10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 

FORM 10-Q

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

For the quarterly period ended March 31, 2016

OR

¨ 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: 0-22196

INNODATA INC.

(Exact name of registrant as specified in its charter)

Delaware	13-3475943
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
Three University Plaza	07601
Hackensack, New Jersey	(Zip Code)
(Address of principal executive offices)

(201) 371-8000

(Registrant’s telephone number, including area code)

[None]

(Former name, former address and former fiscal year, if changed since last report)

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 þ No ¨

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  þ    No  ¨

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.

Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer  ¨ Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

The number of outstanding shares of the registrant’s common stock, $.01 par value, as of April 30, 2016 was 25,445,071.

INNODATA INC. AND SUBSIDIARIES

For the Quarter Ended March 31, 2016

INDEX

Part I – Financial Information

		Page No.
Item 1.	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2016 and 2015	2
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	3
	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2016 and 2015	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
	Part II – Other Information
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)

	March 31,			December 31,
	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	25,386		$	24,908
Accounts receivable, net		10,317			9,249
Prepaid expenses and other current assets		3,018			2,900
Deferred income taxes		339			282
Total current assets		39,060			37,339
Property and equipment, net		4,515			4,723
Other assets		2,279			2,330
Deferred income taxes		1,345			1,382
Intangibles, net		4,124			3,987
Goodwill		1,531			1,476
Total assets	$	52,854		$	51,237
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,164		$	1,250
Accrued expenses		3,331			3,312
Accrued salaries, wages and related benefits		4,739			4,905
Income and other taxes		1,254			1,255
Current portion of long-term obligations		1,453			1,582
Deferred income taxes		-			76
Total current liabilities		12,941			12,380
Deferred income taxes		737			716
Long-term obligations		3,588			3,436
Commitments and contingencies
Non-controlling interests		(3,359	)		(3,507	)
STOCKHOLDERS’ EQUITY:
Serial preferred stock; 5,000,000 shares authorized, none outstanding		-			-
Common stock, $.01 par value; 75,000,000 shares authorized; 27,069,000 shares issued and 25,445,000 outstanding at March 31, 2016 and December 31, 2015		270			270
Additional paid-in capital		24,609			24,590
Retained earnings		17,927			17,924
Accumulated other comprehensive income (loss)		629			(84	)
		43,435			42,700
Less: treasury stock, 1,624,000 shares at March 31, 2016 and December 31, 2015, at cost		(4,488	)		(4,488	)
Total stockholders’ equity		38,947			38,212
Total liabilities and stockholders’ equity	$	52,854		$	51,237

See notes to condensed consolidated financial statements.

1

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended
	March 31,
	2016			2015
Revenues	$	15,698		$	13,802
Operating costs and expenses:
Direct operating costs		11,465			11,125
Selling and administrative expenses		3,811			4,135
Interest expense (income), net		13			(26	)
Totals		15,289			15,234
Income (loss) before income taxes		409			(1,432	)
Provision for income taxes		518			554
Net loss		(109	)		(1,986	)
Loss attributable to non-controlling interests		112			146
Net income (loss) attributable to Innodata Inc. and Subsidiaries	$	3		$	(1,840	)
Income (loss) per share attributable to Innodata Inc. and Subsidiaries:
Basic and diluted	$	0.00		$	(0.07	)
Diluted	$	0.00		$	0.00
Weighted average shares outstanding:
Basic		25,445			25,337
Diluted		25,574			25,337
Comprehensive income (loss):
Net loss	$	(109	)	$	(1,986	)
Pension liability adjustment, net of taxes		(82	)		10
Change in fair value of derivatives, net of taxes		439			506
Foreign currency translation adjustment, net of taxes		356			(539	)
Other Comprehensive income (loss)		713			(23	)
Total Comprehensive income (loss)		604			(2,009	)
Comprehensive loss attributed to non-controlling interest		112			146
Comprehensive income (loss) attributable to Innodata Inc. and Subsidiaries	$	716		$	(1,863	)

See notes to consolidated financial statements.

2

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
(In thousands)

	Three Months Ended
	March 31,
	2016			2015
Cash flow from operating activities:
Net loss	$	(109	)	$	(1,986	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		652			727
Stock-based compensation		279			285
Deferred income taxes		(167	)		(135	)
Pension cost		64			188
Changes in operating assets and liabilities:
Accounts receivable		(3,165	)		2,260
Prepaid expenses and other current assets		252			521
Other assets		(15	)		(67	)
Accounts payable and accrued expenses		3,180			487
Accrued salaries, wages and related benefits		(170	)		(220	)
Income and other taxes		(72	)		(4	)
Net cash provided by operating activities		729			2,056
Cash flow used in investing activities:
Capital expenditures		(153	)		(186	)
Net cash used in investing activities		(153	)		(186	)
Cash flow used in financing activities:
Payment of long term obligations		(190	)		(482	)
Net cash used in financing activities		(190	)		(482	)
Effect of exchange rate changes on cash and cash equivalents		92			(183	)
Net increase in cash and cash equivalents		478			1,205
Cash and cash equivalents, beginning of period		24,908			24,216
Cash and cash equivalents, end of period	$	25,386		$	25,421
Supplemental disclosures of noncash investing and financing activities:
Cash paid for income taxes	$	302		$	124

See notes to condensed consolidated financial statements.

3

INNODATA INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

(In thousands)

											Accumulated
					Additional						Other
	Common Stock				Paid-in			Retained			Comprehensive			Treasury
	Shares		Amount		Capital			Earnings			Income (Loss)			Stock			Total
January 1, 2016		25,445	$	270	$	24,590		$	17,924		$	(84	)	$	(4,488	)	$	38,212
Net income		-		-		-			3			-			-			3
Stock-based compensation		-		-		279			-			-			-			279
Acquisition of non-controlling interest		-		-		(260	)		-			-			-			(260	)
Pension liability adjustments, net of taxes		-		-		-			-			(82	)		-			(82	)
Foreign currency translation adjustment, net of taxes		-		-		-			-			356			-			356
Change in fair value of derivatives, net of taxes		-		-		-			-			439			-			439
March 31, 2016		25,445	$	270	$	24,609		$	17,927		$	629		$	(4,488	)	$	38,947
January 1, 2015		25,337	$	268	$	22,780		$	20,750		$	(287	)	$	(4,288	)	$	39,223
Net loss		-		-		-			(1,840	)		-			-			(1,840	)
Stock-based compensation		-		-		285			-			-			-			285
Pension liability adjustments, net of taxes		-		-		-			-			10			-			10
Foreign currency translation adjustment, net of taxes		-		-		-			-			(539	)		-			(539	)
Change in fair value of derivatives, net of taxes		-		-		-			-			506			-			506
March 31, 2015		25,337	$	268	$	23,065		$	18,910		$	(310	)	$	(4,288	)	$	37,645

See notes to consolidated financial statements.

4

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

1. Description of Business and Summary of Significant Accounting Policies

Description of Business- Innodata Inc. and Subsidiaries (the “Company”) is a global digital services and solutions company. The Company’s technology and services power leading information products and online retail destinations around the world. The Company’s solutions help prestigious enterprises harness the power of digital data to re-imagine how they operate and drive performance. The Company serves publishers, media and information companies, digital retailers, banks, insurance companies, government agencies and many other industries.

The Company operates in three reporting segments: Content Services (CS), Innodata Advanced Data Solutions (IADS) and Media Intelligence Solutions (MIS).

The Company’s CS segment provides solutions to digital retailers, information services companies, publishers and enterprises that have one or more of the following broad business requirements: development of digital content (including e-books); development of new digital information products; and operational support of existing digital information products and systems.

The Company’s IADS segment designs and develops new capabilities to enable clients in the financial services, insurance, medical and healthcare sectors to improve decision-support through digital technologies. IADS operates through two subsidiaries. Synodex offers a range of services for healthcare, medical and insurance companies, and docGenix provides services to financial services institutions. As of March 31, 2016, Innodata owned 91% of Synodex and 94% of docGenix, both limited liability companies.

In July 2014, the Company acquired MediaMiser, a leading provider of media monitoring and analysis software and professional services for organizations of all sizes. Through its innovative web-based and mobile solutions, MediaMiser reduces the time and effort it takes to gather, analyze and distribute valuable business intelligence extracted from traditional and social media sources. For organizations that prefer to outsource, MediaMiser also provides detailed analysis reports and daily media briefings through an expert client services team. In December 2014, the Company acquired intellectual property and related assets of Bulldog Reporter. Bulldog Reporter has provided PR industry newsletters, a journalist database, media intelligence and professional development programs for over 30 years. The Company’s MIS segment operates through its MediaMiser and Bulldog Reporter subsidiaries.

Basis of Presentation-The condensed consolidated financial statements for the interim periods included herein are unaudited; however, they contain all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company as of March 31, 2016, the results of its operations and comprehensive income (loss) for the three months ended March 31, 2016 and 2015, cash flows and stockholders’ equity for the three months ended March 31, 2016 and 2015. The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2015, included in the Company's Annual Report on Form 10-K. Unless otherwise noted, the accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the December 31, 2015 consolidated financial statements.

5

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

Principles of Consolidation-The consolidated financial statements include the accounts of Innodata Inc. and its wholly-owned subsidiaries, MediaMiser, a corporation in which the Company owns substantially all of the economic interest, and the Synodex and docGenix limited liability companies that are majority-owned by the Company. The non-controlling interests in the Synodex and docGenix limited liability companies are accounted for in accordance with Financial Accounting Standards Board (FASB) non-controlling interest guidance. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates-In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those related to revenue recognition, allowance for doubtful accounts and billing adjustments, long-lived assets, intangible assets, goodwill, valuation of deferred tax assets, valuation of securities underlying stock-based compensation, litigation accruals, pension benefits, purchase price allocation of the assets acquired in the acquisition of MediaMiser and Bulldog Reporter, valuation of derivative instruments and estimated accruals for various tax exposures.

Foreign Currency Translation-The functional currency for the Company’s production operations located in the Philippines, India, Sri Lanka and Israel is the U.S. dollar. Transactions denominated in Philippine pesos, Indian and Sri Lankan rupees and Israeli shekels are translated to U.S. dollars at rates which approximate those in effect on transaction dates.

The functional currency of the foreign subsidiaries located in Germany and Canada are the Euro and the Canadian dollar, respectively. The financial statements of these subsidiaries are reported in these respective currencies. Financial information is translated from the applicable functional currency to the U.S. dollar (the reporting currency) for inclusion in our condensed consolidated financial statements. Income, expenses and cash flows are translated at weighted average exchange rates prevailing during the fiscal period, and assets and liabilities are translated at fiscal period-end exchange rates. Resulting translation adjustments are included as a component of accumulated other comprehensive income (loss) in stockholders' equity. Foreign exchange transaction gains or losses are included in direct operating costs in the accompanying consolidated statements of operations and comprehensive income (loss).

Revenue Recognition-For the CS segment, revenue is recognized based on the quantity delivered or resources utilized, the period in which services are performed and delivered. Revenues for contracts billed on a time-and-materials basis are recognized as services are performed. Revenues under fixed-fee contracts, which are not significant to the overall revenues, are recognized on the percentage of completion method of accounting, as services are performed or milestones are achieved.

For the IADS segment, revenue is recognized primarily based on the quantity delivered and the period in which services are performed and deliverables are made as per contracts. A portion of our IADS segment revenue is derived from licensing our software and providing access to our hosted software platform. Revenue from such services are recognized monthly when access to the service is provided to the end user and there are no significant remaining obligations, persuasive evidence of an arrangement exists, the fees are fixed or determinable and collection is reasonably assured.

6

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

The MIS segment derives its revenues primarily from subscription arrangements and provision of enriched media analysis services. Revenue from subscriptions is recognized monthly when access to the service is provided to the end user and there are no significant remaining obligations, persuasive evidence of an arrangement exists, the fees are fixed or determinable and collection is reasonably assured. Revenues from enriched media analysis services are recognized when the services are performed and delivered to the clients.

Revenues include reimbursement of out-of-pocket expenses, with the corresponding out-of-pocket expenses included in direct operating costs.

Recent Accounting Pronouncements-In May 2014, the FASB issued guidance on revenue from contracts with customers. This update is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This accounting guidance is effective prospectively for annual reporting periods, and interim periods within those periods, beginning after December 15, 2017 and early adoption is permitted in the first quarter of 2017. Companies may use either a full retrospective or a modified retrospective approach to adopt the new standard when it takes effect. The Company has not yet determined the potential effects of the adoption of this standard on its condensed consolidated financial statements.

In November 2015, the FASB issued guidance related to balance sheet classification of deferred taxes. This new guidance requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not anticipate that adoption of this standard will have a material impact on its condensed consolidated financial statements.

In February 2016, the FASB issued guidance related to leases. This new guidance requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months.  The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases.  The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply.  This new guidance is effective for annual periods beginning after December 15, 2018.  Early application is permitted.  The Company has not yet determined the potential effects of the adoption of this standard on its condensed consolidated financial statements.

In March 2016, the FASB issued guidance relating to share based compensation. This new guidance is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The new guidance is effective for annual periods beginning after December 15, 2016.  Early application is permitted.  The Company does not anticipate that adoption of this standard will have a material impact on its condensed consolidated financial statements.

7

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

2. Property and Equipment

Property and equipment are stated at costs less accumulated depreciation and amortization (in thousands), and consist of the following:

	March 31,			December 31
	2016			2015
Equipment	$	13,450		$	13,437
Software		5,212			5,089
Furniture and equipment		2,123			2,313
Leasehold improvements		4,937			4,956
Total		25,722			25,795
Less: accumulated depreciation and amortization		(21,207	)		(21,072	)
	$	4,515		$	4,723

Depreciation and amortization expense of property and equipment was approximately $0.4 million and $0.5 million for the three months ended March 31, 2016 and 2015, respectively.

3. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the three months ended March 31, 2016 and March 31, 2015 were as follows (in thousands):

Balance as of January 1, 2016	$	1,476
Foreign currency translation adjustment		55
Balance as of March 31, 2016	$	1,531

Balance as of January 1, 2015	$	1,635
Foreign currency translation adjustment		(83	)
Balance as of March 31, 2015	$	1,552

Information regarding the Company’s acquisition-related intangible assets is as follows (in thousands):

	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Total
Gross carrying amounts:
Balance as of January 1, 2016	$	1,978	$	2,036	$	555	$	41	$	4,610
Foreign currency translation		137		141		17		4		299
Balance as of March 31, 2016	$	2,115	$	2,177	$	572	$	45	$	4,909

8

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

	Developed technology			Customer relationships			Trademarks and tradenames			Patents			Total
Gross carrying amounts:
Balance as of January 1, 2015	$	2,371		$	2,439		$	596		$	50		$	5,456
Foreign currency translation		(206	)		(211	)		(19	)		(4	)		(440	)
Balance as of March 31, 2015	$	2,165		$	2,228		$	577		$	46		$	5,016

	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Total
Accumulated amortization:
Balance as of January 1, 2016	$	280	$	240	$	98	$	5	$	623
Amortization expense		49		42		22		2		115
Foreign currency translation		24		20		2		1		47
Balance as of March 31, 2016	$	353	$	302	$	122	$	8	$	785

	Developed technology			Customer relationships			Trademarks and tradenames			Patents		Total
Accumulated amortization:
Balance as of January 1, 2015	$	99		$	85		$	11		$	-	$	195
Amortization expense		57			49			23			-		129
Foreign currency translation		(12	)		(10	)		(1	)		-		(23	)
Balance as of March 31, 2015	$	144		$	124		$	33		$	-	$	301

Amortization expense relating to acquisition-related intangible assets was $ $0.1 million for the three months ended March 31, 2016 and 2015, respectively.

Developed technology, customer relationships, trademarks and trade names are amortized over the estimated useful life of 10 years, 12 years and 5-10 years, respectively.

Estimated annual amortization expense for intangible assets subsequent to March 31, 2016 is as follows (in thousands):

Year	Amortization
2016	$	487
2017	$	487
2018	$	487
2019	$	472
2020	$	422
Thereafter	$	1,769
	$	4,124

9

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

4. Income Taxes

The Company had unrecognized tax benefits of approximately $1.3 million as of March 31, 2016 and approximately $1.2 million as of December 31, 2015. The portion of unrecognized tax benefits relating to interest and penalties was approximately $0.5 million at March 31, 2016 and December 31, 2015. The unrecognized tax benefits as of March 31, 2016 and December 31, 2015, if recognized, would have an impact on the Company’s effective tax rate.

The following presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the three months ended March 31, 2016 (amounts in thousands):

	Unrecognized tax benefits
Balance - January 1, 2016	$	1,207
Increase for tax provision		40
Interest accrual		14
Foreign currency revaluation		2
Balance - March 31, 2016	$	1,263

The Company is subject to Federal income tax, as well as income tax in various states and foreign jurisdictions. The Company is no longer subject to examination by Federal tax authorities for years prior to 2006 and by New Jersey tax authorities for years prior to 2012. Various foreign subsidiaries currently have open tax years from 2003 through 2014.

Pursuant to an income tax audit by the Indian Bureau of Taxation in 2009, the Company’s Indian subsidiaries received a tax assessment approximating $304,000 including interest, through March 31, 2016 for the fiscal year ended March 31, 2006. Management disagrees with the basis of these tax assessments, has filed an appeal against the assessments and is contesting them vigorously. In January 2012, the Indian subsidiary received a final tax assessment of approximately $1.0 million, including interest, for the fiscal year ended March 31, 2008, from the Indian Bureau of Taxation. Management disagrees with the basis of this tax assessment, and has filed an appeal against it. Due to this assessment, the Company recorded a tax provision amounting to $484,000 including interest through March 31, 2016. In April 2015, the Company received a favorable judgment whereby the Appeal Officer reduced the tax assessment to $0.3 million. Under the Indian Income Tax Act, however, the income tax assessing officer has the right to appeal against the judgment passed by the Appeal Officer. In the third quarter of 2015, the income tax assessing officer exercised this right and filed an appeal. Based on recent experience, management believes that the tax provision of $484,000 including interest is adequate. As the Company is continually subject to tax audits by the Indian Bureau of Taxation, the Company continuously assesses the likelihood of an unfavorable assessment for all fiscal years for which the Company has not been audited and, as of March 31, 2016, the Company recorded a tax provision amounting to $155,000 including interest for such year.

In 2015 the Company’s Indian subsidiary was subject to an inquiry by the Service Tax Bureau in India regarding the classification of services provided by this subsidiary, asserting that the services provided by this subsidiary fall under the category of online information and database access or retrieval services (OID Services), and not under the category of business support services (BS Services) that are exempt from service tax as historically indicated in the subsidiary’s service tax filings. In the event the Service Tax Bureau is successful in proving that the services fall under the category of OID Services the revenues earned by the Company’s Indian subsidiary would be subject to a service tax of approximately 14.5% of revenues and this would increase the operating costs of the Company by an equivalent amount. The revenues of the Company’s Indian subsidiary for the three months ended March 31, 2016 were $4.2 million. The Company disagrees with the Service Tax Bureau’s position and is contesting these assertions vigorously.

10

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

In 2016 the Company’s Indian subsidiary received notices of appeal from the Commissioner, Service Tax, seeking to reverse service tax refunds previously granted to our Indian subsidiary for certain quarters in 2014 and 2015, asserting that the services provided by this subsidiary fall under the category of OID Services and not BS Services. The Company disagrees with the basis of these appeals and is contesting them vigorously. The Company expects delays in receiving service tax refunds until such time as the appeals are adjudicated with finality.

From time to time the Company is also subject to various other tax proceedings and claims for its India and Philippines subsidiaries. The Company has recorded a tax provision amounting to $320,000 including interest through March 31, 2016, for several other ongoing tax proceedings in India and the Philippines. Although the ultimate outcome cannot be determined at this time, the Company continues to contest these claims vigorously.

The Company projects that during the period from 2016 through 2018 the U.S. entity may not have sufficient cash to pay in full amounts that will be payable by it to the Company’s Asian operating subsidiaries and that the cash deficit will amount to approximately $3.0 million. The resulting deferral in payments would result in a deemed dividend that would be taxable income to the U.S. entity and would be set off against its net operating loss carryforwards. The Company adjusted its deferred tax assets and the corresponding valuation allowance as of December 31, 2015 to reflect the projected deferral. In the first quarter of 2016 the U.S. entity deferred $2.0 million in payments due to its Asian operating subsidiaries.

5. Commitments and Contingencies

Litigation - In 2008, the Supreme Court of the Republic of the Philippines refused to review a decision of the Court of Appeals in Manila against a Philippines subsidiary of the Company that is inactive and has no material assets, and purportedly also against Innodata Inc., that orders the reinstatement of certain former employees of the subsidiary to their former positions and also orders the payment of back wages and benefits that aggregate approximately $8.0 million. Based on consultation with legal counsel, the Company believes that recovery against the Company is unlikely.

The Company is also subject to various legal proceedings and claims which arise in the ordinary course of business. 

While management currently believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s consolidated financial position or overall trends in consolidated results of operations, litigation is subject to inherent uncertainties. Substantial recovery against the Company in the above-referenced Philippines action could have a material adverse impact on the Company, and unfavorable rulings or recoveries in the other proceedings could have a material adverse impact on the operating results of the period in which the ruling or recovery occurs. In addition, the Company’s estimate of potential impact on the Company’s consolidated financial position or overall consolidated results of operations for the above legal proceedings could change in the future.

11

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

The Company’s legal reserves related to legal proceedings and claims are based on a determination of whether or not a loss is probable. The Company reviews outstanding proceedings and claims with external counsel to assess probability and estimates of loss. The reserves are adjusted if necessary. While the Company intends to defend these matters vigorously, adverse outcomes that it estimates could reach approximately $100,000 in the aggregate beyond recorded amounts are reasonably possible. If circumstances change, the Company may be required to record adjustments that could be material to its reported consolidated financial condition and results of operations.

Foreign Currency - To the extent that the currencies of the Company’s production facilities located in the Philippines, India, Sri Lanka and Israel fluctuate, the Company is subject to risks of changing costs of production after pricing is established for certain client projects. In addition, the Company is exposed to the risk of foreign currency fluctuation on the non U.S. dollar denominated revenues, and on the monetary assets and liabilities held by its foreign subsidiaries that are denominated in local currency.

Indemnifications-The Company is obligated under certain circumstances to indemnify directors, certain officers and employees against costs and liabilities incurred in actions or threatened actions brought against such individuals because such individuals acted in the capacity of director and/or officer or fiduciary of the Company. In addition, the Company has contracts with certain clients pursuant to whom the Company has agreed to indemnify the client for certain specified and limited claims. These indemnification obligations occur in the ordinary course of business and, in many cases, do not include a limit on potential maximum future payments. As of March 31, 2016, the Company has not recorded a liability for any obligations arising as a result of these indemnifications.

Liens-In connection with the procurement of tax incentives at one of the Company’s foreign subsidiaries, the foreign zoning authority was granted a first lien on the subsidiary’s property and equipment. As of March 31, 2016, the net book value of the property and equipment was $0.4 million.

6. Stock Options

In 2014, the Company adopted, with stockholder approval, amendments to the Innodata Inc. 2013 Stock Plan. The maximum number of shares of common stock that may be delivered, purchased or used for reference purposes (with respect to stock appreciation rights or stock units) with respect to awards granted under the Innodata Inc. 2013 Stock Plan, as amended and restated (the “2013 Plan”) is 2,138,655 shares of common stock of Innodata (“Stock”), plus (i) 41,096 shares of Stock that were available for issuance under the Innodata Isogen, Inc. 2009 Stock Plan, as amended and restated (the “Prior Plan”) as of June 4, 2013, plus (ii) any shares subject to an award or portion of any award under the Prior Plan that were outstanding as of June 4, 2013 that expire or terminate unexercised, become unexercisable or are forfeited or otherwise terminated, surrendered or canceled as to any shares without the delivery of shares of stock or other consideration. Shares of stock subject to options or stock appreciation rights granted under the 2013 Plan count against the share reserve as one share for every one share subject to such option or stock appreciation right and shares subject to any other type of award granted under the 2013 Plan count against the share reserve as two shares for every one share subject to such award. If any award, or portion of an award, under the 2013 Plan or Prior Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares without the delivery of shares of Stock or other consideration, the shares subject to such award will thereafter be available for further awards under the 2013 Plan as provided in the next sentence. Shares of Stock that again become available for awards pursuant to the expiration, termination, forfeiture or cancellation of any award (other than an option or stock appreciation right) granted under the 2013 Plan, or of any award (other than an option or stock appreciation right) granted after March 31, 2011 under the Prior Plan, will be added back as two shares for every one share subject to such award or Prior Plan award. All other awards under the 2013 Plan and all other awards under the Prior Plan will be added back as one share for every one share subject to such award or Prior Plan award. The number of shares used for reference purposes in connection with these awards will be considered "delivered" for purposes of computing the maximum number of shares that may be delivered under the 2013 Plan.

12

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. The weighted average fair values of the options granted and weighted average assumptions are as follows:

	Number of Options			Weighted - Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2016		3,970,146		$	3.02
Granted		710,000			2.67
Exercised		-			-
Forfeited/Expired		(65,000	)		2.89
Outstanding at March 31, 2016		4,615,146		$	2.97		5.79	$	-
Exercisable at March 31, 2016		2,279,758		$	3.17		4.03	$	-
Vested and Expected to Vest at March 31, 2016		4,615,146		$	2.97		5.79	$	-

The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. The weighted average fair values of the options granted and weighted average assumptions are as follows:

	Three Months Ended
	March 31,
	2016			2015
Weighted average fair value of options granted	$	1.09		$	-
Risk-free interest rate		1.38% - 1.73	%		-
Expected life (years)		5 - 6			-
Expected volatility factor		49	%		-
Expected dividends		-			-

The total compensation cost related to non-vested stock awards not yet recognized as of March 31, 2016 totaled approximately $2.0 million. The weighted-average period over which these costs will be recognized is twenty eight months.

The stock-based compensation expense related to the Company’s various stock awards was allocated as follows (in thousands):

13

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

	Three months ended March 31,
	2016		2015
Direct operating costs	$	90	$	91
Selling and administrative expenses		189		194
Total stock-based compensation	$	279	$	285

7. Long term obligations

Total long-term obligations as of March 31, 2016 and December 31, 2015 consist of the following (in thousands):

	March 31,		December 31,
	2016		2015
Vendor obligations
Capital lease obligations (1)	$	385	$	423
Deferred lease payments (2)		704		707
Microsoft licenses (3)		250		360
Acquisition related liability (4)		1,062		993
Pension obligations
Accrued pension liability		2,640		2,535
		5,041		5,018
Less: Current portion of long term obligations		1,453		1,582
Totals	$	3,588	$	3,436

⁽¹⁾ In March 2014, the Company entered into an equipment sale leaseback agreement with a financing company. The cash proceeds from the transaction were $0.9 million. The Company leased the equipment for a period of 36 months at an effective interest rate of approximately 6% and has the option to purchase the equipment for a nominal amount at the end of the lease term. The Company has accounted for this transaction as a financing arrangement, wherein the equipment remains on the Company’s books and will continue to be depreciated. As of March 31, 2016, the Company had made $0.7 million in lease payments under the sale leaseback agreement.

⁽²⁾ Deferred lease payments represent the effect of straight-lining operating lease payments over the respective lease terms.

⁽³⁾ In March 2014, the Company renewed a vendor agreement to acquire certain additional software licenses and to receive support and subsequent software upgrades on these and other currently owned software licenses through February 2017. Pursuant to this agreement, the Company is obligated to pay approximately $0.4 million annually over the term of the agreement. The total cost, net of deferred interest (in thousands), was allocated to the following asset accounts in 2014:

14

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

Prepaid expenses and other current assets	$	356
Other assets		713
Property and equipment		136
	$	1,205

⁽⁴⁾ Amount represents a portion of the purchase price consideration for the acquisition of MediaMiser as follows: $0.6 million to be paid by the Company on July 28, 2016 in shares of Innodata Inc.’s common stock, or at the Company’s option, in cash. In addition, the Company agreed to pay up to a maximum of $4.6 million of contingent consideration based on MediaMiser’s achieving certain revenue and EBITDA levels during the period from April 1, 2016 to March 31, 2017. The fair value of the contingent consideration as of March 31, 2016 was $0.5 million.

8. Comprehensive Income (Loss)

Accumulated other comprehensive loss, as reflected in the condensed consolidated balance sheets, consists of pension liability adjustments, net of taxes, foreign currency translation adjustment, net of taxes and changes in fair value of derivatives, net of taxes. The components of accumulated other comprehensive income (loss) as of March 31, 2016, and reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and 2015, were as follows (net of tax):

	Pension Liability Adjustment			Fair Value of Derivatives			Foreign Currency Translation Adjustment			Accumulated Other Comprehensive  Income (Loss)
Balance at January 1, 2016	$	1,523		$	(165	)	$	(1,442	)	$	(84	)
Other comprehensive income before reclassifications, net of taxes		-			386			356			742
Total other comprehensive income (loss) before reclassifications, net of taxes		1,523			221			(1,086	)		658
Net amount reclassified to earnings		(82	)		53			-			(29	)
Balance at March 31, 2016	$	1,441		$	274		$	(1,086	)	$	629

	Pension Liability Adjustment		Fair Value of Derivatives			Foreign Currency Translation Adjustment			Accumulated Other Comprehensive  Income (Loss)
Balance at January 1, 2015	$	497	$	(337	)	$	(447	)	$	(287	)
Other comprehensive income (loss) before reclassifications, net of taxes		-		474			(539	)		(65	)
Total other comprehensive income (loss) before reclassifications, net of taxes		497		137			(986	)		(352	)
Net amount reclassified to earnings		10		32			-			42
Balance at March 31, 2015	$	507	$	169		$	(986	)	$	(310	)

All reclassifications out of accumulated other comprehensive income (loss) had an impact on direct operating costs in the condensed consolidated statements of operations and comprehensive income (loss).

15

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

9. Segment Reporting and Concentrations

The Company’s operations are classified into three reportable segments: Content Services (CS), Innodata Advanced Data Solutions (IADS) and Media Intelligence Solutions (MIS).

The CS segment provides solutions to digital retailers, information services companies, publishers and enterprises that have one or more of the following broad business requirements: development of digital content (including e-books); development of new digital information products; and operational support of existing digital information products and systems.

The IADS segment performs advanced data analysis. IADS operates through two subsidiaries: Synodex and docGenix. Synodex offers a range of data analysis services in the healthcare, medical and insurance areas. docGenix provides services to certain financial services institutions.

In July 2014, the Company acquired MediaMiser, an Ottawa, Canada-based provider of automated, real-time traditional and social media monitoring services. In December 2014, the Company acquired intellectual property and related assets of Bulldog Reporter. Both these businesses constitute the Company’s MIS segment.

A significant portion of the Company’s revenues is generated from its production facilities in the Philippines, India, Sri Lanka, Canada, Germany and Israel.

Revenues from external clients and segment operating profit (loss), and other reportable segment information are as follows (in thousands):

16

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

	Three Months Ended March 31,
	2016			2015
Revenues:
Content Services	$	13,644		$	12,191
IADS		897			405
MediaMiser		1,157			1,206
Total Consolidated	$	15,698		$	13,802
Income (loss) before provision for income taxes(1):
Content Services	$	2,246		$	362
IADS		(1,369	)		(1,596	)
MediaMiser		(468	)		(198	)
Total Consolidated	$	409		$	(1,432	)
Income (loss) before provision for income taxes(2):
Content Services	$	1,542		$	(219	)
IADS		(671	)		(1,015	)
MediaMiser		(462	)		(198	)
Total Consolidated	$	409		$	(1,432	)

	March 31, 2016		December 31, 2015
Total assets:
Content Services	$	41,882	$	41,842
IADS		1,046		1,026
MediaMiser		9,926		8,369
Total Consolidated	$	52,854	$	51,237

⁽¹⁾ Before elimination of any inter-segment profits

⁽²⁾ After elimination of any inter-segment profits

The following table summarizes revenues by geographic region (determined based upon customer’s domicile) (in thousands):

	Three months ended
	March 31,
	2016		2015
United States	$	8,273	$	6,588
The Netherlands		2,562		2,112
United Kingdom		1,981		2,201
Canada		404		1,370
Other - principally Europe		2,478		1,531
	$	15,698	$	13,802

17

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

Long-lived assets as of March 31, 2016 and December 31, 2015, respectively, by geographic region, are comprised of (in thousands):

	March 31,		December 31,
	2016		2015
United States	$	1,064	$	1,104
Foreign countries:
Philippines		1,457		5,223
India		1,507		1,611
Sri Lanka		572		1,580
Canada		5,538		635
Israel		30		31
Germany		2		2
Total foreign		9,106		9,082
	$	10,170	$	10,186

Two clients in the CS Segment generated approximately 31% of the Company’s total revenues for the three months ended March 31, 2016 and 34% of the Company’s total revenues for the three months ended March 31, 2015. Another client in the CS segment accounted for 13% of the Company’s total revenues for the three months ended March 31, 2016 but accounted for less than 10% of the Company’s total revenues for the years ended March 31, 2015. No other client accounted for 10% or more of total revenues during these periods. Further, for the three months ended March 31, 2016 and 2015, revenues from non-U.S. clients accounted for 47% and 52%, respectively, of the Company’s total revenues.

As of March 31, 2016, approximately 53% of the Company's accounts receivable was from foreign (principally European) clients and 66% of accounts receivable was due from four clients. As of December 31, 2015, approximately 62% of the Company's accounts receivable was from foreign (principally European) clients and 68% of accounts receivable was due from four clients.

10. Income (Loss) Per Share

	Three months ended March 31,
	2016		2015
	(in thousands)
Net income (loss) attributable to Innodata Inc. and Subsidiaries	$	3	$	(1,840	)
Weighted average common shares outstanding		25,445		25,337
Dilutive effect of outstanding options		129		-
Adjusted for dilutive computation		25,574		25,337

18

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by considering the impact of the potential issuance of common shares, using the treasury stock method, on the weighted average number of shares outstanding. For those securities that are not convertible into a class of common stock, the “two-class” method of computing income per share is used.

Options to purchase 4.4 million shares and 2.6 million shares of common stock for the three months ended March 31, 2016 and 2015, respectively, were outstanding but not included in the computation of diluted net income (loss) per share, because the options exercise price was greater than the average market price of the common shares and, therefore, the effect would have been anti-dilutive. In addition, diluted net income (loss) per share for the three months ended March 31, 2015 does not include 1.0 million potential common shares, derived from the exercise of stock options, because as a result of the Company’s incurring losses, their effect would have been anti-dilutive.

11. Derivatives

The Company conducts a large portion of its operations in international markets that subject it to foreign currency fluctuations. The most significant foreign currency exposures occur when revenue and associated accounts receivable are collected in one currency and expenses to generate that revenue are incurred in another currency. The Company’s primary exchange rate exposure relates to payroll, other payroll costs and operating expenses in the Philippines, India, Sri Lanka and Israel.

In addition, although the majority of the Company’s revenues is denominated in U.S. dollars, a significant portion of the total revenues is denominated in Canadian dollars and Euros.

To manage its exposure to fluctuations in foreign currency exchange rates, the Company entered into foreign currency forward contracts, authorized under Company policies, with counterparties that were highly rated financial institutions. The Company utilized non-deliverable forward contracts expiring within twelve months to reduce its foreign currency risk.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. The Company does not hold or issue derivatives for trading purposes. All derivatives are recognized at their fair value and classified based on the instrument’s maturity date. The total notional amount for outstanding derivatives as of March 31, 2016 and December 31, 2015 was $19.3 million and $15.8 million, respectively, which is comprised of cash flow hedges denominated in U.S. dollars.

The following table presents the fair value of derivative instruments included within the consolidated balance sheets as of March 31, 2016 and December 31, 2015 (in thousands):

	Balance Sheet Location	Fair Value
		2016		2015
Derivatives designated as hedging instruments:
Foreign currency forward contracts	Prepaid expenses and other current assets	$	274	$	-
Foreign currency forward contracts	Accrued expenses	$	-	$	165

19

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

The effects of foreign currency forward contracts designated as cash flow hedges on the Company’s condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2016 and 2015, respectively, were as follows (in thousands):

	Three Months Ended
	March 31,
	2016			2015
Net gain recognized in OCI(1)	$	386		$	474
Net loss reclassified from accumulated OCI into income(2)	$	(53	)	$	(32	)
Net gain recognized in income(3)	$	-		$	-

⁽¹⁾Net change in fair value of the effective portion classified into other comprehensive income ("OCI")

⁽²⁾Effective portion classified within direct operating costs

⁽³⁾There were no ineffective portions for the period presented.

12. Financial Instruments

The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximated their fair value as of March 31, 2016 and December 31, 2015, because of the relative short maturity of these instruments.

“Fair Value Measurements and Disclosures” defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The accounting standard establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three levels. The three levels are defined as follows:

· Level 1: Unadjusted quoted price in active market for identical assets and liabilities.

· Level 2: Observable inputs other than those included in Level 1.

· Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The following table sets forth the assets and liabilities as of March 31, 2016 and December 31, 2015 that the Company measured at fair value, on a recurring basis by level, within the fair value hierarchy (in thousands). As required by the standard, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.

20

INNODATA INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(Unaudited)

March 31, 2016	Level 1		Level 2		Level 3
Assets
Derivatives	$	-	$	274	$	-
Liabilities
Contingent Considerations	$	-	$	-	$	485

December 31, 2015	Level 1		Level 2		Level 3
Liabilities
Derivatives	$	-	$	165	$	-
Contingent Considerations	$	-	$	-	$	453

The following table summarizes the change in fair value of the Level 3 liability for the three months ended March 31, 2016:

Balance as of December 31, 2015	$	453
Foreign currency translation adjustment		32
Balance as of March 31, 2016	$	485

The Level 2 liabilities contain foreign currency forward contracts. Fair value is determined based on the observable market transactions of spot and forward rates. The fair value of these contracts as of March 31, 2016 is included in prepaid and other current assets in the accompanying condensed consolidated balance sheets. The fair value of these contracts as of December 31, 2015 is included in accrued expenses in the accompanying condensed consolidated balance sheets.

The acquisition of MediaMiser includes contingent consideration that requires additional amounts to be paid by the Company based on MediaMiser’s revenues and EBITDA during the period from April 1, 2016 to March 31, 2017. The fair value measurement of the contingent consideration obligation is determined using Level 3 unobservable inputs supported by little or no market activity by applying the probability-weighted discounted cash flow approach. The fair value of the contingent consideration as of March 31, 2016 and December 31, 2015 was $0.5 million, and the Company has recorded this amount in long term obligations in the condensed consolidated financial statements.

21

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Disclosures in this Form 10-Q contain certain forward-looking statements, including without limitation, statements concerning our operations, economic performance, and financial condition. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “project,” “head start,” "believe," "expect," “should,” "anticipate," "indicate," "point to," “forecast,” “likely” and other similar expressions generally identify forward-looking statements, which speak only as of their dates.

These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties, including without limitation, that contracts may be terminated by clients; projected or committed volumes of work may not materialize; our Innodata Advanced Data Solutions (“IADS”) segment is a venture formed in 2011 with minimal revenue to date, that has incurred losses since inception and has recorded impairment charges for all of its fixed assets; we currently intend to continue to invest in IADS; the primarily at-will nature of contracts with our Content Services clients and the ability of these clients to reduce, delay or cancel projects; continuing Content Services segment revenue concentration in a limited number of clients; continuing Content Services segment reliance on project-based work; inability to replace projects that are completed, canceled or reduced; difficulty in integrating and deriving synergies from acquisitions, joint venture and strategic investments; potential undiscovered liabilities of companies that we may acquire; depressed market conditions; changes in external market factors; the ability and willingness of our clients and prospective clients to execute business plans which give rise to requirements for our services; changes in our business or growth strategy; the emergence of new or growing competitors; various other competitive and technological factors; and other risks and uncertainties indicated from time to time in our other filings with the Securities and Exchange Commission.

Our actual results could differ materially from the results referred to in the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the results referred to in the forward-looking statements contained in this Form 10-Q will occur.

We undertake no obligation to update or review any guidance or other forward-looking information, whether as a result of new information, future developments or otherwise.

Business Overview

Innodata (NASDAQ: INOD) is a global digital services and solutions company. Our technology and services power leading information products and online retail destinations around the world. Our solutions help prestigious enterprises harness the power of digital data to re-imagine how they operate and drive performance. We serve publishers, media and information companies, digital retailers, banks, insurance companies, government agencies and many other industries. Founded in 1988, we comprise a team of 5,000 diverse people in eight countries who are dedicated to delivering services and solutions that help the world embrace digital data as a means of enhancing our lives and transforming our businesses.​​

We operate in three reporting segments: Content Services (CS), Innodata Advanced Data Solutions (IADS) and Media Intelligence Solutions (MIS). Our CS segment provides solutions to digital retailers, information services companies, publishers and enterprises that have one or more of the following broad business requirements: development of digital content (including e-books); development of new digital information products; and operational support of existing digital information products and systems.

22

Many of our clients are driving or are responding to rapid and fundamental changes in the way end users discover, consume and create published information. For some of our publishing and information services clients, this means transforming information products from print to digital; for others, it means migrating already-digital products from web-only distribution to multiple-channel distribution that includes mobile and tablet devices and incorporates mobility, social platform and semantic search; and for others still, it means re-tooling pure search-based information products into workflow-embedded analytical tools that combine content with software to enable context-aware decision-making; and for a select number of our information services clients, it means embracing the content-as-a-service model to integrate content with other tools, applications and data. Each of these transformations requires shifts in products, as well as the technology and the operations that support them.

For our enterprise publishing clients, changes in the way end users discover, consume and create published information often necessitates replacing old processes and technologies that generated static, whole documents with new processes and technologies that enable content to reside as modular components which are re-combined dynamically to create up-to-date, product-specific assembly guides, engineering diagrams/schematics, compliance documentation, field operations guides and clinical documentation destined simultaneously for the web, tablets and smartphones.

By blending consulting, technology and operations sourcing, along with deep domain expertise, we provide measurable outcomes for publishing companies, information services companies and enterprises through business transformation, accelerating innovation and efficient operations.

We are one of the largest producers of e-books, serving four of the five leading digital retailers of e-books as well as 80 leading trade, education and professional publishers that sell e-books. We manufacture both standard e-books and interactive e-books in a variety of formats (including EPUB, Mobi and Kindle) and in 12 major languages (including Japanese and Chinese). In addition, we distribute e-books on behalf of publishers and authors to more than 25 e-book retailers across North America, the United Kingdom, Australia and 24 countries in the European Union. Since the fall of 2011, we have produced over 1,000,000 e-book titles.

We help our clients develop high-value information products. Our clients include four of the ten largest information industry companies in the world, spanning financial, legal, healthcare and scientific information.

We work with clients at a strategic business and technology level to address business process and technology challenges related to digital content supply chain optimization and strategy. By aligning operations and technology with business goals, we help businesses accelerate new product development and introduction; control cost; consolidate and leverage technology investment; and obtain benefits of scale.

Many enterprises are embracing new digital information technologies and workflow processes within their operations in order to improve internal decision-support systems. We formed our IADS segment in mid-2011 to design and develop new capabilities to enable clients in the financial services, insurance, medical and healthcare sectors to improve decision-support through digital technologies. We believe that by creating and commercializing innovative business strategies and technology solutions we will be able to accelerate our growth and reduce our revenue volatility.

Our IADS segment operates through our Synodex and docGenix subsidiaries. As of March 31, 2016 we owned 91% of Synodex and 94% of docGenix.

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The main focus of the Synodex business is the extraction and classification of data from unstructured medical records in an innovative way to provide improved data service capabilities for insurance underwriting, insurance claims, medical records management and clinical trial support services. Synodex has developed and deployed its APS.Extract^® product for specific use with life insurance underwriting and claims.

The main focus of the docGenix business is the extraction and classification of data from unstructured legal documents in order to improve an organization’s ability to analyze documentation and feed actionable data to downstream applications.

The IADS subsidiaries have incurred losses and have reported minimal revenues since their inception in 2011. Our investment net of revenues in these subsidiaries in the first quarter of 2016 was approximately $0.7 million (consisting mainly of operating expenses). We wrote off all of the fixed assets of IADS in the third quarter of 2013 and have expensed all investments in IADS since that time. In the immediate future we intend to continue to invest in these subsidiaries net of revenues at the combined rate of $0.7 to $0.9 million per quarter.

Our MIS segment operates through our MediaMiser and Bulldog Reporter subsidiaries.

MediaMiser provides media monitoring and analysis software and professional services to several Fortune 500 companies and Canadian government institutions as well as small- and medium-sized businesses. Through web-based and mobile solutions, MediaMiser enables companies to reduce the time and effort required to extract, analyze and share valuable business intelligence from traditional and social media sources. For organizations that prefer to outsource, MediaMiser provides detailed analysis reports and daily media briefings through an expert client services team.

MediaMiser’s proprietary technology platform monitors, aggregates, analyzes and shares content from more than 200,000 sources across social, traditional and digital media. The platform includes a unique and patented sentiment analysis engine that identifies whether opinions expressed in a particular document or online text are positive, negative or neutral.

Increasingly, companies looking to market their products, identify market opportunities and manage their reputations are seeking technology and technology-enabled services to help them keep pace with the proliferation of traditional and social media news sources. We believe that MediaMiser’s technology platform is well suited to this need and will provide MediaMiser with a competitive advantage as it seeks to expand into new geographical markets and penetrate further into its existing market.

Bulldog Reporter supplies media intelligence news and analysis to public relations and corporate communications professionals with the mission of helping these practitioners achieve competitive performance. Bulldog Reporter publishes the industry’s well-known trade journal, Bulldog Reporter’s Daily Dog. In addition, it publishes a daily online newsletter—Inside Health Media—that focuses on media relations, and it provides media list and media intelligence services through its Media Pro online directory. Bulldog Reporter presents industry awards competitions—the Bulldog Awards—which recognize excellence in multiple categories including corporate social responsibility, media relations, digital and social marketing, not-for-profit activity and overall outstanding professional performance.

Our services are organized and managed around three vectors: a vertical industry focus, a horizontal service/process focus, and a supportive operations focus.

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The vertically-aligned groups understand our clients’ businesses and strategic initiatives. The vertical group for each particular industry includes experts hired from that industry.

Our service/process-aligned groups include engineering personnel and delivery personnel. Our engineering teams are responsible for creating secure and efficient custom workflows and integrating proprietary and third-party technologies to automate manual processes and improve the consistency and quality of our work product. These tools include categorization engines that utilize pattern recognition algorithms based on comprehensive rule sets and related heuristics, data extraction tools that automatically retrieve specific types of information from large data sources, and workflow systems that enable various tasks and activities to be performed across our multiple facilities.

Our globally distributed delivery personnel are responsible for executing our client engagements in accordance with service-level agreements. We deliver services from facilities in the United States, India, the Philippines, Sri Lanka, Israel, Germany and Canada.

Other support groups are responsible for managing diverse enabling functions including human resources, organizational development, network and communications technology infrastructure support and physical infrastructure and facilities management.

Our sales staff, program managers and consultants operate primarily from our North American and European locations, as well as from client sites.

Recent Development

The Company recently became aware of certain potentially improper payments and related transactions made by or at the direction of certain foreign employees of a foreign subsidiary in connection with the inspection of the subsidiary’s compliance with local employment-related tax requirements. Based on the information known at this time, we believe that the amounts in question are not material with respect to the Company’s financial condition or results of operations. The Audit Committee has initiated an internal investigation into this matter with the assistance of independent counsel and forensic accountants, and has voluntarily contacted the U.S. Department of Justice and the U.S. Securities and Exchange Commission to advise them of the internal investigation. We are unable at this time to predict the result or cost of the Audit Committee’s investigation, the impact on our evaluation of internal controls, or what action may be taken by governmental authorities or penalties or remedial measures they may seek. We intend to cooperate fully with the authorities.

Revenues

In our CS segment revenues are recognized based on the quantity delivered or resources utilized and in the period in which the services are performed and once delivery has occurred. Revenues for contracts billed on a time-and-materials basis are recognized as services are performed. Revenues under fixed-fee contracts, which are not significant to the overall revenues, are recognized on the percentage of completion method of accounting, as services are performed or milestones are achieved.

In our IADS segment we recognize revenues primarily based on the quantity delivered, and the period in which services are performed and deliverables are made as per contracts. A portion of our IADS segment revenue is derived from licensing our software and providing access to our hosted software platform. Revenue from such services are recognized monthly when access to the service is provided to the end user and there are no significant remaining obligations, persuasive evidence of an arrangement exists, the fees are fixed or determinable and collection is reasonably assured.

Our MIS segment derives its revenues primarily from subscription arrangements and provision of enriched media analysis services. Revenue from subscriptions are recognized monthly when access to the service is provided to the end user and there are no significant remaining obligations, persuasive evidence of an arrangement exists, the fees are fixed or determinable, and collection is reasonably assured. Revenues from enriched media analysis services are recognized when the services are performed and delivered to the clients.

We consider standard accounting criteria for determining whether to report revenue gross as a principal versus net as an agent.  Factors considered include whether we are the primary obligor, have risks and rewards of ownership, and bear the risk that a client may not pay for the services performed.  If there are circumstances where the above criteria are not met and therefore we are not the principal in providing services, amounts received from clients are presented net of payments in the condensed consolidated statements of operations and comprehensive income (loss).

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Revenues include reimbursement of out-of-pocket expenses, with the corresponding out-of-pocket expenses included in direct operating costs.

Direct Operating Costs

Direct operating costs consist of direct payroll, occupancy costs, data center hosting fees, content acquisition costs, depreciation and amortization, travel, telecommunications, computer services and supplies, realized gain (loss) on forward contracts, foreign currency revaluation gain (loss), and other direct expenses that are incurred in providing services to our clients.

Selling and Administrative Expenses

Selling and administrative expenses consist of management and administrative salaries, sales and marketing costs including commissions, new services research and related software development, third-party software, advertising and trade conferences, professional fees and consultant costs, and other administrative overhead costs.

Adjusted EBITDA Performance Metric

In addition to measures of financial performance presented in our condensed consolidated financial statements, we monitor “Adjusted EBITDA” to help us evaluate our ongoing operating performance and including our ability to operate the business effectively.

We define Adjusted EBITDA as net income (loss) attributable to Innodata Inc. and Subsidiaries in accordance with GAAP before income taxes, depreciation, amortization of intangible assets, impairment charges, stock-based compensation, loss attributable to non-controlling interests and interest income (expense).

We believe Adjusted EBITDA is useful to our management and investors in evaluating our operating performance and for financial and operational decision-making purposes. In particular, it facilitates comparisons of the core operating performance of our company from period to period on a consistent basis and helps us to identify underlying trends in our business. We believe it provides useful information about our operating results, enhances the overall understanding of our past performance and future prospects and allows for greater transparency with respect to key metrics used by the management in our financial and operational decision-making. We use this measure to establish operational goals for managing our business and evaluating our performance. 

Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for results reported under GAAP. Some of these limitations are:

· Adjusted EBITDA does not reflect tax payments, and such payments reflect a reduction in cash available to us;

· Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs and for our cash expenditures or future requirements for capital expenditures or contractual commitments;

· Adjusted EBITDA excludes the potential dilutive impact of stock-based compensation expense related to our workforce, interest income (expense) and net loss attributable to noncontrolling interests, and these items may represent a reduction or increase in cash available to us;

· Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; and

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· Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently from our calculation, limiting its usefulness as a comparative measure.

Adjusted EBITDA should be considered as a supplement to, and not as a substitute for or superior to, GAAP net income.

The following table shows reconciliation from net income (loss) to Adjusted EBITDA for the periods presented (in thousands):

	Three Months Ended
	March 31,
	2016			2015
Adjusted EBITDA:
Net income (loss) attributable to Innodata Inc. and Subsidiaries	$	3		$	(1,840	)
Depreciation and amortization		652			727
Stock-based compensation		279			285
Provision for income taxes		518			554
Interest expense (income), net		13			(26	)
Non-controlling interests		(112	)		(146	)
Adjusted EBITDA	$	1,353		$	(446	)

Results of Operations

Three Months Ended March 31, 2016 and 2015

Revenues

Total revenues were $15.7 million for the three months ended March 31, 2016 compared to $13.8 million for the three months ended March 31, 2015, an increase of $1.9 million or approximately 14%.

Revenues from the CS segment were $13.6 million and $12.2 million for the three months ended March 31, 2016 and 2015, respectively, an increase of $1.4 million or approximately 12%. This increase is primarily attributable to e-book related services from one client and revenue from other non e-book clients including ramp-up on a new project for a European publisher.

Revenues from the IADS segment were $0.9 million for the three months ended March 31, 2016 and $0.4 million for the three months ended March 31, 2015, an increase of $0.5 million or 122%. The increase is primarily attributable to an increase in the volume of work from Synodex clients.

Revenues from the MIS segment were $1.2 million for the three months ended March 31, 2016 and 2015, respectively.

Two clients in the CS Segment generated approximately 31% of our total revenues for the three months ended March 31, 2016 and 34% of our total revenues for the three months ended March 31, 2015. Another client in the CS segment accounted for 13% of our total revenues for the three months ended March 31, 2016 but accounted for less than 10% of our total revenues for the years ended March 31, 2015. No other client accounted for 10% or more of total revenues during these periods. Further, for the three months ended March 31, 2016 and 2015, revenues from non-U.S. clients accounted for 47% and 52%, respectively, of our total revenues.

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Direct Operating Costs

Direct operating costs were $11.5 million and $11.1 million for the three months ended March 31, 2016 and 2015, respectively, an increase of $0.4 million or 3%. Direct operating costs as a percentage of total revenues declined to 73% for the three months ended March 31, 2016 compared to 81% for the three months ended March 31, 2015.

Direct operating costs for the CS segment were approximately $9.5 million and $9.3 million for the three months ended March 31, 2016 and 2015, respectively, an increase of $0.2 million or 2%. Direct operating costs for the CS segment as a percentage of CS segment revenues were 69% and 77% for the three months ended March 31, 2016 and 2015, respectively. The decrease in direct operating costs as a percentage of CS segment revenues was principally attributable to increase in CS revenues.

Direct operating costs for the IADS segment were $1.2 million for the three months ended March 31, 2016 and $1.1 million for the three months ended March 31, 2015, net of intersegment profits. The increase in direct operating costs for the IADS segment is primarily due to an increase in production headcount. Direct operating costs for the IADS segment as a percentage of IADS segment revenues were 133% and 267% for the three months ended March 31, 2016 and 2015, respectively. The decrease in direct operating costs as a percentage of IADS segment revenues was principally attributable to the increase in IADS revenues by 122%.

Direct operating costs for the MIS segment were $0.8 million and $0.7 million for the three months ended March 31, 2016 and 2015, respectively. The increase in direct operating costs for the IADS segment is primarily due to an increase in data and content-related costs. Direct operating costs for the MIS segment as a percentage of MIS segment revenues were 71% and 54% for the three months ended March 31, 2016 and 2015, respectively. The increase in direct operating costs as a percentage of MIS segment revenues was principally attributable to increase in direct operating costs on constant revenues.

Selling and Administrative Expenses

Selling and administrative expenses were $3.8 million for the three months ended March 31, 2016 compared to $4.1 million for the three months ended March 31, 2015, a decrease of $0.3 million or approximately 8%. Selling and administrative expenses as a percentage of total revenues decreased to 24% for the three months ended March 31, 2016 compared to 30% for the three months ended March 31, 2015.

Selling and administrative expenses for the CS segment were $2.6 million and $3.0 million in these respective periods. The decline in selling and administrative expenses for the CS segment is primarily due to payroll cost optimization and a decline in other administrative costs. Selling and administrative expenses for the CS segment as a percentage of CS segment revenues decreased to 19% for the three months ended March 31, 2016 compared to 25% for the three months ended March 31, 2015. The decrease in selling and administrative expenses as a percentage of CS segment revenues was principally attributable to increase in CS revenues and decline in selling and administrative expenses.

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Selling and administrative expenses for the IADS segment for the respective periods were $0.4 million and $0.3 million, net of intersegment profits. Selling and administrative expenses for the IADS segment as a percentage of IADS segment revenues decreased to 42% for the three months ended March 31, 2016 compared to 83% for the three months ended March 31, 2015. The decrease in selling and administrative expenses as a percentage of IADS segment revenues was principally attributable to the increase in IADS revenues by 122%.

Selling and administrative expenses for the MIS segment were $0.8 million for the three months ended March 31, 2016 and 2015, respectively. Selling and administrative expenses for the MIS segment as a percentage of MIS segment revenues increased to 69% for the three months ended March 31, 2016 from 62% for the three months ended March 31, 2015.

Income Taxes

We recorded a provision for income taxes of approximately $0.5 million and $0.6 million for the three months ended March 31, 2016 and 2015, respectively. Taxes primarily consist of a provision for foreign taxes recorded in accordance with the local tax regulations by our foreign subsidiaries. Effective income tax rates are disproportionate due to the losses incurred by our U.S. entity and our Canadian subsidiary and a valuation allowance recorded on deferred taxes on these entities. Some of our foreign subsidiaries are subject to tax holidays or preferential tax rates which reduce our overall effective tax rate when compared to the U.S. statutory tax rate. In addition, the earnings of our foreign subsidiaries are not subject to tax in the U.S. unless the earnings are repatriated.

We have a valuation allowance on all our U.S. deferred tax assets on account of continuing losses incurred by our U.S. entity. In addition, we also have a valuation allowance on deferred tax assets of the MIS segment.

Net Income (Loss)

We generated net income of $3,000 during the three months ended March 31, 2016compared to a net loss of $1.8 million during the three months ended March 31, 2015.

Net income for the CS segment was $1.2 million for the three months ended March 31, 2016, compared to a net loss of $0.6 million for the three months ended March 31, 2015, net of intersegment profits. This change is primarily on account of an increase in revenues and a decline in selling and administrative expenses.

Net loss for the IADS segment was $0.7 million for the three months ended March 31, 2016 compared to $1.0 million for the three months ended March 31, 2015, net of intersegment profits. The decline in net loss is primarily due to an increase in revenues.

Net loss for the MIS segment was $0.5 million for the three months ended March 31, 2016 compared to $0.2 million for the three months ended March 31, 2015. This change is primarily on account of an increase in direct operating costs.

Adjusted EBITDA

Adjusted EBITDA for the three months ended March 31, 2016 was $1.4 million compared to a loss of $0.4 million for the three months ended March 31, 2015, an increase of $1.8 million. Adjusted EBITDA for the CS segment was $2.4 million and $0.6 million for the three months ended March 31, 2016 and 2015, respectively, an increase of $1.8 million or approximately 287%. Adjusted EBITDA was a loss of $0.7 million and a loss of $1.0 million for the IADS segment for the three months ended March 31, 2016 and 2015, respectively. Adjusted EBITDA was a loss of $0.3 million for the three months ended March 31, 2016 and was break-even for the three months ended March 31, 2015 for the MIS segment.

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Liquidity and Capital Resources

Selected measures of liquidity and capital resources, expressed in thousands, are as follows:

	March 31, 2016		December 31, 2015
Cash and cash equivalents	$	25,386	$	24,908
Working capital		26,119		24,959

At March 31, 2016 we had cash and cash equivalents of $25.4 million, of which $22.2 million was held by our foreign subsidiaries located in Asia and $3.2 million was held in the United States. If needed, amounts held by foreign subsidiaries can be repatriated to the United States to satisfy working capital needs of the U.S. entity, but under current law, such amounts would be subject to United States federal income taxes. As of March 31, 2016 our intent is to permanently reinvest these funds outside the United States, except for $3.0 million in projected deemed dividend described below.

We have used, and plan to use, our cash and cash equivalents for (i) investments in IADS which are expected to be at the rate of $0.7-$0.9 million per quarter in the immediate future; (ii) investment of $0.7 million in our MIS segment: (iii) the expansion of our other operations; (iv) general corporate purposes, including working capital; and (v) possible business acquisitions. As of March 31, 2016, we had working capital of approximately $26.1 million, as compared to working capital of approximately $25.0 million as of December 31, 2015.

We believe that our existing cash and cash equivalents and internally generated funds will provide sufficient sources of liquidity to satisfy our financial needs for the next 12 months. However, we may curtail or lessen our continuing investments in our IADS segment and other segments, or reduce our operating expenses, if these funds are insufficient and outside financing is not available on terms we find attractive.

We project that during the period from 2016 through 2018 the U.S. entity may not have sufficient cash to pay in full amounts that will be payable by it to our Asian operating subsidiaries and that the cash deficit will amount to approximately $3.0 million. The resulting deferral in payments would result in a deemed dividend that would be taxable income to the U.S. entity and would be set off against its net operating loss carryforwards. We adjusted our deferred tax assets and the corresponding valuation allowance as of December 31, 2015 to reflect the projected deferral. In the first quarter of 2016 the U.S. entity deferred $2.0 million in payments due to its Asian operating subsidiaries.

In October 2015 we filed a shelf registration statement on Form S-3, which will give us the ability to offer from time to time up to an aggregate of $70 million of securities, subject to market cap limitations, which may consist of common stock, preferred stock, debt securities, warrants, or units consisting of any of the foregoing. The registration is intended to give us flexibility should financing opportunities arise.

Net Cash Provided By Operating Activities

Cash provided by our operating activities for the three months ended March 31, 2016 was $0.7 million, resulting from a net loss of $0.1 million and adjustments for non-cash items of $0.8 million. Adjustments for non-cash items primarily consisted of $0.7 million for depreciation and amortization, stock option expense of $0.3 million and reduction in tax provisions of $0.2 million.

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Cash provided by our operating activities for the three months ended March 31, 2015 was $2.1 million, resulting from a net loss of $2.0 million, adjustments for non-cash items of $1.1 million, and $3.0 million provided by working capital changes. Adjustments for non-cash items primarily consisted of $0.7 million for depreciation and amortization and stock option expense of $0.3 million. Working capital activities primarily consisted of a source of cash of $2.3 million as a result of net collections of accounts receivable and a source of cash of $0.5 million for a decrease in prepaid expenses and other current assets.

Our days’ sales outstanding (DSO) for the three months ended March 31, 2016 was approximately 57 days as compared to 61 days for the year ended December 31, 2015. We calculate DSO for a reported period by first dividing the total revenues for the period by the average net accounts receivable for the period (which is the sum of the net accounts receivable at the beginning of the period and the net accounts receivable at the end of the period, divided by two), to yield an amount we refer to as the “accounts receivable turnover.” Then we divide the total number of days within the reported period by the accounts receivable turnover to yield DSO expressed in number of days.

Net Cash Used In Investing Activities

For each of the three months ended March 31, 2016 and 2015 cash used in our investing activities for capital expenditures was $0.2 million that principally consisted of purchases of technology equipment, including workstations and software. We continue to expense all capital expenditures for the IADS segment. During the next twelve months, we anticipate that capital expenditures for ongoing technology, equipment, infrastructure upgrades and development of our proprietary software platform, tools and technologies will approximate $2.5 to $3.5 million, a portion of which we may finance.

Net Cash Used in Financing Activities

For the three months ended March 31, 2016 and 2015, cash used in financing activities are comprised of total payments of long-term obligations of $0.2 million and $0.5 million.

Contractual Obligations

The table below summarizes our contractual obligations (in thousands) at March 31, 2016 and the effects that those obligations are expected to have on our liquidity and cash flows in future periods.

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Capital lease	$	385	$	331	$	54
Vendor obligations		250		250		-
Non cancellable operating leases		1,254		443		811
Total contractual cash obligations	$	1,889	$	1,024	$	865	$	-	$	-

Future expected obligations under our pension benefit plan have not been included in the contractual cash obligations in the table above.

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Inflation, Seasonality and Prevailing Economic Conditions

Our most significant costs are the salaries and related benefits of our employees in Asia. We are exposed to higher inflation in wage rates in the countries in which we operate. We generally perform work for our clients under project-specific contracts, requirements-based contracts or long-term contracts. We must adequately anticipate wage increases, particularly on our fixed-price contracts. There can be no assurance that we will be able to recover cost increases through increases in the prices that we charge for our services to our clients.

Our quarterly operating results are subject to certain fluctuations. We experience fluctuations in our revenue and earnings as we replace and begin new projects, which may have some normal start-up delays, or we may be unable to replace a project entirely. These and other factors may contribute to fluctuations in our operating results from quarter to quarter. In addition, as some of our Asian facilities are closed during holidays in the fourth quarter, we typically incur higher wages, due to overtime, that reduce our margins.

Critical Accounting Policies and Estimates

Our discussion and analysis of our results of operations, liquidity and capital resources is based on our condensed consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts and billing adjustments, long-lived assets, intangible assets, goodwill, valuation of deferred tax assets, value of securities underlying stock-based compensation, litigation accruals, pension benefits, purchase price allocation of MediaMiser and Bulldog Reporter, valuation of derivative instruments and estimated accruals for various tax exposures. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates and could have a significant, adverse effect on our results of operations and financial position. For a discussion of our critical accounting policies see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2015. There have been no material changes to our critical accounting policies during the three months ended March 31, 2016.

Recent Accounting Pronouncements

In May 2014, the FASB issued guidance on revenue from contracts with customers. This update is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This accounting guidance is effective prospectively for annual reporting periods, and interim periods within that period, beginning after December 15, 2017, and early adoption is permitted in the first quarter of 2017. Companies may use either a full retrospective or a modified retrospective approach to adopt the new standard when it takes effect. We have not yet determined the potential effects of the adoption of this standard on our condensed consolidated financial statements.

In November 2015, the FASB issued guidance related to balance sheet classification of deferred taxes. This new guidance requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. We do not anticipate that adoption of this standard will have a material impact on our condensed consolidated financial statements.

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In February 2016, the FASB issued guidance related to leases. This new guidance requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases.  The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply.  This new standard is effective for annual periods beginning after December 15, 2018. Early application is permitted. We have not yet determined the potential effects of the adoption of this standard on our condensed consolidated financial statements.

In March 2016, the FASB issued guidance relating to share based compensation. This new guidance is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard is effective for annual periods beginning after December 15, 2016. Early application is permitted. We do not anticipate that adoption of this standard will have a material impact on our condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk

Our equipment sales leaseback financing and capital lease transaction carries a fixed interest rate. Thus as of March 31, 2016 we are not exposed to any market risk due to interest rate fluctuations.

Foreign currency risk

Although the majority of our revenues is denominated in U.S. dollars, a significant portion of our revenues is denominated in Canadian dollars and Euros. In addition, a significant portion of our expenses, primarily labor expenses in the Philippines, India, Sri Lanka, Germany, Canada and Israel, is incurred in the local currencies of the countries in which we operate. For financial reporting purposes, we translate all non-U.S. denominated transactions into U.S. dollars in accordance with accounting principles generally accepted in the United States. As a result, we are exposed to the risk that fluctuations in the value of these currencies relative to the U.S. dollar could have a direct impact on our revenues and our results of operations.

To mitigate the exposure of fluctuating future cash flows due to changes in foreign exchange rates, we entered into foreign currency forward contracts. These foreign currency forward contracts were entered into with a maximum term of twelve months and have an aggregate notional amount of approximately $19.3 million as of March 31, 2016. The total unrealized gain on the outstanding hedges was $0.3 million as of March 31, 2016.

The impact of foreign currency fluctuations will continue to present economic challenges to us and could negatively impact our overall results of operations. A 10% appreciation in the U.S. dollar’s value relating to hedged currencies would decrease the forward contracts’ fair value by approximately $1.8 million as of March 31, 2016. Similarly, a 10% depreciation in the U.S. dollar’s value relative to hedged currencies would increase the forward contracts’ fair value by approximately $2.2 million. Any increase or decrease in the fair value of our currency exchange-rate-sensitive forward contracts, if utilized, would be substantially offset by a corresponding decrease or increase in the fair value of the hedged underlying cash flows.

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We may continue to enter into these, or other such instruments, in the future to reduce foreign currency exposure to appreciation or depreciation in the value of these foreign currencies.

Other than the aforementioned forward contracts, we have not engaged in any hedging activities nor have we entered into off-balance-sheet transactions or arrangements. In addition, as of March 31, 2016, our foreign locations held cash and cash equivalents totaling approximately $22.2 million. These assets are exposed to foreign exchange risk arising from changes in foreign exchange rates. At present, we do not enter into any hedging instruments to mitigate foreign exchange risk on such assets; however, we may do so in the future.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we performed an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 (the Exchange Act)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As set forth under “Recent Development” in Management’s Discussion and Analysis, the Company recently became aware of certain potentially improper payments and related transactions that were made by or at the direction of foreign employees of a foreign subsidiary, and the Audit Committee has initiated an investigation into this matter. Depending on the results of the investigation, the Audit Committee may determine to review the effectiveness of the Company’s disclosure controls and procedures and its internal control over financial reporting.

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PART II.        OTHER INFORMATION

Item 1. Legal Proceedings

There were no material changes from the legal proceedings previously disclosed in Part I, Item 3. “Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2015.

Item 1A. Risk Factors

The matter set forth under “Recent Development” in Item 2 of this Report is a risk factor that is in addition to the risk factors previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered equity securities during the three months ended March 31, 2016.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits

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

31.2 Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

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

101. INS XBRL Instance Document

101. SCH XBRL Taxonomy Extension Schema Document

101. CAL XBRL Taxonomy Extension Calculation Link base Document

101. DEF XBRL Taxonomy Extension Definition Link base Document

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36

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INNODATA INC.

Date:	May 10, 2016	/s/ Jack Abuhoff
		Jack Abuhoff
		Chairman of the Board,
		Chief Executive Officer and President
Date:	May 10, 2016	/s/ O’Neil Nalavadi
		O’Neil Nalavadi
		Senior Vice President
		Chief Financial Officer and Principal Accounting Officer

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Jack Abuhoff, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Innodata Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. 

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

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  May 10, 2016
	/s/ Jack Abuhoff
	Jack Abuhoff
	Chairman of the Board,
	Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, O’Neil Nalavadi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Innodata Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

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

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  May 10, 2016
	/s/ O’Neil Nalavadi
	O’Neil Nalavadi
	Senior Vice President
	Chief Financial Officer and Principal Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Innodata Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack Abuhoff, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

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

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

/s/ Jack Abuhoff

Jack Abuhoff

Chairman of the Board,

Chief Executive Officer and President

May 10, 2016

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Innodata Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, O’Neil Nalavadi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

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

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

/s/ O’Neil Nalavadi

O’Neil Nalavadi

Senior Vice President

Chief Financial Officer and Principal Accounting Officer

May 10, 2016

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 30, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Entity Registrant Name	INNODATA INC
Entity Central Index Key	0000903651
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	INOD
Entity Common Stock, Shares Outstanding		25,445,071

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 25,386	$ 24,908
Accounts receivable, net	10,317	9,249
Prepaid expenses and other current assets	3,018	2,900
Deferred income taxes	339	282
Total current assets	39,060	37,339
Property and equipment, net	4,515	4,723
Other assets	2,279	2,330
Deferred income taxes	1,345	1,382
Intangibles, net	4,124	3,987
Goodwill	1,531	1,476
Total assets	52,854	51,237
Current liabilities:
Accounts payable	2,164	1,250
Accrued expenses	3,331	3,312
Accrued salaries, wages and related benefits	4,739	4,905
Income and other taxes	1,254	1,255
Current portion of long-term obligations	1,453	1,582
Deferred income taxes	0	76
Total current liabilities	12,941	12,380
Deferred income taxes	737	716
Long-term obligations	$ 3,588	$ 3,436
Commitments and contingencies
Non-controlling interests	$ (3,359)	$ (3,507)
STOCKHOLDERS’ EQUITY:
Serial preferred stock; 5,000,000 shares authorized, none outstanding	0	0
Common stock, $.01 par value; 75,000,000 shares authorized; 27,069,000 shares issued and 25,445,000 outstanding at March 31, 2016 and December 31, 2015	270	270
Additional paid-in capital	24,609	24,590
Retained earnings	17,927	17,924
Accumulated other comprehensive income (loss)	629	(84)
Stockholders' Equity before Treasury Stock, Total	43,435	42,700
Less: treasury stock, 1,624,000 shares at March 31, 2016 and December 31, 2015, at cost	(4,488)	(4,488)
Total stockholders' equity	38,947	38,212
Total liabilities and stockholders' equity	$ 52,854	$ 51,237

XML

CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Serial preferred stock, shares authorized	5,000,000	5,000,000
Serial preferred stock, outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	27,069,000	25,445,000
Common stock, shares outstanding	27,069,000	25,445,000
Treasury stock, shares	1,624,000	1,624,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues	$ 15,698	$ 13,802
Operating costs and expenses:
Direct operating costs	11,465	11,125
Selling and administrative expenses	3,811	4,135
Interest expense (income), net	13	(26)
Totals	15,289	15,234
Income (loss) before income taxes	409	(1,432)
Provision for income taxes	518	554
Net loss	(109)	(1,986)
Loss attributable to non-controlling interests	112	146
Net income (loss) attributable to Innodata Inc. and Subsidiaries	$ 3	$ (1,840)
Income (loss) per share attributable to Innodata Inc. and Subsidiaries:
Basic and diluted (in dollars per share)	$ 0.00	$ (0.07)
Weighted average shares outstanding:
Basic (in shares)	25,445	25,337
Diluted (in shares)	25,574	25,337
Comprehensive income (loss):
Net loss	$ (109)	$ (1,986)
Pension liability adjustment, net of taxes	(82)	10
Change in fair value of derivatives, net of taxes	439	506
Foreign currency translation adjustment, net of taxes	356	(539)
Other Comprehensive income (loss)	713	(23)
Total Comprehensive income (loss)	604	(2,009)
Comprehensive loss attributed to non-controlling interest	112	146
Comprehensive income (loss) attributable to Innodata Inc. and Subsidiaries	$ 716	$ (1,863)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flow from operating activities:
Net loss	$ (109)	$ (1,986)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	652	727
Stock-based compensation	279	285
Deferred income taxes	(167)	(135)
Pension cost	64	188
Changes in operating assets and liabilities:
Accounts receivable	(3,165)	2,260
Prepaid expenses and other current assets	252	521
Other assets	(15)	(67)
Accounts payable and accrued expenses	3,180	487
Accrued salaries, wages and related benefits	(170)	(220)
Income and other taxes	(72)	(4)
Net cash provided by operating activities	729	2,056
Cash flow used in investing activities:
Capital expenditures	(153)	(186)
Net cash used in investing activities	(153)	(186)
Cash flow used in financing activities:
Payment of long term obligations	(190)	(482)
Net cash used in financing activities	(190)	(482)
Effect of exchange rate changes on cash and cash equivalents	92	(183)
Net increase in cash and cash equivalents	478	1,205
Cash and cash equivalents, beginning of period	24,908	24,216
Cash and cash equivalents, end of period	25,386	25,421
Supplemental disclosures of noncash investing and financing activities:
Cash paid for income taxes	$ 302	$ 124

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]
Balance at Dec. 31, 2014	$ 39,223	$ 268	$ 22,780	$ 20,750	$ (287)	$ (4,288)
Balance (in shares) at Dec. 31, 2014		25,337
Net Income (loss)	(1,840)	$ 0	0	(1,840)	0	0
Stock-based compensation	285	0	285	0	0	0
Pension liability adjustments, net of taxes	10	0	0	0	10	0
Foreign currency translation adjustment, net of taxes	(539)	0	0	0	(539)	0
Change in fair value of derivatives, net of taxes	506	0	0	0	506	0
Balance at Mar. 31, 2015	37,645	$ 268	23,065	18,910	(310)	(4,288)
Balance (in shares) at Mar. 31, 2015		25,337
Balance at Dec. 31, 2015	38,212	$ 270	24,590	17,924	(84)	(4,488)
Balance (in shares) at Dec. 31, 2015		25,445
Net Income (loss)	3	$ 0	0	3	0	0
Stock-based compensation	279	0	279	0	0	0
Acquisition of non-controlling interest	(260)	0	(260)	0	0	0
Pension liability adjustments, net of taxes	(82)	0	0	0	(82)	0
Foreign currency translation adjustment, net of taxes	356	0	0	0	356	0
Change in fair value of derivatives, net of taxes	439	0	0	0	439	0
Balance at Mar. 31, 2016	$ 38,947	$ 270	$ 24,609	$ 17,927	$ 629	$ (4,488)
Balance (in shares) at Mar. 31, 2016		25,445

XML

Description of Business and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Business Description and Accounting Policies [Text Block]

1. Description of Business and Summary of Significant Accounting Policies

Description of Business- Innodata Inc. and Subsidiaries (the “Company”) is a global digital services and solutions company. The Company’s technology and services power leading information products and online retail destinations around the world. The Company’s solutions help prestigious enterprises harness the power of digital data to re-imagine how they operate and drive performance. The Company serves publishers, media and information companies, digital retailers, banks, insurance companies, government agencies and many other industries.

The Company operates in three reporting segments: Content Services (CS), Innodata Advanced Data Solutions (IADS) and Media Intelligence Solutions (MIS).

The Company’s CS segment provides solutions to digital retailers, information services companies, publishers and enterprises that have one or more of the following broad business requirements: development of digital content (including e-books); development of new digital information products; and operational support of existing digital information products and systems.

The Company’s IADS segment designs and develops new capabilities to enable clients in the financial services, insurance, medical and healthcare sectors to improve decision-support through digital technologies. IADS operates through two subsidiaries. Synodex offers a range of services for healthcare, medical and insurance companies, and docGenix provides services to financial services institutions. As of March 31, 2016, Innodata owned 91% of Synodex and 94% of docGenix, both limited liability companies.

In July 2014, the Company acquired MediaMiser, a leading provider of media monitoring and analysis software and professional services for organizations of all sizes. Through its innovative web-based and mobile solutions, MediaMiser reduces the time and effort it takes to gather, analyze and distribute valuable business intelligence extracted from traditional and social media sources. For organizations that prefer to outsource, MediaMiser also provides detailed analysis reports and daily media briefings through an expert client services team. In December 2014, the Company acquired intellectual property and related assets of Bulldog Reporter. Bulldog Reporter has provided PR industry newsletters, a journalist database, media intelligence and professional development programs for over 30 years. The Company’s MIS segment operates through its MediaMiser and Bulldog Reporter subsidiaries.

Basis of Presentation-The condensed consolidated financial statements for the interim periods included herein are unaudited; however, they contain all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company as of March 31, 2016, the results of its operations and comprehensive income (loss) for the three months ended March 31, 2016 and 2015, cash flows and stockholders’ equity for the three months ended March 31, 2016 and 2015. The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2015, included in the Company's Annual Report on Form 10-K. Unless otherwise noted, the accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the December 31, 2015 consolidated financial statements.

Principles of Consolidation-The consolidated financial statements include the accounts of Innodata Inc. and its wholly-owned subsidiaries, MediaMiser, a corporation in which the Company owns substantially all of the economic interest, and the Synodex and docGenix limited liability companies that are majority-owned by the Company. The non-controlling interests in the Synodex and docGenix limited liability companies are accounted for in accordance with Financial Accounting Standards Board (FASB) non-controlling interest guidance. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates-In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those related to revenue recognition, allowance for doubtful accounts and billing adjustments, long-lived assets, intangible assets, goodwill, valuation of deferred tax assets, valuation of securities underlying stock-based compensation, litigation accruals, pension benefits, purchase price allocation of the assets acquired in the acquisition of MediaMiser and Bulldog Reporter, valuation of derivative instruments and estimated accruals for various tax exposures.

Foreign Currency Translation-The functional currency for the Company’s production operations located in the Philippines, India, Sri Lanka and Israel is the U.S. dollar. Transactions denominated in Philippine pesos, Indian and Sri Lankan rupees and Israeli shekels are translated to U.S. dollars at rates which approximate those in effect on transaction dates.

The functional currency of the foreign subsidiaries located in Germany and Canada are the Euro and the Canadian dollar, respectively. The financial statements of these subsidiaries are reported in these respective currencies. Financial information is translated from the applicable functional currency to the U.S. dollar (the reporting currency) for inclusion in our condensed consolidated financial statements. Income, expenses and cash flows are translated at weighted average exchange rates prevailing during the fiscal period, and assets and liabilities are translated at fiscal period-end exchange rates. Resulting translation adjustments are included as a component of accumulated other comprehensive income (loss) in stockholders' equity. Foreign exchange transaction gains or losses are included in direct operating costs in the accompanying consolidated statements of operations and comprehensive income (loss).

Revenue Recognition-For the CS segment, revenue is recognized based on the quantity delivered or resources utilized, the period in which services are performed and delivered. Revenues for contracts billed on a time-and-materials basis are recognized as services are performed. Revenues under fixed-fee contracts, which are not significant to the overall revenues, are recognized on the percentage of completion method of accounting, as services are performed or milestones are achieved.

For the IADS segment, revenue is recognized primarily based on the quantity delivered and the period in which services are performed and deliverables are made as per contracts. A portion of our IADS segment revenue is derived from licensing our software and providing access to our hosted software platform. Revenue from such services are recognized monthly when access to the service is provided to the end user and there are no significant remaining obligations, persuasive evidence of an arrangement exists, the fees are fixed or determinable and collection is reasonably assured.

The MIS segment derives its revenues primarily from subscription arrangements and provision of enriched media analysis services. Revenue from subscriptions is recognized monthly when access to the service is provided to the end user and there are no significant remaining obligations, persuasive evidence of an arrangement exists, the fees are fixed or determinable and collection is reasonably assured. Revenues from enriched media analysis services are recognized when the services are performed and delivered to the clients.

Revenues include reimbursement of out-of-pocket expenses, with the corresponding out-of-pocket expenses included in direct operating costs.

Recent Accounting Pronouncements-In May 2014, the FASB issued guidance on revenue from contracts with customers. This update is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This accounting guidance is effective prospectively for annual reporting periods, and interim periods within those periods, beginning after December 15, 2017 and early adoption is permitted in the first quarter of 2017. Companies may use either a full retrospective or a modified retrospective approach to adopt the new standard when it takes effect. The Company has not yet determined the potential effects of the adoption of this standard on its condensed consolidated financial statements.

In November 2015, the FASB issued guidance related to balance sheet classification of deferred taxes. This new guidance requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not anticipate that adoption of this standard will have a material impact on its condensed consolidated financial statements.

In February 2016, the FASB issued guidance related to leases. This new guidance requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months.  The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases.  The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply.  This new guidance is effective for annual periods beginning after December 15, 2018.  Early application is permitted.  The Company has not yet determined the potential effects of the adoption of this standard on its condensed consolidated financial statements.

In March 2016, the FASB issued guidance relating to share based compensation. This new guidance is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The new guidance is effective for annual periods beginning after December 15, 2016.  Early application is permitted.  The Company does not anticipate that adoption of this standard will have a material impact on its condensed consolidated financial statements.

XML

Property and Equipment

3 Months Ended

Mar. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

2. Property and Equipment

Property and equipment are stated at costs less accumulated depreciation and amortization (in thousands), and consist of the following:

	March 31,		December 31
	2016		2015
Equipment	$	13,450	$	13,437
Software		5,212		5,089
Furniture and equipment		2,123		2,313
Leasehold improvements		4,937		4,956
Total		25,722		25,795
Less: accumulated depreciation and amortization		(21,207)		(21,072)
	$	4,515	$	4,723

Depreciation and amortization expense of property and equipment was approximately $0.4 million and $0.5 million for the three months ended March 31, 2016 and 2015, respectively.

XML

Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

3. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the three months ended March 31, 2016 and March 31, 2015 were as follows (in thousands):

Balance as of January 1, 2016	$	1,476
Foreign currency translation adjustment		55
Balance as of March 31, 2016	$	1,531

Balance as of January 1, 2015	$	1,635
Foreign currency translation adjustment		(83)
Balance as of March 31, 2015	$	1,552

Information regarding the Company’s acquisition-related intangible assets is as follows (in thousands):

	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Total
Gross carrying amounts:
Balance as of January 1, 2016	$	1,978	$	2,036	$	555	$	41	$	4,610
Foreign currency translation		137		141		17		4		299
Balance as of March 31, 2016	$	2,115	$	2,177	$	572	$	45	$	4,909

	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Total
Gross carrying amounts:
Balance as of January 1, 2015	$	2,371	$	2,439	$	596	$	50	$	5,456
Foreign currency translation		(206)		(211)		(19)		(4)		(440)
Balance as of March 31, 2015	$	2,165	$	2,228	$	577	$	46	$	5,016

	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Total
Accumulated amortization:
Balance as of January 1, 2016	$	280	$	240	$	98	$	5	$	623
Amortization expense		49		42		22		2		115
Foreign currency translation		24		20		2		1		47
Balance as of March 31, 2016	$	353	$	302	$	122	$	8	$	785

	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Total
Accumulated amortization:
Balance as of January 1, 2015	$	99	$	85	$	11	$	-	$	195
Amortization expense		57		49		23		-		129
Foreign currency translation		(12)		(10)		(1)		-		(23)
Balance as of March 31, 2015	$	144	$	124	$	33	$	-	$	301

Amortization expense relating to acquisition-related intangible assets was $ $0.1 million for the three months ended March 31, 2016 and 2015, respectively.

 

Developed technology, customer relationships, trademarks and trade names are amortized over the estimated useful life of 10 years, 12 years and 5-10 years, respectively.

Estimated annual amortization expense for intangible assets subsequent to March 31, 2016 is as follows (in thousands):

Year	Amortization
2016	$	487
2017	$	487
2018	$	487
2019	$	472
2020	$	422
Thereafter	$	1,769
	$	4,124

XML

Income Taxes

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

4. Income Taxes

The Company had unrecognized tax benefits of approximately $1.3 million as of March 31, 2016 and approximately $1.2 million as of December 31, 2015. The portion of unrecognized tax benefits relating to interest and penalties was approximately $0.5 million at March 31, 2016 and December 31, 2015. The unrecognized tax benefits as of March 31, 2016 and December 31, 2015, if recognized, would have an impact on the Company’s effective tax rate.

The following presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the three months ended March 31, 2016 (amounts in thousands):

	Unrecognized tax benefits
Balance - January 1, 2016	$	1,207
Increase for tax provision		40
Interest accrual		14
Foreign currency revaluation		2
Balance - March 31, 2016	$	1,263

The Company is subject to Federal income tax, as well as income tax in various states and foreign jurisdictions. The Company is no longer subject to examination by Federal tax authorities for years prior to 2006 and by New Jersey tax authorities for years prior to 2012. Various foreign subsidiaries currently have open tax years from 2003 through 2014.

Pursuant to an income tax audit by the Indian Bureau of Taxation in 2009, the Company’s Indian subsidiaries received a tax assessment approximating $304,000 including interest, through March 31, 2016 for the fiscal year ended March 31, 2006. Management disagrees with the basis of these tax assessments, has filed an appeal against the assessments and is contesting them vigorously. In January 2012, the Indian subsidiary received a final tax assessment of approximately $1.0 million, including interest, for the fiscal year ended March 31, 2008, from the Indian Bureau of Taxation. Management disagrees with the basis of this tax assessment, and has filed an appeal against it. Due to this assessment, the Company recorded a tax provision amounting to $484,000 including interest through March 31, 2016. In April 2015, the Company received a favorable judgment whereby the Appeal Officer reduced the tax assessment to $0.3 million. Under the Indian Income Tax Act, however, the income tax assessing officer has the right to appeal against the judgment passed by the Appeal Officer. In the third quarter of 2015, the income tax assessing officer exercised this right and filed an appeal. Based on recent experience, management believes that the tax provision of $484,000 including interest is adequate. As the Company is continually subject to tax audits by the Indian Bureau of Taxation, the Company continuously assesses the likelihood of an unfavorable assessment for all fiscal years for which the Company has not been audited and, as of March 31, 2016, the Company recorded a tax provision amounting to $155,000 including interest for such year.

In 2015 the Company’s Indian subsidiary was subject to an inquiry by the Service Tax Bureau in India regarding the classification of services provided by this subsidiary, asserting that the services provided by this subsidiary fall under the category of online information and database access or retrieval services (OID Services), and not under the category of business support services (BS Services) that are exempt from service tax as historically indicated in the subsidiary’s service tax filings. In the event the Service Tax Bureau is successful in proving that the services fall under the category of OID Services the revenues earned by the Company’s Indian subsidiary would be subject to a service tax of approximately 14.5% of revenues and this would increase the operating costs of the Company by an equivalent amount. The revenues of the Company’s Indian subsidiary for the three months ended March 31, 2016 were $4.2 million. The Company disagrees with the Service Tax Bureau’s position and is contesting these assertions vigorously.

In 2016 the Company’s Indian subsidiary received notices of appeal from the Commissioner, Service Tax, seeking to reverse service tax refunds previously granted to our Indian subsidiary for certain quarters in 2014 and 2015, asserting that the services provided by this subsidiary fall under the category of OID Services and not BS Services. The Company disagrees with the basis of these appeals and is contesting them vigorously. The Company expects delays in receiving service tax refunds until such time as the appeals are adjudicated with finality.

From time to time the Company is also subject to various other tax proceedings and claims for its India and Philippines subsidiaries. The Company has recorded a tax provision amounting to $320,000 including interest through March 31, 2016, for several other ongoing tax proceedings in India and the Philippines. Although the ultimate outcome cannot be determined at this time, the Company continues to contest these claims vigorously.

The Company projects that during the period from 2016 through 2018 the U.S. entity may not have sufficient cash to pay in full amounts that will be payable by it to the Company’s Asian operating subsidiaries and that the cash deficit will amount to approximately $3.0 million. The resulting deferral in payments would result in a deemed dividend that would be taxable income to the U.S. entity and would be set off against its net operating loss carryforwards. The Company adjusted its deferred tax assets and the corresponding valuation allowance as of December 31, 2015 to reflect the projected deferral. In the first quarter of 2016 the U.S. entity deferred $2.0 million in payments due to its Asian operating subsidiaries.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

5. Commitments and Contingencies

Litigation - In 2008, the Supreme Court of the Republic of the Philippines refused to review a decision of the Court of Appeals in Manila against a Philippines subsidiary of the Company that is inactive and has no material assets, and purportedly also against Innodata Inc., that orders the reinstatement of certain former employees of the subsidiary to their former positions and also orders the payment of back wages and benefits that aggregate approximately $8.0 million. Based on consultation with legal counsel, the Company believes that recovery against the Company is unlikely.

The Company is also subject to various legal proceedings and claims which arise in the ordinary course of business. 

While management currently believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company’s consolidated financial position or overall trends in consolidated results of operations, litigation is subject to inherent uncertainties. Substantial recovery against the Company in the above-referenced Philippines action could have a material adverse impact on the Company, and unfavorable rulings or recoveries in the other proceedings could have a material adverse impact on the operating results of the period in which the ruling or recovery occurs. In addition, the Company’s estimate of potential impact on the Company’s consolidated financial position or overall consolidated results of operations for the above legal proceedings could change in the future.

The Company’s legal reserves related to legal proceedings and claims are based on a determination of whether or not a loss is probable. The Company reviews outstanding proceedings and claims with external counsel to assess probability and estimates of loss. The reserves are adjusted if necessary. While the Company intends to defend these matters vigorously, adverse outcomes that it estimates could reach approximately $100,000 in the aggregate beyond recorded amounts are reasonably possible. If circumstances change, the Company may be required to record adjustments that could be material to its reported consolidated financial condition and results of operations.

Foreign Currency - To the extent that the currencies of the Company’s production facilities located in the Philippines, India, Sri Lanka and Israel fluctuate, the Company is subject to risks of changing costs of production after pricing is established for certain client projects. In addition, the Company is exposed to the risk of foreign currency fluctuation on the non U.S. dollar denominated revenues, and on the monetary assets and liabilities held by its foreign subsidiaries that are denominated in local currency.

Indemnifications-The Company is obligated under certain circumstances to indemnify directors, certain officers and employees against costs and liabilities incurred in actions or threatened actions brought against such individuals because such individuals acted in the capacity of director and/or officer or fiduciary of the Company. In addition, the Company has contracts with certain clients pursuant to whom the Company has agreed to indemnify the client for certain specified and limited claims. These indemnification obligations occur in the ordinary course of business and, in many cases, do not include a limit on potential maximum future payments. As of March 31, 2016, the Company has not recorded a liability for any obligations arising as a result of these indemnifications.

Liens-In connection with the procurement of tax incentives at one of the Company’s foreign subsidiaries, the foreign zoning authority was granted a first lien on the subsidiary’s property and equipment. As of March 31, 2016, the net book value of the property and equipment was $0.4 million.

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Stock Options

3 Months Ended

Mar. 31, 2016

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

6. Stock Options

In 2014, the Company adopted, with stockholder approval, amendments to the Innodata Inc. 2013 Stock Plan. The maximum number of shares of common stock that may be delivered, purchased or used for reference purposes (with respect to stock appreciation rights or stock units) with respect to awards granted under the Innodata Inc. 2013 Stock Plan, as amended and restated (the “2013 Plan”) is 2,138,655 shares of common stock of Innodata (“Stock”), plus (i) 41,096 shares of Stock that were available for issuance under the Innodata Isogen, Inc. 2009 Stock Plan, as amended and restated (the “Prior Plan”) as of June 4, 2013, plus (ii) any shares subject to an award or portion of any award under the Prior Plan that were outstanding as of June 4, 2013 that expire or terminate unexercised, become unexercisable or are forfeited or otherwise terminated, surrendered or canceled as to any shares without the delivery of shares of stock or other consideration. Shares of stock subject to options or stock appreciation rights granted under the 2013 Plan count against the share reserve as one share for every one share subject to such option or stock appreciation right and shares subject to any other type of award granted under the 2013 Plan count against the share reserve as two shares for every one share subject to such award. If any award, or portion of an award, under the 2013 Plan or Prior Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares without the delivery of shares of Stock or other consideration, the shares subject to such award will thereafter be available for further awards under the 2013 Plan as provided in the next sentence. Shares of Stock that again become available for awards pursuant to the expiration, termination, forfeiture or cancellation of any award (other than an option or stock appreciation right) granted under the 2013 Plan, or of any award (other than an option or stock appreciation right) granted after March 31, 2011 under the Prior Plan, will be added back as two shares for every one share subject to such award or Prior Plan award. All other awards under the 2013 Plan and all other awards under the Prior Plan will be added back as one share for every one share subject to such award or Prior Plan award. The number of shares used for reference purposes in connection with these awards will be considered "delivered" for purposes of computing the maximum number of shares that may be delivered under the 2013 Plan.

The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. The weighted average fair values of the options granted and weighted average assumptions are as follows:

					Weighted-
					Average
			Weighted -		Remaining
	Number of		Average		Contractual Term		Aggregate
	Options		Exercise Price		(years)		Intrinsic Value
Outstanding at January 1, 2016		3,970,146	$	3.02
Granted		710,000		2.67
Exercised		-		-
Forfeited/Expired		(65,000)		2.89
Outstanding at March 31, 2016		4,615,146	$	2.97		5.79	$	-
Exercisable at March 31, 2016		2,279,758	$	3.17		4.03	$	-
Vested and Expected to Vest at March 31, 2016		4,615,146	$	2.97		5.79	$	-

 The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. The weighted average fair values of the options granted and weighted average assumptions are as follows:

	Three Months Ended
	March 31,
	2016			2015
Weighted average fair value of options granted	$	1.09		$	-
Risk-free interest rate		1.38% - 1.73	%		-
Expected life (years)		5 - 6			-
Expected volatility factor		49	%		-
Expected dividends		-			-

The total compensation cost related to non-vested stock awards not yet recognized as of March 31, 2016 totaled approximately $2.0 million. The weighted-average period over which these costs will be recognized is twenty eight months.

The stock-based compensation expense related to the Company’s various stock awards was allocated as follows (in thousands):

	Three months ended
	March 31,
	2016		2015
Direct operating costs	$	90	$	91
Selling and administrative expenses		189		194
Total stock-based compensation	$	279	$	285

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Long term obligations

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

7. Long term obligations

Total long-term obligations as of March 31, 2016 and December 31, 2015 consist of the following (in thousands):

	March 31,		December 31,
	2016		2015
Vendor obligations
Capital lease obligations (1)	$	385	$	423
Deferred lease payments (2)		704		707
Microsoft licenses (3)		250		360
Acquisition related liability (4)		1,062		993
Pension obligations
Accrued pension liability		2,640		2,535
		5,041		5,018
Less: Current portion of long term obligations		1,453		1,582
Totals	$	3,588	$	3,436

⁽¹⁾ In March 2014, the Company entered into an equipment sale leaseback agreement with a financing company. The cash proceeds from the transaction were $0.9 million. The Company leased the equipment for a period of 36 months at an effective interest rate of approximately 6% and has the option to purchase the equipment for a nominal amount at the end of the lease term. The Company has accounted for this transaction as a financing arrangement, wherein the equipment remains on the Company’s books and will continue to be depreciated. As of March 31, 2016, the Company had made $0.7 million in lease payments under the sale leaseback agreement.

 

⁽²⁾ Deferred lease payments represent the effect of straight-lining operating lease payments over the respective lease terms.

⁽³⁾ In March 2014, the Company renewed a vendor agreement to acquire certain additional software licenses and to receive support and subsequent software upgrades on these and other currently owned software licenses through February 2017. Pursuant to this agreement, the Company is obligated to pay approximately $0.4 million annually over the term of the agreement. The total cost, net of deferred interest (in thousands), was allocated to the following asset accounts in 2014:

Prepaid expenses and other current assets	$	356
Other assets		713
Property and equipment		136
	$	1,205

⁽⁴⁾ Amount represents a portion of the purchase price consideration for the acquisition of MediaMiser as follows: $0.6 million to be paid by the Company on July 28, 2016 in shares of Innodata Inc.’s common stock, or at the Company’s option, in cash. In addition, the Company agreed to pay up to a maximum of $4.6 million of contingent consideration based on MediaMiser’s achieving certain revenue and EBITDA levels during the period from April 1, 2016 to March 31, 2017. The fair value of the contingent consideration as of March 31, 2016 was $0.5 million.

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Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2016

Stockholders' Equity Note [Abstract]

Comprehensive Income (Loss) Note [Text Block]

8. Comprehensive Income (Loss)

Accumulated other comprehensive loss, as reflected in the condensed consolidated balance sheets, consists of pension liability adjustments, net of taxes, foreign currency translation adjustment, net of taxes and changes in fair value of derivatives, net of taxes. The components of accumulated other comprehensive income (loss) as of March 31, 2016, and reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and 2015, were as follows (net of tax):

	Pension Liability Adjustment		Fair Value of Derivatives		Foreign Currency Translation Adjustment		Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2016	$	1,523	$	(165)	$	(1,442)	$	(84)
Other comprehensive income before reclassifications, net of taxes		-		386		356		742
Total other comprehensive income (loss) before reclassifications, net of taxes		1,523		221		(1,086)		658
Net amount reclassified to earnings		(82)		53		-		(29)
Balance at March 31, 2016	$	1,441	$	274	$	(1,086)	$	629

	Pension Liability Adjustment		Fair Value of Derivatives		Foreign Currency Translation Adjustment		Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2015	$	497	$	(337)	$	(447)	$	(287)
Other comprehensive income (loss) before reclassifications, net of taxes		-		474		(539)		(65)
Total other comprehensive income (loss) before reclassifications, net of taxes		497		137		(986)		(352)
Net amount reclassified to earnings		10		32		-		42
Balance at March 31, 2015	$	507	$	169	$	(986)	$	(310)

All reclassifications out of accumulated other comprehensive income (loss) had an impact on direct operating costs in the condensed consolidated statements of operations and comprehensive income (loss).

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Segment Reporting and Concentrations

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

9. Segment Reporting and Concentrations

The Company’s operations are classified into three reportable segments: Content Services (CS), Innodata Advanced Data Solutions (IADS) and Media Intelligence Solutions (MIS).

The CS segment provides solutions to digital retailers, information services companies, publishers and enterprises that have one or more of the following broad business requirements: development of digital content (including e-books); development of new digital information products; and operational support of existing digital information products and systems.

The IADS segment performs advanced data analysis. IADS operates through two subsidiaries: Synodex and docGenix. Synodex offers a range of data analysis services in the healthcare, medical and insurance areas. docGenix provides services to certain financial services institutions.

In July 2014, the Company acquired MediaMiser, an Ottawa, Canada-based provider of automated, real-time traditional and social media monitoring services. In December 2014, the Company acquired intellectual property and related assets of Bulldog Reporter. Both these businesses constitute the Company’s MIS segment.

A significant portion of the Company’s revenues is generated from its production facilities in the Philippines, India, Sri Lanka, Canada, Germany and Israel.

Revenues from external clients and segment operating profit (loss), and other reportable segment information are as follows (in thousands):

	Three Months Ended March 31,
	2016		2015
Revenues:
Content Services	$	13,644	$	12,191
IADS		897		405
MediaMiser		1,157		1,206
Total Consolidated	$	15,698	$	13,802
Income (loss) before provision for income taxes(1):
Content Services	$	2,246	$	362
IADS		(1,369)		(1,596)
MediaMiser		(468)		(198)
Total Consolidated	$	409	$	(1,432)
Income (loss) before provision for income taxes(2):
Content Services	$	1,542	$	(219)
IADS		(671)		(1,015)
MediaMiser		(462)		(198)
Total Consolidated	$	409	$	(1,432)

	March 31, 2016		December 31, 2015
Total assets:
Content Services	$	41,882	$	41,842
IADS		1,046		1,026
MediaMiser		9,926		8,369
Total Consolidated	$	52,854	$	51,237

⁽¹⁾ Before elimination of any inter-segment profits

⁽²⁾ After elimination of any inter-segment profits

The following table summarizes revenues by geographic region (determined based upon customer’s domicile) (in thousands):

	Three months ended
	March 31,
	2016		2015
United States	$	8,273	$	6,588
The Netherlands		2,562		2,112
United Kingdom		1,981		2,201
Canada		404		1,370
Other - principally Europe		2,478		1,531
	$	15,698	$	13,802

Long-lived assets as of March 31, 2016 and December 31, 2015, respectively, by geographic region, are comprised of (in thousands):

	March 31,		December 31,
	2016		2015
United States	$	1,064	$	1,104
Foreign countries:
Philippines		1,457		5,223
India		1,507		1,611
Sri Lanka		572		1,580
Canada		5,538		635
Israel		30		31
Germany		2		2
Total foreign		9,106		9,082
	$	10,170	$	10,186

Two clients in the CS Segment generated approximately 31% of the Company’s total revenues for the three months ended March 31, 2016 and 34% of the Company’s total revenues for the three months ended March 31, 2015. Another client in the CS segment accounted for 13% of the Company’s total revenues for the three months ended March 31, 2016 but accounted for less than 10% of the Company’s total revenues for the years ended March 31, 2015. No other client accounted for 10% or more of total revenues during these periods. Further, for the three months ended March 31, 2016 and 2015, revenues from non-U.S. clients accounted for 47% and 52%, respectively, of the Company’s total revenues.

 

As of March 31, 2016, approximately 53% of the Company's accounts receivable was from foreign (principally European) clients and 66% of accounts receivable was due from four clients. As of December 31, 2015, approximately 62% of the Company's accounts receivable was from foreign (principally European) clients and 68% of accounts receivable was due from four clients.

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Income (Loss) Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

10. Income (Loss) Per Share

	Three months ended
	March 31,
	2016		2015
	(in thousands)
Net income (loss) attributable to Innodata Inc. and Subsidiaries	$	3	$	(1,840)
Weighted average common shares outstanding		25,445		25,337
Dilutive effect of outstanding options		129		-
Adjusted for dilutive computation		25,574		25,337

Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by considering the impact of the potential issuance of common shares, using the treasury stock method, on the weighted average number of shares outstanding. For those securities that are not convertible into a class of common stock, the “two-class” method of computing income per share is used.

Options to purchase 4.4 million shares and 2.6 million shares of common stock for the three months ended March 31, 2016 and 2015, respectively, were outstanding but not included in the computation of diluted net income (loss) per share, because the options exercise price was greater than the average market price of the common shares and, therefore, the effect would have been anti-dilutive. In addition, diluted net income (loss) per share for the three months ended March 31, 2015 does not include 1.0 million potential common shares, derived from the exercise of stock options, because as a result of the Company’s incurring losses, their effect would have been anti-dilutive.

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Derivatives

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

11. Derivatives

The Company conducts a large portion of its operations in international markets that subject it to foreign currency fluctuations. The most significant foreign currency exposures occur when revenue and associated accounts receivable are collected in one currency and expenses to generate that revenue are incurred in another currency. The Company’s primary exchange rate exposure relates to payroll, other payroll costs and operating expenses in the Philippines, India, Sri Lanka and Israel.

In addition, although the majority of the Company’s revenues is denominated in U.S. dollars, a significant portion of the total revenues is denominated in Canadian dollars and Euros.

To manage its exposure to fluctuations in foreign currency exchange rates, the Company entered into foreign currency forward contracts, authorized under Company policies, with counterparties that were highly rated financial institutions. The Company utilized non-deliverable forward contracts expiring within twelve months to reduce its foreign currency risk.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions. The Company does not hold or issue derivatives for trading purposes. All derivatives are recognized at their fair value and classified based on the instrument’s maturity date. The total notional amount for outstanding derivatives as of March 31, 2016 and December 31, 2015 was $19.3 million and $15.8 million, respectively, which is comprised of cash flow hedges denominated in U.S. dollars.

The following table presents the fair value of derivative instruments included within the consolidated balance sheets as of March 31, 2016 and December 31, 2015 (in thousands):

	Balance Sheet Location	Fair Value
		2016		2015
Derivatives designated as hedging instruments:
Foreign currency forward contracts	Prepaid expenses and other current assets	$	274	$	-
Foreign currency forward contracts	Accrued expenses	$	-	$	165

The effects of foreign currency forward contracts designated as cash flow hedges on the Company’s condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2016 and 2015, respectively, were as follows (in thousands):

	Three Months Ended
	March 31,
	2016		2015
Net gain recognized in OCI(1)	$	386	$	474
Net loss reclassified from accumulated OCI into income(2)	$	(53)	$	(32)
Net gain recognized in income(3)	$	-	$	-

⁽¹⁾Net change in fair value of the effective portion classified into other comprehensive income ("OCI")

⁽²⁾Effective portion classified within direct operating costs

⁽³⁾There were no ineffective portions for the period presented.

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Financial Instruments

3 Months Ended

Mar. 31, 2016

Investments, All Other Investments [Abstract]

Financial Instruments Disclosure [Text Block]

12. Financial Instruments

The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximated their fair value as of March 31, 2016 and December 31, 2015, because of the relative short maturity of these instruments.

“Fair Value Measurements and Disclosures” defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The accounting standard establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three levels. The three levels are defined as follows:

⋅ Level 1: Unadjusted quoted price in active market for identical assets and liabilities.

⋅ Level 2: Observable inputs other than those included in Level 1.

⋅ Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The following table sets forth the assets and liabilities as of March 31, 2016 and December 31, 2015 that the Company measured at fair value, on a recurring basis by level, within the fair value hierarchy (in thousands). As required by the standard, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.

March 31, 2016	Level 1		Level 2		Level 3
Assets
Derivatives	$	-	$	274	$	-
Liabilities
Contingent Considerations	$	-	$	-	$	485

December 31, 2015	Level 1		Level 2		Level 3
Liabilities
Derivatives	$	-	$	165	$	-
Contingent Considerations	$	-	$	-	$	453

The following table summarizes the change in fair value of the Level 3 liability for the three months ended March 31, 2016:

Balance as of December 31, 2015	$	453
Foreign currency translation adjustment		32
Balance as of March 31, 2016	$	485

The Level 2 liabilities contain foreign currency forward contracts. Fair value is determined based on the observable market transactions of spot and forward rates. The fair value of these contracts as of March 31, 2016 is included in prepaid and other current assets in the accompanying condensed consolidated balance sheets. The fair value of these contracts as of December 31, 2015 is included in accrued expenses in the accompanying condensed consolidated balance sheets.

The acquisition of MediaMiser includes contingent consideration that requires additional amounts to be paid by the Company based on MediaMiser’s revenues and EBITDA during the period from April 1, 2016 to March 31, 2017. The fair value measurement of the contingent consideration obligation is determined using Level 3 unobservable inputs supported by little or no market activity by applying the probability-weighted discounted cash flow approach. The fair value of the contingent consideration as of March 31, 2016 and December 31, 2015 was $0.5 million, and the Company has recorded this amount in long term obligations in the condensed consolidated financial statements.

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Description of Business and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Business Combinations Policy [Policy Text Block]

Description of Business- Innodata Inc. and Subsidiaries (the “Company”) is a global digital services and solutions company. The Company’s technology and services power leading information products and online retail destinations around the world. The Company’s solutions help prestigious enterprises harness the power of digital data to re-imagine how they operate and drive performance. The Company serves publishers, media and information companies, digital retailers, banks, insurance companies, government agencies and many other industries.

The Company operates in three reporting segments: Content Services (CS), Innodata Advanced Data Solutions (IADS) and Media Intelligence Solutions (MIS).

The Company’s CS segment provides solutions to digital retailers, information services companies, publishers and enterprises that have one or more of the following broad business requirements: development of digital content (including e-books); development of new digital information products; and operational support of existing digital information products and systems.

The Company’s IADS segment designs and develops new capabilities to enable clients in the financial services, insurance, medical and healthcare sectors to improve decision-support through digital technologies. IADS operates through two subsidiaries. Synodex offers a range of services for healthcare, medical and insurance companies, and docGenix provides services to financial services institutions. As of March 31, 2016, Innodata owned 91% of Synodex and 94% of docGenix, both limited liability companies.

In July 2014, the Company acquired MediaMiser, a leading provider of media monitoring and analysis software and professional services for organizations of all sizes. Through its innovative web-based and mobile solutions, MediaMiser reduces the time and effort it takes to gather, analyze and distribute valuable business intelligence extracted from traditional and social media sources. For organizations that prefer to outsource, MediaMiser also provides detailed analysis reports and daily media briefings through an expert client services team. In December 2014, the Company acquired intellectual property and related assets of Bulldog Reporter. Bulldog Reporter has provided PR industry newsletters, a journalist database, media intelligence and professional development programs for over 30 years. The Company’s MIS segment operates through its MediaMiser and Bulldog Reporter subsidiaries.

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation-The condensed consolidated financial statements for the interim periods included herein are unaudited; however, they contain all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company as of March 31, 2016, the results of its operations and comprehensive income (loss) for the three months ended March 31, 2016 and 2015, cash flows and stockholders’ equity for the three months ended March 31, 2016 and 2015. The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2015, included in the Company's Annual Report on Form 10-K. Unless otherwise noted, the accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the December 31, 2015 consolidated financial statements.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation-The consolidated financial statements include the accounts of Innodata Inc. and its wholly-owned subsidiaries, MediaMiser, a corporation in which the Company owns substantially all of the economic interest, and the Synodex and docGenix limited liability companies that are majority-owned by the Company. The non-controlling interests in the Synodex and docGenix limited liability companies are accounted for in accordance with Financial Accounting Standards Board (FASB) non-controlling interest guidance. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates-In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those related to revenue recognition, allowance for doubtful accounts and billing adjustments, long-lived assets, intangible assets, goodwill, valuation of deferred tax assets, valuation of securities underlying stock-based compensation, litigation accruals, pension benefits, purchase price allocation of the assets acquired in the acquisition of MediaMiser and Bulldog Reporter, valuation of derivative instruments and estimated accruals for various tax exposures.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation-The functional currency for the Company’s production operations located in the Philippines, India, Sri Lanka and Israel is the U.S. dollar. Transactions denominated in Philippine pesos, Indian and Sri Lankan rupees and Israeli shekels are translated to U.S. dollars at rates which approximate those in effect on transaction dates.

The functional currency of the foreign subsidiaries located in Germany and Canada are the Euro and the Canadian dollar, respectively. The financial statements of these subsidiaries are reported in these respective currencies. Financial information is translated from the applicable functional currency to the U.S. dollar (the reporting currency) for inclusion in our condensed consolidated financial statements. Income, expenses and cash flows are translated at weighted average exchange rates prevailing during the fiscal period, and assets and liabilities are translated at fiscal period-end exchange rates. Resulting translation adjustments are included as a component of accumulated other comprehensive income (loss) in stockholders' equity. Foreign exchange transaction gains or losses are included in direct operating costs in the accompanying consolidated statements of operations and comprehensive income (loss).

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition-For the CS segment, revenue is recognized based on the quantity delivered or resources utilized, the period in which services are performed and delivered. Revenues for contracts billed on a time-and-materials basis are recognized as services are performed. Revenues under fixed-fee contracts, which are not significant to the overall revenues, are recognized on the percentage of completion method of accounting, as services are performed or milestones are achieved.

For the IADS segment, revenue is recognized primarily based on the quantity delivered and the period in which services are performed and deliverables are made as per contracts. A portion of our IADS segment revenue is derived from licensing our software and providing access to our hosted software platform. Revenue from such services are recognized monthly when access to the service is provided to the end user and there are no significant remaining obligations, persuasive evidence of an arrangement exists, the fees are fixed or determinable and collection is reasonably assured.

The MIS segment derives its revenues primarily from subscription arrangements and provision of enriched media analysis services. Revenue from subscriptions is recognized monthly when access to the service is provided to the end user and there are no significant remaining obligations, persuasive evidence of an arrangement exists, the fees are fixed or determinable and collection is reasonably assured. Revenues from enriched media analysis services are recognized when the services are performed and delivered to the clients.

Revenues include reimbursement of out-of-pocket expenses, with the corresponding out-of-pocket expenses included in direct operating costs.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements-In May 2014, the FASB issued guidance on revenue from contracts with customers. This update is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This accounting guidance is effective prospectively for annual reporting periods, and interim periods within those periods, beginning after December 15, 2017 and early adoption is permitted in the first quarter of 2017. Companies may use either a full retrospective or a modified retrospective approach to adopt the new standard when it takes effect. The Company has not yet determined the potential effects of the adoption of this standard on its condensed consolidated financial statements.

In November 2015, the FASB issued guidance related to balance sheet classification of deferred taxes. This new guidance requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not anticipate that adoption of this standard will have a material impact on its condensed consolidated financial statements.

In February 2016, the FASB issued guidance related to leases. This new guidance requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months.  The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases.  The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply.  This new guidance is effective for annual periods beginning after December 15, 2018.  Early application is permitted.  The Company has not yet determined the potential effects of the adoption of this standard on its condensed consolidated financial statements.

In March 2016, the FASB issued guidance relating to share based compensation. This new guidance is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The new guidance is effective for annual periods beginning after December 15, 2016.  Early application is permitted.  The Company does not anticipate that adoption of this standard will have a material impact on its condensed consolidated financial statements.

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Property and equipment are stated at costs less accumulated depreciation and amortization (in thousands), and consist of the following:

	March 31,		December 31
	2016		2015
Equipment	$	13,450	$	13,437
Software		5,212		5,089
Furniture and equipment		2,123		2,313
Leasehold improvements		4,937		4,956
Total		25,722		25,795
Less: accumulated depreciation and amortization		(21,207)		(21,072)
	$	4,515	$	4,723

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill [Table Text Block]

The changes in the carrying amount of goodwill for the three months ended March 31, 2016 and March 31, 2015 were as follows (in thousands):

Balance as of January 1, 2016	$	1,476
Foreign currency translation adjustment		55
Balance as of March 31, 2016	$	1,531

Balance as of January 1, 2015	$	1,635
Foreign currency translation adjustment		(83)
Balance as of March 31, 2015	$	1,552

Schedule of Finite-Lived Intangible Assets [Table Text Block]

Information regarding the Company’s acquisition-related intangible assets is as follows (in thousands):

	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Total
Gross carrying amounts:
Balance as of January 1, 2016	$	1,978	$	2,036	$	555	$	41	$	4,610
Foreign currency translation		137		141		17		4		299
Balance as of March 31, 2016	$	2,115	$	2,177	$	572	$	45	$	4,909

	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Total
Gross carrying amounts:
Balance as of January 1, 2015	$	2,371	$	2,439	$	596	$	50	$	5,456
Foreign currency translation		(206)		(211)		(19)		(4)		(440)
Balance as of March 31, 2015	$	2,165	$	2,228	$	577	$	46	$	5,016

	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Total
Accumulated amortization:
Balance as of January 1, 2016	$	280	$	240	$	98	$	5	$	623
Amortization expense		49		42		22		2		115
Foreign currency translation		24		20		2		1		47
Balance as of March 31, 2016	$	353	$	302	$	122	$	8	$	785

	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Total
Accumulated amortization:
Balance as of January 1, 2015	$	99	$	85	$	11	$	-	$	195
Amortization expense		57		49		23		-		129
Foreign currency translation		(12)		(10)		(1)		-		(23)
Balance as of March 31, 2015	$	144	$	124	$	33	$	-	$	301

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Estimated annual amortization expense for intangible assets subsequent to March 31, 2016 is as follows (in thousands):

Year	Amortization
2016	$	487
2017	$	487
2018	$	487
2019	$	472
2020	$	422
Thereafter	$	1,769
	$	4,124

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block]

The following presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the three months ended March 31, 2016 (amounts in thousands):

	Unrecognized tax benefits
Balance - January 1, 2016	$	1,207
Increase for tax provision		40
Interest accrual		14
Foreign currency revaluation		2
Balance - March 31, 2016	$	1,263

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Stock Options (Tables)

3 Months Ended

Mar. 31, 2016

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

The weighted average fair values of the options granted and weighted average assumptions are as follows:

					Weighted-
					Average
			Weighted -		Remaining
	Number of		Average		Contractual Term		Aggregate
	Options		Exercise Price		(years)		Intrinsic Value
Outstanding at January 1, 2016		3,970,146	$	3.02
Granted		710,000		2.67
Exercised		-		-
Forfeited/Expired		(65,000)		2.89
Outstanding at March 31, 2016		4,615,146	$	2.97		5.79	$	-
Exercisable at March 31, 2016		2,279,758	$	3.17		4.03	$	-
Vested and Expected to Vest at March 31, 2016		4,615,146	$	2.97		5.79	$	-

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The weighted average fair values of the options granted and weighted average assumptions are as follows:

	Three Months Ended
	March 31,
	2016			2015
Weighted average fair value of options granted	$	1.09		$	-
Risk-free interest rate		1.38% - 1.73	%		-
Expected life (years)		5 - 6			-
Expected volatility factor		49	%		-
Expected dividends		-			-

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

The stock-based compensation expense related to the Company’s various stock awards was allocated as follows (in thousands):

	Three months ended
	March 31,
	2016		2015
Direct operating costs	$	90	$	91
Selling and administrative expenses		189		194
Total stock-based compensation	$	279	$	285

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Long term obligations (Tables)

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Schedule of Debt [Table Text Block]

Total long-term obligations as of March 31, 2016 and December 31, 2015 consist of the following (in thousands):

	March 31,		December 31,
	2016		2015
Vendor obligations
Capital lease obligations (1)	$	385	$	423
Deferred lease payments (2)		704		707
Microsoft licenses (3)		250		360
Acquisition related liability (4)		1,062		993
Pension obligations
Accrued pension liability		2,640		2,535
		5,041		5,018
Less: Current portion of long term obligations		1,453		1,582
Totals	$	3,588	$	3,436

⁽¹⁾ In March 2014, the Company entered into an equipment sale leaseback agreement with a financing company. The cash proceeds from the transaction were $0.9 million. The Company leased the equipment for a period of 36 months at an effective interest rate of approximately 6% and has the option to purchase the equipment for a nominal amount at the end of the lease term. The Company has accounted for this transaction as a financing arrangement, wherein the equipment remains on the Company’s books and will continue to be depreciated. As of March 31, 2016, the Company had made $0.7 million in lease payments under the sale leaseback agreement.

 

⁽²⁾ Deferred lease payments represent the effect of straight-lining operating lease payments over the respective lease terms.

⁽³⁾ In March 2014, the Company renewed a vendor agreement to acquire certain additional software licenses and to receive support and subsequent software upgrades on these and other currently owned software licenses through February 2017. Pursuant to this agreement, the Company is obligated to pay approximately $0.4 million annually over the term of the agreement. The total cost, net of deferred interest (in thousands), was allocated to the following asset accounts in 2014:

Prepaid expenses and other current assets	$	356
Other assets		713
Property and equipment		136
	$	1,205

⁽⁴⁾ Amount represents a portion of the purchase price consideration for the acquisition of MediaMiser as follows: $0.6 million to be paid by the Company on July 28, 2016 in shares of Innodata Inc.’s common stock, or at the Company’s option, in cash. In addition, the Company agreed to pay up to a maximum of $4.6 million of contingent consideration based on MediaMiser’s achieving certain revenue and EBITDA levels during the period from April 1, 2016 to March 31, 2017. The fair value of the contingent consideration as of March 31, 2016 was $0.5 million.

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Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2016

Stockholders' Equity Note [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The components of accumulated other comprehensive income (loss) as of March 31, 2016, and reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and 2015, were as follows (net of tax):

	Pension Liability Adjustment		Fair Value of Derivatives		Foreign Currency Translation Adjustment		Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2016	$	1,523	$	(165)	$	(1,442)	$	(84)
Other comprehensive income before reclassifications, net of taxes		-		386		356		742
Total other comprehensive income (loss) before reclassifications, net of taxes		1,523		221		(1,086)		658
Net amount reclassified to earnings		(82)		53		-		(29)
Balance at March 31, 2016	$	1,441	$	274	$	(1,086)	$	629

	Pension Liability Adjustment		Fair Value of Derivatives		Foreign Currency Translation Adjustment		Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2015	$	497	$	(337)	$	(447)	$	(287)
Other comprehensive income (loss) before reclassifications, net of taxes		-		474		(539)		(65)
Total other comprehensive income (loss) before reclassifications, net of taxes		497		137		(986)		(352)
Net amount reclassified to earnings		10		32		-		42
Balance at March 31, 2015	$	507	$	169	$	(986)	$	(310)

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Segment Reporting and Concentrations (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

Revenues from external clients and segment operating profit (loss), and other reportable segment information are as follows (in thousands):

	Three Months Ended March 31,
	2016		2015
Revenues:
Content Services	$	13,644	$	12,191
IADS		897		405
MediaMiser		1,157		1,206
Total Consolidated	$	15,698	$	13,802
Income (loss) before provision for income taxes(1):
Content Services	$	2,246	$	362
IADS		(1,369)		(1,596)
MediaMiser		(468)		(198)
Total Consolidated	$	409	$	(1,432)
Income (loss) before provision for income taxes(2):
Content Services	$	1,542	$	(219)
IADS		(671)		(1,015)
MediaMiser		(462)		(198)
Total Consolidated	$	409	$	(1,432)

	March 31, 2016		December 31, 2015
Total assets:
Content Services	$	41,882	$	41,842
IADS		1,046		1,026
MediaMiser		9,926		8,369
Total Consolidated	$	52,854	$	51,237

⁽¹⁾ Before elimination of any inter-segment profits

⁽²⁾ After elimination of any inter-segment profits

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

The following table summarizes revenues by geographic region (determined based upon customer’s domicile) (in thousands):

	Three months ended
	March 31,
	2016		2015
United States	$	8,273	$	6,588
The Netherlands		2,562		2,112
United Kingdom		1,981		2,201
Canada		404		1,370
Other - principally Europe		2,478		1,531
	$	15,698	$	13,802

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

Long-lived assets as of March 31, 2016 and December 31, 2015, respectively, by geographic region, are comprised of (in thousands):

	March 31,		December 31,
	2016		2015
United States	$	1,064	$	1,104
Foreign countries:
Philippines		1,457		5,223
India		1,507		1,611
Sri Lanka		572		1,580
Canada		5,538		635
Israel		30		31
Germany		2		2
Total foreign		9,106		9,082
	$	10,170	$	10,186

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Income (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended
	March 31,
	2016		2015
	(in thousands)
Net income (loss) attributable to Innodata Inc. and Subsidiaries	$	3	$	(1,840)
Weighted average common shares outstanding		25,445		25,337
Dilutive effect of outstanding options		129		-
Adjusted for dilutive computation		25,574		25,337

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Derivatives (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

The following table presents the fair value of derivative instruments included within the consolidated balance sheets as of March 31, 2016 and December 31, 2015 (in thousands):

	Balance Sheet Location	Fair Value
		2016		2015
Derivatives designated as hedging instruments:
Foreign currency forward contracts	Prepaid expenses and other current assets	$	274	$	-
Foreign currency forward contracts	Accrued expenses	$	-	$	165

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block]

The effects of foreign currency forward contracts designated as cash flow hedges on the Company’s condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2016 and 2015, respectively, were as follows (in thousands):

	Three Months Ended
	March 31,
	2016		2015
Net gain recognized in OCI(1)	$	386	$	474
Net loss reclassified from accumulated OCI into income(2)	$	(53)	$	(32)
Net gain recognized in income(3)	$	-	$	-

⁽¹⁾Net change in fair value of the effective portion classified into other comprehensive income ("OCI")

⁽²⁾Effective portion classified within direct operating costs

⁽³⁾There were no ineffective portions for the period presented.

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Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Investments, All Other Investments [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following table sets forth the assets and liabilities as of March 31, 2016 and December 31, 2015 that the Company measured at fair value, on a recurring basis by level, within the fair value hierarchy (in thousands). As required by the standard, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.

March 31, 2016	Level 1		Level 2		Level 3
Assets
Derivatives	$	-	$	274	$	-
Liabilities
Contingent Considerations	$	-	$	-	$	485

December 31, 2015	Level 1		Level 2		Level 3
Liabilities
Derivatives	$	-	$	165	$	-
Contingent Considerations	$	-	$	-	$	453

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following table summarizes the change in fair value of the Level 3 liability for the three months ended March 31, 2016:

Balance as of December 31, 2015	$	453
Foreign currency translation adjustment		32
Balance as of March 31, 2016	$	485

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Description of Business and Summary of Significant Accounting Policies (Details Textual)	Mar. 31, 2016
Synodex [Member]
Description of Business and Summary of Significant Accounting Policies [Line Items]
Noncontrolling Interest, Ownership Percentage By Parent	91.00%
DocGenix [Member]
Description of Business and Summary of Significant Accounting Policies [Line Items]
Noncontrolling Interest, Ownership Percentage By Parent	94.00%

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Property and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Total	$ 25,722	$ 25,795
Less: accumulated depreciation and amortization	(21,207)	(21,072)
Property, Plant and Equipment, Net	4,515	4,723
Equipment [Member]
Property, Plant and Equipment [Line Items]
Total	13,450	13,437
Software [Member]
Property, Plant and Equipment [Line Items]
Total	5,212	5,089
Furniture and equipment [Member]
Property, Plant and Equipment [Line Items]
Total	2,123	2,313
Leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Total	$ 4,937	$ 4,956

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Property and Equipment (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Property, Plant and Equipment [Line Items]
Depreciation, Depletion and Amortization	$ 652	$ 727
Property, Plant and Equipment [Member]
Property, Plant and Equipment [Line Items]
Depreciation, Depletion and Amortization	$ 400	$ 500

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Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Goodwill [Line Items]
Balance	$ 1,476	$ 1,635
Foreign currency translation adjustment	55	(83)
Balance	$ 1,531	$ 1,552

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Goodwill and Intangible Assets (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Gross carrying amounts:
Balance	$ 4,610	$ 5,456
Foreign currency translation	299	(440)
Balance	4,909	5,016
Accumulated amortization:
Balance	623	195
Amortization expense	115	129
Foreign currency translation	47	(23)
Balance	785	301
Developed Technology Rights [Member]
Gross carrying amounts:
Balance	1,978	2,371
Foreign currency translation	137	(206)
Balance	2,115	2,165
Accumulated amortization:
Balance	280	99
Amortization expense	49	57
Foreign currency translation	24	(12)
Balance	353	144
Customer Relationships [Member]
Gross carrying amounts:
Balance	2,036	2,439
Foreign currency translation	141	(211)
Balance	2,177	2,228
Accumulated amortization:
Balance	240	85
Amortization expense	42	49
Foreign currency translation	20	(10)
Balance	302	124
Trademarks and TradeNames [Member]
Gross carrying amounts:
Balance	555	596
Foreign currency translation	17	(19)
Balance	572	577
Accumulated amortization:
Balance	98	11
Amortization expense	22	23
Foreign currency translation	2	(1)
Balance	122	33
Patents [Member]
Gross carrying amounts:
Balance	41	50
Foreign currency translation	4	(4)
Balance	45	46
Accumulated amortization:
Balance	5	0
Amortization expense	2	0
Foreign currency translation	1	0
Balance	$ 8	$ 0

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Goodwill and Intangible Assets (Details 2) $ in Thousands	Mar. 31, 2016 USD ($)
Finite-Lived Intangible Assets [Line Items]
2016	$ 487
2017	487
2018	487
2019	472
2020	422
Thereafter	1,769
Finite-Lived Intangible Assets, Net	$ 4,124

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Goodwill and Intangible Assets (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 115	$ 129
Developed Technology Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 49	57
Finite-Lived Intangible Asset, Useful Life	10 years
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 42	49
Finite-Lived Intangible Asset, Useful Life	12 years
Trademarks and Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 22	$ 23
Maximum [Member] | Trademarks and Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	10 years
Minimum [Member] | Trademarks and Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	5 years

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Income Taxes (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Income Tax Contingency [Line Items]
Balance - January 1, 2016	$ 1,207
Increase for tax position	40
Interest accrual	14
Foreign currency revaluation	2
Balance - March 31, 2016	$ 1,263

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Income Taxes (Details Textual) - USD ($)	1 Months Ended	3 Months Ended		12 Months Ended
	Apr. 30, 2015	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015	Dec. 31, 2008
Income Taxes [Line Items]
Unrecognized Tax Benefits		$ 1,263,000		$ 1,207,000
Income Tax Examination, Penalties and Interest Accrued		500,000		$ 500,000
Foreign Income Tax Expense (Benefit), Continuing Operations	$ 300,000
Income Tax Expense (Benefit)		518,000	$ 554,000
Percentage for Subsidiary Service Tax				14.50%
Subsidiary Revenue		4,200,000
Deferred Income Tax Expense (Benefit)		(167,000)	$ (135,000)
Indian Bureau Of Taxation [Member]
Income Taxes [Line Items]
Foreign Income Tax Expense (Benefit), Continuing Operations		304,000			$ 1,000,000
Tax Adjustments, Settlements, and Unusual Provisions		484,000
Deferred Foreign Income Tax Expense (Benefit)		155,000
Income Tax Expense (Benefit)		484,000
Philippine Bureau Of Taxation [Member]
Income Taxes [Line Items]
Income Tax Expense (Benefit)		320,000
Asian Operating Subsidiaries [Member]
Income Taxes [Line Items]
Effective Income Tax Rate Reconciliation, Other Adjustments, Amount		3,000,000
Deferred Income Tax Expense (Benefit)		$ 2,000,000

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Commitments and Contingencies (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Commitments and Contingencies [Line Items]
Estimated Litigation Liability	$ 8,000,000
Litigation Settlement, Expense	100,000
Property, Plant and Equipment, Net, Total	4,515,000	$ 4,723,000
Liens Under Foreign Tax Authority [Member]
Commitments and Contingencies [Line Items]
Property, Plant and Equipment, Net, Total	$ 400,000

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Stock Options (Details) - Employee Stock Option [Member]	3 Months Ended
	Mar. 31, 2016 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Options, Outstanding at January 1, 2016 (in shares) | shares	3,970,146
Number of Options, Granted (in shares) | shares	710,000
Number of Options, Exercised (in shares) | shares	0
Number of Options, Forfeited/Expired (in shares) | shares	(65,000)
Number of Options, Outstanding at March 31, 2016 (in shares) | shares	4,615,146
Number of Options, Exercisable at March 31, 2016 (in shares) | shares	2,279,758
Number of Options, Vested and Expected to Vest at March 31, 2016 (in shares) | shares	4,615,146
Weighted - Average Exercise Price, Outstanding at January 1, 2016 (in dollars per share) | $ / shares	$ 3.02
Weighted - Average Exercise Price, Granted (in dollars per shares) | $ / shares	2.67
Weighted - Average Exercise Price, Exercised (in dollars per share) | $ / shares	0
Weighted - Average Exercise Price, Forfeited/Expired (in dollars per share) | $ / shares	2.89
Weighted - Average Exercise Price, Outstanding at March 31, 2016 (in dollars per share) | $ / shares	2.97
Weighted - Average Exercise Price, Exercisable at March 31, 2016 (in dollars per share) | $ / shares	3.17
Weighted - Average Exercise Price, Vested and Expected to Vest at March 31, 2016 (in dollars per share) | $ / shares	$ 2.97
Weighted - Average Remaining Contractual Term, Outstanding at March 31, 2016 (in years)	5 years 9 months 14 days
Weighted - Average Remaining Contractual Term, Exercisable at March 31, 2016 (in years)	4 years 11 days
Weighted - Average Remaining Contractual Term, Vested and Expected to Vest at March 31, 2016 (in years)	5 years 9 months 14 days
Aggregate Intrinsic Value, Outstanding at March 31, 2016 | $	$ 0
Aggregate Intrinsic Value, Exercisable at March 31, 2016 | $	0
Aggregate Intrinsic Value, Vested and Expected to Vest at March 31, 2016 | $	$ 0

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Stock Options (Details 1) - Employee Stock Option [Member] - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average fair value of options granted (in dollars per share)	$ 1.09	$ 0
Risk-free interest rate		0.00%
Expected life (years)		0 years
Expected volatility factor	49.00%	0.00%
Expected dividends	0.00%	0.00%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	1.38%
Expected life (years)	5 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	1.73%
Expected life (years)	6 years

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Stock Options (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	$ 279	$ 285
Direct Operating Costs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	90	91
Selling and Administrative Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	$ 189	$ 194

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Stock Options (Details Textual) $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-Based Compensation, Nonvested Awards, Total Compensation Cost Not Yet Recognized | $	$ 2.0
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	28 months
2013 Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-Based Compensation Arrangement By Share-Based Payment Award, Number Of Shares Authorized	2,138,655
2009 Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	41,096

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Long term obligations (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Vendor obligations
Capital lease obligations	[1]	$ 385	$ 423
Deferred lease payments	[2]	704	707
Microsoft licenses	[3]	250	360
Acquisition related liability	[4]	1,062	993
Pension obligations
Accrued pension liability		2,640	2,535
Long-term Debt		5,041	5,018
Less: Current portion of long-term obligations		1,453	1,582
Totals		$ 3,588	$ 3,436

[1] In March 2014, the Company entered into an equipment sale leaseback agreement with a financing company. The cash proceeds from the transaction were $0.9 million. The Company leased the equipment for a period of 36 months at an effective interest rate of approximately 6% and has the option to purchase the equipment for a nominal amount at the end of the lease term. The Company has accounted for this transaction as a financing arrangement, wherein the equipment remains on the Company’s books and will continue to be depreciated. As of March 31, 2016, the Company had made $0.7 million in lease payments under the sale leaseback agreement.

[2] Deferred lease payments represent the effect of straight-lining operating lease payments over the respective lease terms.

[3] In March 2014, the Company renewed a vendor agreement to acquire certain additional software licenses and to receive support and subsequent software upgrades on these and other currently owned software licenses through February 2017. Pursuant to this agreement, the Company is obligated to pay approximately $0.4 million annually over the term of the agreement.

[4] Amount represents a portion of the purchase price consideration for the acquisition of MediaMiser as follows: $0.6 million to be paid by the Company on July 28, 2016 in shares of Innodata Inc.’s common stock, or at the Company’s option, in cash. In addition, the Company agreed to pay up to a maximum of $4.6 million of contingent consideration based on MediaMiser’s achieving certain revenue and EBITDA levels during the period from April 1, 2016 to March 31, 2017. The fair value of the contingent consideration as of March 31, 2016 was $0.5 million.

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Long term obligations (Details 1) $ in Thousands	12 Months Ended
	Dec. 31, 2014 USD ($)
Debt Instrument [Line Items]
Finite-lived Intangible Assets Acquired	$ 1,205
Prepaid expenses and other current assets [Member]
Debt Instrument [Line Items]
Finite-lived Intangible Assets Acquired	356
Other assets [Member]
Debt Instrument [Line Items]
Finite-lived Intangible Assets Acquired	713
Property and equipment [Member]
Debt Instrument [Line Items]
Finite-lived Intangible Assets Acquired	$ 136

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Long term obligations (Details Textual) - USD ($) $ in Millions	1 Months Ended		3 Months Ended
	Jul. 28, 2016	Mar. 31, 2014	Mar. 31, 2016	Mar. 31, 2017
MediaMiser [Member]
Debt Instrument [Line Items]
Business Combination, Contingent Consideration, Liability			$ 0.5
MediaMiser [Member] | Scenario, Forecast [Member]
Debt Instrument [Line Items]
Business Combination, Contingent Consideration, Liability, Current				$ 4.6
Vendor Agreement [Member]
Debt Instrument [Line Items]
License Costs		$ 0.4
Sale Leaseback Agreement [Member]
Debt Instrument [Line Items]
Capital Lease Obligations Lease Period		36 months
Sale Leaseback Transaction, Imputed Interest Rate		6.00%
Proceeds from Long-term Capital Lease Obligations		$ 0.9
Sale Leaseback Transaction, Rent Expense			$ 0.7
Subsequent Event [Member] | MediaMiser [Member]
Debt Instrument [Line Items]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	$ 0.6

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Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Pension Liability Adjustment, Other comprehensive income (loss):
Pension Liability Adjustment, Balance at Beginning of the Period	$ 1,523	$ 497
Pension Liability Adjustment, Other comprehensive income (loss) before reclassifications, net of taxes	0	0
Pension Liability Adjustment, Total other comprehensive income (loss) before reclassifications, net of taxes	1,523	497
Pension Liability Adjustment, Net amount reclassified to earnings	(82)	10
Pension Liability Adjustment, Balance at End of the Period	1,441	507
Fair Value of Derivatives, Other comprehensive income (loss):
Fair Value of Derivatives, Balance at Beginning of the Period	(165)	(337)
Fair Value of Derivatives, Other comprehensive income (loss) before reclassifications, net of taxes	386	474
Fair Value of Derivatives, Total other comprehensive income (loss) before reclassifications, net of taxes	221	137
Fair Value of Derivatives, Net amount reclassified to earnings	53	32
Fair Value of Derivatives, Balance at End of the Period	274	169
Foreign Currency Translation Adjustment, Other comprehensive income (loss):
Foreign Currency Translation Adjustment, Balance at Beginning of the Period	(1,442)	(447)
Foreign Currency Translation Adjustment, Other comprehensive income (loss) before reclassifications, net of taxes	356	(539)
Foreign Currency Translation Adjustment, Total other comprehensive income (loss) before reclassifications, net of taxes	(1,086)	(986)
Foreign Currency Translation Adjustment, Net amount reclassified to earnings	0	0
Foreign Currency Translation Adjustment, Balance at End of the period	(1,086)	(986)
Accumulated Other Comprehensive Income (loss), Other comprehensive income (loss):
Accumulated Other Comprehensive Income (loss), Balance at Beginning of the period	(84)	(287)
Accumulated Other Comprehensive Income (loss), Other comprehensive income (loss) before reclassifications, net of taxes	742	(65)
Accumulated Other Comprehensive Income (loss), Total other comprehensive income (loss) before reclassifications, net of taxes	658	(352)
Accumulated Other Comprehensive Income (loss), Net amount reclassified to earnings	(29)	42
Accumulated Other Comprehensive Income (loss), Balance at End of the period	$ 629	$ (310)

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Segment Reporting and Concentrations (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Segment Reporting Information [Line Items]
Revenues		$ 15,698	$ 13,802
Total assets		52,854		$ 51,237
Before Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Income (loss) before provision for income taxes	[1]	409	(1,432)
After Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Income (loss) before provision for income taxes	[2]	409	(1,432)
Content Services [Member]
Segment Reporting Information [Line Items]
Revenues		13,644	12,191
Total assets		41,882		41,842
Content Services [Member] | Before Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Income (loss) before provision for income taxes	[1]	2,246	362
Content Services [Member] | After Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Income (loss) before provision for income taxes	[2]	1,542	(219)
IADS [Member]
Segment Reporting Information [Line Items]
Revenues		897	405
Total assets		1,046		1,026
IADS [Member] | Before Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Income (loss) before provision for income taxes	[1]	(1,369)	(1,596)
IADS [Member] | After Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Income (loss) before provision for income taxes	[2]	(671)	(1,015)
MediaMiser [Member]
Segment Reporting Information [Line Items]
Total assets		9,926		$ 8,369
MIS [Member]
Segment Reporting Information [Line Items]
Income (loss) before provision for income taxes		1,157	1,206
MIS [Member] | Before Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Income (loss) before provision for income taxes	[1]	(468)	(198)
MIS [Member] | After Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Income (loss) before provision for income taxes	[2]	$ (462)	$ (198)

[1] Before elimination of any inter-segment profits

[2] After elimination of any inter-segment profits

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Segment Reporting and Concentrations (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Segment Reporting Information [Line Items]
Revenues	$ 15,698	$ 13,802
Other - principally Europe
Segment Reporting Information [Line Items]
Revenues	2,478	1,531
United States
Segment Reporting Information [Line Items]
Revenues	8,273	6,588
The Netherlands
Segment Reporting Information [Line Items]
Revenues	2,562	2,112
United Kingdom
Segment Reporting Information [Line Items]
Revenues	1,981	2,201
Canada
Segment Reporting Information [Line Items]
Revenues	$ 404	$ 1,370

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Segment Reporting and Concentrations (Details 2) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
Long - lived assets	$ 10,170	$ 10,186
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Long - lived assets	1,064	1,104
Canada
Revenues from External Customers and Long-Lived Assets [Line Items]
Long - lived assets	5,538	635
India
Revenues from External Customers and Long-Lived Assets [Line Items]
Long - lived assets	1,507	1,611
Philippines
Revenues from External Customers and Long-Lived Assets [Line Items]
Long - lived assets	1,457	5,223
Sri Lanka
Revenues from External Customers and Long-Lived Assets [Line Items]
Long - lived assets	572	1,580
Israel
Revenues from External Customers and Long-Lived Assets [Line Items]
Long - lived assets	30	31
Germany
Revenues from External Customers and Long-Lived Assets [Line Items]
Long - lived assets	2	2
Foreign Countries
Revenues from External Customers and Long-Lived Assets [Line Items]
Long - lived assets	$ 9,106	$ 9,082

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Segment Reporting and Concentrations (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Foreign Customer [Member] | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	47.00%	52.00%
Foreign Customer [Member] | Accounts Receivable [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	53.00%		62.00%
Two clients [Member] | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	31.00%	34.00%
Four Clients [Member] | Accounts Receivable [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	66.00%		68.00%
One Other Client [Member] | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	13.00%	10.00%

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Income (Loss) Per Share (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share Basic and Diluted [Line Items]
Net income (loss) attributable to Innodata Inc. and Subsidiaries	$ 3	$ (1,840)
Weighted average common shares outstanding	25,445	25,337
Dilutive effect of outstanding options	129	0
Adjusted for dilutive computation	25,574	25,337

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Income (Loss) Per Share (Details Textual) - shares shares in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded From Computation Of Earnings Per Share, Amount		1.0
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded From Computation Of Earnings Per Share, Amount	4.4	2.6

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Derivatives (Details) - Foreign currency forward contracts [Member] - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Prepaid expenses and other current assets [Member]
Derivatives, Fair Value [Line Items]
Derivative Instruments and Hedges, Liabilities	$ 274	$ 0
Accrued expenses [Member]
Derivatives, Fair Value [Line Items]
Derivative Instruments and Hedges, Liabilities	$ 0	$ 165

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Derivatives (Details 1) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Net gain recognized in OCI	[1]	$ 386	$ 474
Net loss reclassified from accumulated OCI into income	[2]	(53)	(32)
Net gain recognized in income	[3]	$ 0	$ 0

[1] Net change in fair value of the effective portion classified into other comprehensive income ("OCI")

[2] Effective portion classified within direct operating costs

[3] There were no ineffective portions for the period presented.

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Derivatives (Details Textual) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Derivative [Line Items]
Derivative, Notional Amount	$ 19.3	$ 15.8

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Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Inputs, Level 1 [Member]
Assets
Derivatives	$ 0
Liabilities
Derivatives		$ 0
Contingent Considerations	0	0
Fair Value, Inputs, Level 2 [Member]
Assets
Derivatives	274
Liabilities
Derivatives		165
Contingent Considerations	0	0
Fair Value, Inputs, Level 3 [Member]
Assets
Derivatives	0
Liabilities
Derivatives		0
Contingent Considerations	$ 485	$ 453

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Financial Instruments (Details 1) - Fair Value, Inputs, Level 3 [Member] $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Balance as of December 31, 2015	$ 453
Foreign currency translation adjustment	32
Balance as of March 31, 2016	$ 485

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Financial Instruments (Details Textual) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
MediaMiser [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Business Combination, Contingent Consideration, Liability	$ 0.5	$ 0.5