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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
Commission File Number 0-22196
INNODATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
13-3475943
(I.R.S. EmployerIdentification No.)
Three University Plaza
Hackensack, NJ 07601
(Address of principal executive offices)
(201) 488-1200
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
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 /x/ No / /
State the number of shares outstanding of each of the issuer's common equity, as
of the latest practicable date: As of July 31, 2002 there were approximately
21,630,000 shares of common stock outstanding.
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Financial Statements
--------------------
See pages 2-8
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
See pages 9-13
Item 3. Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
See page 14
PART ll. OTHER INFORMATION
- -------- -----------------
See page 15
INNODATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
June 30, December 31,
2002 2001
--------- ------------
Unaudited Derived from
audited
financial
statements
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 9,797 $ 6,267
Accounts receivable-net 5,068 7,846
Prepaid expenses and other current assets 1,216 978
Deferred income taxes 1,626 1,793
------- -------
Total current assets 17,707 16,884
PROPERTY AND EQUIPMENT - NET 8,107 10,236
OTHER ASSETS 2,157 2,351
GOODWILL 623 623
------- -------
TOTAL $28,594 $30,094
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Acquisition notes payable $ 325 $ 650
Accounts payable and accrued expenses 2,235 2,875
Accrued salaries and wages 3,866 3,770
Income and other taxes 746 735
------- -------
Total current liabilities 7,172 8,030
------- -------
DEFERRED INCOME TAXES PAYABLE 1,655 1,702
------- -------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; authorized 75,000,000
shares; issued, 21,855,000 and 21,716,000 shares at
June 30, 2002 and December 31, 2001, respectively. 218 217
Additional paid-in capital 13,415 13,355
Retained earnings 7,773 8,429
------- -------
21,406 22,001
Less: treasury stock - at cost; 270,000 shares (1,639) (1,639)
------- -------
Total stockholders' equity 19,767 20,362
------- -------
TOTAL $28,594 $30,094
======= =======
See notes to unaudited condensed consolidated financial statements
INNODATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(In thousands, except per share amounts)
(Unaudited)
2002 2001
-------- --------
REVENUES $10,389 $13,782
------- -------
OPERATING COSTS AND EXPENSES:
Direct operating expenses 8,805 11,598
Selling and administrative expenses 2,587 2,122
Interest income - net (17) (58)
------- -------
Total 11,375 13,662
------- -------
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES (986) 120
(BENEFIT FROM) PROVISION FOR INCOME TAXES (87) 10
------- -------
NET (LOSS) INCOME $ (899) $ 110
======= =======
BASIC (LOSS) INCOME PER SHARE $(.04) $.01
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING 21,586 21,277
======= =======
DILUTED (LOSS) INCOME PER SHARE $(.04) $-
======= =======
ADJUSTED DILUTIVE SHARES OUTSTANDING 21,586 25,206
======= =======
See notes to unaudited condensed consolidated financial statements
INNODATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(In thousands, except per share amounts)
(Unaudited)
2002 2001
-------- --------
REVENUES $22,945 $31,840
------- -------
OPERATING COSTS AND EXPENSES:
Direct operating expenses 18,544 23,521
Selling and administrative expenses 5,070 4,285
Interest income - net (21) (151)
------- -------
Total 23,593 27,655
------- -------
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES (648) 4,185
PROVISION FOR INCOME TAXES 8 1,392
------- -------
NET (LOSS) INCOME $ (656) $ 2,793
======= =======
BASIC (LOSS) INCOME PER SHARE $(.03) $.13
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING 21,518 21,252
======= =======
DILUTED (LOSS) INCOME PER SHARE $(.03) $.11
======= =======
ADJUSTED DILUTIVE SHARES OUTSTANDING 21,518 25,236
======= =======
See notes to unaudited condensed consolidated financial statements
INNODATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(In thousands)
(Unaudited)
2002 2001
-------- --------
OPERATING ACTIVITIES:
Net (loss) income $ (656) $ 2,793
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization 2,819 2,146
Deferred income taxes 120 319
Changes in operating assets and liabilities:
Accounts receivable 2,778 (3,386)
Prepaid expenses and other current assets (396) 366
Other assets (90) (709)
Accounts payable and accrued expenses (640) 11
Accrued salaries and wages 96 677
Income and other taxes 11 (66)
------ -------
Net cash provided by operating activities 4,042 2,151
------ -------
INVESTING ACTIVITIES:
Capital expenditures (248) (4,237)
------ -------
FINANCING ACTIVITIES:
Payment of acquisition notes (325) -
Purchase of treasury stock - (1,639)
Proceeds from exercise of stock options 61 308
------ -------
Net cash used in financing activities (264) (1,331)
------ -------
INCREASE (DECREASE) IN CASH 3,530 (3,417)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 6,267 9,040
------ -------
CASH AND EQUIVALENTS, END OF PERIOD $9,797 $ 5,623
====== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 9 $ -
====== =======
Income taxes $ 218 $ 1,294
====== =======
See notes to unaudited condensed consolidated financial statements
INNODATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the financial
position as of June 30, 2002, the results of operations for the three and
six months ended June 30, 2002 and 2001, and the cash flows for the six
months ended June 30, 2002 and 2001. The results of operations for the six
months ended June 30, 2002 are not necessarily indicative of results that
may be expected for any other interim period or for the full year.
These financial statements should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 2001 included
in the Company's Annual Report on Form 10-K. The accounting policies used
in preparing these financial statements are the same as those described in
the December 31, 2001 financial statements.
2. An analysis of the changes in each caption of stockholders' equity for the
six months ended June 30, 2002 (in thousands) is as follows.
Additional
Common Stock Paid-in Retained Treasury
Shares Amount Capital Earnings Stock Total
------ ----- -------- --------- -------- --------
January 1, 2002 21,716 $217 $13,355 $8,429 $(1,639) $20,362
Net loss - - - (656) - (656)
Issuance of common stock
upon exercise of stock options 139 1 60 - - 61
------ ---- ------- ------- ------- -------
June 30, 2002 21,855 $218 $13,415 $7,773 $(1,639) $19,767
====== ==== ======= ====== ======= =======
3. Basic earnings per share is based on the weighted average number of common
shares outstanding without consideration of potential common stock. Diluted
earnings per share is based on the weighted average number of common and
potential common shares outstanding. The difference between weighted
average common shares outstanding and adjusted dilutive shares outstanding
represents the dilutive effect of outstanding options.
Diluted net loss per share does not include potential common shares derived
from stock options because they are antidilutive. The number of
antidilutive securities excluded from the dilutable loss per share
calculation were 1,841,000 and 2,146,000 for the three and six months ended
June 30, 2002, respectively.
The basis of the earnings per share computation for the three and six
months ended June 30, 2002 and 2001 (in thousands, except per share
amounts) is as follows:
Three Months Six Months
---------------- ----------------
2002 2001 2002 2001
------- ------- ------- -------
Net (loss) income $ (899) $ 110 $ (656) $ 2,793
======= ======= ======= =======
Weighted average common shares outstanding 21,586 21,277 21,518 21,252
Dilutive effect of outstanding options - 3,929 - 3,984
------- ------- ------- -------
Adjusted for dilutive computation 21,586 25,206 21,518 25,236
======= ======= ======= =======
Basic (loss) income per share $(.04) $.01 $(.03) $.13
===== ==== ===== =======
Diluted (loss) income per share $(.04) $ - $(.03) $.11
===== === ==== ====
4. The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the Company's financial statements.
5. As a result of the acquisition of ISOGEN International in December 2001,
the Company's operations are now classified into two reporting segments:
(1) content services and (2) systems integration and training. The content
services operating segment aggregates, converts, tags and editorially
enhances digital content and performs XML transformations. The Company
offers such services as a comprehensive outsourcing solution and
individually as discrete activities. The Company's systems integration and
training operating segment offers system design, custom application
development, consulting services, and systems integration conforming to XML
and related standards and provides a broad range of introductory as well as
advanced curricula and training on XML and other knowledge management
standards.
Three Months Ended June 30, Six Months Ended June 30,
-------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----
(in thousands) (in thousands)
Revenues
- --------
Content services $ 9,678 $13,782 $20,599 $31,840
Systems and training services 711 - 2,346 -
------- ------- ------- -------
Total consolidated $10,389 $13,782 $22,945 $31,840
======= ======= ======= =======
(Loss) income before income taxes (a)
- -------------------------------------
Content services $ (268) $ 120 $ (41) $ 4,185
Systems and training services (718) - (607) -
------- ------- ------- -------
Total consolidated $ (986) $ 120 $ (648) $ 4,185
======= ======= ======= =======
(a) Corporate overhead has not been allocated to the systems and training services segment.
June 30, December 31,
2002 2001
--------- ------------
(in thousands)
Total assets
- ------------
Content services $27,351 $28,414
Systems and training services 1,243 1,680
------- -------
Total consolidated $28,594 $30,094
======= =======
6. On April 2, 2002, the Company issued a $280,000 standby letter of credit
for software licenses, which expires on October 31, 2002.
7. Subsequent to June 30, 2002, the Company granted options, principally to an
officer, to purchase 153,750 shares of its common stock at $4.00 per share
and 3,000 shares of its common stock at $4.60 per share. In addition, the
Company issued 11,587 shares of its common stock pursuant to an employment
agreement with an officer of the Company. Compensation expense of
approximately $10,000 will be recorded in third quarter as selling and
administrative expenses.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company
Innodata Corporation ("Innodata" or the "Company") is a leading provider of
digital content outsourcing services. It delivers content manufacturing and XML-
related digital asset services to online information providers and companies in
the telecommunications, technology, healthcare, defense, and Internet commerce
sectors. It has over 100 active clients, including Amazon.com, Dow Jones &
Company, Lockheed Martin Corporation, ProQuest Company, Reed Elsevier, Reuters,
Simon & Schuster, The Thomson Corporation, and Wolters Kluwer.
Commencing with the acquisition of ISOGEN International in December 2001,
the Company operates through three divisions. Its Content Division aggregates,
converts, tags and editorially enhances digital content - services the Company
refers to collectively as "content manufacturing" services. The Company offers
content manufacturing services as a comprehensive outsourcing solution and
individually as discrete activities. The Content Division also transforms data
to Extensible Markup Language (XML). The Company's Systems Division offers
system design, custom application development, consulting services, and systems
integration conforming to XML and related standards. The Company's Training
Division provides a broad range of introductory as well as advanced curricula
and training on XML and other knowledge management standards.
For financial reporting purposes, the Company's operations have been
classified into two reporting segments: (1) content services and (2) systems
integration and training. Prior to the acquisition of ISOGEN International in
December 2001, the Company operated as a single segment.
Results of Operations
Three Months Ended June 30, 2002 and 2001
Revenues decreased 25% to $10,389,000 for the three months ended June 30,
2002 compared to $13,782,000 for the similar period in 2001. Revenues from the
content services segment decreased 30% to $9,678,000 for the three months ended
June 30, 2002 compared to $13,782,000 for the similar period in 2001. The
decline principally resulted from the loss in revenues from three clients which
substantially curtailed their operations, one of which accounted for $3.8
million of the Company's content services segment revenues in the second quarter
of 2001, and from an overall decrease in work from a majority of the Company's
other clients. The Company replaced this shortfall in part by a $1.1 million
increase in revenues from a client from whom the Company derived no revenues in
the second quarter 2001. Revenues from the Company's systems and training
segment were $711,000 for the three months ended June 30, 2002.
One client accounted for 39% and 30% of the Company's revenues for the
three months ended June 30, 2002 and 2001, respectively. Revenues from this
client have substantially resulted from a phase of a project which is expected
to substantially wind down during the third quarter of 2002. The timing and
value of subsequent phases, if any, is not at this time known by the Company.
Two other clients accounted for 11% each of revenues for the three months ended
June 30, 2002. No other client accounted for 10% or more of revenues during this
period. Further, in 2002 and 2001, export revenues, substantially all of which
were derived from European clients, accounted for 18% and 14%, respectively, of
the Company's revenues.
In 2000 and early 2001, a significant portion of the Company's revenue
increase came from XML transformation projects by early-stage companies that had
raised significant venture capital to pursue digital library and e-business
initiatives. The downturn in the technology industry in 2001 resulted in a
falloff of revenues from companies in this industry sector. Furthermore, the
economic downturn that became evident late in 2001 resulted in many blue-chip
publishers that had shown increased interest in XML transformation projects
electing to curtail discretionary spending and slow down new initiatives. To in
part address this sales challenge, the Company has begun to refocus its sales
force to emphasize its content manufacturing/outsourcing services.
Direct operating expenses were $8,805,000 in the second quarter of 2002 and
$11,598,000 in the second quarter of 2001, a decrease of 24%. Direct operating
expenses for the content services segment were $7,789,000 in the second quarter
of 2002 and $11,599,000 in the second quarter of 2001, a decrease of 33%. Direct
operating expenses as a percentage of revenues for the content services segment
were 80% in 2002 and 84% in 2001. The dollar decrease for the content services
segment in 2002 is principally due to a reduction in labor costs associated with
lower revenues. The percentage decrease for the content services segment in 2002
is primarily attributable to a twelve percentage point decrease in labor costs
as a percentage of revenue resulting in part from restructuring and cost
reduction activities. In addition, during the three months ended June 30, 2001,
the Company incurred approximately $1 million in labor costs on a new project
for which no revenues were earned. This overall decrease was offset in part by
an eight percentage point increase in non-labor costs as a percent of revenues
resulting from the decline in revenues without a corresponding decrease in such
costs. Direct operating expenses for the Company's systems and training segment
were $1,016,000, or 143% of systems and training segment revenue, for the three
months ended June 30, 2002. Direct operating expenses primarily include direct
payroll, telecommunications, depreciation, equipment lease costs, computer
services, supplies and occupancy.
Selling and administrative expenses were $2,587,000 and $2,122,000 in the
second quarter of 2002 and 2001, respectively. The overall increase is primarily
due to selling and marketing costs of the ISOGEN International Division, which
was acquired in December 2001. Selling and administrative expenses for the
content services segment were $2,179,000 and $2,122,000 in the second quarter of
2002 and 2001, respectively, an increase of 3%. Selling and administrative
expenses as a percentage of revenues for the content services segment increased
to 23% in 2002 from 15% in the 2001 quarter due primarily to the decrease in
revenues without a corresponding decrease in such expenses. Selling and
administrative expenses for the systems and training segment were $408,000, or
57% of sales, in the second quarter of 2002. Selling and administrative expenses
primarily include management and administrative salaries, sales and marketing
costs, and administrative overhead.
Six Months Ended June 30, 2002 and 2001
Revenues decreased 28% to $22,945,000 for the six months ended June 30,
2002 compared to $31,840,000 for the similar period in 2001. Revenues from the
content services segment decreased 35% to $20,599,000 for the six months ended
June 30, 2002 compared to $31,840,000 for the similar period in 2001. The
decline principally resulted from the loss in revenues from three clients which
substantially curtailed operations, one of which accounted for approximately $15
million of the Company's content services segment revenues in the six months
ended June 30, 2001, and from an overall decrease in work from a portion of the
Company's other clients. The Company replaced this shortfall in part by a $3.1
million increase in revenues from a client from whom the Company derived no
revenues in the six months ended June 30, 2001 and from a $3 million increase in
revenues from two other clients. Revenues from the Company's systems and
training segment were $2,346,000 for the six months ended June 30, 2002.
One client accounted for 37% and 18% of the Company's revenues for the six
months ended June 30, 2002 and 2001, respectively. Revenues from this client
have substantially resulted from a phase of a project which is expected to
substantially wind down during the third quarter of 2002. The timing and value
of subsequent phases, if any, is not at this time known by the Company. Two
other clients accounted for 14% and 10%, respectively, of revenues for the six
months ended June 30, 2002. No other client accounted for 10% or more of
revenues during this period. Further, in 2002 and 2001, export revenues,
substantially all of which were derived from European clients, accounted for 17%
and 11%, respectively, of the Company's revenues.
In 2000 and early 2001, a significant portion of the Company's revenue
increase came from XML transformation projects by early-stage companies that had
raised significant venture capital to pursue digital library and e-business
initiatives. The downturn in the technology industry in 2001 resulted in a
falloff of revenues from companies in this industry sector. Furthermore, the
economic downturn that became evident late in 2001 resulted in many blue-chip
publishers that had shown increased interest in XML transformation projects
electing to curtail discretionary spending and slow down new initiatives. To in
part address this sales challenge, the Company has begun to refocus its sales
force to emphasize its content manufacturing/outsourcing services.
Direct operating expenses were $18,544,000 and $23,521,000 in the six
months ended June 30, 2002 and 2001, respectively, a decrease of 21%. Direct
operating expenses for the content services segment were $16,437,000 and
$23,521,000 in the six months ended June 30, 2002 and 2001, respectively, a
decrease of 30%. Direct operating expenses as a percentage of revenues for the
content services segment were 80% in 2002 and 74% in 2001. The dollar decrease
for the content services segment in 2002 is principally due to a reduction in
labor costs associated with lower revenues. The percentage increase for the
content services segment in 2002 is primarily attributable to the decline in
revenues without a corresponding decline in fixed operating costs. Direct
operating expenses for the Company's systems and training segment were
$2,107,000, or 90% of systems and training segment revenues, for the six months
ended June 30, 2002. Direct operating expenses primarily include direct payroll,
telecommunications, depreciation, equipment lease costs, computer services,
supplies and occupancy.
Selling and administrative expenses were $5,070,000 and $4,285,000 in the
six months ended June 30, 2002 and 2001, respectively. The overall increase is
primarily due to selling and marketing costs of the ISOGEN International
Division, which was acquired in December 2001. Selling and administrative
expenses for the content services segment were $4,240,000 and $4,285,000 for the
six months ended June 30, 2002 and 2001, respectively, a decrease of 1%. Selling
and administrative expenses as a percentage of revenues for the content services
segment increased to 21% in 2002 from 13% in the 2001 quarter due primarily to
the decrease in revenues without a corresponding decrease in such expenses.
Selling and administrative expenses for the systems and training segment were
$830,000, or 35% of sales, in the second quarter of 2002. Selling and
administrative expenses primarily include management and administrative
salaries, sales and marketing costs, and administrative overhead.
Liquidity and Capital Resources
Selected measures of liquidity and capital resources are as follows:
June 30, 2002 December 31, 2001
-------------- ------------------
Cash and Cash Equivalents $ 9,797,000 $6,267,000
Working Capital $10,535,000 $8,854,000
Stockholders' Equity Per Common Share* $.92 $.95
*Represents total stockholders' equity divided by the actual number of
common shares outstanding (which excludes treasury stock).
Net Cash Provided By Operating Activities
Net cash provided by operating activities was $4,042,000 and $2,151,000 for
the six months ended June 30, 2002 and 2001, respectively, an increase of
approximately $1,891,000. The increase was primarily due to increase in net
changes in operating assets and liabilities of $5.3 million (principally
accounts receivable) offset by a decrease in net income of $3.4 million.
Net Cash Used in Investing Activities
As a result of the decline in revenues and associated reduction in
production capacity, the need for new equipment has been diminished in
comparison with the prior two years. Accordingly, in the six months ended June
30, 2002, the Company spent approximately $248,000 for capital expenditures,
compared to approximately $4,237,000 in the six months ended June 30, 2001.
Net Cash Used in Financing Activities
In the six months ended June 30, 2002, net cash used in financing
activities totaled approximately $264,000 compared to $1,331,000 in the
comparable period in 2001. In 2002, the Company repaid the first of two notes it
delivered in connection with the acquisition of ISOGEN INTERNATIONAL; the second
note, also for $325,000, is due September 2002. In 2001, cash used in financing
activities was principally attributable to $1.6 million used to repurchase
shares of the Company's common stock.
Availability of Funds
The Company has a $4 million line of credit with a bank pursuant to which
it may borrow up to 80% of eligible accounts receivable. The line, which is due
on demand, is collateralized by accounts receivable. Interest is charged at 1/2%
above the bank's prime rate. There were no outstanding borrowings as of June 30,
2002.
On April 2, 2002, the Company issued a $280,000 standby letter of credit
for software licenses which expires on October 31, 2002.
Management believes that existing cash, internally generated funds, and
short term bank borrowings will be sufficient for reasonably anticipated working
capital and capital expenditure requirements during the next 12 months. The
Company funds its foreign expenditures from its U.S. corporate headquarters on
an as-needed basis.
Inflation, Seasonality and Prevailing Economic Conditions
To date, inflation has not had a significant impact on the Company's
operations. The Company generally performs its work for its clients under
project-specific contracts, requirements-based contracts or long-term contracts.
Contracts are typically subject to numerous termination provisions. The
Company's revenues are not significantly affected by seasonality.
Disclosures in this Form 10-Q contain certain forward-looking statements,
including without limitation, statements concerning the Company's 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 "believe," "expect," "anticipate" and
other similar expressions generally identify forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. These forward-looking statements are based
largely on the Company's current expectations, and are subject to a number of
risks and uncertainties, including without limitation, changes in external
market factors, the ability and willingness of the Company's clients and
prospective clients to execute business plans which give rise to requirements
for digital content services and professional services in knowledge processing,
difficulty in integrating and deriving synergies from acquisitions, potential
undiscovered liabilities of companies that Innodata acquires, changes in the
Company's 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 the Company's filings
with the Securities and Exchange Commission. 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 in fact occur.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to interest rate change market risk with respect to
its credit facility with a financial institution which is priced based on the
prime rate of interest. At June 30, 2002, there were no borrowings under the
credit facility. To the extent the Company utilizes all or a portion of its line
of credit, changes in the prime interest rate during fiscal 2002 will have a
positive or negative effect on the Company's interest expense.
The Company has operations in foreign countries. While it is exposed to
foreign currency fluctuations, the Company presently has no financial
instruments in foreign currency and does not maintain funds in foreign currency
beyond those necessary for operations.
PART II.OTHER INFORMATION
- -------------------------
Item 1. Legal Proceedings. Not Applicable
-----------------
Item 2. Changes in Securities. Not Applicable
---------------------
Item 3. Defaults upon Senior Securities. Not Applicable
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable
---------------------------------------------------
Item 5. Other Information. Not Applicable
-----------------
Item 6. (a) Exhibits.
--------
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Form 8-K Report. None
---------------
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 CORPORATION
Date: August 13, 2002 /s/
--------------- -----------------------------------
Jack Abuhoff
Chairman of the Board of Directors,
Chief Executive Officer and President
Date: August 13, 2002 /s/
--------------- ------------------------------------
Stephen Agress
Vice President - Finance
Chief Accounting Officer
EXHIBIT 99.1
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 Corporation (the "Company")
on Form 10-Q for the quarter ended June 30, 2002 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.
Section 1350, as adopted pursuant to Section 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) 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
Chief Executive Officer
August 13, 2002
EXHIBIT 99.2
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 Corporation (the "Company")
on Form 10-Q for the quarter ended June 30, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Stephen Agress,
Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 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) 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/
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Stephen Agress
Principal Financial Officer
August 13, 2002