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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington D.C. 20549

FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010Oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                    to


Commission File Number 001-33287

Information Services Group, Inc.(Exact name of registrant as specified in its charter)

Delaware(State of Incorporation)

20-5261587(I.R.S. Employer Identification Number)


Two Stamford Plaza
281 Tresser Boulevard
Stamford, CT 06901(Address of principal executive offices and zip code)

Registrant's
telephone number, including area code:(203) 517-3100

Securities
registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registeredUnits

The NASDAQ Stock Market LLCShares of Common Stock, $0.001 par value

The NASDAQ Stock Market LLCWarrants

The NASDAQ Stock Market LLC


Securities
registered pursuant to Section 12(g) of the Act:None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o    No ý

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes o    No o

Indicate by check mark if disclosure of delinquent filers pursuant 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. o

Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large
accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

The aggregate market value of the voting common stock, par value $0.001 per share, held by non-affiliates of the registrant computed by reference to
the closing sales price for the registrant's common stock on June 30, 2010, as reported on the NASDAQ Stock Market was approximately $58,338,294.

In
determining the market value of the voting stock held by any non-affiliates, shares of common stock of the registrant beneficially owned by directors, officers and other
holders of non-publicly traded shares of common stock of the registrant have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other
purposes.

As
of February 25, 2011, the registrant had outstanding 36,268,623 shares of common stock, par value $0.001 per share.

Documents Incorporated by Reference

Document Description

10-K PartPortions of the Proxy Statement for the 2011 Annual Meeting of Stockholders (the "Proxy Statement"), to be filed within 120 days of the end of the fiscal year ended December 31, 2010, are incorporated by
reference in Part III hereof. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part hereof.

III (Items 10, 11, 12, 13, 14)




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SAFE HARBOR STATEMENT



PART IItem 1.

Business

5Item 1A.

Risk Factors

10Item 1B.

Unresolved Staff Comments

18Item 2.

Properties

18Item 3.

Legal Proceedings

18Item 4.

(Removed and Reserved)

18PART IIItem 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

19Item 6.

Selected Financial Data

22Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

24Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

37Item 8.

Financial Statements and Supplementary Data.

37Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

37Item 9A.

Controls and Procedures

38Item 9B.

Other Information

38PART IIIItem 10.

Directors and Executive Officers of the Registrant

39Item 11.

Executive Compensation

39Item 12.

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

39Item 13.

Certain Relationships, Related Transactions and Director Independence

39Item 14.

Principal Accountant Fees and Services

39PART IVItem 15.

Exhibits and Financial Statement Schedule

40SIGNATURES PAGE


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SAFE HARBOR STATEMENT

Information Services Group ("ISG") believes that some of the information in this Annual Report on Form 10-K
constitutes forward-looking statements. You can identify these statements by forward-looking words such as "may," "expect," "anticipate," "contemplate," "believe," "estimate," "intends" and "continue"
or similar words. You should read statements that contain these words carefully because they:



These
forward-looking statements include, but are not limited to, statements relating to:



ISG
believes it is important to communicate its expectations to its stockholders. However, there may be events in the future that ISG is not able to predict accurately or over which it
has no control. The risk factors and cautionary language discussed in this Annual Report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the
expectations in such forward-looking statements, including among other things:



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You
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report.

All
forward-looking statements included herein attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or
referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligation to update these forward-looking statements to reflect events or circumstances
after the date of this Annual Report or to reflect the occurrence of unanticipated events.

This
Annual Report also contains forward-looking statements attributed to estimates of the growth of our markets. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Forward-looking statements contained in this Annual Report speak only as of the date of this Annual Report. Unless required by law, we undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise. You should, however, review the risks and uncertainties we describe in the reports we will file from time to time with
the SEC after the date of this Annual Report.

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PART I

Item 1.    Business

As used herein, unless the context otherwise requires, ISG, the registrant, is referred to in this Form 10-K annual
report ("Form 10-K") as the "Company," "we," "us" and "our."

Our Company

Information Services Group, Inc. (Nasdaq: III) is a leading technology insights, market intelligence and advisory
services company. We support private and public sector clients in transforming and optimizing their operational environments through strategic consulting, benchmarking and analytics, managed services
and research with a focus on information technology, business process transformation and enterprise resource planning.

Our
company was founded in 2006 with the strategic vision to become a high-growth, leading provider of information-based advisory services. In 2007, ISG consummated its
initial public
offering and completed the acquisition of TPI Advisory Services Americas, Inc. ("TPI"). In the first quarter of 2011, ISG completed the acquisitions of Compass and STA Consulting. We continue
to believe that our vision will be realized through the acquisition, integration, and successful operation of market-leading brands within the data, analytics and advisory industry. Including our most
recent acquisitions, we now operate in 21 countries and employ nearly 700 professionals globally, delivering advisory, benchmarking and analytical insight to large, multinational corporations and
governments in North America, Europe and Asia Pacific. We deliver these services through three go-to market brands: TPI, Compass and STA Consulting.

While
each of our brands is focused on a specific client or service niche within the data, analytics and advisory industry, we believe that there are important cyclical and secular
challenges faced by our private and public sector clients which will continue to fuel demand for the professional services we provide. In the private sector, for example, we believe that companies
will continue to face significant challenges associated with globalization, including the need to decrease operating costs, increase efficiencies and deal with increasing numbers of emerging and
transformational technologies such as cloud computing. Similarly, public sector organizations at the national, regional and local levels increasingly must deal with the complex and converging issues
of outdated technology systems, significantly impaired revenue sources and an aging workforce.

Overall,
we believe that the environmental dynamics at work in both the private and public sectors mitigate decisively in favor of the professional services, analytics and advice ISG
companies can provide. In this dynamic environment, the strength of our client relationships greatly depends on the quality of our advice and insight, the independence of our thought leadership and
the effectiveness of our people in assisting our clients to implement strategies that successfully address their most pressing operational challenges.

We
are organized as a corporation under the laws of the State of Delaware and are based in Stamford, CT. The current mailing address of the company's principal executive office is:

Information
Services Group, Inc.

Two
Stamford Plaza, 281 Tresser Boulevard, Stamford, CT 06901, and its telephone number is (203) 517-3100.

Our Services

During periods of expansion or contraction, for enterprises large or small, public or private, in North America or Europe and Asia
Pacific, our services have helped organizations address their most

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complex
operational issues. The functional domain experience of our experts and deep empirical data help clients better understand their strategic options. We provide four key lines of
service:



These
services & products are delivered through three "go-to market" brands: TPI, Compass and STA Consulting. While each of our brands has a distinct market identity
and operates within a specific niche, our brands not only share a common vision and operational orientation, they are supported by an integrated shared services platform which allows them to work
together to deliver comprehensive services in a way that is seamless to our clients.

Recent Developments

On January 4, 2011, ISG acquired Compass, a premier independent global provider of business and information technology
benchmarking, performance improvement, data and analytics services. It was founded in 1980 and headquartered in the United Kingdom and has approximately 180 employees in 16 countries serving nearly
250 clients.

On
February 10, 2011, ISG acquired Austin, Texas-based STA Consulting, a premier independent information technology advisor serving the public sector. STA Consulting advises
clients on information technology strategic planning and the acquisition and implementation of new Enterprise Resource Planning (ERP) and other enterprise administration and management systems. STA
Consulting was founded in 1997 and has approximately 40 professionals.

See
Note 3Acquisitions in the Notes to the Consolidated Financial Statements for additional information regarding these acquisitions.

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Our Competitive Advantages

We believe that the following strengths differentiate us from our competition:



We
believe that the strengths disclosed above are central to our ability to deal successfully with the challenges that we face.

Our Strategy

We intend to use our competitive strengths to develop new services and products, sustain our growth and strengthen our existing market
position by pursuing the following strategies:



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Our Proprietary Data Assets and Market Intelligence

One of our core assets is the information, data, analytics, methodologies and other intellectual capital the Company possesses. This
intellectual property underpins the independent nature of our operational assessments, strategy development, deal-structuring, negotiation and other consulting services we provide our
clients.

With
each engagement we conduct, we enhance both the quantity and quality of the intellectual property we can employ on behalf of our clients, thus providing a continuous and unique
source of information, data and analytics.

This
intellectual property is proprietary and we rely on multiple legal and contractual provisions and devices to protect our intellectual property rights. We recognizes the value of our
intellectual property and vigorously defend it. As a result, the Company maintains strict policies and procedures regarding ownership, use and protection with all parties, including our employees.

Clients

With the acquisitions of Compass and STA Consulting, we operate in 21 countries and across numerous industries. Our private sector
clients operate in the financial services, telecom, healthcare and pharmaceuticals, manufacturing, transportation and travel and energy and utilities industries. The majority of our clients operate
large businesses and are ranked in the Forbes Global 2000 companies annually. Our public sector clients represent state and local governments (cities and counties) and authorities (airport and
transit) in the United States and national and provincial government units in the United Kingdom, Canada and Australia.

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Competition

Competition in the sourcing, data, information and advisory market is primarily driven by independence and objectivity, expertise,
possession of relevant benchmarking data, breadth of service capabilities, reputation and price. We compete with other sourcing advisors, research firms, strategy consultants and sourcing service
providers. A significant number of independent sourcing and advisory firms offer similar services. In our view, however, these firms generally lack the benchmarking data, scale and diversity of
expertise that we possess. In addition, most research firms do not possess the data repository of recent, comparable transactions and benchmarking data. Strategy consultants bring strategy services
capabilities to the sourcing and advisory market. However, since they do not focus exclusively on the sourcing market, they lack the depth of experience that sourcing, data and advisory firms such as
ISG possess. In addition, strategy consultants do not possess the sourcing and technology implementation expertise or the benchmarking data capabilities that are critical to implementing and managing
successful transformational projects for businesses and governments. Other service providers often lack the depth of experience, competitive benchmarking data and independence critical to playing the
role of "trusted advisor" to clients.

Employees

As of December 31, 2010, the Company employed 438 people worldwide. As a result of the acquisitions of Compass and STA
Consulting, the Company now employs approximately 700 professionals in 21 countries.

The
Company's employee base includes executive management, service leads, partners, directors, advisors, analysts, technical specialists and functional support staff.

We
recruit advisors from service providers, consulting firms and clients with direct operational experience. These advisors leverage extensive practical expertise derived from
experiences in corporate leadership, consulting, research, financial analysis, contract negotiations and operational service delivery.

All
employees are required to execute confidentially, conflict of interest and intellectual property agreements as a condition of employment. There are no collective bargaining
agreements covering any of our employees.

ISG's
voluntary advisor turnover rate ranged between 9% and 15% over the last three years.

Available Information

Our Internet address iswww.informationsg.com. The content on our website is available
for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K. We make available through our Internet
website under the heading "Investor Relations," our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K
after we electronically file any such materials with the Securities and Exchange Commission. Copies of our key corporate governance documents, including our Code of Ethics for Directors, Officers and
Employees and charters for our Audit Committee, our Nominating and Corporate Governance Committee and our Compensation Committee are also on our website. Stockholders may request free copies of these
documents including our Annual Report to Stockholders by writing to Information Services Group, Inc., Two Stamford Plaza, 281 Tresser Boulevard, Stamford CT 06901, Attention: David E. Berger,
or by calling (203) 517-3100.

Our
annual and quarterly reports and other information statements are available to the public through the SEC's website atwww.sec.gov. In
addition, the Notice of Annual Meeting of Stockholders, Proxy Statement and 2010 Annual Report to Stockholders are available free of charge at www.informationsg.com.

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Item 1A.    Risk Factors

The loss of key executives could adversely affect our business.

The success of our business is dependent upon the continued service of a relatively small group of key executives, including
Mr. Connors, Chairman and Chief Executive Officer; Mr. Berger, Executive Vice President, Chief Financial Officer; and Mr. Whitmore, Vice Chairman, ISG and CEO, Compass, among
others.

Although
we currently intend to retain our existing management, the terms of which have not yet been determined, we cannot assure you that such individuals will remain with us for the
immediate or
foreseeable future. The unexpected loss of the services of one or more of these executives could adversely affect our business.

Our outstanding warrants may be exercised in the future, which would increase the number of shares eligible for future resale in the public market and would result in
dilution to our stockholders. This might have an adverse effect on the market price of the common stock.

As part of the purchase consideration paid to MCP-TPI Holdings, LLC, a Texas limited liability company
("MCP-TPI"), ISG issued warrants exercisable beginning on November 16, 2008 into 5 million shares of ISG common stock at an exercise price of $9.18 per share. To the extent
these warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to our stockholders and increase the number of shares eligible for resale in the
public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our shares.

We have outstanding a substantial amount of debt, which may limit our ability to fund general corporate requirements and obtain additional financing, limit our flexibility
in responding to business opportunities and competitive developments and increase our vulnerability to adverse economic and industry conditions.

We incurred a substantial amount of indebtedness to finance the acquisition of TPI, including transaction costs and deferred
underwriting fees. On November 16, 2007, our wholly-owned subsidiary International Consulting Acquisition Corp. ("ICAC") entered into a senior secured credit facility comprised of a
$95.0 million term loan facility and a $10.0 million revolving credit facility. On November 16, 2007, ICAC borrowed $95.0 million under the term loan facility to finance
the purchase price for our acquisition of TPI and to pay transaction costs. As a result of the substantial fixed costs associated with the debt obligations, we expect that:



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These
debt obligations may also impair our ability to obtain additional financing, if needed, and our flexibility in the conduct of our business. Our indebtedness under the senior
secured revolving credit facility is secured by substantially all of our assets, leaving us with limited collateral for additional financing. Moreover, the terms of our indebtedness under the senior
secured revolving credit facility restrict our ability to take certain actions, including the incurrence of additional indebtedness, mergers and acquisitions, investments and asset sales. Our ability
to pay the fixed costs associated with our debt obligations will depend on our operating performance and cash flow, which in turn depend on general economic conditions and the advisory services
market. A failure to pay interest or indebtedness when due could result in a variety of adverse consequences, including the acceleration of our indebtedness. In such a situation, it is unlikely that
we would be able to fulfill our obligations under or repay the accelerated indebtedness or otherwise cover our fixed costs. As of December 31, 2010, the total principal outstanding under the
term loan facility was $69.8 million. There were no borrowings under the revolving credit facility during fiscal 2010.

Failure to maintain effective internal controls over financial reporting could adversely affect our business and the market price of our Common Stock.

Pursuant to rules adopted by the SEC implementing Section 404 of the Sarbanes-Oxley Act of 2002, we are required to assess the
effectiveness of our internal controls over financial reporting and provide a management report on our internal controls over financial reporting in all annual reports. This report contains, among
other matters, a statement as to whether or not our
internal controls over financial reporting are effective and the disclosure of any material weaknesses in our internal controls over financial reporting identified by management.

The
Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides a framework for companies to assess and improve their internal control systems. Auditing Standard
No. 5 provides the professional standards and related performance guidance for auditors to attest to, and report on, management's assessment of the effectiveness of internal control over
financial reporting under Section 404. Management's assessment of internal controls over financial reporting requires management to make subjective judgments and, some of the judgments will be
in areas that may be open to interpretation. Therefore, our management's report on our internal controls over financial reporting may be difficult to prepare, and our auditors may not agree with our
management's assessment.

While
we currently believe our internal controls over financial reporting are effective, we are required to comply with Section 404 on an annual basis. If, in the future, we
identify one or more material weaknesses in our internal controls over financial reporting during this continuous evaluation process, our management will be unable to assert such internal controls are
effective. Although we currently anticipate being able to continue to satisfy the requirements of Section 404 in a timely fashion, we cannot be certain as to the timing of completion for our
future evaluation, testing and any required remediation due in large part to the fact that there are limited precedents available by which to measure compliance with these new requirements. Therefore,
if we are unable to assert that our internal controls over financial reporting are effective in the future, or if our auditors are unable to express an opinion on the effectiveness of our internal
controls, our investors could lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our business and the market price of our Common Stock.

Our operating results have been, and may in the future be, adversely impacted by the worldwide economic crisis and credit tightening.

Our results of operations are affected by the level of business activity of our clients, which in turn is affected by the level of
economic activity in the industries and markets that they serve. A decline in the level of business activity of our clients could have a material adverse effect on our revenue and

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profit
margin. In particular, our exposure to certain industries currently experiencing financial difficulties, including the automobile and financial services industries, could have an adverse affect
on our results of operations. Future economic conditions could cause some clients to reduce or defer their expenditures for consulting services. We have implemented and will continue to implement
cost-savings initiatives to manage our expenses as a percentage of revenue. However, current and future cost-management initiatives may not be sufficient to maintain our
margins if the economic environment should weaken for a prolonged period.

The rate of growth in the broadly defined business information services & advisory sector and/or the use of technology in business may fall significantly below the
levels that we currently anticipate.

Our business is dependent upon continued growth in sourcing activity, the use of technology in business by our clients and prospective
clients and the continued trend towards sourcing of complex information technology and business process tasks by large and small organizations. If sourcing diminishes as a management and operational
tool, the growth in the use of technology slows down or the cost of sourcing alternatives rises, our business could suffer. Companies that have already invested substantial resources in developing
in-house information technology and business process functions may be particularly reluctant or slow to move to a sourcing solution that may make some of their existing personnel and
infrastructure obsolete.

Our engagements may be terminated, delayed or reduced in scope by clients at any time.

Our clients may decide at any time to abandon, postpone and/or to reduce our involvement in an engagement. Our engagements can
therefore terminate, or the scope of our responsibilities may diminish, with limited advance notice. If an engagement is terminated, delayed or reduced unexpectedly, the professionals working on the
engagement could be underutilized until we assign them to other projects. Accordingly, the termination or significant reduction in the scope of a single large engagement, or multiple smaller
engagements, could harm our business results.

Our operating results may fluctuate significantly from period to period as a result of factors outside of our control.

We expect our revenues and operating results to vary significantly from accounting period to accounting period due to factors
including:



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We depend on project-based advisory engagements, and our failure to secure new engagements could lead to a decrease in our revenues.

Advisory engagements typically are project-based. Our ability to attract advisory engagements is subject to numerous factors, including
the following:



Any
material decline in our ability to secure new advisory arrangements could have an adverse impact on our revenues and financial condition.

We may not be able to maintain our existing services and products.

We operate in a rapidly evolving market, and our success depends upon our ability to deliver high quality advice and analysis to our
clients. Any failure to continue to provide credible and reliable information and advice that is useful to our clients could have a significant adverse effect on future business and operating results.
Further, if our advice proves to be materially incorrect and the quality of service is diminished, our reputation may suffer and demand for our services and products may decline. In addition, we must
continue to improve our methods for delivering our products and services in a cost-effective manner.

We may not have the ability to develop and offer the new services and products that we need to remain competitive.

Our future success will depend in part on our ability to offer new services and products. To maintain our competitive position, we must
continue to enhance and improve our services and products, develop or acquire new services and products in a timely manner, and appropriately position and price new services and products relative to
the marketplace and our costs of producing them. These new services and products must successfully gain market acceptance by addressing specific industry and business sectors and by anticipating and
identifying changes in client requirements. The process of researching, developing, launching and gaining client acceptance of a new service or product, or assimilating and marketing an acquired
service or product, is risky and costly. We may not be able to introduce new, or assimilate acquired, services and products successfully. Any failure to achieve successful client acceptance of new
services and products could have an adverse effect on our business results.

We may fail to anticipate and respond to market trends.

Our success depends in part upon our ability to anticipate rapidly changing technologies and market trends and to adapt our advice,
services and products to meet the changing sourcing advisory needs of our clients. Our clients regularly undergo frequent and often dramatic changes. That environment of rapid and continuous change
presents significant challenges to our ability to provide our clients with current and timely analysis, strategies and advice on issues of importance to them. Meeting these challenges requires the
commitment of substantial resources. Any failure to continue to respond to developments, technologies, and trends in a manner that meets market needs could have an adverse effect on our business
results.

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We may be unable to protect important intellectual property rights.

We rely on copyright and trademark laws, as well as nondisclosure and confidentiality arrangements, to protect our proprietary rights
in our methods of performing our services and our tools for analyzing financial and other information. There can be no assurance that the steps we have taken to protect our intellectual property
rights will be adequate to deter misappropriation of our rights or that we will be able to detect unauthorized use and take timely and effective steps to enforce our rights. If substantial and
material unauthorized uses of our proprietary methodologies and analytical tools were to occur, we may be required to engage in costly and time-consuming litigation to enforce our rights.
There can be no assurance that we would prevail in such litigation. If others were able to use our intellectual property or were to independently develop our methodologies or analytical tools, our
ability to compete effectively and to charge appropriate fees for our services may be adversely affected.

We face competition and our failure to compete successfully could materially adversely affect our results of operations and financial condition.

The business information services and advisory sector is competitive, highly fragmented and subject to rapid change. We face
competition from many other providers ranging from large organizations to small firms and independent contractors that provide specialized services. Our competitors include any firm that provides
sourcing or benchmarking advisory services, IT strategy or business process consulting, which may include a variety of consulting firms, service providers, niche advisors and, potentially, advisors
currently or formerly employed by us. Some of our competitors have significantly more financial and marketing resources, larger professional staffs, closer client relationships, broader geographic
presence or more widespread recognition than us.

In
addition, limited barriers to entry exist in the markets in which we do business. As a result, additional new competitors may emerge and existing competitors may start to provide
additional or complementary services. Additionally, technological advances may provide increased competition from a variety of sources. There can be no assurance that we will be able to successfully
compete against current and future competitors and our failure to do so could result in loss of market share, diminished value in our products and services, reduced pricing and increased marketing
expenditures. Furthermore, we may not be successful if we cannot compete effectively on quality of advice and analysis, timely delivery of information, client service or the ability to offer services
and products to meet changing market needs for information, analysis or price.

We rely heavily on key members of our management team.

We are dependent on our management team. We have entered into subscription and non-competition agreements with a number of
these key management personnel. If any of the covenants contained in the subscription and non-competition agreements are violated, the key management personnel will forfeit their shares
(or the after-tax proceeds if the shares have been sold). We issued restricted stock units ("RSUs") and stock appreciation rights ("SARs") to key employees. Vesting rights in the RSUs and
SARs are subject to compliance with restrictive covenant agreements. Vested and unvested RSUs and SARs will be forfeited upon any violation of the restrictive covenant agreements. Despite the
non-competition and restrictive covenant agreements, we may not be able to retain these managers and may not be able to enforce the non-competition and restrictive covenants.
If we were to lose a number of key members of our management team and were unable to replace these people quickly, we could have difficulty maintaining our growth and certain key relationships with
large clients.

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We depend upon our ability to attract, retain and train skilled advisors and other professionals.

Our business involves the delivery of advisory & consulting services. Therefore, our continued success depends in large part
upon our ability to attract, develop, motivate, retain and train skilled advisors and other professionals who have advanced information technology and business processing domain expertise, financial
analysis skills, project management experience and other similar abilities. We do not have non-competition agreements with many non-executive advisors. Consequently, these
advisors could resign and join one of our competitors or provide sourcing advisory services to our clients through their own ventures.

We
must also recruit staff globally to support our services and products. We face competition for the limited pool of these qualified professionals from, among others, technology
companies, market research firms, consulting firms, financial services companies and electronic and print media companies, some of which have a greater ability to attract and compensate these
professionals. Some of the personnel that we attempt to hire may be subject to non-compete agreements that could impede our short-term recruitment efforts. Any failure to
retain key personnel or hire and train additional qualified personnel as required supporting the evolving needs of clients or growth in our business could adversely affect the quality of our products
and services, and our future business and operating results.

We may have agreements with certain clients that limit the ability of particular advisors to work on some engagements for a period of time.

We provide services primarily in connection with significant or complex sourcing transactions and other matters that provide potential
competitive advantage and/or involve sensitive client information. Our engagement by a client occasionally precludes us from staffing certain advisors on new engagements because the advisors have
received confidential information from a client who is a competitor of the new client. Furthermore, it is possible that our engagement by a client could preclude us from accepting engagements with
such client's competitors because of confidentiality concerns.

In many industries in which we provide advisory services, there has been a trend toward business consolidations and strategic alliances that could limit the pool of
potential clients.

Consolidations and alliances reduce the number of potential clients for our services and products and may increase the chances that we
will be unable to continue some of our ongoing engagements or secure new engagements.

We derive a significant portion of our revenues from our largest clients (including those in the automobile sector) and could materially and adversely be affected if we lose
one or more of our large clients.

Our 20 largest clients accounted for approximately 45% of revenue in 2010 and 44% in 2009. In particular, revenues from clients in the
automobile sector collectively accounted for approximately 15% of our 2010 annual revenue. Although only General Motors accounts for more than 10% of our revenues, if one or more of our large clients
terminate or significantly reduce their engagements or fail to remain a viable business, then our revenues could be materially and adversely affected. In addition, sizable receivable balances could be
jeopardized if large clients fail to remain viable.

Our international operations expose us to a variety of risks which could negatively impact our future revenue and growth.

Approximately 42% of our revenues for 2010 and 2009 were derived from sales outside of the Americas. This number is expected to
increase with the acquisition of Compass.
Our operating results are subject to the risks inherent in international business activities, including:



15

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Table of Contents



Air
travel, telecommunications and entry through international borders are all vital components of our business. If a terrorist attack similar to 9/11 were to occur, our business could
be disproportionately impacted because of the disruption a terrorist attack causes on these vital components.

We
intend to continue to expand our global footprint in order to meet our clients' needs. This may involve expanding into countries beyond those in which we currently operate. We may
involve expanding into less developed countries, which may have less political, social or economic stability and less developed infrastructure and legal systems. As we expand our business into new
countries, regulatory, personnel, technological and other difficulties may increase our expenses or delay our ability to start up operations or become profitable in such countries. This may affect our
relationships with our clients and could have an adverse affect on our business.

We operate in a number of international areas which exposes us to significant foreign currency exchange rate risk.

We have significant international revenue, which is generally collected in local currency. We currently hold or issue forward exchange
contracts for hedging purposes. We do enter into forward contracts for hedging of specific transactions. All are settled prior to quarter end.
The percentage of total revenues generated outside the Americas increased from 22% in 2004 to 42% in 2010. It is expected that our international revenues will continue to grow as European and Asian
markets adopt sourcing solutions and through the acquisition of Compass. The translation of our revenues into U.S. dollars, as well as our costs of operating internationally, may adversely affect our
business, results of operations and financial condition.

We may be subject to claims for substantial damages by our clients arising out of disruptions to their businesses or inadequate service and our insurance coverage may be
inadequate.

Most of our service contracts with clients contain service level and performance requirements, including requirements relating to the
quality of our services. Failure to consistently meet service requirements of a client or errors made by our employees in the course of delivering services to our clients could disrupt the client's
business and result in a reduction in revenues or a claim for damages against us. Additionally, we could incur liability if a process we manage for a client were to result in internal control failures
or impair our client's ability to comply with our own internal control requirements.

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Table of Contents

Under
our service agreements with our clients, our liability for breach of our obligations is generally limited to actual damages suffered by the client and is typically capped at the
greater of an agreed amount or the fees paid or payable to us under the relevant agreement. These limitations and caps on liability may be unenforceable or otherwise may not protect us from liability
for damages. In addition, certain liabilities, such as claims of third parties for which we may be required to indemnify our clients or liability for breaches of confidentiality, are generally not
limited under those agreements. Although we have commercial general liability insurance coverage, the coverage may not continue to be available on acceptable terms or in sufficient amounts to cover
one or more large claims. The successful assertion of one or more large claims against us that exceed available insurance coverage or changes in our insurance policies (including premium increases or
the imposition of large deductible or co-insurance requirements) could have a material adverse effect on our business.

We could be liable to our clients for damages and subject to liability and our reputation could be damaged if our client data is compromised.

We may be liable to our clients for damages caused by disclosure of confidential information. We are often required to collect and
store sensitive or confidential client data in order to perform the services we provide under our contracts. Many of our contracts do not limit
our potential liability for breaches of confidentiality. If any person, including any of our current or former employees, penetrates our network security or misappropriates sensitive data or if we do
not adapt to changes in data protection legislation, we could be subject to significant liabilities to our clients or to our clients' customers for breaching contractual confidentiality provisions or
privacy laws. Unauthorized disclosure of sensitive or confidential client data, whether through breach of our processes, systems or otherwise, could also damage our reputation and cause us to lose
existing and potential clients. We may also be subject to civil actions and criminal prosecution by government or government agencies for breaches relating to such data. Our insurance coverage for
breaches or mismanagement of such data may not continue to be available on reasonable terms or in sufficient amounts to cover one or more large claims against us.

Client restrictions on the use of client data could adversely affect our activities.

The majority of the data we use to populate our databases comes from our client engagements. The insight sought by clients from us
relates to the contractual data and terms, including pricing and costs, to which we have access in the course of assisting our clients in the negotiation of our sourcing agreements. Data is obtained
through the course of our engagements with clients who agree to contractual provisions permitting us to consolidate and utilize on an aggregate basis such information. If we were unable to utilize key
data from previous client engagements, our business, financial condition and results of operations could be adversely affected.

We may not be able to maintain the equity in our brand name.

We have operated under the brand "TPI" for several years and have legally registered trademarks in certain appropriate jurisdictions.
There are other entities providing advisory and similar technology-related services that use "Technology Partners" as, or as part of, their names. There can be no assurance that the resulting
confusion and lack of brand-recognition in the marketplace created by this situation will not adversely affect our business. We expect similar challenges going forward with the "Compass" and "STA
Consulting" brand names.

We
believe that our "TPI", "Compass" and "STA Consulting" brand names, including our independence, is critical to our efforts to attract and retain clients and staff and that the
importance of brand recognition will increase as competition increases. We may expand our marketing activities to promote and strengthen our brands and may need to increase our marketing budget, hire
additional marketing and public relations personnel, expend additional sums to protect the brands and otherwise

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Table of Contents

increase
expenditures to create and maintain client brand loyalty. If we fail to effectively promote and maintain the brands or incur excessive expenses in doing so, our future business and operating
results could be adversely impacted.

Item 1B.    Unresolved Staff Comments

None.

Item 2.    Properties

We maintain our executive offices in Stamford, Connecticut. We do not share our space at our executive offices. The majority of our
business activities are performed on client sites. We do not own offices or properties. We have leased offices in the United States, Australia, Canada, China, France, Germany, India, Italy, Japan,
Netherlands, Singapore, Spain, Sweden and the United Kingdom.

Item 3.    Legal Proceedings

We are not aware of any asserted or unasserted legal proceedings or claims that we believe would have a material adverse effect on our
financial condition, results of operations or cash flows.

Item 4.    (Removed and Reserved)

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

On February 1, 2007, our units began trading on the American Stock Exchange under the symbol "III.U". Each of our units
consisted of one share of common stock and one warrant. On February 12, 2007, the common stock and warrants underlying our units began to trade separately on the American Stock Exchange under
the symbols "III" and "III.WS", respectively. Our securities were traded on the American Stock Exchange until January 31, 2008.

On
February 1, 2008, our common stock, warrants and units began trading on The Nasdaq Stock Market LLC under the symbols "III", "IIIW" and "IIIIU", respectively. The
following sets forth the high and low closing sales price of our common stock, warrants and units, as reported on The Nasdaq Stock Market LLC for the periods shown:

Common Stock

Warrants

UnitsHigh

Low

High

Low

High

LowMarch 31, 2010

$
3.72

$
2.97

$
0.08

$
0.04

$
3.00

$
2.61June 30, 2010


3.55


2.00


0.07


0.00


3.00


3.00September 30, 2010


2.19


1.34


0.02


0.00


3.00


1.38December 31, 2010


2.25


1.75


0.02


0.00


8.73


1.38




Common Stock

Warrants

UnitsHigh

Low

High

Low

High

LowMarch 31, 2009

$
3.48

$
2.80

$
0.08

$
0.05

$
4.00

$
1.94June 30, 2009


3.72


2.63


0.15


0.04


3.04


2.81September 30, 2009


4.13


2.60


0.14


0.06


3.29


2.77December 31, 2009


3.95


2.86


0.12


0.04


3.21


2.14


On
January 31, 2011, our warrants and units expired pursuant to their terms and are no longer traded on The Nasdaq Stock Market. On February 25, 2011, the last reported
sale price for our common stock on The Nasdaq Stock Market was $2.28 per share.

As
of December 31, 2010, there were 352 holders of record of 32,601,159 ISG common stock.

Dividend Policy

We have not paid any dividends on our common stock to date. It is the current intention of ISG's Board of Directors to retain all
earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future. The payment of dividends in the future will be
within the discretion of our then Board of Directors and will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition.

Securities Authorized for Issuance under Equity Compensation Plan

At the special meeting of stockholders held on November 13, 2007, the 2007 Equity Incentive Plan was approved by ISG
stockholders. On May 11, 2010, the ISG stockholders approved an amendment for an additional 4.5 million shares authorized for issuance under the 2007 Equity Incentive Plan, except that
each share of the Company's common stock issued under a "full value" award (awards other than stock options or stock appreciation rights) will reduce the number of shares available for issuance by
1.44 shares. The following table lists information regarding outstanding options and shares reserved for future issuance under our Amended and Restated 2007 Equity Incentive Plan as of

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December 31,
2010. We have not issued any shares of our common stock to employees as compensation under a plan that has not been approved by our stockholders.

Plan Category

Number of Shares of
Common Stock to
be Issued upon
Exercise of
Outstanding
Options, Warrants
and Rights

Weighted
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights(1)

Number of Shares of
Common Stock
Remaining Available
for Future Issuance
under our Stock
Option Plans
(Excluding Shares
Reflected in Column 1)(2)Approved by Stockholders


2,461,164

$
5.07


5,787,610Not Approved by Stockholders








Total


2,461,164

$
5.07


5,787,610


(1)The
weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding stock awards which have no exercise price.(2)Includes
883,319 shares available for future issuance under the Company's Employee Stock Purchase Plan.


STOCK PERFORMANCE GRAPH

The following graph compares the cumulative 4 years total stockholder return on our Common Stock from February 12, 2007
(the day our common stock began publicly trading) through December 31, 2010, with the cumulative total return for the same period of (i) the NASDAQ Composite Index, (ii) the
Russell 2000 Index and (iii) the Peer Group described below. The comparison assumes for the same period the investment of $100 on February 12, 2007 in our Common Stock and in each of the
indices and, in each case, assumes reinvestment of all dividends.

COMPARISON OF 4 YEAR CUMULATIVE TOTAL RETURN*Among Information Services Group Inc., the NASDAQ Composite Index  The Russell 2000 Index and A Peer Group

GRAPHIC

---

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Table of Contents

Measurement Periods

ISG

NASDAQ

Russell 2000

Peer Group(a)February 2007

$
100.14

$
100.00

$
100.00

$
105.44March 2007

$
101.08

$
100.17

$
101.07

$
108.54April 2007

$
103.39

$
104.42

$
102.89

$
111.46May 2007

$
104.34

$
107.60

$
107.10

$
119.23June 2007

$
103.66

$
108.12

$
105.53

$
116.23July 2007

$
103.39

$
105.68

$
98.32

$
108.08August 2007

$
102.71

$
107.82

$
100.54

$
117.40September 2007

$
103.66

$
113.14

$
102.27

$
120.06October 2007

$
102.17

$
119.94

$
105.20

$
120.73November 2007

$
91.19

$
111.31

$
97.65

$
117.32December 2007

$
92.82

$
111.17

$
97.59

$
121.22January 2008

$
78.46

$
99.99

$
90.93

$
103.71February 2008

$
72.49

$
95.07

$
87.56

$
111.63March 2008

$
69.92

$
95.15

$
87.93

$
113.65April 2008

$
70.19

$
101.02

$
91.61

$
115.27May 2008

$
65.99

$
105.64

$
95.82

$
114.88June 2008

$
65.04

$
96.21

$
88.44

$
117.42July 2008

$
57.72

$
96.25

$
91.72

$
127.87August 2008

$
66.80

$
97.59

$
95.03

$
136.76September 2008

$
66.40

$
85.72

$
87.46

$
123.72October 2008

$
37.26

$
70.96

$
69.26

$
103.32November 2008

$
41.73

$
63.69

$
61.07

$
95.04December 2008

$
46.07

$
65.79

$
64.62

$
94.35January 2009

$
43.36

$
61.78

$
57.43

$
79.05February 2009

$
43.09

$
57.95

$
50.45

$
66.31March 2009

$
41.60

$
63.88

$
54.95

$
77.51April 2009

$
40.24

$
71.36

$
63.45

$
89.28May 2009

$
37.26

$
74.15

$
65.36

$
87.83June 2009

$
40.79

$
76.79

$
66.32

$
89.18July 2009

$
47.29

$
82.90

$
72.71

$
94.07August 2009

$
53.93

$
84.46

$
74.79

$
78.01September 2009

$
54.07

$
88.95

$
79.11

$
83.03October 2009

$
48.78

$
86.19

$
73.74

$
80.26November 2009

$
43.63

$
90.51

$
76.05

$
84.37December 2009

$
42.95

$
95.53

$
82.17

$
84.86January 2010

$
49.19

$
90.40

$
79.15

$
85.44February 2010

$
40.24

$
94.32

$
82.71

$
86.40March 2010

$
46.21

$
100.94

$
89.45

$
84.91April 2010

$
46.61

$
103.22

$
94.51

$
90.80May 2010

$
34.69

$
94.63

$
87.34

$
93.53June 2010

$
27.10

$
88.94

$
80.57

$
89.20July 2010

$
29.13

$
95.08

$
86.11

$
87.49August 2010

$
20.33

$
89.56

$
79.73

$
89.66September 2010

$
24.25

$
100.31

$
89.67

$
94.33October 2010

$
25.07

$
106.12

$
93.34

$
97.14November 2010

$
29.95

$
105.68

$
96.57

$
99.75December 2010

$
28.05

$
112.30

$
104.24

$
105.58


(a)The
Peer Group consists of the following companies: CRA International Inc., Diamond Management and Technology Consultants, Inc., Forrester
Research Inc., FTI Consulting, Inc., Gartner Group, Inc., Huron Consulting Group, Inc., LECG Corporation and The Hackett Group, Inc. The Peer Group is weighted by
market capitalization.


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Table of Contents

Item 6.    Selected Financial Data

The following historical information was derived from the audited consolidated financial statements of ISG and its subsidiaries for the
years ended December 31, 2010, 2009, 2008, 2007 and the period beginning with ISG's inception (July 20, 2006) through December 31, 2006. The information for ISG for the year ended
December 31, 2007 includes operations for TPI from November 17, 2007 through December 31, 2007. The information is only a summary and should be read in conjunction with the
historical consolidated financial statements and related notes. The historical results included below are not indicative of the future performance of ISG.

Years Ended December 31,

Period from
July 20, 2006
(inception) to
December 31, 20062010

2009

2008

2007(dollars in thousands, except per share data)Statement of Operations Data:Revenues

$
132,013

$
132,744

$
174,795

$
18,901

$
Depreciation and amortization


9,846


9,562


10,000


910


2Operating (loss) income


(51,741
)(1)

814
(2)

(57,642
)(3)

(1,664
)

(51
)Interest expense


(3,241
)

(4,550
)

(6,928
)

(1,174
)

(4
)Interest income


159


262


1,300


10,453


Foreign currency transaction (loss) gain


(268
)

(140
)

578


84


Income tax benefit (provision)


1,926


778


4,783


(3,226
)

Net (loss) income


(53,165
)

(2,836
)

(57,909
)

4,473


(55
)Basic weighted average common shares


32,050


31,491


31,282


36,465


7,096Net (loss) income per common sharebasic


(1.66
)

(0.09
)

(1.85
)

0.12


(0.01
)Diluted weighted average common shares


32,050


31,491


31,282


38,376


7,096Net (loss) income per common sharediluted


(1.66
)

(0.09
)

(1.85
)

0.12


(0.01
)Cash Flow Data:Cash provided by (used in):Operating activities

$
5,747

$
4,056

$
20,481

$
5,921

$
(47
)Investing activities

$
(6,707
)
$
(1,239
)
$
(1,634
)
$
(203,630
)
$
(48
)Financing activities

$
(1,698
)
$
(22,080
)
$
(3,939
)
$
244,367

$
184Balance Sheet Data (at period end)Total assets

$
184,564

$
241,973

$
279,588

$
357,290

$
817Debt

$
69,813

$
71,813

$
94,050

$
95,000

$
Shareholders' equity (deficit)

$
81,817

$
131,625

$
130,581

$
190,788

$
(49
)


(1)As
a result of its goodwill and intangible asset impairment assessments, ISG recorded an impairment charge of $46.6 million during the third quarter
of 2010 associated with goodwill and $5.9 million related to intangible assets.(2)As
a result of its intangible asset impairment assessments, ISG recorded an impairment charge of $6.8 million during the third quarter of 2009
associated with intangible assets.(3)As
a result of its goodwill and intangible asset impairment assessments, ISG recorded an impairment charge of $49.4 million during the fourth quarter
of 2008 associated with goodwill and $24.8 million related to intangible assets.


22

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Table of Contents




The
following historical information was derived from the audited consolidated financial statements of TPI and its subsidiaries for the period from January 1, 2007 through
November 16, 2007 and as of and for the year ended December 31, 2006. The information is only a summary and should be read in conjunction with the historical consolidated financial
statements and related notes. The historical results included below are not indicative of the future performance of TPI.

Period From
January 1,
2007 to
November 16,
2007

Year Ended
December 31,
2006Statement of Operations Data:Revenues

$
153,751

$
161,503Operating expenses:Direct costs and expenses for advisors


91,368


95,562Selling, general, and administrative


45,287


50,585Profit shares program compensation(1)


58,175


Depreciation and amortization


1,969


2,437Operating (loss) income


(43,048
)

12,919Interest income


204


108Interest expense


(3,200
)

(3,821
)Loss on extinguishment of debt





(527
)Foreign currency transaction gain (loss)


335


(136
)Income (loss) before taxes


(45,709
)

8,543Income tax provision


(4,948
)

(3,457
)Net (loss) income


(50,657
)

5,086Cash Flow Data:Cash provided by (used in):Operating activities

$
3,248

$
3,437Investing activities

$
(1,157
)
$
(777
)Financing activities

$
(613
)
$
261Balance Sheet Data: (end of period)Cash and cash equivalents




$
9,454Total assets




$
48,821Total stockholders' equity (deficit)




$
572


(1)Concurrent
with the ISG's acquisition of TPI on November 16, 2007, TPI recorded $58.2 million in non-cash compensation charges
related to their Management Share Unit and A2 Profit Participation Share programs.


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Table of Contents

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion together with Item 6 "Selected Financial Data" and our audited consolidated financial
statements and the related notes included in Item 8 "Financial Statements and Supplementary Data". In addition to historical consolidated financial information, this discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. These forward-looking statements are subject to numerous risks and uncertainties. Statements, other than those based on
historical facts, which address activities, events or developments that we expect or anticipate may occur in the future are forward-looking statements. Such forward-looking statements are and will be,
as the case may be, subject to many risks, uncertainties and factors relating to ISG's operations and business environment that may cause actual results to be materially different from any future
results, express or implied, by such forward-looking statements. These forward-looking
statements must be understood in the context of numerous risks and uncertainties, including, but not limited to, those described previously in section 1A "Risk Factors."

ISG OVERVIEW

Information Services Group (Nasdaq: III) is a leading technology insights, market intelligence and advisory services company. We
support private and public sector clients in transforming and optimizing their operational environments through strategic consulting, benchmarking and analytics, managed services and research with a
focus on information technology, business process transformation and enterprise resource planning.

Our
Company was founded in 2006 with the strategic vision to become a high-growth, leading provider of information-based advisory services. We continue to believe that our
vision will be realized through the acquisition, integration, and successful operation of market-leading brands within the data, analytics and advisory industry.

Including
our most recent acquisitions, we now operate in 21 countries and employ nearly 700 professionals globally, delivering advisory, benchmarking and analytical insight to large,
multinational corporations and governments in North America, Europe and Asia Pacific. We deliver these services through three go-to market brands: TPI, Compass and STA Consulting.

Results of Operations for the Years Ended December 31, 2010 and December 31, 2009

Revenues

Revenues are generally derived from engagements priced on a time and materials basis and are recorded based on actual time worked as
the services are performed. Revenues related to materials (mainly out-of-pocket expenses such as airfare, lodging and meals) required during an engagement generally do not
include a profit mark-up and can be charged and reimbursed discretely or as part of the overall fee
arrangement. Invoices are issued to clients monthly, semimonthly or in accordance with the specific contractual terms of each project.

The
Company operates in one segment, fact-based sourcing advisory services. The Company operates principally in the Americas, Europe, and Asia Pacific. The Company's foreign
operations are subject to local government regulations and to the uncertainties of the economic and political conditions of those areas.

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Geographical
information for the segment is as follows:

Years Ended December 31,Geographic Area

2010

2009

Change

Percent
Change(in thousands)Americas

$
76,123

$
77,007

$
(884
)

(1.1
)%Europe


39,400


44,696


(5,296
)

(11.8
)%Asia Pacific


16,490


11,041


5,449


49.4
%Total revenues

$
132,013

$
132,744

$
(731
)

(0.6
)%


The
net decrease in revenues of $0.7 million or 1% in 2010 was attributable principally to a 12% decrease in Europe revenues to $39.4 million and a 1% decrease in Americas
revenues to $76.1 million.
The decrease in revenues is primarily due to lower levels of sourcing activity, particularly in Europe, attributable to lower volumes in information technology related sourcing activity. This decrease
was partially offset by a 49% increase in revenues from Asia Pacific primarily due to increase in business process outsourcing and information technology related sourcing activity. The translation of
foreign currency revenues into US dollars also favorably impacted performance compared to the prior year. Billable staff at December 31, 2010 totaled 323, as compared to 328 at
December 31, 2009.

Operating Expenses

The following table presents a breakdown of our operating expenses by functional category:

Years Ended December 31,Operating Expenses

2010

2009

Change

Percent
Change(in thousands)Direct costs and expenses for advisors

$
71,528

$
67,674

$
3,854


5.7
%Selling, general and administrative


49,889


47,894


1,995


4.2
%Goodwill impairment charge


46,591





46,591


100.0
%Intangible asset impairment charge


5,900


6,800


(900
)

(13.2
)%Depreciation and amortization


9,846


9,562


284


3.0
%Total operating expenses

$
183,754

$
131,930

$
(51,824
)

(39.3
)%


The
increase in direct costs of $3.9 million or 6% was principally attributable to the greater use of outside contractors to meet skill set and language requirements of various
engagements and higher compensation levels. Foreign currency translation also increased costs in 2010 compared with the same 2009 period. Compensation costs consist of a mix of fixed and variable
salaries, annual bonuses, benefits and pension plan contributions. Bonus compensation is determined based on achievement against Company financial and individual targets, and is accrued monthly
throughout the year based on management estimates of target achievement. Statutory and elective pension plans are offered to employees as appropriate. Direct costs also include employee taxes, health
insurance, workers compensation and disability insurance.

A
portion of compensation expenses for certain billable employees are allocated between direct costs and selling, general and administrative costs based on relative time spent between
billable and non-billable activities.

Selling
costs consist principally of compensation expense related to business development, proposal preparation and delivery, and negotiation of new client contracts. Costs also include
travel expenses relating to the pursuit of sales opportunities, expenses for hosting periodic client conferences, public relations activities, participation in industry conferences, industry
relations, website maintenance and

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business
intelligence activities. Additionally, the Company maintains a dedicated global marketing function responsible for developing and managing sales campaigns, brand promotion, the TPI Index and
assembling proposals.

The
Company maintains a comprehensive program for training and professional development. Related expenses include product training, updates on new service offerings or methodologies and
development of client project management skills. Also included in training and professional development are expenses associated with the development, enhancement and maintenance of our proprietary
methodologies and tools and the systems that support them.

General
and administrative expenses consist principally of executive management compensation, allocations of billable employee compensation related to general management activities, IT
infrastructure, and costs for the finance, accounting, information technology and human resource functions. General and administrative costs also reflect continued investment associated with
implementing and operating client and employee management systems. Because our billable personnel operate primarily on client premises, all occupancy expenses are recorded as general and
administrative.

The
increase of $2.0 million or 4% in selling and general and administrative ("SG&A") expenses was principally attributable to an increase of $3.0 million related to
spending for outside professional services including $2.4 million for acquisition related deal costs, $1.8 million related to client related events and travel expenses, and
$0.3 million in share-based compensation. This increase was partially offset by decrease of $2.2 million reduction related to the greater allocation of advisor time to billable
activities, $0.6 million in bad debt reserves and $0.3 million related to insurance and occupancy expenses.

Depreciation and Amortization Expense

The increase of $0.3 million was primarily due to higher amortization expense for amortizable intangible assets as a result of
an assessment of future revenue attributable to customer relationships as part of the Company's intangible assets impairment testing conducted in 2010. The Company's fixed assets consist of furniture,
fixtures, equipment (mainly personal computers) and leasehold improvements. Depreciation expense is generally computed by applying the straight-line method over the estimated useful lives
of assets. The Company also capitalizes some costs associated with the purchase and development of internal-use software, system conversions and website development costs. These costs are
amortized over the estimated useful life of the software or system.

The
Company amortizes its intangible assets (e.g. client relationships and databases) over their estimated useful lives. Goodwill, trademark and trade names related to
acquisitions are not amortized but is subject to annual impairment testing.

Impairment of goodwill and intangible assets

As a result of declining revenue, driven by a global recession which has impacted and reduced sourcing industry activity, the Company
determined a triggering event had occurred requiring a goodwill and indefinite-lived intangibles impairment test be performed in the third quarter of 2010. The Company recorded a non-cash
impairment charge of $46.6 million associated with goodwill and $5.9 million associated with indefinite-lived intangible assets. During the third quarter of 2009, the Company also
recorded non-cash impairment charges of $6.8 million associated with intangible assets as a result of its impairment testing.

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Other (Expense), Net

The following table presents a breakdown of other (expense), net:

Years Ended December 31,2010

2009

Change

Percent
Change(in thousands)Interest income

$
159

$
262

$
(103
)

(39.3
)%Interest expense


(3,241
)

(4,550
)

1,309


28.8
%Foreign currency loss


(268
)

(140
)

(128
)

(91.4
)%Total other (expense), net

$
(3,350
)
$
(4,428
)
$
1,078


24.3
%


The
decrease of $1.1 million was primarily the result of lower interest expense due to reduced debt levels partially offset by foreign currency related losses and lower interest
income.

Income Tax Expense

The Company's effective tax rate varies from period to period based on the mix of earnings among the various state and foreign tax
jurisdictions in which business is conducted and the level of non-deductible expenses incurred in any given period. The Company recorded an income tax benefit for 2010 of
$1.9 million as compared to $0.8 million for 2009. The Company's effective tax rate for the year ended December 31, 2010 was 3.5% compared to 21.5% for the year ended
December 31, 2009. The decrease in the effective rate was primarily due to the impact of the goodwill impairment recorded in 2010 and the write down of a deferred tax asset previously recorded
on stock awards and booking of valuation allowance on foreign net operating losses in 2009.

Results of Operations for the Years Ended December 31, 2009 and December 31, 2008

Revenues

Geographical information for the segment is as follows:

Years Ended December 31,Geographic Area

2009

2008

Change

Percent
Change(in thousands)Americas

$
77,007

$
96,548

$
(19,541
)

(20.2
)%Europe


44,696


64,485


(19,789
)

(30.7
)%Asia Pacific


11,041


13,762


(2,721
)

(19.8
)%Total revenues

$
132,744

$
174,795

$
(42,051
)

(24.1
)%


The
net decrease in revenues of $42.1 million or 24% in 2009 was attributable principally to a 20% decrease in Americas revenues to $77.0 million and a 29% decrease in
international revenues to $55.7 million. The decrease in revenues is primarily due to lower levels of sourcing activity, particularly in the U.S. and Europe, attributable to uncertainty and
delayed decision making by clients resulting from the prolonged worldwide economic downturn and the impact of foreign currency translation to U.S. dollars on reported results. Declines in IT
and BPO related sourcing activity were the primary contributors to this year-over-year decline. Billable staff at December 31, 2009 totaled 328, as compared to 342 at
December 31, 2008.

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Operating Expenses

The following table presents a breakdown of our operating expenses by functional category:

Years Ended December 31,Operating Expenses

2009

2008

Change

Percent
Change(in thousands)Direct costs and expenses for advisors

$
67,674

$
96,311

$
(28,637
)

(29.7
)%Selling, general and administrative


47,894


51,972


(4,078
)

(7.8
)%Goodwill impairment charge





49,363


(49,363
)

(100.0
)%Intangible asset impairment charge


6,800


24,791


(17,991
)

(72.6
)%Depreciation and amortization


9,562


10,000


(438
)

(4.4
)%Total operating expenses

$
131,930

$
232,437

$
(100,507
)

(43.2
)%


The
decrease in direct costs of $28.6 million or 30% was principally attributable to lower compensation due to a lower level of advisory staff, reduced provisions for performance
based bonus programs and lower levels of client reimbursable expenses. Foreign currency translation also reduced costs in 2009 compared with the same 2008 period. Compensation costs consist of a mix
of fixed and variable salaries, annual bonuses, benefits and pension plan contributions.

The
decrease of $4.1 million or 8% in SG&A expenses was principally attributable to cost reductions of $2.4 million related to headcount and fixed and variable compensation
levels, $1.1 million related to spending for outside professional services, $0.7 million related to travel expenses, $0.6 million related to training, client development activity
and the impact of foreign currency translation to U.S. dollars on reported results. This reduction was partially offset by an increase of $1.1 million for severance charges,
$0.8 million in share-based compensation, $0.3 million in computer related expenses and $0.2 million in bad debt reserves.

Depreciation and Amortization Expense

This decrease of $0.4 million was primarily due to the reduction of amortization expense for intangible assets impaired as part
of the Company's intangible assets impairment testing conducted in 2008.

Impairment of goodwill and intangible assets

As a result of declining revenue, driven by a global recession which has impacted and reduced sourcing industry activity, the Company
determined a triggering event had occurred requiring a goodwill and indefinite-lived intangibles impairment test be performed in the third quarter of 2009. The Company recorded a non-cash
impairment charge of $6.8 million
associated with indefinite-lived intangible assets. During the fourth quarter of 2008, the Company also recorded non-cash impairment charges of $49.4 million associated with
goodwill and $24.8 million related to intangible assets as a result of its annual impairment testing.

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Other Income (Expense), Net

The following table presents a breakdown of other (expense), net:

Years Ended December 31,2009

2008

Change

Percent
Change(in thousands)Interest income

$
262

$
1,300

$
(1,038
)

(79.8
)%Interest expense


(4,550
)

(6,928
)

2,378


34.3
%Foreign currency (loss) gain


(140
)

578


(718
)

(124.2
)%Total other (expense), net

$
(4,428
)
$
(5,050
)
$
622


12.3
%


The
decrease of $0.6 million was primarily the result of lower interest expense primarily due to $22.2 million of debt repayments partially offset by foreign currency
related losses and lower interest income.

Income Tax Expense

The Company's effective tax rate varies from period to period based on the mix of earnings among the various state and foreign tax
jurisdictions in which business is conducted and the level of non-deductible expenses incurred in any given period. The Company recorded an income tax benefit for 2009 of
$0.8 million. The Company's effective tax rate for the year ended December 31, 2009 was 21.5% compared to 7.6% for the year ended December 31, 2008. The increase in the effective
rate was primarily due to the impact of the goodwill impairment recorded in 2008 and the derecognition of deferred tax asset previously recorded on stock awards and booking of valuation allowance on
foreign net operating losses in 2009.

Liquidity and Capital Resources

Liquidity

The Company's primary sources of liquidity are cash flows from operations and existing cash and cash equivalents. Operating assets and
liabilities consist primarily of receivables from billed and unbilled services, accounts payable, accrued expenses, and accrued payroll and related benefits. The volume of billings and timing of
collections and payments affect these account balances.

The
following table summarizes ISG's cash flows for the years ended December 31, 2010, 2009 and 2008:

Years Ended
December 31,2010

2009

2008(in thousands)Net cash provided by (used in):Operating activities

$
5,747

$
4,056

$
20,481Investing activities, including acquisitions


(6,707
)

(1,239
)

(1,634
)Financing activities


(1,698
)

(22,080
)

(3,939
)Effect of exchange rate changes on cash


173


903


(939
)Net (decrease) increase in cash and cash equivalents

$
(2,485
)
$
(18,360
)
$
13,969


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As
of December 31, 2010, the Company's liquidity and capital resources included cash and cash equivalents of $46.1 million compared to $42.8 million as of
December 31, 2009, a net increase of $3.3 million, which was primarily attributable to the following:



Capital Resources

On November 16, 2007, in connection with the acquisition of TPI, International Consulting Acquisition Corp., a wholly-owned
indirect subsidiary of ISG (the "Borrower"), entered into a senior secured credit facility comprised of a $95.0 million term loan facility and a $10.0 million revolving credit facility
(collectively referred to as the 2007 Credit Agreement). On November 16, 2007, the Borrower borrowed $95.0 million under the term loan facility to finance a portion of the purchase price
for the TPI acquisition and to pay transaction costs. The material terms of the 2007 Credit Agreement are as follows:



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As
of December 31, 2010, the total principal outstanding under the term loan facility was $69.8 million. There were no borrowings under the revolving credit facility during
fiscal 2010.

Under
the 2007 Credit Agreement, the Company is required to hedge at least 40% of borrowings outstanding under the term loan facility. Subsequent to December 31, 2007, the Company
entered into an agreement to cap the interest rate at 7% on $38.0 million of the LIBOR component of our borrowings under the term loan facility for a period of three years. The expense related
to this interest rate cap was nominal. This agreement expired in January 2011 and is not required going forward.

On
June 29, 2009, the Company made a voluntary principal prepayment of $12.0 million against its outstanding term loan balance of $93.8 million. In conjunction with
this prepayment, our lenders consented to the following conditions: (1) agreement to execute the Company's UK tax planning strategy to reduce future potential cash taxes, (2) exclusion
of the impact in the calculation of EBITDA of up to $5.0 million of restructuring charges relating to the Borrower's previously announced 2009 restructuring plan through December 31,
2009 and (3) exclusion of the impact in the calculation of EBITDA of establishing, if necessary, a reserve in respect of certain accounts receivable and work in progress due from General Motors
Corporation for worked performed on or before June 1, 2009.

On
September 11, 2009, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) for the remaining life of the 2007 Credit Agreement to
provide the Company with greater financing flexibility in return for additional debt repayments. In accordance with the terms of the amended 2007 Credit Agreement, the Company made $5.0 million
of principal repayments on September 30, 2009 and December 31, 2009 to reduce the outstanding term loan balance to $71.8 million. The principal repayments were made from excess
cash balances generated through the Company's normal business operations. In accordance with the terms of the 2007 Credit Agreement, the Company made a $2.0 million principal repayment on
March 31, 2010 to reduce the outstanding term loan balance to $69.8 million.

On
September 27, 2010, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) from September 30, 2010 to December 30, 2010
and to restore the exclusion of the impact in the calculation of earnings before interest, taxes, depreciation, and amortization EBITDA of up to $5.0 million of restructuring charges through
December 31, 2011 in order to provide the Company with greater financing flexibility. The Company also received approval to complete the acquisition of STA Consulting subject to certain
conditions.

On
December 23, 2010, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) from December 31, 2010 to March 30, 2011 in
order to provide the Company with greater financing flexibility. Our lenders also agreed to allow the Company to extend the date to complete the acquisition of STA to March 31, 2011. On
February 10, 2011 the acquisition of STA Consulting was completed.

On
March 16, 2011, our lenders agreed to amend the total leverage ratio (as defined) for the remaining life of the 2007 Credit Agreement to provide the Company with greater
financing flexibility in return for additional quarterly term loan principal repayments. In accordance with the terms of the amended 2007 Credit Agreement, the Company will make mandatory principal
repayments of $3.0 million on March 31, 2011 and $1.0 million on June 30, 2011, September 30, 2011 and December 31, 2011 respectively to reduce the
outstanding term loan balance to $63.8 million. The principal repayments will be made from cash generated through the Company's normal business operations.

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Additional
mandatory principal repayments totaling $7.0 million and $10.0 million will be due in 2012 and 2013 respectively with the remaining principal repayments due in
2014. The final mandatory term loan principal repayment will be due on November 16, 2014, which is the maturity date for the term loan.

Contractual Obligations

The following table summarizes the Company's contractual obligations as of December 31, 2010, and the timing and effect that
such obligations are expected to have on the Company's liquidity and capital requirements in future periods.

Payments Due by Period

Contractual Obligations

Total

Less than
1 Year

1  3 Years

3  5 Years

More Than
5 Years(In Thousands)Debt obligations, principal and interest

$
80,850

$
2,844

$
5,695

$
72,311

$
Operating lease obligations


2,470


1,050


1,175


245


Total

$
83,320

$
3,894

$
6,870

$
72,556

$



The
Company believes that cash flows generated from operations, existing cash and cash equivalents and borrowing capacity under our senior secured credit facility are sufficient to
finance the requirements of our business during future periods.

Off-Balance Sheet Arrangements

ISG does not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent
interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity.

Employee Retirement Plans

The Company maintains a qualified defined contribution profit-sharing plan (the "Plan") for U.S.-based employees. Prior to
January 1, 2008, contributions to the Plan were made by the Company up to a maximum per eligible employee of 12.75% of total cash compensation or $25,500, whichever was less. Post
January 1, 2008, the annual contribution was adjusted to be 3% of total cash compensation or $7,350, whichever is less. Employees are generally eligible to participate in the Plan after six
months of service, and are 100% vested upon entering the Plan. For the fiscal years ended December 31, 2010, 2009 and 2008, TPI contributed $1.2 million, $1.6 million and
$1.5 million, respectively, to the Plan. These amounts were invested by the participants in a variety of investment options under an arrangement with a third party asset manager. All current
and future financial risks associated with the gains and losses on investments are borne by Plan participants.

Seasonality and Quarterly Results

The negotiation of sourcing transactions and, as a result, our revenue and earnings are subject to seasonal fluctuations. As a result
of year-end holidays, macro-economic factors and client budget and spending patterns, our revenues have historically been weighted toward the second half of each year. Our earnings track
this revenue seasonality and are also impacted by the timing of the adoption of annual price increases and certain costs and, as a result, have historically been higher in the second half of each
year. Due to the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires the
appropriate application of certain accounting policies, many of which

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require
management to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements and related notes. Since future events and their
impact cannot be determined with certainty, the actual results may differ from estimates. Such differences may be material to the consolidated financial statements.

The
Company believes the application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are periodically
reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, the Company has found the application of accounting policies to be appropriate, and actual results
have not differed materially from those determined using necessary estimates.

The
Company's accounting policies are more fully described in Note 2 "Summary of Significant Accounting Policies" in the "Notes to the Consolidated Financial Statements." The
Company has identified the following critical accounting policies:

Revenue Recognition

In accordance with the provisions of accounting standard for revenue recognition, we recognize our revenues for the sale of services
and products when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, the fee is fixed or determinable and the collectability of the related revenue is
reasonably assured.

The
Company principally derives revenues from fees for services generated on a project-by-project basis. Prior to the commencement of a project, the Company
reaches agreement with the client on rates for services based upon the scope of the project, staffing requirements and the level of client involvement. It is the Company's policy to obtain written
agreements from new clients prior to performing services. In these agreements, the clients acknowledge that they will pay based upon the amount of time spent on the project or an agreed upon fee
structure.
Revenues for services rendered are recognized on a time and materials basis or on a fixed-fee or capped-fee basis in accordance with accounting and disclosure requirements for
revenue recognition.

Fees
for services that have been performed, but for which the Company has not invoiced the customers are recorded as unbilled receivables in the accompanying consolidated balance sheets.
Invoices issued before the related services have been performed are recorded as deferred revenue in the accompanying consolidated balance sheets.

Revenues
for time and materials contracts are recognized based on the number of hours worked by the Company's advisors at an agreed upon rate per hour and are recognized in the period in
which services are performed. Revenues for time and materials contracts are billed monthly, semimonthly or in accordance with the specific contractual terms of each project.

Revenues
related to fixed-fee or capped-fee contracts are recognized into revenue as value is delivered to the customer. The pattern of revenue recognition for
these contracts varies depending on the terms of the individual contracts, and may be recognized proportionally or deferred until the end of the contract term and recognized when our obligations have
been fulfilled with the customer. In instance where substantive acceptance provisions are specified in the customer contracts, revenues is deferred until all acceptance criteria have been met. The
pattern of revenue recognition for the proportional contracts is recognized on the proportional performance method of accounting based on the ratio of labor hours incurred to estimated total labor
hours, which the Company considers to be the best available indicator of the pattern and timing in which contract obligations are fulfilled. This percentage is multiplied by the contracted dollar
amount of the project to determine the amount of revenue to recognize in an accounting period. The contracted amount used in this calculation typically excludes the amount the client pays for
reimbursable expenses. There are situations where the number of hours to complete projects may exceed the Company's original estimate as a result of an increase in project scope or unforeseen events.
On a regular basis, the Company reviews the hours incurred and estimated total labor hours to complete. The results of any revisions in these estimates are reflected in the period in which they become
known. The Company believes it has a demonstrated history of successfully estimating the total labor hours to complete a project.

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The agreements entered into in connection with a project, whether on a time and materials basis or fixed-fee or capped-fee basis,
typically allow the Company's clients to terminate early due to breach or for convenience with 30 days' notice. In the event of termination, the client is contractually required to pay for all
time, materials and expenses incurred by the Company through the effective date of the termination. In addition, from time to time, the Company enters into agreements with clients that limit the
Company's right to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit the Company from performing a defined
range of services that it might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or
the specific project team.

Accounts and Unbilled Receivables and Allowance for Doubtful Accounts

Our trade receivables primarily consist of amounts due for services already performed via fixed fee or time and materials arrangements.
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of clients to pay fees or for disputes that affect its ability to fully collect billed
accounts receivable. The allowance for these risks is prepared by reviewing the status of all accounts and recording reserves on a specific identification method based on previous experiences and
historical bad debts. However, our actual experience may vary significantly from these estimates. If the financial condition of our clients were to
deteriorate, resulting in their inability or unwillingness to pay their invoices, we may need to record additional allowances or write-offs in future periods. To the extent the provision
relates to a client's inability or unwillingness to make required payments, the provision is recorded as bad debt expense, which is classified within selling, general and administrative expense in the
accompanying consolidated statement of operations.

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

Direct Costs and Expenses for Advisors

Direct costs and expenses for advisors include payroll expenses and advisory fees directly associated with the generation of revenues
and other program expenses. Direct costs and expenses for advisors are expensed as incurred.

Direct
costs and expenses for advisors also include expense accruals for discretionary bonus payments. Bonus accrual levels are adjusted throughout the year based on actual and projected
individual and Company performance.

Income Taxes

The Company uses the asset and liability method to account for income taxes, including recognition of deferred tax assets and
liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. The Company reviews its deferred tax assets for
recovery. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in the valuation
allowance from period to period are included in the Company's tax provision in the period of change.

In
June 2006, the Financial Accounting Standards Board ("FASB") issued authoritative guidance for uncertain income tax positions recognized in an enterprise's financial statements in
accordance with the Income Tax Topic of the Accounting Standards Codification ("ASC"). This interpretation requires companies to use a prescribed model for assessing the financial recognition and
measurement of all tax positions taken or expected to be taken in its tax returns. This guidance provides clarification on derecognition, classification, interest and penalties, accounting in interim
periods, disclosures and

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transition.
We adopted this guidance on January 1, 2007. Our provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well as the
related interest.

Business Combinations

We apply the FASB authoritative guidance to all business combinations for which the acquisition date is on or after January 1,
2009, and to certain future income tax effects related to our prior business combinations, should they arise. In these acquisitions, tangible and intangible assets acquired and liabilities assumed are
recorded at fair value and goodwill is recognized for any difference between the price of the acquisition and our fair value determination.

Goodwill and Intangible Assets

The Company's goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired at the
date of acquisition. The primary other identifiable intangible assets of the Company with indefinite lives are trademarks of the business acquired. These assets are not amortized but rather tested for
impairment at least annually by applying a fair-value based test in accordance with accounting and disclosure requirements for goodwill and other indefinite-lived intangible assets. This
test is performed by the Company during its fourth fiscal quarter or more frequently if the Company believes impairment indicators are present. At December 31, 2010, the Company maintains a
single operating segment and reporting unit.

The
provisions require that we perform a two-step impairment test on goodwill. In the first step, we compare the fair value of the reporting unit to its carrying amount,
including goodwill. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test whereby the carrying value of
the reporting unit's goodwill is compared to its implied fair value. If the carrying value of the goodwill exceeds the implied fair value, an impairment loss equal to the difference is recorded. Due
primarily to a significant decline in the Company's market capitalization during the third quarter of 2010 and the challenging economic
environment, driven by the global recession which has impacted and reduced sourcing industry activity, the Company determined a triggering event had occurred requiring that a goodwill and other
indefinite-lived assets impairment test be performed.

In
performing the first step of the impairment test on goodwill, we determined the fair value of the reporting unit under both a market and income approach. The income approach utilizes
a discounted cash flow model and is based on projections of future operations of the reporting unit as of the valuation date. The market approach is based on the Company's stock price and provides a
direct indication of fair value. Under the market approach, we determined the fair value of the reporting unit utilizing a relevant average of the Company's common stock price for the August 31
measurement period, as quoted on the Nasdaq Global Market plus a 35% control premium based upon recent transactions of comparable companies. In light of current macro-economic conditions and current
revenue run rates, the discounted cash flow or income approach assumed revenue growth rates of approximately 3% per year. We employed a rate of 15% to discount future excess cash flows.

We
determined the implied fair value of goodwill by allocating the fair value of our reporting unit to the reporting unit's assets and liabilities using purchase price allocation
guidance in order to determine the implied value of goodwill. We concluded that the implied fair value is $48.5 million, resulting in an impairment of $46.6 million, which is included in
loss from operations in the accompanying consolidated statement of operations for 2010.

Our
indefinite-lived intangible assets impairment tests involve estimates and management's judgment. The fair value of trademarks and trade name assets were determined using the relief
from royalty method by discounting the cash flows that represent a savings over having to pay a royalty fee

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for
use of the trademarks and trade names. The discounted cash flow valuation uses the same projections used under the income approach described above.

Due
to the continued challenging macro-economic factors impacting industry conditions as well as financial performance, we concluded that the indefinite life trademarks and trade names
were impaired by $5.9 million which is included in the loss from operations in the accompanying consolidated statement of operations for 2010. This impairment charge was measured as the excess
of the carrying value over the fair value of the asset.

The
Company tested the fair values of the goodwill and indefinite-lived intangible assets during our scheduled annual impairment testing in the fourth quarter of 2010 and determined
there was no additional impairment.

We
will continue to monitor our market capitalization for evidence of further impairment. Future downturn in our business, continued deterioration of economic conditions, or continued
further decline in our market capitalization may result in an additional impairment charge or charges in future periods, which could adversely affect our results of operations for those periods.

The
goodwill and intangible assets impairment charge is non-cash in nature and does not affect the Company's liquidity, cash flows from operations and debt covenants.

Long-Lived Assets

Long-lived assets, excluding goodwill and indefinite-lived intangibles, to be held and used by the Company are reviewed to
determine whether any significant change in the long-lived asset's physical condition, a change in industry conditions or a reduction in cash flows associated with the use of the
long-lived asset. If these or other factors indicate the carrying amount of the asset may not be recoverable, the Company determines whether an impairment has occurred through the use of
an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has occurred, the Company recognizes a loss for the difference between the
carrying amount and the fair value of the asset. The fair value of the asset is measured using market prices or, in the absence of market prices, an estimate of discounted cash flows. Cash flows are
generally discounted at an interest rate commensurate with our weighted average cost of capital for a similar asset. Assets are classified as held for sale when the Company has a plan for disposal of
certain assets and those assets meet the held for sale criteria of accounting and disclosure requirement for the impairment or disposal of long-lived assets.

Stock-Based Compensation

Stock Appreciation Rights ("SARs") for a fixed number of shares are granted to certain employees with an exercise price based on the
closing trading price of the Company's common stock on the grant date. The Company uses the Black-Scholes option pricing model to determine the fair value of each option award on the date of grant.
The volatility calculation is based on the most recent trading day average volatility of a representative sample of nine companies with market capitalizations of approximately $65 million to
$645 million that management believes to be engaged in the business of information services (the "Sample Companies"). The Company referred to the average volatility of the Sample Companies
because management believes that the average volatility of such companies is a reasonable benchmark to use in estimating the expected volatility of the Company's common stock. The
risk-free interest rate is determined based upon the interest rate on a U.S. Treasury Bill with a term equal to the expected life of the option at the time the option was granted. An
expected life of five years was taken into account for purposes of assigning a
fair value to the option. The expected life represents the period of time the awards granted are expected to be outstanding.

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The
Company also grants restricted stock with a fair value that is determined based on the closing price of the Company's common stock on the date of grant. SARs and restricted stock
generally vest over a four-year period. Stock-based compensation expense is recognized ratably over the applicable service period.

The
Company follows the provisions of accounting and disclosures requirement for share-based payments, requiring the measurement and recognition of all share-based compensation under the
fair value method.

Recent Accounting Pronouncements

See Note 2 to our consolidated financial statements included elsewhere in this report.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to financial market risks primarily related to changes in interest rates and manages these risks by employing a
variety of debt instruments. Although we do not believe a change in interest rates will materially affect our financial position or results of financial operations, it has purchased an interest rate
cap to limit our exposure for forty percent of the total term loan value to an increase in LIBOR rates beyond seven percent. A 100 basis point change in interest rates would result in an annual change
in the results of operations of $0.7 million pre-tax.

We
operate in a number of international areas which exposes us to significant foreign currency exchange rate risk. We have significant international revenue, which is generally collected
in local currency. As of December 31, 2010, the Company had no outstanding forward exchange contracts or other derivative instruments for hedging or speculative purposes. The percentage of
total revenues generated outside the Americas increased from 22% in 2004 to 42% in 2010. It is expected that our international revenues will continue to grow as European, Asian and other markets adopt
sourcing solutions and as a result of our acquisition of Compass. We recorded a foreign exchange transaction loss of $0.3 million for the year ended December 31, 2010. The translation of
our revenues into U.S. dollars, as well as our costs of operating internationally, may adversely affect our business, results of operations and financial condition.

The
Company has not invested in foreign operations in highly inflationary economies; however, we may do so in future periods.

Concentrations
of credit risk consist primarily of cash and cash equivalents and accounts receivable. All cash and cash equivalents are on deposit in fully liquid form in high quality
financial institutions. We extend credit to our clients based on an evaluation of each client's financial condition.

TPI's
20 largest clients accounted for approximately 45% of revenue in 2010 and 44% in 2009. In particular, revenues from clients in the automobile sector collectively accounted for
approximately 15% of our 2010 annual revenue. Although only General Motors accounts for more than 10% of our revenues, if one or more of our large clients terminate or significantly reduce their
engagements or fail to remain a viable business, then our revenues could be materially and adversely affected. In addition, our large clients generally maintain sizable receivable balances at any
given time and our ability to collect such receivables could be jeopardized if such client fails to remain a viable business.

Item 8.    Financial Statements and Supplementary Data.

Reference is made to our financial statements beginning on page F-2 of this report.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

37

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Table of Contents

Item 9A.    Controls and Procedures

Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or
submit under the Securities Exchange Act of 1934 as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission, and that such information is accumulated and communicated to ISG's management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures as of December 31, 2010, as required by the Rule 13a-15(b) under the Exchange Act. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and procedures were effective as of December 31, 2010.

Management's Report on Internal Control Over Financial Reporting

Management of ISG is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of ISG's financial statements for external reporting purposes in accordance with US generally accepted accounting principles. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under
the supervision and with the participation of ISG's management, including ISG's Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness
of the internal control over financial reporting of ISG as of December 31, 2010, as required by Rule 13a-15(c) under the Exchange Act. In making this assessment, ISG used the
criteria set forth in the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under
the framework in Internal ControlIntegrated Framework, management concluded that ISG's internal control over financial reporting was effective as of December 31, 2010.

The
effectiveness of the Company's internal control over financial reporting as of December 31, 2010, has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2010 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

Item 9B.    Other Information

None.

38

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Table of Contents

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

The
information required hereunder is incorporated by reference from the sections of ISG's Proxy Statement filed in connection with our 2011 Annual Meeting of Stockholders under the
caption "Management."

The
information required hereunder is incorporated by reference from the sections ISG's Proxy Statement filed in connection with our 2011 Annual Meeting of Stockholders under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance."

The
information required hereunder is incorporated by reference from the sections of ISG's Proxy Statement filed in connection with our 2011 Annual Meeting of Stockholders under the
caption "Corporate Governance."

The
information required hereunder is incorporated by reference from the sections of ISG's Proxy Statement filed in connection with our 2011 Annual Meeting of Stockholders under the
caption "Corporate Governance."

Item 11.    Executive Compensation

The information required hereunder is incorporated by reference from the sections of the ISG's Proxy Statement filed in connection with
its 2011 Annual Meeting of Stockholders under the caption "Compensation of Officers and Directors."

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required hereunder is incorporated by reference from the sections of the ISG's Proxy Statement filed in connection with
its 2011 Annual Meeting of Stockholders under the caption "Security Ownership of Certain Beneficial Owners."

Item 13.    Certain Relationships and Related Transactions and Director Independence

The information required hereunder is incorporated by reference from the sections in ISG's Proxy Statement filed in connection with its
2011 Annual Meeting of the Stockholders under the caption "Corporate Governance."

Item 14.    Principal Accounting Fees and Services

The information required hereunder is incorporated by reference from the sections in ISG's Proxy Statement filed in connection with its
2011 Annual Meeting of the Stockholders under the caption "Proposal No. 2 Ratification of Engagement of Independent Registered Public Accounting Firm."

39

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Table of Contents

PART IV

Item 15.    Exhibits and Financial Statement Schedule

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



Financial Statements of Information Services Group, Inc.:Reports of Independent Registered Public Accounting Firm

F-1Consolidated Balance Sheets

F-2Consolidated Statement of Operations

F-3Consolidated Statement of Stockholders' Equity

F-4Consolidated Statement of Cash Flows

F-5Notes to Consolidated Financial Statements

F-6


(a)(2)    Financial Statement Schedule

Schedule IIValuation and Qualifying Accounts

(a)(3)    Exhibits:

We hereby file as part of this Annual Report on Form 10-K the Exhibits listed in the attached Exhibit Index.

40

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Table of Contents

Report of Independent Registered Public Accounting Firm

To
the Board of Directors and Stockholders of
Information Services Group, Inc:

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of Information Services Group, Inc. and its subsidiaries at December 31, 2010 and 2009, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial
statement schedule listed in the index appearing under Item 15 (a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2010, based on criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A.
Our responsibility is to express opinions on these financial statements, on the financial statement schedule and on the Company's internal control over financial reporting based on our integrated
audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/
PricewaterhouseCoopers LLP

Houston,
Texas
March 16, 2011

F-1

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Table of Contents

INFORMATION SERVICES GROUP, INC.        CONSOLIDATED BALANCE SHEETS        (in thousands, except par value)

December 31,
2010

December 31,
2009ASSETSCurrent assetsCash and cash equivalents

$
40,301

$
42,786Accounts and unbilled receivables, net of allowance of $195 and $206, respectively


26,603


26,273Deferred tax asset


2,852


2,137Prepaid expense and other current assets


1,281


1,424Total current assets


71,037


72,620Restricted cash


5,750


Furniture, fixtures and equipment, net of accumulated depreciation of $3,950 and $2,941, respectively


2,113


2,586Goodwill


48,474


95,065Intangible assets, net


55,746


70,072Other assets


1,444


1,630Total assets

$
184,564

$
241,973LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesAccounts payable

$
1,656

$
1,859Current maturities of long-term debt





2,000Deferred revenue


1,175


1,672Accrued expenses


10,701


9,392Total current liabilities


13,532


14,923Long-term debt, net of current maturities


69,813


69,813Deferred tax liability


19,336


25,411Other liabilities


66


201Total liabilities


102,747


110,348Commitments and contingencies (Note 13)Stockholders' equityPreferred stock, $.001 par value; 10,000 shares authorized; none issued





Common stock, $.001 par value, 100,000 shares authorized; 32,617 shares issued and 32,601 outstanding at December 31, 2010 and 31,816 shares issued
and 31,800 outstanding at December 31, 2009


33


32Additional paid-in capital


192,989


189,601Treasury stock (16 and 16 common shares, respectively, at cost)


(57
)

(57
)Accumulated other comprehensive loss


(1,553
)

(1,521
)Accumulated deficit


(109,595
)

(56,430
)Total stockholders' equity


81,817


131,625Total liabilities and shareholders' equity

$
184,564

$
241,973


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

F-2

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Table of Contents

INFORMATION SERVICES GROUP, INC.        CONSOLIDATED STATEMENT OF OPERATIONS        (in thousands, except per share data)

Years Ended December 31,2010

2009

2008Revenues

$
132,013

$
132,744

$
174,795Operating expensesDirect costs and expenses for advisors


71,528


67,674


96,311Selling, general and administrative


49,889


47,894


51,972Goodwill impairment charge


46,591





49,363Intangible assets impairment charge


5,900


6,800


24,791Depreciation and amortization


9,846


9,562


10,000Operating (loss) income


(51,741
)

814


(57,642
)Interest income


159


262


1,300Interest expense


(3,241
)

(4,550
)

(6,928
)Foreign currency transaction (loss) gain


(268
)

(140
)

578Loss before taxes


(55,091
)

(3,614
)

(62,692
)Income tax benefit


(1,926
)

(778
)

(4,783
)Net loss

$
(53,165
)
$
(2,836
)
$
(57,909
)Weighted average shares outstanding:Basic


32,050


31,491


31,282Diluted


32,050


31,491


31,282Loss per share:Basic

$
(1.66
)
$
(0.09
)
$
(1.85
)Diluted

$
(1.66
)
$
(0.09
)
$
(1.85
)


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

F-3

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Table of Contents

INFORMATION SERVICES GROUP, INC.        CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY        (in thousands)

Common Stock





Accumulated
Other
Comprehensive
LossAdditional
Paid-in-
Capital

Treasury
Stock

(Accumulated
Deficit)

Total
Stockholders'
EquityShares

AmountBalance, December 31, 2007


31,366

$
31

$
187,078

$


$
(739
)
$
4,418

$
190,788Comprehensive loss:Net loss

















(57,909
)

(57,909
)Foreign currency translation, net of tax of $1,197














(1,673
)




(1,673
)Total comprehensive loss




















(59,582
)Restricted stocks units granted








401











401Equity securities repurchased


(8
)




(2,496
)

(739
)







(3,235
)Issuance of treasury shares








(230
)

490





(14
)

246Stock based compensation








1,963











1,963Balance December 31, 2008


31,358


31


186,716


(249
)

(2,412
)

(53,505
)

130,581Comprehensive loss:Net loss

















(2,836
)

(2,836
)Foreign currency translation, net of tax of $546














891





891Total comprehensive loss




















(1,945
)Issuance of common stock


458


1


81











82Equity securities repurchased











(86
)







(86
)Issuance of treasury shares








(27
)

278





(89
)

162Stock based compensation








2,831











2,831Balance December 31, 2009


31,816


32


189,601


(57
)

(1,521
)

(56,430
)

131,625Comprehensive loss:Net loss

















(53,165
)

(53,165
)Foreign currency translation, net of tax of $20














(32
)




(32
)Total comprehensive loss




















(53,197
)Issuance of common stock


801


1


301











302Stock based compensation








3,087











3,087Balance December 31, 2010


32,617

$
33

$
192,989

$
(57
)
$
(1,553
)
$
(109,595
)
$
81,817


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

F-4

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Table of Contents

INFORMATION SERVICES GROUP, INC.        CONSOLIDATED STATEMENT OF CASH FLOWS        (in thousands)

Years Ended December 31,2010

2009

2008Cash flows from operating activitiesNet loss

$
(53,165
)
$
(2,836
)
$
(57,909
)Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation expense


1,420


1,419


1,529Goodwill impairment charge


46,591





49,363Intangible assets impairment charge


5,900


6,800


24,791Amortization of intangible assets


8,426


8,143


8,471Amortization of deferred financing costs


359


784


529Stock-based compensation


3,087


2,831


1,963Bad debt expense


(51
)

510


275Deferred tax benefit


(6,763
)

(5,653
)

(12,152
)Loss on disposal of fixed assets


11


5


8Changes in operating assets and liabilities:Accounts receivable


(675
)

2,856


4,761Prepaid expense and other current assets


(31
)

(112
)

1,268Accounts payable


(202
)

(776
)

(2,125
)Deferred revenue


(497
)

200


(656
)Accrued expenses


1,337


(10,115
)

365Net cash provided by operating activities


5,747


4,056


20,481Cash flows from investing activitiesPurchase of furniture, fixtures and equipment


(957
)

(1,239
)

(1,634
)Restricted cash


(5,750
)




Net cash used in investing activities


(6,707
)

(1,239
)

(1,634
)Cash flows from financing activitiesPrincipal payments on borrowings


(2,000
)

(22,238
)

(950
)Proceeds from issuance of ESPP shares


302


82


Issuance of treasury stock





162


246Equity securities repurchased





(86
)

(3,235
)Net cash used in financing activities


(1,698
)

(22,080
)

(3,939
)Effect of exchange rate changes on cash


173


903


(939
)Net (decrease) increase in cash and cash equivalents


(2,485
)

(18,360
)

13,969Cash and cash equivalents, beginning of period


42,786


61,146


47,177Cash and cash equivalents, end of period

$
40,301

$
42,786

$
61,146Supplemental disclosures of cash flow information:Cash paid for:Interest

$
2,910

$
4,157

$
6,240Taxes

$
7,712

$
5,205

$
5,499Noncash investing and financing activities:Purchase price adjustments

$


$
240

$
1,721Issuance of restricted stock units in connection with VCP

$


$


$
401Issuance of treasury stock for ESPP and vested restricted stock awards

$


$
117

$
244


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

F-5

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Table of Contents



INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(tabular amounts in thousands, except per share data)

NOTE 1DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Information Services Group, Inc. (the "Company") was incorporated in Delaware on July 20, 2006. The Company was formed to acquire, through a merger, capital stock exchange,
asset or stock acquisition or other similar business combination one or more domestic or international operating businesses.

The
registration statement for the Company's initial public offering (the "Offering") was declared effective on January 31, 2007. The Company consummated the Offering on
February 6, 2007. Preceding the consummation of the Offering, an affiliate of the Company's officers purchased 6,500,000 warrants at $1 per warrant in a private placement (the "Private
Placement"). The Company received net proceeds of $255.4 million from the Private Placement and the Offering. The Company's management had broad discretion with respect to the specific
application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering were to be applied toward consummating a business combination with (or acquisition of)
an operating business in the information services industry. This operating company was subsequently identified as TPI Advisory Services Americas, Inc., a Texas corporation ("TPI").

On
November 16, 2007 (the "TPI Acquisition Date"), the Company consummated the acquisition of TPI, pursuant to a Purchase Agreement dated April 24, 2007, as amended on
September 30, 2007, by and between MCP-TPI Holdings, LLC, a Texas limited liability company ("MCP-TPI"), and the Company. For accounting purposes, the TPI
acquisition has been treated as a business combination. The results of TPI are included in the consolidated financial statements subsequent to the TPI Acquisition Date. During the periods prior to the
TPI Acquisition Date, the Company was in the development stage.

On
January 4, 2011, ISG completed the acquisition of Compass. Compass is a premier independent global provider of business and information technology benchmarking, performance
improvement, data and analytics services. It was founded in 1980 and headquartered in the United Kingdom and has 180 employees in 16 countries serving nearly 250 clients worldwide. The company
pioneered the aggregation and application of sophisticated metrics to understand root causes of organizational performance issues. In addition, their Fact-Based Consulting unit generates
tangible improvements in client businesses through sourcing advisory programs, recommendations in operational excellence and support in implementing transformational change in business operations.
Compass uses benchmarking to support fact-based decision making, analysis to optimize cost reduction, and tools and techniques to manage business performance.

On
February 10, 2011 ISG completed the acquisition of STA Consulting (Salvaggio, Teal & Associates) a premier independent information technology advisor serving the public
sector. STA Consulting advises clients on information technology strategic planning and the acquisition and implementation of new Enterprise Resource Planning (ERP) and other enterprise administration
and management systems. STA was founded in 1997 and is based in Austin, Texas with approximately 40 professionals experienced in information systems consulting in public sector areas such as
government operations, IT and project management, contract negotiations, financial management, procurement, human resources and payroll. STA Consulting works with such states as Alaska, Kansas,
Kentucky, Louisiana, Mississippi and West Virginia. STA Consulting and TPI have worked together in the past on engagements for such states as Georgia and Texas.

F-6

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 1DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (Continued)

We
support private and public sector clients in transforming and optimizing their operational environments through strategic consulting, benchmarking and analytics, managed services and
research with a focus on information technology, business process transformation and enterprise resource planning.

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, references to the Company include ISG and its consolidated subsidiaries.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management 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 periods reported. Actual results may differ from those estimates. The complexity of the estimation process and issues related to the assumptions, risks
and uncertainties inherent in the application of the proportional performance method of accounting affect the amounts of revenues, expenses, unbilled receivables and deferred revenue. Numerous
internal and external factors can affect estimates. Estimates are also used for but not limited to: allowance for doubtful accounts, useful lives of furniture, fixtures and equipment, depreciation
expense, fair value assumptions in analyzing goodwill and intangible asset impairments, income taxes and deferred tax asset valuation, and the valuation of stock based compensation.

Business Combinations

We apply the FASB authoritative guidance to all business combinations for which the acquisition date is on or after January 1,
2009, and to certain future income tax effects related to our prior business combinations, should they arise. In these acquisitions, tangible and intangible assets acquired and liabilities assumed are
recorded at fair value and goodwill is recognized for any difference between the price of the acquisition and our fair value determination.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents, including
certain money market accounts. The Company principally maintains its cash in money market and bank deposit accounts in the United States of America which typically exceed applicable insurance limits.
The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

F-7

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Restricted Cash

Restricted cash consists of cash and cash equivalents which the Company has pledged to fulfill certain obligations and are not
available for general corporate purposes.

In
December 2010, the Company funded the escrow for the closing of the acquisition of Compass in the amount of $5.8 million. The $5.8 million was classified as restricted
cash at December 31, 2010.

Accounts and Unbilled Receivables and Allowance for Doubtful Accounts

Our trade receivables primarily consist of amounts due for services already performed via fixed fee or time and materials arrangements.
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of clients to pay fees or for disputes that affect its ability to fully collect billed
accounts receivable. The allowance for these risks is prepared by reviewing the status of all accounts and recording reserves on a specific identification method based on previous experiences and
historical bad debts. However, our actual experience may vary significantly from these estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or
unwillingness to pay their invoices, we may need to record additional allowances or write-offs in future periods. To the extent the provision relates to a client's inability or
unwillingness to make required payments, the provision is recorded as bad debt expense, which is classified within selling, general and administrative expense in the accompanying consolidated
statement of operations.

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

Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist primarily of prepaid expenses for insurance, conferences as well as deposits for facilities,
programs and promotion items.

Furniture, Fixtures and Equipment, net

Furniture, fixtures and equipment is recorded at cost. Depreciation is computed by applying the straight-line method over
the estimated useful life of the assets, which ranges from two to five years. Leasehold improvements are depreciated over the lesser of the useful life of the underlying asset or the lease term, which
generally range from three to five years. Expenditures for renewals and betterments are capitalized. Repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation
of assets sold or otherwise disposed of are removed from the accounts and any associated gain or loss thereon is reflected in the accompanying consolidated statement of operations.

Internal-Use Software and Website Development Costs

The Company capitalizes internal-use software and website development costs and records these amounts within furniture,
fixtures and equipment. Accounting standards require that certain costs related to the development or purchase of internal-use software and systems as well as the costs incurred in the
application development stage related to its website be capitalized and amortized over

F-8

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

During
the years ended December 31, 2010 and 2009, the Company capitalized $0.5 and $0.3 million of costs associated with the system conversion and website development,
respectively.

Goodwill and Intangible Assets

The Company's goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired at the
date of acquisition. The primary other identifiable intangible assets of the Company with indefinite lives are trademarks of the business acquired. These assets are not amortized but rather tested for
impairment at least annually by applying
a fair-value based test in accordance with accounting and disclosure requirements for goodwill and other indefinite-lived intangible assets. This test is performed by the Company during
its fourth fiscal quarter or more frequently if the Company believes impairment indicators are present. At December 31, 2010, the Company maintains a single operating segment and reporting
unit.

The
provisions require that we perform a two-step impairment test on goodwill. In the first step, we compare the fair value of the reporting unit to its carrying amount,
including goodwill. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test whereby the carrying value of
the reporting unit's goodwill is compared to its implied fair value. If the carrying value of the goodwill exceeds the implied fair value, an impairment loss equal to the difference is recorded. Due
primarily to a significant decline in the Company's market capitalization during the third quarter of 2010 and the challenging economic environment, driven by the global recession which has impacted
and reduced sourcing industry activity, the Company determined a triggering event had occurred requiring that a goodwill and other indefinite-lived assets impairment test be performed.

In
performing the first step of the impairment test on goodwill, we determined the fair value of the reporting unit under both a market and income approach. The income approach utilizes
a discounted cash flow model and is based on projections of future operations of the reporting unit as of the valuation date. The market approach is based on the Company's stock price and provides a
direct indication of fair value. Under the market approach, we determined the fair value of the reporting unit utilizing a relevant average of the Company's common stock price for the August 31
measurement period, as quoted on the Nasdaq Global Market plus a 35% control premium based upon recent transactions of comparable companies. In light of current macro-economic conditions and current
revenue run rates, the discounted cash flow or income approach assumed revenue growth rates of approximately 3% per year. We employed a rate of 15% to discount future excess cash flows.

We
determined the implied fair value of goodwill by allocating the fair value of our reporting unit to the reporting unit's assets and liabilities using purchase price allocation
guidance in order to determine the implied value of goodwill. We concluded that the implied fair value is $48.5 million, resulting in an impairment of $46.6 million, which is included in
loss from operations in the accompanying consolidated statement of operations for 2010.

F-9

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Our
indefinite-lived intangible assets impairment tests involve estimates and management's judgment. The fair value of trademarks and trade name assets were determined using the relief
from royalty method by discounting the cash flows that represent a savings over having to pay a royalty fee for use of the trademarks and trade names. The discounted cash flow valuation uses the same
projections used under the income approach described above.

Due
to the continued challenging macro-economic factors impacting industry conditions as well as financial performance, we concluded that the indefinite life trademarks and trade names
were impaired by $5.9 million which is included in the loss from operations in the accompanying consolidated statement of operations for 2010. This impairment charge was measured as the excess
of the carrying value over the fair value of the asset.

The
Company tested the fair values of the goodwill and indefinite-lived intangible assets during our scheduled annual impairment testing in the fourth quarter of 2010 and determined
there was no additional impairment.

We
will continue to monitor our market capitalization for evidence of further impairment. Future downturn in our business, continued deterioration of economic conditions, or continued
further decline in our market capitalization may result in an additional impairment charge or charges in future periods, which could adversely affect our results of operations for those periods.

The
goodwill and intangible assets impairment charge is non-cash in nature and does not affect the Company's liquidity, cash flows from operations and debt covenants.

Long-Lived Assets

Long-lived assets, excluding goodwill and indefinite-lived intangibles, to be held and used by the Company are reviewed to
determine whether any significant change in the long-lived asset's physical condition, a change in industry conditions or a reduction in cash flows associated with the use of the
long-lived asset. If these or other factors indicate the carrying amount of the asset may not be recoverable, the Company determines whether an impairment has occurred through the use of
an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has occurred, the Company recognizes a loss for the difference between the
carrying amount and the fair value of the asset. The fair value of the asset is measured using market prices or, in the absence of market prices, an estimate of discounted cash flows. Cash flows are
generally discounted at an interest rate commensurate with our weighted average cost of capital for a similar asset. Assets are classified as held for sale when the Company has a plan for disposal of
certain assets and those assets meet the held for sale criteria of accounting and disclosure requirement for the impairment or disposal of long-lived assets.

Debt Issuance Costs

Costs directly incurred in obtaining long-term financing, typically bank and attorney fees, are deferred and are amortized
over the life of the related loan using the effective interest method. Deferred issuance costs are classified as other assets in the accompanying consolidated balance sheet. Amortization of debt
issuance costs is included in interest expense and totaled $0.4 million and $0.8 million for the years ended December 31, 2010 and 2009, respectively.

F-10

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition

In accordance with the provisions of accounting standard for revenue recognition, we recognize our revenues for the sale of services
and products when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, the fee is fixed or determinable and the collectability of the related revenue is
reasonably assured.

The
Company principally derives revenues from fees for services generated on a project-by-project basis. Prior to the commencement of a project, the Company
reaches agreement with the client on rates for services based upon the scope of the project, staffing requirements and the level of client involvement. It is the Company's policy to obtain written
agreements from new clients prior to performing services. In these agreements, the clients acknowledge that they will pay based upon the amount of time spent on the project or an agreed upon fee
structure. Revenues for services rendered are recognized on a time and materials basis or on a fixed-fee or capped-fee basis in accordance with accounting and disclosure
requirements for revenue recognition.

Fees
for services that have been performed, but for which the Company has not invoiced the customers are recorded as unbilled receivables in the accompanying consolidated balance sheets.
Invoices issued before the related services have been performed are recorded as deferred revenue in the accompanying consolidated balance sheets.

Revenues
for time and materials contracts are recognized based on the number of hours worked by the Company's advisors at an agreed upon rate per hour and are recognized in the period in
which services are performed. Revenues for time and materials contracts are billed monthly, semimonthly or in accordance with the specific contractual terms of each project.

Revenues
related to fixed-fee or capped-fee contracts are recognized into revenue as value is delivered to the customer. The pattern of revenue recognition for
these contracts varies depending on the terms of the individual contracts, and may be recognized proportionally or deferred until the end of the contract term and recognized when our obligations have
been fulfilled with the customer. In instance where substantive acceptance provisions are specified in the customer contracts, revenues is deferred until all acceptance criteria have been met. The
pattern of revenue recognition for the proportional contracts is recognized on the proportional performance method of accounting based on the ratio of labor hours incurred to estimated total labor
hours, which the Company considers to be the best available indicator of the pattern and timing in which contract obligations are fulfilled. This percentage is multiplied by the contracted dollar
amount of the project to determine the amount of revenue to recognize in an accounting period. The contracted amount used in this calculation typically excludes the amount the client pays for
reimbursable expenses. There are situations where the number of hours to complete projects may exceed the Company's original estimate as a result of an increase in project scope or unforeseen events.
On a regular basis, the Company reviews the hours incurred and estimated total labor hours to complete. The results of any revisions in these estimates are reflected in the period in which they become
known. The Company believes it has a demonstrated history of successfully estimating the total labor hours to complete a project.

The
agreements entered into in connection with a project, whether on a time and materials basis or fixed-fee or capped-fee basis, typically allow the Company's
clients to terminate early due to breach or for convenience with 30 days' notice. In the event of termination, the client is contractually required

F-11

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

to
pay for all time, materials and expenses incurred by the Company through the effective date of the termination. In addition, from time to time, the Company enters into agreements with clients that
limit the Company's right to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit the Company from performing a
defined range of services that it might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific
employees or the specific project team.

Reimbursable Expenditures

Amounts billed to customers for reimbursable expenditures are included in revenues and the associated costs incurred by the Company are
included in direct costs and expenses
for advisors in the accompanying consolidated statement of operations. Non-reimbursable amounts are expensed as incurred. Reimbursable expenditures totaled $9.6 million and
$9.8 million for the years ended December 31, 2010 and 2009, respectively.

Direct Costs and Expenses for Advisors

Direct costs and expenses for advisors include payroll expenses and advisory fees directly associated with the generation of revenues
and other program expenses. Direct costs and expenses for advisors are expensed as incurred.

Direct
costs and expenses for advisors also include expense accruals for discretionary bonus payments. Bonus accrual levels are adjusted throughout the year based on actual and projected
individual and Company performance.

Stock-Based Compensation

Stock Appreciation Rights ("SARs") for a fixed number of shares are granted to certain employees and with an exercise price based on
the closing trading price of the Company's common stock on the grant date. The Company uses the Black-Scholes option pricing model to determine the fair value of each option award on the date of
grant. The volatility calculation is based on the most recent trading day average volatility of a representative sample of nine companies with market capitalizations of approximately
$65 million to $645 million that management believes to be engaged in the business of information services (the "Sample Companies"). The Company referred to the average volatility of the
Sample Companies because management believes that the average volatility of such companies is a reasonable benchmark to use in estimating the expected volatility of the Company's common stock. The
risk-free interest rate is determined based upon the interest rate on a U.S. Treasury Bill with a term equal to the expected life of the option at the time the option was granted. An
expected life of five years was taken into account for purposes of assigning a fair value to the option. The expected life represents the period of time the awards granted are expected to be
outstanding.

The
Company also grants restricted stock with a fair value that is determined based on the closing price of the Company's common stock on the date of grant. SARs and restricted stock
generally vest over a four-year period. Stock-based compensation expense is recognized ratably over the applicable service period.

F-12

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The
Company follows the provisions of accounting and disclosures requirement for share-based payments, requiring the measurement and recognition of all share-based compensation under the
fair value method.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and
accounts receivable. The Company places its cash investments with high quality financial institutions. The Company extends credit to its customers based upon an evaluation of the customer's financial
condition and credit history and generally does not require collateral. Revenues from clients in the automobile sector collectively accounted for approximately 15% of our 2010 annual revenue. Revenues
from one client accounted for approximately 10% of our 2010 annual revenue.

Treasury Stock

The Company makes treasury stock purchases in the open market pursuant to the share repurchase program, which was approved by the Board
of Directors on November 14, 2007.

Treasury
stock is recorded on the consolidated balance sheet at cost as a reduction of stockholders' equity. Shares are released from Treasury at original cost on a first-in,
first-out basis, with any gain on the sale reflected as an adjustment to additional paid-in capital. Losses are reflected as an adjustment to additional paid-in
capital to the extent of gains previously recognized, otherwise as an adjustment to retained earnings.

Foreign Currency Translation

The assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the
end of the reporting period. Revenue and expense items are translated at average exchange rates for the reporting period. Resulting translation adjustments are included in the accompanying statement
of stockholders' equity as a component ofAccumulated Other Comprehensive Loss.

The
functional currency of the Company and its subsidiaries is the respective local currency. The Company has contracts denominated in foreign currencies and therefore, a portion of the
Company's revenues are subject to foreign currency risks. Transactional currency gains and losses that arise from transactions denominated in currencies other than the functional currencies of our
operations are recorded inForeign Currency Transaction (Loss) Gainin the accompanying consolidated statement of operations.

Fair Value of Financial Instruments

In September 2006, the Financial Accounting Standards Board ("FASB') issued accounting and disclosure requirement for fair value
measurements which establishes a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. This standard does not require any new fair value measurements;
however, it eliminates inconsistencies in the guidance provided in previous accounting pronouncements. The carrying value of the Company's cash and cash

F-13

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

equivalents,
receivables, accounts payable, long-term debt, other current liabilities, and accrued interest approximate fair value.

As
defined in the Accounting Standards Codification ("ASC"), fair value is the price that would be received upon a sale of an asset or paid upon a transfer of a liability in an orderly
transaction between market participants at the measurement date (exit price). Market participants can use market data or assumptions in pricing the asset or liability, including assumptions about risk
and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable. The use of unobservable inputs is intended to
allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. Under the fair-value hierarchy



Income Taxes

The Company uses the asset and liability method to account for income taxes, including recognition of deferred tax assets and
liabilities for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax basis. The Company reviews its deferred tax assets for
recovery. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in the valuation
allowance from period to period are included in the Company's tax provision in the period of change.

In
June 2006, the FASB issued authoritative guidance for uncertain income tax positions recognized in an enterprise's financial statements in accordance with the Income Tax Topic of the
ASC. This interpretation requires companies to use a prescribed model for assessing the financial recognition and measurement of all tax positions taken or expected to be taken in its tax returns.
This guidance provides clarification on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. We adopted this guidance on January 1,
2007. Our provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well as the related interest.

Loss Per Share

Basic earnings per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of

F-14

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

common
stock that would share in the net income of the Company. For the year ended December 31, 2010, the effect of 35.6 million warrants, 0.4 million stock appreciation rights
and 1.4 million Units (each Unit comprising one common share and one warrant) associated with the Company's IPO underwriters purchase option have not been considered in the diluted earnings per
share calculation, since the market price of the Company's common stock was less than the exercise price during the period in the computation. Also, 2.0 million restricted shares have not been
considered in the diluted earnings per share calculation for the year ended December 31, 2010, as the effect would be anti-dilutive. For the year ended December 31, 2009, the
effect of 35.6 million warrants, 0.3 million stock appreciation rights and 1.4 million Units (each Unit comprising one common share and one warrant) associated with the Company's
IPO underwriters purchase option have not been considered in the diluted earnings per share calculation, since the market price of the Company's common stock was less than the exercise price during
the period in the computation. Also, 0.8 million restricted shares have not been considered in the diluted earnings per share calculation for the year ended December 31, 2009, as the
effect would be anti-dilutive. For the year ended December 31, 2008, the effect of 35.6 million warrants, 0.3 million stock appreciation rights and 1.4 million
Units (each Unit comprising one common share and one warrant) associated with the Company's IPO underwriters purchase option have not been considered in the diluted earnings per share calculation,
since the market price of the Company's common stock was less than the exercise price during the period in the computation. Also, 0.3 million stock appreciation rights and 2.0 million
restricted shares have not been considered in the diluted earnings per share calculation for the year ended December 31, 2008, as the effect would be anti-dilutive

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

Years Ended December 31,2010

2009

2008Numerator:Net loss

$
(53,165
)
$
(2,836
)
$
(57,909
)Denominator:Basic weighted average common shares outstanding


32,050


31,491


31,282Diluted effects of SARs, restricted shares, Employee Stock Purchase Plan shares and warrants








32,050


31,491


31,282Loss per share:Basic

$
(1.66
)
$
(0.09
)
$
(1.85
)Diluted

$
(1.66
)
$
(0.09
)
$
(1.85
)


F-15

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Pronouncements

In March 2010, the FASB issued guidance related to revenue recognition for multiple element deliverables which eliminates the
requirement that all undelivered elements must have objective and reliable evidence of fair value before a company can recognize the portion of the consideration that is attributable to items that
already have been delivered. Under the new guidance, the relative selling price method is required to be used in allocating consideration between deliverables and the residual value method will no
longer be permitted. This guidance is effective prospectively for revenue arrangements entered into or materially modified in 2011 although early adoption is permitted. A company may elect, but will
not be required, to adopt the amendments retrospectively for all prior periods. The Company adopted this standard in the fourth quarter of 2009. The adoption of this standard did not have a material
impact on the Company's consolidated financial statements.

In
December 2010, the FASB issued updated guidance related to business combinations. The objective of this guidance is to address diversity in practice about the interpretation of the
pro forma revenue and earnings disclosure requirements for business combinations. The amendments in this guidance specify that if a public entity presents comparative financial statements, the entity
should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual
reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly
attributable to the business combination included in the reported pro forma revenue and earnings. The amendments affect any public entity that enters into business combinations that are material on an
individual or aggregate basis. This guidance is effective for business combinations occurring after December 15, 2010. The adoption of this guidance did not have a material impact on the
Company's consolidated financial statements.

NOTE 3ACQUISITIONS

Compass Acquisition

On January 4, 2011 (the "Compass Acquisition Date"), the Company executed an Agreement for the Sale and Purchase of the Entire
Issued Share Capital of CCGH Limited (the "Agreement") and consummated the acquisition of the entire issued share capital CCGH Limited, an English corporation ("Compass").

Under
the terms of the Agreement, each of the holders of the issued share capital of Compass (the "Compass Sellers") agreed to sell and transfer, and the Company agreed to buy, the
entire share capital of Compass (the "Share Purchase"). The Share Purchase was consummated on January 4, 2011.

F-16

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 3ACQUISITIONS (Continued)

The
total allocable purchase price consists of the following:

Cash

$
5,750Common Stock*


7,980Convertible Notes**


6,250Stamp Tax


98Total allocable purchase price

$
20,078


*3,500,000
shares issued at $2.28 per share as part of the acquisition.**The
Convertible Notes (the "Notes") mature on January 4, 2018 and interest is payable on the outstanding principal amount, computed daily, at the rate
of 3.875% per annum on January 31 of each calendar year and on the seventh anniversary of the date of the Notes. The Notes are subject to transfer restrictions until January 31, 2013. If
the price of the Company's common stock on the Nasdaq Global Market exceeds $4 per share for 60 consecutive trading days (the "Trigger Event"), the holder of the Notes may convert all (but not less
than all) of the outstanding principal amount of the Notes into shares of the Company's common stock at the rate of 1 share for every $4 in principal amount outstanding. After the Trigger Event, the
Company may prepay all or any portion of the outstanding principal amount of the Notes by giving the holder 30 days written notice.


The
purchase price has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the Compass Acquisition Date. The purchase price
allocation was based upon a valuation completed by third-party valuation specialists using an income approach and estimates and assumptions provided by management. The excess of the purchase price
over the net tangible and identifiable intangible assets was recorded as goodwill. Goodwill of $16.6 million acquired in the acquisition is not deductible for tax purposes.

The
following table summarizes the preliminary allocation of the aggregate purchase price to the fair value of the assets acquired and liabilities assumed as of the Compass Acquisition
Date:

Allocation of Purchase Price:Cash

$
1,091Accounts receivable


9,449Prepaid expenses and other assets


2,042Furniture, fixtures and equipment, net


685Goodwill


16,580Intangible assets


5,045Accounts payable


(1,603
)Accrued expenses and other


(11,294
)Deferred income tax liability


(1,917
)Net assets acquired

$
20,078


F-17

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 3ACQUISITIONS (Continued)

The intangible assets acquired include database, trademark and trade name, customer relationships, covenant not-to-compete and goodwill. Some of these assets,
such as goodwill and the trademark and trade name are not subject to amortization but rather an annual test for possible impairment; other intangible assets that are amortized over their useful lives
are reviewed when events or changes or circumstances indicate the carrying amount of the asset may not be recoverable.

Under
the purchase method of accounting, the total purchase price of approximately $20.1 million was allocated to Compass's net tangible and intangible assets based on their
estimated fair values as of the Compass Acquisition Date. Intangible assets are amortized utilizing the estimated pattern of the consumption of the economic benefit over their estimated lives, ranging
from one to ten weighted average years. Based on the valuation and other factors as described above, the purchase price assigned to intangible assets and the amortization period were as follows:

Purchase Price
Allocation

Asset LifeAmortizable intangible assets:Customer relationships

$
1,150

10 yearsCovenants not-to-compete


15

2 yearsDatabasesFinancial Data Repository


1,840

7 yearsNon-amortizable intangible assets:Trademark and trade name


2,040

IndefiniteTotal intangible assets

$
5,045


We
have not finalized our assessment of the fair values as there has been insufficient time between the acquisition date and the issuance of this Form 10-K to complete
our review of individual contracts, agreements, and accounting records of Compass.

STA Acquisition

On February 10, 2011 (the "STA Acquisition Date"), the Company executed an Asset Purchase Agreement (the "STA Agreement") with
Salvaggio & Teal Ltd. (d/b/a Salvaggio, Teal & Associates, "STA"), Salvaggio & Teal II, LLC, Mitt Salvaggio, Kirk Teal, Nathan Frey and International Consulting
Acquisition Corp., a wholly-owned subsidiary of ISG, and consummated
the acquisition of substantially all of the assets and assumption of certain specified liabilities of STA (collectively, the "Asset Purchase").

Under
the terms of the STA Agreement, ISG acquired the specified assets for cash consideration of $9,000,000, subject to certain adjustments. In addition, the sellers under the Agreement
(the "STA Sellers") are eligible to receive up to $7.75 million of earn-out payments for fiscal years 2011  2015 if certain revenue and earnings targets
are met. Finally, the STA Sellers were granted 250,000 restricted shares of ISG common stock (the "ISG Restricted Shares") that will vest if the commercial enterprise resource planning (ERP) revenue
of ISG and its affiliates are met.

As
of the STA Acquisition Date, we have recorded a liability of $6.7 million representing the fair value of the contingent consideration. This amount was estimated through a
valuation model that incorporated industry-based, probability-weighted assumptions related to the achievement of these

F-18

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 3ACQUISITIONS (Continued)

milestones
and thus the likelihood of us making payments. These cash outflow projections have been discounted using a rate of 2.3%, which is the cost of debt financing for market participants.

The
total allocable purchase price consists of the following:

Cash

$
8,732Contingent consideration*


7,217Total allocable purchase price

$
15,949


*Included
250,000 shares of equity contingent consideration at $1.91 per share as part of the acquisition.


The
following table summarizes the preliminary allocation of the aggregate purchase price to the fair value of the assets acquired and liabilities assumed as of the STA Acquisition Date:

Allocation of Purchase Price:Accounts receivable

$
2,036Other assets


57Goodwill


4,207Intangible assets


11,210Accounts payable


(1,066
)Accrued expenses and other


(495
)Net assets acquired

$
15,949


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

Purchase Price Allocation

Asset LifeAmortizable intangible assets:Customer relationships

$
8,490

10 yearsBacklog


1,880

2 yearsCovenants not-to-compete


150

5 yearsNon-amortizable intangible assets:Trademark and trade name


690

IndefiniteTotal intangible assets

$
11,210


We
have not finalized our assessment of the fair values as there has been insufficient time between the acquisition date and the issuance of this Form 10-K to complete
our review of individual contracts, agreements, and accounting records of STA.

The
results of Compass and STA and the purchase price allocation are not included in the consolidated balance sheet at December 31, 2010.

F-19

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 3ACQUISITIONS (Continued)

The
following unaudited pro forma financial information for the year ended December 31, 2010, assumes that the acquisitions of Compass and STA occurred at the beginning of the
period presented. The unaudited proforma financial information is presented for information purposes only. Such information is based upon the stand alone historical results of each company and does
not reflect the actual results that would have been reported had the acquisitions been completed when assumed, nor is it indicative of the future results of operations for the combined enterprise.

Proforma

Year Ended
December 31,
2010(unaudited)Revenues

$
186,754Direct costs and expenses for advisors


108,079Selling, general and administrative


63,821Impairment of intangible assets


52,491Depreciation and amortization


12,385Operating loss


(50,022
)Other expense, net


(5,508
)Net loss before taxes


(55,530
)Income tax benefit


1,208Net loss

$
(54,322
)Basic loss per share

$
(1.53
)Diluted loss per share

$
(1.53
)


NOTE 4ACCOUNTS AND UNBILLED RECEIVABLES

Accounts and unbilled receivables consisted of the following:

December 31,
2010

December 31,
2009Accounts receivable

$
16,372

$
16,717Unbilled revenue


10,179


9,506Receivables from related parties


52


50$
26,603

$
26,273


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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 5PREPAID EXPENSE AND OTHER CURRENT ASSETS

Prepaid expense and other current assets consisted of the following:

December 31,
2010

December 31,
2009Prepaid rent

$
39

$
67Prepaid insurance


171


318Security deposit


181


174Deferred costs


200


129Other


690


736$
1,281

$
1,424


NOTE 6FURNITURE, FIXTURES AND EQUIPMENT

Furniture, fixtures and equipment consisted of the following:

Estimated
Useful Lives

December 31,
2010

December 31,
2009Computer hardware, software and other office equipment

2 to 5 years

$
3,158

$
3,941Furniture, fixtures and leasehold improvements

2 to 5 years


660


604Internal-use software and development costs

3 to 5 years


2,245


981Accumulated depreciation




(3,950
)

(2,940
)$
2,113

$
2,586


Depreciation
expense was $1.4 million, $1.4 million and $1.5 million for the years ended December 31, 2010, 2009 and 2008, respectively.

F-21

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 7GOODWILL

The changes in the carrying amount of goodwill for the years ended December 31, 2010 and 2009 are as follows:

2010

2009Balance as of January 1Goodwill

$
144,428

$
144,612Accumulated impairment losses


(49,363
)

(49,363
)95,065


95,249Purchase price adjustments related to TPI acquisition





(184
)Impairment losses


(46,591
)

(46,591
)

(184
)Balance as of December 31Goodwill


144,428


144,428Accumulated impairment losses


(95,954
)

(49,363
)$
48,474

$
95,065


In
2009, the Company adjusted its goodwill for purchase price allocation charges related principally to the restructuring accrual. As a result of declining revenue, driven by a global
recession which has impacted and reduced sourcing industry activity, the Company determined a triggering event had occurred requiring a goodwill impairment test be performed during the third quarter
of 2010. As a result of this testing, the Company recorded a pre-tax non-cash impairment charge of $46.6 million associated with goodwill.

The
Company tested the fair values of the goodwill and indefinite-lived intangible assets during our scheduled annual impairment testing in the fourth quarter of 2010 and determined
there was no additional impairment.

F-22

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 8INTANGIBLE ASSETS

The carrying amount of intangible assets, net of accumulated amortization and impairment charges, as of December 31, 2010 and 2009 consisted of the following:

2010Gross
Carrying
Amount

Accumulated
Amortization

Impairment
Losses

Net Book
ValueAmortizable intangibles:Customer relationships

$
42,500

$
(14,842
)
$


$
27,658Noncompete agreements


5,500


(4,297
)




1,203Software


1,500


(1,172
)




328Backlog


3,000


(3,000
)




Databases


9,500


(2,452
)

(6,391
)

65762,000


(25,763
)

(6,391
)

29,846Indefinite-lived:Trademark and trade names


57,000





(31,100
)

25,900Intangibles

$
119,000

$
(25,763
)
$
(37,491
)
$
55,746




2009Gross
Carrying
Amount

Accumulated
Amortization

Impairment
Losses

Net Book
ValueAmortizable intangibles:Customer relationships

$
42,500

$
(8,915
)
$


$
33,585Noncompete agreements


5,500


(2,922
)




2,578Software


1,500


(797
)




703Backlog


3,000


(3,000
)




Databases


9,500


(1,703
)

(6,391
)

1,40662,000


(17,337
)

(6,391
)

38,272Indefinite-lived:Trademark and trade names


57,000





(25,200
)

31,800Intangibles

$
119,000

$
(17,337
)
$
(31,591
)
$
70,072


F-23

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 8INTANGIBLE ASSETS (Continued)

Amortization
expense was $8.4 million, $8.1 million and $8.5 million for the years ended December 31, 2010, 2009 and 2008, respectively. The estimated future
amortization expense subsequent to December 31, 2010, is as follows:

2011

$
7,4832012


4,5852013


4,1832014


3,7032015


3,543Thereafter


6,349$
29,846


As
a result of declining revenue, driven by a global recession which has impacted and reduced sourcing industry activity, the Company determined a triggering event had occurred requiring
a goodwill and indefinite-lived intangibles impairment test be performed during the third quarter of 2010. As a result of this testing, the Company recorded a pre-tax non-cash
impairment charge of $5.9 million associated with intangible assets compared to $6.8 million recorded in the third quarter of 2009.

NOTE 9ACCRUED LIABILITIES

The components of accrued liabilities at December 31, 2010 and 2009 are as follows:

December 31,
2010

December 31,
2009Accrued payroll and vacation pay

$
2,587

$
3,502Accrued corporate and payroll related taxes


2,241


2,959Accrued acquisition costs


2,135


Other


3,738


2,931$
10,701

$
9,392


NOTE 10RESTRUCTURING ACCRUAL



As a result of the continuing global economic recession, the Company initiated a program in the second quarter of 2009 to
(i) further reduce or eliminate the impact of under-utilized advisory resources, (ii) adjust certain fixed and variable compensation levels, and (iii) lower discretionary general
and administrative expenses. The program was completed in the third quarter of 2009.

F-24

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 10RESTRUCTURING ACCRUAL (Continued)

A summary of the activity affecting the Company's accrued restructuring liability related to the 2009 cost productivity plan for the year ended December 31, 2009 is as follows:

Workforce
ReductionsBalance at December 31, 2008

$
Amounts accrued


1,620Amounts paid


(1,050
)Adjustment


(570
)Balance at December 31, 2009

$



NOTE 11SHARE REPURCHASE PROGRAM

Under a stock repurchase plan approved by the Board of Directors on October 16, 2007, the Company repurchased 12.1 million shares of common stock since that date. This
program includes the repurchase of common shares, units and/or warrants. On November 14, 2007, the Board of Directors authorized an additional repurchase program of up to $15.0 million.
As of December 31, 2010, there was $10.1 million available under this repurchase program.

NOTE 12FINANCING ARRANGEMENTS AND LONG-TERM DEBT

On November 16, 2007, in connection with the acquisition of TPI, International Consulting Acquisition Corp., a wholly-owned indirect subsidiary of ISG (the "Borrower"), entered
into a senior secured credit facility comprised of a $95.0 million term loan facility and a $10.0 million revolving credit facility (collectively referred to as the 2007 Credit
Agreement). On November 16, 2007, the Borrower borrowed $95.0 million under the term loan facility to finance a portion of the purchase price for the TPI acquisition and to pay
transaction costs. The material terms of the 2007 Credit Agreement are as follows:



F-25

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 12FINANCING ARRANGEMENTS AND LONG-TERM DEBT (Continued)



As
of December 31, 2010, the total principal outstanding under the term loan facility was $69.8 million. There were no borrowings under the revolving credit facility during
fiscal 2010.

Under
the 2007 Credit Agreement, the Company is required to hedge at least 40% of borrowings outstanding under the term loan facility. Subsequent to December 31, 2007, the Company
entered into an agreement to cap the interest rate at 7% on $38.0 million of the LIBOR component of our borrowings under the term loan facility for a period of three years. The expense related
to this interest rate cap was nominal. This agreement expired in January 2011 and is not required going forward.

On
June 29, 2009, the Company made a voluntary principal prepayment of $12.0 million against its outstanding term loan balance of $93.8 million. In conjunction with
this prepayment, our lenders consented to the following conditions: (1) agreement to execute the Company's UK tax planning strategy to reduce future potential cash taxes, (2) exclusion
of the impact in the calculation of EBITDA of up to $5.0 million of restructuring charges relating to the Borrower's previously announced 2009 restructuring plan through December 31,
2009 and (3) exclusion of the impact in the calculation of EBITDA of establishing, if necessary, a reserve in respect of certain accounts receivable and work in progress due from General Motors
Corporation for worked performed on or before June 1, 2009.

On
September 11, 2009, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) for the remaining life of the 2007 Credit Agreement to
provide the Company with greater financing flexibility in return for additional debt repayments. In accordance with the terms

F-26

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 12FINANCING ARRANGEMENTS AND LONG-TERM DEBT (Continued)

of
the amended 2007 Credit Agreement, the Company made $5.0 million of principal repayments on September 30, 2009 and December 31, 2009 to reduce the outstanding term loan balance
to $71.8 million.
The principal repayments were made from excess cash balances generated through the Company's normal business operations. In accordance with the terms of the 2007 Credit Agreement, the Company made a
$2.0 million principal repayment on March 31, 2010 to reduce the outstanding term loan balance to $69.8 million.

On
September 27, 2010, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) from September 30, 2010 to December 30, 2010
and to restore the exclusion of the impact in the calculation of earnings before interest, taxes, depreciation, and amortization EBITDA of up to $5.0 million of restructuring charges through
December 31, 2011 in order to provide the Company with greater financing flexibility. The Company also received approval to complete the acquisition of STA Consulting subject to certain
conditions.

On
December 23, 2010, our lenders agreed to amend the total leverage ratio (as defined in the 2007 Credit Agreement) from December 31, 2010 to March 30, 2011 in
order to provide the Company with greater financing flexibility. Our lenders also agreed to allow the Company to extend the date to complete the acquisition of STA to March 31, 2011. On
February 10, 2011, the acquisition of STA Consulting was completed.

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

Debt2011

$
2012


2013


2014


69,813$
69,813


NOTE 13COMMITMENTS AND CONTINGENCIES

Employee Retirement Plans

The Company's TPI subsidiary maintains a qualified profit-sharing plan (the "Plan"). Prior to January 1, 2008, the provisions of
the Plan provide for a maximum employer contribution per eligible employee of the lesser of 12.75% of compensation or $25,500. Effective January 1, 2008, the contribution was adjusted to 3% of
total cash compensation or $7,350, whichever is less. Employees are generally eligible to participate in the Plan after six months of service and are
100% vested upon entering the Plan. For the year ended December 31, 2010 and 2009, $1.2 million and $1.6 million were contributed to the Plan by the Company, respectively.

Leases

The Company leases its office space under long-term operating lease agreements which expire at various dates through
December 2014. Under the operating leases, the Company pays certain operating expenses relating to the leased property and monthly base rent.

F-27

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 13COMMITMENTS AND CONTINGENCIES (Continued)

Aggregate
future minimum payments under noncancelable leases with initial or remaining terms of one year or more consist of the following at December 31, 2010:

Operating
Leases2011

$
1,0502012


8652013


3102014


2452015


Total minimum lease payments

$
2,470


The
Company's rental expense for operating leases was $1.4 million, $1.5 million and $1.3 million, in 2010, 2009 and 2008, respectively.

NOTE 14RELATED PARTY TRANSACTIONS

From time to time, the Company may have receivables and payables with employees and shareholders. All related party transactions have been conducted in the normal course of business as
if the parties
were unrelated. As of December 31, 2010 and December 31, 2009, the Company had outstanding receivables from related parties, including shareholders, totaling $0.1 million and
$0.1 million and no outstanding payables, respectively.

NOTE 15INCOME TAXES

The components of income (loss) before income taxes for the years ended December 31, 2010, 2009 and 2008 consists of the following:

Years Ended December 31,2010

2009

2008Domestic

$
(56,919
)
$
(8,290
)
$
(75,482
)Foreign


1,828


4,676


12,790Total loss before income taxes

$
(55,091
)
$
(3,614
)
$
(62,692
)


F-28

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 15INCOME TAXES (Continued)

The
components of the 2010, 2009 and 2008 income tax (benefit) provision are as follows:

Years Ended December 31,2010

2009

2008Current:Federal

$
3,191

$
2,715

$
2,357State


722


566


954Foreign


924


1,594


4,058Total current provision


4,837


4,875


7,369Deferred:Federal


(6,000
)

(5,360
)

(11,258
)State


(337
)

(233
)

(894
)Foreign


(426
)

(60
)

Total deferred benefit


(6,763
)

(5,653
)

(12,152
)Total

$
(1,926
)
$
(778
)
$
(4,783
)


The
differences between the effective tax rates reflected in the total provision for income taxes and the U.S. federal statutory rate of 35% for the year ended December 31, 2010,
2009 and 2008 were as follows:

Years Ended December 31,2010

2009

2008Tax benefit computed at 35%

$
(19,281
)
$
(1,265
)
$
(21,942
)Nondeductible goodwill impairment


16,307





17,277Nondeductible expenses


743


107


168State income taxes, net of federal benefit


148


151


(233
)Derecognition of stock compensation deferred tax asset


68


117


Valuation allowance


85


118


Other


4


(6
)

(53
)Income tax benefit

$
(1,926
)
$
(778
)
$
(4,783
)Effective income tax rates


3.5
%

21.5
%

7.6
%


F-29

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 15INCOME TAXES (Continued)

The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows:

December 31,
2010

December 31,
2009Current deferred tax assetCompensation related expenses

$
1,418

$
887Foreign currency translation


952


932Other


806


648Total current deferred tax asset


3,176


2,467Current deferred tax liabilityPrepaids


(324
)

(330
)Total current deferred tax liability


(324
)

(330
)Net current deferred tax asset

$
2,852

$
2,137Noncurrent deferred tax assetCompensation related expenses

$
980

$
529Foreign tax credit carryovers


1,055


450Foreign net operating loss carryovers


880


279Valuation allowance for deferred tax assets


(203
)

(118
)Total noncurrent deferred tax asset


2,712


1,140Noncurrent deferred tax liabilityDepreciable assets


(217
)

(176
)Intangible assets


(20,951
)

(26,096
)Other


(880
)

(279
)Total noncurrent deferred tax liability


(22,048
)

(26,551
)Net noncurrent deferred tax liability


(19,336
)

(25,411
)Net deferred tax liability

$
(16,484
)
$
(23,274
)


A
valuation allowance of $0.2 million was established at December 31, 2010 due to estimates of future utilization of net operating loss carryovers in certain foreign
jurisdictions.

Benefits
from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the
appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is
measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the
more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously
recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting
period in which that threshold is no longer met. It is the Company's

F-30

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 15INCOME TAXES (Continued)

policy
to accrue for interest and penalties related to its uncertain tax positions within income tax expense.

For
the years ended December 31, 2010, 2009 and 2008, the Company updated its assessment of its tax positions in the taxing jurisdictions where it has operations and determined
that additional accruals were required for the year ended December 31, 2010.

A
tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period is as follows:

December 31,2010

2009

2008Balance, beginning of year

$
323

$
282

$
225Additions as a result of tax positions taken during the current period


292


2


75Reductions relating to tax settlements with taxing authorities





(36
)

(93
)Total unrecognized tax benefit


615


248


207Interest and penalties associated with uncertain tax positions


50


75


75Balance, end of year

$
665

$
323

$
282


The
amount of unrecognized tax benefit, if recognized, that would affect the effective tax rate is immaterial. With few exceptions, the Company is no longer subject to U.S. federal,
state, local, or non-U.S. income tax examinations by tax authorities for years before 2003.

NOTE 16STOCK-BASED COMPENSATION PLANS

At the special meeting of stockholders held on November 13, 2007, the 2007 Equity Incentive Plan ("Incentive Plan") and 2007 Employee Stock Purchase Plan ("ESPP") were approved by
the Company's stockholders. The Incentive Plan authorizes the grant of awards to participants with respect to a maximum of 4.0 million shares of the Company's common stock, subject to
adjustment to avoid dilution or enlargement of intended benefits in the event of certain significant corporate events, which awards may be made in the form of (i) nonqualified stock options;
(ii) stock options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code (stock options described in clause (i) and (ii), "options");
(iii) stock appreciation rights ("SARs"); (iv) restricted stock and/or restricted stock units; (v) performance awards; and (vi) other stock based awards; provided that the
maximum number of shares with respect to which stock options and stock appreciation rights may be granted in the equity incentive plan to any one participant in any given calendar year may not exceed
$0.8 million, and the maximum amount payable to a participant in the equity plan in connection with the settlement of any of any award(s) designated as a "performance compensation awards" in
respect of a single performance period shall be: (x) with respect to performance compensation awards that are paid in shares, 500,000 shares and (y) with respect to performance
compensation awards that are paid in cash, $5.0 million. The issuance of shares or the payment of cash upon the exercise of an award or in consideration of the cancellation or termination of an
award shall reduce the total number of shares available under the equity incentive plan, as applicable. The provisions of each award will vary based on the type of award granted and will be specified
by the Compensation Committee of the Board of

F-31

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 16STOCK-BASED COMPENSATION PLANS (Continued)

Directors.
Those awards which are based on a specific contractual term will be granted with a term not to exceed ten years. The SARs granted under the Incentive Plan are granted with an exercise price
equal to the fair market value of the Common Shares at the time the SARs are granted.

On
May 11, 2010, the ISG stockholders approved an amendment for an additional 4.5 million shares authorized for issuance under the 2007 Equity Incentive Plan, except that
each share of the Company's common stock issued under a "full value" award (awards other than stock options or stock appreciation rights) will reduce the number of shares available for issuance by
1.44 shares.

As
of December 31, 2010, there were 4,904,291 and 883,319 shares available for grant under the amended and restated Incentive Plan and ESPP, respectively.

The
Company recognized $3.1 million, $2.8 million and $2.0 million in employee stock-based compensation expense during the years ended December 31, 2010, 2009
and 2008, respectively. This expense was recorded in selling, general and administrative in the consolidated statement of operations.

Stock Appreciation Rights

The Compensation Committee may grant (i) a stock appreciation right independent of an option or (ii) a stock appreciation
right in connection with an option, or a portion thereof. A stock appreciation right granted pursuant to clause (ii) of the preceding sentence (A) may be granted at the time the related
option is granted or at any time prior to the exercise or cancellation of the related option, (B) shall cover the same number of shares covered by an option (or such lesser number of shares as
the Compensation Committee may determine) and (C) shall be subject to the same terms and conditions as such option except for such additional limitations as are contemplated above (or such
additional limitations as may be included in an award agreement).

SARs
granted pursuant to the Incentive Plan are granted with an exercise price equal to the fair market value of the Common Shares at the time the SARs are granted. Pursuant to the
applicable award agreements, the SARs vest and become exercisable with respect to 25% of the shares subject to the SARs on the first four anniversaries of the grant date, so long as the employee
remains employed with the Company on each such date. If the employee's employment with the Company is terminated as a result of the employee's death or disability, all unvested SARs will be fully
vested. If the employee retires, the SARs will continue to vest on the same schedule as if the employee had remains employed with the Company. Any vested SARs will expire upon the earliest to occur of
the following: (i) the tenth anniversary of the grant date; (ii) one year following the date of the employee's termination of services as a result of death or permanent disability;
(iii) 90 days following the fourth anniversary of the grant date, following the participant's retirement; (iv) 30 days following the date of the participant's termination
of employment for any reason (other than as a result of death, disability or retirement); and (v) immediately upon a termination for cause. SARs will be settled in the form of shares of the
Company's common stock upon exercise.

F-32

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 16STOCK-BASED COMPENSATION PLANS (Continued)

A
summary of the status of the Company's SARs issued under its Incentive Plan is presented below:

SARs

Weighted-Average
Exercise
Price

Weighted-Average
Remaining
Contractual
Life

Aggregate
Intrinsic
Value(in years)Outstanding at December 31, 2007


355

$
7.20Granted


320

$
3.18Exercised




$
Forfeited


(34
)
$
7.20Outstanding at December 31, 2008


641

$
5.19


6.4

$
70Granted


12

$
3.15Exercised




$
Forfeited


(59
)
$
5.51Outstanding at December 31, 2009


594

$
5.12


8.4

$
Granted




$
Exercised




$
Forfeited


(155
)
$
5.26Outstanding at December 31, 2010


439

$
5.07


7.4

$
Vested and expected to vest at December 31, 2010


439

$
5.07


7.4

$
Exercisable at December 31, 2010


268

$
5.50


7.3

$



The
weighted-average grant date fair value for SARs granted during the years ended December 31, 2010, 2009 and 2008 was $0, $1.90 and $1.86, respectively. The total fair value of
the SARs vested during the years ended December 31, 2010, 2009 and 2008 was $0.3 million, $0.4 million and $0.2, respectively. As of December 31, 2010, there was
$0.3 million of total unrecognized compensation cost related to the Company's unvested SARs and that cost is expected to be recognized over a weighted-average period of 1.5 years.

The
Company uses the Black-Scholes option pricing model to determine the fair value of each SAR award on the date of grant. The estimated fair value of the SARs is amortized to expense
on a straight-line basis over the vesting period. The Company did not grant any SAR during the years end December 31, 2010. The specific assumptions used in determining the fair
values for the SARs granted during the years ended December 31, 2010, 2009 and 2008 are discussed in more detail below and are noted in the following table.

The
volatility calculation is based on the most recent trading day average volatility of a representative sample of nine companies with market capitalizations of approximately
$65 million to $645 million that management believes to be engaged in the business of information services (the "Sample Companies"). The Company referred to the average volatility of the
Sample Companies because management believes that the average volatility of such companies is a reasonable benchmark to use in estimating the expected volatility of the Company's common stock
post-business combination.

F-33

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 16STOCK-BASED COMPENSATION PLANS (Continued)

The
risk-free interest rate is determined based upon the interest rate on a U.S. Treasury Bill with a term equal to the expected life of the SARs at the time the SARs was granted. An
expected life of five years was taken into account for purposes of assigning a fair value to the SARs. The
expected life represents the period of time the awards granted are expected to be outstanding. There were no SARs issued during 2010.

Years Ended December 31,2010

2009

2008Expected stock volatility





73.2
%

70.1
%Risk-free interest rate





1.7
%

1.6
%Expected term (in years)





5.0


5.0Dividend yield





0.0
%

0.0
%


The
Company has never issued any stock options as of December 31, 2010.

Restricted Share Awards/Units

The Incentive Plan provides for the granting of restricted share awards ("RSA") or restricted share units ("RSU"), the vesting of which
is subject to conditions and limitations established at the time of the grant. Upon the grant of an RSA, the participant has the rights of a shareholder, including but not limited to the right to vote
such shares and the right to receive any dividends paid on such shares. Recipients of RSU awards will not have the rights of a shareholder of the Company until such date as the Common Shares are
issued or transferred to the recipient. The Company granted 175,932 RSAs valued at $3,500 for each employee worldwide employed as of November 16, 2007 and otherwise receiving RSU under existing
programs. Subject to the employee's continued employment, the restricted shares will vest with respect to 25% of the shares on each of the first four anniversaries of the grant date. If the employee
retires (at the normal retirement age stated in the applicable retirement plan or applicable law, if there is a mandatory retirement age), the restricted shares will continue to vest on the same
schedule as if the employee remained employed with the Company. Upon a change in control, or upon a termination of employment due to employee's death or permanent disability, the restricted shares
become 100% vested. Dividends will accrue and be paid if and when the restricted shares vest.

The
Company also granted RSUs to specific employees which have the following characteristics:



F-34

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 16STOCK-BASED COMPENSATION PLANS (Continued)

If the employee's employment is terminated (i) at any time during the vesting period due to the employee's death, disability or retirement prior to the applicable vesting date or
(ii) without cause by the Company after 50% of the relevant period has elapsed, then the RSUs will vest prorata based on the period of time worked relative to such period. However, no shares
will be distributed until the applicable pro rata vesting date (and, in the case of the Performance-Based RSUs, only if and to the extent that the EBITDA target is achieved). In all other terminations
occurring prior to the applicable vesting date, the RSUs will expire. All RSUs will be payable in shares of the Company's common stock immediately upon vesting. No dividend equivalents will be paid
with respect to any RSUs.

The
fair value of RSAs and RSUs is determined based on the closing price of the Company's shares on the grant date. The total fair value is amortized to expense on a
straight-line basis over the vesting period.

A
summary of the status of the Company's RSAs and RSUs issued under its Incentive Plan as of December 31, 2010 and changes during the year then ended, is presented below:

RSA

Weighted-
Average
Grant Date
Fair Value

RSU

Weighted-
Average
Grant Date
Fair ValueNon-vested at December 31, 2007


175

$
7.20


619

$
4.50Granted




$



1,484

$
4.08Vested


(36
)
$
7.20




$
Forfeited


(36
)
$
7.20


(107
)
$
4.38Non-vested at December 31, 2008


103

$
7.20


1,996

$
4.20Granted




$



1,165

$
3.13Vested


(30
)
$
7.20


(406
)
$
4.29Forfeited


(14
)
$
7.20


(210
)
$
4.36Non-vested at December 31, 2009


59

$
7.20


2,545

$
4.21Granted




$



350

$
2.07Vested


(26
)
$
7.20


(637
)
$
3.64Forfeited


(8
)
$
7.20


(260
)
$
4.53Non-vested at December 31, 2010


25

$
7.20


1,998

$
3.96


The
total fair value of RSAs and RSUs vested during the years ended December 31, 2010, 2009 and 2008 was $2.4 million, $2.0 million and $0.3 million,
respectively. As of December 31, 2010, there was $0.2 million and $4.4 million of unrecognized compensation cost related to RSAs and RSUs, which is expected to be recognized over
a weighted-average period of 0.9 years and 2.3 years, respectively.

Employee Stock Purchase Plan

The ESPP provides that a total of 1.2 million shares of Common Stock are reserved for issuance under the plan. The ESPP, which
is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code, is implemented utilizing three-month offerings with purchases occurring at
three-month intervals. The ESPP administration is overseen by the Company's

F-35

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 16STOCK-BASED COMPENSATION PLANS (Continued)

Compensation
Committee. Employees are eligible to participate if they are employed by the Company for at least 20 hours per week and more than five months in a calendar year. The ESPP permits
eligible employees to purchase Common Stock through payroll deductions, ranging from one to ten percent of their eligible earnings subject to IRS regulated cap of $25,000. The price of Common Stock
purchased under the ESPP is 90% of the fair market value of the Common Stock on the applicable purchase date. Employees may end their participation in an offering at any time during the offering
period, and participation ends automatically upon termination of employment. The Compensation Committee may at any time amend or terminate the ESPP, except that no such amendment or termination may
adversely affect shares previously granted under the ESPP. The Company may issue new shares for ESPP using treasury shares or newly issued shares. For the year ended December 31, 2010, the
Company issued 142,715 shares for ESPP. There were 883,319 shares available for purchase at December 31, 2010 under the ESPP.

NOTE 17WARRANTS

The Company 28,125,000 units at a price of $8.00 per unit and the underwriters for the Company's initial public offering exercised their over-allotment option and purchased
an additional 4,218,750 units. Each unit included one share of common stock and a warrant to purchase one share of common stock at an exercise price of $6.00.

On
February 6, 2007, Oenoke Partners, LLC purchased, in a Private Placement, 6,500,000 warrants at $1 per warrant. The warrants were exercisable on a cashless basis and had
terms and provisions that were identical to those of the warrants sold in the Offering, except that these warrants would not be subject to redemption. Oenoke Partners, LLC also agreed that it
would not sell or otherwise transfer the warrants until one year after the Company consummated a business combination, which occurred on November 16, 2007. Oenoke LLC was dissolved on
December 17, 2008 and the shares and warrants were transferred to ISG's Executive Officers. The 30,647,000 warrants described above expired on January 31, 2011.

The
Company also sold to the underwriters, for $100, a four-year option to purchase up to a total of 1,406,250 units at a per-unit price of $9.60. The units
issuable upon exercise of this option were also identical to those offered in the Offering except that warrants included in the option have an exercise price of $7.50. The option expired on
February 6, 2011.

In
connection with the acquisition of TPI, the Company issued 5,000,000 warrants valued at $13.6 million ($2.72 per warrant) at an exercise price of $9.18 per share (the
"MCP-TPI Warrants"). The MCP-TPI Warrants are currently exercisable and expire on November 16, 2012.

F-36

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 17WARRANTS (Continued)

A
summary of the warrant activity as of December 31, 2010, 2009 and 2008 and changes during the years then ended, is presented below:

Number of
Warrants

Weighted-
Average Exercise
PriceWarrants outstanding as of December 31, 2007


44,972

$
6.40Warrants repurchased


(7,919
)

6.00Warrants outstanding as of December 31, 2008


37,053

$
6.49Warrants repurchased





Warrants outstanding as of December 31, 2009


37,053

$
6.49Warrants repurchased





Warrants outstanding as of December 31, 2010


37,053

$
6.49


NOTE 18SEGMENT AND GEOGRAPHICAL INFORMATION

The Company operates in one segment, fact-based sourcing advisory services. The Company operates principally in the Americas, Europe, and Asia Pacific. The Company's foreign
operations are subject to local government regulations and to the economic and political uncertainties of those areas.

Geographical
information for the segment is as follows:

Years Ended December 31,2010

2009

2008RevenuesAmericas(1)

$
76,123

$
77,007

$
96,548Europe(2)


39,400


44,696


64,485Asia Pacific


16,490


11,041


13,762$
132,013

$
132,744

$
174,795Identifiable long-lived assetsAmericas

$
1,919

$
2,359

$
2,480Europe


111


118


111Asia Pacific


83


109


180$
2,113

$
2,586

$
2,771


(1)Substantially
all relates to operations in the United States.(2)Includes
revenues from operations in Germany of $20.1 million, $16.3 million and $19.5 million in 2010, 2009 and 2008, respectively.
Includes revenues from operations in the United Kingdom of $9.3 million, $16.3 million and $33.5 million in 2010, 2009 and 2008, respectively.


F-37

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 18SEGMENT AND GEOGRAPHICAL INFORMATION (Continued)




The
segregation of revenues by geographic region is based upon the location of the legal entity performing the services. The Company does not measure or monitor gross profit or operating
income by geography for the purposes of making operating decisions or allocating resources.

NOTE 19UNAUDITED QUARTERLY INFORMATION

Quarters EndedMarch 31,
2010

June 30,
2010

September 30,
2010

December 31,
2010Fiscal 2010:Net sales

$
34,844

$
33,372

$
32,190

$
31,607Gross profit

$
16,363

$
15,593

$
13,548

$
14,981Operating income (loss)(1)

$
1,666

$
1,027

$
(51,915
)
$
(2,519
)Other expense, net

$
(864
)
$
(710
)
$
(891
)
$
(885
)Income (loss) from operations

$
802

$
317

$
(52,806
)
$
(3,404
)Net income (loss)

$
460

$
186

$
(51,747
)
$
(2,064
)Basic earnings (loss) per share

$
0.01

$
0.01

$
(1.61
)
$
(0.06
)Diluted earnings (loss) per share

$
0.01

$
0.01

$
(1.61
)
$
(0.06
)Basic weighted average common shares


31,922


31,981


32,044


32,255Diluted weighted average common shares


32,134


32,219


32,044


32,255




Quarters EndedMarch 31,
2009

June 30,
2009

September 30,
2009

December 31,
2009Fiscal 2009:Net sales

$
34,299

$
31,518

$
32,462

$
34,465Gross profit

$
19,434

$
13,904

$
15,494

$
16,238Operating income (loss)(2)(3)

$
2,053

$
1,376

$
(4,204
)
$
1,589Other income, net

$
(1,152
)
$
(1,206
)
$
(1,179
)
$
(891
)Income (loss) from operations

$
901

$
170

$
(5,383
)
$
698Net income (loss)

$
541

$
98

$
(3,597
)
$
122Basic earnings (loss) per share

$
0.02

$
0.00

$
(0.11
)
$
0.00Diluted earnings (loss) per share

$
0.02

$
0.00

$
(0.11
)
$
0.00Basic weighted average common shares


31,418


31,471


31,478


31,595Diluted weighted average common shares


31,465


31,559


31,478


31,992


(1)As
a result of its goodwill and intangible asset impairment assessments, ISG recorded an impairment charge of $46.6 million during the third quarter
of 2010 associated with goodwill and $5.9 million related to intangible assets.(2)As
a result of its intangible asset impairment assessments, ISG recorded an impairment charge of $6.8 million during the third quarter of 2009
associated with intangible assets.


F-38

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Table of Contents

INFORMATION SERVICES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(tabular amounts in thousands, except per share data)

NOTE 19UNAUDITED QUARTERLY INFORMATION (Continued)

(3)The
Company recorded a decrease to expense in the fourth quarter of 2009 totaling $0.2 million relating to employee benefits that were incurred in
prior periods.


NOTE 20SUBSEQUENT EVENT

On March 16, 2011, our lenders agreed to amend the total leverage ratio (as defined) for the remaining life of the 2007 Credit Agreement to provide the Company with greater
financing flexibility in return for additional quarterly term loan principal repayments. In accordance with the terms of the amended 2007 Credit Agreement, the Company will make mandatory principal
repayments of $3.0 million on March 31, 2011 and $1.0 million on June 30, 2011, September 30, 2011 and December 31, 2011 respectively to reduce the
outstanding term loan balance to $63.8 million. The principal repayments will be made from cash generated through the Company's normal business operations.

Additional
mandatory principal repayments totaling $7.0 million and $10.0 million will be due in 2012 and 2013 respectively with the remaining principal repayments due in
2014. The final mandatory term loan principal repayment will be due on November 16, 2014, which is the maturity date for the term loan.

F-39

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Table of Contents

EXHIBIT INDEX

Exhibit
Number

Description2.0

Purchase Agreement, dated as of April 24, 2007, as amended, by and between Registrant and MCP-TPI Holdings, LLC (previously filed as Annex A to the Registrant's Definitive Proxy Statement filed with the SEC
on October 17, 2007 (Commission File Number: 001-33287), and incorporated herein by reference).2.1

Agreement for the Sale and Purchase of the Entire Issued Share Capital of CCGH Limited, dated as of January 4, 2011, between Registrant and the persons named therein filed with the SEC on January 4, 2011
(Commission File Number: 001-33287), and incorporated herein by reference).2.2

Asset Purchase Agreement, dated as of February 10, 2011, among Registrant (for specific section only), and Salvaggio & Teal Ltd. (d/b/a Salvaggio, Teal & Associates), Salvaggio &
Teal II, LLC, Mitt Salvaggio, Kirk Teal, Nathan Frey, International Consulting Acquisition Corp., filed with the SEC on February 11, 2011 (Commission File Number: 001-33287), and incorporated herein by reference).3.1

Amended and Restated Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to Amendment No. 5 to the Registrant's Registration Statement on Form S-1 filed with the SEC on
January 29, 2007 (Commission File Number: 333-136536), and incorporated herein by reference).3.2

Amended and Restated By-Laws previously filed as Exhibit 3.2 to the Registrant's Form 8-K filed with the SEC on December 10, 2008 (Commission File Number: 001-33287), and incorporated herein by
reference.4.1

Specimen Common Stock Certificate (previously filed as Exhibit 4.2 to Amendment No. 3 to the Registrant's Registration Statement on Form S-1 filed with the SEC on December 22, 2006 (Commission File
Number: 333-136536), and incorporated herein by reference).4.2

Common Stock Purchase Warrant, dated as of November 16, 2007, issued to MCP-TPI Holdings, LLC (previously filed as Exhibit 4.8 to the Registrant's Form 8-K filed with the SEC on November 27,
2007 (Commission File Number: 001-33287), and incorporated herein by reference).4.3

Form of Subordinated Convertible Note (previously filed as Exhibit 4.1 to the Registrant's Form 8-K filed with the SEC on January 4, 2011 (Commission File Number: 001-33287), and incorporated herein by
reference).10.1

Office Lease Agreement (previously filed as Exhibit 10.2 to Amendment No. 1 to the Registrant's Registration Statement on Form S-1 filed with the SEC on October 2, 2006 (Commission File Number:
333-136536), and incorporated herein by reference).10.2

Registration Rights Agreement between the Registrant and the existing Stockholders dated as of February 6, 2007 (previously filed as Exhibit 10.9 to Amendment No. 3 to the Registrant's Registration
Statement on Form S-1 filed with the SEC on December 22, 2006 (Commission File Number: 333-136536), and incorporated herein by reference).10.3

Amended and Restated 2007 Equity Incentive Plan (previously filed as Annex A to the Registrant's Definitive Proxy Statement filed with the SEC on April 7, 2010 (Commission File Number: 001-33287), and
incorporated herein by reference).10.4

2007 Employee Stock Purchase Plan (previously filed as Annex C to the Registrant's Definitive Proxy Statement filed with the SEC on October 17, 2007 (Commission File Number: 001-33287), and incorporated
herein by reference).


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Table of Contents

Exhibit
Number

Description10.5

Credit Agreement, dated as of November 16, 2007, among International Advisory Holdings Corp., International Consulting Acquisition Corp., various lenders and Deutsche Bank Trust Company Americas, as Administrative
Agent (previously filed as Exhibit 10.30 to the Registrant's Form 8-K filed with the SEC on November 27, 2007 (Commission File Number: 001-33287), and incorporated herein by reference).10.6

First Amendment to Credit Agreement dated September 11, 2009 (previously filed as Exhibit 10.1 to the Registrant's Form 10-Q filed with the SEC on November 6, 2009) (Commission File Number:
001-33287), and incorporated herein by reference).10.7

Second Amendment to Credit Agreement dated October 29, 2010 (previously filed as Exhibit 10.1 to the Registrant's Form 10-Q filed with the SEC on November 9, 2010) (Commission File Number:
001-33287), and incorporated herein by reference).10.8
*
Third Amendment to Credit Agreement dated December 23, 2010.10.9
*
Fourth Amendment to Credit Agreement dated March 16, 2011.10.10
**
Employment Letter dated as of September 24, 2009, between the Company and David E. Berger (previously filed as Exhibit 10.1 to the Registrant's Form 8-K filed with the SEC on September 29, 2009)
(Commission File Number: 001-33287), and incorporated herein by reference).10.11
**
Form of Restricted Stock Unit Award Agreement (Time-Based), (previously filed as Exhibit 10.2 to the Registrant's Form 8-K filed with the SEC on September 29, 2009) (Commission File Number: 001-33287),
and incorporated herein by reference).10.12
**
Form of Restricted Covenant Agreement, (previously filed as Exhibit 10.3 to the Registrant's Form 8-K filed with the SEC on September 29, 2009) (Commission File Number: 001-33287), and incorporated
herein by reference).10.13
**
Severance Agreement dated as of October 5, 2009, between the Company and David E. Berger (previously filed as Exhibit 10.4 to the Registrant's Form 8-K filed with the SEC on September 29, 2009)
(Commission File Number: 001-33287), and incorporated herein by reference).10.14
**
Change in Control Agreement dated as of January 7, 2011, between the Company and Michael P. Connors (previously filed as Exhibit 10.2 to the Registrant's Form 8-K filed with the SEC on January 7,
2011) (Commission File Number: 001-33287), and incorporated herein by reference).10.15
**
Change in Control Agreement dated as of January 7, 2011, between the Company and David E. Berger (previously filed as Exhibit 10.3 to the Registrant's Form 8-K filed with the SEC on January 7,
2011) (Commission File Number: 001-33287), and incorporated herein by reference).10.16
**
Employment Letter dated as of January 4, 2011 between the Company and David Whitmore (previously filed as Exhibit 10.1 to the Registrant's Form 8-K filed with the SEC on January 7, 2011)
(Commission File Number: 001-33287), and incorporated herein by reference).11.0
*
Computation of Earnings Per Share (included in Consolidated Statement of Operations to the Consolidated Financial Statements included in Part IIItem 8 herein).14.0

Code of Ethics (previously filed as Exhibit 14.0 to the Registrant's Form 10-K filed with the SEC on March 27, 2008) (Commission File Number: 001-33287), and incorporated herein by
reference).21.1
*
Subsidiaries of the Company.


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Table of Contents

Exhibit
Number

Description23.1
*
Consent of Independent Registered Public Accounting Firm.24.1
*
Power of Attorney.31.1
*
Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a).31.2
*
Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a).32.1
*
Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.32.2
*
Certification of Chief Financial Officer Pursuant to 18 U.S.C. §1350.


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Table of Contents

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Stamford, in the State of Connecticut on March 16, 2011.

INFORMATION SERVICES GROUP, INC.By:

/s/ MICHAEL P. CONNORSMichael P. Connors Chairman and Chief Executive Officer


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf and in the capacities and on the dates
indicated.

Name

Position

Date/s/ MICHAEL P. CONNORS Michael P. Connors

Chairman and Chief Executive Officer (Principal Executive Officer)

March 16, 2011/s/ DAVID E. BERGER David E. Berger

Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

March 16, 2011*GERALD S. HOBBS Gerald S. Hobbs

Director

March 16, 2011*KALPANA RAINA Kalpana Raina

Director

March 16, 2011*DONALD C. WAITE III Donald C. Waite III

Director

March 16, 2011*ROBERT E. WEISSMAN Robert E. Weissman

Director

March 16, 2011*By:

/s/ MICHAEL P. CONNORS Michael P. Connors**


**By
authority of the power of attorney filed as Exhibit 24.1 hereto


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Table of Contents

INFORMATION SERVICES GROUP, INC.    SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS  (in thousands)

Description

Balance at
Beginning
of Period

Balance
Assumed in
Acquisitions

Charges to
Costs and
Expenses

Deductions

Balance at
End of
PeriodYear ended December 31, 2010:Allowance for doubtful accounts

$
206





40


(51
)
$
195Allowance for tax valuation

$
118





85




$
203Year ended December 31, 2009:Allowance for doubtful accounts

$
132





510


(436
)
$
206Allowance for tax valuation

$






118




$
118Year ended December 31, 2008:Allowance for doubtful accounts

$






275


(143
)
$
132Allowance for tax valuation

$
411








(411
)
$



---