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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-K

(Mark One)
|X|    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
       OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

COMMISSION FILE NUMBER  0-22196

                            INNODATA ISOGEN, INC.
            (Exact name of registrant as specified in its charter)


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

      THREE UNIVERSITY PLAZA
      HACKENSACK, NEW JERSEY                           07601
(Address of principal executive offices)             (Zip Code)

         (201) 488-1200
  (Registrant's telephone number)

Securities registered under Section 12(b) of the Exchange Act:    NONE

Securities registered under Section 12(g) of the Exchange Act:    COMMON STOCK,
                                                                  $.01 PAR VALUE

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 past  twelve  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. Yes |X| No |_|

Indicate by check mark if disclosure  of  delinquent  filers in response to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2).
Yes |_|   No |X|

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common  equity,  as of
the last business day of the registrant's most recently  completed second fiscal
quarter. $25,500,000

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

  21,951,000 SHARES OF COMMON STOCK, $.01 PAR VALUE, AS OF FEBRUARY 29, 2004.

                      DOCUMENTS INCORPORATED BY REFERENCE
                            [SEE INDEX TO EXHIBITS]

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<PAGE>

                                     PART I
                                     ------


ITEM 1.  DESCRIPTION OF BUSINESS.


GENERAL DESCRIPTION

      Innodata Isogen,  Inc., formerly known as Innodata  Corporation,  improves
the way  companies  create,  manage and  distribute  information  - helping them
reduce   content-related   costs,  achieve  better  outcomes  and  compete  more
effectively in demanding global markets.

      Our  solutions  encompass  both the  manufacture  of content (for which we
provide services such as digitization,  imaging, data conversion, XML and markup
services,  metadata creation,  advanced classification  services,  editorial and
knowledge  services)  as well as the  design,  implementation,  integration  and
deployment  of the systems used to manage  content (for which we provide  custom
application development, consulting and training.)

      We  serve  leading  organizations  in  four  content-rich   segments:  (1)
publishing,  media and  information  services,  (2) culture and  education,  (3)
government and (4) global  enterprise - including  Global 2000 companies  across
more than a dozen sectors, such as aerospace,  defense,  engineering,  financial
services,   e-commerce,   healthcare,   information  technology,   intelligence,
manufacturing, pharmaceuticals, retail and telecommunications.

      We have more than a hundred active  clients,  including  Amazon.com,  Reed
Elsevier,  Thomson,  Wolters Kluwer, EBSCO, ProQuest,  Simon & Schuster,  McGraw
Hill,  Derwent  Information,  John  Wiley  &  Sons,  Lockheed  Martin,  Hamilton
Sunstrand, Primerica, CAB International and the Smithsonian Institution.

      We typically service these clients in multi-year  relationships.  In 2003,
more than 90 percent of our  revenue  was  derived  from  clients  that used our
services  for more than one year,  and more than 80 percent of our  revenue  was
derived from clients that used our services for more than two years.

      We were  incorporated  in Delaware in June 1988 and are  headquartered  in
Hackensack,  New  Jersey,  just  outside New York City.  We have two  additional
solutions  centers in North America,  seven  production  facilities in Asia (the
Philippines, India and Sri Lanka), and a technology and tools development center
in India.


THE CONTENT SUPPLY CHAIN

      Our wide  range  of  content-related  offerings  is  organized  in a clear
conceptual  framework - the content  supply chain. A content supply chain is the
series of  integrated  activities  necessary  to create,  manage and  distribute
information products.

                                      I-1
<PAGE>

      Another way to describe the content  supply chain is the business  process
that transforms ideas into actual information products. This business process is
the strategic focus of our company at present.

      Innodata Isogen  optimizes  content supply chains.  Our clients can choose
from an array of point  solutions or deploy an  integrated  set of services - or
they can simply  outsource  their entire  content supply chain to us to maximize
the value of their operational dollars.

      Each client we serve makes a distinct set of demands on content.  Each has
different objectives.  Each, therefore,  has somewhat distinct challenges in its
content supply chain.

      For  instance,   many  of  our  publishing   clients  are  under  enormous
competitive  pressure to cut costs,  while at the same time,  manufacturing  and
marketing information products with enhanced features, functionality and quality
in rapid response to market conditions.

      In the wider enterprise arena,  requirements for greater and more accurate
technical,  product and regulatory  documentation are increasing.  The result is
that the  burden  of  content  creation,  management  and  distribution  is also
growing. These spiraling costs multiply further as global enterprises broach new
nations,  markets  and  cultures,  and these costs come right out of a company's
bottom line.

      At the same time, major cultural and educational institutions,  as well as
a number of important  government  agencies,  are seeking new and better ways of
leveraging  vast  stores of  aggregated  content  to  fulfill  their  respective
missions - even as greater  demands  are being  placed on their  limited  human,
technical and financial resources.

      Whether a client uses content to support  products and services (as in the
case of equipment  manufacturers),  or sells  content as the basis of a business
model (as in the case of publishers),  we can help them realize significant cost
savings  and greater  productivity,  maintain or improve  content  quality,  and
achieve better overall outcomes.


BASIC STRUCTURE OF OPERATIONS

      We have  two main  operating  units:  content  services  and  professional
services. (We formerly referred to the professional services unit as systems and
training services).

      In addition to providing  sophisticated  content  creation  and  editorial
services (such as indexing & abstracting),  the content  services unit collects,
processes,  digitizes and encodes large volumes of content. The content services
unit also transforms content to Extensible Markup Language (XML), creating large
XML-compliant  content  repositories  for  single-source  publishing  and  other
activities.

      Our  largest  XML  production  facility,  the XML  Content  Factory in the
Philippines,  is the largest  known  purpose-built  for the  manufacture  of XML
content.

      The  professional  services  unit  designs and builds  powerful  XML-based
content management and publishing systems,  and provides data modeling,  systems
integration, custom application development and consulting services.

                                      I-2
<PAGE>

      Professional  services also instructs both  front-line  technologists  and
their executive managers on structured  information  standards (such as XML) and
their larger implications for business systems.


CONTENT SERVICES

      At  present,   the  conversion  of  hardcopy  and  paper  collections  and
legacy-formatted  electronic data to a variety of output formats - including XML
other related markup standards - is an important part of our overall offerings.

      For this purpose, we use high-speed  scanning; a variety of commercial and
proprietary OCR/ICR  (optical/intelligent  character recognition)  applications;
structured workflow processes; and proprietary applications and tools (including
custom filters and parsers)  designed to create accurate,  consistent markup and
data. We use proprietary  technology for data  enhancement  and validation,  and
create automated  procedures - utilizing industry  standards-compliant  software
tools to ensure validated SGML and XML markup.

      Another important  offering is knowledge  services.  We employ hundreds of
highly  educated  subject  matter  experts  in  fields  such  as  law,  finance,
education,  science, medicine, and engineering. They provide content development
and enhancement,  taxonomy and controlled vocabulary development,  hyperlinking,
tagging,  indexing and abstracting and general editorial services.  We typically
price  these  services  on a  resource-utilization  basis or  quantity-delivered
basis.

      An  increasing  number  of  publishing   organizations  are  migrating  to
XML-based,   single-source   publishing  systems,   creating  a  single  content
repository  from which to create  multiple  information  products (as opposed to
having to build a separate data store for each information product) to save time
and money.

      What's more,  publishers  who maintain  their content in XML can syndicate
content and spontaneously  synthesize content for interactive Web services.  XML
content  transformation  is the  prerequisite  for content  owners to accomplish
these outcomes.

      To transform  content to XML, tags are inserted within the content to give
the content  context and meaning that  computers  can process.  Our  proprietary
technology  includes  production-grade,  auto-tagging  applications that utilize
pattern  recognition  algorithms based on comprehensive  rule sets and heuristic
online  databases.  This  technology  enables mass creation or conversion of XML
content from complex, unstructured information.

      We also translate desktop publishing documents (QuarkXPress, PDF, MS Word,
etc.) to XML variants,  from which we generate a variety of file formats  (HTML,
OeB, PDF,  proprietary  eBook  formats,  etc.) to support  multiple  channels of
distribution.  We typically price these services based on units of data produced
or transformed.

      Underlying all content services activities is a sophisticated  information
technology and communications infrastructure,  which enables multiple production
processes to be  performed  simultaneously  across any number of our  production
facilities.

                                      I-3
<PAGE>

      We use server-based information technology to operate through a structured
workflow using advanced tools. We drive efficiency and quality by using advanced
manufacturing and management  techniques  including total quality management and
statistical process control.


PROFESSIONAL SERVICES (FORMERLY SYSTEMS AND TRAINING SERVICES)

      Clients who use our professional  services  typically require  publishing,
performance  support or process  automation systems that enable multiple authors
to  collaborate  on content and enable  multiple  products to be generated  from
single-source XML repositories.

      We  design  and  build  these  powerful  XML-based  systems,  and  provide
full-service consulting and systems integration services to configure,  improve,
and validate these and other  software  systems and  technologies.  Services are
provided in accordance with ISO, IEC, ANSI, IETF, and W3C standards.

      We  deliver  sophisticated  classification  services,  using  topic  maps,
taxonomies and ontologies,  and provide clients training in the associated tools
and  methodologies.   We  also  provide  clients  with  professional   training,
courseware  and  continuing  education in XML and other  structured  information
standards.

      In addition,  our  professional  services  division fields skilled process
analysts,  workflow  architects and project managers,  which enables us to offer
our  clients  the  opportunity  to not only  outsource  operations,  but also to
transform  and enhance  them.  This  enables our clients to achieve even greater
value from  outsourcing,  and is often  referred to as  business  transformation
outsourcing.

      We  typically  price  professional  services on either an hourly basis for
actual time and expense incurred, or on a fixed-fee,  turnkey basis. Revenue for
services   billed  under  fixed-fee   arrangements   is  recognized   using  the
percentage-of-completion  method  under  contract  accounting  as  services  are
performed or output milestones are reached. The percentage completed is measured
either  by the  percentage  of  labor  hours  incurred  to date in  relation  to
estimated total labor hours or in consideration of achievement of certain output
milestones,  depending  on the  specific  nature of each  contract.  Revenue for
contracts  billed on a time and  materials  basis is  recognized as services are
performed.

BUSINESS STRATEGY

      We  aim  to be a  principal  strategic  partner  to  information-intensive
organizations worldwide,  providing comprehensive content supply chain solutions
that  enable  them to compete  more  aggressively  and better  respond to market
challenges.

      To accomplish  this, we intend to capitalize on the increased  willingness
of  organizations  in our markets to (a) use  business  process  outsourcing  to
reduce expenses  associated with content creation,  management and distribution,
(b)  leverage  the  concentrated  expertise,  talent and capital  investment  of
business process specialists, and (c) focus internal resources on other critical
competitive  activities,  such as  business  strategy,  product  definition  and
development,  sales  and  marketing  and  customer  relationship  management  to
generate more unique value for their customers.

                                      I-4
<PAGE>

      We aim to  respond  to  our  clients'  increased  interest  in  publishing
information  more  efficiently  and  economically  from a single  repository  to
multiple channels (i.e., Web, print, CD, print-on-demand,  PDA, mobile phone and
other  formats and devices)  and to re-use  existing  content  assets to quickly
create new products.

      We understand that there is a vast quantity of textual,  audio,  and video
content that will be made available via digital processes and  technologies.  We
believe  many  publishers  will  choose XML and its  related  standards  to help
accomplish  this. We intend to be the first choice for  organizations  requiring
large-scale,  high  fidelity  XML  transformations,   as  well  as  XML  systems
development and training.


TARGET MARKETS

      We will target our business  development efforts to  information-intensive
organizations,  such as  leading  commercial  publishers,  media  companies  and
information  services  providers,  Global 2000  enterprises,  major cultural and
educational institutions and government agencies.

      Specifically, we plan to drive opportunities with these organizations by:

    o Expanding   existing   relationships   and   developing   new,   long-term
      relationships  with  organizations  that have  substantial  and  recurring
      requirements for content supply chain services; and

    o Leveraging our business  process and technical  expertise,  worldwide data
      manufacturing   capabilities,   high-value  talent  pool  and  information
      technology infrastructure to achieve substantial cost savings for clients,
      while  enabling  them to deliver  high-quality  information  products more
      rapidly.

      Furthermore,  we  aim to  dominate  the  market  for  XML  transformation,
      systems, and training by:

    o Deploying  existing and emerging  technologies to develop  large-scale XML
      content repositories more efficiently;

    o Maintaining  our  position as a  preferred  provider  of  large-scale  XML
      content  services,  while  extending  our  leadership  in XML  systems and
      consulting;

    o Entering  into  additional   engagements  with  high-profile  clients  for
      large-scale XML content services; and

    o Continuing  to take an active role in  developing  structured  information
      standards.

      In addition, we intend to:

    o Extend our offerings consistent with our position as a leading provider of
      content supply chain solutions;

                                      I-5
<PAGE>

    o Design  customized,  value-added  offerings  to meet the  unique  needs of
      clients in targeted vertical markets;

    o Embrace new technology initiatives that are strategic for our clients; and

    o Maintain a significant base of business to continue to generate  economies
      of scale, which enable us to achieve competitive costs.


CLOSE RELATIONSHIPS WITH CLIENTS

      We view our long-term  relationship  with clients as a critical element in
our historical and future success.

      To  continue to meet the needs of existing  and  prospective  clients in a
timely  fashion,  we work  directly with our clients to identify and develop new
and improved offerings.

      To promote  continued close  relationships  with clients,  we provide 24/7
project support  through our Asia-based  customer  service center,  and maintain
sales, solutions and strategic support in North America and Europe, in proximity
to the business operations of most of our current clients.

      We  generally  perform  our work for our  clients  under  project-specific
contracts,  requirements-based agreements, or long-term arrangements.  Contracts
are typically subject to numerous termination provisions.

      One client  accounted  for 33% and 17% of our revenues for the years ended
December 31, 2003 and 2002  respectively,  and a second client accounted for 30%
of our revenues for the year ended  December 31, 2002.  One other client,  which
substantially curtailed operations, accounted for 30% in the year ended December
31, 2001.  No other  client  accounted  for 10% or more of revenues  during this
period.  Further,  in the years ended December 31, 2003,  2002 and 2001,  export
revenues,  substantially  all of  which  were  derived  from  European  clients,
accounted for 47%, 23%, and 13%, respectively, of our revenues.

      We are from time to time required by clients to enter into  non-disclosure
agreements  pursuant  to which we agree not to  disclose  their  identity or the
nature of our relationship with them.

      Reasons for requiring  such  arrangements  vary,  but typically  involve a
preference on the part of the client not to publicize its  outsourcing  strategy
or to telegraph to competitors a new product development initiative.


COMPREHENSIVE SERVICE OFFERINGS

      The breadth and depth of our service  offering  distinguishes  us from our
competitors. Many competitors offer only a single service, such as data capture,
but do not offer the full  complement  of content  supply chain  solutions  that
large, content-rich organizations increasingly require.

                                      I-6
<PAGE>

      We provide a wide range of content-related  services to enable its clients
to obtain the full benefit from their content assets, while reducing their costs
of production, ownership and distribution.


INNOVATIVE TECHNOLOGY-BASED SOLUTIONS

      We  have  invested   substantially  in  our  information   technology  and
communications  systems  to  ensure  clients a  reliable  and  highly  redundant
infrastructure, and to enable us to employ the latest tools to drive significant
process efficiencies.

INFORMATION AS TO OPERATING SEGMENTS

      The applicable  information on our operating  segments for the three years
ended  December  31, 2003 and as of December  31, 2003 and 2002,  is included in
Note 8 to the Company's financial statements.

SALES AND MARKETING

      We primarily market our solutions directly to end-user organizations, with
some business  development activity channeled through a limited number of highly
qualified partner organizations.

      Our  sales  organization  is  responsible  for  qualifying  and  otherwise
pursuing  prospects,  securing  direct  personal  access to  decision-makers  at
existing and  prospective  clients,  and  obtaining  orders for our services and
solutions.  Full-time sales professionals work directly with clients to identify
and define the solutions that best fit their needs.

      Sales activities  include the design and generation of  presentations  and
proposals,  account and client relationship  management and otherwise organizing
account activities.

      Consulting  personnel from our project analysis group and our professional
services group closely support the direct sales effort. These individuals assist
the sales force in  understanding  the technical  needs of clients and providing
responses  to  these  needs,  including  demonstrations,   prototypes,   pricing
quotations,  and time estimates. In addition, account managers from our customer
service group support our direct sales effort by providing ongoing project-level
post-sale support to customers.

      Our marketing  organization  is  responsible  for raising  visibility  and
awareness of the company and our offerings, defining and communicating our value
proposition, generating leads and furnishing effective sales support tools.

      Marketing,  in conjunction with sales, is the primary  architect of market
definition,  strategy and messaging and is responsible,  when  appropriate,  for
securing market intelligence and research,  and providing accompanying analysis,
including competitive analysis.

      Primary marketing outreach  activities include event marketing  (including
exhibiting  at trade  shows,  conferences  and  seminars),  direct and  database
marketing, public and media relations (including speaking engagements and active
participation  in industry and technical  standards  bodies),  and Web marketing
(including  search  engine   optimization,   search  engine  marketing  and  the

                                      I-7
<PAGE>

maintenance  and continued  development  of external Web sites).  Marketing also
supports our partner activities.

COMPETITION

      The markets for our services are highly competitive.  The most significant
competitive factors are quality and reliability of services,  price of services,
scope and scale, quality of supporting services, and technical competence.

      We  are  not  aware  of any  single  competitor  that  provides  the  same
comprehensive range of content supply chain solutions that we do, and we believe
that  we have  created  significant  differentiation  relative  to our  specific
business process expertise, the high quality and reliability of our services, as
well as our scope of services and scale of services.

      However,  our  industry  is  highly  fragmented  and we  face  significant
competition in each of our service areas.

      In terms of  content  services,  we believe  we  compete  successfully  by
offering high quality services and favorable pricing by leveraging our technical
skills, process knowledge and economies of scale.

      Competition is highly  fragmented  here.  However,  we have  substantially
greater resources than most of our competitors,  resulting in greater breadth of
services,  as well as scope and scale. Thus, we have a greater ability to obtain
client  contracts where the undertaking  required is technically  sophisticated,
sizable in scope or scale, or requires significant investment.

      With respect to XML data transformation, companies compete on the basis of
quality, accuracy, price, and consistency,  as well as on the ability to deliver
large-scale,   tag-intensive   requirements  quickly.  Our  ability  to  compete
favorably is,  therefore,  dependent upon its ability to react  appropriately to
short and long-term  trends,  harness new  technology,  and deliver  large-scale
requirements quickly.

      SPI  Technologies,  Apex  CoVantage,  Techbooks  and Jouve,  among others,
compete for content services business.

      What's more,  as a provider of  outsourced  services,  we compete at times
with in-house  personnel at current or prospective  clients,  who may attempt to
duplicate our services using in-house staffers.

      In terms of our  professional  services,  a number of large and  mid-sized
technology and business consulting practices offer  content-related  integration
and consulting services as part of their broad and generalized offerings.

      Major companies such as IBM, EDS, Bearing Point, Accenture, Booz Allen and
others  compete for content  supply  chain  dollars,  though few, if any,  focus
exclusively  on this niche.  There are fewer firms,  most with lesser  capacity,
with a narrower  strategic focus on the content supply chain - Thomas Technology
Solutions and RivCom are among them.  In addition,  we must  frequently  compete
with our clients' own internal information technologies capability.

                                      I-8
<PAGE>

RESEARCH AND DEVELOPMENT

      We maintain a research  and  development  capability  to  evaluate,  on an
ongoing basis, advances in computer software, hardware and peripherals, computer
networking,  telecommunication systems and Internet-related technologies as they
relate  to  our  business  and  to  develop  and  install  enhancements  to  our
proprietary systems.

      During the last three fiscal  years,  we invested in the  development  and
integration  of  proprietary  applications  for use in our  various  facilities.
Applications  development was predominantly  associated with improving accuracy,
consistency,  and speed of complex XML tagging for large-scale requirements.  We
intend to make further  investments in applications  development and integration
to respond to market opportunities.

EMPLOYEES

      As of February 29, 2004,  we employed an  aggregate  of  approximately  80
persons in the United States and Europe, and approximately 7,500 persons in five
production facilities in the Philippines,  one production facility in Sri Lanka,
one production facility in India, and a software development center in India.

      No employees  are  currently  represented  by a labor union and we believe
that our relations with our employees are satisfactory.

      To retain  our  qualified  personnel,  we offer  highly  competitive  base
salaries that are supplemented by results-based incentives.

      Senior   managers  are  eligible  for  bonuses  and  stock  options.   Our
compensation  structure is coupled with an extensive benefits package,  tailored
by region,  that can  include  comprehensive  health  insurance  coverage,  paid
vacation  and  holiday  leaves,  rice,  clothing  and  optical  allowances,  and
continuing education programs

      Moreover, at many of our overseas locations, we provide overtime premiums,
holiday pay,  bereavement and birthday leave, as well as maternity and paternity
benefits.

      At all of our  locations,  we enforce  vigorous  policies  to protect  our
employees  against  sexual  harassment  and  discrimination  based on age, race,
gender or sexual orientation.  The average age of our employees is approximately
25 to 30 years.  Most of our employees  have  graduated from at least a two-year
college program.  Many of our employees hold advanced degrees in law,  business,
technology, medicine, and social sciences.

RISK FACTORS

      The nature of our business, as well as our strategy, the size and location
of our  facilities,  and other factors  entail a certain  amount of risk.  These
risks may include, but are not limited to, the following:

                                      I-9
<PAGE>

      RISK OF CONTINUATION OR WORSENING OF PRESENT MARKET CONDITIONS

      The current economic uncertainty has curtailed business initiatives by our
clients and potential clients. To address this sales challenge and to reduce the
percentage  of total  revenue  that are often  non-recurring,  we have  begun to
refocus  our sales force to  emphasize  our  content  manufacturing  outsourcing
services.  Nevertheless,  a material  recovery in revenues and earnings  will in
substantial  part depend on removal of the current  uncertainty  and a return to
more vigorous economic growth.

      RISKS OF EXPANDED OPERATIONS

      We have expanded our operations  rapidly in recent years. As a result,  we
have  incurred  new  fixed  operating  expenses  associated  with our  expansion
efforts,  including  increases in  depreciation  expense,  rental  expense,  and
overall  increases in cost of sales. In order to capitalize on this  investment,
we need to develop new client  relationships  and expand  existing  ones. If our
revenues do not increase  sufficiently to offset these  expenses,  our operating
results may be adversely affected.

      RISKS OF ACQUISITIONS

      Acquisitions involve a number of risks and challenges.  These include, but
are not limited to: diversion of management's  attention;  the need to integrate
acquired operations; potential loss of key employees and clients of the acquired
companies;  lack of experience operating in the market of the acquired business;
and an increase in expenses and working capital requirements.

      To integrate acquired operations, we must implement management information
systems and  operating  systems and  assimilate  and manage the personnel of the
acquired operations.  Geographic  distances may further complicate  integration.
The integration of acquired businesses may not be successful and could result in
disruption to other parts of our business.

      Any of these and other  factors  could  adversely  affect  our  ability to
achieve  anticipated  levels of profitability of acquired  operations or realize
other  anticipated   benefits  of  an  acquisition.   Furthermore,   any  future
acquisitions may require us to incur debt or obtain additional equity financing,
which could  increase our leverage or be dilutive to our existing  shareholders.
No assurance can be given that we will consummate any additional acquisitions in
the future.

      VARIABILITY OF CLIENT REQUIREMENTS AND OPERATING RESULTS

      A number  of our  significant  client  contracts  are  requirements-based.
Clients  may cancel  their  production  requirements,  change  their  production
requirements,  or delay their  production  requirements for a number of reasons.
Cancellations,  reductions,  or delays by a significant  client or by a group of
clients would  adversely  affect our results of operations.  In addition,  other
factors may  contribute  to  fluctuations  in our results of  operations.  These
factors  include:  the  timing  of client  orders;  the  volume of these  orders
relative to our capacity; market acceptance of clients' new products; the timing
of our  expenditures  in  anticipation of future orders;  our  effectiveness  in
managing  manufacturing  processes;  changes in economic  conditions;  and local
factors  and  events  that  may  affect  our  production  volume  (such as local
holidays) or unforeseen events (e.g., earthquakes, storms, civil unrest).

                                      I-10
<PAGE>

      We  make   significant   decisions   based  on  our  estimates  of  client
requirements, including decisions about the levels of business that we will seek
and accept, production schedules,  equipment procurement,  personnel hiring, and
other  resource  acquisition.  The nature of our  clients'  commitments  and the
possibility  of changes in demand for their  products  may reduce our ability to
estimate accurately future client requirements. On occasion, clients may require
rapid increases in production, which can stress our resources.  Although we have
increased our content conversion capacity and plan further increases,  there can
be no assurance we will have  sufficient  capacity at any given time to meet all
of our clients'  demands.  In addition,  because many of our costs and operating
expenses are relatively fixed, a reduction in client demand can adversely affect
our margins.

      VARIABILITY OF QUARTERLY OPERATING RESULTS

      We expect our  revenues  and  operating  results  to vary from  quarter to
quarter.  Such  variations  are likely to be caused by many factors that are, to
some extent, outside our control,  including: mix and timing of client projects;
completing client projects;  timing of new contracts; and one-time non-recurring
and unusual charges.

      Accordingly,  we believe that quarter-to-quarter  comparisons of operating
results for preceding  quarters are not necessarily  meaningful.  You should not
rely on the results of one quarter as an indication of our future performance.

      CLIENT CONCENTRATION; DEPENDENCE ON THE ONLINE INFORMATION INDUSTRY

      One client  accounted  for 33% and 17% of our revenues for the years ended
December 31, 2003 and 2002  respectively,  and a second client accounted for 30%
of our revenues for the year ended  December 31, 2002.  One other client,  which
substantially curtailed operations, accounted for 30% in the year ended December
31, 2001.  No other  client  accounted  for 10% or more of revenues  during this
period.  Further,  in the years ended December 31, 2003,  2002 and 2001,  export
revenues,  substantially  all of  which  were  derived  from  European  clients,
accounted for 47%, 23%, and 13%,  respectively,  of our revenues.  A significant
amount of our  revenues  are  derived  from  clients in the  online  information
industry.  Accordingly,  our accounts  receivable  generally include significant
amounts  due  from  such  clients.  In  addition,   as  of  December  31,  2003,
approximately  39%  of  the  Company's  accounts  receivable  was  from  foreign
(principally European) clients. On occasion, we may lose a client as a result of
a business  failure,  contract  expiration,  or the selection of another service
provider.  We  cannot  guarantee  that  we will  be  able  to  retain  long-term
relationships  or secure  renewals of  short-term  relationships  with our major
clients  in  the  future.   Moreover,   revenue  derived  from  certain  of  our
relationships depend upon the level of services we perform,  which may vary from
period to period depending on client requirements.

      Factors affecting the online  information  industry generally could have a
material  adverse  effect on our clients and, as a result,  on our  performance.
Such factors include:  the inability of our clients to adapt to rapidly changing
technology  and evolving  industry  standards,  the  inability of our clients to
develop and market  their  products,  some of which are new and  untested;  and,
recessionary  periods in our  clients'  markets.  If  clients'  products  become
obsolete or fail to gain widespread commercial  acceptance,  our business may be
materially and adversely affected.


                                      I-11
<PAGE>

      RISK OF INCREASED TAXES

      We have  structured our operations in a manner designed to maximize income
in  countries  where tax  incentives  have been  extended to  encourage  foreign
investment or where income tax rates are low. Our taxes could  increase if these
tax incentives are not renewed upon  expiration,  or tax rates  applicable to us
are  increased.  Substantially  all  of  the  services  provided  by  our  Asian
subsidiaries  are  performed  on behalf of clients  based in North  America  and
Europe.  We believe that profits from our Asian  operations are not sufficiently
connected  to  jurisdictions  in North  America or Europe to give rise to income
taxation there.  However,  tax authorities in jurisdictions in North America and
Europe  could  challenge  the manner in which  profits are  allocated  among our
subsidiaries, and we may not prevail in any such challenge. If our Asian profits
became  subject  to income  taxes in such  other  jurisdictions,  our  worldwide
effective tax rate could increase.

      RISKS OF COMPETITION

      The markets for our services are extremely competitive and fragmented.  As
a result of this highly competitive  environment,  we may lose customers or have
difficulty  in acquiring  new  customers  and our results of  operations  may be
adversely  affected.  A significant source of competition for us is the in-house
capability  of our target  client  base.  There can be no  assurance  that these
clients  will  outsource  more of their needs or that such  businesses  will not
bring in-house services that they currently outsource.

      RISKS OF INTERNATIONAL OPERATIONS

      While the major part of our operations are carried on in the  Philippines,
India,  and Sri Lanka, our headquarters are in the United States and our clients
are primarily  located in North America and Europe.  As a result,  we are not as
affected  by  economic  conditions  overseas  as we would be if we  depended  on
revenues  from  sources  internal  to those  countries.  However,  such  adverse
economic  factors as inflation,  external debt,  negative  balance of trade, and
underemployment may significantly impact us.

      Certain  aspects  of  overseas  economies  directly  affect  us.  Overseas
operations remain vulnerable to political unrest, which could interfere with our
operations.  Political  instability  could also change the present  satisfactory
legal  environment  for us through the  imposition  of  restrictions  on foreign
ownership, repatriation of funds, adverse labor laws, and the like.

      Our Indian operations are conducted through wholly-owned subsidiaries that
have been granted an income tax holiday  through  March 31,  2006.  Accordingly,
minimal  income  taxes  will be  payable  on  earnings  from  operations  of the
subsidiaries during such period, unless repatriated to the U.S.

      We fund our overseas  operations through transfers of U.S. dollars only as
needed and generally do not maintain any significant amount of funds or monetary
assets  overseas.  To the extent  that we need to bring  currency  to the United
States from our  overseas  operations,  we may be  affected by currency  control
regulations.

      The Philippines is subject to relatively  frequent  earthquakes,  volcanic
eruptions,   floods,  and  other  natural  disasters,   which  may  disrupt  our
operations. Further, power outages lasting for periods of as long as eight hours
per day have occurred.  Our facilities are equipped with standby generators that

                                      I-12
<PAGE>

have produced  electric  power during these  outages;  however,  there can be no
assurance that our operations will not be adversely  affected  should  municipal
power production capacity deteriorate.

      The geographical  distances between Asia, the Americas,  and Europe create
logistical and communications challenges which we must overcome.

      The  Philippines  has ongoing  problems  with Muslim  insurgents.  The Abu
Sayyaf  group of  kidnappers,  which is  purported  to have ties to the Al Qaeda
terrorist  organization,  is concentrated on Basilan Island,  an island far away
from our  facilities,  and the government has stepped up activities to eradicate
the group.  There can be no assurances  that these efforts will be successful or
that the group will not attempt to disrupt  activities or commit  terrorist acts
in other areas.

      RISKS OF CURRENCY FLUCTUATIONS AND HEDGING OPERATIONS

      The Philippines has  historically  experienced high rates of inflation and
major  fluctuations  in exchange rate between the  Philippine  peso and the U.S.
dollar.  Continuing  inflation  without  corresponding  devaluation  of the peso
against the dollar,  or any other  increase in value of the peso relative to the
dollar,  may have a material  adverse  effect on our  operations  and  financial
condition.  Since 1997, we have not purchased foreign currency futures contracts
for pesos. However, we may choose to do so in the future.

      DEPENDENCE ON KEY PERSONNEL

      Our success  depends to a large extent upon the continued  services of our
key executives and skilled personnel.  Several of our officers and key employees
are bound by employment or non-competition agreements.  However, there can be no
assurance  that we will  retain  our  officers  and key  employees.  We could be
materially and adversely affected by the loss of such personnel.

      VOLATILITY OF MARKET PRICE OF COMMON STOCK

      The stock market in recent  years has  experienced  significant  price and
volume fluctuations that have affected the market prices for the common stock of
technology and  Internet-related  companies.  Such  fluctuations have often been
unrelated to or disproportionately impacted by the operating performance of such
companies.   The  market  for  our  common  stock  may  be  subject  to  similar
fluctuations.   Factors  such  as   fluctuations   in  our  operating   results,
announcements  of  new  contracts,  partnerships,  acquisitions  and  alliances,
technological innovations or events affecting other companies in the Internet or
technology  industry  generally,  as well as currency  fluctuations  and general
market  conditions,  may have a  significant  effect on the market  price of our
common stock.


ITEM 2.  DESCRIPTION OF PROPERTY.

      Our services  are  primarily  performed  from our  Hackensack,  New Jersey
corporate  headquarters,  two other North American  offices,  and seven overseas
production  facilities,  including our 100,000  square foot XML Content  Factory
complex located in Mandaue,  the  Philippines.  In addition,  we have a software
development  facility in Gurgaon,  India.  All  facilities  are leased for terms
expiring on various

                                      I-13
<PAGE>

dates  through  2010,  and many are  cancelable  at our  option.  Annual  rental
payments on property leases are expected to approximate $1,600,000.

      We believe that we maintain  adequate fire, theft and liability  insurance
for our facilities and that our facilities are adequate for our present needs.

ITEM 3.  LEGAL PROCEEDINGS.

      In  connection  with the cessation of all  operations  at certain  foreign
subsidiaries,  certain  former  employees have filed various  illegal  dismissal
actions in the  Philippines  seeking,  among other  remedies,  reinstatement  of
employment, payment of back wages and damages approximating one million dollars.
Outside counsel has advised management that under the circumstances, the Company
is not legally  obligated to pay severance to such terminated  employees.  Based
upon the advice of counsel,  management  believes the actions are  substantially
without merit and intends to defend the actions vigorously.

      In addition,  one of the foreign  subsidiaries which ceased operations has
been  presented  with a tentative  tax  assessment by the  Philippine  Bureau of
Internal Revenue for an amount approximating  $400,000, plus applicable interest
and  penalties.  Management  believes the tentative  assessment  is  principally
without substance and any amounts that the Company estimates might ultimately be
paid in settlement (which are not expected to be material) have been accrued.

      In  addition,  the  Company is subject to various  legal  proceedings  and
claims which arise in the ordinary course of business.

      While  management  currently  believes that that  ultimate  outcome of all
these  proceedings  will not have a  material  adverse  effect on the  Company's
financial  position or overall  trends in results of  operations,  litigation is
subject to inherent  uncertainties.  Were an unfavorable  ruling to occur, there
exists the possibility of a material adverse impact on the operating  results of
the period in which the ruling  occurs.  In addition,  the estimate of potential
impact on the Company's  financial position or overall results of operations for
the above legal proceedings could change in the future.


                                      I-14
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      The  following  matters  were voted on at the  November  14,  2003  Annual
Meeting of Stockholders. The total shares voted were 20,658,017.


ELECTION OF DIRECTORS:

   NOMINEE                     FOR           WITHHELD     Against    ABSTAIN
   -------                     ---           --------     -------    -------

   Jack Abuhoff                20,402,506     255,511        -            -
   Charles Goldfarb            20,531,888     126,129        -            -
   John Marozsan               20,517,896     140,121        -            -
   Todd Solomon                20,402,806     255,211        -            -
   Louise Forlenza             20,517,896     140,121        -            -
   Haig Bagerdjian             20,517,896     140,121        -            -

APPOINTMENT OF AUDITORS        20,600,091         -       18,101     39,825

AMENDMENT TO COMPANY'S         20,633,034           1     14,482     10,500
CERTIFICATE OF INCORPORATION
TO CHANGE THE COMPANY'S NAME
TO INNODATA ISOGEN, INC.

                                      I-15
<PAGE>

                                    PART II
                                    -------

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

      Innodata Isogen, Inc. (the "Company") Common Stock is quoted on the Nasdaq
National Market System under the symbol "INOD." On February 29, 2004, there were
133  stockholders  of record of the Company's  Common Stock based on information
provided  by the  Company's  transfer  agent.  Virtually  all  of the  Company's
publicly  held  shares are held in "street  name" and the Company  believes  the
actual  number of  beneficial  holders of its Common  Stock to be  approximately
3,500.

      The  following  table  sets  forth  the high  and low  sales  prices  on a
quarterly basis for the Company's  Common Stock, as reported on Nasdaq,  for the
two years ended December 31, 2003.

                                            COMMON STOCK
                                            SALE PRICES

                             2002           HIGH      LOW
                             ----           ----      ---

                        First Quarter       $3.30   $1.81

                        Second Quarter       2.60    1.05

                        Third Quarter        1.50    0.75

                        Fourth Quarter       1.07    0.60

                             2003           HIGH      LOW
                             ----           ----      ---

                        First Quarter       $1.09   $0.73

                        Second Quarter       1.47    0.84

                        Third Quarter        2.60    1.11

                        Fourth Quarter       4.96    2.42

DIVIDENDS

      The Company has never paid cash dividends on its Common Stock and does not
anticipate that it will do so in the foreseeable  future.  The future payment of
dividends,  if any, on the Common Stock is within the discretion of the Board of
Directors and will depend on the Company's  earnings,  its capital  requirements
and financial condition and other relevant factors.


                                      II-1
<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

      The following table sets forth the aggregate information for the Company's
equity compensation plans in effect as of December 31, 2003:



<TABLE>
<CAPTION>

                                          NUMBER OF
                                   SECURITIES TO BE ISSUED    WEIGHTED-AVERAGE      NUMBER OF SECURITIES
                                     UPON EXCERCISE OF        EXERCISE PRICE OF   REMAINING AVAILABLE FOR
                                    OUTSTANDING OPTIONS     OUTSTANDING OPTIONS    FUTURE ISSUANCE UNDER

PLAN CATEGORY                       WARRANTS AND RIGHTS     WARRANTS AND RIGHTS   EQUITY COMPENSATION PLANS
                                            (A)                     (B)                    (C)

<S>                                      <C>                       <C>                  <C>
Equity compensation plans
approved by security holders             6,575,000                 $2.24                1,696,000

Equity compensation plans
not approved by security holders         1,015,000 (1)             $0.84                  500,000 (2)
                                         ---------                 -----                ---------

Total                                    7,590,000                 $2.45                2,196,000
                                         =========                 =====                =========
</TABLE>

      (1)   Consists  of stock  options to purchase  1,015,164  shares of common
            stock  granted to the  Company's  current  Chairman  pursuant  to an
            agreement entered into at time of hire.
      (2)   Consists of 500,000  shares of common  stock which were  reserved to
            use for future equity grants by the Company's  Board of Directors as
            it deems appropriate.

                                      II-2
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                         2003        2002        2001         2000        1999
                                                ----        ----        ----         ----        ----

<S>                                         <C>         <C>         <C>          <C>         <C>
REVENUES                                    $ 36,714    $ 36,385    $ 58,278     $ 50,731    $ 27,490
                                            --------    --------    --------     --------    --------
OPERATING COSTS AND EXPENSES
   Direct operating costs                     27,029      32,005      44,354       34,458      17,854

   Selling and administrative                  8,898      10,038       8,337        7,248       6,783

   Provision for doubtful accounts                --          --       2,942           --          --
   Restructuring costs and asset impairment       --         244         865           --          --
   Interest expense                                9          29           9           43          10

   Interest income                               (30)        (89)       (216)        (155)       (111)
                                            --------    --------    --------     --------    --------

    Total                                     35,906      42,227      56,291       41,594      24,536
                                            --------    --------    --------     --------    --------

INCOME (LOSS) BEFORE PROVISION FOR
  (BENEFIT FROM) INCOME TAXES                    808      (5,842)      1,987        9,137       2,954
PROVISION FOR (BENEFIT FROM) INCOME TAXES        333        (677)        639        2,969         841
                                            --------    --------    --------     --------    --------

NET INCOME (LOSS)                           $    475    $ (5,165)   $  1,348     $  6,168    $  2,113
                                            ========    ========    ========     ========    ========

BASIC INCOME (LOSS) PER SHARE               $    .02    $   (.24)   $    .06     $    .30    $    .11
                                            ========    ========    ========     ========    ========

DILUTED INCOME (LOSS) PER SHARE             $    .02    $   (.24)   $    .05     $    .26    $    .10
                                            ========    ========    ========     ========    ========

CASH DIVIDENDS PER SHARE                          --          --          --           --          --
                                            --------    --------    --------     --------    --------


DECEMBER 31,                                    2003        2002        2001         2000        1999
                                            --------    --------    --------     --------    --------

WORKING CAPITAL                             $ 11,983    $  8,570    $  8,854     $  9,505    $  5,966
                                            ========    ========    ========     ========    ========
TOTAL ASSETS                                $ 25,146    $ 22,697    $ 30,094     $ 27,946    $ 15,646
                                            ========    ========    ========     ========    ========
LONG-TERM DEBT                                   272          --          --           --    $      5
                                            ========    ========    ========     ========    ========

STOCKHOLDERS' EQUITY                        $ 17,404    $ 15,569    $ 20,362     $ 19,316    $ 11,652
                                            ========    ========    ========     ========    ========
</TABLE>


                                       II-3
<PAGE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2003 AND 2002

      Revenues were $36,714,000 for the year ended December 31, 2003 compared to
$36,385,000 for the similar period in 2002.  Revenues from the content  services
segment  decreased  9% to  $29,997,000  for the year  ended  December  31,  2003
compared to $33,089,000 for the similar period in 2002. The decrease principally
reflects the decline in revenues of  approximately  $11 million from two clients
whose largest projects were  substantially  completed in 2002. The shortfall was
replaced in part by a $9 million increase in revenues from three other clients.

      Revenues from the Company's professional services (formerly referred to as
systems  integration  and training)  segment were  $6,737,000 for the year ended
December 31, 2003 and  $3,296,000 for the similar period in 2002, an increase of
104%. The increase was  principally  attributable to an increase in the quantity
and size of the system integration projects booked in 2003.

      One client  accounted  for 33% and 17% of the  Company's  revenues for the
years  ended  December  31,  2003 and 2002,  respectively,  and a second  client
accounted  for 30% of the  Company's  revenues  for the year ended  December 31,
2002. No other client  accounted for 10% or more of revenues during this period.
Further, in the years ended December 31, 2003 and 2002, export revenues, most of
which  were  derived  from  European   clients,   accounted  for  47%  and  23%,
respectively, of the Company's revenues.

      A  significant  portion  of  the  Company's  services  are  provided  on a
requirements  basis, and more than half of its revenues are project-based.  This
work tends to vary from period to period. Often times, when a particular project
for a large client is completed,  the large client  contracts  with us for a new
project.  Additionally,  the Company seeks wherever possible to  counter-balance
periodic  declines in work for some clients with increased  work for others.  To
reduce the  percentage of total revenue that is  non-recurring,  the Company has
begun to refocus its sales force to sources of recurring revenue.

      Direct operating expenses were $27,029,000 for the year ended December 31,
2003 and  $32,005,000  for the year ended  December 31, 2002, a decrease of 16%.
Direct  operating  expenses as a percentage of revenues were 74% in 2003 and 88%
in 2002.  Direct  operating  expenses  for the  content  services  segment  were
$23,070,000  and  $28,053,000  in the years  ended  December  31, 2003 and 2002,
respectively,  a decrease of 18%. Direct  operating  expenses as a percentage of
revenues  for the content  services  segment were 77% and 85% in the years ended
December 31, 2003 and 2002,  respectively.  The dollar  decline,  as well as the
decline in such costs as a percent of sales for the content  services segment in
the 2003 period,  was principally due to a reduction in labor and in fixed costs
associated  with the Company's  cost  reduction  initiatives.  Direct  operating
expenses  primarily  include direct payroll,  telecommunications,  depreciation,
computer  services,  supplies and occupancy.  Direct operating  expenses for the
Company's professional services segment were $3,959,000,  or 59% of professional
services segment  revenues,  for the year ended December 31, 2003 and $3,952,000
or 120% of such  revenues,  for the year ended  December  2002.  The decrease in
direct operating costs as a

                                      II-4
<PAGE>

percent of professional  services segment revenue was primarily  attributable to
an  increase in revenue  without a  corresponding  increase in direct  operating
costs.

      Selling and administrative expenses were $8,898,000 and $10,038,000 in the
years ended December 31, 2003 and 2002, respectively, a decrease of 11%. Selling
and administrative expenses for the content services segment were $7,348,000 and
$8,525,000  for the years  ended  December  31, 2003 and 2002,  respectively,  a
decrease of 14%. The decrease is primarily  attributable  to the cost  reduction
initiatives  that were implemented  during the second half of 2002.  Selling and
administrative  expenses as a percentage  of revenues  for the content  services
segment  were  25%  and  26%  for  years  ended  December  31,  2003  and  2002,
respectively.  Selling and administrative expenses for the professional services
segment were  $1,550,000  or 23% of sales,  in the year ended  December 31, 2003
compared to $1,513,000,  or 46% of sales, for the year ended December 2002. This
decrease in professional services segment selling and administrative expenses as
a  percent  of sales is  primarily  due to an  increase  in  revenue  without  a
corresponding   increase  in  selling  and  administrative  costs.  Selling  and
administrative   expenses   primarily  include   management  and  administrative
salaries, sales and marketing costs, and administrative overhead.

      In early 2002,  the Company  closed a facility in Asia,  resulting  in the
write-off of property and equipment associated with the closed facility totaling
approximately   $244,000.   Such   write-off  of  equipment  was  classified  as
Restructuring Costs and Asset Impairment for the year ended December 31, 2002.

      For the year ended  December 31, 2003,  the provision for income taxes was
41% of pre-tax income,  compared to a 12% benefit from income taxes as a percent
of pre-tax loss in the year ended December 31, 2002. For the year ended December
31, 2002,  the income tax benefit was lower as a percentage of pre-tax loss than
the federal  statutory  rate primarily as a result of certain  overseas  foreign
source  losses for which no tax benefit is  available.  The provision for income
taxes for the year ended  December 30, 2003 is higher as a percentage of pre-tax
loss than the federal  statutory  rate due primarily to foreign and state income
taxes,  and to  certain  foreign  source  losses  for  which no tax  benefit  is
available,  partially  offset  by the  effect  of  income  in tax  jurisdictions
currently under tax holiday.

YEARS ENDED DECEMBER 31, 2002 AND 2001

      Revenues decreased 38% to $36,385,000 for the year ended December 31, 2002
compared  to  $58,278,000  for the  similar  period in 2001.  Revenues  from the
content  services  segment  decreased  43% to  $33,089,000  for the  year  ended
December 31, 2002 compared to  $57,825,000  for the similar  period in 2001. The
decrease  principally  resulted  from the loss in revenues from one client which
substantially  curtailed  operations,  which  accounted  for  approximately  $17
million of the Company's content services segment revenues in 2001, and from the
decline in revenues from a second  client,  whose  projects  were  substantially
completed in 2002.  Revenues from the Company's  professional  services  segment
were  $3,296,000  for the year ended  December 31, 2002 and $453,000 for the one
month period from December 1, 2001 (date of acquisition) to December 31, 2001.

      One client  accounted  for 30% and 27% of the  Company's  revenues for the
year ended December 31, 2002 and 2001 respectively and a second client accounted
for 16% of the  Company's  revenues for the year ended  December  31, 2002.  One
other client, which substantially curtailed operations, accounted for 30% of the
Company's  revenues  in the year  ended  December  31,  2001.  No

                                      II-5
<PAGE>

other client accounted for 10% or more of revenues during this period.  Further,
in the year ended December 31, 2002 and 2001, export revenues, substantially all
of  which  were  derived  from  European  clients,  accounted  for 23% and  13%,
respectively, of the Company's revenues.

      In early 2001, a  significant  portion of the Company's  revenue  increase
came from XML transformation  projects by early-stage  companies that had raised
significant   venture   capital  to  pursue   digital   library  and  e-business
initiatives.  The  downturn in the  technology  industry  in 2001  resulted in a
falloff of  revenues  from  companies  in this  industry  sector.  The  economic
downturn also caused many blue-chip publishers to curtail discretionary spending
and new  initiatives  on XML  transformation  projects.  To  address  this sales
challenge  and to  reduce  the  percentage  of  total  revenue  that  are  often
non-recurring, the Company has begun to refocus its sales force to emphasize its
content outsourcing services.

      Direct operating expenses were $32,005,000 for the year ended December 31,
2002 and  $44,354,000  for the year ended  December 31, 2001, a decrease of 28%.
Direct  operating  expenses as a percentage of revenues were 88% in 2002 and 76%
in 2001.  Direct  operating  expenses  for the  content  services  segment  were
$28,053,000  and  $44,039,000  in the year  ended  December  31,  2002 and 2001,
respectively,  a decrease of 36%. Direct  operating  expenses as a percentage of
revenues  for the content  services  segment  were 85% and 76% in the year ended
December 31, 2002 and 2001,  respectively.  The dollar  decrease for the content
services  segment in the 2002 period is principally  due to a reduction in labor
costs  associated  with  lower  revenues,  and  to  reductions  in  fixed  costs
associated  with  the  Company's  cost  reduction  initiatives.  The  percentage
increase  for the  content  services  segment  in the 2002  period is  primarily
attributable  to the decrease in revenues  without a  corresponding  decrease in
non-labor  costs.  Labor costs as a percentage of revenue  remained  consistent.
Direct operating expenses for the Company's  professional  services segment were
$3,952,000,  or 120% of professional  services  segment  revenues,  for the year
ended  December  31, 2002 and  $315,000,  or 70% of  revenues,  for the month of
December 2001.  Direct  operating  expenses  primarily  include direct  payroll,
telecommunications,  depreciation,  equipment  maintenance  and  upgrade  costs,
computer services, supplies and occupancy.

      Selling and administrative expenses were $10,038,000 and $8,337,000 in the
year ended December 31, 2002 and 2001, respectively, an increase of 20%. Selling
and administrative expenses for the content services segment were $8,525,000 and
$8,227,000  for the year ended  December  31,  2002 and 2001,  respectively,  an
increase of 4%. The increase for the content  services  segment is primarily due
to a non-cash compensation charge of approximately  $500,000, and an increase in
selling and marketing costs of approximately $684,000, offset by a 14% reduction
in general and administrative expenses. Selling and administrative expenses as a
percentage of revenues for the content services segment  increased to 26% in the
2002  period  from 19% in the 2001  period  due  primarily  to the  decrease  in
revenues  without  a  corresponding  decrease  in  such  expenses.  Selling  and
administrative  expenses for the professional  services segment were $1,513,000,
or 46% of sales,  in the year ended  December 31, 2002 compared to $110,000,  or
24% of sales, for the one month period December 2001. Selling and administrative
expenses  primarily include management and  administrative  salaries,  sales and
marketing costs, and administrative overhead.

      For the year ended  December 31, 2001,  the Company  provided an allowance
for doubtful accounts of approximately  $2.6 million  representing the remaining
balance due at December  31,  2001 from a client that  accounted  for 30% of its
2001  revenues  because the client has reported an  inability  to

                                      II-6
<PAGE>

raise further  operating  funds  required to make payment.  In January 2004, the
Company  reached a settlement  with this client to pay  $1,000,000  cash as full
satisfaction of the outstanding balance due to the Company.  The $1,000,000 will
be reflected as a bad debt recovery  income in the Company's  first quarter 2004
financial statements.  In addition,  in 2001 the Company provided  approximately
$350,000 for other client bad debts incurred in the ordinary course of business.

      During the fourth quarter 2001, the Company  commenced  certain actions to
reduce  production  operations  at a  wholly  owned  Asian  subsidiary  that was
operating  at a loss  and to  reduce  overall  excess  capacity  in  Asia.  Such
activities,  which  culminated in the cessation and closure of all operations at
the  subsidiary  and included  employee  layoffs,  were  completed  in 2002.  In
addition,  during 2002, the Company closed a second  facility,  resulting in the
write-off of property and equipment associated with the closed facility totaling
approximately  $244,000.  Such  write-off of equipment  has been  classified  as
Restructuring  Costs and Asset  Impairment for the year ended December 31, 2002.
Included in Restructuring Costs and Asset Impairment for the year ended December
31, 2001 are estimated facility closure costs, including employee related costs,
approximating  $600,000,  and  the  write-off  of  leasehold  improvement  costs
totaling  approximately  $265,000.  In  2002,  the  Company  paid  approximately
$350,000 in closing costs.

      For the year ended  December 31, 2002, the income tax benefit was lower as
a percentage  of pre-tax loss than the federal  statutory  rate due primarily to
certain overseas foreign source losses for which no tax benefit is available.

LIQUIDITY AND CAPITAL RESOURCES

      Selected measures of liquidity and capital resources are as follows:

<TABLE>
<CAPTION>
                                                 December 31, 2003  December 31, 2002
                                                 -----------------  -----------------

      <S>                                           <C>                <C>
      Cash and Cash Equivalents - unrestricted      $5,051,000         $7,255,000
      Working Capital                               11,983,000          8,570,000
      Stockholders' Equity Per Common Share*           $.79               $.73
</TABLE>

      *Represents total  stockholders'  equity divided by the actual number of
       common shares outstanding (which excludes treasury stock).

NET CASH PROVIDED BY OPERATING ACTIVITIES

      Net cash provided by operating  activities  was $682,000 in the year ended
December 31, 2003 compared to $3,050,000  provided by operating  activities  for
the year ended December 31, 2002, a decrease of approximately $2.4 million.  The
decrease was  primarily  due to a $7.3 million net increase in operating  assets
and liabilities and a decrease in non-cash  charges of  approximately  $600,000,
partially offset by an increase of $5.6 million in net income.  The $7.3 million
net increase in operating assets and liabilities was principally  comprised of a
$9.8 million  increase in accounts  receivable net of a $1.6 million increase in
accrued salaries and a $1.4 million decrease in refundable income taxes.

      Accounts receivable totaled $8,497,000 at December 31, 2003,  representing
approximately 71 days of sales outstanding,  compared to $3,253,000, or 52 days,
at December 31, 2002. The increase in accounts receivable  resulted  principally
from a 76% increase in revenues in the three months ended

                                      II-7
<PAGE>

December 31, 2003, as compared to the three months ended  December 31, 2002. The
increase  in  amount  and in days  sales  outstanding  is also  attributable  to
significant  accounts  receivable  balances from two clients,  most of which was
subsequently collected.

      A significant amount of the Company's revenues are derived from clients in
the  publishing  industry.   Accordingly,   the  Company's  accounts  receivable
generally include significant amount due from such clients.  In addition,  as of
December 31, 2003,  approximately 39% of the Company's  accounts  receivable was
from foreign  (principally  European) clients, and approximately 27% of accounts
receivable was due from one client.

NET CASH USED IN INVESTING ACTIVITIES

      During the year ended December 31, 2003,  the Company spent  approximately
$2,408,000 for capital expenditures, compared to approximately $1,162,000 in the
year ended  December  31,  2002.  In addition,  the Company  acquired  equipment
totaling  approximately  $467,000 in 2003 utilizing  capital leases.  During the
next 12 months, the Company  anticipates  similar to modest increases in capital
spending levels.  Such past and anticipated  capital spending relates to project
requirement  specific  equipment  for  certain  new  projects,   normal  ongoing
equipment  upgrades  and  replacement,  and costs  related to the  purchase  and
implementation of new management information systems.

AVAILABILITY OF FUNDS

      The Company has a $1 million  bank line of credit which is secured by a $1
million certificate of deposit. Interest is charged at the bank's alternate base
rate (4% at December 31, 2003).  The line expires on May 31, 2004. No loans were
outstanding at December 31, 2003.

      Management  believes that existing cash,  internally  generated  funds and
short term bank borrowings will be sufficient for reasonably anticipated working
capital  and capital  expenditure  requirements  during the next 12 months.  The
Company funds its foreign  expenditures from its U.S. corporate  headquarters on
an as-needed basis.

CONTRACTUAL OBLIGATIONS

      The table below  reflects  the  Company's  contractual  cash  obligations,
expressed in thousands, at December 31, 2003.

<TABLE>
<CAPTION>
                                                        PAYMENTS DUE BY PERIOD
                                               LESS THAN                          AFTER 5
    CONTRACTUAL OBLIGATIONS           TOTAL     1 YEAR    1-3 YEARS  4-5 YEARS   5 YEARS

<S>                                  <C>        <C>        <C>        <C>        <C>
Capital lease obligations            $  457     $  171     $  286     $   --     $   --
Non-cancelable Operating leases       3,817        600      1,751      1,222        244
                                     ------     ------     ------     ------     ------
Total contractual cash obligations   $4,274     $  771     $2,037     $1,222     $  244
                                     ======     ======     ======     ======     ======
</TABLE>


                                      II-8
<PAGE>

INFLATION, SEASONALITY AND PREVAILING ECONOMIC CONDITIONS

      To date,  inflation  has not had a  significant  impact  on the  Company's
operations.  The  Company  generally  performs  its work for its  clients  under
project-specific   contracts,    requirements-based   contracts   or   long-term
arrangements.   Contracts   are  typically   subject  to  numerous   termination
provisions.   The  Company's   revenues  are  not   significantly   affected  by
seasonality.

CRITICAL ACCOUNTING POLICIES

      Basis of Presentation and Use of Estimates

      Management's  discussion  and  analysis of its results of  operations  and
financial  condition  is  based  upon  the  Company's   consolidated   financial
statements,  which have been prepared in accordance with  accounting  principles
generally  accepted in the United States.  The  preparation  of these  financial
statements  requires  management to make estimates and judgments that affect the
reported  amounts of assets,  liabilities,  revenues and  expenses,  and related
disclosure of  contingent  assets and  liabilities.  On an on-going  basis,  the
Company evaluates its estimates, including those related to accounts receivable.
Management  bases its  estimates on historical  experience  and on various other
assumptions  that are believed to be  reasonable  under the  circumstances,  the
results of which form the basis for making  judgments  about the carrying values
of assets and  liabilities  that are not readily  apparent  from other  sources.
Actual results may differ from these estimates  under  different  assumptions or
conditions.


      Allowance for Doubtful Accounts

      The  Company   establishes   credit  terms  for  new  clients  based  upon
management's  review of their credit information and project terms, and performs
ongoing  credit  evaluations  of its  customers,  adjusting  credit  terms  when
management believes  appropriate based upon payment history and an assessment of
their current credit  worthiness.  The Company records an allowance for doubtful
accounts for  estimated  losses  resulting  from the inability of its clients to
make required  payments.  The Company  determines its allowance by considering a
number of factors,  including the length of time trade  accounts  receivable are
past due, the Company's  previous loss history,  the client's current ability to
pay its obligation to the Company,  and the condition of the general economy and
the  industry  as a whole.  While  credit  losses  have  generally  been  within
expectations and the provisions  established,  the Company cannot guarantee that
credit loss rates in the future will be consistent with those experienced in the
past. In addition, there is credit exposure if the financial condition of one of
the Company's major clients were to deteriorate. In the event that the financial
condition  of  the  Company's  clients  were  to  deteriorate,  resulting  in an
impairment  of their  ability to make  payments,  additional  allowances  may be
necessary.

      Revenue Recognition

      Revenue for content  manufacturing and outsourcing  services is recognized
in the period in which services are performed and delivered.

      The  Company  recognizes  revenues  from  custom  application  and systems
integration development which requires significant  production,  modification or
customization  of software in accordance with Statement of Position  ("SOP") No.
97-2 "Software Revenue Recognition" and SOP No. 81-1 "Accounting for Performance
of Construction-Type and Certain  Production-Type

                                      II-9
<PAGE>

Contracts".  Revenue for such contracts  billed under fixed fee  arrangements is
recognized using the  percentage-of-completion  method under contract accounting
as services are  performed or output  milestones  are  reached.  The  percentage
completed is measured  either by the  percentage of labor hours incurred to date
in relation to estimated total labor hours or in consideration of achievement of
certain output  milestones,  depending on the specific  nature of each contract.
For  arrangements  in which  percentage-of  completion  accounting is used,  the
Company  records  cash  receipts  from  customers  and billed  amounts  due from
customers  in excess of  recognized  revenue as  billings  in excess of revenues
earned on  contracts  in progress  (which is  included in accounts  receivable).
Revenue for  contracts  billed on a time and  materials  basis is  recognized as
services are performed.

      Property and Equipment

      Property and equipment is depreciated on the straight-line method over the
estimated  useful lives of the related  assets,  which is generally  two to five
years.  Leasehold  improvements are amortized on a straight-line  basis over the
shorter of their estimated useful lives or the lives of the leases.  The Company
makes  estimates  regarding  the useful lives of these assets and any changes in
actual  lives could  result in  material  changes in the net book value of these
assets.  The Company evaluates the  recoverability of long-lived assets whenever
adverse  events or  changes  in  business  climate  indicate  that the  expected
undiscounted  future  cash  flows  from  the  related  asset  may be  less  than
previously  anticipated.  If the net book value of the related asset exceeds the
undiscounted  future  cash  flows of the asset,  the  carrying  amount  would be
reduced to the present value of its expected future cash flows and an impairment
loss would be recognized. This analysis requires the Company to make significant
estimates and assumptions,  and changes in facts and circumstances  could result
in  material  changes  in the  carrying  value  of the  assets  and the  related
depreciation expense.

      Income Taxes

      Deferred  taxes  are  determined  based  on  the  difference  between  the
financial  statement and tax 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 some or all of a  deferred  tax asset will not be
realized.  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 to the extent
such earnings are not anticipated to be remitted to the United States.

      Goodwill and Other Intangible Assets

      Statement  of Financial  Accounting  Standard  ("SFAS") 142 requires  that
goodwill be tested for  impairment at the reporting  unit level  (segment or one
level below a segment) on an annual  basis and between  annual  tests in certain
circumstances.  Application of the goodwill  impairment test requires  judgment,
including  the   identification   of  reporting  units,   assigning  assets  and
liabilities  to reporting  units,  assigning  goodwill to reporting  units,  and
determining  the  fair  value  of each  reporting  unit.  Significant  judgments
required to estimate the fair value of reporting units include estimating future
cash  flows,  determining  appropriate  discount  rates and  other  assumptions.
Changes  in  these  estimates  and  assumptions   could  materially  affect  the
determination of fair value for each reporting unit.

                                     II-10
<PAGE>

      Accounting for Stock-Based Compensation

      The  Company  accounts  for  stock-based   compensation  plans  under  the
recognition  and  measurement  principles of APB Opinion No. 25,  Accounting for
Stock  Issued  to  Employees,  and  related  Interpretations.   In  general,  no
stock-based   employee   compensation  cost  is  reflected  in  the  results  of
operations, unless options granted under those plans have an exercise price that
is less than the  market  value of the  underlying  common  stock on the date of
grant.

RECENT ACCOUNTING PRONOUNCEMENTS

      Accounting for Certain Financial  Instruments with  Characteristics  of
both Liabilities and Equity

      In May  2003,  the FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Financial  Instruments  with  Characteristics  of both  Liabilities  and Equity"
("SFAS No. 150").  SFAS No. 150 clarifies the accounting  for certain  financial
instruments  with  characteristics  of both  liabilities and equity and requires
that those  instruments be classified as liabilities.  SFAS No. 150 is effective
for  financial  instruments  entered  into or  modified  after May 31,  2003 and
otherwise is effective at the  beginning of the first interim  period  beginning
after June 15, 2003.  The adoption of SFAS No. 150 did not impact the  Company's
Consolidated Financial Statements.

      Consolidation of Variable Interest Entities

      In January 2003, the FASB issued  Interpretation No. 46, "Consolidation of
Variable  Interest  Entities" ("FIN No. 46"). FIN No.46 explains how to identify
variable  interest  entities and how an  enterprise  assesses its interests in a
variable  interest  entity to decide  whether to  consolidate  that  entity.  In
December,  2003,  the FASB issued FIN 46R which  clarifies and modifies  certain
provisions of FIN 46. The Company has evaluated FIN No. 46 and  determined  that
this  interpretation  did not  have any  impact  on the  Company's  Consolidated
Financial Statements as the Company has no variable interest entities.

FORWARD-LOOKING STATEMENTS

      Disclosures in this Form 10-K contain certain forward-looking  statements,
including without limitation,  statements  concerning the Company's  operations,
economic performance and financial condition.  These forward-looking  statements
are made  pursuant  to the safe  harbor  provisions  of the  Private  Securities
Litigation  Reform Act of 1995.  The words  "intend","may",  "plan",  "believe,"
"expect,"   "anticipate"  and  other  similar  expressions   generally  identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates.

      These  forward-looking  statements  are  based  largely  on the  Company's
current  expectations,  and are subject to a number of risks and  uncertainties,
including  without  limitation,  continuation or worsening of present  depressed
market  conditions,   changes  in  external  market  factors,  the  ability  and
willingness of the Company's clients and prospective clients to execute business
plans  which give rise to  requirements  for digital  content  and  professional
services  in  knowledge  processing,  difficulty  in  integrating  and  deriving
synergies from  acquisitions,  potential  undiscovered  liabilities of companies
that Innodata  acquires,  changes in the Company's  business or growth strategy,
the  emergence of new

                                     II-11
<PAGE>

or growing  competitors,  various other competitive and  technological  factors,
risks and  uncertainties  described  under "Risk  Factors",  and other risks and
uncertainties  indicated  from time to time in the  Company's  filings  with the
Securities and Exchange Commission.

      Actual results could differ materially from the results referred to in the
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the results referred to in the  forward-looking  statements
contained in this Form 10-K will in fact occur.  We make no commitment to revise
or  update  any  forward-looking  statements  in  order  to  reflect  events  or
circumstances after the date any such statement is made.



ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company is exposed to interest rate change market risk with respect to
its credit facility with a financial  institution,  which is priced based on the
bank's alternate base rate (4% at December 31, 2003. At December 31, 2003, there
were no borrowings under the credit facility. Changes in the prime interest rate
during 2004 will have a positive or negative  effect on the  Company's  interest
expense.  Such exposure will increase accordingly should the Company utilize its
line of credit during 2004.

      The Company has  operations in foreign  countries.  While it is exposed to
foreign  currency   fluctuations,   the  Company   presently  has  no  financial
instruments in foreign  currency and does not maintain funds in foreign currency
beyond those necessary for operations.

                                     II-12
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS.

                     INNODATA ISOGEN, INC. AND SUBSIDIARIES
                         INDEX TO FINANCIAL STATEMENTS

                                                                     PAGE
                                                                     ----

Independent Auditors' Report                                        II-14

Consolidated Balance Sheets as of December 31, 2003 and 2002        II-15

Consolidated Statements of Operations for the three years ended     II-16
December 31, 2003

Consolidated Statement of Stockholders' Equity for the three        II-17
years ended December 31, 2003

Consolidated Statements of Cash Flows for the three years ended     II-18
December 31, 2003

Notes to Consolidated Financial Statements                        II-19-32


                                     II-13
<PAGE>

REPORT OF INDEPENDENT  CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
  Innodata Isogen, Inc.

We have audited the accompanying consolidated balance sheets of Innodata Isogen,
Inc.  and  subsidiaries  as of  December  31,  2003 and  2002,  and the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the three years in the period ended December 31, 2003.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated  financial position of Innodata Isogen,
Inc. and  subsidiaries  as of December 31, 2003 and 2002,  and the  consolidated
results of their  operations and their  consolidated  cash flows for each of the
three years in the period ended December 31, 2003 in conformity  with accounting
principles generally accepted in the United States of America.

We have also audited Schedule II for each of the three years in the period ended
December 31, 2003. In our opinion, this schedule, when considered in relation to
the  basic  financial  statements  taken as a  whole,  presents  fairly,  in all
material respects, the information therein.


   /s/ Grant Thornton LLP
------------------------------
Grant Thornton LLP
New York, New York
March 11, 2004

                                     II-14
<PAGE>

                    INNODATA ISOGEN, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                          DECEMBER 31, 2003 AND 2002
                            (DOLLARS IN THOUSANDS)

                                                         2003      2002
 ASSETS

 CURRENT ASSETS:
 Cash and equivalents                                  $  5,051    $  7,255
 Cash and equivalents - restricted                        1,000          --
 Accounts receivable-net of allowance for doubtful
   accounts of $1,219 in 2003 and $1,254 in 2002          8,497       3,253
 Prepaid expenses and other current assets                  999         706
 Refundable income taxes                                  1,075       1,491
 Deferred income taxes                                    1,421       1,501
                                                       --------    --------

       TOTAL CURRENT ASSETS                              18,043      14,206

PROPERTY AND EQUIPMENT - NET                              5,628       6,707

OTHER ASSETS                                                800       1,109

GOODWILL                                                    675         675
                                                       --------    --------
TOTAL                                                  $ 25,146    $ 22,697
                                                       ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

 Accounts payable                                      $  1,299    $    647
 Accrued expenses                                         1,152       2,008
 Accrued salaries and wages                               2,865       2,526
 Income and other taxes                                     598         455
 Current portion of capital lease obligations               146          --
                                                       --------    --------

       TOTAL CURRENT LIABILITIES                          6,060       5,636
                                                       --------    --------
DEFERRED INCOME TAXES                                     1,410       1,492
                                                       --------    --------
OBLIGATIONS UNDER CAPITAL LEASE                             272          --
                                                       --------    --------

COMMITMENTS AND CONTINGENT LIABILITIES

STOCKHOLDERS' EQUITY:
 Common stock, $.01 par value-authorized 75,000,000
   shares; issued - 22,535,000 shares in 2003 and
    22,046,000 shares in 2002                               226         220
 Additional paid-in capital                              15,413      14,084
 Retained earnings                                        3,739       3,264
                                                       --------    --------
                                                         19,378      17,568


 Less: treasury stock - at cost; 584,000 and
610,000 shares in 2003 and 2002, respectively            (1,974)     (1,999)
                                                       --------    --------



       TOTAL STOCKHOLDERS' EQUITY                        17,404      15,569
                                                       --------    --------
TOTAL                                                  $ 25,146    $ 22,697
                                                       ========    ========


                 See notes to consolidated financial statements
                                     II-15
<PAGE>

                    INNODATA ISOGEN, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                 YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                  2003        2002       2001

REVENUES                                        $ 36,714    $ 36,385   $ 58,278
                                                --------    --------   --------

OPERATING COSTS AND EXPENSES
    Direct operating costs                        27,029      32,005     44,354
    Selling and administrative expenses            8,898      10,038      8,337
    Provision for doubtful accounts                   --          --      2,942
    Restructuring costs and asset impairment          --         244        865
    Interest expense                                   9          29          9
    Interest income                                  (30)        (89)      (216)
                                                --------    --------   --------

               TOTAL                              35,906      42,227     56,291
                                                --------    --------   --------

INCOME (LOSS)  BEFORE PROVISION FOR  (BENEFIT
FROM) INCOME TAXES                                   808      (5,842)     1,987

PROVISION FOR (BENEFIT FROM) INCOME TAXES            333        (677)       639
                                                --------    --------   --------
NET INCOME (LOSS)                               $    475    $ (5,165)  $  1,348
                                                ========    ========   ========
BASIC INCOME  (LOSS)  PER SHARE                 $    .02    $   (.24)  $    .06
                                                ========    ========   ========
DILUTED INCOME (LOSS)  PER SHARE                $    .02    $   (.24)  $    .05
                                                ========    ========   ========

                 See notes to consolidated financial statements
                                     II-16
<PAGE>

                     INNODATA ISOGEN, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                       ADDITIONAL
                                    COMMON STOCK         PAID-IN    RETAINED    TREASURY
                                   SHARES    AMOUNT      CAPITAL    EARNINGS      STOCK       TOTAL
                                   ------    ------      -------    --------      -----       -----

<S>     <C>                       <C>       <C>         <C>         <C>         <C>         <C>
JANUARY 1, 2001                   21,688    $    217    $ 12,239    $  7,081    $   (221)   $ 19,316

Net income                            --          --          --       1,348          --       1,348

Issuance of common
  stock upon exercise of
  stock options                      605           6         384          --          --         390

Purchase of treasury stock            --          --          --          --      (1,639)     (1,639)

Retirement of treasury stock        (577)         (6)       (215)         --         221          --

Income tax benefit
  from exercise of stock
  options                             --          --         947          --          --         947
                                --------    --------    --------    --------    --------    --------

DECEMBER 31, 2001                 21,716         217      13,355       8,429      (1,639)     20,362


Net loss                              --          --          --      (5,165)         --      (5,165)

Issuance of common
  stock upon exercise of
  stock options                      318           3         107          --          --         110

Purchase of treasury stock            --          --          --          --        (360)       (360)

Non-cash compensation                 12          --         523          --          --         523

Income tax benefit
  from exercise of stock
  options                             --          --          99          --          --          99
                                --------    --------    --------    --------    --------    --------

DECEMBER 31, 2002                 22,046         220      14,084       3,264      (1,999)     15,569

Net income                            --          --          --         475          --         475

Issuance of common stock
  upon exercise of stock
  options                            515           6         565          --          --         571

Retirement of treasury
  stock                              (26)         --         (25)         --          25          --

Income tax benefit from
  exercise of stock
  options                             --          --         132          --          --         132

Non-cash compensation                 --          --         657          --          --         657
                                --------    --------    --------    --------    --------    --------

DECEMBER 31, 2003                 22,535    $    226    $ 15,413    $  3,739     $(1,974)    $17,404
                                ========    ========    ========    ========    ========    ========
</TABLE>

                 See notes to consolidated financial statements
                                     II-17
<PAGE>

                     INNODATA ISOGEN INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              2003       2002       2001
                                                              ----       ----       ----
 OPERATING ACTIVITIES:
  <S>                                                       <C>        <C>        <C>
  Net income (loss)                                          $   475    $(5,165)   $ 1,348
  Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
   Depreciation and amortization                               4,528      5,228      4,790
   Non-cash compensation                                         657        523         --
   Provision for doubtful accounts                                --         --      2,942
    Loss on disposal of fixed assets                             147         --         --
   Tax benefit from exercise of stock options                    132         99        947
   Restructuring costs and asset impairment                       --        244        865
   Deferred income taxes                                          (2)        30       (463)
   Changes in operating assets and liabilities, net of
   acquisition:
    Accounts receivable                                       (5,244)     4,593     (3,913)
    Prepaid expenses and other current assets                   (947)      (680)       545
    Refundable income taxes                                      416       (982)      (509)
    Other assets                                                 242        894       (723)
    Accounts payable                                             652       (811)      (907)
    Accrued expenses                                            (856)       601        365
    Accrued salaries and wages                                   339     (1,244)       (71)
    Income and other taxes                                       143       (280)      (376)
                                                             -------    -------    -------

       Net cash provided by operating activities                 682      3,050      4,840
                                                             -------    -------    -------
INVESTING ACTIVITIES:
  Increase in restricted cash                                 (1,000)        --         --
  Capital expenditures                                        (2,408)    (1,162)    (5,568)
  Payments in connection with acquisition                         --         --       (796)
                                                             -------    -------    -------

       Net cash used in investing activities                  (3,408)    (1,162)    (6,364)
                                                             -------    -------    -------

FINANCING ACTIVITIES:
  Payments of obligations under capital lease                    (49)        --         --
  Payment of acquisition notes                                    --       (650)        --
  Proceeds from exercise of stock options                        571        110        390
  Purchase of treasury stock                                      --       (360)    (1,639)
                                                             -------    -------    -------

       Net cash provided by (used in) financing activities       522       (900)    (1,249)
                                                             -------    -------    -------

(DECREASE) INCREASE IN CASH AND EQUIVALENTS                   (2,204)       988     (2,773)
CASH AND EQUIVALENTS, BEGINNING OF YEAR                        7,255      6,267      9,040
                                                             -------    -------    -------

CASH AND EQUIVALENTS, END OF YEAR                            $ 5,051    $ 7,255    $ 6,267
                                                             =======    =======    =======

SUPPLEMENTAL  DISCLOSURES  OF CASH FLOW  INFORMATION
  Cash paid during the year for:
   Income taxes                                              $   417    $   261    $ 1,513
   Interest expense                                          $    23    $    29    $    --
NON-CASH INVESTING AND FINANCING ACTIVITIES:
   Acquisition of equipment utilizing capital leases         $   467    $    --    $    --
</TABLE>

                 See notes to consolidated financial statements
                                     II-18
<PAGE>

                     INNODATA ISOGEN, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                  --------------------------------------------

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      BUSINESS  AND  BASIS  OF   PRESENTATION  -  Innodata   Isogen,   Inc.  and
subsidiaries  (the "Company"),  which on November 14, 2003 changed its name from
Innodata  Corporation to Innodata Isogen, Inc., is a leading provider of digital
asset  services  and  solutions.  The  Company's  solutions  encompass  both the
manufacture  of  content  (for  which  the  Company  provides  services  such as
digitization,  imaging,  data  conversion,  XML and  markup  services,  metadata
creation, advanced classification services, editorial and knowledge services) as
well as the design,  implementation,  integration  and deployment of the systems
used to manage  content  (for  which the  Company  provides  custom  application
development,  consulting and training.) through offices located both in the U.S.
and Asia. The consolidated financial statements include the accounts of Innodata
Isogen,  Inc.  and  its  subsidiaries,  all  of  which  are  wholly  owned.  All
intercompany transactions and balances have been eliminated in consolidation.

      USE OF ESTIMATES - In preparing  financial  statements in conformity  with
generally  accepted  accounting  principles,  management  is  required  to  make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the  financial  statements  and revenues and  expenses  during the  reporting
period. Actual results could differ from those estimates.

      REVENUE  RECOGNITION - Revenue for content  manufacturing  and outsourcing
services  is  recognized  in the  period in which  services  are  performed  and
delivered.

      The  company  recognizes  revenues  from  custom  application  and systems
integration development which requires significant  production,  modification or
customization  of software in accordance with Statement of Position  ("SOP") No.
97-2 "Software Revenue Recognition" and SOP No. 81-1 "Accounting for Performance
of Construction-Type and Certain  Production-Type  Contracts".  Revenue for such
services  billed  under  fixed  fee   arrangements   is  recognized   using  the
percentage-of-completion  method  under  contract  accounting  as  services  are
performed or output milestones are reached. The percentage completed is measured
either  by the  percentage  of  labor  hours  incurred  to date in  relation  to
estimated total labor hours or in consideration of achievement of certain output
milestones,  depending on the specific nature of each contract. For arrangements
in which percentage-of  completion  accounting is used, the Company records cash
receipts  from  customers  and billed  amounts due from  customers  in excess of
recognized  revenue as  billings in excess of revenues  earned on  contracts  in
progress  (which is  included  in accounts  receivable).  Revenue for  contracts
billed on a time and materials basis is recognized as services are performed.

      FOREIGN  CURRENCY - The functional  currency for the Company's  production
operations located in the Philippines,  India and Sri Lanka is U.S. dollars.  As
such, transactions  denominated in Philippine pesos, Indian and Sri Lanka rupees
were translated to U.S.  dollars at rates which  approximate  those in effect on
transaction  dates.  Monetary  assets  and  liabilities  denominated  in foreign
currencies at December 31, 2003 and 2002 were translated at the exchange rate in
effect as of those  dates.  Exchange  losses  resulting  from such  transactions
totaled  approximately  $9,000  and  $59,000  in 2003  and  2002,  respectively.
Exchange gains in 2001 resulting from such transactions totaled $75,000.

                                     II-19
<PAGE>

      STATEMENT OF CASH FLOWS - For financial statement purposes (including cash
flows), the Company considers all highly liquid debt instruments  purchased with
an  original   maturity  of  three  months  or  less  to  be  cash  equivalents.
Supplemental  disclosure of non-cash investing activities in 2001 (in thousands)
is as follows:

              Acquisition costs                         $1,514
              Acquisition notes issued                    (650)
              Other amounts payable                        (68)
                                                        ------
              Payments in connection with acquisition   $  796
                                                        ======

      DEPRECIATION - Property and equipment is depreciated on the  straight-line
method over the estimated useful lives of the related assets, which is generally
two to five years. Leasehold improvements are amortized on a straight-line basis
over the shorter of their estimated useful lives or the lives of the leases. The
Company  makes  estimates  regarding  the useful  lives of these  assets and any
changes in actual lives could  result in material  changes in the net book value
of these assets.  The Company evaluates the  recoverability of long-lived assets
whenever  adverse  events or  changes  in  business  climate  indicate  that the
expected  undiscounted future cash flows from the related asset may be less than
previously  anticipated.  If the net book value of the related asset exceeds the
undiscounted  future  cash  flows of the asset,  the  carrying  amount  would be
reduced to the present value of its expected future cash flows and an impairment
loss would be recognized. This analysis requires the Company to make significant
estimates and assumptions,  and changes in facts and circumstances  could result
in  material  changes  in the  carrying  value  of the  assets  and the  related
depreciation expense.

      GOODWILL AND OTHER INTANGIBLE  ASSETS - Statement of Financial  Accounting
Standard  ("SFAS") 142 requires  that  goodwill be tested for  impairment at the
reporting  unit level  (segment or one level below a segment) on an annual basis
and between annual tests in certain  circumstances.  Application of the goodwill
impairment test requires  judgment,  including the  identification  of reporting
units,  assigning assets and liabilities to reporting units,  assigning goodwill
to reporting  units,  and  determining  the fair value of each  reporting  unit.
Significant  judgments  required to estimate the fair value of  reporting  units
include estimating future cash flows, determining appropriate discount rates and
other  assumptions.  Changes in these estimates and assumptions could materially
affect the determination of fair value for each reporting unit.

      INCOME  TAXES -  Deferred  taxes are  determined  based on the  difference
between the financial  statement and tax 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 some or all of a  deferred  tax
asset will not be realized.  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
to the extent such  earnings  are not  anticipated  to be remitted to the United
States.

      ACCOUNTING  FOR  STOCK-BASED  COMPENSATION  - At December  31,  2003,  the
Company has various stock-based employee compensation plans, which are described
more fully in Note 7. The Company accounts for those plans under the recognition
and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees,  and related  Interpretations.  In general,  no stock-based  employee
compensation  cost is reflected  in the results of  operations,  unless  options
granted  under such plans have an exercise  price less than the market  value of
the  underlying  common  stock  on  the  date  of

                                     II-20
<PAGE>

grant. The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value  recognition  provisions of FASB
Statement No. 123,  Accounting  for  Stock-Based  Compensation,  to  stock-based
employee compensation.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                                          2003       2002       2001
                                                         (in thousands, except per share amounts)

<S>                                                           <C>        <C>        <C>
Net income (loss), as reported                                $   475    $(5,165)   $ 1,348


  Deduct: Total stock-based employee compensation
    determined under fair value based method, net of
    related tax effects                                        (3,193)    (2,315)    (2,185)

  Add: Compensation expense included in the
    determination of net income as reported, net of
    related tax effects, related to the extension of stock
    options                                                       455        318         --
                                                              -------    -------    -------

Pro forma net (loss) income                                   $(2,263)   $(7,162)   $  (837)
                                                              =======    =======    =======

Income (loss) per share:
    Basic - as reported                                       $   .02    $  (.24)   $   .06
                                                              =======    =======    =======
    Basic - pro forma                                         $  (.10)   $  (.33)   $  (.04)
                                                              =======    =======    =======

    Diluted - as reported                                     $   .02    $  (.24)   $   .05
                                                              =======    =======    =======
    Diluted - pro forma                                       $  (.10)   $  (.33)   $  (.04)
                                                              =======    =======    =======
</TABLE>


      FAIR VALUE OF FINANCIAL  INSTRUMENTS  - The Company has estimated the fair
value of financial  instruments  using  available  market  information and other
valuation methodologies in accordance with SFAS No. 107, "Disclosures About Fair
Value of Financial  Instruments."  Management  of the Company  believes that the
fair value of financial  instruments for which estimated fair value has not been
specifically  presented,   primarily  cash  and  accounts  receivable,   is  not
materially  different than the related  carrying value.  Determinations  of fair
value are based on subjective data and significant  judgment  relating to timing
of  payments  and  collections  and  the  amounts  to  be  realized.   Different
assumptions and/or estimation  methodologies might have a material effect on the
fair  value  estimates.  Accordingly,  the  estimates  of  fair  value  are  not
necessarily  indicative  of the amounts the Company  would  realize in a current
market exchange.

      ACCOUNTS  RECEIVABLE - The majority of the Company's  accounts  receivable
are due  from  secondary  publishers  and  information  providers.  The  Company
establishes credit terms for new clients based upon management's review of their
credit information and project terms, and performs ongoing credit evaluations of
its customers, adjusting credit terms when management believes appropriate based
upon payment history and an assessment of their current credit  worthiness.  The
Company  records  an  allowance  for  doubtful  accounts  for  estimated  losses
resulting  from the  inability  of its clients to make  required  payments.  The
Company  determines its allowance by considering a number of factors,  including
the  length  of time  trade  accounts  receivable  are past due,  the  Company's
previous loss history, the client's current ability to pay its obligation to the
Company,  and the condition of the general  economy and the

                                     II-21
<PAGE>

industry as a whole. The Company writes-off accounts receivable when they become
uncollectible,  and  payments  subsequently  received  on such  receivables  are
credited to the  allowance  for  doubtful  accounts.  While  credit  losses have
generally been within expectations and the provisions  established,  the Company
cannot  guarantee  that credit loss rates in the future will be consistent  with
those  experienced  in the past.  In addition,  there is credit  exposure if the
financial  condition of one of the Company's  major clients were to deteriorate.
In the event that the  financial  condition  of the  Company's  clients  were to
deteriorate,  resulting  in an  impairment  of their  ability to make  payments,
additional allowances may be necessary.

      INCOME  (LOSS)  PER  SHARE - Basic  earnings  per  share  is  based on the
weighted average number of common shares  outstanding  without  consideration of
potential  common  stock.  Diluted  earnings  per share is based on the weighted
average number of common and, if dilutive,  potential common shares outstanding.
The  calculation  takes into account the shares that may be issued upon exercise
of stock options,  reduced by the shares that may be repurchased  with the funds
and tax benefits received from the exercise,  based on average prices during the
year.

      ACCOUNTING FOR CERTAIN FINANCIAL  INSTRUMENTS WITH CHARACTERISTICS OF BOTH
LIABILITIES AND EQUITY - In May 2003, the FASB issued SFAS No. 150,  "Accounting
for Certain Financial  Instruments with  Characteristics of both Liabilities and
Equity"  ("SFAS No. 150").  SFAS No. 150 clarifies  the  accounting  for certain
financial  instruments with  characteristics  of both liabilities and equity and
requires that those  instruments be classified as  liabilities.  SFAS No. 150 is
effective for financial  instruments entered into or modified after May 31, 2003
and  otherwise  is  effective  at the  beginning  of the  first  interim  period
beginning  after June 15, 2003.  The adoption of SFAS No. 150 did not impact the
Company's Consolidated Financial Statements.

      CONSOLIDATION  OF VARIABLE  INTEREST  ENTITIES - In January 2003, the FASB
issued  Interpretation  No. 46,  "Consolidation of Variable  Interest  Entities"
("FIN No. 46"). FIN No.46 explains how to identify  variable  interest  entities
and how an enterprise  assesses its interests in a variable  interest  entity to
decide whether to consolidate  that entity.  In December,  2003, the FASB issued
FIN 46R which clarifies and modifies  certain  provisions of FIN 46. The Company
has evaluated FIN No. 46 and determined  that this  interpretation  did not have
any impact on the Company's Consolidated Financial Statements as the Company has
no variable interest entities.

2.    PROPERTY AND EQUIPMENT

      Property and equipment,  stated at cost less accumulated  depreciation and
amortization (in thousands), consist of the following:

               DECEMBER 31,                        2003      2002

               Equipment                        $14,608   $16,136
               Furniture and office equipment       820     1,037
               Leasehold improvements             2,342     2,314
                                                -------   -------
                   Total                         17,770    19,487

               Less accumulated depreciation
                  and amortization               12,142    12,780
                                                -------   -------
                                                $ 5,628   $ 6,707
                                                =======   =======

                                     II-22
<PAGE>

      As of  December  31,  2003 and 2002,  the net book value of  property  and
equipment  located at the Company's  production  facilities in the  Philippines,
India, and Sri Lanka was approximately $4,766,000 and $6,361,000, respectively.

      In 2003, the Company entered into a three year lease for certain equipment
located in one of its Philippine  facilities.  The equipment was  capitalized at
its fair market value of approximately  $641,000,  which represented the present
value of the minimum lease payments plus trade-in  value of exchanged  equipment
of $175,000. The loss on such trade-in approximated $58,000.

3.    ACQUISITION

      As of December 1, 2001,  the Company  acquired the operating  assets,  and
assumed certain designated  liabilities,  of the ISOGEN International  operating
division of DataChannel,  Inc.  ISOGEN  International  ("ISOGEN")  helps clients
across a variety of industries  with the design,  architecture,  implementation,
integration  and deployment of the systems that they use to manage  information.
It  specializes   in  consulting   and  training  in  the   knowledge-processing
technologies of XML (Extensible  Markup  Language),  SGML (Standard  Generalized
Markup Language), and other standards.

      The purchase price,  including acquisition costs, consisted of $796,000 in
cash, two acquisition  promissory notes,  each for $325,000,  plus an additional
$68,000 payable September 30, 2002 subject to realization of certain events. The
promissory  notes accrued  interest at a rate of 7% per annum,  and were paid in
2002.

4.    INCOME TAXES

      The  significant  components of the  provision  for (benefit  from) income
taxes (in thousands) are as follows:

<TABLE>
<CAPTION>
                                                              2003       2002        2001
         Current income tax expense (benefit):
            <S>                                            <C>        <C>        <C>
            Foreign                                        $    29    $    97    $    (7)
            Federal                                            230       (827)       906
         State and local                                        76         23        203
                                                           -------    -------    -------
                                                               335       (707)     1,102
         Deferred income tax expense (benefit) provision        (2)        30       (463)
                                                           -------    -------    -------
         Provision for (benefit from) income taxes         $   333    $  (677)   $   639
                                                           =======    =======    =======
</TABLE>

                                     II-23
<PAGE>

      Reconciliation of the U.S.  statutory rate with the Company's  effective
tax rate is summarized as follows:

                                                    2003       2002        2001

       Federal statutory rate                         35.0%   (35.0)%     35.0%


       Effect of:
          State income taxes (net of federal tax
            benefit)                                   5.9      0.6        1.8
          Foreign source losses for which no tax
            benefit is available                       7.3     23.8          -
          Effect of foreign tax holiday, net of
            foreign income not deemed
            permanently reinvested                   (24.0)    (3.4)      (5.3)
          Foreign taxes                                7.6        -        0.9
          Non deductible compensation                  5.9        -          -
          Other                                        3.5      2.4       (0.2)
                                                     -----    -----      -----

       Effective rate                                 41.2%    (11.6)%    32.2%
                                                     =====    =====      =====

      As of December 31, 2003 and 2002,  the  composition  of the  Company's net
deferred income taxes (in thousands) is as follows:

                                                    2003      2002

 Deferred income tax assets:
   Allowances not currently deductible             $ 1,358  $ 1,435
   Depreciation and amortization                       114      230

   Equity compensation not currently deductible        348      150
   Expenses not deductible until paid                   63       66
                                                   -------  -------
                                                     1,883    1,881
                                                   =======  =======

Deferred income tax liabilities:
   Foreign source income, not taxable
     until repatriated                              (1,872)  (1,872)
                                                   -------  -------
Net deferred asset                                 $    11  $     9
                                                   =======  =======

Net deferred income tax asset - current            $ 1,421  $ 1,501
Net deferred income tax liability - non current     (1,410)  (1,492)
                                                   -------  -------
Net deferred income tax asset                      $    11  $     9
                                                   =======  =======

5.    COMMITMENTS AND CONTINGENT LIABILITIES

      LINE OF CREDIT - The  Company  has $1 million  line of credit with a bank,
which is secured by a $1 million certificate of deposit.  Interest is charged at
the bank's  alternate  base rate (4% at December 31, 2003).  The line expires on
May 31, 2004.

      LEASES - The Company is obligated under various operating lease agreements
for office and production space.  Certain  agreements contain escalation clauses
and requirements  that the Company pay taxes,  insurance and maintenance  costs.
The lease  agreements for production  space in most overseas  facilities,  which
expire through 2010, contain provisions pursuant to which the Company may cancel
the leases upon three months notice, generally subject to forfeiture of security
deposit.  The annual  rental for the  cancelable  leased space is  approximately
$1,000,000.  For the years ended December 31, 2003,  2002 and 2001, rent expense
for office and production space totaled approximately $1,700,000, $2,100,000 and
$1,900,000, respectively.


                                      II-24
<PAGE>

      In  addition,  the  Company  leases  certain  equipment  under  short-term
operating  lease  agreements.  For the years ended  December 31, 2003,  2002 and
2001,  rent expense for equipment  totaled  approximately  $36,000,  $46,000 and
$400,000, respectively.

      At  December  31,  2003,  future  minimum  annual  rental  commitments  on
non-cancelable leases (excluding operating leases with terms less than one year)
(in thousands) are as follows:


                                            OPERATING     CAPITAL
                                              LEASES       LEASES

        2004                                $   600       $   171
        2005                                    587           171
        2006                                    585           115
        2007                                    579             -
        2008                                    611             -
        Thereafter                              855             -
                                            -------       -------
                                            $ 3,817           457
                                            =======
        Less: Amounts representing interest
        (7% per annum)                                         39
                                                          -------
        Present value of minimum lease payments           $   418
                                                          =======

      LITIGATION AND FOREIGN TAX  ASSESSMENTS - In connection with the cessation
of all  operations at certain  foreign  subsidiaries  (Note 10),  certain former
employees  have filed  various  illegal  dismissal  actions  in the  Philippines
seeking,  among other  remedies,  reinstatement  of employment,  payment of back
wages and damages approximating one million dollars. Outside counsel has advised
management that under the circumstances, the Company is not legally obligated to
pay severance to such  terminated  employees.  Based upon the advice of counsel,
management  believes the actions are substantially  without merit and intends to
defend the actions vigorously.

      In addition,  one of the foreign  subsidiaries which ceased operations has
been  presented  with a tentative  tax  assessment by the  Philippine  Bureau of
Internal Revenue for an amount approximating  $400,000, plus applicable interest
and  penalties.  Management  believes the tentative  assessment  is  principally
without  substance  and any amounts that might  ultimately be paid in settlement
(which is not expected to be material) have been accrued.

      In  addition,  the  Company is subject to various  legal  proceedings  and
claims which arise in the ordinary course of business.

      While  management  currently  believes that that  ultimate  outcome of all
these  proceedings  will not have a  material  adverse  effect on the  Company's
financial  position or overall  trends in results of  operations,  litigation is
subject to inherent  uncertainties.  Were an unfavorable  ruling to occur, there
exists the possibility of a material adverse impact on the operating  results of
the period in which the ruling  occurs.  In addition,  the estimate of potential
impact on the Company's  financial position or overall results of operations for
the above legal proceedings could change in the future.


                                      II-25
<PAGE>

      FOREIGN CURRENCY - The Company's production  facilities are located in the
Philippines,  India and Sri Lanka.  To the extent that the  currencies  of these
countries  fluctuate,  the  Company  is subject  to risks of  changing  costs of
production after pricing is established for certain customer projects.  However,
most significant contracts contain provisions for price renegotiation.

      EMPLOYMENT  AGREEMENTS  - On January 1, 2004,  the Company  entered into a
four  year  employment  agreement  with the  co-founder  of  ISOGEN  to serve as
Executive Vice President of the Company.  Pursuant to the agreement,  he will be
compensated  at a rate of  $250,000  per annum for the first  year,  subject  to
annual  review  for  discretionary  annual  increases  thereafter,  and  will be
eligible to receive an annual cash bonus, the amount of which will be based upon
meeting  certain  goals.  In addition,  on November 10, 2003,  he was granted an
option to purchase  200,000  shares of the  Company's  common stock at $3.35 per
share.  In  connection  with  his  previous  employment  agreement,  in 2002 the
executive  was granted an option to  purchase  150,000  shares of the  Company's
common stock at $4.00 per share,  and was issued 11,587  unregistered  shares of
the Company's common stock.  Compensation  expense of approximately  $10,000 was
recorded  in the year ended  December  31,  2002 as selling  and  administrative
expenses pursuant to the stock issuance.

      In May 2001, the Company  entered into an agreement with its then Chairman
of the Board pursuant to which he will continue to serve as a part-time employee
at a salary of $2,000 per month for five years.  In  addition,  the Company paid
him $400,000 in exchange for a six year non-compete agreement, which is included
in other  assets  and is being  amortized  over  the term of the  agreement.  On
December 31, 2003, the unamortized balance was $222,000.

      PHILIPPINE  PENSION  REQUIREMENT  -  The  Philippine   government  enacted
legislation  requiring  businesses  to  provide a  lump-sum  pension  payment to
employees working at least five years and who are employed by the Company at age
60. Those eligible employees are to receive approximately 60% of one month's pay
for each year of  employment  with the  Company.  The  liability  for the future
payment is  insignificant  at December  31,  2003.  Under the  legislation,  the
Company is not required to fund future costs, if any.

      INDEMNIFICATIONS - The Company is obligated under certain circumstances to
indemnify directors and certain officers against costs and liabilities  incurred
in actions or threatened  actions brought  against such individual  because such
individuals  acted in the  capacity of director and / or officer of the Company.
In addition,  the Company has contracts with certain  clients  pursuant to which
the Company has agreed to indemnify the client for certain specified and limited
claims. These indemnification obligations are in the ordinary course of business
and,  in many  cases,  do not  include  a limit on a  maximum  potential  future
payments.  As of December 31, 2003, the Company has not recorded a liability for
any obligations arising as a result of these indemnifications.

      LIENS - In connection with the procurement of tax incentives at one of the
company's foreign subsidiaries, the foreign zoning authority was granted a first
lien on the subsidiary's  property and equipment.  As of December 31, 2003, such
equipment had a book value of $543,000.


                                      II-26
<PAGE>

6.    CAPITAL STOCK

      COMMON STOCK - On March 23, 2001,  the Company  paid a  two-for-one  stock
dividends.  In addition, in 2001 the stockholders increased the number of common
shares  the  Company  is  authorized  to  issue  to  75,000,000.  The  financial
statements  and notes thereto,  including all share and per share amounts,  have
been restated to reflect such split.

      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  which  differ as to their  relative  terms,  rights,
preferences and limitations.

      STOCKHOLDER  RIGHTS PLAN - On December  16,  2002,  the Board of Directors
adopted a Stockholder  Rights Plan ("Rights  Plan") in which one right ("Right")
was  declared  as a  dividend  for each  share  of the  Company's  common  stock
outstanding.  The  purpose  of the plan is to deter a  hostile  takeover  of the
Company. Each Right entitles its holders to purchase,  under certain conditions,
one  one-thousandth  of a share  of  newly  authorized  Series  C  Participating
Preferred  Stock  ("Preferred  Stock"),  with one  one-thousandth  of a share of
Preferred  Stock intended to be the economic and voting  equivalent of one share
of the Company's  common stock.  Rights will be exercisable  only if a person or
group  acquires  beneficial  ownership  of 15%  (25% in the  case  of  specified
executive  officers of the  Company) or more of the  Company's  common  stock or
commences a tender or exchange offer, upon the consummation of which such person
or group would  beneficially own such percentage of the common stock.  Upon such
an event,  the Rights  enable  dilution  of the  acquiring  person's  or group's
interest by  providing  that other  holders of the  Company's  common  stock may
purchase,  at an exercise  price of $4.00,  the Company's  common stock having a
market  value of $8.00 based on the then market  price of the  Company's  common
stock, or at the discretion of the Board of Directors,  Preferred Stock,  having
double the value of such exercise price.  The Company will be entitled to redeem
the  Rights at $.001  per right  under  certain  circumstances  set forth in the
Rights  Plan.  The Rights  themselves  have no voting  power and will  expire on
December 26, 2012, unless earlier exercised, redeemed or exchanged.

      COMMON STOCK  RESERVED - As of December 31, 2003, the Company had reserved
for issuance  approximately  9,285,000  shares of common  stock  pursuant to the
Company's stock option plans (including an aggregate of 1,015,164 options issued
to the  Company's  Chairman  which  were not  granted  pursuant  to  stockholder
approved  stock  option  plans) and  500,000  shares of common  stock to use for
..grants as the Company's Board of Directors deems appropriate.

      TREASURY  STOCK - During the year ended  December  31,  2002,  the Company
repurchased 340,000 shares of its common stock at a cost of $360,000.

      In August 2002, the Board of Directors  authorized the repurchase of up to
$1.5 million of the Company's  common stock, of which  approximately  $1,140,000
remains available for repurchase under the program at December 31, 2003.

7.    STOCK OPTIONS

      The  Company  adopted,  with  stockholder   approval,   1993,  1994,  1994
Disinterested Director, 1995, 1996, 1998, 2001, and 2002 Stock Option Plans (the
"1993 Plan," "1994 Plan," "1994 DD Plan," "1995 Plan," "1996 Plan," "1998 Plan,"
"2001  Plan," and "2002  Plan")  which  provide  for the  granting of options to
purchase not more than an aggregate of 1,050,000, 1,260,000, 210,000, 2,400,000,
1,999,992, 3,600,000, 900,000, and 950,000 shares of common stock, respectively,
subject to adjustment under certain circumstances. Such options may be incentive
stock options  ("ISOs") within the meaning of the Internal Revenue Code of 1986,
as amended, or options that do not qualify as ISOs ("Non-Qualified Options").


                                      II-27
<PAGE>

      The option  exercise  price per share may not be less than the fair market
value per share of common  stock on the date of grant  (110% of such fair market
value for an ISO,  if the  grantee  owns stock  possessing  more than 10% of the
combined  voting power of all classes of the  Company's  stock).  Options may be
granted under the Stock Option Plan to all officers, directors, and employees of
the Company  and,  in  addition,  Non-Qualified  Options may be granted to other
parties who perform  services for the Company.  No options may be granted  under
the 1994 Plan and 1994 DD Plan after May 19, 2004; under the 1995 Plan after May
16, 2005; under the 1996 Plan after July 8, 2006; under the 1998 Plan after July
8, 2008;  under the 2001 Plan after May 31, 2011;  and under the 2002 Plan until
after June 30, 2012.

      The Plans may be amended  from time to time by the Board of  Directors  of
the  Company.  However,  the Board of  Directors  may not,  without  stockholder
approval, amend the Plans to increase the number of shares of common stock which
may be  issued  under  the Plans  (except  upon  changes  in  capitalization  as
specified in the Plans),  decrease the minimum  exercise  price  provided in the
Plans or change the class of persons eligible to participate in the Plans.

      The Company has adopted the  disclosure-only  provisions  of SFAS No. 123,
"Accounting  for Stock  Based  Compensation."  Accordingly,  to the  extent  the
exercise  price of options  granted to employees is equal to or greater than the
market value of the underlying  common stock on the date of grant,  compensation
expense  is  not  recognized  for  stock  options  granted  to  employees.   Had
compensation cost for the Company's stock option grants been determined based on
the fair value at the grant date for awards in 2003, 2002, and 2001,  consistent
with the provisions of SFAS No. 123, the Company would have reflected a net loss
of approximately $2.3 million or $(.10) basic and diluted in 2003; a net loss of
approximately  $7.1 million or $(.33) basic and diluted in 2002;  and a net loss
of $837,000 or $(.04) per share,  basic and diluted,  in 2001. The fair value of
options at date of grant was  estimated  using the  Black-Scholes  pricing model
with the following weighted average assumptions:  expected life of six years for
options  granted  in 2003 and four years for  options  granted in 2002 and 2002;
risk free interest rate of 4.2% in 2003, 3.5% in 2002, and 5% in 2001,  expected
volatility of 140% in 2003, 119% in 2002 and 118% in 2001.

      The  following  table  presents  information  related to stock options for
2003, 2002 and 2001.


                                      II-28
<PAGE>

<TABLE>
<CAPTION>

                                            WEIGHTED
                                            AVERAGE    WEIGHTED             WEIGHTED
                 PER SHARE                  REMAINING  AVERAGE              AVERAGE
                 RANGE OF      NUMBER      CONTRACTUAL EXERCISE   NUMBER    EXERCISE
                 EXERCISE      OUTSTANDING    LIFE      PRICE   EXERCISABLE  PRICE
                 PRICES
                 ------------  ----------  ----------  -------- ----------  --------

<S>               <C>         <C>            <C>       <C>       <C>      <C>
Balance 1/1/01   $0.25 - 0.47   1,019,640       2       $0.34    1,019,640   $0.34
                 $0.50 - 0.75   2,858,632       3       $0.58    2,429,632   $0.56
                 $1.29            399,996       2       $1.29     399,996    $1.29
                 $1.56 - 2.25   2,699,108       4       $1.90     295,984    $1.73
                 $2.50 - 2.69     343,200       5       $2.52            -       -
                               ----------                       ----------
                                7,320,576                        4,145,252
                                                                ==========

   Cancelled     $2.00 - 6.10    (156,127)              $3.83
   Granted       $3.05 - 6.57   1,292,200               $5.42
   Exercised     $0.25 - 4.00    (605,357)              $0.71
                               ----------

Balance 12/31/01 $0.25 - 0.47     979,644       1       $0.35      979,644   $0.35
                 $0.50 - 0.75   2,406,818       2       $0.58    2,406,818   $0.58
                 $1.29            399,996       1       $1.29      399,996   $1.29
                 $1.56 - 2.25   2,564,992       4       $1.89      928,903   $1.87
                 $2.50 - 2.69     277,642       4       $2.50       80,519   $2.50
                 $3.05 - 4.60      29,200       4       $3.70            0       -
                 $5.43 - 5.89   1,180,000       4       $5.45            0       -
                 $6.00 - 6.57      13,000       4       $6.21            0       -
                               ----------                       ----------
                                7,851,292                        4,795,880
                               ==========                       ==========

   Cancelled     $0.25 - 6.22    (489,482)              $1.29
   Granted       $1.00 - 4.60     220,750               $3.64
   Exercised     $0.25 - 0.50    (317,676)              $0.35
                               ----------

Balance 12/31/02 $0.25 - 0.47     445,668       2       $0.41      445,668   $0.41
                 $0.50 - 0.75   2,347,922       2       $0.59    2,347,922   $0.59
                 $1.00 - 1.29     409,996       5       $1.28      399,996   $1.28
                 $1.56 - 2.25   2,421,548       3       $1.88    1,524,469   $1.87
                 $2.50            228,800       3       $2.50      124,026   $2.50
                 $3.00 - 4.60     232,950       5       $3.74       12,105   $3.68
                 $5.43 - 5.89   1,170,000       4       $5.45      544,855   $5.45
                 $6.00 - 6.57       8,000       4       $6.24        3,416   $6.25
                               ----------                       ----------
                                7,264,884                        5,402,457
                                                                ==========

   Cancelled                     (127,176)              $2.42
   Granted                      1,002,000               $3.40
   Exercised                     (550,328)              $1.14
                               ----------

Balance 12/31/03 $0.25 - 0.47     445,668       7       $0.41      445,668   $0.41
                 $0.50 - 0.75   2,003,472       7       $0.59    2,003,472   $0.59
                 $1.00 - 1.29     409,996       4       $1.28      400,551   $1.29
                 $1.56 - 2.25   2,172,294       2       $1.86    1,836,132   $1.84
                 $2.50            194,200       2       $2.50      152,808   $2.50
                 $3.00 - 4.60   1,185,750       9       $3.49      112,679   $3.86
                 $5.43 - 5.89   1,170,000       2       $5.45      823,478   $5.45
                 $6.00 - 6.57       8,000       2       $6.24        5,416   $6.25
                               ----------                       ----------
                                7,589,380                        5,780,204
                               ==========                       ==========
</TABLE>


                                      II-29
<PAGE>

      Options granted prior to 2003 vest over a four year period and have a five
year life.  In 2003,  substantially  all options  granted  vest over a four year
period and have a ten year life. The weighted  average fair value as of the date
of grant for options granted in 2003, 2002 and 2001 is $3.21,  $3.64, and $4.25,
respectively.

      In 2003, the Company  extended the expiration  date of options  granted to
certain  officers,  directors  and  employees,  substantially  all of which were
vested, to purchase 315,000,  566,000,  522,000 and 133,000 shares of its common
stock at $.47,  $.50,  $.67 and  $2.00,  respectively.  In  connection  with the
extension,  the option  holders agreed not to sell shares of stock acquired upon
exercise of the extended  options for designated  periods of time ending between
June 2004 to March  2005.  In  connection  with this  transaction,  compensation
expense of  approximately  $650,000 was  recorded in the second  quarter of 2003
based upon the difference between the exercise price and the market price of the
underlying  common  stock on the date the options  were  extended.  Compensation
expense is included as a component of selling and administrative expenses.

      In 2002, the Company  extended the expiration date of options to the Chief
Executive  Officer to  purchase  6,672,  248,496,  360,000,  399,996 and 123,996
shares of its  common  stock at $.42,  $.50,  $.58,  $1.29 and $.25,  per share,
respectively.  In  connection  with this  transaction,  compensation  expense of
approximately  $513,000  was  recorded  in the  third  quarter  as  selling  and
administrative  expenses.  In addition,  the Company issued 11,587 shares of its
common stock pursuant to an employment agreement with an officer of the Company.
Compensation expense of approximately  $10,000 was recorded in the third quarter
of 2002 as selling and  administrative  expenses.  No  compensation  expense was
recognized  in connection  with stock option grants for the year ended  December
31, 2001 since the  exercise  price of options  granted  equaled or exceeded the
market value of the underlying common stock on the date of grant.

8.    SEGMENT REPORTING AND CONCENTRATIONS

      As a result of the acquisition of ISOGEN  International  in December 2001,
the Company's management currently monitors its operations through two reporting
segments:  (1) content services and (2) professional services (formerly referred
to as systems integration and training).  The content services operating segment
aggregates, converts, tags and editorially enhances digital content and performs
XML  transformations.  The Company's  professional  services  operating  segment
offers system design, custom application  development,  consulting services, and
systems integration conforming to XML and related standards and provides a broad
range of  introductory  as well as advanced  curricula  and  training on XML and
other knowledge management standards.


                                      II-30
<PAGE>

                                           2003        2002         2001
                                                  (IN THOUSANDS)
Revenues
Content services                          $29,977     $33,089      $57,825
Professional services                       6,737       3,296          453
                                         --------    --------     --------
Total consolidated                        $36,714     $36,385      $58,278
                                         ========    ========     ========

Income (loss) before income taxes (a)
Content services                          $  (420)    $(3,326)     $ 1,959

Professional services                       1,228      (2,516)          28
                                         --------    --------     --------
Total consolidated                        $   808     $(5,842)     $ 1,987
                                         ========    ========     ========

    (a)  In  2002  and  2001,  corporate  overhead  was  not  allocated  to  the
professional services segment. In 2003, corporate overhead has been allocated to
the professional services segment based upon a percentage of consolidated sales.
For  comparative  purposes,  income  before  income  taxes for the  years  ended
December 31 2002 and 2001 have been reclassified to allocate  corporate overhead
using a method consistent with 2003.

                                             DECEMBER 31,
                                           2003        2002
                                           (IN THOUSANDS)

Total assets
Content services                          $20,986     $20,721
Professional services                       4,160       1,976
                                         --------    --------
Total consolidated                        $25,146     $22,697
                                         ========    ========

      One client  accounted  for 33% and 17% of the  Company's  revenues for the
years  ended  December  31,  2003 and  2002  respectively,  and a second  client
accounted  for 30% of the  Company's  revenues  for the year ended  December 31,
2002. One other client, which substantially curtailed operations,  accounted for
30% in the year ended  December 31, 2001.  No other client  accounted for 10% or
more of revenues  during this period.  Further,  in the years ended December 31,
2003, 2002 and 2001,  export revenues,  substantially  all of which were derived
from European  clients,  accounted for 47%, 23%, and 13%,  respectively,  of the
Company's revenues.

      A significant amount of the Company's revenues are derived from clients in
the  publishing  industry.   Accordingly,   the  Company's  accounts  receivable
generally include significant amounts due from such clients. In addition,  as of
December 31, 2003,  approximately 39% of the Company's  accounts  receivable was
from foreign (principally European) clients.

9.    INCOME (LOSS) PER SHARE
                                            2003       2002         2001
                                      (in thousands, except per share  amounts)

Net income (loss)                         $   475    $ (5,165)     $ 1,348
                                         ========    ========     ========
Weighted average common shares
 outstanding                               21,570      21,489       21,332
Dilutive effect of outstanding options      1,396           -        3,312
                                         --------    --------     --------

Adjusted for dilutive computation          22,966      21,489       24,644
                                         ========   =========     ========
Basic income (loss) per share             $   .02    $   (.24)        $.06
                                         ========   =========     ========
Diluted income (loss) per share           $   .02    $   (.24)        $.05
                                         ========   =========     ========


                                      II-31
<PAGE>

      Diluted  net loss per  share in 2002  does not  include  potential  common
shares derived from stock options because they are  antidilutive.  The number of
antidilutive  securities  excluded from the dilutable loss per share calculation
were 1,542,000 for the year ended December 31, 2002.

10.   RESTRUCTURING COSTS AND ASSET IMPAIRMENT

      During the fourth quarter 2001, the Company  commenced  certain actions to
reduce  production  operations  at a  wholly  owned  Asian  subsidiary  that was
operating  at a loss  and to  reduce  overall  excess  capacity  in  Asia.  Such
activities,  which  culminated in the cessation and closure of all operations at
such  subsidiary  and included  employee  layoffs,  were  completed in 2002.  In
addition,  during 2002 the Company  closed a second  facility,  resulting in the
write-off of property and equipment associated with the closed facility totaling
approximately  $244,000.  Such  write-off of equipment  has been  classified  as
Restructuring Costs and Asset Impairment for the year ended December 31, 2002.

      Included in  Restructuring  Costs and Asset  Impairment for the year ended
December 31, 2001 are  estimated  facility  closure  costs,  including  employee
related  costs,   approximating   $600,000,   and  the  write-off  of  leasehold
improvement  costs totaling  approximately  $265,000.  In 2002, the Company paid
approximately $350,000 in closing costs.

11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

                                  FIRST     SECOND       THIRD      FOURTH
                                 QUARTER    QUARTER     QUARTER     QUARTER
                                        (in thousands, except per share)
2003
Revenues                           $6,653  $8,056     $11,184      $10,821
Net income (loss)                  (1,113)   (636)      1,490          734

Net income (loss) per share         $(.05)  $(.03)       $.07         $.03

Diluted net income (loss) per share $(.05)  $(.03)       $.06         $.03

2002
Revenues                          $12,556 $10,389      $7,278        $6,162
Net income (loss)                     243    (899)     (2,521)      (1,988)
Net income (loss) per share          $.01   $(.04)      $(.12)       $(.09)
Diluted net income (loss) per share  $.01   $(.04)      $(.12)       $(.09)

12.   SUBSEQUENT EVENT

      For the year ended  December 31, 2001,  the Company  provided an allowance
for doubtful accounts of approximately  $2.6 million  representing the remaining
balance due at December  31,  2001 from a client that  accounted  for 30% of its
2001  revenues  because the client has reported an  inability  to raise  further
operating funds required to make payment. In January 2004, the Company reached a
settlement with this client to pay $1,000,000  cash as full  satisfaction of the
outstanding  balance due to the Company.  The $1,000,000  will be reflected as a
bad  debt  recovery  income  in  the  Company's  first  quarter  2004  financial
statements.


                                      II-32
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None

ITEM 9A.  CONTROLS AND PROCEDURES

      The Company maintains disclosure controls and procedures that are designed
to ensure that  information  required to be disclosed in the Company's  Exchange
Act reports is recorded,  processed,  summarized  and  reported  within the time
periods  specified in the SEC's rules and forms,  and that such  information  is
accumulated and  communicated to the Company's  management,  including its Chief
Executive  Officer and  Principal  Financial  Officer to allow timely  decisions
regarding required  disclosure.  Management  necessarily applied its judgment in
assessing the costs and benefits of such controls and procedures which, by their
nature, can provide only reasonable  assurance  regarding  management's  control
objectives.  Management,  including the Company's Chief Executive  Officer along
with the Company's  Principal  Financial  Officer,  concluded that the Company's
disclosure  controls  and  procedures  are  effective  in reaching  the level of
reasonable assurance regarding management's control objectives.

      The Company has carried out an evaluation,  under the supervision and with
the  participation  of the Company's  management,  including the Company's Chief
Executive Officer along with the Company's  Principal  Financial Officer, of the
effectiveness of the design and operation of the Company's  disclosure  controls
and  procedures  pursuant  to  Exchange  Act  Rule  13a-15(b).  Based  upon  the
foregoing,  as of December 31, 2003, the Company's Chief Executive Officer along
with the Company's  Principal  Financial  Officer,  concluded that the Company's
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating  to  the  Company  (including  its  consolidated
subsidiaries)  required to be included in the  Company's  Exchange  Act reports.
There has been no change during the Company's  fiscal quarter ended December 31,
2003 in the  Company's  internal  control  over  financial  reporting  that  was
identified in  connection  with the foregoing  evaluation  which has  materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.

                                     II-33

<PAGE>


                                   PART III

ITEM 10.  DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
          SECTION 16(A) OF THE EXCHANGE ACT.

      The  information  concerning  the  Company's  required  by  this  Item  is
incorporated  by reference to the Company's  proxy  statement  under the heading
"Executive  Officers".   The  information  concerning  the  Company's  Directors
required  by this Item is  incorporated  by  reference  to the  Company's  proxy
statement  under the heading  "Election of  Directors".  Information  concerning
compliance  by the  Company's  officers,  Directors  and 10%  stockholders  with
Section  16(a)  of the  Securities  Exchange  Act of  1934  is  incorporated  by
reference to the  information  contained in the Company's  Proxy Statement under
the  heading  "Section  16(a)  Beneficial   Ownership   Reporting   Compliance."
Information  regarding  the  presence  of an audit  committee  financial  expert
required  by this Item is  incorporated  by  reference  to the  Company's  Proxy
Statement under the heading "Audit Committee."

      The  Company  has  adopted a code of  ethics  that  applies  to all of its
employees,  officers, and directors,  including its principal executive officer,
principal  financial and accounting  officer,  and  controller.  The text of the
Company's  code of ethics is posted on its  website at  www.innodata-isogen.com.
The Company intends to disclose future  amendments to, or waivers from,  certain
provisions  of the code of  ethics  for  executive  officers  and  directors  in
accordance with applicable NASDAQ and SEC requirements.

ITEM 11.  EXECUTIVE COMPENSATION.

EXECUTIVE COMPENSATION

      The  information  called for by Item 11 is  incorporated by reference from
the  Company's  definitive  proxy  statement  for the  2004  Annual  Meeting  of
Stockholders  to be filed  pursuant to Regulation  14A under the Exchange Act no
later than 120 days after the end of the Company's 2003 fiscal year. Information
appearing under the captions  "Report of the Compensation  Committee;  Report of
the Section  162(m)  subcommittee";  "Report of the Audit  Committee" and "Stock
Performance  Graph" to be included in the Company's 2004 Proxy  Statement is not
incorporated herein by this reference.

ITEM 12. SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

      The  information  called for by Item 12 is  incorporated by reference from
the  Company's  definitive  proxy  statement  for the  2004  Annual  Meeting  of
Stockholders  to be filed  pursuant to Regulation  14A under the Exchange Act no
later than 120 days after the end of the Company's 2003 fiscal year.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      The  information  called for by Item 13 is  incorporated by reference from
the  Company's  definitive  proxy  statement  for the  2004  Annual  Meeting  of
Stockholders  to be filed  pursuant to Regulation  14A under the Exchange Act no
later than 120 days after the end of the Company's 2003 fiscal year.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The  information  called for by Item 14 is  incorporated by reference from
the  Company's  definitive  proxy  statement  for the  2004  Annual  Meeting  of
Stockholders  to be filed  pursuant to Regulation  14A under the Exchange Act no
later than 120 days after the end of the Company's 2003 fiscal year.


                                      III-1
<PAGE>

                                   PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Exhibits  which are  indicated  as being  included in previous  filings are
incorporated herein by reference.

EXHIBIT DESCRIPTION                    FILED AS EXHIBIT

3.1 (a) Restated Certificate of        Filed herewith
        Incorporation filed on
        April 29, 1993

3.1 (b) Certificate of Amendment of    Filed herewith
        Certificate of
        Incorporation of Innodata
        Corporation filed on
        March 1, 2001

3.1 (c) Certificate of Amendment of    Filed herewith
        Certificate of
        Incorporation of Innodata
        Corporation filed on
        November 14, 2003

3.2     Form of Amended and Restated   Exhibit 3.1 to Form 8-K dated December
        By-Laws                        16, 2002

3.3     Form of Certificate of         Filed as Exhibit A to Exhibit 4.1 to Form
        Designation of                 8-K dated
        Series C Participating         December 16, 2002
        Preferred Stock

4.2     Specimen of Common Stock       Exhibit 4.2 to Form SB-2 Registration
        certificate                    Statement No. 33-62012

4.3     Form of Rights Agreement,      Exhibit 4.1 to Form 8-K dated December
        dated as of                    16, 2002
        December 16, 2002 between
        Innodata Corporation
        and American Stock Transfer &
        Trust Co., as
        Rights Agent

10.1    1994 Stock Option Plan         Exhibit A to Definitive Proxy dated
                                       August 9, 1994

10.2    1993 Stock Option Plan         Exhibit 10.4 to Form SB-2 Registration
                                       Statement No. 33-62012

10.3    Form of Indemnification        Exhibit 10.3 to Form 10-K dated December
        Agreement                      31, 2002

10.4    1994 Disinterested Directors   Exhibit B to Definitive Proxy dated
        Stock Option Plan              August 9, 1994

10.5    1995 Stock Option Plan         Exhibit A to Definitive Proxy dated
                                       August 10, 1995

10.6    1996 Stock Option Plan         Exhibit A to Definitive Proxy dated
                                       November 7, 1996

10.7    1998 Stock Option Plan         Exhibit A to Definitive Proxy dated
                                       November 5, 1998

10.8    2001 Stock Option Plan         Exhibit A to Definitive Proxy dated June
                                       29, 2001

10.9    2002 Stock Option Plan         Exhibit A to Definitive Proxy dated
                                       September 3, 2002

10.10   Employment Agreement dated as  Filed herewith
        of January 1, 2004 with George
        Kondrach

                                      IV-1
<PAGE>

21  Significant subsidiaries of Filed herewith the registrant

23      Consent of Grant Thornton LLP   Filed herewith

31.1    Certificate  of Chief  Executive  Filed  herewith  Officer and Principal
        Financial Officer pursuant to Section 302 of the  Sarbanes-Oxley  Act of
        2002.

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

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

(b)   Form 8-K Report. None.

(d)   Financial Statement Schedules

      Schedule II - Valuation and Qualifying Accounts

                                      IV-2
<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       INNODATA ISOGEN, INC.


                                       By  /s/
                                           -------------------------------------
                                           Jack Abuhoff
                                           Chairman of the Board of Directors,
                                           Chief Executive Officer and President

      In accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

Signature                      Title                            Date

                               Chairman of the Board of         March 26, 2004
   /s/                         Directors,
------------------------------
Jack Abuhoff                   Chief Executive Officer and
                               President

   /s/                         Vice Chairman of the Board of    March 26, 2004
------------------------------
Todd Solomon                   Directors and Consultant

   /s/                         Vice President - Finance         March 26, 2004
------------------------------
Stephen Agress                 Chief Accounting Officer
                               (Principal Accounting and
                               Financial Officer)


                               Director                         March 26, 2004
------------------------------
Haig S. Bagerdjian


   /s/                         Director                         March 26, 2004
------------------------------
Louise C. Forlenza

   /s/                         Director                         March 24, 2004
------------------------------
Dr. Charles F. Goldfarb

   /s/                         Director                         March 26, 2004
------------------------------
John R. Marozsan


<PAGE>

                              INNODATA ISOGEN, INC.
                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS
                             (DOLLARS IN THOUSANDS)

Activity in the Company's  allowance  for doubtful  accounts for the years ended
December 31, 2003, 2002 and 2001 was as follows:

<TABLE>
<CAPTION>
                                                      ADDITIONS
                                        -------------------------------------
                  BALANCE AT                CHARGED TO           CHARGED TO                                  BALANCE AT
PERIOD        BEGINNING OF PERIOD       COSTS AND EXPENSES     OTHER ACCOUNTS            DEDUCTIONS          END OF PERIOD
------        -------------------       ------------------     --------------            ----------          -------------

<S>                 <C>                     <C>                   <C>                 <C>                     <C>
 2003               $1,254                  $  -                  $  -                $    (35)               $1,219

 2002               $1,853                  $  -                  $  -                $   (599)               $1,254

 2001               $  884                  $2,942                $  -                $ (1,973)               $1,853
</TABLE>