Financial Analysis

7. Commitments and contingencies Litigation - In 2008, a judgment was rendered in the Philippines against a Philippine subsidiary of the Company that is no longer active and purportedly also against Innodata Inc., in favor of certain former employees of the Philippine subsidiary.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 potential payment amount aggregates to approximately $5.6 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 legal interest at 6% per annum. The potential 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 themselves 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 (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 …

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16. Line of Credit On April 4, 2023, the Company entered into a Credit Agreement (the Credit Agreement) with Wells Fargo Bank, National Association, as lender, and Innodata Inc., Innodata Synodex, LLC, Innodata docGenix, LLC and Agility PR Solutions LLC as co-borrowers. On July 21, 2023, Innodata Services, LLC signed a Joinder Agreement to join the Credit Agreement as a co-borrower. On August 5, 2024, the Company entered into a second amendment to the Credit Agreement (together with the Credit Agreement, the Amended Credit Agreement). The Amended Credit Agreement provides for a secured revolving line of credit (the Revolving Credit Facility) up to an amount equal to the lesser of the borrowing base and $30.0 million (the Maximum Credit) and provides that a Borrower may request an increase to the Revolving Credit Facilitys Maximum Credit of up to, but not to exceed $50.0 million, subject to the approval of the Lender. The Revolving Credit Facilitys borrowing base is calculated on the basis of (i) 85% of eligible accounts (other than eligible foreign accounts and unbilled accounts), plus (ii) the lesser of (a) 80% of eligible accounts that are unbilled accounts and (b) 30% of all eligible accounts, plus (iii) the lesser of (a) 85% of eligible foreign accounts, (b) 20% of all eligible accounts and (c) $4.0 million, minus (iv) certain other reserves and adjustments. As of December 31, 2025, such borrowing base calculation equaled approximately $30.0 million. The Credit Agreement …

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11. Stock Based Compensation The Innodata Inc. 2013 Stock Plan (as amended, the 2013 Plan) expired in accordance with its terms on June 3, 2023. Pursuant to the terms of the 2013 Plan, no further awards may be granted under the 2013 Plan following its expiration. As of December 31, 2025, there were 2,639,893 shares of our common stock underlying outstanding options or rights under the 2013 Plan. Outstanding awards made under the 2013 Plan prior to the 2013 Plans expiration will remain in effect until such awards have been satisfied or terminated in accordance with the terms of the 2013 Plan and such awards. On June 9, 2023, stockholders of the Company approved amendments to the Innodata Inc. 2021 Equity Compensation Plan (as amended, the 2021 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 2021 Plan is 4,000,000 (the Share Reserve). Shares subject to an option or stock appreciation right granted under the 2021 Plan count against the Share Reserve as one share for every share granted, and shares subject to any other type of award granted under the 2021 Plan count against the Share Reserve as two shares for every share granted for awards granted prior to April 11, 2023, and one and a half shares for every share granted for awards granted on or after April 11, 2023. Any shares withheld, tendered or exchanged by a par …

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4. Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the year ended December 31, 2025 were as follows (in thousands): Amount Balance - January 1, 2025 $ 1,998 Foreign currency translation adjustment 81 Balance - December 31, 2025 $ 2,079 As of September 30, 2025, the Company performed its annual goodwill impairment analysis for the Agility segment. It involved a quantitative goodwill impairment test and estimated the fair value based on a combination of the income approach (estimates of future discounted cash flows) and the market approach (market multiples for similar companies) using unobservable inputs (Level 3). The income approach uses a discounted cash flow (DCF) method that utilizes the present value of cash flows to estimate the segments fair value. The future cash flows of the segment were projected based on the Companys estimates of future revenues, operating income, and other factors such as working capital and capital expenditures. As part of the DCF analysis, the Company projected revenue and operating profits and assumed long-term revenue growth rates in the terminal year. The market approach utilizes multiples of revenues and earnings before interest expense, taxes, depreciation, and amortization (EBITDA) to estimate the segments fair value. The market multiples used for the segment were based on a group of comparable companies market multiples applied to the Companys revenue. The Company concluded that there is no impairment of …

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5. Income Taxes United States and foreign components of income before provision for income taxes for each of the years ended December 31, were as follows (in thousands): Year Ended December 31 2025 2024 United States $ 33,506 $ 21,692 Foreign 7,919 2,793 Totals $ 41,425 $ 24,485 The significant components of the provision for income taxes for the years ended December 31, 2025 and 2024 were as follows (in thousands): Year Ended December 31 2025 2024 Current income tax provision: Foreign $ 2,235 $ 525 Federal 2,932 126 State and local (24) 768 5,143 1,419 Deferred income tax provision: Foreign (229) (294) Federal 3,459 (4,059) State and local 871 (1,256) 4,101 (5,609) Provision for income taxes $ 9,244 $ (4,190) The Company elected to prospectively adopt the guidance in ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The following table reconciles the U.S. federal statutory income tax rate of 21% to the Companys effective income tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09 (In thousands, except percentages): Year Ended December 31 2025 Amount Percentage Income before provision for income taxes $ 41,425 - U.S. Federal Statutory Tax Rate at 21% 8,699 21.0 % State and Local Income Taxes, Net of Federal Income Tax Effect Other State Tax Expense * 1,200 2.9 State True up (499) (1.2) Foreign Tax Effects India 1,048 2.5 Other (876) (2.1) Effects of Changes in Tax Laws or Rates Enacted in the Current …

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8. Operating Leases The Company has various 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 three to eleven years and, in most cases, provide for rental escalations ranging from 1.75% to 15%. Most of these agreements are renewable at the mutual consent of the parties to the contract. The Company recognizes an operating lease liability and right-of-use asset in compliance with current lease accounting standard ASC 842. The amount of right-of-use asset is equal to the present value of the remaining lease payments discounted using the incremental borrowing rate of each respective country. Modifications, if any are recalculated and corresponding adjustments are made to the carrying values of both the lease liability and right-of-use assets. A right-of-use asset is measured as 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 years presented (in thousands): Year Ended December 31 2025 2024 Rent expense for long-term operating leases $ 1,345 $ 1,257 Rent expense for short-term leases 208 178 Total rent expense $ 1,553 $ 1,435 The …

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Recently Adopted Accounting Pronouncements - On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASUs effective date is for fiscal years beginning after December 15, 2024 with early adoption permitted. The adoption of the ASU No. 2023-09 will enhance quantitative and qualitative disclosures related to rate reconciliation of significant components and income tax paid. The Company has adopted this standard and complied with the required disclosures. See Note 5, Income Taxes. Recently Issued Accounting Pronouncements Not Yet Adopted - In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), fourth amendment via ASU No. 2025-01: Disaggregation of Income Statement Expenses. ASU No. 2024-03 does not change or remove existing expense disclosure requirements but requires disaggregated disclosures about certain expense categories and captions, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. ASU No. 2024-03 will be effective for the Company beginning in fiscal year 2027, and for interim financial reporting beginning in the first quarter of fiscal year 2028. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on the Companys disclosures within the consolidated financial statements. In July 2025, th …

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9. Pension Benefits U.S. Defined Contribution Pension Plan - The Company has a defined contribution plan qualified under Section 401(k) of the Internal Revenue Code, pursuant to which substantially all of its U.S. employees are eligible to participate after completing six months of service. Participants may elect to contribute a portion of their compensation to the plan. Under the plan, the Company has the discretion to match a portion of participants contributions. For the years ended December 31, 2025 and 2024, the Company did not make any matching contributions. Most of the non-U.S. subsidiaries provide for government-mandated defined pension benefits. For certain of these subsidiaries, vested eligible employees are provided a lump sum payment upon retiring from the Company at a defined age. The lump sum amount is based on the salary and tenure as of retirement date. Other non-U.S. subsidiaries provide for a lump sum payment to vested employees on retirement, death, incapacitation or termination of employment, based upon the salary and tenure as of the date employment ceases. The liability for such defined benefit obligations is determined and provided on the basis of actuarial valuations. As of December 31, 2025, these plans were unfunded. Pension expense for our foreign subsidiaries totaled approximately $1.3 million and $1.2 million for the years ended December 31, 2025 and 2024, respectively. The following tables set out the status of the non-U.S. pension benefits and …

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13. Segment reporting and concentrations The Companys operations are classified in three reporting segments: Digital Data Solutions (DDS), Synodex and Agility. The DDS segment provides AI training and post-training data, model evaluation, alignment, and safety, AI model deployment and integration, and AI-enabled platforms. The Synodex segment provides an industry platform that transforms medical records into structured for insurance and healthcare workflows. The Agility segment provides an industry platform that provides media intelligence and public relations workflow software enhanced with AI-driven monitoring, analytics, and content capabilities. We continue to invest in these platforms to incorporate advances in AI while emphasizing reliability, transparency, and user trust. A significant portion of the Companys revenues is generated from its locations in the Philippines, India, Sri Lanka, Canada, Germany, Israel, United States and the United Kingdom. The Companys chief operating decision maker (CODM) is the senior executive committee that includes the chief executive officer, chief operating officer, and the chief financial officer (interim). The U.S. GAAP measures used by the Companys CODM to evaluate segment performance and allocate resourcessuch as employees, property, and financial or capital resources during the annual budgeting and forecasting process, are Revenues, Gross Profit and Income before provision for income taxes. Performance results are monitored, review …

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10. Capital Stock Common Stock - The Company is authorized to issue 75,000,000 shares of common stock. Each share of common stock has one vote. Subject to preferences that may be applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors. No common stock dividends have been declared to date. Preferred Stock - The Company is authorized to issue 4,998,000 shares of preferred stock. The Board of Directors is authorized to fix the terms, rights, preferences and limitations of the preferred stock and to issue the preferred stock in series that differ as to their relative terms, rights, preferences and limitations. Common Stock Reserved - As of December 31, 2025, the Company had available for future issuance 746,241 shares of common stock pursuant to the Companys stock option plans. Treasury Stock - In July 2019, the Companys Board of Directors authorized the repurchase of up to $2.0 million of its common stock in open market or private transactions. There is no expiration date associated with the program. There were no share repurchases in the years ended December 31, 2025 and 2024. As of December 31, 2025, the Company repurchased 1.5 million shares of its common stock under the July 2019 authorization with a value of $1.8 million. …

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