired for calculation of the allowance for doubtful accounts and is subject to additional disclosures detailing the modifications of the debt. The guidance is effective for interim or annual periods beginning on or after June 15, 2011. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

          In June 2011, the FASB issued accounting guidance related to the presentation of comprehensive income. This guidance presents an entity with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This guidance relates only to the presentation of comprehensive income. The provisions of this new guidance are effective for fiscal years and interim periods beginning after December 15, 2011 and are applied retrospectively for all periods presented. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

          In September 2011, the FASB amended the guidance on the annual testing of goodwill for impairment. The amended guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This guidance will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity's financial statements for the most recent annual or interim period have not yet been issued. We do not anticipate the adoption of this guidance will materially impact the Company's consolidated financial statements

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Current assets
Cash and cash equivalents	$ 24,469	$ 40,301
Accounts and unbilled receivables, net of allowance of $549 and $195, respectively	42,851	26,603
Deferred tax asset	3,330	2,852
Prepaid expense and other current assets	2,118	1,281
Total current assets	72,768	71,037
Restricted cash	51	5,750
Furniture, fixtures and equipment, net of accumulated depreciation of $4,730 and $3,950, respectively	2,954	2,113
Goodwill	34,691	48,474
Intangible assets, net	35,070	55,746
Other assets	945	1,444
Total assets	146,479	184,564
Current liabilities
Accounts payable	4,089	1,656
Current maturities of long-term debt	7,000
Deferred revenue	4,604	1,175
Accrued expenses	16,748	10,701
Total current liabilities	32,441	13,532
Long-term debt, net of current maturities	63,063	69,813
Deferred tax liability	10,305	19,336
Other liabilities	4,786	66
Total liabilities	110,595	102,747
Commitments and contingencies (Note 14)
Stockholders' equity
Preferred stock, $.001 par value; 10,000 shares authorized; none issued
Common stock, $.001 par value, 100,000 shares authorized; 36,675 shares issued and 36,276 outstanding at December 31, 2011 and 32,617 shares issued and 32,601 outstanding at December 31, 2010	37	33
Additional paid-in capital	204,076	192,989
Treasury stock (399 and 16 common shares, respectively, at cost)	(450)	(57)
Accumulated other comprehensive loss	(2,247)	(1,553)
Accumulated deficit	(165,532)	(109,595)
Total stockholders' equity	35,884	81,817
Total liabilities and shareholders' equity	$ 146,479	$ 184,564

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CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash flows from operating activities
Net loss	$ (55,937)	$ (53,165)	$ (2,836)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense	1,483	1,420	1,419
Goodwill impairment charge	34,314	46,591
Intangible assets impairment charge	27,380	5,900	6,800
Amortization of intangible assets	9,551	8,426	8,143
Amortization of deferred financing costs	360	359	784
Stock-based compensation	3,143	3,087	2,831
Bad debt expense	588	(51)	510
Deferred tax benefit	(11,003)	(6,763)	(5,653)
Loss on disposal of fixed assets	3	11	5
Changes in operating assets and liabilities:
Accounts receivable	(6,238)	(675)	2,856
Prepaid expense and other current assets	1,401	(31)	(112)
Accounts payable	(236)	(202)	(776)
Deferred revenue	593	(497)	200
Accrued expenses	(4,531)	1,337	(10,115)
Net cash provided by operating activities	871	5,747	4,056
Cash flows from investing activities
Acquisitions, net of cash acquired	(13,684)
Restricted cash	5,699	(5,750)
Proceeds from sale of furniture, fixtures and equipment	20
Purchase of furniture, fixtures and equipment	(1,690)	(957)	(1,239)
Net cash used in investing activities	(9,655)	(6,707)	(1,239)
Cash flows from financing activities
Principal payments on borrowings	(6,000)	(2,000)	(22,238)
Proceeds from issuance of ESPP shares	322	302	82
Issuance of treasury stock			162
Equity securities repurchased	(1,225)		(86)
Net cash used in financing activities	(6,903)	(1,698)	(22,080)
Effect of exchange rate changes on cash	(145)	173	903
Net decrease in cash and cash equivalents	(15,832)	(2,485)	(18,360)
Cash and cash equivalents, beginning of period	40,301	42,786	61,146
Cash and cash equivalents, end of period	24,469	40,301	42,786
Cash paid for:
Interest	2,914	2,910	4,157
Taxes	3,904	7,712	5,205
Noncash investing and financing activities:
Issuance of common stock for acquisition	7,980
Issuance of convertible debt for acquisition	6,250
Purchase price adjustments			240
Issuance of treasury stock for ESPP and vested restricted stock awards	$ 832		$ 117

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INCOME TAXES

12 Months Ended

Dec. 31, 2011

INCOME TAXES

INCOME TAXES

NOTE 16—INCOME TAXES

          The components of income (loss) before income taxes for the years ended December 31, 2011, 2010 and 2009 consists of the following:

	Years Ended December 31,
	2011			2010			2009
Domestic	$	(69,932	)	$	(56,919	)	$	(8,290	)
Foreign		5,669			1,828			4,676
Total loss before income taxes	$	(64,263	)	$	(55,091	)	$	(3,614	)

          The components of the 2011, 2010 and 2009 income tax (benefit) provision are as follows:

	Years Ended December 31,
	2011			2010			2009
Current:
Federal	$	1,195		$	3,191		$	2,715
State		291			722			566
Foreign		1,191			924			1,594
Total current provision		2,677			4,837			4,875
Deferred:
Federal		(9,307	)		(6,000	)		(5,360	)
State		(1,091	)		(337	)		(233	)
Foreign		(605	)		(426	)		(60	)
Total deferred benefit		(11,003	)		(6,763	)		(5,653	)
Total	$	(8,326	)	$	(1,926	)	$	(778	)

          The differences between the effective tax rates reflected in the total provision for income taxes and the U.S. federal statutory rate of 35% for the year ended December 31, 2011, 2010 and 2009 were as follows:

	Years Ended December 31,
	2011			2010			2009
Tax benefit computed at 35%	$	(22,492	)	$	(19,281	)	$	(1,265	)
Nondeductible goodwill impairment		12,010			16,307			—
Nondeductible expenses		193			743			107
State income taxes, net of federal benefit		(899	)		148			151
Derecognition of stock compensation deferred tax asset		1,255			68			117
Valuation allowance		1,607			85			118
Other		—			4			(6	)
Income tax benefit	$	(8,326	)	$	(1,926	)	$	(778	)
Effective income tax rates		13.0	%		3.5	%		21.5	%

          The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows:

	December 31, 2011			December 31, 2010
Current deferred tax asset
Compensation related expenses	$	923		$	1,418
Foreign currency translation		1,445			952
Other		1,376			806
Total current deferred tax asset		3,744			3,176
Current deferred tax liability
Prepaids		(414	)		(324	)
Total current deferred tax liability		(414	)		(324	)
Net current deferred tax asset	$	3,330		$	2,852
Noncurrent deferred tax asset
Compensation related expenses	$	573		$	980
Foreign tax credit carryovers		922			869
Foreign net operating loss carryovers		3,641			880
U.S. net operating loss carryovers of non-consolidated entity		5,465			—
Valuation allowance for deferred tax assets		(9,026	)		(203	)
Total noncurrent deferred tax asset		1,575			2,526
Noncurrent deferred tax liability
Depreciable assets		(329	)		(217	)
Intangible assets		(10,119	)		(20,951	)
Investment in foreign subsidiaries		(1,432	)		(694	)
Total noncurrent deferred tax liability		(11,880	)		(21,862	)
Net noncurrent deferred tax liability		(10,305	)		(19,336	)
Net deferred tax liability	$	(6,975	)	$	(16,484	)

          A valuation allowance was established at December 31, 2011 and 2010 due to estimates of future utilization of net operating loss carryovers in the U.S. and certain foreign jurisdictions, derived primarily from the acquisitions and recorded through purchase accounting. The valuation allowance at December 31, 2011 also includes a full valuation for the Company's foreign tax credit carryovers and foreign taxes on its controlled foreign corporation unremitted earnings.

          Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. It is the Company's policy to accrue for interest and penalties related to its uncertain tax positions within income tax expense.

          For the years ended December 31, 2011, 2010 and 2009, the Company updated its assessment of its tax positions in the taxing jurisdictions where it has operations and determined that additional accruals were required for the year ended December 31, 2011.

          A tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period is as follows:

	December 31,
	2011		2010		2009
Balance, beginning of year	$	665	$	323	$	282
Additions as a result of tax positions taken during the current period		4		292		2
Additions as a result of acquisitions		1,537		—		—
Reductions relating to tax settlements with taxing authorities		—		—		(36	)
Total unrecognized tax benefit		2,206		615		248
Interest and penalties associated with uncertain tax positions		80		50		75
Balance, end of year	$	2,286	$	665	$	323

          The amount of unrecognized tax benefit, if recognized, that would affect the effective tax rate is $0.4 million. With few exceptions, the Company is no longer subject to U.S. federal, state, local, or non-U.S. income tax examinations by tax authorities for years before 2004.

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WARRANTS

12 Months Ended

Dec. 31, 2011

WARRANTS

WARRANTS

NOTE 18—WARRANTS

          The Company issued 28,125,000 units at a price of $8.00 per unit and the underwriters for the Company's initial public offering exercised their over-allotment option and purchased an additional 4,218,750 units. Each unit included one share of common stock and a warrant to purchase one share of common stock at an exercise price of $6.00.

          On February 6, 2007, Oenoke Partners, LLC purchased, in a Private Placement, 6,500,000 warrants at $1 per warrant. The warrants were exercisable on a cashless basis and had terms and provisions that were identical to those of the warrants sold in the Offering, except that these warrants would not be subject to redemption. Oenoke Partners, LLC also agreed that it would not sell or otherwise transfer the warrants until one year after the Company consummated a business combination, which occurred on November 16, 2007. Oenoke LLC was dissolved on December 17, 2008 and the shares and warrants were transferred to ISG's Executive Officers. The 30,647,000 warrants described above expired on January 31, 2011.

          The Company also sold to the underwriters, for $100, a four-year option to purchase up to a total of 1,406,250 units at a per-unit price of $9.60. The units issuable upon exercise of this option were also identical to those offered in the Offering except that warrants included in the option have an exercise price of $7.50. The option expired on February 6, 2011.

          In connection with the acquisition of TPI, the Company issued 5,000,000 warrants valued at $13.6 million ($2.72 per warrant) at an exercise price of $9.18 per share (the "MCP-TPI Warrants"). The MCP-TPI Warrants are currently exercisable and expire on November 16, 2012.

          A summary of the warrant activity as of December 31, 2011, 2010 and 2009 and changes during the years then ended, is presented below:

	Number of Warrants			Weighted- Average Exercise Price
Warrants outstanding as of December 31, 2008		37,053		$	6.49
Warrants repurchased		—			—
Warrants outstanding as of December 31, 2009		37,053		$	6.49
Warrants repurchased		—			—
Warrants outstanding as of December 31, 2010		37,053		$	6.49
Warrants expired		(32,053	)		6.07
Warrants outstanding as of December 31, 2011		5,000		$	9.18

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DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

12 Months Ended

Dec. 31, 2011

DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

          Information Services Group, Inc. (the "Company") was incorporated in Delaware on July 20, 2006. The Company was formed to acquire, through a merger, capital stock exchange, asset or stock acquisition or other similar business combination one or more domestic or international operating businesses.

          The registration statement for the Company's initial public offering (the "Offering") was declared effective on January 31, 2007. The Company consummated the Offering on February 6, 2007. The Company's management had broad discretion with respect to the specific application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering were to be applied toward consummating a business combination with (or acquisition of) an operating business in the information services industry. This operating company was subsequently identified as TPI Advisory Services Americas, Inc., a Texas corporation ("TPI").

          On November 16, 2007 (the "TPI Acquisition Date"), we consummated the acquisition of TPI, pursuant to a Purchase Agreement dated April 24, 2007, as amended on September 30, 2007, by and between MCP-TPI Holdings, LLC, a Texas limited liability company ("MCP-TPI"), and the Company. For accounting purposes, the TPI acquisition has been treated as a business combination. The results of TPI are included in the consolidated financial statements subsequent to the TPI Acquisition Date. During the periods prior to the TPI Acquisition Date, the Company was in the development stage.

          On January 4, 2011, the Company completed the acquisition of Compass. Compass is a premier independent global provider of business and information technology benchmarking, performance improvement, data and analytics services. It was founded in 1980 and headquartered in the United Kingdom and has 180 employees in 16 countries serving nearly 250 clients worldwide. The company pioneered the aggregation and application of sophisticated metrics to understand root causes of organizational performance issues. In addition, their Fact-Based Consulting unit generates tangible improvements in client businesses through sourcing advisory programs, recommendations in operational excellence and support in implementing transformational change in business operations. Compass uses benchmarking to support fact-based decision making, analysis to optimize cost reduction, and tools and techniques to manage business performance. For accounting purposes, the acquisition of Compass has been treated as a business combination.

          On February 10, 2011 the Company completed the acquisition of STA Consulting (Salvaggio, Teal & Associates) a premier independent information technology advisor serving the public sector. STA Consulting advises clients on information technology strategic planning and the acquisition and implementation of new Enterprise Resource Planning (ERP) and other enterprise administration and management systems. STA Consulting was founded in 1997 and is based in Austin, Texas with approximately 40 professionals experienced in information systems consulting in public sector areas such as government operations, IT and project management, contract negotiations, financial management, procurement, human resources and payroll. STA Consulting works with such states as Alaska, Kansas, Kentucky, Louisiana, Mississippi and West Virginia. STA Consulting and TPI have worked together in the past on engagements for such states as Georgia and Texas. For accounting purposes, the acquisition of STA Consulting has been treated as a business combination.

          During the fourth quarter of 2011, we decided to merge our individual corporate brands into one globally integrated business under the ISG brand. TPI, the world's leading sourcing data and advisory firm; Compass, a premier independent provider of business and IT benchmarking; and STA Consulting, a premier independent technology advisory serving the North America public sector, will be marketed together under the ISG brand. The merger is designed to offer clients one source to drive operational excellence in their organizations. We have retained our legacy brands to identify specific products and services we are known for including "The TPI Index", "TPI Sourcing" and "Compass Benchmarks".

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
CONSOLIDATED BALANCE SHEETS
Accounts and unbilled receivables, allowance (in dollars)	$ 549	$ 195
Furniture, fixtures and equipment, accumulated depreciation (in dollars)	$ 4,730	$ 3,950
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	36,675	32,617
Common stock, shares outstanding	36,276	32,601
Treasury stock, shares	399	16

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OTHER LIABILITIES

12 Months Ended

Dec. 31, 2011

OTHER LIABILITIES

OTHER LIABILITIES

NOTE 11—OTHER LIABILITIES

          The components of other liabilities at December 31, 2011 and 2010 are as follows:

	December 31, 2011		December 31, 2010
Contingent consideration—noncurrent	$	4,786	$	—
Other		—		66
	$	4,786	$	66

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2011	Feb. 24, 2012	Jun. 30, 2011
Document and Entity Information
Entity Registrant Name	Information Services Group Inc.
Entity Central Index Key	0001371489
Document Type	10-K
Document Period End Date	Dec. 31, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 58,011,635
Entity Common Stock, Shares Outstanding		36,315,638
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY

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SHARE REPURCHASE PROGRAM

12 Months Ended

Dec. 31, 2011

SHARE REPURCHASE PROGRAM

SHARE REPURCHASE PROGRAM

NOTE 12—SHARE REPURCHASE PROGRAM

          Under a stock repurchase plan approved by the Board of Directors on October 16, 2007, the Company repurchased 12.1 million shares of common stock since that date. This program includes the repurchase of common shares, units and/or warrants. On November 14, 2007, the Board of Directors authorized an additional repurchase program of up to $15.0 million. As of December 31, 2011, there was $8.9 million available under this repurchase program.

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CONSOLIDATED STATEMENT OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Revenues	$ 184,426	$ 132,013	$ 132,744
Operating expenses
Direct costs and expenses for advisors	104,823	71,528	67,674
Selling, general and administrative	67,717	49,889	47,894
Goodwill impairment charge	34,314	46,591
Intangible assets impairment charge	27,380	5,900	6,800
Depreciation and amortization	11,034	9,846	9,562
Operating (loss) income	(60,842)	(51,741)	814
Interest income	75	159	262
Interest expense	(3,458)	(3,241)	(4,550)
Foreign currency transaction loss	(38)	(268)	(140)
Loss before taxes	(64,263)	(55,091)	(3,614)
Income tax benefit	(8,326)	(1,926)	(778)
Net loss	(55,937)	(53,165)	(2,836)
Weighted average shares outstanding:
Basic (in shares)	36,258	32,050	31,491
Diluted (in shares)	36,258	32,050	31,491
Loss per share:
Basic (in dollars per share)	$ (1.54)	$ (1.66)	$ (0.09)
Diluted (in dollars per share)	$ (1.54)	$ (1.66)	$ (0.09)
Comprehensive loss:
Net loss	(55,937)	(53,165)	(2,836)
Other comperhensive (loss) income	(694)	(32)	891
Comprehensive loss	$ (56,631)	$ (53,197)	$ (1,945)

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FURNITURE, FIXTURES AND EQUIPMENT

12 Months Ended

Dec. 31, 2011

FURNITURE, FIXTURES AND EQUIPMENT

FURNITURE, FIXTURES AND EQUIPMENT

NOTE 6—FURNITURE, FIXTURES AND EQUIPMENT

          Furniture, fixtures and equipment consisted of the following:

	Estimated Useful Lives	December 31, 2011			December 31, 2010
Computer hardware, software and other office equipment	2 to 5 years	$	3,797		$	3,158
Furniture, fixtures and leasehold improvements	2 to 5 years		1,161			660
Internal-use software and development costs	3 to 5 years		2,726			2,245
Accumulated depreciation			(4,730	)		(3,950	)
		$	2,954		$	2,113

          Depreciation expense was $1.5 million, $1.4 million and $1.4 million for the years ended December 31, 2011, 2010 and 2009, respectively.

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PREPAID EXPENSE AND OTHER CURRENT ASSETS

12 Months Ended

Dec. 31, 2011

PREPAID EXPENSE AND OTHER CURRENT ASSETS

PREPAID EXPENSE AND OTHER CURRENT ASSETS

NOTE 5—PREPAID EXPENSE AND OTHER CURRENT ASSETS

          Prepaid expense and other current assets consisted of the following:

	December 31, 2011		December 31, 2010
Prepaid rent	$	290	$	39
Prepaid insurance		285		171
Security deposits		506		181
Deferred costs		286		200
Other		751		690
	$	2,118	$	1,281

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STOCK-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2011

STOCK-BASED COMPENSATION PLANS

STOCK-BASED COMPENSATION PLANS

NOTE 17—STOCK-BASED COMPENSATION PLANS

          At the special meeting of stockholders held on November 13, 2007, the 2007 Equity Incentive Plan ("Incentive Plan") and 2007 Employee Stock Purchase Plan ("ESPP") were approved by the Company's stockholders. The Incentive Plan authorizes the grant of awards to participants with respect to a maximum of 4.0 million shares of the Company's common stock, subject to adjustment to avoid dilution or enlargement of intended benefits in the event of certain significant corporate events, which awards may be made in the form of (i) nonqualified stock options; (ii) stock options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code (stock options described in clause (i) and (ii), "options"); (iii) stock appreciation rights ("SARs"); (iv) restricted stock and/or restricted stock units; (v) performance awards; and (vi) other stock based awards; provided that the maximum number of shares with respect to which stock options and stock appreciation rights may be granted in the equity incentive plan to any one participant in any given calendar year may not exceed $0.8 million, and the maximum amount payable to a participant in the equity plan in connection with the settlement of any of any award(s) designated as a "performance compensation awards" in respect of a single performance period shall be: (x) with respect to performance compensation awards that are paid in shares, 500,000 shares and (y) with respect to performance compensation awards that are paid in cash, $5.0 million. The issuance of shares or the payment of cash upon the exercise of an award or in consideration of the cancellation or termination of an award shall reduce the total number of shares available under the equity incentive plan, as applicable. The provisions of each award will vary based on the type of award granted and will be specified by the Compensation Committee of the Board of Directors. Those awards which are based on a specific contractual term will be granted with a term not to exceed ten years. The SARs granted under the Incentive Plan are granted with an exercise price equal to the fair market value of the Common Shares at the time the SARs are granted.

          On May 11, 2010, the ISG stockholders approved an amendment for an additional 4.5 million shares authorized for issuance under the 2007 Equity Incentive Plan, except that each share of the Company's common stock issued under a "full value" award (awards other than stock options or stock appreciation rights) will reduce the number of shares available for issuance by 1.44 shares.

          As of December 31, 2011, there were 3,493,455 and 606,417 shares available for grant under the amended and restated Incentive Plan and ESPP, respectively.

          The Company recognized $3.1 million, $3.1 million and $2.8 million in employee stock-based compensation expense during the years ended December 31, 2011, 2010 and 2009, respectively. This expense was recorded in selling, general and administrative in the consolidated statement of operations.

Stock Appreciation Rights

          The Compensation Committee may grant (i) a stock appreciation right independent of an option or (ii) a stock appreciation right in connection with an option, or a portion thereof. A stock appreciation right granted pursuant to clause (ii) of the preceding sentence (A) may be granted at the time the related option is granted or at any time prior to the exercise or cancellation of the related option, (B) shall cover the same number of shares covered by an option (or such lesser number of shares as the Compensation Committee may determine) and (C) shall be subject to the same terms and conditions as such option except for such additional limitations as are contemplated above (or such additional limitations as may be included in an award agreement).

          SARs granted pursuant to the Incentive Plan are granted with an exercise price equal to the fair market value of the Common Shares at the time the SARs are granted. Pursuant to the applicable award agreements, the SARs vest and become exercisable with respect to 25% of the shares subject to the SARs on the first four anniversaries of the grant date, so long as the employee remains employed with the Company on each such date. If the employee's employment with the Company is terminated as a result of the employee's death or disability, all unvested SARs will be fully vested. If the employee retires, the SARs will continue to vest on the same schedule as if the employee had remained employed with the Company. Any vested SARs will expire upon the earliest to occur of the following: (i) the tenth anniversary of the grant date; (ii) one year following the date of the employee's termination of services as a result of death or permanent disability; (iii) 90 days following the fourth anniversary of the grant date, following the participant's retirement; (iv) 30 days following the date of the participant's termination of employment for any reason (other than as a result of death, disability or retirement); and (v) immediately upon a termination for cause. SARs will be settled in the form of shares of the Company's common stock upon exercise.

          A summary of the status of the Company's SARs issued under its Incentive Plan is presented below:

	SARs			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life		Aggregate Intrinsic Value
						(in years)
Outstanding at December 31, 2008		641		$	5.19		6.4	$	70
Granted		12		$	3.15
Exercised		—		$	—
Forfeited		(59	)	$	5.51
Outstanding at December 31, 2009		594		$	5.12		8.4	$	—
Granted		—		$	—
Exercised		—		$	—
Forfeited		(105	)	$	4.94
Outstanding at December 31, 2010		489		$	5.16		7.2	$	—
Granted		—		$	—
Exercised		—		$	—
Forfeited		(93	)	$	5.64
Outstanding at December 31, 2011		396		$	5.04		6.5	$	—
Vested and expected to vest at December 31, 2011		396		$	5.04		6.5	$	—
Exercisable at December 31, 2011		340		$	5.35		6.4	$	—

          The weighted-average grant date fair value for SARs granted during the years ended December 31, 2011, 2010 and 2009 was $0, $0 and $1.90, respectively. The total fair value of the SARs vested during the years ended December 31, 2011, 2010 and 2009 was $0.2 million, $0.3 million and $0.4, respectively. As of December 31, 2011, there was $0.1 million of total unrecognized compensation cost related to the Company's unvested SARs and that cost is expected to be recognized over a weighted-average period of 0.95 years.

          The Company uses the Black-Scholes option pricing model to determine the fair value of each SAR award on the date of grant. The estimated fair value of the SARs is amortized to expense on a straight-line basis over the vesting period. The Company did not grant any SAR during the years end December 31, 2011. The specific assumptions used in determining the fair values for the SARs granted during the years ended December 31, 2011, 2010 and 2009 are discussed in more detail below and are noted in the following table.

          Prior to December 31, 2009, the volatility calculation was based on the most recent trading day average volatility of a representative sample of seven companies with market capitalizations of approximately $197 million to $3.7 billion that management believes to be engaged in the business of information services (the "Sample Companies"). The Company referred to the average volatility of the Sample Companies because management believed that the average volatility of such companies is a reasonable benchmark to use in estimating the expected volatility of the Company's common stock post-business combination and as a public company. The risk-free interest rate is determined based upon the interest rate on a U.S. Treasury Bill with a term equal to the expected life of the SARs at the time the SARs was granted. An expected life of five years was taken into account for purposes of assigning a fair value to the SARs. The expected life represents the period of time the awards granted are expected to be outstanding. There were no SARs issued during the years ended December 31, 2011 and 2010.

	Years Ended December 31,
	2011		2010		2009
Expected stock volatility		—		—		73.2	%
Risk-free interest rate		—		—		1.7	%
Expected term (in years)		—		—		5.0
Dividend yield		—		—		0.0	%

          The Company has not issued any stock options from the offering date through December 31, 2011.

Restricted Share Awards/Units

          The Incentive Plan provides for the granting of restricted share awards ("RSA") or restricted share units ("RSU"), the vesting of which is subject to conditions and limitations established at the time of the grant. Upon the grant of an RSA, the participant has the rights of a shareholder, including but not limited to the right to vote such shares and the right to receive any dividends paid on such shares. Recipients of RSU awards will not have the rights of a shareholder of the Company until such date as the Common Shares are issued or transferred to the recipient. The Company granted 175,932 RSAs valued at $3,500 for each employee worldwide employed as of November 16, 2007 and otherwise receiving RSU under existing programs. Subject to the employee's continued employment, the restricted shares vested with respect to 25% of the shares on each of the first four anniversaries of the grant date. If the employee retires (at the normal retirement age stated in the applicable retirement plan or applicable law, if there is a mandatory retirement age), the restricted shares will continue to vest on the same schedule as if the employee remained employed with the Company. Upon a change in control, or upon a termination of employment due to employee's death or permanent disability, the restricted shares become 100% vested. Dividends accrue and will be paid if and when the restricted shares vest.

          The Company also granted RSUs to specific employees which have the following characteristics:

• •

  Performance-Based RSU Vesting:  The RSUs have been forfeited as the 2010 EBITDA target was not achieved.

  •

  Time-Based RSU Vesting:  So long as the employee continues to be employed through the fourth anniversary of the grant date, the RSUs will become 100% vested on such date.

          If the employee's employment is terminated (i) at any time during the vesting period due to the employee's death, disability or retirement prior to the applicable vesting date or (ii) without cause by the Company after 50% of the relevant period has elapsed, then the RSUs will vest prorata based on the period of time worked relative to such period. However, no shares will be distributed until the applicable pro rata vesting date (and, in the case of the Performance-Based RSUs, only if and to the extent that the EBITDA target is achieved). In all other terminations occurring prior to the applicable vesting date, the RSUs will expire. All RSUs will be payable in shares of the Company's common stock immediately upon vesting. No dividend equivalents will be paid with respect to any RSUs.

          The fair value of RSAs and RSUs is determined based on the closing price of the Company's shares on the grant date. The total fair value is amortized to expense on a straight-line basis over the vesting period.

          A summary of the status of the Company's RSAs and RSUs issued under its Incentive Plan as of December 31, 2011 and changes during the year then ended, is presented below:

	RSA			Weighted- Average Grant Date Fair Value		RSU			Weighted- Average Grant Date Fair Value
Non-vested at December 31, 2008		103		$	7.20		1,996		$	4.20
Granted		—		$	—		1,165		$	3.13
Vested		(30	)	$	7.20		(406	)	$	4.29
Forfeited		(14	)	$	7.20		(210	)	$	4.36
Non-vested at December 31, 2009		59		$	7.20		2,545		$	4.21
Granted		—		$	—		350		$	2.07
Vested		(26	)	$	7.20		(637	)	$	3.64
Forfeited		(8	)	$	7.20		(260	)	$	4.53
Non-vested at December 31, 2010		25		$	7.20		1,998		$	3.96
Granted		—		$	—		1,986		$	1.98
Vested		(22	)	$	7.20		(931	)	$	4.29
Forfeited		(3	)	$	7.20		(395	)	$	4.68
Non-vested at December 31, 2011		—		$	—		2,658		$	2.26

          The total fair value of RSAs and RSUs vested during the years ended December 31, 2011, 2010 and 2009 was $4.1 million, $2.4 million and $2.0 million, respectively. As of December 31, 2011, there was $0 million and $4.6 million of unrecognized compensation cost related to RSAs and RSUs, which is expected to be recognized over a weighted-average period of 0 years and 2.3 years, respectively.

Employee Stock Purchase Plan

          The ESPP provides that a total of 1.2 million shares of Common Stock are reserved for issuance under the plan. The ESPP, which is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code, is implemented utilizing three-month offerings with purchases occurring at three-month intervals. The ESPP administration is overseen by the Company's Compensation Committee. Employees are eligible to participate if they are employed by the Company for at least 20 hours per week and more than five months in a calendar year. The ESPP permits eligible employees to purchase Common Stock through payroll deductions, ranging from one to ten percent of their eligible earnings subject to IRS regulated cap of $25,000. The price of Common Stock purchased under the ESPP is 90% of the fair market value of the Common Stock on the applicable purchase date. Employees may end their participation in an offering at any time during the offering period, and participation ends automatically upon termination of employment. The Compensation Committee may at any time amend or terminate the ESPP, except that no such amendment or termination may adversely affect shares previously granted under the ESPP. The Company may issue new shares for ESPP using treasury shares or newly issued shares. For the year ended December 31, 2011, the Company issued 276,902 shares for ESPP. There were 606,417 shares available for purchase at December 31, 2011 under the ESPP.

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FINANCING ARRANGEMENTS AND LONG-TERM DEBT

12 Months Ended

Dec. 31, 2011

FINANCING ARRANGEMENTS AND LONG-TERM DEBT

FINANCING ARRANGEMENTS AND LONG-TERM DEBT

NOTE 13—FINANCING ARRANGEMENTS AND LONG-TERM DEBT

          Long-term debt consists of the following:

	December 31, 2011		December 31, 2010
Senior secured credit facility	$	63,813	$	69,813
Compass convertible notes		6,250		—
		70,063		69,813
Less current installments on long term debt		7,000		—
Long-term debt	$	63,063	$	69,813

          Aggregate annual maturities of debt obligations by calendar year, are as follows:

	Debt
2012	$	7,000
2013		10,000
2014		46,813
2015		—
2016		—
Thereafter		6,250
	$	70,063

          We have outstanding a substantial amount of debt, which may limit our ability to fund general corporate requirements and obtain additional financing, limit our flexibility in responding to business opportunities and competitive developments and increase our vulnerability to adverse economic and industry conditions.

          We incurred a substantial amount of indebtedness to finance the acquisition of TPI, including transaction costs and deferred underwriting fees. On November 16, 2007, our wholly-owned subsidiary International Consulting Acquisition Corp. ("ICAC") entered into a senior secured credit facility comprised of a $95.0 million term loan facility and a $10.0 million revolving credit facility. On November 16, 2007, ICAC borrowed $95.0 million under the term loan facility to finance the purchase price for our acquisition of TPI and to pay transaction costs. As a result of the substantial fixed costs associated with the debt obligations, we expect that:

• •

  a decrease in revenues will result in a disproportionately greater percentage decrease in earnings;

  •

  we may not have sufficient liquidity to fund all of these fixed costs if our revenues decline or costs increase;

  •

  we may have to use our working capital to fund these fixed costs instead of funding general corporate requirements, including capital expenditures;

  •

  we may not have sufficient liquidity to respond to business opportunities, competitive developments and adverse economic conditions; and

  •

  our results of operations will be adversely affected if interest rates increase because, based on our current outstanding term loan borrowings in the amount of $63.8 million, a 1% increase in interest rates would result in a pre-tax impact on earnings of approximately $0.6 million per year.

          These debt obligations may also impair our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business. Our indebtedness under the senior secured revolving credit facility is secured by substantially all of our assets, leaving us with limited collateral for additional financing. Moreover, the terms of our indebtedness under the senior secured revolving credit facility restrict our ability to take certain actions, including the incurrence of additional indebtedness, mergers and acquisitions, investments and asset sales. Our ability to pay the fixed costs associated with our debt obligations will depend on our operating performance and cash flow, which in turn depend on general economic conditions and the advisory services market. A failure to pay interest or indebtedness when due could result in a variety of adverse consequences, including the acceleration of our indebtedness. In such a situation, it is unlikely that we would be able to fulfill our obligations under or repay the accelerated indebtedness or otherwise cover our fixed costs. As of December 31, 2011, the total principal outstanding under the term loan facility was $63.8 million. There were no borrowings under the revolving credit facility during fiscal 2011.

          The material terms of the 2007 Credit Agreement are as follows:

• •

  The 2007 Credit Agreement has a maturity date of November 14, 2014.

  •

  The 2007 Credit Agreement is secured by all of the equity interests owned by the newly formed holding company of the Borrower, International Advisory Holdings Corp. ("Holdings") and its direct and indirect domestic subsidiaries and, subject to agreed exceptions, its direct and indirect "first-tier" foreign subsidiaries and a perfected first priority security interest in all of Holdings' and its direct and indirect domestic subsidiaries' tangible and intangible assets.

  •

  Holdings and the Borrower's existing direct and indirect subsidiaries and future wholly-owned domestic subsidiaries serve as guarantors to the Borrower's obligations under the 2007 Credit Agreement.

  •

  At the Borrower's option, the 2007 Credit Agreement bears interest at a rate per annum equal to either (i) the "Base Rate" (which is the higher of (a) the rate publicly announced from time to time by the administrative agent as its "prime rate" and (b) the Federal Funds Rate plus 0.5% per annum), plus the applicable margin (as defined below) or (ii) Eurodollar Rate (adjusted for maximum reserves) as determined by the Administrative Agent, plus the applicable margin. The applicable margin shall be a percentage per annum equal to 2.5% for the term loans and the revolving loans maintained as Base Rate loans or 3.5% for the term loans and revolving loans maintained as Eurodollar loans.

  •

  Mandatory repayments of term loans shall be required from (subject to agreed exceptions) (i) 100% of the proceeds from asset sales by Holdings and its subsidiaries, (ii) 100% of the net proceeds from issuances of debt by Holdings and its subsidiaries, (iii) so long as the total leverage ratio is 3.0 to 1.0 or higher, 50% of annual excess cash flow of Holdings and its subsidiaries and (iv) 100% of the net proceeds from insurance recovery and condemnation events of Holdings and its subsidiaries.

  •

  The 2007 Credit Agreement contains a number of covenants that, among other things, place restrictions on matters customarily restricted in senior secured credit facilities, including restrictions on indebtedness (including guarantee obligations), liens, fundamental changes, sales or disposition of property or assets, investments (including loans, advances, guarantees and acquisitions), transaction with affiliates, dividends and other payments in respect of capital stock, optional payments and modifications of other material debt instruments, negative pledges and agreements restricting subsidiary distributions and changes in line of business. In addition, the Borrower is required to comply with a total leverage ratio as defined in the 2007 Credit Agreement. The total leverage ratio is defined as the ratio of consolidated indebtedness to consolidated Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA).

  •

  The 2007 Credit Agreement contains customary events of default, including cross-default to other material agreements, judgment default and change of control.

          On June 29, 2009, the Company made a voluntary principal prepayment of $12.0 million against its outstanding term loan balance of $93.8 million. In conjunction with this prepayment, our lenders consented to the following conditions: (1) agreement to execute the Company's UK tax planning strategy to reduce future potential cash taxes, (2) exclusion of the impact in the calculation of EBITDA of up to $5.0 million of restructuring charges relating to the Borrower's previously announced 2009 restructuring plan through December 31, 2009 and (3) exclusion of the impact in the calculation of EBITDA of establishing, if necessary, a reserve in respect of certain accounts receivable and work in progress due from General Motors Corporation for worked performed on or before June 1, 2009.

          On September 11, 2009, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) for the remaining life of the 2007 Credit Agreement to provide the Company with greater financing flexibility in return for additional debt repayments. In accordance with the terms of the amended 2007 Credit Agreement, the Company made $5.0 million of principal repayments on September 30, 2009 and December 31, 2009 to reduce the outstanding term loan balance to $71.8 million. The principal repayments were made from excess cash balances generated through the Company's normal business operations. In accordance with the terms of the 2007 Credit Agreement, the Company made a $2.0 million principal repayment on March 31, 2010 to reduce the outstanding term loan balance to $69.8 million.

          On September 27, 2010, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) from September 30, 2010 to December 30, 2010 and to restore the exclusion of the impact in the calculation of earnings before interest, taxes, depreciation, and amortization EBITDA of up to $5.0 million of restructuring charges through December 31, 2011 in order to provide the Company with greater financing flexibility. The Company also received approval to complete the acquisition of STA Consulting subject to certain conditions.

          On December 23, 2010, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) from December 31, 2010 to March 30, 2011 in order to provide the Company with greater financing flexibility. Our lenders also agreed to allow the Company to extend the date to complete the acquisition of STA Consulting to March 31, 2011. On February 10, 2011, the acquisition of STA Consulting was completed.

          On March 16, 2011, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) for the remaining life of the 2007 Credit Agreement to provide us with greater financing flexibility in return for additional quarterly term loan principal repayments. In accordance with the terms of the amended 2007 Credit Agreement, we made mandatory principal repayments of $3.0 million on March 31, 2011 and $1.0 million on June 30, 2011, September 30, 2011 and December 31, 2011, respectively, to reduce the outstanding term loan balance to $63.8 million. The principal repayments will be made from cash generated through our normal business operations.

          On March 13, 2012, our lenders agreed to allow International Consulting Acquisition Corp., a wholly-owned indirect subsidiary of ISG (the "Borrower"), to include the results of operations of Compass in the calculation of our leverage ratio. The Borrower also received approval to increase the annual cash dividend payable to ISG to $2.0 million.

          Additional mandatory principal repayments totaling $7.0 million and $10.0 million will be due in 2012 and 2013 respectively with the remaining principal repayments due in 2014. The final mandatory term loan principal repayment will be due on November 16, 2014, which is the maturity date for the term loan.

          As of December 31, 2011 and 2010, the total principal outstanding under the term loan facility was $63.8 million and $69.8 million, respectively. There were no borrowings under the revolving credit facility during 2011 or 2010. The carrying amount of long-term debt owed to banks approximates fair value based on interest rates that are currently available to us for issuance of debt with similar terms and maturities. The 2007 Credit Agreement includes quarterly financial covenants that require us to maintain a maximum total leverage ratio (as defined in the 2007 Credit Agreement). As of December 31, 2011, our maximum total leverage ratio was 3.50 to 1.00 and we were in compliance with all covenants contained in the 2007 Credit Agreement. The maximum total leverage ratio will continue to decline over the life of the 2007 Credit Agreement. The maximum total leverage ratio for 2012 is 3.25 for the quarter ending March 31, 2012 and 3.0 through the period ending December 31, 2012 and will continue to decline thereafter. We currently expect to be in compliance with the covenants contained within the 2007 Credit Agreement. In the event we are unable to remain in compliance with the debt covenants associated with the 2007 Credit Agreement we have alternative options available to us including, but not limited to, the ability to make a prepayment on our debt without penalty to bring the actual leverage ratio into compliance. In addition, should the Company's revenues not meet our forecast, the Company has the ability to reduce various expenditures to minimize the impact to the leverage ratio. Such actions may include reductions to headcount, variable compensation, marketing expenses, conferences and non-billable travel. Our available cash balances and liquidity will be negative impacted should such prepayment be necessary.

          We anticipate that our current cash and the ongoing cash flows from our operations will be adequate to meet our working capital and capital expenditure needs for at least the next twelve months. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if economic conditions change from those currently prevailing or from those now anticipated, or if other unexpected circumstances arise that may have a material effect on the cash flow or profitability of our business. If we require additional capital resources to grow our business, either internally or through acquisition, we may seek to sell additional equity securities or to secure debt financing. The sale of additional equity securities or certain forms of debt financing could result in additional dilution to our stockholders. We may not be able to obtain financing arrangements in amounts or on terms acceptable to us in the future.

Compass Convertible Notes

          On January 4, 2011, as part of the consideration for the Share Purchase, we issued an aggregate of $6.3 million in convertible notes to Compass. The Notes mature on January 4, 2018 and interest is payable on the outstanding principal amount, computed daily, at the rate of 3.875% per annum on January 31 of each calendar year and on the seventh anniversary of the date of the Notes. The Notes are subject to transfer restrictions until January 31, 2013. If the price of our common stock on the Nasdaq Global Market exceeds $4 per share for 60 consecutive trading days (the "Trigger Event"), the holder of the Notes may convert all (but not less than all) of the outstanding principal amount of the Notes into shares of our common stock at the rate of 1 share for every $4 in principal amount outstanding. After the Trigger Event, we may prepay all or any portion of the outstanding principal amount of the Notes by giving the holder 30 days written notice.

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ACCRUED LIABILITIES

12 Months Ended

Dec. 31, 2011

ACCRUED LIABILITIES

ACCRUED LIABILITIES

NOTE 9—ACCRUED LIABILITIES

          The components of accrued liabilities at December 31, 2011 and 2010 are as follows:

	December 31, 2011		December 31, 2010
Accrued payroll and vacation	$	5,170	$	2,587
Accrued corporate and payroll related taxes		5,513		2,241
Accrued acquisition costs		—		2,135
Contingent consideration—current		2,000		—
Other		4,065		3,738
	$	16,748	$	10,701

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GOODWILL

12 Months Ended

Dec. 31, 2011

GOODWILL.

GOODWILL

NOTE 7—GOODWILL

          The changes in the carrying amount of goodwill for the years ended December 31, 2011 and 2010 are as follows:

	2011			2010
Balance as of January 1
Goodwill	$	144,428		$	144,428
Accumulated impairment losses		(95,954	)		(49,363	)
		48,474			95,065
Acquisitions		20,531			—
Impairment losses		(34,314	)		(46,591	)
		(13,783	)		(46,591	)
Balance as of December 31
Goodwill		164,959			144,428
Accumulated impairment losses		(130,268	)		(95,954	)
	$	34,691		$	48,474

          As a result of the Company's annual impairment test performed during the fourth quarter of 2011, the Company recorded pre-tax non-cash impairment charge of $34.3 million associated with goodwill. During the third quarter of 2010, the Company also recorded a pre-tax non-cash impairment charge of $46.6 million associated with goodwill.

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INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2011

INTANGIBLE ASSETS

INTANGIBLE ASSETS

NOTE 8—INTANGIBLE ASSETS

          The carrying amount of intangible assets, net of accumulated amortization and impairment charges, as of December 31, 2011 and 2010 consisted of the following:

	2011
	Gross Carrying Amount		Acquisitions		Accumulated Amortization			Impairment Losses(1)			Net Book Value
Amortizable intangibles:
Customer relationships	$	42,500	$	9,640	$	(21,056	)	$	—		$	31,084
Noncompete agreements		5,500		165		(5,535	)		—			130
Software		1,500		—		(1,500	)		—			—
Backlog		3,000		1,880		(3,862	)		—			1,018
Databases(1)		9,500		1,840		(3,331	)		(6,391	)		1,618
Trademark and trade names(2)		57,000		2,730		(30	)		(58,480	)		1,220
Intangibles	$	119,000	$	16,255	$	(35,314	)	$	(64,871	)	$	35,070

(1)

Included impairment of $6.4 million recorded during the fourth quarter of 2008.

(2)

Included impairment of $27.4 million recorded during the fourth quarter of 2011.

	2010
	Gross Carrying Amount		Accumulated Amortization			Impairment Losses			Net Book Value
Amortizable intangibles:
Customer relationships	$	42,500	$	(14,842	)	$	—		$	27,658
Noncompete agreements		5,500		(4,297	)		—			1,203
Software		1,500		(1,172	)		—			328
Backlog		3,000		(3,000	)		—			—
Databases(1)		9,500		(2,452	)		(6,391	)		657
		62,000		(25,763	)		(6,391	)		29,846
Indefinite-lived:
Trademark and trade names		57,000		—			(31,100	)		25,900
Intangibles	$	119,000	$	(25,763	)	$	(37,491	)	$	55,746

(1)

Included impairment of $6.4 million recorded during the fourth quarter of 2008.

          Amortization expense was $9.5 million, $8.4 million and $8.1 million for the years ended December 31, 2011, 2010 and 2009, respectively. The estimated future amortization expense subsequent to December 31, 2011, is as follows:

2012	$	7,150
2013		5,827
2014		5,191
2015		4,988
2016		4,673
Thereafter		7,241
	$	35,070

          In the fourth quarter of 2011, we reclassified our acquired trademarks and trade names to definite lived assets which will be amortized over a remaining useful of approximately seven years. We decided to merge our individual corporate brands into one global integrate go-to-market business under the ISG brand. As a result of this transition, during our annual impairment test, we concluded that the indefinite lived trademarks and trade names were impaired by $27.4 million.

          During the third quarter of 2010, the Company also recorded pre-tax non-cash impairment charges of $5.9 million associated with intangible assets.

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RESTRUCTURING ACCRUAL

12 Months Ended

Dec. 31, 2011

RESTRUCTURING ACCRUAL

RESTRUCTURING ACCRUAL

NOTE 10—RESTRUCTURING ACCRUAL

          Concurrent with the closing of the Compass acquisition, the Company initiated a workforce reduction focused on implementing selected cost savings and productivity improvements. The workforce reduction is focused on integration-related cost synergies including selling, general and administrative support, elimination of unnecessary sales and advisory positions and real estate consolidations.

          A summary of the activity affecting the Company's accrued contractual termination benefit liability for the year ended December 31, 2011 is as follows:

	Workforce Reductions
Balance at December 31, 2010	$	—
Amounts accrued		2,683
Amounts paid/incurred		(2,071	)
Balance at December 31, 2011	$	612

          The $2.7 million of net restructuring charges was primarily related to contractual termination benefits, and was recorded in selling, general and administrative expenses. We expect that the remaining actions of our workforce reduction will be completed over the next three months.

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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2011

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 15—RELATED PARTY TRANSACTIONS

          From time to time, the Company may have receivables and payables with employees and shareholders. All related party transactions have been conducted in the normal course of business as if the parties were unrelated. As of December 31, 2011 and December 31, 2010, the Company had outstanding receivables from related parties, including shareholders, totaling $46,419 and $52,270, respectively, and no outstanding payables.

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UNAUDITED QUARTERLY INFORMATION

12 Months Ended

Dec. 31, 2011

UNAUDITED QUARTERLY INFORMATION

UNAUDITED QUARTERLY INFORMATION

NOTE 20—UNAUDITED QUARTERLY INFORMATION

	Quarters Ended
	March 31, 2011			June 30, 2011			September 30, 2011			December 31, 2011
Fiscal 2011:
Net sales	$	40,658		$	50,253		$	48,901		$	44,614
Gross profit	$	16,428		$	22,535		$	20,896		$	19,744
Operating (loss) income(1)	$	(5,187	)	$	2,513		$	1,777		$	(59,945	)
Other expense, net	$	(815	)	$	(625	)	$	(980	)	$	(1,001	)
(Loss) income from operations	$	(6,002	)	$	1,888		$	797		$	(60,946	)
Net (loss) income	$	(2,045	)	$	687		$	(2,593	)	$	(51,986	)
Basic (loss) earnings per share	$	(0.06	)	$	0.02		$	(0.07	)	$	(1.44	)
Diluted earnings (loss) per share	$	(0.06	)	$	0.02		$	(0.07	)	$	(1.44	)
Basic weighted average common shares		36,104			36,376			36,337			36,213
Diluted weighted average common shares		36,104			38,379			36,337			36,213

	Quarters Ended
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010
Fiscal 2010:
Net sales	$	34,844		$	33,372		$	32,190		$	31,607
Gross profit	$	16,363		$	15,593		$	13,548		$	14,981
Operating income (loss)(2)	$	1,666		$	1,027		$	(51,915	)	$	(2,519	)
Other income, net	$	(864	)	$	(710	)	$	(891	)	$	(885	)
Income (loss) from operations	$	802		$	317		$	(52,806	)	$	(3,404	)
Net income (loss)	$	460		$	186		$	(51,747	)	$	(2,064	)
Basic earnings (loss) per share	$	0.01		$	0.01		$	(1.61	)	$	(0.06	)
Diluted earnings (loss) per share	$	0.01		$	0.01		$	(1.61	)	$	(0.06	)
Basic weighted average common shares		31,922			31,981			32,044			32,255
Diluted weighted average common shares		32,134			32,219			32,044			32,255

(1)

As a result of its goodwill and intangible asset impairment assessments, ISG recorded an impairment charge of $34.3 million during the fourth quarter of 2011 associated with goodwill and $27.4 million related to intangible assets.

(2)

As a result of its goodwill and intangible asset impairment assessments, ISG recorded an impairment charge of $46.6 million during the third quarter of 2010 associated with goodwill and $5.9 million related to intangible assets.

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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Additional Paid-in Capital	Treasury Stock	Accumulated Other Comprehensive Loss	Retained (Accumulated Deficit)
Balance at Dec. 31, 2008	$ 130,581	$ 31	$ 186,716	$ (249)	$ (2,412)	$ (53,505)
Balance (in shares) at Dec. 31, 2008		31,358
Increase (Decrease) in Stockholders' Equity
Net loss	(2,836)					(2,836)
Other comperhensive (loss) income	891				891
Equity securities repurchased	(86)			(86)
Issuance of common stock	82	1	81
Issuance of common stock (in shares)		458
Issuance of treasury shares	162		(27)	278		(89)
Stock based compensation	2,831		2,831
Balance at Dec. 31, 2009	131,625	32	189,601	(57)	(1,521)	(56,430)
Balance (in shares) at Dec. 31, 2009		31,816
Increase (Decrease) in Stockholders' Equity
Net loss	(53,165)					(53,165)
Other comperhensive (loss) income	(32)				(32)
Issuance of common stock	302	1	301
Issuance of common stock (in shares)		801
Stock based compensation	3,087		3,087
Balance at Dec. 31, 2010	81,817	33	192,989	(57)	(1,553)	(109,595)
Balance (in shares) at Dec. 31, 2010	32,617	32,617
Increase (Decrease) in Stockholders' Equity
Net loss	(55,937)					(55,937)
Other comperhensive (loss) income	(694)				(694)
Equity securities repurchased	(1,225)			(1,225)
Issuance of common stock	322		322
Issuance of common stock (in shares)		558
Issuance of treasury shares			(832)	832
Issuance of common stock for acquisition	8,458	4	8,454
Issuance of common stock for acquisition (in shares)		3,500
Stock based compensation	3,143		3,143
Balance at Dec. 31, 2011	$ 35,884	$ 37	$ 204,076	$ (450)	$ (2,247)	$ (165,532)
Balance (in shares) at Dec. 31, 2011	36,675	36,675

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ACCOUNTS AND UNBILLED RECEIVABLES

12 Months Ended

Dec. 31, 2011

ACCOUNTS AND UNBILLED RECEIVABLES

ACCOUNTS AND UNBILLED RECEIVABLES

NOTE 4—ACCOUNTS AND UNBILLED RECEIVABLES

          Accounts and unbilled receivables consisted of the following:

	December 31, 2011		December 31, 2010
Accounts receivable	$	32,242	$	16,372
Unbilled revenue		10,563		10,179
Receivables from related parties		46		52
	$	42,851	$	26,603

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Dec. 31, 2011

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

Description	Balance at Beginning of Period		Balance Assumed in Acquisitions		Charges to Costs and Expenses		Deductions			Balance at End of Period
Year ended December 31, 2011:
Allowance for doubtful accounts	$	195		327		588		(561	)	$	549
Allowance for tax valuation	$	203		8,159		1,103		(439	)	$	9,026
Year ended December 31, 2010:
Allowance for doubtful accounts	$	206		—		40		(51	)	$	195
Allowance for tax valuation	$	118		—		85		—		$	203
Year ended December 31, 2009:
Allowance for doubtful accounts	$	132		—		510		(436	)	$	206
Allowance for tax valuation	$	—		—		118		—		$	118

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2011

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

NOTE 14—COMMITMENTS AND CONTINGENCIES

Employee Retirement Plans

          The Company's TPI subsidiary maintains a qualified profit-sharing plan (the "Plan"). Prior to January 1, 2008, the provisions of the Plan provide for a maximum employer contribution per eligible employee of the lesser of 12.75% of compensation or $25,500. Effective January 1, 2008, the contribution was adjusted to 3% of total cash compensation or $7,350, whichever is less. Employees are generally eligible to participate in the Plan after six months of service and are 100% vested upon entering the Plan. For the years ended December 31, 2011, 2010 and 2009, $1.3 million, $1.2 million and $1.6 million were contributed to the Plan by the Company, respectively.

Leases

          The Company leases its office space under long-term operating lease agreements which expire at various dates through December 2021. Under the operating leases, the Company pays certain operating expenses relating to the leased property and monthly base rent.

          Aggregate future minimum payments under noncancelable leases with initial or remaining terms of one year or more consist of the following at December 31, 2011:

	Operating Leases
2012	$	2,017
2013		1,436
2014		1,239
2015		903
2016		421
Thereafter		961
Total minimum lease payments	$	6,977

          The Company's rental expense for operating leases was $3.9 million, $1.4 million and $1.5 million, in 2011, 2010 and 2009, respectively.

STA Consulting Contingent Consideration

          As of December 31, 2011, we have recorded a liability of $6.8 million representing the estimated fair value of contingent consideration related to the acquisition of STA Consulting, of which $2.0 million is classified as current and is expected to be paid in the first quarter of 2012 and $4.8 million is classified as noncurrent.