UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþx Noo¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þx No o¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

~~Large accelerated filer~~o ~~Accelerated filer~~o ~~Non-accelerated filer~~þ ~~Smaller reporting company~~þ ~~Emerging growth company~~o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐¨

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

The number of outstanding shares of the registrant’s common stock, $0.01 par value per share, as of ~~July~~October 31, 2019 was ~~25,952,454.~~25,527,679.

								September 30,			December 31,
	June 30,			December 31,				2019			2018
	2019			2018				(Unaudited)
ASSETS							ASSETS
Current assets:
Cash and cash equivalents	$	12,261		$	10,869			$	13,188		$	10,869
Accounts receivable, net of allowance for doubtful accounts of $700 and $1,000, respectively		8,512			10,626
Accounts receivable, net of allowance for doubtful accounts of $800 and $1,000, respectively									8,297			10,626
Prepaid expenses and other current assets		5,186			5,778				4,829			5,778
Total current assets		25,959			27,273				26,314			27,273
Property and equipment, net		6,960			6,813				7,074			6,813
Right of use asset		7,559			-
Right-of-use asset									7,271			-
Other assets		2,218			2,436				2,075			2,436
Deferred income taxes		1,881			1,204				1,759			1,204
Intangibles, net		5,928			6,275				5,597			6,275
Goodwill		2,095			2,050				2,062			2,050
Total assets	$	52,600		$	46,051			$	52,152		$	46,051
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,833		$	1,834			$	2,111		$	1,834
Accrued expenses		3,357			2,903				2,983			2,903
Accrued salaries, wages and related benefits		3,753			4,494				4,479			4,494
Income and other taxes		4,231			3,532				4,215			3,532
Long-term obligations - current portion		838			1,529				699			1,529
Operating lease liability - current portion		1,163			-				1,149			-
Total current liabilities		15,175			14,292				15,636			14,292

Deferred income taxes		547			571				528			571
Long-term obligations, net of current portion		3,114			4,062				3,086			4,062
Operating lease liability, net of current portion		7,266			-				6,949			-

Non-controlling interests		(3,447	)		(3,440	)			(3,450	)		(3,440	)
Commitments and contingencies

STOCKHOLDERS’ EQUITY:
Serial preferred stock; 5,000,000 shares authorized, none outstanding		-			-
Common stock, $.01 par value; 75,000,000 shares authorized; 27,633,000 shares issued and 25,952,000 outstanding at June 30, 2019; 27,558,000 shares issued and 25,877,000 outstanding at December 31, 2018		276			275
Series preferred stock; 5,000,000 shares authorized, none outstanding									-			-
Common stock, $.01 par value; 75,000,000 shares authorized; 27,633,000 shares issued and 25,918,000 outstanding at September 30, 2019; 27,558,000 shares issued and 25,877,000 outstanding at December 31, 2018									275			275
Additional paid-in capital		27,852			27,579				28,203			27,579
Retained earnings		6,244			7,349				5,689			7,349
Accumulated other comprehensive income (loss)		195			(15	)
Accumulated other comprehensive loss									(98	)		(15	)
		34,567			35,188				34,069			35,188
Less: treasury stock, 1,681,000 shares at cost		(4,622	)		(4,622	)
Less: Treasury stock, 1,715,000 shares at September 30, 2019 and 1,681,000 shares at December 31, 2018 at cost									(4,666	)		(4,622	)
Total stockholders’ equity		29,945			30,566				29,403			30,566
Total liabilities and stockholders’ equity	$	52,600		$	46,051			$	52,152		$	46,051

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	Three Months Ended
	June 30,						Nine Months Ended
	2019			2018			September 30,
							2019			2018
Revenues	$	13,639		$	14,270		$	41,179		$	42,439
Operating costs and expenses:
Direct operating costs		9,575			9,929			28,154			29,060
Selling and administrative expenses		4,613			3,667			14,166			11,223
Goodwill impairment		-			675			-			675
Interest expense, net		12			10			36			24
		14,200			14,281			42,356			40,982

Loss before provision for income taxes		(561	)		(11	)
Income (loss) before provision for income taxes								(1,177	)		1,457

Provision for income taxes		100			451			493			1,502

Net loss		(661	)		(462	)
Consolidated net loss								(1,670	)		(45	)

Income (loss) attributable to non-controlling interests		(8	)		4			(10	)		1

Net loss attributable to Innodata Inc. and Subsidiaries	$	(653	)	$	(466	)	$	(1,660	)	$	(46	)

Loss per share attributable to Innodata Inc. and Subsidiaries:
Basic and diluted	$	(0.03	)	$	(0.02	)	$	(0.06	)	$	(0.00	)

Weighted average shares outstanding:
Basic and diluted		25,877			25,877			25,870			25,877

Comprehensive loss:
Net loss	$	(661	)	$	(462	)
Pension liability adjustments, net of taxes		(41	)		(58	)
Consolidated net loss							$	(1,670	)	$	(45	)
Pension liability adjustment, net of taxes								(118	)		(174	)
Change in fair value of derivatives, net of taxes		-			(61	)		-			(489	)
Foreign currency translation adjustment		23			(337	)		35			(251	)
Other comprehensive loss		(18	)		(456	)		(83	)		(914	)
Total comprehensive loss		(679	)		(918	)		(1,753	)		(959	)
Comprehensive income (loss) attributed to non-controlling interest		(8	)		4			(10	)		1
Comprehensive loss attributable to Innodata Inc. and Subsidiaries	$	(671	)	$	(922	)	$	(1,743	)	$	(960	)

	Six Months Ended
	June 30,						Nine Months Ended
	2019			2018			September 30,
							2019			2018
Cash flows from operating activities:
Net loss	$	(1,112	)	$	(738	)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Consolidated net loss							$	(1,670	)	$	(45	)
Adjustments to reconcile consolidated net loss to net cash provided by operating activities:
Depreciation and amortization		1,561			1,724			2,248			2,558
Goodwill impairment		-			675			-			675
Stock-based compensation		273			271			624			539
Deferred income taxes		(677	)		243			(607	)		285
Pension cost		240			(3	)		274			(15	)
Changes in operating assets and liabilities:
Accounts receivable		2,392			1,452			2,509			1,053
Prepaid expenses and other current assets		455			(1,505	)		752			(1,960	)
Other assets		224			266			367			656
Accounts payable and accrued expenses		(160	)		(971	)		(208	)		(902	)
Accrued salaries, wages and related benefits		(759	)		(628	)		(29	)		(757	)
Income and other taxes		677			2,194			669			1,919
Net cash provided by operating activities		3,114			2,980			4,929			4,006

Cash flows from investing activities:
Capital expenditures		(813	)		(1,256	)		(1,393	)		(1,700	)
Net cash used in investing activities		(813	)		(1,256	)		(1,393	)		(1,700	)

Cash flows from financing activities:
Payment of long-term obligations		(699	)		(1,371	)		(881	)		(1,792	)
Issuance of restricted shares		1			-
Purchase of treasury stock								(44	)		-
Net cash used in financing activities		(698	)		(1,371	)		(925	)		(1,792	)

Effect of exchange rate changes on cash and cash equivalents		(211	)		(54	)		(292	)		(31	)

Net increase in cash and cash equivalents		1,392			299			2,319			483

Cash and cash equivalents, beginning of period		10,869			11,407			10,869			11,407

Cash and cash equivalents, end of period	$	12,261		$	11,706		$	13,188		$	11,890

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	528		$	203		$	726		$	426
Cash paid for operating leases	$	1,155		$	1,308		$	1,673		$	1,951

	Common Stock				Additional Paid-in		Retained			Accumulated Other Comprehensive			Treasury
	Shares		Amount		Capital		Earnings			Income (Loss)			Stock			Total			Common Stock				Additional Paid-in			Retained			Accumulated Other Comprehensive			Treasury Stock					Total Stockholders’
																			Shares		Amount		Capital			Earnings			Income (Loss)			Shares		Amount			Equity
January 1, 2018		25,877	$	275	$	27,275	$	7,345		$	846		$	(4,622	)	$	31,119			27,558	$	275	$	27,275		$	7,345		$	846			1,681	$	(4,622	)	$	31,119
Net loss attributable to Innodata Inc. and subsidiaries		-		-		-		(268	)		-			-			(268	)
Net loss attributable to Innodata Inc. and Subsidiaries																				-		-		-			(268	)		-			-		-			(268	)
Stock-based compensation		-		-		140		-			-			-			140			-		-		140			-			-			-		-			140
Pension liability adjustments, net of taxes		-		-		-		-			(59	)		-			(59	)		-		-		-			-			(59	)		-		-			(59	)
Foreign currency translation adjustment		-		-		-		-			(28	)		-			(28	)		-		-		-			-			(28	)		-		-			(28	)
Change in fair value of derivatives, net of taxes		-		-		-		-			(531	)		-			(531	)		-		-		-			-			(531	)		-		-			(531	)
March 31, 2018		25,877		275		27,415		7,077			228			(4,622	)		30,373			27,558		275		27,415			7,077			228			1,681		(4,622	)		30,373
Net loss attributable to Innodata Inc. and subsidiaries		-		-		-		(466	)		-			-			(466	)
Net loss attributable to Innodata Inc. and Subsidiaries																				-		-		-			(466	)		-			-		-			(466	)
Stock-based compensation		-		-		131		-			-			-			131			-		-		131			-			-			-		-			131
Pension liability adjustments, net of taxes		-		-		-		-			(58	)		-			(58	)		-		-		-			-			(58	)		-		-			(58	)
Foreign currency translation adjustment		-		-		-		-			(337	)		-			(337	)		-		-		-			-			(337	)		-		-			(337	)
Change in fair value of derivatives, net of taxes		-		-		-		-			(61	)		-			(61	)		-		-		-			-			(61	)		-		-			(61	)
June 30, 2018		25,877	$	275	$	27,546	$	6,611		$	(228	)	$	(4,622	)	$	29,582			27,558		275		27,546			6,611			(228	)		1,681		(4,622	)		29,582

Net income attributable to Innodata Inc. and Subsidiaries																				-		-		-			688			-			-		-			688
Stock-based compensation																				-		-		268			-			-			-		-			268
Acquisition of non-controlling interest																				-		-		(492	)		-			-			-		-			(492	)
Pension liability adjustments, net of taxes																				-		-		-			-			(57	)		-		-			(57	)
Foreign currency translation adjustment, net of taxes																				-		-		-			-			114			-		-			114
Change in fair value of derivatives, net of taxes																				-		-		-			-			103			-		-			103
September 30, 2018																				27,558	$	275	$	27,322		$	7,299		$	(68	)		1,681	$	(4,622	)	$	30,206

January 1, 2019		25,877	$	275	$	27,579	$	7,349		$	(15	)	$	(4,622	)	$	30,566			27,558	$	275	$	27,579		$	7,349		$	(15	)		1,681	$	(4,622	)	$	30,566
Net loss attributable to Innodata Inc. and subsidiaries		-		-		-		(452	)		-			-			(452	)
Net loss attributable to Innodata Inc. and Subsidiaries																				-		-		-			(452	)		-			-		-			(452	)
Issuance of restricted stock		75		1		5		-			-			-			6			75		-		5			-			-			-		-			5
Stock-based compensation		-		-		123		-			-			-			123			-		-		123			-			-			-		-			123
Pension liability adjustments, net of taxes		-		-		-		-			(36	)		-			(36	)		-		-		-			-			(36	)		-		-			(36	)
Foreign currency translation adjustment		-		-		-		-			264			-			264			-		-		-			-			264			-		-			264
March 31, 2019		25,952		276		27,707		6,897			213			(4,622	)		30,471			27,633		275		27,707			6,897			213			1,681		(4,622	)		30,470
Net loss attributable to Innodata Inc. and subsidiaries		-		-		-		(653	)		-			-			(653	)
Net loss attributable to Innodata Inc. and Subsidiaries																				-		-		-			(653	)		-			-		-	��		(653	)
Issuance of restricted stock		-		-		9		-			-			-			9			-		-		9			-			-			-		-			9
Stock-based compensation		-		-		136		-			-			-			136			-		-		136			-			-			-		-			136
Pension liability adjustments, net of taxes		-		-		-		-			(41	)		-			(41	)		-		-		-			-			(41	)		-		-			(41	)
Foreign currency translation adjustment		-		-		-		-			23			-			23			-		-		-			-			23			-		-			23
June 30, 2019		25,952	$	276	$	27,852	$	6,244		$	195		$	(4,622	)	$	29,945			27,633		275		27,852			6,244			195			1,681		(4,622	)		29,944
Net loss attributable to Innodata Inc. and Subsidiaries																				-		-		-			(555	)		-			-		-			(555	)
Issuance of restricted stock																				-		-		9			-			-			-		-			9
Purchase of treasury stock																				-		-		-			-			-			34		(44	)		(44	)
Stock-based compensation																				-		-		342			-			-			-		-			342
Pension liability adjustments, net of taxes																				-		-		-			-			(41	)		-		-			(41	)
Foreign currency translation adjustment																				-		-		-			-			(252	)		-		-			(252	)
September 30, 2019																				27,633	$	275	$	28,203		$	5,689		$	(98	)		1,715	$	(4,666	)	$	29,403

Description of Business - Innodata Inc. (including its subsidiaries, “we”, the “Company”, or “Innodata”) is a global services and technology company. We combine human expertise with advanced deep learning technologies to power leading information products and enterprise AI (artificial intelligence)/digital transformation.

The Company, founded in 1988 and headquartered in northern New Jersey, features a ~~3,500-strong~~3,000-strong global delivery and technology team spanning ten offices globally and a research and technology incubator, Innodata Labs, which focuses on applied machine learning and emerging artificial intelligence. The Company is organized and operates in three different operating segments: the Digital Data Solutions (DDS) segment, the Synodex segment, and the Agility segment.

The Company’s core services are (i) data acquisition, transformation, and enrichment at scale; (ii) digital operations management and analytics; and (iii) applications development. We report our core business as the ~~Digital Data Solutions (DDS)~~DDS segment.

The Company also has venture businesses that leverage its core capabilities to provide specific industry solutions. The Company’s Synodex venture business delivers a software-as-a-service (SaaS) platform and managed services for digital transformation of medical data. The Company’s Agility PR Solutions (Agility) venture business delivers a SaaS platform and managed service for delivering news, information, and content to targeted journalists and influencers, as well as monitoring and analyzing coverage across traditional and social media sources. Each venture business is reported as a separate segment.

The Company’s DDS segment specializes in combiningartificial neural networks andhuman expertise in multiple domains (including health, science, and law) to make “unstructured information” (sometimes referred to as “content”) useable. For business information companies, “useable” means that the content can be sold via subscription to adigital product. For enterprises, “useable” means that the content can drivedigital process transformationandartificial intelligence (AI). The Company works with all classes of data, including sensitive and protected data.

The Company also develops digital products for business information companies and digital systems which replace legacy systems and processes.

In 2019, the Company ~~continues~~continued to execute a strategy we initiated in 2017 focused on technology differentiation, increasingly taking an innovation-led approach to create value for clients while driving leaner, more cost-effective operations.

The Company’s Synodex segment designs and develops new capabilities to enable clients in the insurance and healthcare sectors to transform medical records into useable digital data and to apply technologies to the digital data to augment decision support.

The main focus of the Synodex business is the extraction and classification of data from unstructured medical records in an innovative way to provide improved data service capabilities for insurance underwriting, insurance claims, medical records management, life settlement claims, and clinical trial support services.

The Company’s Synodex segment operates through the Company’s Innodata Synodex, LLC subsidiary. As of ~~June~~September 30, 2019, Innodata Inc. owned 92.5% of Innodata Synodex, LLC.

The Company’s Agility segment provides public relations (PR) tools and related professional services that enable PR and communications professionals to discover influencers, amplify messages, monitor coverage, and measure the impact of campaigns.

Bulldog Reporter, a publisher of PR-related news and a popular e-newsletter, and the Bulldog Awards, a PR awards program that recognizes outstanding performance among PR and communications professionals and agencies, are properties of Agility.

Basis of Presentation- The condensed consolidated financial statements for the interim periods included herein are unaudited; however, they contain all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company as of ~~June~~September 30, 2019, the results of its operations and comprehensive ~~loss~~income (loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, cash flows for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, and stockholders’ equity for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018. The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.

Certain information and note disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States of America ~~(“U.S. GAAP”)~~(U.S. GAAP) have been condensed or omitted from these condensed consolidated financial statements pursuant to the rules and regulations of the SEC and, accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2018, included in the Company's Annual Report on Form 10-K. Unless otherwise noted, the accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the consolidated financial statements for the year ended December 31, ~~2018 consolidated financial statements.~~2018.

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

Use of Estimates- In preparing financial statements in conformity with USU.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those related to allowance for doubtful accounts and billing adjustments, long-lived assets, intangible assets, goodwill, valuation of deferred tax assets, valuation of stock-based compensation, litigation accruals and estimated accruals for various tax exposures.

Revenue Recognition– Commencing January 1, 2018, the ~~Company’s~~Company recognizes revenue ~~recognition is~~ in accordance with ~~ASU~~Accounting Standards Update (ASU) No. 2014-09,Revenue from Contracts with ~~Customers~~.Customers. The Company’s revenue is recognized when control of the promised services is transferred to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services as per the agreement with the customer. In case there are agreements with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligations are distinct within the context of the agreement at the agreement’s inception. Performance obligations that are not distinct at agreement inception are combined. ~~We allocate~~The Company allocates the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation, if any, and then ~~evaluate~~evaluates how the services are transferred to the customer to determine the timing of revenue recognition.

For the DDS segment, revenue is recognized primarily based on the quantity delivered or resources utilized in the period in which services are performed and performance conditions are satisfied as per the agreement. Revenues for agreements billed on a time-and-materials basis are recognized as services are performed. Revenues under fixed-fee agreements, which are not significant to the overall revenues, are recognized based on the proportional performance method of accounting, as services are performed, or milestones are achieved.

For the Synodex segment, revenue is recognized primarily based on the quantity delivered in the period in which services are performed and performance conditions are satisfied as per the agreement. A portion of our Synodex segment revenue is derived from licensing our functional software and providing access to our hosted software platform. Revenue from such services is recognized monthly when ~~access to the service is provided to the end user;~~ all parties to the agreement have agreed to the agreement; each party’s rights are identifiable; the payment terms are identifiable; the agreement has commercial substance; access to the service is provided to the end user; and collection is probable.

The Agility segment derives its revenue primarily from subscription arrangements and provision of enriched media analysis services. It also derives revenue as a reseller of corporate communication solutions. Revenue from subscriptions is recognized monthly when access to the service is provided to the end user; all parties to the agreement have agreed to the agreement; each party’s rights are identifiable; the payment terms are identifiable; the agreement has commercial substance; and collection is probable. Revenue from enriched media analysis services is recognized when the services are performed, and performance conditions are satisfied. Revenues from the reseller agreements are recognized at gross with our functioning as a principal due to our meeting the following criteria. We act as the primary obligor in the sales transaction; assume the credit risk; set the price; can select suppliers; and are involved in the execution of the services, including after sales service.

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

~~We consider~~The Company considers U.S. GAAP criteria for determining whether to report revenue gross as a principal versus net as an agent. Factors considered include whether we are the primary obligor, have risks and rewards of ownership, and bear the risk that a customer may not pay for the services performed. If there are circumstances where the above criteria are not met and therefore, we are not the principal in providing services, amounts received from customers are presented net of payments in the condensed consolidated statements of operations and comprehensive loss.

Contract acquisition cost, which is included in prepaid expenses and other current assets, for our Agility segment is amortized over the term of ~~the~~a subscription agreement ~~which~~that normally has a duration of 12 months or less. ~~We review~~The Company reviews these costs on a periodic basis to determine the need to adjust the carrying values for pre-terminated contracts.

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

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

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

Income Taxes- Deferred taxes are determined based on the difference between the financial statement and tax ~~basis~~bases of assets and liabilities using enacted tax rates, as well as any net operating loss or tax credit carryforwards expected to reduce taxes payable in future years. A valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax assets will not be realized. While the Company considers future taxable income in assessing the need for the valuation allowance, in the event that the Company determines that it would be able to realize the deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. Similarly, in the event that the Company determines that it would not be able to realize the deferred tax assets in the future considering future taxable income, an adjustment to the deferred tax assets would decrease income in the period such determination was made. Changes in the valuation allowance from period to period are included in the Company’s tax provision in the period of change. The Company indefinitely reinvests the foreign earnings in its foreign subsidiaries. Unremitted earnings of foreign subsidiaries have been included in the consolidated financial statements without giving effect to the United States taxes that may be payable on distribution to the United States, because such earnings are not anticipated to be remitted to the United States.

In assessing the realization of deferred tax assets, management considered whether it is more likely than not that all or some portion of the U.S. and Canadian deferred tax assets will not be realizable. As the expectation of future taxable income resulting from the Synodex and Agility segments cannot be predicted with certainty, the Company maintains a valuation allowance against all the U.S. and Canadian deferred tax assets.

The Company accounts for income taxes regarding uncertain tax positions, and recognizes interest and penalties related to uncertain tax positions in income tax expense in the consolidated statements of operations and comprehensive loss.

Leases -In February 2016, the FASB issued ~~Accounting Standards Update (“ASU”)~~ASU No. 2016-02, “Leases (Topic 842),” as modified ~~(“ASU 2016-02”)~~(ASU 2016-02), which ~~replaces~~replaced existing leasing rules with a comprehensive lease measurement and recognition standard and expanded disclosure requirements. ASU 2016-02 requires lessees to recognize most leases on their balance sheets as liabilities, with corresponding “right-of-use” assets and is effective for annual reporting periods beginning after December 15, 2018, subject to early adoption. The Company adopted ASU 2016-02 effective January 1, 2019. Upon adoption, the Company recognized a ~~right of use~~right-of-use asset and corresponding lease liability. Refer to Note 6, Operating Leases.

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies:

Whenever a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) and at the date of renewal or extension period for scenario (b).

Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. All of the Company’s leases are classified as operating leases. Operating lease payments are recognized as an operating expense on a straight-line basis over the lease term.

Deferred Revenue - represents payments received from clients in advance of providing services and amounts deferred if conditions for revenue recognition have not been met. Included in accrued expenses on the accompanying consolidated balance sheets as of ~~June~~September 30, 2019 and December 31, 2018 is deferred revenue amounting to ~~$1.4~~$1.0 million and $1.1 million, respectively.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments – Overall ~~(“Subtopic 825-10”)~~(Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” ~~(“ASU 2016-01”)~~(ASU 2016-01), which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The Company adopted this standard in the first quarter of 2019, and it did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General: Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans” ~~(“ASU 2018-14”)~~(ASU 2018-14), that makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. The guidance eliminates requirements for certain disclosures that are no longer considered cost beneficial and adds new disclosure requirements that the FASB considers pertinent. ASU 2018-14 is effective for fiscal years ending after December 15, 2020 for public entities; early adoption is permitted. The Company is currently evaluating the early adoption of ~~ASU-2018-14~~ASU 2018-14 but does not expect it to have a material impact on the Company’s consolidated financial statements.

The changes in the carrying amount of goodwill for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 were as follows (in thousands):

Balance as of January 1, 2019	$	2,050		$	2,050
Foreign currency translation adjustment		45			12
Balance as of June 30, 2019	$	2,095
Balance as of September 30, 2019				$	2,062

Balance as of January 1, 2018	$	2,832		$	2,832
Foreign currency translation adjustment		(49	)		(35	)
Goodwill impairment		(675	)		(675	)
Balance as of June 30, 2018	$	2,108
Balance as of September 30, 2018				$	2,122

As of ~~June~~September 30, 2018, the Company recorded a full goodwill impairment of $675,000 for its DDS segment.

The Company periodically analyzes whether any indicators of impairment have occurred. As part of these periodic analyses, the Company compares its estimated fair value, as determined based on its stock price, to its net book value. The continued decline in the Company’s stock price was viewed by the Company as a triggering event under ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment”, (ASU 2017-04) which required an assessment for possible goodwill impairment as of June 30, 2018. Under the provisions of ASU 2017-04, which the Company opted to early adopt, goodwill impairment is recognized based on Step 1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value.

The Company performed this assessment as of June 30, 2018 and determined that the fair value of the Agility segment exceeded its carrying value, but the fair value of the DDS segment was below its carrying value. As a result, the Company recorded a full goodwill impairment of $675,000 for the DDS segment reporting unit as of June 30, 2018.

The Company ~~will perform~~performed its annual goodwill assessment for the Agility segment as of September 30, 2019. In performing the assessment, the Company adhered to the provisions of ASU 2017-04 by using a single step approach that determines the carrying value of goodwill and comparing it against the excess of the reporting unit’s fair value. Based on the Company’s assessment, the Company reached the conclusion that there was no goodwill impairment because the fair value of the Agility segment’s goodwill exceeded its carrying value. Therefore, there was no goodwill impairment recorded during the nine months ended September 30, 2019.

~~(Unaudited)~~The fair value measurement of goodwill was classified within Level 3 of the fair value hierarchy because the Company used the income approach, which utilizes significant inputs that are unobservable in the market. The Company believes it made reasonable estimates and assumptions to calculate the fair value of the reporting unit as of the impairment test measurement date.

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

																	Trademarks				Media
													Developed		Customer		and trade				Contact
	Developed technology		Customer relationships		Trademarks and tradenames		Patents		Media Contact Database		Total		technology		relationships		names		Patents		Database			Total
Gross carrying amounts:
Balance as of January 1, 2019	$	2,999	$	2,081	$	855	$	42	$	3,546	$	9,523	$	2,999	$	2,081	$	855	$	42	$	3,546		$	9,523
Foreign currency translation		99		96		13		1		19		228		51		63		4		1		(36	)		83
Balance as of June 30, 2019	$	3,098	$	2,177	$	868	$	43	$	3,565	$	9,751
Balance as of September 30, 2019													$	3,050	$	2,144	$	859	$	43	$	3,510		$	9,606

	Developed technology			Customer relationships			Trademarks and tradenames			Patents		Media Contact Database			Total			Developed technology		Customer relationships		Trademarks and trade names		Patents		Media Contact Database			Total
Accumulated amortization:
Balance as of January 1, 2018	$	902		$	645		$	330		$	15	$	547		$	2,439
Balance as of January 1, 2019																		$	1,137	$	766	$	440	$	19	$	886		$	3,248
Amortization expense		159			93			61			2		181			496			230		133		90		3		269			725
Foreign currency translation		(39	)		(33	)		(5	)		-		(3	)		(80	)		24		24		2		1		(15	)		36
Balance as of June 30, 2018	$	1,022		$	705		$	386		$	17	$	725		$	2,855
Balance as of September 30, 2019																		$	1,391	$	923	$	532	$	23	$	1,140		$	4,009

Amortization expense relating to acquisition-related intangible assets was $0.2 million for each of the three months ended ~~June~~September 30, 2019 and 2018. Amortization expense relating to acquisition-related intangible assets was ~~$0.5~~$0.7 million for each of the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018.

As of the date hereof, estimated amortization expense for intangible assets after ~~June~~September 30, 2019 is as follows (in thousands):

Year	Amortization		Amortization
2019	$	487	$	240
2020		907		893
2021		907		893
2022		907		893
2023		907		893
Thereafter		1,813		1,785
	$	5,928	$	5,597

The Company recorded a provision for income taxes of ~~$0.1~~$0.4 million and $0.5 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively; and ~~$0.1~~$0.5 million and ~~$1.0~~$1.5 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. Taxes primarily consist of a provision for foreign taxes recorded by the Company’s foreign subsidiaries in accordance with the local tax ~~regulations by the Company’s foreign subsidiaries.~~regulations. Effective income tax rates are disproportionate due to the losses incurred by the Company’s U.S. entities and Canadian subsidiaries and a valuation allowance recorded on deferred taxes of these entities and tax effects of foreign operations, including foreign exchange gains and losses.

The reconciliation of the U.S. statutory rate with the Company’s effective tax rate for the ~~six-month~~nine-month period ended ~~June~~September 30, 2019 is summarized in the table below:

Pursuant to the Tax Cuts and Jobs Act of 2017, during the fourth quarter of 2017, the Company recorded a one-time deemed repatriation of foreign earnings and profits (“E&P”) amounting to $25.8 million. No toll charge liability was recorded due to the available net operating loss carryforwards.

As of ~~June~~September 30, 2019, the Company performed a calculation of the Global Intangible Low-Taxed Income ~~(“GILTI”)~~(GILTI) provisions and concluded that it continues to have no impact on account of the net losses of our foreign subsidiaries.

The following table presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the ~~six~~nine months ended ~~June~~September 30, 2019 (in thousands):

The Company had unrecognized tax benefits of approximately ~~$2.7~~$2.8 million and $2.4 million as of ~~June~~September 30, 2019 and December 31, 2018, respectively. The portion of unrecognized tax benefits relating to an increase in tax positions was approximately $0.2 million while the portion of unrecognized tax benefits relating to interest and penalties was approximately $0.1 million for the ~~six~~nine months ended ~~June~~September 30, 2019. The unrecognized tax benefits as of ~~June~~September 30, 2019 and December 31, 2018, if recognized, would have an impact on the Company’s effective tax rate.

The Company is subject to Federal income tax, as well as income tax in various states and foreign jurisdictions. The Company has open periods for U.S. Federal and state taxes from 2015 through 2018. Various foreign subsidiaries currently have open tax years from 2003 through 2018.

In September 2015, the Company’s Indian subsidiary was subject to an inquiry by the Service Tax Department in India regarding the classification of services provided by this subsidiary, asserting that the services provided by this subsidiary fall under the category of online information and database access or retrieval services (OID Services), and not under the category of business support services (BS Services) that are exempt from service tax as historically indicated in the subsidiary’s service tax filings. Management disagrees with the Service Tax Department’s position and is vigorously contesting these assertions. In the event the Service Tax Department is successful in proving that the services fall under the category of OID Services, the revenues earned by the Company’s Indian subsidiary for the period July 2012 through November 2016 would be subject to a service tax of between 12.36% and 15%. The revenue of our Indian subsidiary during this period was approximately ~~$68.3~~$66.0 million. In accordance with new rules promulgated by the Service Tax Department, as of December 1, 2016 service tax is no longer applicable to OID or BS Services. Based on the assessment of the Company’s counsel, the Company has not recorded any tax liability for this case.

In October 2016, the Company’s Indian subsidiary received notices of appeal from the Indian Service Tax Department in India seeking to reverse service tax refunds of approximately $160,000 previously granted to our Indian subsidiary for three quarters in 2014, asserting that the services provided by this subsidiary fall under the category of OID Services and not BS Services. The appeal was determined in favor of the Service Tax Department. Management disagrees with the basis of this decision and is contesting it vigorously. The Company expects delays in its Indian subsidiary receiving further service tax refunds until this matter is adjudicated with finality, and currently has service tax credits of approximately $1.0 million recorded as a receivable. Based on the assessment of the Company’s counsel, the Company has not recorded any tax liability for this case.

Litigation –In 2008, a judgment was rendered in the Philippines against a Philippine subsidiary of the Company that is no longer active and purportedly also against Innodata Inc., in favor of certain former employees of the Philippine subsidiary. The payment amount aggregates to approximately $6.2 million, plus legal interest that accrued at 12% per annum from August 13, 2008 to June 30, 2013, and thereafter accrued and continues to accrue at 6% per annum. The payment amount as expressed in U.S. dollars varies with the Philippine peso to U.S. dollar exchange rate. In December 2017, a group of 97 of the former employees of the Philippine subsidiary indicated that they proposed to record the judgment as to them in New Jersey. In January 2018, in response to an action initiated by Innodata Inc., the United States District Court for the District of New Jersey ~~(the “USDC”)~~(USDC) entered a preliminary injunction that enjoins these former employees from pursuing or seeking recognition or enforcement of the judgment against Innodata Inc. in the United States during the pendency of the action and until further order of the USDC. In June 2018, the USDC entered a consent order administratively closing the action subject to return of the action to the active docket upon the written request of Innodata Inc. or the former employees, with the USDC retaining jurisdiction over the matter and the preliminary injunction remaining in full force and effect.

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

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

The Company’s legal reserves related to legal proceedings and claims are based on a determination of whether or not a loss is probable. The Company reviews outstanding proceedings and claims with external counsel to assess probability and estimates of loss. The reserves are adjusted if necessary. While the Company intends to defend against these matters vigorously, adverse outcomes that it estimates could reach approximately $275,000 in the aggregate beyond recorded amounts are reasonably possible. If circumstances change, the Company may be required to record adjustments that could be material to its reported consolidated financial condition and results of operations.

The Innodata Inc. 2013 Stock Plan, as amended and restated effective June 7, 2016, is referred to herein as the “Plan.” The number of shares of common stock of Innodata Inc. that may be delivered, purchased or used for reference purposes (with respect to stock appreciation rights or stock units) for awards granted under the Plan after June 7, 2016 is 5,858,892 (the ~~“Share Reserve”)~~Share Reserve). Shares subject to an option or stock appreciation right granted under the Plan after June 7, 2016 count against the Share Reserve as one share for every share granted, and shares subject to any other type of award granted under the Plan after June 7, 2016 count against the Share Reserve as two shares for every share granted. Any award, or portion of an award, under the Plan or under the Company’s 2009 Stock Plan (as amended and restated (the ~~“Prior Plan”)~~Prior Plan)) that expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares without delivery of shares or other consideration will be added back to the Share Reserve as one share for each such share that was subject to an option or stock appreciation right granted under the Plan or the Prior Plan, and two shares for each such share that was subject to an award other than an option or stock appreciation right granted under the Plan or the Prior Plan. If any shares are withheld, tendered or exchanged by a participant in the Plan as full or partial payment to Innodata of the exercise price under an option under the Plan or the Prior Plan or in satisfaction of a participant’s tax withholding obligations with respect to any award under the Plan or the Prior Plan, there will be added back to the Share Reserve one share for each such share that was withheld, tendered or exchanged in respect of an option or stock appreciation right granted under the Plan or the Prior Plan, and two shares for each such share that was withheld, tendered or exchanged in respect of an award other than an option or stock appreciation right granted under the Plan or the Prior Plan.

A summary of stock option activity under the Plan as of ~~June~~September 30, 2019, and changes during the ~~six~~nine months then ended, are presented below:

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

	For the Six Months Ended June 30,					For the Nine Months Ended September 30,
	2019			2018		2019		2018
Weighted average fair value of options granted	$	0.64		$	-
Weighted-average fair value of options granted						$	0.56	$	0.54

Risk-free interest rate		2.55	%		-		1.7% - 2.6%		2.77%
Expected life (years)		6			-		5-6		5-6
Expected volatility factor		45	%		-		45-46%		49%
Expected dividends		None			-		-		-

A summary of restricted shares under the Company’s Plan as of ~~June~~September 30, 2019 are presented below:

	Number of Shares		Weighted-Average Grant Date Fair Value
					Number of Shares		Weighted-Average Grant Date Fair Value
Granted		75,000		1.38		75,000	$	1.38
Vested		-		-		-		-
Forfeited/Expired		-		-		-		-
Unvested at June 30, 2019		75,000	$	1.38
Unvested at September 30, 2019						75,000	$	1.38

The compensation cost related to non-vested stock options and restricted stock awards not yet recognized as of ~~June~~September 30, 2019 totaled approximately ~~$0.9~~$1.6 million. The ~~weighted average~~weighted-average period over which these costs will be recognized is 2428 months.

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

The Company has various operating lease agreements for its offices and service delivery centers. The Company has determined that the risks and benefits related to the leased properties are retained by the lessors. Accordingly, these are accounted for as operating leases.

These lease agreements are for terms ranging from two to 11 years and, in most cases, provide for rental escalations ranging from 1.75% to 10%. Most of these agreements are renewable at the mutual consent of the parties in the contract.

The Company adopted Accounting Standards Codification ASU ~~Topic 842 - Leases~~2016-02, beginning January 1, 2019 and ~~adopted~~applied the practical expedients consistently for all of its leases. Accordingly, the Company:

In addition, the Company elected to retrospectively determine the lease term and assess impairment of the ~~right of use~~right-of-use asset.

At the date of transition, the Company recognized an operating lease liability and ~~right of use~~right-of-use asset. The amount of lease liability is equal to the present value of the remaining lease payments as of January 1, 2019, discounted using the incremental borrowing rate of each respective country.

A ~~right of use~~right-of-use asset is measured atas the amount of the lease liability adjusted for the amount of deferred straight-line rent, prepaid rent and lease incentive allowances previously recognized.

The table below summarizes the amounts recognized in the financial statements related to operating leases for the periods presented (in thousands):

The following table presents the maturity profile of the Company’s operating lease liabilities based on the contractual undiscounted payments with a reconciliation of these amounts to the remaining net present value of the operating lease liability reported in the consolidated balance sheet as of ~~June~~September 30, 2019 (in thousands).

Year	Amount			Amount

2019	$	930		$	461
2020		1,757			1,736
2021		1,341			1,331
2022		1,258			1,249
2023		1,051			1,047
2024 and thereafter		5,701			5,685
Total lease payments		12,038			11,509
Less: Interest		(3,609	)		(3,411	)
Net present value of lease liabilities	$	8,429		$	8,098

Current portion	$	1,163		$	1,149
Long term portion		7,266
Long-term portion					6,949
Total	$	8,429		$	8,098

The weighted average remaining lease terms and discount rates for all of our operating leases as of ~~June~~September 30, 2019 were as follows:

Total long-term obligations of the Company as of ~~June~~September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	June 30,		December 31,
	2019		2018		September 30,		December 31,
					2019		2018
Pension obligations - accrued pension liability	$	2,750	$	2,591	$	2,781	$	2,591
Settlement agreement⁽¹⁾		810		1,010		748		1,010
Capital lease obligations		290		574		256		574
Microsoft licenses⁽²⁾		102		355		-		355
Deferred lease payments		-		489		-		489
Lease incentive liability		-		572		-		572
		3,952		5,591		3,785		5,591
Less: Current portion of long-term obligations		838		1,529		699		1,529
Totals	$	3,114	$	4,062	$	3,086	$	4,062

⁽¹⁾ Represents payment to be made pursuant to a settlement agreement between a subsidiary of the Company and 19 former employees of such subsidiary in December of 2018. The balance is payable in monthly installments through March 2023.

⁽²⁾ In March 2017, the Company renewed a vendor agreement to acquire certain additional software licenses and to receive support and subsequent software upgrades on these and other currently owned software licenses through February 2020. Pursuant to this agreement, the Company is obligated to pay approximately $0.4 million annually over the term of the agreement.

Accumulated other comprehensive loss, as reflected in the condensed consolidated balance sheets, consists of pension liability adjustments, net of taxes, foreign currency translation adjustments, net of taxes and changes in fair value of derivatives, net of taxes. The components of accumulated other comprehensive loss as of ~~June~~September 30, 2019, and reclassifications out of accumulated other comprehensive loss for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, were as follows (net of tax) (in thousands):

	Pension Liability Adjustment			Fair Value of Derivatives			Foreign Currency Translation Adjustment			Accumulated Other Comprehensive Income			Pension Liability Adjustment			Fair Value of Derivatives		Foreign Currency Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance at April 1, 2019	$	1,415		$	-		$	(1,202	)	$	213
Other comprehensive income before reclassifications, net of taxes		-			-			23			23
Total other comprehensive income (loss) before reclassifications, net of taxes		1,415			-			(1,179	)		236
Net amount reclassified to earnings		(41	)		-			-			(41	)
Balance at June 30, 2019	$	1,374		$	-		$	(1,179	)	$	195

	Pension Liability Adjustment			Fair Value of Derivatives			Foreign Currency Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance at April 1, 2018	$	1,132		$	(189	)	$	(715	)	$	228
Balance at July 1, 2019													$	1,374		$	-	$	(1,179	)	$	195
Other comprehensive loss before reclassifications, net of taxes		-			(148	)		(337	)		(485	)		-			-		(252	)		(252	)
Total other comprehensive income (loss) before reclassifications, net of taxes		1,132			(337	)		(1,052	)		(257	)		1,374			-		(1,431	)		(57	)
Net amount reclassified to earnings		(58	)		87			-			29			(41	)		-		-			(41	)
Balance at June 30, 2018	$	1,074		$	(250	)	$	(1,052	)	$	(228	)

	Pension Liability Adjustment			Fair Value of Derivatives			Foreign Currency Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2019	$	1,451		$	-		$	(1,466	)	$	(15	)
Other comprehensive income before reclassifications, net of taxes		-			-			287			287
Total other comprehensive income (loss) before reclassifications, net of taxes		1,451			-			(1,179	)		272
Net amount reclassified to earnings		(77	)		-			-			(77	)
Balance at June 30, 2019	$	1,374		$	-		$	(1,179	)	$	195

	Pension Liability Adjustment			Fair Value of Derivatives			Foreign Currency Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2018	$	1,191		$	342		$	(687	)	$	846
Other comprehensive loss before reclassifications, net of taxes		-			(684	)		(365	)		(1,049	)
Total other comprehensive income (loss) before reclassifications, net of taxes		1,191			(342	)		(1,052	)		(203	)
Net amount reclassified to earnings		(117	)		92			-			(25	)
Balance at June 30, 2018	$	1,074		$	(250	)	$	(1,052	)	$	(228	)
Balance at September 30, 2019													$	1,333		$	-	$	(1,431	)	$	(98	)

	Pension Liability Adjustment			Fair Value of Derivatives			Foreign Currency Translation Adjustment			Accumulated Other Comprehensive Loss
Balance at July 1, 2018	$	1,074		$	(250	)	$	(1,052	)	$	(228	)
Other comprehensive income (loss) before reclassifications, net of taxes		-			(50	)		114			64
Total other comprehensive income (loss) before reclassifications, net of taxes		1,074			(300	)		(938	)		(164	)
Net amount reclassified to earnings		(57	)		153			-			96
Balance at September 30, 2018	$	1,017		$	(147	)	$	(938	)	$	(68	)

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

The Company’s operations are classified in three reporting segments: ~~Digital Data Solutions (DDS),~~DDS, Synodex and ~~Agility PR Solutions (Agility).~~Agility.

The DDS segment specializes in combiningdeep neural networks andhuman expertise in multiple domains (including health, science, and law) to make “unstructured information” (sometimes referred to as “content”) useable. For business information companies, “useable” means that the content can be sold via subscription to adigital product. For enterprises, “useable” means that the content can drivedigital process transformationandAI. The Company works with all classes of data, including sensitive and protected data.

The Synodex segment enables clients in the insurance and healthcare sectors to transform medical records into useable digital data and to apply technologies to the digital data to augment decision support.

The Agility segment providestools and related professional services that enable PR and communications professionals to discover influencers, amplify messages, monitor coverage, and measure the impact of campaigns. Bulldog Reporter, a publisher of PR-related news and a popular e-newsletter, and the Bulldog Awards, a PR awards program that recognizes outstanding performance among PR and communications professionals and agencies, are properties of Agility.

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

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

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018			2019			2018
Revenues:
DDS	$	10,052		$	10,826		$	20,229		$	21,303		$	10,124		$	10,756		$	30,353		$	32,059
Synodex		915			1,013			1,939			1,995			977			1,013			2,916			3,008
Agility		2,672			2,431			5,165			5,092			2,745			2,280			7,910			7,372
Total Consolidated	$	13,639		$	14,270		$	27,333		$	28,390		$	13,846		$	14,049		$	41,179		$	42,439

Income (loss) before provision for income taxes⁽¹⁾:
DDS	$	153		$	456		$	227		$	1,112		$	376		$	1,731		$	603		$	2,843
Synodex		(130	)		88			(11	)		53			(70	)		91			(81	)		144
Agility		(584	)		(555	)		(1,256	)		(870	)		(443	)		(660	)		(1,699	)		(1,530	)
Total Consolidated	$	(561	)	$	(11	)	$	(1,040	)	$	295		$	(137	)	$	1,162		$	(1,177	)	$	1,457

Income (loss) before provision for income taxes⁽²⁾:
DDS	$	94		$	400		$	106		$	990		$	309		$	1,673		$	415		$	2,663
Synodex		(91	)		127			68			134			(26	)		132			42			266
Agility		(564	)		(538	)		(1,214	)		(829	)		(420	)		(643	)		(1,634	)		(1,472	)
Total Consolidated	$	(561	)	$	(11	)	$	(1,040	)	$	295		$	(137	)	$	1,162		$	(1,177	)	$	1,457

	June 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Goodwill:
Total assets:
DDS					$	29,186	$	22,334
Synodex						752		787
Agility	$	2,095	$	2,050		22,214		22,930
Total Consolidated					$	52,152	$	46,051

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

Long-lived assets of the Company as of September 30, 2019 and December 31, 2018, respectively, by geographic region, were comprised of the following (in thousands):

Long-lived ~~assets of the Company as of June 30, 2019 and December 31, 2018, respectively, by geographic region, are comprised of the following (in thousands):~~

~~Long lived~~ assets include the unamortized balance of ~~right of use~~right-of-use assets amounting to ~~$7.6~~$7.3 million as of ~~June~~September 30, 2019.

Two clients in the DDS segment together generated approximately ~~26%~~25% of the Company’s total revenues for the three months ended ~~June~~September 30, 2019 and ~~31%~~29% of the Company’s total revenues for the three months ended ~~June~~September 30, 2018. No other client accounted for 10% or more of total revenues during these periods. Further, revenues from non-U.S. clients accounted for ~~54%~~57% and ~~58%~~54% of the Company’s total revenues for the three months ended ~~June~~September 30, 2019 and 2018, respectively.

Two clients in the DDS segment together generated approximately 26% of the Company’s total revenues for the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~31%~~30% of the Company’s total revenues for the ~~six~~nine months ended ~~June~~September 30, 2018. No other client accounted for 10% or more of total revenues during these periods. Further, for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, revenues from non-U.S. clients accounted for ~~53%~~54% and ~~58%~~57%, respectively, of the Company’s total revenues.

As of ~~June~~September 30, 2019, approximately ~~58%~~59% of the Company's accounts receivable was from foreign (principally European) clients and ~~36%~~43% of the Company’s accounts receivable was due from ~~two~~three clients. As of December 31, 2018, approximately 57% of the Company's accounts receivable was from foreign (principally European) clients and 48% of the Company’s accounts receivable was due from three clients.

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

Options to purchase ~~5.0~~6.9 million shares and 3.5 million shares of common stock ~~were outstanding as of June~~for the three months ended September 30, 2019 and 2018, respectively, were outstanding but not included in the computation of diluted income (loss) per share because the exercise price of the options was greater than the average market price of the common shares and therefore the effect would have been anti-dilutive. Options to purchase 6.9 million shares and 5.5 million shares of common stock for the nine months ended September 30, 2019 and 2018, respectively, were outstanding but not included in the computation of diluted net loss per share because the effect would have been anti-dilutive.

In October 2019, the Company re-purchased 390,625 shares of its common stock in a privately negotiated transaction at $1.28 per share, for a total cost of $500,000.

The effects of foreign currency forward contracts designated as cash flow hedges on the Company’s condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2019 and 2018, respectively, were as follows (in thousands):

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

Disclosures in this Form 10-Q contain certain forward-looking statements, including without limitation, statements concerning our operations, economic performance, and financial condition. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “project,” “head start,” ~~“believe,” “expect,”~~"believe," "expect," “can,” “continue,” “could,” “intend,” “may,” “should,” “will,” "anticipate," "indicate," "point to," “forecast,” “predict,” “likely,” “goals,” “optimistic,” “foster,” “estimate,” “plan”, “potential”, or the negatives thereof, and other similar expressions generally identify forward-looking statements.

These forward-looking statements are based on management’s current expectations, assumptions and estimates and are subject to a number of risks and uncertainties, including, without limitation, that contracts may be terminated by clients; projected or committed volumes of work may not materialize; the primarily at-will nature of contracts with our Digital Data Solutions clients and the ability of these clients to reduce, delay or cancel projects; the likelihood of continued development of the markets, particularly new and emerging markets, that our services support; continuing Digital Data Solutions segment revenue concentration in a limited number of clients; continuing Digital Data Solutions segment reliance on project-based work; inability to replace projects that are completed, canceled or reduced; our dependency on content providers in our Agility segment; difficulty in integrating and deriving synergies from acquisitions, joint venture and strategic investments; potential undiscovered liabilities of companies and businesses that we may acquire; potential impairment of the carrying value of goodwill and other acquired intangible assets of companies and businesses that we acquire; changes in our business or growth strategy; depressed market conditions; changes in external market factors; the ability and willingness of our clients and prospective clients to execute business plans which give rise to requirements for our services; changes in our business or growth strategy; the emergence of new or growing competitors; various other competitive and technological factors; the Company’s use of and reliance on information technology systems, including potential security breaches, cyber-attacks, privacy breaches or data breaches that result in the unauthorized disclosure of consumer, customer, employee or Company information, or service interruptions; and other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission. Such risks and uncertainties may be in addition to the ~~risk~~risks described in ~~part~~Part I, Item 1A, “Risk ~~factors;~~Factors;” Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; and other parts of our Annual Report on Form ~~10-k~~10-K for the year ended December ~~31,2018.~~31, 2018.

Our actual results could differ materially from the results referred to in the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the results referred to in the forward-looking statements contained in this Form 10-Q will occur, and you should not place undue reliance on these forward-looking statements. These forward-looking statements speak only as of the date hereof.

We undertake no obligation to update or review any guidance or other forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by the federal securities laws.

Innodata Inc. (NASDAQ: INOD) (including its subsidiaries, the “Company”, “Innodata”, “we” or “our”) is a global services and technology company. We combine human expertise with deep learning technologies to power leading information products and enterprise artificial intelligence (AI)/digital transformation.

Our core services are (i) data acquisition, transformation, and enrichment at scale; (ii) digital operations management and analytics; and (iii) content applications. We report our core business as the ~~Digital Data Solutions (DDS)~~DDS segment.

We also have venture businesses that leverage our core capabilities to provide specific industry solutions. ~~Our~~In the Synodex segment, our Synodex venture business delivers a software-as-a-service (SaaS) platform and managed services for digital transformation of medical data. ~~Our~~In our Agility ~~PR Solutions (Agility)~~segment, our Agility venture business delivers a SaaS platform and managed service for delivering news, information, and content to targeted journalists and influencers, as well as monitoring and analyzing coverage across traditional and social media sources. ~~Each venture business is reported as a separate segment.~~

We specialize in combiningdeep neural networks andhuman expertise in multiple domains (including health, science, and law) to make “unstructured information” (sometimes referred to as “content”) useable. For business information companies, “useable” means that the content can be sold via subscription to adigital product. For enterprises, “useable” means that the content can drivedigital process transformationandAI. We work with all classes of data, including sensitive and protected data.

We also develop digital products for business information companies and digital systems which replace legacy systems and processes.

We continued to implement a strategy we initiated in 2017 focused on technology differentiation, increasingly taking an innovation-led approach to create value for clients while driving leaner, more cost-effective operations.

Finding the right approach for mixing machines and experts-in-the-loop for each customer requirement is one of our core competencies. On the human side, we have over three thousand staff with deep domain expertise in legal, tax, regulatory, scientific, technical, and health-related content. Many hold advanced degrees. They work from our global operations centers in North and South America, Europe, Israel, India, Sri Lanka and the Philippines. Our operations centers in Asia are ISO 27001 certified. On the technology side, we use deep learning, a sophisticated machine learning technique which is a branch of artificial intelligence that has enjoyed great success in real-world applications.

In our approach, content is fed first into our deep learning machines that automate much of the work but distinguish between what they can automatically process and what requires human intervention. Work that requires humans is “pushed” to human experts. Once human experts perform tasks, their output is then fed back to the machines, which, as a result, become “smarter” and achieve over time progressively greater levels of automation. (See “Our Technology and Infrastructure”, below.)

Our customers include leading digital businesses in banking and financial services, technology, and digital retailing and four of the largest information industry companies in the world, spanning financial, legal, healthcare and scientific vertical markets. Our customers often seek to use digital data in combination with AI to support their businesses or to digitally transform operations. Our information industry customers sell subscriptions to data products that require enhanced digital data.

In order to use content in an information product or in AI, there are often significant obstacles that must be overcome: the content may be contained in multiple websites; it may be in disparate formats; and it may lack the necessary semantics and metadata to make it product- or AI-ready. We overcome these obstacles by combining advanced technology and human subject matter experts, enabling us to produce highly refined product- and AI-ready content efficiently and at scale.

Acquiring unstructured data often involves monitoring thousands of sources such as websites in real-time for new or changing content and then automatically extracting the changed content. One of the challenges with web data monitoring and extraction is that the HTML code underlying web pages often changes, causing programs and scripts to break. We overcome this by using enterprise-class tools for content change detection and extraction. These tools use both machine learning-based visual data abstraction combined with traditional programmatic approaches. With visual abstraction, the technology knows what the content “looks like” and recognizes when a data element moves from one spot on a Web page to another.

Digital data transformation can refer to a large number of very specific tasks necessary to create well-structured, valid XML, such as text zoning, editing, format tagging, format conversion, extraction, cross-reference capture, and linking.

Digital data enrichment often includes structural tagging as well as semantic enrichment such as entity tagging and normalization. Data enrichment also includes text categorization - classifying content to systems that organize knowledge such as ontologies and knowledge graphs. This kind of enrichment enables powerful information retrieval and discovery and provides hooks for integration and interoperability.

We provide digital operations management and analytics for an increasing diversity of complex functions. At present, these include IP rights management, contract management, customer relations, data processing, regulatory reporting, publishing workflow management, publisher relationship management, and transaction management. Our services draw on a combination of industry and functional expertise from our thousands of global delivery resources, many with advanced degrees, augmented by sophisticated machine learning and robotics process automation (RPA) technology.

Our digital operations management solutions often leverage our core competency in augmenting human expert effort with advanced technology and configuring the technology to continually improve as a result of expert feedback. In this way, we provide high-quality, cost-effective solutions for our customers that become increasingly automated, resulting in further cost and improvements in both productivity and response time.

Many of the operations we manage are mission-critical for our customers (as opposed to back-office), are unique, and have multiple contingencies and potential points of failure. To manage this complexity, we have developed methodologies and best practices around process management and risk mitigation, and we work with clients at a strategic business and technology level.

We develop and maintain applications used in conjunction with product- or AI-ready content we create. Our content applications address knowledge representation, search/discovery, and digital transformation of customer workflows. Our scope of services spans full-stack development, knowledge engineering, and integration support.

Our deep learning technologies are built on frameworks such as TensorFlow and Torch that layer algorithms to create artificial neural networks that continuously learn on the job, constantly improving the quality and accuracy of results.

Our content processing application infrastructure consists of three integrated tiers. The first tier is anorchestration layer featuring a console we use to configure our workflow engines. Each workflow is customized around the content acquisition, transformation, and enrichment tasks required to transform a specific input into a specific output. This is where we oversee and manage AI, setting our accuracy thresholds and quality assurance parameters to decide when cognitive tasks that have been performed by machines are sent for human review.

The second tier of our data processing application infrastructure is amicroservices layer of deep learning networks which perform discrete tasks automatically. Microservices are invoked by workflows via RESTful APIs. Our deep neural networks are trained to understand domain-specific terms and meaning and can be deployed to enforce privacy and maintain customer-proprietary learning. We have built domain-specific and task-specific microservices that perform deep sequence labelling, text categorization, and computer vision. The technology works by observing text patterns using algorithms and assigning labels based on these observed values.

For each cognitive decision, the machines provide a result together with a confidence score. A high confidence score means the machine is confident that it has performed accurately, and the content is ready to be deployed in an information product or for AI. A low confidence score means expert review is required.

Our third layer is human experts-in-the-loop. When an expert review is required, the human experts use tools we refer to as “workbenches” to apply their expertise to a task. The workbenches are integrated with the microservice endpoints in one of two ways. In one deployment, only low-confidence data is sent to workbenches for human review. In an alternative deployment, we send both high-confidence and low-confidence data back to the workbench, displaying the confidence level for each decision taken by the machine. In both of these deployments, human-reviewed work is retroactively fed back into the deep neural network, enabling it to get smarter. The result is continuous, ~~predicable~~predictable improvement and progressively greater levels of automation.

Our data storage and application hosting platform has been built utilizing an innovative enterprise infrastructure platform enabling robust performance scaling, strong security, high availability, and advanced business continuity. We support a range of strategies to suit our customers’ needs for data security, compliance, scalability and reliability. We can host data and applications in our own data centers at our production facilities or we can utilize third-party cloud services which provide the benefit of “infinite scalability” of hardware resources. When we are processing sensitive information for banks and insurance companies, we utilize U.S.-based, co-located data centers in combination with advanced data encryption (both at rest and in motion to the Advanced Encryption Standard 256 or similar standard) and desktop virtualization technologies, ensuring that data never leaves secured environments in the U.S. We employ a range of security features including monitored firewalls and intrusion detection devices. We can deploy on-premises, as well, and our machine learning microservices can be consumed via API.

We comply with the requirements of the United States Health Insurance Portability and Accountability Act of 1996 as amended (HIPAA) (including by the Health Information Technology for Economic and Clinical Health Data (HITECH)) and the United Kingdom’s Data Protection Act 2018, as applicable. Innodata Inc. is certified to the EU-U.S. Privacy Shield framework, which certification includes Synodex and Agility as covered entities.

Our DDS segment includes our Innodata docGenix, LLC subsidiary (docGenix). As of ~~June~~September 30, 2019, Innodata Inc. owned 94% of docGenix.

Our venture businesses provide specific industry solutions. We have chosen to invest in these businesses because they leverage one or more of our core capabilities (typically data acquisition/transformation/enrichment at scale, content applications, and global workforce deployment), have attractive business models such as SaaS (software-as-a-service), and expand our addressable market. Each venture business is reported as its own business segment.

Synodex enables clients in the insurance and healthcare sectors to transform medical records into useable digital data and to apply technologies to the digital data to augment decision support.

Our Synodex segment operates through our Innodata Synodex, LLC subsidiary. As of ~~June~~September 30, 2019, Innodata Inc. owned 92.5% of Innodata Synodex, LLC. More information about our Synodex segment can be found atwww.synodex.com.

Agilityprovides tools and related professional services that enable public relations (PR) and communications professionals to discover influencers, amplify messages, monitor coverage, and measure the impact of campaigns. Agility has been ranked as the #1 easiest to use media and influencer targeting platform ~~and as a “momentum leader” based on company growth and customer satisfaction ratings,~~ out-performing significantly larger, more established competitors.¹ The media intelligence solutions market is highly fragmented, with only a limited number of providers of integrated solutions such as Agility.

¹ G2 Crowd Inc.,https://www.g2.com/gated_content/tokens/5ca8f8c7-7fd5-41ad-a9c9-1b7d0a47932a

¹~~G2 Crowd Inc., https://www.g2.com/categories/media-and-influencer-targeting~~

To provide our services, we maintain a big data engine that stores and indexes media content. We index approximately two billion media items each year.

Revenue Recognition– ~~commencing~~Commencing January 1, 2018, we recognize revenue in accordance with Accounting Standards Update ~~(“ASU”)~~(ASU) 2014-09,Revenue from Contracts with ~~Customers~~.Customers. Revenue is recognized when control of the promised services is transferred to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services as per the agreement with the customer. In case there are agreements with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligations are distinct within the context of the agreement at the agreement’s inception. Performance obligations that are not distinct at agreement inception are combined. We allocate the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation, if any, and then evaluate how the services are transferred to the customer to determine the timing of revenue recognition.

The Agility segment derives its revenue primarily from subscription arrangements and provision of enriched media analysis services. It also derives revenue as a reseller of corporate communication solutions. Revenue from subscriptions is recognized monthly when access to the service is provided to the end user; all parties to the agreement have agreed to the agreement; each party’s rights are identifiable; the payment terms are identifiable; the agreement has commercial substance; and collection is probable. Revenue from enriched media analysis services is recognized when the services are performed, and performance conditions are satisfied. Revenues from the reseller agreements, which are not significant to the overall revenues, are recognized at gross with our functioning as a principal due to our meeting the following criteria. We act as the primary obligor in the sales transaction; assume the credit risk; set the price; can select suppliers; and are involved in the execution of the services, including after sales service.

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

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

Contract acquisition cost for our Agility segment, which is included in prepaid expenses and other current assets, is amortized over the term of ~~the~~a subscription agreement ~~which~~that normally has a duration of 12 months or less. We review these costs on a periodic basis to determine the need to adjust the carrying values for pre-terminated contracts.

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

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

The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocates the purchase price of each acquired business to its respective net tangible and intangible assets and liabilities. Acquired intangible assets principally consist of technology, customer relationships, backlog and trademarks. Liabilities related to intangibles principally consist of unfavorable vendor contracts. The Company determines the appropriate useful life by performing an analysis of expected cash flows based on projected financial information of the acquired businesses. Intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the majority of the economic benefits are expected to be consumed. Intangible ~~liabilities~~assets are amortized into direct operating costs ratably over their expected related revenue streams over their useful lives.

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. The Company does not amortize goodwill but evaluates it for impairment at the reporting unit level annually during the third quarter of each fiscal year (as of September 30 of that quarter) or when an event occurs, or circumstances change, that indicates the carrying value may not be recoverable. In 2018, the Company adopted ASU No. 2017-04, ~~Intangibles~~“Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill ~~Impairment.~~Impairment”. Under the newly adopted guidance, the optional qualitative assessment, referred to as “Step 0”, and the first step of the quantitative assessment (“Step 1”) remained unchanged versus the prior guidance. However, the requirement to complete the second step (“Step 2”), which involved determining the implied fair value of goodwill and comparing it to the carrying value of that goodwill to measure the impairment loss, was eliminated. As a result, Step 1 will be used to determine both the existence and amount of goodwill impairment. An impairment loss will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying value of goodwill in that reporting unit.

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

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

We believe Adjusted EBITDA is useful to our management and investors in evaluating our operating performance and for financial and operational decision-making purposes. In particular, Adjusted EBITDA facilitates period-to-period comparisons of our operating results on a consistent basis by excluding items that are not reflective of our core operations or are not within our control and helps us identify underlying trends in our business. In this regard, we believe it provides useful information about our operating results, enhances the overall understanding of our past performance and future prospects and allows for greater transparency with respect to key metrics used by the management in our financial and operational decision-making. We also use this measure to establish operational goals for managing our business and evaluating our performance.

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

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

The following tables reconcile net income (loss) to Adjusted EBITDA (loss) for the periods presented (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018		2019			2018
Adjusted EBITDA:
Net loss attributable to Innodata Inc. and Subsidiaries	$	(653	)	$	(466	)	$	(1,105	)	$	(734	)
Net income (loss) attributable to Innodata Inc. and Subsidiaries													$	(555	)	$	688	$	(1,660	)	$	(46	)
Depreciation and amortization		752			840			1,561			1,724			687			833		2,248			2,558
Goodwill impairment		-			675			-			675			-			-		-			675
Stock-based compensation		145			131			273			271			351			268		624			539
Provision for income taxes		100			451			72			1,033			421			469		493			1,502
Interest expense, net		12			10			23			14			13			10		36			24
Non-controlling interests		(8	)		4			(7	)		(4	)		(3	)		5		(10	)		1
Adjusted EBITDA - Consolidated	$	348		$	1,645		$	817		$	2,979		$	914		$	2,273	$	1,731		$	5,253

	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018		2019			2018		2019			2018
Adjusted EBITDA:
Net income (loss) attributable to Synodex Segment	$	(81	)	$	119	$	69		$	129	$	(20	)	$	125	$	49		$	254
Stock-based compensation		3			-		6			-		6			-		12			-
Non-controlling interests		(10	)		8		(1	)		5		(5	)		7		(6	)		12
Adjusted EBITDA (loss) - Synodex Segment	$	(88	)	$	127	$	74		$	134	$	(19	)	$	132	$	55		$	266

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018			2019			2018
Adjusted EBITDA:
Net loss attributable to Agility Segment	$	(550	)	$	(525	)	$	(1,189	)	$	(804	)	$	(410	)	$	(631	)	$	(1,599	)	$	(1,435	)
Depreciation and amortization		387			379			771			761			405			389			1,176			1,150
Stock-based compensation		15			2			23			4			15			2			38			6
Provision for income taxes		(11	)		(12	)		(22	)		(24	)		(11	)		(12	)		(33	)		(36	)
Interest expense, net		1			3			2			6			1			2			3			8
Adjusted EBITDA loss - Agility Segment	$	(158	)	$	(153	)	$	(415	)	$	(57	)	$	-		$	(250	)	$	(415	)	$	(307	)

Total revenues were ~~$13.6~~$13.8 million for the three months ended ~~June~~September 30, 2019 compared to ~~$14.3~~$14.0 million for the three months ended ~~June~~September 30, 2018, a decrease of approximately ~~$0.7~~$0.2 million or 5%1%.

Revenues from the DDS segment were ~~$10.0~~$10.1 million and ~~$10.9~~$10.8 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively, a decrease of approximately ~~$0.9~~$0.7 million or 8%6%. The decrease is attributable to lower volume from three clients.

Revenues from the Synodex segment were ~~$0.9 million and~~ $1.0 million for each of the ~~three months~~three-month periods ended ~~June~~September 30, 2019 and ~~2018, respectively, a decrease of $0.1 million or approximately 10%. This decrease is primarily attributable to lower volume from one client.~~2018.

Revenues from the Agility segment were $2.7 million and ~~$2.4~~$2.3 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively, an increase of ~~$0.3~~$0.4 million or approximately ~~13%~~17%. The increase is ~~due~~attributable to ~~seasonal revenues from our annual Bulldog awards program of $0.1 million and $0.2 million increased~~higher revenues from subscriptions to our Agility media database.

Direct operating costs were ~~$9.6~~$9.0 million and ~~$9.9~~$9.2 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively, a decrease of ~~$0.3~~$0.2 million or 3%2%. Direct operating costs as a percentage of total revenues ~~increased to 71%~~were 65% and 66% for the three months ended ~~June~~September 30, 2019 ~~compared to 69% for the three months ended June 30, 2018.~~and 2018, respectively.

Direct operating costs for the DDS segment were approximately ~~$7.1~~$6.5 million and ~~$7.7~~$6.9 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively, a decrease of ~~$0.6~~$0.4 million or 8%6%. Direct operating costs for the three months ended June 30, 2019 include a one-time charge of $400,000 for an assessment of retroactive foreign social security contributions as a result of a recent decision by the Supreme Court of India that affects companies generally.The decrease is due to a reduction in direct operating costs ~~is attributed to lower labor and reduced delivery center costs arising from~~of $0.6 million as part of our continuing cost rationalization ~~that commenced~~initiatives, offset in ~~the second half~~part by foreign exchange transaction losses of ~~2017.~~$0.2 million. The reduction of $0.6 million is primarily a result of lower compensation related costs of $0.3 million, lower occupancy costs and related depreciation of $0.2 million, and lower other facility related costs of $0.1 million. Direct operating costs for the DDS segment as a percentage of DDS segment revenues were ~~71%~~64% for each of the ~~three months~~three-month periods ended ~~June~~September 30, 2019 and 2018.

Direct operating costs for the Synodex segment were $0.8 million for each of the ~~three months~~three-month periods ended ~~June~~September 30, 2019 and ~~$0.7 million for the three months ended June 30,~~ 2018, net of intersegment profits. Direct operating costs for the Synodex segment as a percentage of revenues were ~~89%~~85% and ~~70%~~80% for the three months ended ~~June~~September 30, 2019 and 2018, respectively. Direct operating costs as a percentage of revenues increased in the ~~second~~third quarter of 2019 primarily due to lower revenue ~~timing~~ from one ~~client combined with the cost of hardware and software upgrades which were expensed in the second quarter of 2019.~~client.

Direct operating costs for the Agility segment were $1.7 million and $1.5 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively. The $0.2 million increase is primarily a result of expenditures in support of increased revenues. Direct operating costs for the Agility segment as a percentage of Agility segment revenues were 63% and 70% for ~~each of~~ the ~~three months~~three-month periods ended ~~June~~September 30, 2019 and ~~2018.~~2018, respectively.

Selling and administrative expenses were ~~$4.6~~$5.0 million for the three months ended ~~June~~September 30, 2019, compared to $3.7 million for the three months ended ~~June~~September 30, 2018, an increase of ~~$0.9~~$1.3 million or approximately ~~24%~~35%. This increase is a result of investments in strategic initiatives designed to expand our addressable market. Innodata has made prescient, early investments in machine learning and artificial intelligence and is now positioned to turn these into new products and services. Selling and administrative expenses as a percentage of total revenues were ~~34%~~36% for the three months ended ~~June~~September 30, 2019 and 26% for the three months ended ~~June~~September 30, 2018.

Selling and administrative expenses for the DDS segment were ~~$2.9~~$3.3 million and ~~$2.1~~$2.2 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively, an increase of ~~$0.8~~$1.1 million or ~~38%~~50%. This increase is a result of investments in strategic initiatives designed to expand our addressable market. The savings realized from our cost rationalization initiatives were channeled into our strategic initiatives. The increase in selling and administrative expenses isfor the DDS segment were primarily ~~attributable~~due to ~~investing in our product~~higher compensation related costs of $0.9 million and ~~marketing strategic initiatives.~~recruitment and professional fees of approximately $0.2 million. As a percentage of DDS revenues, DDS selling and administrative expenses were ~~29%~~33% for the three months ended ~~June~~September 30, 2019 and ~~19%~~20% for the three months ended ~~June~~September 30, 2018. The increase in selling and administrative expenses as a percentage of revenues is due to lower revenues combined with increased selling and administrative expenses.

Selling and administrative expenses for the Synodex segment were $0.2 million and $0.1 million for ~~each of~~ the three months ended ~~June~~September 30, 2019 and ~~2018.~~2018, respectively. The increase is attributable to higher professional fees incurred for the period. Selling and administrative expenses for the Synodex segment as a percentage of Synodex segment revenues were ~~22% for the three months ended June 30, 2019 and~~ 20% for the three months ended ~~June~~September 30, 2019 and 10% for the three months ended September 30, 2018.

Selling and administrative expenses for the Agility segment were $1.5 million and $1.4 million for the three months ended ~~June~~September 30, 2019 and 2018, ~~respectively, an increase of $0.1 million or 7%.~~respectively. The ~~$0.1 million~~ increase is primarily ~~a result of expenditures~~due to additional provisions for doubtful accounts and higher marketing costs in support of ~~increased revenues.~~sales initiatives. Selling and administrative expenses for the Agility segment as a percentage of Agility segment revenues were 56% for the three months ended ~~June~~September 30, 2019 and ~~58%~~61% for the three months ended ~~June~~September 30, 2018.

~~During~~We performed our annual goodwill assessment for the ~~three months ended June~~Agility segment as of September 30, ~~2018,~~2019. In performing the assessment, we ~~recorded~~adhered to the provisions of ASU 2017-04, by using a ~~full~~single step approach that determines the carrying value of goodwill and comparing it against the excess of the reporting unit’s fair value. Based on our assessment, we reached the conclusion that there was no goodwill impairment because the fair value of ~~$675,000 for~~ the ~~DDS segment. There~~Agility segment’s goodwill exceeded its carrying value. Therefore, there was no goodwill impairment recorded during the three months ended ~~June 30, 2019.~~

The Company periodically analyzes whether any indicators of impairment have occurred. As part of these periodic analyses, the Company compares its estimated fair value, as determined based on its stock price, to its net book value. The continued decline in the Company’s stock price was viewed by the Company as a triggering event under ASU 2017-04 which required an assessment for possible goodwill impairment as of June 30, 2018. Under the provisions of ASU 2017-04, which the Company opted to early adopt, goodwill impairment is recognized based on Step 1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value.

~~The Company will perform its annual goodwill assessment for the Agility segment as of~~ September 30, 2019.

We recorded a provision for income taxes of ~~$0.1~~$0.4 million and $0.5 million for the three months ended ~~June~~September 30, 2019 and 2018, respectively. The ~~$0.4~~$0.1 million decrease is primarily due to a ~~higher~~lower tax provision by our foreign subsidiaries attributable to foreign exchange gains in the three months ended ~~June~~September 30, 2018.

Taxes primarily consist of a provision for foreign taxes recorded in accordance with the local tax regulations by our foreign subsidiaries. Effective income tax rates are disproportionate due to the losses incurred by our U.S. entity and our Canadian subsidiaries and a valuation allowance recorded on deferred taxes on these entities and tax effects of foreign operations, including foreign exchange gains and losses.

We incurred a net loss of $0.6 million during the three months ended September 30, 2019, compared to a net income of $0.7 million during the three months ended ~~June~~September 30, ~~2019 compared to a net loss of $0.5 million during the three months ended June 30,~~ 2018.

The DDS segment was breakeven for the three months ended June 30, 2019, compared to net loss of $0.1 million for the three months ended June 30, 2018, net of intersegment profits. Net loss for the three months ended June 30, 2019 include a one-time charge of $400,000 for an assessment of retroactive foreign social security contributions as a result of a recent decision by the Supreme Court of India that affects companies generally.

Net loss for the ~~Synodex~~DDS segment was $0.1 million for the three months ended ~~June~~September 30, 2019, compared to net income of $1.2 million for the three months ended September 30, 2018, net of intersegment profits. The decrease in net income of $1.3 million is attributable to lower revenues of $0.6 million and higher operating expenses of $0.7 million in the period.

The Synodex segment was breakeven for the three months ended September 30, 2019, compared to a net income of $0.1 million for the three months ended ~~June~~September 30, 2018, net of intersegment profits. The decrease is due to revenue timing from one client.

Net loss for the Agility segment was ~~$0.6 million and~~ $0.5 million for the three months ended ~~June~~September 30, 2019, ~~and~~compared to $0.6 million for the three months ended September 30, 2018, ~~respectively.~~

net of intersegment profits. The decrease in net loss is due to higher revenues offset by an increase in operating costs.

Adjusted EBITDA for the three months ended ~~June~~September 30, 2019 was ~~$0.3~~$0.9 million, compared to ~~$1.6~~$2.3 million for the three months ended ~~June~~September 30, 2018.

Adjusted EBITDA for the DDS segment was ~~$0.6 million compared to $1.7~~$0.9 million for the three months ended ~~June~~September 30, 2019, ~~and~~compared to $2.4 million for the three months ended September 30, 2018, ~~respectively,~~ a decrease of ~~$1.1~~$1.5 million or ~~65%~~64%. The decrease is primarily attributable to ~~$0.7~~the $1.3 million ~~of goodwill impairment, $0.3~~lower income and $0.2 million ~~tax provision by our foreign subsidiaries attributable to foreign exchange gains and $0.1 million~~lower depreciation and amortization in the three months ended ~~June~~September 30, ~~2018.~~2019.

Adjusted EBITDA for the Synodex segment was ~~a loss of~~breakeven for the three months ended September 30, 2019, compared to $0.1 million for the three months ended ~~June 30, 2019 compared to an income of $0.1 million for the three months ended June~~September 30, 2018, a decrease of ~~$0.2~~$0.1 million. ~~This~~The decrease is ~~primarily~~ due to revenue timing from one ~~client combined with the cost of existing hardware and software upgrades which were expensed in the second quarter of 2019.~~client.

Adjusted EBITDA for the Agility segment was breakeven for the three months ended September 30, 2019, compared to a loss of $0.2 million for ~~each of~~ the three months ended ~~June~~September 30, ~~2019 and~~ 2018. The improvement is a result of a lower loss incurred for the period.

Total revenues were ~~$27.3~~$41.2 million for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to ~~$28.4~~$42.4 million for the ~~six~~nine months ended ~~June~~September 30, 2018, a decrease of ~~$1.1~~$1.2 million or 4%3%.

Revenues from the DDS segment were ~~$20.2~~$30.4 million and ~~$21.3~~$32 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively, a decrease of approximately ~~$1.1~~$1.6 million or 5%. The decrease in revenues is primarily attributable to lower volume from one client.

Revenues from the Synodex segment were ~~$1.9~~$2.9 million and ~~$2.0~~$3.0 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively, a decrease of $0.1 million or 5%3%. This decrease is primarily due to ~~revenue timing~~lower volume from one client.

Revenues from the Agility segment were ~~$5.2~~$7.9 million and ~~$5.1~~$7.4 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, ~~respectively.~~respectively, an increase of $0.5 million or approximately 7%. The increase is attributable to higher revenues from subscriptions to our Agility media database.

Direct operating costs were ~~$19.1~~$28.2 million and ~~$19.8~~$29.1 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively, a decrease of ~~$0.7~~$0.9 million or 4%3%. Direct operating costs as a percentage of total revenues were ~~70%~~68% and 69% for ~~each of~~ the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~2018.~~2018, respectively.

Direct operating costs for the DDS segment were approximately ~~$14.2~~$20.8 million and ~~$15.2~~$22.1 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively, a decrease of ~~$1.0~~$1.3 million or 7%6%. ~~Direct~~The decrease is due to a reduction in direct operating costs ~~for the six months ended June 30, 2019 include~~of $2.4 million as part of our continuing cost rationalization initiatives offset in part by foreign exchange transaction losses of $0.7 million and a one-time charge of ~~$400,000~~$0.4 million for an assessment of retroactive foreign social security contributions as a result of a ~~recent~~ decision by the Supreme Court of India that affects companies generally. The ~~decrease in direct operating~~reduction of $2.4 million is primarily a result of lower compensation related costs ~~is attributed to~~of $1.2 million, lower ~~labor~~occupancy costs and ~~reduced delivery center~~related depreciation of $0.7 million, and lower other facility related costs ~~arising from continuing cost rationalization that commenced in the second half~~ of ~~2017.~~$0.5 million. Direct operating costs for the DDS segment as a percentage of DDS segment revenues were ~~70%~~68% and ~~71%~~69% for ~~each of~~ the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively.

Direct operating costs for the Synodex segment were ~~$1.6~~$2.4 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and ~~$1.5~~$2.3 million for the ~~six~~nine months ended ~~June~~September 30, 2018, net of intersegment profits. The increase is due to the cost of hardware and software upgrades expensed during the year. Direct operating costs for the Synodex segment as a percentage of Synodex segment revenues were ~~84%~~83% and ~~75%~~77% for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. ~~Direct~~The increase in direct operating costs as a percentage of revenues ~~increased~~ in the ~~second quarter of~~nine months ended September 30, 2019 is primarily due to lower revenue ~~timing~~ from one client combined with the higher cost of hardware and software upgrades, ~~which were~~ expensed induring the ~~second quarter of 2019.~~year.

Direct operating costs for the Agility segment were ~~$3.3~~$5.0 million and ~~$3.1~~$4.7 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. The ~~$0.2~~$0.3 million increase is primarily a result of expenditures in support of increased revenues. Direct operating costs for the Agility segment as a percentage of Agility segment revenues were 63% and ~~61%~~64% for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. The increase is due to higher content related costs.

Selling and administrative expenses were ~~$9.2~~$14.2 million for the ~~six~~nine months ended ~~June~~September 30, 2019, compared to ~~$7.6~~$11.2 million for the ~~six~~nine months ended ~~June~~September 30, 2018, an increase of ~~$1.6~~$3.0 million or ~~21%~~27%. This increase is a result of investments in strategic initiatives designed to expand our addressable market. Selling and administrative expenses as a percentage of total revenues increased to 34% for the ~~six~~nine months ended ~~June~~September 30, 2019 from ~~27%~~26% for the ~~six~~nine months ended ~~June~~September 30, 2018.

Selling and administrative expenses for the DDS segment were ~~$5.9~~$9.2 million and ~~$4.4~~$6.6 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively, an increase of ~~$1.5~~$2.6 million or ~~34%~~39%. This increase is a result of investments in strategic initiatives designed to expand our addressable market. The savings realized from our cost rationalization initiatives were channeled into our strategic initiatives. The increase in selling and administrative expenses isfor the DDS segment were primarily ~~attributable~~due to ~~investing in our product~~higher compensation related costs of $1.8 million, recruitment and professional fees of $0.6 million, and other selling and marketing ~~strategic initiatives.~~costs of $0.2 million. As a percentage of DDS revenues, DDS selling and administrative expenses were ~~29%~~30% and 21% for ~~each of~~ the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. The increase in selling and administrative expenses as a percentage of revenues is due to lower revenues combined with increased selling and administrative expenses.

Selling and administrative expenses for the Synodex segment were ~~$0.3 million and $0.4~~$0.5 million for each of the ~~six months~~nine-month periods ended ~~June~~September 30, 2019 and ~~2018, respectively.~~2018. Selling and administrative expenses for the Synodex segment as a percentage of Synodex segment revenues were ~~16% and 20%~~17% for each of the ~~six months~~nine-month periods ended ~~June~~September 30, 2019 and ~~2018, respectively.~~2018.

Selling and administrative expenses for the Agility segment were ~~$3.0~~$4.5 million and ~~$2.8~~$4.2 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. The $0.3 million increase is primarily due to compensation related expenses, additional provisions for doubtful accounts and higher marketing costs in support of sales initiatives. Selling and administrative expenses for the Agility segment as a percentage of Agility segment revenues were ~~58%~~57% and 55% for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively.

~~During the six months ended June 30, 2018, we recorded a full goodwill impairment of $675,000 for the DDS segment. There was no goodwill impairment recorded during the six months ended June 30, 2019.~~

We ~~periodically analyze whether any indicators of impairment have occurred. As part of these periodic analyses, we compare the Company’s estimated fair value, as determined based on~~performed our stock price, to our net book value. The continued decline in our stock price was viewed as a triggering event under ASU 2017-04 which required an assessment for possible goodwill impairment as of June 30, 2018. Under the provisions of ASU 2017-04, which we opted to early adopt, goodwill impairment is recognized based on Step 1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value.

~~The Company will perform its~~ annual goodwill assessment for the Agility segment as of September 30, 2019. In performing the assessment, we adhered to the provisions of ASU 2017-04, by using a single step approach that determines the carrying value of goodwill and comparing it against the excess of the reporting unit’s fair value. Based on our assessment, we reached the conclusion that there was no goodwill impairment because the fair value of the Agility segment’s goodwill exceeded its carrying value. Therefore, there was no goodwill impairment recorded during the nine months ended September 30, 2019.

The Company performed an assessment as of June 30, 2018 and determined that the fair value of the Agility segment exceeded its carrying value, but the fair value of the DDS segment was below its carrying value. As a result, the Company recorded a full goodwill impairment of $675,000 for the DDS segment reporting unit during the nine months ended September 30, 2018.

We recorded a provision for income taxes of ~~$0.1~~$0.5 million and ~~$1.0~~$1.5 million for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. The ~~$0.9~~$1.0 million decrease is primarily due to a higher tax provision by our foreign subsidiaries attributable to foreign exchange gains in the ~~six~~nine months ended ~~June~~September 30, 2018.

Taxesprimarily consist of a provision for foreign taxes recorded in accordance with the local tax regulations by our foreign subsidiaries. Effective income tax rates are disproportionate due to the losses incurred by our U.S. entity and our Canadian subsidiaries and a valuation allowance recorded on deferred taxes on these entities. Some of our foreign subsidiaries are subject to tax holidays or preferential tax rates, which reduce our overall effective tax rate when compared to the U.S. statutory tax rate.

The reconciliation of the U.S. statutory rate with the Company’s effective tax rate for the ~~six-month~~nine-month period ended ~~June~~September 30, 2019 is summarized in the table below:

Pursuant to the Tax Cuts and Jobs Act of 2017, during the fourth quarter of 2017, we recorded a one-time deemed repatriation of foreign earnings and profits (“E&P”) amounting to $25.8 million. No toll charge liability was recorded due to the available net operating loss carryforwards.

As of ~~June~~September 30, 2019, we performed a calculation of the GILTI provisions and concluded that it continues to have no impact on account of the net losses of our foreign subsidiaries.

Despite access to overseas earnings and the resulting toll charge, we intend to indefinitely reinvest foreign earnings in our foreign subsidiaries on account of the foreign jurisdiction withholding taxes that we would have to incur on the actual remittances. Unremitted earnings of foreign subsidiaries amounted to approximately ~~$19.4~~$18.5 million at ~~June~~September 30, 2019. If such earnings are repatriated in the future, or are no longer deemed to be indefinitely reinvested, we would have to accrue the applicable amount of foreign jurisdiction withholding taxes associated with such remittances.

We have a valuation allowance on all of our U.S. deferred tax assets on account of continuing losses incurred by our U.S. entity. In addition, we also have a valuation allowance on the deferred tax assets of our Canadian subsidiaries. Our Canadian subsidiaries also have research and development expenditures available to reduce taxable income in future years, which may be carried forward indefinitely. The potential benefits from these balances have not been recognized for financial statement purposes.

The Company is subject to Federal income tax, as well as income tax in various states and foreign jurisdictions. The Company has open periods for U.S. Federal and state taxes from 2016 through 2019. Various foreign subsidiaries currently have open tax years from 2003 through 2018. Refer to Item 1, Note 3 for more information about Tax Assessments.

We incurred a net loss of ~~$1.1~~$1.7 million for the ~~six~~nine months ended ~~June~~September 30, 2019, compared to ~~$0.7 million~~a net loss of $46,000 for the ~~six~~nine months ended ~~June~~September 30, 2018.

The net loss for the DDS segment was ~~breakeven~~$0.1 million for ~~each of~~ the ~~six~~nine months ended ~~June~~September 30, 2019, ~~and~~compared to a net income of $1.1 million for the nine months ended September 30, 2018, net of intersegment profits. Net loss for the ~~six~~nine months ended ~~June~~September 30, 2019 ~~include~~includes a one-time charge of $400,000 for an assessment of retroactive foreign social security contributions as a result of a ~~recent~~ decision by the Supreme Court of India that affects companies generally. The decrease in net income of $1.2 million is attributable to lower revenues of $1.6 million, higher operating expenses of $1.3 million, a decrease in tax provisions of $1.0 million, and a decrease in goodwill impairment of $0.7 million.

The ~~net income for the~~ Synodex segment was ~~$0.1 million~~breakeven for ~~each of~~ the ~~six~~nine months ended ~~June~~September 30, 2019, ~~and~~compared to a net income of $250,000 for the nine months ended September 30, 2018, net of intersegment profits. The decrease is due to revenue timing from one client.

The net loss for the Agility segment was ~~$1.2~~$1.6 million for the ~~six~~nine months ended ~~June~~September 30, 2019, compared to a net loss of ~~$0.8~~$1.4 million for the ~~six~~nine months ended ~~June~~September 30, 2018. The ~~$0.4~~$0.2 million increase in net loss is primarily a result of expenditures in support of increased revenues.

Adjusted EBITDA for the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$0.8~~$1.7 million, compared to Adjusted EBITDA of ~~$3.0~~$5.3 million for the ~~six~~nine months ended ~~June~~September 30, 2018.

Adjusted EBITDA for the DDS segment was ~~$1.1~~$2.0 million for the ~~six~~nine months ended ~~June~~September 30, 2019, compared to ~~$2.9~~$5.3 million for the ~~six~~nine months ended ~~June~~September 30, 2018, a decrease of ~~$1.8~~$3.3 million or 62%. The decrease is primarily attributable to a $1.1 million higher tax provision by our foreign subsidiaries due to foreign exchange gains and $0.7 million of goodwill impairment in the ~~six~~nine months ended ~~June~~September 30, 2018.

Adjusted EBITDA for the Synodex segment was $0.1 million for the ~~Synodex segment for each of the six~~nine months ended ~~June~~September 30, 2019, ~~and~~compared to $0.3 million for the nine months ended September 30, 2018. The decrease is due to revenue timing from one client.

Adjusted EBITDA for the Agility segment was a loss of $0.4 million for the ~~six~~nine months ended ~~June~~September 30, 2019, compared to a ~~break-even~~loss of $0.3 million for the ~~six~~nine months ended ~~June~~September 30, 2018. The increase is a result of a higher net loss incurred for the period.

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

	June 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Cash and cash equivalents	$	12,261	$	10,869	$	13,188	$	10,869
Working capital		10,784		12,981		10,678		12,981

At ~~June~~September 30, 2019, we had cash and cash equivalents of ~~$12.3~~$13.2 million, of which ~~$5.4~~$5.9 million was held by our foreign subsidiaries, and the ~~$6.9~~$7.3 million balance was held in the United States. Based on our calculations, as a result of the one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiary earnings and profits, we will not have any liability for taxes with respect to repatriated foreign earnings under Internal Revenue Service Regulation 956 until our cumulative exposure for unrepatriated foreign earnings reaches a threshold of $25.8 million. Although we do not currently intend to repatriate amounts held by foreign subsidiaries, we could if needed repatriate these amounts less up to 21% in withholding taxes of foreign jurisdictions.

We have used, and plan to use, our cash and cash equivalents for (i) investments in the Agility segment; (ii) the expansion of our other operations; (iii) technology innovations; (iv) product management and strategic marketing; (v) general corporate purposes, including working capital; and (vi) possible business acquisitions. As of ~~June~~September 30, 2019, we had working capital of approximately ~~$10.8~~$10.7 million, as compared to working capital of approximately $13.0 million as of December 31, 2018.

We did not have any material commitments for capital expenditures as of ~~June~~September 30, 2019. In October 2019, we re-purchased 390,625 shares of our common stock in a privately negotiated transaction at $1.28 per share, for a total cost of $500,000.

We believe that our existing cash and cash equivalents and internally generated funds will provide sufficient sources of liquidity to satisfy our financial needs for the next 12 months. However, we have no debt facilities or lines of credit, and reductions in our cash and cash equivalents from operating losses, capital expenditures, adverse legal decisions, acquisitions or otherwise would materially and adversely affect the Company.

Cash provided by our operating activities for the ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$3.1~~$4.9 million primarily on account of the ~~$2.4~~$2.5 million decrease in our accounts receivable, a $0.8 million decrease in prepaid and other current assets, a $0.7 million decrease in in income and other taxes and a ~~$0.4~~$0.1 million increase in other working capital. This favorable result was reduced by our net loss of ~~$1.1~~$1.7 million in the period. The reduction in accounts receivable is a result of improvements in our ~~collection effort~~collections during the period. Refer to the condensed consolidated statements of cash flows for further details.

Our days’ sales outstanding (DSO) were 6362 days for the ~~six~~nine months ended ~~June~~September 30, 2019 and 66 days for the year ended December 31, 2018. We calculate DSO for a reported period by first dividing the total revenues for the period by the average net accounts receivable for the period (which is the sum of the net accounts receivable at the beginning of the period and the net accounts receivable at the end of the period, divided by two), to yield an amount we refer to as the “accounts receivable turnover.” Then we divide the total number of days within the reported period by the accounts receivable turnover to yield DSO expressed in number of days.

For the ~~six~~nine months ended ~~June~~September 30, 2019, cash used in our investing activities was ~~$0.8~~$1.4 million. These expenditures principally consisted of purchases of technology equipment including servers, network infrastructure and workstations.

During the next 12 months, we anticipate that capital expenditures for ongoing technology, equipment and infrastructure upgrades will approximate $2.0 million to ~~$2.5~~$2.3 million. The source of funds for the anticipated capital expenditures will be cash generated from our operations.

For the ~~six~~nine months ended ~~June~~September 30, 2019, cash used in financing activities was for payments of long-term obligations of ~~$0.7 million.~~$0.9 million and repurchasing of 34,150 shares of our common stock at a cost of approximately $44,000 at a volume-weighted average price of $1.29 per share. The repurchase was made under the 2019 authorization approved by the Board of Directors.

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

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

Our Synodex subsidiary experiences seasonal fluctuations in revenues. Typically, revenue is lowest in the third quarter of the calendar year and highest in the fourth quarter of the calendar year. The seasonality is directly linked to the number of life insurance applications received by the insurance companies.

Our discussion and analysis of our results of operations, liquidity and capital resources is based on our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts and billing adjustments, long-lived assets, intangible assets, goodwill, valuation of deferred tax assets, value of securities underlying stock-based compensation, litigation accruals, pension benefits, purchase price allocation of Agility, valuation of derivative instruments and estimated accruals for various tax exposures. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates and could have a significant adverse effect on our consolidated results of operations and financial position. We believe the following critical accounting policies affect our more significant estimates and judgments in the preparation of our consolidated financial statements.

The significant accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the Company’s Annual Report on Form 10-K, unless otherwise noted.

In January 2016, the Financial Accounting Standards Board (FASB) issued ~~ASU~~Accounting Standards Update (ASU) No. 2016-01, ~~Financial~~“Financial Instruments – Overall ~~(“Subtopic 825-10”)~~(Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial ~~Liabilities (“ASU 2016-01”)~~Liabilities” (ASU 2016-01), which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The Company adopted this standard in the first quarter of 2019, and it did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, “Compensation-Retirement Benefits-Defined Benefits Plans-General: Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans” ~~(“ASU 2018-14”)~~(ASU 2018-14), that makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. The guidance eliminates requirements for certain disclosures that are no longer considered cost beneficial and adds new disclosure requirements that the FASB considers pertinent. ASU 2018-14 is effective for fiscal years ending after December 15, 2020 for public entities; early adoption is permitted. We are currently evaluating the early adoption of ~~ASU-2018-14~~ASU 2018-14 but do not expect it to have a material impact to the Company’s consolidated financial statements.

We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision, and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e), as of ~~June~~September 30, 2019. Based on this evaluation, our principal executive officer and our principal financial officer concluded that, as of ~~June~~September 30, 2019, our disclosure controls and procedures were effective.

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the three months ended ~~June~~September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Reference is made to the disclosure under “Legal Proceedings” in Part I, Item 3 in our Annual Report on Form 10-K for the year ended December 31, 2018.

There were no material changes from the risk factors previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018.

~~None.~~There were no sales of unregistered equity securities during the three months ended September 30, 2018.

We purchased 34,150 shares of our common stock, for a total cost of approximately $44,054, during the three months ended September 30, 2019, as shown in the table below:

In July 2019, our Board of Directors authorized the repurchase of up to $2.0 million of its issued and outstanding common stock in open market or privately negotiated transactions. There is no expiration date associated with the program.

** In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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

	For the quarterly period ended ~~June~~September 30, 2019

OR

o¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Delaware		13-3475943
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

55 Challenger Road		07660
Ridgefield Park, New Jersey		(Zip Code)
(Address of principal executive offices)

Large accelerated filer¨	Accelerated filer¨	Non-accelerated filerx	Smaller reporting companyx
Emerging growth company¨

		Page No.
	Part I – Financial Information

Item 1.	Financial Statements
	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2019 and December 31, 2018	1
	Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for the three months ended ~~June~~September 30, 2019 and 2018	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018	3
	Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2826
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4847
Item 4.	Controls and Procedures	4947

	Part II – Other Information

Item 1.	Legal Proceedings	4948
Item 1A.	Risk Factors	4948
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4948
Item 3.	Defaults Upon Senior Securities	4948
Item 4.	Mine Safety Disclosures	4948
Item 5.	Other Information	4948

Item 6.	Exhibits	5049

Signatures

	~~June~~September 30, 2019

Federal income tax ~~expense~~benefit at statutory rate		21.0	%
Effect of:
Tax effects of FX gains and losses		~~53.4~~39.3
Change in valuation allowance		~~10.9~~15.1
Foreign rate differential		1.8
Return to provision true up		0.3
State income tax net of federal benefit		(1.8	)
Withholding tax		(4.5	)
Increase in unrecognized tax benefits ~~(FIN48)~~(FIN 48)		(~~27.7~~30.8	)
Tax effects of foreign operations		(~~61.3~~84.8	)
~~Return to provision true up~~Others		~~0.4~~2.4
~~Foreign~~Effective tax rate ~~differential~~(expense)		(~~0.1~~	)
~~Other~~		~~(3.5~~	)
~~Effective tax rate~~		~~(6.9~~42.0	)%

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	INOD	NASDAQ


	b.	a renewal option is exercised, or extension granted, unless the term of the renewal or extension was initially included in the lease term;


	c.	there is a change in the determination of whether fulfillment is dependent on a specified asset; or

	Unrecognized tax benefits
Balance - January 1, 2019	$	2,424
Increase in tax position		183
Interest accrual		88
Foreign currency remeasurement		34
Balance - June 30, 2019	$	2,729

	Unrecognized tax benefits
Balance - January 1, 2019	$	2,424
Increase in tax position		229
Interest accrual		135
Foreign currency remeasurement		(34	)
Balance - September 30, 2019	$	2,754

	Number of Options			Weighted - Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2019		4,982,040		$	2.14
Granted		220,000			1.38
Exercised		-
Forfeited/Expired		(174,237	)		2.04
Outstanding at June 30, 2019		5,027,803		$	2.11		6.27	$	-

Exercisable at June 30, 2019		3,564,211		$	2.49		5.13	$	-

Vested and Expected to Vest at June 30, 2019		5,027,803		$	2.11		6.27	$	-

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018

Direct operating costs	$	20	$	55	$	38	$	109
Selling and administrative expenses		125		76		235		162
Total stock-based compensation	$	145	$	131	$	273	$	271

	For the three months ended		For the six months ended
	June 30, 2019		June 30, 2019

Rent expense for long-term operating leases	$	453	$	907
Rent expense for short-term leases		85		172
Total rent expense	$	538	$	1,079

	For the three months ended		For the nine months ended
	September 30, 2019		September 30, 2019
Rent expense for long-term operating leases	$	453	$	1,360
Rent expense for short-term leases		66		237
Total rent expense	$	519	$	1,597

~~Weighted average~~Weighted-average lease term remaining		73	70 months
~~Weighted average~~Weighted-average discount rate			8.98	%

Period		Total Number of Shares (or Units) Purchased				Average Price Paid per Share (or Unit)				Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs				Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs Available for Repurchase
August 1-31, 2019			34,150			$	1.29				34,150			$	1,955,947


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


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


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


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


101		The following materials from Innodata Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2019, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2019 (unaudited) and December 31, 2018; (ii) Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 (unaudited); (iii) Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 (unaudited); (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 and (v) Notes to Condensed Consolidated Financial Statements (unaudited).

Date:	~~Date:~~	~~August 8,~~November 7, 2019	/s/ Jack Abuhoff
			Jack Abuhoff
			Chairman of the Board,
			Chief Executive Officer and President

Date:
	~~Date:~~	~~August 8,~~November 7, 2019	/s/ Robert O’Connor
			Chief Financial Officer and Principal Accounting Officer