What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-08-09 · 82 added, 58 removed, 298 unchanged (32% of the section changed)

3 unchanged sentences

(In thousands, except par value)

September 30,

Current assets

25 unchanged sentences

Common stock, $ 0.001 par value, 100,000 shares authorized;

49,362 shares issued and 48,377 outstanding at June 30, 2021 and 48,297 shares issued and 48,189 outstanding at December 31, 2020

49,362 shares issued and 48,952 outstanding at September 30, 2021 and 48,297 shares issued and 48,189 outstanding at December 31, 2020

Additional paid-in capital

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating expenses

8 unchanged sentences

Income tax provision

Net income (loss)

Weighted average shares outstanding:

Earnings (loss) per share:

Earnings per share:

Comprehensive income:

Net income (loss)

Foreign currency translation, net of tax (expense) benefit of $( 66 ), $( 287 ), $ 277 , and $ 192 respectively

Comprehensive income (loss)

Foreign currency translation, net of tax benefit (expense) of $ 303 , ($ 398 ), $ 579 , and ($ 207 ) respectively

Comprehensive income

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

4 unchanged sentences

Stockholders’

Balance December 31, 2020

Balance June 30, 2021

Other comprehensive loss

6 unchanged sentences

Stock based compensation

Balance June 30, 2021

Balance September 30, 2021

Comprehensive

5 unchanged sentences

Issuance of treasury shares

Issuance of common stock for RSUs vested

Accrued dividends on unvested shares

Cash dividends paid to shareholders

Stock based compensation

Balance September 30, 2021

Comprehensive

Stockholders’

Balance June 30, 2020

Other comprehensive income

Treasury shares repurchased

Proceeds from issuance of ESPP shares

Issuance of treasury shares

Stock based compensation

Balance September 30, 2020

Comprehensive

Stockholders’

Balance December 31, 2019

Other comprehensive income

Treasury shares repurchased

Proceeds from issuance of ESPP shares

Issuance of treasury shares

Stock based compensation

Balance September 30, 2020

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

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense

6 unchanged sentences

(Benefits) provisions for accounts receivable

Deferred tax provision

Deferred tax provision (benefit)

Changes in operating assets and liabilities:

7 unchanged sentences

Purchase of furniture, fixtures and equipment

Neuralify acquisition (Note 4)

Net cash used in investing activities

30 unchanged sentences

NOTE 2—BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and pursuant to Form 10-Q and Article 10 of Regulation S-X.

In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are considered necessary for a fair statement of the financial position of the Company as of June 30, 2021 and the results of operations for the three and six months ended June 30, 2021 and 2020 and the cash flows for the six months ended June 30, 2021 and 2020.

The accompanying unaudited condensed consolidated financial statements as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020, have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and pursuant to Form 10-Q and Article 10 of Regulation S-X.

In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are considered necessary for a fair statement of the financial position of the Company as of September 30, 2021 and the results of operations for the three and nine months ended September 30, 2021 and 2020 and the cash flows for the nine months ended September 30, 2021 and 2020.

The condensed consolidated balance sheet as of December 31, 2020 has been derived from the Company’s audited consolidated financial statements.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Certain information and disclosures normally included in the notes to annual financial statements prepared in accordance with GAAP have been omitted from these interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

8 unchanged sentences

allowance for doubtful accounts, useful lives of furniture, fixtures and equipment and definite lived intangible assets, depreciation expense, fair value assumptions in evaluating goodwill for impairment, income taxes and deferred tax asset valuation, and the valuation of stock-based compensation.

Restricted Cash

Restricted cash consists of cash and cash equivalents which the Company has committed for rent deposits and are not available for general corporate purposes.

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable, other current liabilities, and accrued interest approximated their fair values at June 30, 2021 and December 31, 2020 due to the short-term nature of these accounts.

Restricted Cash

Restricted cash consists of cash and cash equivalents which the Company has committed for rent deposits and are not available for general corporate purposes.

The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable, other current liabilities, and accrued interest approximated their fair values at September 30, 2021 and December 31, 2020 due to the short-term nature of these accounts.

Fair value measurements were applied with respect to our nonfinancial assets and liabilities measured on a nonrecurring basis, which would consist of measurements primarily to contingent consideration in a business combination.

12 unchanged sentences

Basis of Fair Value Measurements

June 30, 2021

September 30, 2021

Cash equivalents

4 unchanged sentences

Contingent consideration (2)

(1) Contingent consideration is included in “Accrued expenses and other current liabilities” as of June 30, 2021.

(1) Contingent consideration is included in “Accrued expenses and other current liabilities” as of September 30, 2021.

(2) The current and noncurrent Contingent consideration is included in “Accrued expenses and other current liabilities” and “Other liabilities,” respectively, as of December 31, 2020.

3 unchanged sentences

These cash outflow projections have then been discounted using a rate of 2.50 %.

The following table represents the change in the contingent consideration liability during the six months ended June 30, 2021:

Six Months Ended

The following table represents the change in the contingent consideration liability during the nine months ended September 30, 2021:

Nine Months Ended

September 30,

Beginning Balance

Neuralify contingent consideration accrued

Payment of contingent consideration

Accretion of contingent consideration

Unrealized gain (loss) related to currency translation

Ending Balance

The Company’s financial instruments include outstanding borrowings of $ 75.6 million at September 30, 2021 and $ 78.8 million at December 31, 2020, which are carried at amortized cost.

The fair value of debt is classified within Level 3 of the fair value hierarchy.

The fair value of the Company's outstanding borrowings is approximately $ 74.7 million and $ 77.7 million at September 30, 2021 and December 31, 2020, respectively.

The fair values of debt have been estimated

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

The Company’s financial instruments include outstanding borrowings of $ 76.6 million at June 30, 2021 and $ 78.8 million at December 31, 2020, which are carried at amortized cost.

The fair value of debt is classified within Level 3 of the fair value hierarchy.

The fair value of the Company's outstanding borrowings is approximately $ 75.8 million and $ 77.7 million at June 30, 2021 and December 31, 2020, respectively.

The fair values of debt have been estimated using a discounted cash flow analysis based on the Company's incremental borrowing rate for similar borrowing arrangements.

The incremental borrowing rate used to discount future cash flows is 1.9 % and 2.5 % at June 30, 2021 and December 31, 2020, respectively.

using a discounted cash flow analysis based on the Company's incremental borrowing rate for similar borrowing arrangements.

The incremental borrowing rate used to discount future cash flows is 1.9 % and 2.5 % at September 30, 2021 and December 31, 2020, respectively.

The Company also considered recent transactions of peer group companies for similar instruments with comparable terms and maturities as well as an analysis of current market conditions.

9 unchanged sentences

The purchase price was comprised of $ 2.3 million of cash consideration paid at closing and certain former employees of Neuralify, LLC will also have the right to receive additional consideration paid via earn-out payments during the next 18 months , if certain financial targets are met.

At the Agreement date, the Company estimated such earn-out payments would be up to $ 4.9 million.

In October 2021, the 18-month period was extended six months to July 2022.

On the date of the Agreement, the Company estimated such earn-out payments would be up to $ 4.9 million.

The following table summarizes the consideration transferred to acquire Neuralify, LLC and the amounts of identified assets acquired, and liabilities assumed as of the Agreement date:

3 unchanged sentences

Costs associated with this acquisition are included in the selling, general and administrative expenses in the Consolidated Statement of Income and Comprehensive Income and totaled $ 0.1 million during the year ended December 31, 2020.

This business combination was accounted for under the acquisition method of accounting, and as such, the aggregate purchase price was allocated on a preliminary basis to the assets acquired and liabilities assumed based on estimated fair values as of the closing date.

This business combination was accounted for under the acquisition method of accounting, and as such, the aggregate purchase price was allocated to the assets acquired and liabilities assumed based on estimated fair values as of the closing date.

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

37 unchanged sentences

See the table below for a breakdown of contract assets and contract liabilities.

September 30,

Contract assets

Contract liabilities

Revenue recognized for the three and six months ended June 30, 2021 that was included in the contract liability balance at January 1, 2021 was $ 1.3 million and $ 3.2 million, respectively, and represented primarily revenue from our fixed fee and subscription contracts.

Revenue recognized for the three and nine months ended September 30, 2021 that was included in the contract liability balance at January 1, 2021 was $ 0.2 million and $ 3.4 million, respectively, and represented primarily revenue from our fixed fee and subscription contracts.

Remaining Performance Obligations

As of June 30, 2021, the Company had $ 113.8 million of remaining performance obligations, the majority of which are expected to be satisfied within the next year.

As of September 30, 2021, the Company had $ 98.0 million of remaining performance obligations, the majority of which are expected to be satisfied within the next twelve months.

NOTE 6—NET INCOME PER COMMON SHARE

1 unchanged sentence

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would share in the net income of the Company.

For the three and six months ended June 30, 2021, 0.2 million and 0.3 million restricted stock units, respectively, have not been considered in the diluted earnings per share calculation, as the effect would be anti-dilutive.

For the three and nine months ended September 30, 2021, 0.0 million and 0.3 million restricted stock units, respectively, have not been considered in the diluted earnings per share calculation, as the effect would be anti-dilutive.

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

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Three Months Ended September 30,

Nine Months Ended September 30,

Weighted average common shares

Earnings (loss) per share

Net income (loss)

Earnings per share

Basic weighted average common shares

1 unchanged sentence

Diluted weighted average common shares

Diluted earnings (loss) per share

Diluted earnings per share

NOTE 7—INCOME TAXES

The Company’s effective tax rate for the three and six months ended June 30, 2021 was 22.5 % and 22.6 % based on pretax income of $ 5.3 million and $ 9.7 million, respectively.

The Company’s effective tax rate for the quarter ended June 30, 2021 was impacted by the earnings and losses in certain foreign jurisdictions and the impact of vesting of restricted stock units.

The Company’s effective tax rate for the three and six months ended June 30, 2020 was 77.0 % and 193.6 %.

The Company’s effective tax rate for the three and nine months ended September 30, 2021 was 34.9 % and 27.7 % based on pretax income of $ 6.8 million and $ 16.5 million, respectively.

The Company’s effective tax rate for the quarter ended September 30, 2021 was impacted by the earnings and losses in certain foreign jurisdictions and the impact of vesting of restricted stock units.

The Company’s effective tax rate for the three and nine months ended September 30,

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

2020 was 9.9 % and 57.6 %.

The difference was primarily due to the impact of earnings and losses in certain foreign jurisdictions and the impact of vesting of restricted stock units.

1 unchanged sentence

The Company is subject to contingencies which arise through the ordinary course of business.

All material liabilities of which management is aware are properly reflected in the financial statements at June 30, 2021 and December 31, 2020.

All material liabilities of which management is aware are properly reflected in the financial statements at September 30, 2021 and December 31, 2020.

Neuralify Contingent Consideration

As of June 30, 2021, the Company has recorded a liability of $ 5.4 million representing the estimated fair value of contingent consideration related to the acquisition of Neuralify, all of which is classified as current and included in Other current liabilities on the consolidated balance sheet.

As of September 30, 2021, the Company has recorded a liability of $ 5.4 million representing the estimated fair value of contingent consideration related to the acquisition of Neuralify, all of which is classified as current and included in Other current liabilities on the consolidated balance sheet.

NOTE 9—SEGMENT AND GEOGRAPHICAL INFORMATION

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

The segregation of revenues by geographic region is based upon the location of the legal entity performing the services.

16 unchanged sentences

● The senior secured credit facility contains customary events of default, including cross-default to other material agreements, judgment default and change of control.

The Company’s financial statements include outstanding borrowings of $ 76.6 million and $ 78.8 million at June 30, 2021 and December 31, 2020, respectively, which are carried at amortized cost.

The Company’s financial statements include outstanding borrowings of $ 75.6 million and $ 78.8 million at September 30, 2021 and December 31, 2020, respectively, which are carried at amortized cost.

The fair value of debt is classified within Level 3 of the fair value hierarchy.

The fair value of the Company's outstanding borrowings is approximately $ 75.8 million and $ 77.7 million at June 30, 2021 and December 31, 2020, respectively.

The fair value of the Company's outstanding borrowings is approximately $ 74.7 million and $ 77.7 million at September 30, 2021 and December 31, 2020, respectively.

The fair values of debt have been estimated using a discounted cash flow analysis based on the Company's incremental borrowing rate for similar borrowing arrangements.

The incremental borrowing rate used to discount future cash flows is 1.9 %.

The Company also considered recent transactions of peer group companies for similar instruments with comparable terms and maturities as well as an analysis of current market conditions.

The incremental borrowing rate used to discount future cash flows is 1.9 % and 2.5 % at September 30, 2021 and December 31, 2020, respectively.

The Company also considered recent transactions of peer group companies for similar instruments with comparable terms and maturities as well as an analysis of current market conditions and interest rates.

As of September 30, 2021 and December 31, 2020, there were no borrowings under the revolver.

NOTE 11 - RISKS AND UNCERTAINTIES

3 unchanged sentences

The impact of COVID-19 pandemic continues to evolve and, therefore, the Company cannot predict with certainty the extent to which the pandemic will negatively impact our results of operations, cash flows and financial position, liquidity and ability to remain in compliance with our financial covenants.

Given the uncertainty of the marketplace, during fiscal year 2020, the Company implemented business continuity plans to ensure that the Company is able to remain fully operational with a remote workforce, conducted financial modeling scenarios in order to ensure prudent cost

Given the uncertainty of the marketplace, during fiscal year 2020, the Company implemented business continuity plans to ensure that the Company is able to remain

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

containment, and has proactively implemented a series of cash conservation measures.

fully operational with a remote workforce, conducted financial modeling scenarios in order to ensure prudent cost containment, and has proactively implemented a series of cash conservation measures.

These measures reduced personnel costs and other operating expenses, including reductions in staffing and contractor levels, vendor spending, travel, and other measures.

The Company has financial covenants underlying its debt which require a Debt to adjusted EBITDA ratio of 3.25 .

In light of the pandemic, there is uncertainty regarding the marketplace demand for the Company’s services and thus the Company’s future revenue generation.

Accordingly, in light of this uncertainty, the Company has developed plans to further reduce operating expenses to the extent more prolonged revenue shortfalls are experienced which would prevent the Company from complying with its financial covenants.

The Company is currently in compliance with its financial covenants.

5 unchanged sentences

Most of these actions are based on our recent experience and learning in the COVID-19 pandemic and a resulting review of our operations, which continues to address certain operating expenses such as occupancy expense and salaries and related expenses.

A summary of the activity affecting the Company's accrued contractual termination benefit liability for the period ended June 30, 2021 is as follows:

A summary of the activity affecting the Company's accrued contractual termination benefit liability for the period ended September 30, 2021 is as follows:

Restructuring Plan

2 unchanged sentences

Amounts paid/incurred

Balance at June 30, 2021

Balance at September 30, 2021

The $ 2.3 million of net restructuring charges was primarily related to contractual termination benefits, and was recorded in selling, general and administrative expenses.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements