What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-08 compared with 2023-03-10 · 212 added, 137 removed, 818 unchanged (30% of the section changed)

12 unchanged sentences

Based on its evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2023.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which appears herein.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its attestation report which appears herein.

Changes in Internal Control Over Financial Reporting

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Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not

absolute, assurance that the objectives of the control system are met.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

3 unchanged sentences

The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Projections of any evaluation of controls’ effectiveness to future periods are subject to risks.

Projections of any evaluation of the effectiveness of our controls to future periods are subject to risks.

Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies and procedures.

Other Information

During the three months ended December 31, 2023, none of the Company’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Exchange Act).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Directors, Executive Officers and Corporate Governance

Identification of Directors and Executive Officers.

Code of Ethics.

Nominating Committee, Audit Committee, Audit Committee Financial Expert.

Executive Compensation

The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with our 2023 Annual Meeting of Stockholders under the caption “Corporate Governance,” “Executive Compensation,” “Summary Compensation Table” and “Outstanding Equity Awards at 2022 Fiscal Year End.”

The information required hereunder is incorporated by reference from the sections of our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders under the captions “Corporate Governance,” “Compensation Committee Report,” “Compensation Discussion and Analysis,”, “Summary Compensation Table” Grants of Plan-Based Awards - Fiscal 2023,” “Outstanding Equity Awards at 2023 Fiscal Year-End,” “Stock Vested During 2023,” “Potential Payments Upon Termination or Change in Control,” “Director Compensation,” “CEO Pay Ratio” and “Pay Versus Performance.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required hereunder is incorporated by reference from the sections of our Proxy Statement filed in connection with our 2023 Annual Meeting of Stockholders under the caption “Security Ownership of Certain Beneficial Owners.”

The following table lists information regarding outstanding options and shares reserved for future issuance under our Amended and Restated 2007 Equity and Incentive Award Plan (the “Incentive Plan”) and our Amended and Restated Employee Stock Purchase Plan (the “ESPP”) as of December 31, 2023.

We have not issued any shares of our common stock to employees as compensation under a plan that has not been approved by our stockholders.

Equity Compensation Plan Information

Number of Securities

Remaining Available

Exercise Price

for Future Issuance

of Outstanding

under Equity Compensation

Plans (Excluding

Options, Warrants

Securities Reflected in

Plan Category

and Rights (1)

Column (a) (2)(3)

Approved by Stockholders

Not Approved by Stockholders

Of the 3,921,366 shares listed in this column, none are stock options issued under the Incentive Plan, 3,921,366 shares are restricted stock units issued under the Incentive Plan, and none are options issued during the current offering period under the ESPP.

The weighted-average exercise price includes outstanding options and RSUs, treating RSUs as stock awards with an exercise price of zero.

Includes 640,318 shares available for future issuance under the ESPP.

Also includes 2,231,197 shares that were available for grant under the Incentive Plan as options and SARs and also for restricted stock, RSUs or other awards that could provide to the grantee an opportunity to earn the full value of an underlying share (in other words, such earning opportunity is not limited to the appreciation in value of our stock following the grant of the award).

The other information required hereunder is incorporated by reference from the sections of our Proxy Statement to be filed in connection with our 2024 Annual Meeting of Stockholders under the caption “Security Ownership of Certain Beneficial Owners.”

Certain Relationships and Related Transactions, and Director Independence

The information required hereunder is incorporated by reference from the sections in our Proxy Statement filed in connection with our 2023 Annual Meeting of the Stockholders under the caption “Corporate Governance.”

The information required hereunder is incorporated by reference from the sections in our Proxy Statement to be filed in connection with our 2024 Annual Meeting of the Stockholders under the caption “Corporate Governance.”

Principal Accounting Fees and Services

2 Ratification of Engagement of Independent Registered Public Accounting Firm.”

Exhibits and Financial Statement Schedule

Exhibits and Financial Statement Schedule s

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

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We have audited the accompanying consolidated balance sheets of Information Services Group, Inc.

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income and comprehensive income, of stockholders’ equity and of cash flows for the years then ended, including the related notes and schedule of valuation and qualifying accounts for the years then ended appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income and comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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/s/ PricewaterhouseCoopers LLP

Stamford, Connecticut

New York, New York

March 8, 2024

3 unchanged sentences

(In thousands, except par value)

Years Ended December 31,

Current assets

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10,000 shares authorized;

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

Common stock, $ 0.001 par value;

100,000 shares authorized;

49,472 shares issued and 48,653 outstanding at December 31, 2023 and 49,472 shares issued and 48,300 outstanding at December 31, 2022

17 unchanged sentences

Interest expense

Foreign currency transaction gain

Foreign currency transaction (loss) gain

Income before taxes

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Comprehensive income:

Foreign currency translation loss, net of tax benefit of ($ 859 ), and ($ 724 ), respectively

Foreign currency translation gain (loss), net of tax expense (benefit) of $ 212 , ($ 859 ) and ($ 724 ), respectively

Comprehensive income

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Balance December 31, 2022

Other comprehensive gain

Impact of change in accounting policy (Note 3)

Treasury shares repurchased

Proceeds from issuance of ESPP shares

Issuance of common stock for RSUs vested

Accrued dividends on unvested shares

Cash dividends paid to shareholders ($ 0.18 per share)

Stock based compensation

Balance December 31, 2023

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

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Cash flows from operating activities

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

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

Depreciation expense

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Deferred tax benefit from stock issuances

Write-off of deferred financing costs

Amortization of deferred financing costs

1 unchanged sentence

Change in fair value of contingent consideration

Provisions (benefits) for accounts receivable

Deferred tax provision

Provisions for credit losses

Deferred tax (benefit) provision

Changes in operating assets and liabilities:

Accounts receivable and contract assets

Prepaid expense and other assets

Prepaid expenses and other assets

Accounts payable

4 unchanged sentences

Change 4 Growth acquisition (Note 4)

Ventana Research acquisition (Note 4)

Purchase of furniture, fixtures and equipment

1 unchanged sentence

Cash flows from financing activities

Proceeds from revolving facility

Proceeds from revolving facility (Note 12)

Repayment of outstanding debt (Note 12)

Principal payments on borrowings

Proceeds from issuance of employee stock purchase plan shares

Debt financing costs

Payments related to tax withholding for stock-based compensation

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Non-cash investing and financing activities:

Issuance of treasury stock for vested restricted stock awards

Issuance of treasury stock for vested restricted stock units

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

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Numerous internal and external factors can affect estimates.

Estimates are also used for but not limited to:

allowance for doubtful accounts, useful lives of furniture, fixtures and equipment 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.

Estimates are also used for but not limited to 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.

Business Combinations

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Historically, the Company’s bad debt reserves and write-offs have not been significant.

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

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

Historically, the Company’s unbilled receivable reserves and write-offs have not been significant.

During the fourth quarter of 2023, a client that had engaged us for two multi-year projects, which previously commenced in 2021 and 2022, failed to make payments as per the contracted payment schedule and we ceased performing services under the agreements.

After unsuccessful negotiations, we provided the client with notice that we would be terminating the respective projects.

Accordingly, during the fourth quarter of 2023, the Company recorded through bad debt expense an allowance for doubtful accounts reserve of $ 4.8 million associated with this client.

The specific reserve recorded as of December 31, 2023 represents management' s best estimate of the probable amount of collection related to the outstanding amounts under these agreements.

In the event that collection efforts prove unsuccessful, the Company may seek payment through other means, including legal action.

Actual collections from the client may differ from the Company's estimate.

Prepaid Expenses and Other Current Assets

9 unchanged sentences

They also require that costs related to the preliminary project stage, data conversion and post implementation/operation stage of an internal-use software development project be expensed as incurred.

During the years ended December 31, 2022 and 2021, the Company capitalized $ 1.7 million and $ 0.8 million, respectively, of costs associated with system and website development.

During the years ended December 31, 2023, 2022 and 2021 the Company capitalized $ 1.7 million, $ 1.7 million and $ 0.8 million, respectively, of costs associated with system and website development.

Our goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired at the date of acquisition.

5 unchanged sentences

Subsequent increases in value are not recognized in the financial statements.

There was no impairment of goodwill during the years ended December 31, 2022 and 2021, nor were any indicators identified in 2022 or 2021 that would suggest that it is more likely than not that the Company’s reporting unit is impaired.

Long-Lived Assets

Long-lived assets, excluding goodwill and indefinite-lived intangibles, to be held and used by the Company are reviewed to determine whether any significant change in the long-lived asset’s physical condition, a change in industry conditions or a reduction in cash flows associated with the asset group that contains the long-lived asset.

If these or other factors indicate the carrying amount of the asset group, which is the lowest level for which identifiable cash flows exist that are separately identifiable from other cash flows, may not be recoverable, the Company determines whether impairment has occurred through the use of an undiscounted cash flow analysis.

If impairment

INFORMATION SERVICES GROUP, INC.

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(tabular amounts in thousands, except per share data)

has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset group.

There was no impairment of goodwill during the years ended December 31, 2023, 2022 and 2021.

There were no indicators identified in 2023, 2022 or 2021 that would suggest that it is more likely than not that the Company’s reporting unit is impaired.

Long-Lived Assets

If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset group.

The fair value of the asset group is measured using market prices or, in the absence of market prices, an estimate of discounted cash flows.

4 unchanged sentences

Deferred issuance costs are classified as a direct deduction to the long-term debt in the accompanying consolidated balance sheet.

Amortization of debt issuance costs is included in interest expense and totaled $ 0.3 million and $ 0.4 million for the years ended December 31, 2022 and 2021, respectively.

Amortization of debt issuance costs is included in interest expense and totaled $ 0.2 million, $ 0.3 million and $ 0.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Revenue Recognition

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For ongoing managed services contract, revenue is recognized over time, consistent with the weekly or monthly fee specified within such arrangements.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

We also derive revenues based on negotiating reductions in network and software costs of companies with the entity’s related service providers and providing other services such as audits of network and communication expenses and consultation for network architecture.

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We also enter into arrangements for the sale of automation software licenses and related delivery of consulting or implementation services at the same time or within close proximity to one another.

Such software-related performance obligations include the sale of on-

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

premise software, hybrid and software-as-a-service licenses, as well as other software-related services.

Such software-related performance obligations include the sale of on-premise software, hybrid and software-as-a-service licenses, as well as other software-related services.

Revenue associated with the software performance obligation is primarily recognized at the point at which the software is installed or access is granted.

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Non-reimbursable amounts are expensed as incurred.

Reimbursable expenditures totaled $ 0.8 million and $ 0.3 million for the years ended December 31, 2022 and 2021, respectively.

The increase was attributable to pandemic-related travel restrictions being lifted in 2022.

Reimbursable expenditures totaled $ 1.5 million $ 0.8 million and $ 0.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The increase was attributable to pandemic-related travel restrictions being lifted and attending more in person meetings with clients to drive revenue.

Direct Costs and Expenses for Advisors

8 unchanged sentences

We follow the provisions of accounting and disclosure requirements for share-based payments, including the measurement and recognition of all share-based compensation under the fair value method.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

Concentration of Credit Risk

6 unchanged sentences

Shares are released from Treasury at original cost on a first-in, first-out basis, with any gain or loss on the sale reflected as an adjustment to additional paid-in capital.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

Foreign Currency Translation

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Contingent consideration (1)

(1) The current and noncurrent contingent consideration are included in “Accrued expenses and other current liabilities” and “Other liabilities,” respectively, as of December 31, 2022.

(2) Contingent consideration is included in “Accrued expenses and other current liabilities” as of December 31, 2021.

(1) The current and noncurrent contingent consideration are included in “Accrued expenses and other current liabilities,” and “Other liabilities”, respectively, as of December 31, 2023 and December 31, 2022.

The fair value measurement of contingent consideration is classified within Level 3 of the fair value hierarchy and reflects the Company’s own assumptions in measuring fair values using the income approach .

6 unchanged sentences

Neuralify earnout payment

Change 4 Growth contingent consideration payment

Change 4 Growth contingent consideration accrued

Ventana contingent consideration accrued

Accretion of contingent consideration

4 unchanged sentences

(tabular amounts in thousands, except per share data)

The Company’s financial instruments include outstanding borrowings of $ 79.2 million as of December 31, 2022 and $ 74.5 million as of December 31, 2021, which are carried at amortized cost.

The Company’s financial instruments include outstanding borrowings of $ 79.2 million both as of December 31, 2023 and December 31, 2022, which are carried at amortized cost.

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

3 unchanged sentences

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 December 31, 2022 and 2021, there were $ 9.0 million and $ 0.0 million borrowings, respectively, under the revolver.

The Company was in compliance with its financial covenants under the 2020 Credit Agreement as of December 31, 2022.

In the third quarter of 2023, the Company borrowed $ 5.0 million against the revolver and subsequently repaid $ 5.0 million during that quarter.

The Company is currently in compliance with its financial covenants.

We use the asset and liability method to account for income taxes, including recognition of deferred tax assets and liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis.

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Recently Issued Accounting Pronouncements

In June 2016, the FASB issued new guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable, and available-for-sale debt securities.

In June 2016, the Financial Accounting Standards Board (FASB) issued new guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable and contract assets, and available for sale debt securities.

The new guidance replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses and additional disclosures.

As a smaller reporting company, this guidance is effective for fiscal years beginning after December 15, 2022.

The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

We adopted this standard using the modified retrospective approach with an effective date of January 1, 2023 .

The Company recognized a cumulative effect adjustment increasing accumulated deficit and increasing the allowance for credit losses by $ 0.1 million .

NOTE 3—REVENUE

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This may be one single amount covering the whole engagement or several amounts for various phases, functions, or milestones.

Generally, billing occurs subsequent to revenue recognition, resulting in contract assets.

However, we sometimes receive advances or deposits before

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

revenue is recognized, resulting in contract liabilities.

billing occurs subsequent to revenue recognition, resulting in contract assets.

However, we sometimes receive advances or deposits before revenue is recognized, resulting in contract liabilities.

Contract assets and liabilities are generally reported in the current assets and current liabilities sections of the consolidated balance sheet, at the end of each reporting period, based on the timing of the satisfaction of the related performance obligation(s).

4 unchanged sentences

Contract liabilities

Revenue recognized for the year ended December 31, 2022 that was included in the contract liability balance at January 1, 2022 was $ 6.7 million and represented primarily revenue from our fixed-fee and subscription contracts.

Revenue recognized for the year ended December 31, 2023 that was included in the contract liability balance at January 1, 2023 was $ 5.5 million and represented primarily revenue from our fixed-fee, research, and subscription contracts.

Remaining performance obligations

1 unchanged sentence

NOTE 4 — ACQUISITION

Agreemint Acquisition

On March 28, 2022, ISG executed an asset purchase agreement for the purchase of substantially all of the assets of Agreemint, which is an automated, platform-based contracting solution that will enhance the value of ISG GovernX and our other platform solutions now in development.

We determined the transaction to be an asset acquisition as substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset:

the software and related intellectual property rights.

The cash paid for the acquisition as of the balance sheet date is reflected in Cash flows from investing activities of the Statement of Cash Flows.

The related software acquired, which is capitalized within “Furniture, fixtures and equipment, net”, will be depreciated over four years when put into service at the end of the transition period underway to integrate the offering with our ISG GovernX cloud solution.

Change 4 Growth Acquisition

On October 31, 2022, a subsidiary of the Company executed an Asset Purchase Agreement with Change 4 Growth, LLC and consummated the acquisition of substantially all the assets, and assumed certain liabilities, of Change 4 Growth, LLC.

The purchase price was comprised of $ 3.8 million of cash consideration, $ 0.6 million of shares of ISG common stock issued promptly after closing and Change 4 Growth, LLC will also have the right to receive additional consideration paid via earn-out payments, if certain financial targets are met.

Ventana Research Acquisition

On October 31, 2023, a subsidiary of the Company executed an Asset Purchase Agreement with Ventana Research, Inc.

(“Ventana Research”) and consummated the acquisition of substantially all assets, and assumed certain liabilities, of Ventana Research.

The purchase price was comprised of $ 1.0 million of cash consideration paid at closing.

Ventana Research will also have the right to receive additional consideration paid via earn-out payments, if certain financial targets are met.

At the agreement date, the Company estimated such earn-out payment would be $ 1.7 million.

The following table summarizes the preliminary consideration transferred to acquire Change 4 Growth, LLC and the amounts of identified assets acquired, and liabilities assumed as of the agreement date:

Accrued working capital adjustment

ISG common stock

The following table summarizes the preliminary consideration transferred to acquire Ventana Research, Inc.

and the amount of identified assets acquired, and liabilities assumed, as of the agreement date:

Contingent consideration

Total allocable purchase price

The amount of recognized identifiable assets acquired and liabilities assumed as of the agreement date:

Accounts receivable

Intangible assets

Contract liabilities

Net assets acquired

The primary factors that drove the goodwill recognized, the majority of which is deductible for tax purposes, were the inclusion of the legacy Ventana Research workforce and allowing the Company to penetrate an entirely new market sector:

software technology vendors.

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

The amount of recognized identifiable assets acquired and liabilities assumed as of the agreement date:

Costs associated with this acquisition are included in the selling, general and administrative expense in the Consolidated Statement of Income and Comprehensive Income and totaled $ 0.1 million during the year ended December 31, 2023.

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.

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

Purchase Price

Amortizable intangible assets:

Trademark and trade name

Customer relationships

Noncompete agreements

Total intangible assets

The Consolidated Statement of Income and Comprehensive Income includes revenue from the Ventana Research acquisition subsequent to the closing.

Had the acquisition occurred as of January 1, 2023, approximately $ 3.9 million of revenue would have been recognized.

Change 4 Growth Acquisition

On October 31, 2022, a subsidiary of the Company executed an Asset Purchase Agreement with Change 4 Growth, LLC (“Change 4 Growth”) and consummated the acquisition of substantially all the assets, and assumed certain liabilities, of Change 4 Growth.

The purchase price was comprised of $ 3.8 million of cash consideration, $ 0.6 million of shares of ISG common stock issued promptly after closing and Change 4 Growth will also have the right to receive additional consideration paid via earn-out payments, if certain financial targets are met.

At the agreement date, the company estimated such earn-out payment would be $ 5.6 million.

The following table summarizes the consideration transferred to acquire Change 4 Growth and the amounts of identified assets acquired, and liabilities assumed as of the agreement date:

Accrued working capital adjustment

ISG common stock

Contingent consideration

Total allocable purchase price

This acquisition 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 the fair values as of the closing date.

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

Accounts receivable and contract assets

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The primary factors that drove the goodwill recognized, the majority of which is deductible for tax purposes, were the inclusion of legacy Change 4 Growth workforce and associated organizational change management expertise to enhance and expand the offerings of the ISG Enterprise Change service line.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

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

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Total intangible assets

The Consolidated Statement of Income and Comprehensive Income includes revenue from the Change 4 Growth acquisition subsequent to the closing.

Had the acquisition occurred as of January 1, 2022, approximately $ 7.0 million of revenue would have been recognized.

NOTE 5—NET INCOME PER COMMON SHARE

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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.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

For the year ended December 31, 2023, 2.3 million restricted stock units have not been considered in the diluted earnings per share calculation, as the effect would anti-dilutive.

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

Year Ended December 31,

Weighted average common shares

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Receivables from related parties

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 7—FURNITURE, FIXTURES AND EQUIPMENT

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Accumulated depreciation

Depreciation expense was $ 3.0 million and $ 2.7 million for both years ended December 31, 2022 and 2021, respectively.

Depreciation expense was $ 3.1 million, $ 3.0 million and $ 2.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

NOTE 8—LEASES

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As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments.

The Company leases its office space and office equipment under long-term operating lease agreements which expire at various dates through March 2027, some of which include options to extend the leases for up to 3 years , and some of which included options to terminate the leases within 1 year.

The Company leases its office space and office equipment under long-term operating lease agreements which expire at various dates through November 2030, some of which include options to extend the leases for up to 3 years , and some of which included options to terminate the leases within 1 year.

Under the operating leases, the Company pays certain operating expenses relating to the office equipment and leased property.

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

The components of lease expense were as follows:

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Financing cash flows from finance leases

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

Supplemental balance sheet information related to leases was as follows:

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(2) Finance lease right-of-assets are included in “Furniture, fixtures and equipment, net.”

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

Maturities of lease liabilities were as follows:

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Less imputed interest

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 9—INTANGIBLE ASSETS

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Trademark and trade names

Amortization expense was $ 3.2 million, $ 2.3 million and $ 2.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The estimated future amortization expense subsequent to December 31, 2023 is as follows:

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

Amortization expense was $ 2.3 million and $ 2.6 million for the years ended December 31, 2022 and 2021, respectively.

The estimated future amortization expense subsequent to December 31, 2022 is as follows:

NOTE 10—GOODWILL

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Balance as of January 1

Change 4 Growth acquisition

Foreign currency impact and adjustments

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Accrued corporate and payroll related taxes

Accrued contractors expenses

Contingent consideration-current

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Senior secured credit facility

Revolver borrowings

Revolving borrowings

Debt issuance costs

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Long-term debt

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

On March 10, 2020, the Company amended and restated its senior secured credit facility to include an $ 86.0 million term facility and to increase the revolving commitments per the revolving facility (the “2020 Credit Agreement”) from $ 30.0 million to $ 54.0 million.

The revolving loan repayment of the outstanding principal amount and interest payment is due on the maturity date of February 22, 2028.

On February 22, 2023, the Company amended and restated its senior secured credit facility to increase the revolving commitments per the revolving facility (the “2023 Credit Agreement”) from $ 54.0 million to $ 140.0 million and eliminate its term loan.

The material terms under the 2023 Credit Agreement are as follows.

● Each of the term loan facility and revolving credit facility has a maturity date of March 10, 2025 (the “Maturity Date”).

Capitalized terms used but not defined herein have the meanings ascribed to them in the 2023 Credit Agreement:

● The revolving credit facility has a maturity date of February 22, 2028.

● The credit facility is secured by all of the equity interests owned by the Company, and its direct and indirect domestic subsidiaries and, subject to agreed exceptions, the Company’s direct and indirect “first-tier” foreign subsidiaries, and a perfected first priority security interest in all of the Company’s and its direct and indirect domestic subsidiaries’ tangible and intangible assets.

● The Company’s direct and indirect existing and future wholly owned domestic subsidiaries serve as guarantors to the Company’s obligations under the senior secured facility.

● At the Company’s option, the credit facility bears interest at a rate per annum equal to either (i) the “Base Rate” (which is the highest of (a) the rate publicly announced from time to time by the administrative agent as its “prime rate”, (b) the Federal Funds Rate plus 0.5 % per annum and (c) the Eurodollar Rate , plus 1.0 % ), plus the applicable margin or (ii) Eurodollar Rate (adjusted for maximum reserves) as determined by the Administrative Agent (as defined in the 2020 Credit Agreement), plus the applicable margin.

The applicable margin is adjusted quarterly based upon the Company’s quarterly leverage ratio.

● The term loan is repayable in nineteen consecutive quarterly installments of $ 1,075,000 that commenced on June 30, 2020 and a final payment of the outstanding principal amount of the term loan on the Maturity Date.

● Mandatory repayments of term loans shall be required from (subject to agreed exceptions) (i) 100 % of the proceeds from asset sales by the Company and its subsidiaries, (ii) 100 % of the net proceeds from issuances of debt and equity by the Company and its subsidiaries and (iii) 100 % of the net proceeds from insurance recovery and condemnation events of the Company and its subsidiaries.

● The senior secured credit facility contains a number of covenants that, among other things, place restrictions on matters customarily restricted in senior secured credit facilities, including restrictions on indebtedness (including guarantee obligations), liens, fundamental changes, sales or disposition of property or assets, investments (including loans, advances, guarantees and acquisitions), transactions with affiliates, dividends and other payments in respect of capital stock, optional payments and modifications of other material debt instruments, negative pledges and agreements restricting subsidiary

● At the Company’s option, the credit facility bears interest at a rate per annum equal to either (i) the “Base Rate” (which is the highest of (a) the rate publicly announced from time to time by the administrative agent as its “prime rate,” (b) the Federal Funds Rate plus 0.5 % per annum and (c) Term SOFR, plus 1.0 % ), plus the applicable margin (as defined below) or (ii) Term SOFR (which is the Term SOFR screen rate for the relevant interest period plus a credit spread adjustment of 0.10 % ) as determined by the administrative agent, plus the applicable margin.

The applicable margin is adjusted quarterly based upon the Company’s consolidated leverage ratio.

Prior to the end of the first quarter-end following the closing of the credit facility, the applicable margin shall be a percentage per annum equal to 0.50 % for the revolving loans maintained as Base Rate loans or 1.50 % for the revolving loans maintained as Term SOFR loans.

● The senior secured credit facility contains a number of covenants that, among other things, place restrictions on matters customarily restricted in senior secured credit facilities, including restrictions on indebtedness (including guarantee obligations), liens, fundamental changes, sales or dispositions of property or assets, investments (including loans, advances, guarantees and acquisitions), transactions with affiliates, dividends and other payments in respect of capital stock, optional payments and modifications of other material debt instruments, negative pledges and agreements restricting subsidiary distributions and changes in line of business.

In addition, the Company is required to comply with a consolidated leverage ratio and consolidated interest coverage ratio.

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

INFORMATION SERVICES GROUP, INC.

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(tabular amounts in thousands, except per share data)

distributions and changes in line of business.

In addition, the Company is required to comply with a total leverage ratio and fixed charge coverage ratio.

● 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 $ 79.2 million and $ 74.5 million as of December 31, 2022 and December 31, 2021, respectively, which are carried at amortized cost.

The Company’s financial statements include outstanding borrowings of $ 79.2 million both as of December 31, 2023 and December 31, 2022, which are carried at amortized cost.

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

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As of December 31, 2022 and December 31, 2021 there were $ 9.0 million and $ 0.0 million borrowings, respectively, under the revolver.

The Company was in compliance with its financial covenants under the 2020 Credit Agreement as of December 31, 2022.

Refer to Note 18 – Subsequent Event for additional information regarding the Company’s 2020 Credit Agreement.

In the third quarter of 2023, the Company borrowed $ 5.0 million against the revolver and subsequently repaid $ 5.0 million during that quarter.

The Company is currently in compliance with its financial covenants.

NOTE 13—COMMITMENTS AND CONTINGENCIES

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All material liabilities of which management is aware are properly reflected in the financial statements at December 31, 2023 and 2022.

Ventana Research Contingent Consideration

As of December 31, 2023, the Company has recorded a liability of $ 1.7 million representing the estimated fair value of contingent consideration related to the acquisition of Ventana Research, which was classified as “Accrued expenses and other current liabilities” and “Other liabilities” on the consolidated balance sheet.

Change 4 Growth Contingent Consideration

As of December 31, 2022, the Company has recorded a liability of $ 5.6 million representing the estimated fair value of contingent consideration related to the acquisition of Change 4 Growth, of which $ 1.5 million was classified as current and included in accrued expenses on the consolidated balance sheet.

As of December 31, 2023, the Company has recorded a liability of $ 4.2 million representing the estimated fair value of contingent consideration related to the acquisition of Change 4 Growth, which was classified as “Accrued expenses and other current liabilities” and “Other liabilities” on the consolidated balance sheet.

In April 2023, the Company made a contingent consideration payment of $ 1.5 million.

NOTE 14—RELATED PARTY TRANSACTIONS

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Total current provision

Total deferred (benefit) expense

Total deferred benefit

The differences between the effective tax rates reflected in the total provision for income taxes and the U.S.

federal statutory rate of 21 % for both years ended December 31, 2022 and 2021 were as follows:

federal statutory rate of 21 % for each of the years ended December 31, 2023, 2022 and 2021 were as follows:

Years Ended December 31,

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Total noncurrent deferred tax liability

Net noncurrent deferred tax assets/(liability)

Net deferred tax assets/(liability)

Net noncurrent deferred tax assets

Net deferred tax assets

A valuation allowance was established at December 31, 2023 and 2022 due to estimates of future utilization of net operating loss carryovers in the U.S.

and certain foreign jurisdictions, derived primarily from acquisitions and recorded through purchase accounting.

The valuation allowance at December 31, 2022 and 2021 also includes a full valuation for the Company’s foreign tax credit carryovers and foreign taxes on its controlled foreign corporations.

The valuation allowance at December 31, 2023 and 2022 also includes a full valuation for the Company’s foreign tax credit carryovers and foreign taxes on certain controlled foreign corporations.

As of December 31, 2023, the Company had foreign net operating loss (NOL) carryforwards of approximately $ 10.2 million.

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As of December 31, 2023, there were 2,231,197 and 640,318 shares available for grant under the Incentive Plan and ESPP, respectively.

The Company recognized $ 7.5 million and $ 6.5 million in employee stock-based compensation expense during the years ended December 31, 2022 and 2021, respectively.

The Company recognized $ 9.1 million, $ 7.5 million and $ 6.5 million in employee stock-based compensation expense during the years ended December 31, 2023, 2022 and 2021, respectively.

This expense was recorded in selling, general and administrative in the consolidated statement of comprehensive income.

1 unchanged sentence

The Incentive Plan provides for the granting of restricted share units (“RSU”), the vesting of which is subject to conditions and limitations established at the time of the grant.

Recipients of RSU awards will not have the rights of a shareholder of the Company until such date as the Common Shares are issued or transferred to the recipient.

Recipients of RSU awards will not have the rights of a shareholder of the Company until such date as the shares of common stock are issued or transferred to the recipient.

If the employee retires (at the normal retirement age stated in the applicable retirement plan or applicable law, if there is a mandatory retirement age), the restricted shares continue to vest on the same schedule as if the employee remained employed with the Company.

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Non-vested at December 31, 2022

The total fair value of RSUs vested during the years ended December 31, 2022 and 2021 was $ 4.7 million and $ 9.0 million, respectively.

Non-vested at December 31, 2023

The total fair value of RSUs vested during the years ended December 31, 2023, 2022 and 2021 was $ 6.1 million, $ 4.7 million and $ 9.0 million, respectively.

As of December 31, 2023, there was $ 11.7 million of unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of 1.5 years.

8 unchanged sentences

The price of common stock purchased under the ESPP is 90 % of the fair market value of the common stock on the applicable purchase date.

Employees may end their participation in an offering at any time during the offering period, and participation ends automatically upon termination of employment.

The Compensation Committee may at any time amend or terminate the ESPP, except that no such amendment or termination may adversely affect shares previously granted under the ESPP.

The Company may issue new shares for the ESPP using treasury shares or newly issued shares.

Employees may end their participation in an offering at any time during the offering period, and participation ends

INFORMATION SERVICES GROUP, INC.

1 unchanged sentence

(tabular amounts in thousands, except per share data)

automatically upon termination of employment.

The Compensation Committee may at any time amend or terminate the ESPP, except that no such amendment or termination may adversely affect shares previously granted under the ESPP.

The Company may issue new shares for the ESPP using treasury shares or newly issued shares.

For the year ended December 31, 2023, the Company issued 206,806 shares for the ESPP.

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Substantially all relates to operations in the United States.

Includes revenues from operations in Germany of $ 44.2 million and $ 50.0 million in 2022 and 2021, respectively.

Includes revenues from operations in the United Kingdom of $ 18.6 million and $ 15.2 million in 2022 and 2021, respectively.

Includes revenues from operations in Australia of $ 22.9 million and $ 23.1 million in 2022 and 2021, respectively.

Includes revenues from operations in Germany of $ 34.6 million, $ 44.2 million and $ 50.0 million in 2023, 2022 and 2021, respectively.

Includes revenues from operations in the United Kingdom of $ 28.2 million, $ 18.6 million and $ 15.2 million in 2023, 2022 and 2021, respectively.

Includes revenues from operations in Australia of $ 22.6 million, $ 22.9 million and $ 23.1 million in 2023, 2022 and 2021, respectively.

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

1 unchanged sentence

NOTE 18—SUBSEQUENT EVENT

On February 22, 2023, the Company amended the credit agreement the firm originally entered on March 10, 2020.

The amended agreement includes the conversion of the term loan to a $ 140.0 million all-revolver credit facility at more favorable terms, which eliminates mandatory principal payments and extends the agreement’s maturity to February 2028.

On March 5, 2024, the Board approved a first-quarter dividend of $ 0.045 per share, payable March 28, 2024, to shareholders of record as of March 19, 2024.

EXHIBIT INDEX

3 unchanged sentences

001-33287), and incorporated herein by reference).

Asset Purchase Agreement, dated as of February 10, 2011, among Registrant (for specific section only), and Salvaggio & Teal Ltd.

(d/b/a Salvaggio, Teal & Associates), Salvaggio & Teal II, LLC, Mitt Salvaggio, Kirk Teal, Nathan Frey, International Consulting Acquisition Corp., (previously filed as Exhibit 2.1to the Registrant’s Form 8-K filed with the SEC on February 11, 2011 (Commission File Number:

Asset Purchase Agreement, dated as of February 10, 2011, among Registrant (for specific section only), Salvaggio & Teal Ltd.

(d/b/a Salvaggio, Teal & Associates), Salvaggio & Teal II, LLC, Mitt Salvaggio, Kirk Teal, Nathan Frey, and International Consulting Acquisition Corp.

(previously filed as Exhibit 2.1to the Registrant’s Form 8-K filed with the SEC on February 11, 2011 (Commission File Number:

001-33287), and incorporated herein by reference).

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001-33287), and incorporated herein by reference).

Form of Restricted Unit Agreement for Directors (Time Based).

Form of Restricted Unit Agreement for Executives (Time Based).

Form of Restricted Stock Unit Agreement for Executives (Performance Based).

Form of Restricted Unit Agreement for Directors (Time Based) (previously filed as Exhibit 10.5 to the Registrant’s Form 10-K filed with the SEC on March 10, 2023 (Commission File Number:

001-33287), and incorporated herein by reference).

Form of Restricted Unit Agreement for Executives (Time Based) (previously filed as Exhibit 10.6 to the Registrant’s Form 10-K filed with the SEC on March 10, 2023 (Commission File Number:

001-33287), and incorporated herein by reference).

Form of Restricted Stock Unit Agreement for Executives (Performance Based) (previously filed as Exhibit 10.7 to the Registrant’s Form 10-K filed with the SEC on March 10, 2023 (Commission File Number:

001-33287), and incorporated herein by reference).

Form of Restricted Covenant Agreement (previously filed as Exhibit 10.3 to the Registrant’s Form 8-K filed with the SEC on September 29, 2009 (Commission File Number:

9 unchanged sentences

Amendment No.

1 to Employment Agreement for Michael P.

1, dated December 10, 2013, to Employment Agreement for Michael P.

Connors previously filed as Exhibit 10.21 to the Registrant’s Form 10-K filed with the SEC on March 7, 2014 (Commission File Number:

4 unchanged sentences

Amendment No.

2 to Employment Agreement for Michael P.

2 , dated December 13, 2016, to Employment Agreement for Michael P.

Connors (previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on December 16, 2016 (Commission File Number:

3 unchanged sentences

Amendment No.

3 to Employment Agreement for Michael P.

3 , dated December 30, 2020, to Employment Agreement for Michael P.

Connors (previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on December 30, 2020 (Commission File Number:

001-33287), and incorporated herein by reference).

Employment Letter for Humberto P.

Alfonso, dated April 30, 2021 (previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on May 5, 2021 (Commission File Number:

001-33287), and incorporated herein by reference).

Employment Letter for Michael A.

Sherrick, dated June 21, 2023 (previously filed as Exhibit 10.1 to the

Registrant ’ s Form 8-K filed with the SEC on June 23, 2023 (Commission File Number:

001-33287), and

incorporated herein by reference).

Third Amended and Restated Credit Agreement, dated as of February 22, 2023, among Information Services Group, Inc., various lenders and Bank of America, N.A., as Administrative Agent (previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on February 23, 2023 (Commission File Number:

001-33287), and incorporated herein by reference).

Employment Letter for Michael A.

Sherrick, dated June 21, 2023 (previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on June 23, 2023 (Commission File Number:

001-33287), and incorporated herein by reference).

Computation of Earnings Per Share (included in Consolidated Statement of Comprehensive Income to the Consolidated Financial Statements included in Part II—Item 8 herein).

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Certification of Chief Financial Officer Pursuant to 18 U.S.C.

Information Services Group, Inc.

Clawback Policy.

The following financial statements from ISG’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on March 8, 2024, formatted in XBRL (Extensible Business Reporting Language);

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March 8, 2024

/s/ Humberto P.

/s/ MICHAEL A.

Executive Vice President, Chief

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Allowance for tax valuation

Year ended December 31, 2021

Allowance for doubtful accounts

Allowance for tax valuation

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-K

Item 9A. Controls and Procedures