UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,D.C. 20549



FORM 10-K/A

Amendment
No. 1

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

For the fiscal year ended December 31,
2014

Commission file number: 000-52170



INNERWORKINGS, INC.

(Exact name of registrant as specified
in its charter)



|Delaware                                                       |  | 20-5997364                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|600
West Chicago Avenue, Suite 850, Chicago, IL 60654 |  | (312) 642-3700                                      
|----------------------------------------------------- |  | ----------------------------------------------------
|(Address of principal executive offices) (Zip Code)   |  | (Registrants’ telephone number, including area code)



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



|Title of each class             |  | Name of each exchange on which registered
|------------------------------- |  | -----------------------------------------
|Common Stock, $0.0001 par value |  | Nasdaq Global Market                     



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 ̈Nox



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 ̈Nox



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act
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.    YesxNo ̈



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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).    YesxNo ̈



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.x



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



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 ̈ |  | Accelerated filerx |  | Non-accelerated filer ̈                       |  | Smaller reporting company ̈
|------------------------ |  | ------------------ |  | -------------------------------------------- |  | --------------------------
|                         |  |                    |  | (Do not check if a smallerreporting company) |  |                           



The aggregate market value of the common equity held by non-affiliates
of the registrant as of June 30, 2014, the last business day of the registrant’s most recent completed second quarter,
was $316,956,806 (based on the closing sale price of the registrant’s common stock on that date as reported on the Nasdaq
Global Market).





As of February 25, 2014, the registrant had 53,946,282 shares
of common stock, par value $0.0001 per share, outstanding which includes 1,072,005 shares of unvested restricted stock awards that
have voting rights and are held by members of the Board of Directors and the Company’s employees.





DOCUMENTS INCORPORATED BY REFERENCE



Portions of the InnnerWorkings, Inc. Proxy Statement
for the 2015 Annual Meeting of Stockholders (the “Proxy Statement”) are incorporated by reference into Part III
of this Form 10-K.





EXPLANATORY
NOTE





InnerWorkings, Inc.
(the “Company”) is filing this Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K for the year ended
December 31, 2014, originally filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2015 (the
“Original Form 10-K”), in response to a comment received from the SEC requesting that the Company’s independent
registered public accounting firm update its report to include an opinion regarding the Company’s financial statement schedule.



In response to the
SEC’s comment, this Form 10-K/A sets forth the complete text of Item 8 of Part II of the Original Form 10-K, which has been
updated solely to add the following language to the report of our independent registered public accounting firm: “In our
opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.”



Other than the update
discussed above, this Form 10-K/A speaks as of the original filing date of the Original Form 10-K and has not been updated to
reflect other events occurring subsequent to the original filing date. This includes forward-looking statements and all other
sections of this Form 10-K/A that were not amended, which should be read in their historical context.













TABLE OF CONTENTS







|PART II    |                                             | 2 
|---------- | ------------------------------------------- | --
|           |                                             |   
|           | Forward-Looking Statements                  | 2 
|           |                                             |   
|Item 8.    | Financial Statements and Supplementary Data | 2 
|           |                                             |   
|PART IV    |                                             | 35
|           |                                             |   
|Item 15.   | Exhibits, Financial Statement Schedules     | 35
|           |                                             |   
|Signatures |                                             | 36



1







PART
II



Unless otherwise indicated or the context
otherwise requires, references in this Annual Report on Form 10-K to “InnerWorkings, Inc.,” “InnerWorkings,”
the “Company,” “we,” “us” or “our” are to InnerWorkings, Inc., a Delaware
corporation, and its subsidiaries.



Forward-Looking Statements





Certain statements in
this Annual Report on Form 10-K are “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). These statements involve a number of risks, uncertainties and other factors that could
cause our actual results, performance or achievements to be materially different from any future results, performance or achievements
expressed or implied by these forward-looking statements. Factors which could materially affect such forward-looking statements
can be found in Part I, Item 1A entitled “Risk Factors” and Part II, Item 7 entitled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K. Investors
are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue
reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date hereof and
we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.



| | Item 8. | Financial
Statements and Supplementary Data
| | ------- | -------------------------------------------



INDEX TO FINANCIAL STATEMENTS AND

FINANCIAL STATEMENT SCHEDULE



|INNERWORKINGS, INC.:                                                                                 |   
|---------------------------------------------------------------------------------------------------- | --
|                                                                                                     |   
|Management’s Assessment of Internal Control over Financial Reporting                                 | 4 
|Report of Independent Registered Public Accounting Firm                                              | 5 
|Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting | 6 
|Consolidated Statements of Operations                                                                | 7 
|Consolidated Statements of Comprehensive Income (Loss)                                               | 8 
|Consolidated Balance Sheets                                                                          | 9 
|Consolidated Statements of Stockholders’ Equity                                                      | 10
|Consolidated Statements of Cash Flows                                                                | 11
|Notes To Consolidated Financial Statements                                                           | 12



2







MANAGEMENT’S ASSESSMENT OF

INTERNAL CONTROL OVER FINANCIAL REPORTING



The financial statements
were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequate
internal controls over financial reporting.



The Company’s
internal control over financial reporting is 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.
The 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.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



There are inherent limitations
in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls.
Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation.
Further, because of changes in conditions, the effectiveness of internal controls may vary over time.





Management assessed
the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2014. In making
this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) in Internal Control—Integrated Framework (2013 framework). Based on this evaluation, management
concluded that our internal control over financial reporting was effective as of December 31, 2014 based on criteria in Internal
Control –Integrated Framework issued by the COSO.





Ernst & Young
LLP, independent registered public accounting firm, has audited the financial statements of the Company for the fiscal years ended
December 31, 2012, 2013 and 2014 and the Company’s internal control over financial reporting as of December 31, 2014. Their
reports are presented on the following pages.



InnerWorkings, Inc.





March 6, 2015







3







REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



The Board of Directors and Stockholders
of InnerWorkings, Inc. and subsidiaries







We have audited
the accompanying consolidated balance sheets of InnerWorkings, Inc. and subsidiaries as of December 31, 2014 and 2013 and the
related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for
each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule
listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements and schedule based on our 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion,
the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
InnerWorkings, Inc. and subsidiaries at December 31, 2014 and 2013 and the consolidated results of its operations and its
cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.





We also have
audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), InnerWorkings,
Inc.’s and subsidiaries internal control over financial reporting as of December 31, 2014, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated March 6, 2015 expressed an unqualified opinion thereon.



/s/ Ernst & Young LLP

Chicago, Illinois

March 6, 2015



4







Report of Independent Registered Public
Accounting Firm on Internal Control Over Financial Reporting



The Board of Directors and Stockholders
of InnerWorkings, Inc. and subsidiaries







We have
audited InnerWorkings, Inc.’s and subsidiaries internal control over financial reporting as of December 31, 2014, based
on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). InnerWorkings, Inc.’s and
subsidiaries management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements
Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s
internal control over financial reporting based on our audit.



We conducted our audit
in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.



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 (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) 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 (3) 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.



In our opinion, InnerWorkings, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on
the COSO criteria.





We also have audited,
in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets
of InnerWorkings, Inc. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income
(loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2014, and our report
dated March 6, 2015 expressed an unqualified opinion thereon.



/s/ Ernst & Young LLP

Chicago, Illinois

March 6, 2015







5







InnerWorkings,
Inc. and subsidiaries



Consolidated Statements of Operations



|                                                 |  | Years Ended December 31, |            
|------------------------------------------------ |  | ------------------------ | -----------
|                                                 |  | 2012                     |            
|Revenue                                          |  | $                        | 789,585,041
|Cost of goods sold                               |  |                          | 612,026,494
|Gross profit                                     |  |                          | 177,558,547
|Operating expenses:                              |  |                          |            
|Selling, general and administrative expenses     |  |                          | 146,123,614
|Depreciation and amortization                    |  |                          | 10,790,452 
|Change in fair value of contingent consideration |  |                          | (27,688,774
|Preference claim settlement charge               |  |                          | 1,099,386  
|VAT settlement charge                            |  |                          | 1,485,088  
|Goodwill impairment charge                       |  |                          | -          
|Intangible asset impairment charges              |  |                          | -          
|Restructuring and other charges                  |  |                          | -          
|Income (loss) from operations                    |  |                          | 45,748,781 
|Other income (expense):                          |  |                          |            
|Gain on sale of investment                       |  |                          | 1,196,196  
|Interest income                                  |  |                          | 66,489     
|Interest expense                                 |  |                          | (2,438,234 
|Other, net                                       |  |                          | 94,411     
|Total other income (expense)                     |  |                          | (1,081,138 
|Income (loss) before taxes                       |  |                          | 44,667,643 
|Income tax expense (benefit)                     |  |                          | 5,873,621  
|Net income (loss)                                |  | $                        | 38,794,022 
|                                                 |  |                          |            
|Basic earnings (loss) per share                  |  | $                        | 0.79       
|Diluted earnings (loss) per share                |  | $                        | 0.76       



See accompanying notes to the consolidated
financial statements.



6







InnerWorkings,
Inc. and subsidiaries



Consolidated Statements of Comprehensive
Income (Loss)





|                                                                         |  | Years
    Ended December 31, |           
|------------------------------------------------------------------------ |  | ---------------------------- | ----------
|                                                                         |  | 2012                         |           
|Net income
    (loss)                                                    |  | $                            | 38,794,022
|Other comprehensive income
    (loss), before tax                        |  |                              |           
|Foreign
    currency translation adjustments                             |  |                              | 676,272   
|Unrealized
    gains on marketable securities                            |  |                              |           
|Unrealized
    holding gains arising during the period                   |  |                              | 85,958    
|Less:
    Reclassification adjustments for gains included in net income  |  |                              | (1,196,196
|Unrealized
    losses on marketable securities, net                      |  |                              | (1,110,238
|Other comprehensive income
    (loss), before tax                        |  |                              | (433,966  
|Income
    tax benefit related to components of other comprehensive loss |  |                              | 438,556   
|Other
    comprehensive income (loss), net of tax                        |  |                              | 4,590     
|                                                                         |  |                              |           
|Comprehensive
    income (loss)                                          |  | $                            | 38,798,612





See accompanying notes to the consolidated
financial statements.



7







InnerWorkings,
Inc. and subsidiaries



Consolidated Balance Sheets



|                                                                                                                                                                                              |  | December 31, |            
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -----------
|                                                                                                                                                                                              |  | 2013         |            
|Assets                                                                                                                                                                                        |  |              |            
|Current assets:                                                                                                                                                                               |  |              |            
|Cash and cash equivalents                                                                                                                                                                     |  | $            | 18,606,030 
|Accounts receivable, net of allowance for doubtful accounts of $2,128,790 and $2,685,497, respectively                                                                                        |  |              | 171,832,907
|Unbilled revenue                                                                                                                                                                              |  |              | 27,483,544 
|Inventories                                                                                                                                                                                   |  |              | 26,473,732 
|Prepaid expenses                                                                                                                                                                              |  |              | 11,746,965 
|Deferred income taxes                                                                                                                                                                         |  |              | 1,119,333  
|Other current assets                                                                                                                                                                          |  |              | 22,408,692 
|Total current assets                                                                                                                                                                          |  |              | 279,671,203
|Property and equipment, net                                                                                                                                                                   |  |              | 23,724,750 
|Intangibles and other assets:                                                                                                                                                                 |  |              |            
|Goodwill                                                                                                                                                                                      |  |              | 251,228,698
|Intangible assets, net                                                                                                                                                                        |  |              | 56,575,534 
|Deferred income taxes                                                                                                                                                                         |  |              | 2,319,515  
|Other assets                                                                                                                                                                                  |  |              | 1,147,078  
|                                                                                                                                                                                              |  |              | 311,270,825
|Total assets                                                                                                                                                                                  |  | $            | 614,666,778
|Liabilities and stockholders' equity                                                                                                                                                          |  |              |            
|Current liabilities:                                                                                                                                                                          |  |              |            
|Accounts payable-trade                                                                                                                                                                        |  | $            | 169,243,349
|Current portion of contingent consideration                                                                                                                                                   |  |              | 16,718,516 
|Due to seller                                                                                                                                                                                 |  |              | -          
|Other liabilities                                                                                                                                                                             |  |              | 15,818,791 
|Accrued expenses                                                                                                                                                                              |  |              | 17,117,878 
|Total current liabilities                                                                                                                                                                     |  |              | 218,898,534
|Revolving credit facility                                                                                                                                                                     |  |              | 69,000,000 
|Deferred income taxes                                                                                                                                                                         |  |              | 9,061,535  
|Contingent consideration, net of current portion                                                                                                                                              |  |              | 70,613,945 
|Other long-term liabilities                                                                                                                                                                   |  |              | 1,651,190  
|Total liabilities                                                                                                                                                                             |  |              | 369,225,204
|Stockholders' equity:                                                                                                                                                                         |  |              |            
|Common stock, par value $0.0001 per share, 200,000,000 and 200,000,000 shares authorized, 61,395,494 and 61,851,709 shares issued, 51,282,185 and 52,830,842 shares outstanding, respectively |  |              | 6,140      
|Additional paid-in capital                                                                                                                                                                    |  |              | 202,042,296
|Treasury stock at cost, 10,113,309 and 9,020,867 shares, respectively                                                                                                                         |  |              | (62,312,101
|Accumulated other comprehensive income (loss)                                                                                                                                                 |  |              | 2,777,000  
|Retained earnings                                                                                                                                                                             |  |              | 102,928,239
|Total stockholders' equity                                                                                                                                                                    |  |              | 245,441,574
|Total liabilities and stockholders' equity                                                                                                                                                    |  | $            | 614,666,778



See accompanying notes to the consolidated
financial statements.



8







InnerWorkings,
Inc. and subsidiaries



Consolidated Statements of Stockholders'
Equity



|                                                                   |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|------------------------------------------------------------------ |  | ---------------- | ---------- |  | ------------------ | - | ----- | ---------- |  |  | ------------- | - |  | --------------- | ----------- | - | ----------------- | - | ----------- | -------- |  | - | ---------- | -
|                                                                   |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   | Accumulated       |   |             |          |  |   |            |  
|                                                                   |  |                  |            |  |                    |   |       |            |  |  | Other         |   |  |                 |             |   |                   |  
|                                                                   |  | Common
    Stock |            |  | Treasury
    Stock |   |       | Additional |  |  | Comprehensive |   |  | Retained        |             |   |                   |  
|                                                                   |  | Shares           |            |  | Amount             |   |       | Shares     |  |  | Amount        |   |  | Paid-in-Capital |             |   | Income
    (Loss) |   |             | Earnings |  |   | Total      |  
|                                                                   |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Balance at December 31, 2011                                       |  |                  | 57,903,418 |  |                    | $ | 5,790 |            |  |  | 10,905,407    |   |  | $               | (71,241,947 | ) |                   | $ | 179,687,503 |          |  | $ | 268,331    |  
|                                                                   |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Net income                                                         |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Other comprehensive income:                                        |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Foreign currency
    translation adjustment                        |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   | 676,272    |  
|Change in unrealized
    gain on marketable securities, net of tax |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   | (671,682   | )
|Total other comprehensive
    income                               |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   | 4,590      |  
|Comprehensive income                                               |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Issuance of common
    stock upon exercise of stock awards         |  |                  | 2,832,143  |  |                    |   | 284   |            |  |  |               |   |  |                 |             |   |                   |   | 5,445,056   |          |  |   |            |  
|Issuance of treasury
    shares as consideration for acquisition   |  |                  |            |  |                    |   |       |            |  |  | (369,944      | ) |  |                 | 4,170,624   |   |                   |   | 145,768     |          |  |   |            |  
|Excess tax benefit
    derived from stock award exercises          |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   | 6,646,739   |          |  |   |            |  
|Stock based compensation
    expense                               |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   | 6,192,870   |          |  |   |            |  
|                                                                   |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Balance at December 31, 2012                                       |  |                  | 60,735,561 |  |                    |   | 6,074 |            |  |  | 10,535,463    |   |  |                 | (67,071,323 | ) |                   |   | 198,117,936 |          |  |   | 272,921    |  
|                                                                   |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Net loss                                                           |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Other comprehensive income:                                        |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Foreign currency
    translation adjustment                        |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   | 2,505,417  |  
|Change in unrealized
    gain on marketable securities, net of tax |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   | (1,338     | )
|Total other comprehensive
    income                               |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   | 2,504,079  |  
|Comprehensive loss                                                 |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Issuance of common
    stock upon exercise of stock awards         |  |                  | 659,933    |  |                    |   | 66    |            |  |  |               |   |  |                 |             |   |                   |   | 1,594,299   |          |  |   |            |  
|Issuance of treasury
    shares as consideration for acquisition   |  |                  |            |  |                    |   |       |            |  |  | (422,154      | ) |  |                 | 4,759,222   |   |                   |   | 490,522     |          |  |   |            |  
|Excess tax benefit
    derived from stock award exercises          |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   | (2,893,492  | )        |  |   |            |  
|Stock based compensation
    expense                               |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   | 4,733,031   |          |  |   |            |  
|                                                                   |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Balance at December 31, 2013                                       |  |                  | 61,395,494 |  |                    | $ | 6,140 |            |  |  | 10,113,309    |   |  | $               | (62,312,101 | ) |                   | $ | 202,042,296 |          |  | $ | 2,777,000  |  
|                                                                   |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Net income                                                         |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Total other comprehensive
    income (loss)                        |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   | (8,178,135 | )
|Comprehensive income                                               |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Issuance of common
    stock upon exercise of stock awards         |  |                  | 456,215    |  |                    |   | 45    |            |  |  |               |   |  |                 |             |   |                   |   | 182,474     |          |  |   |            |  
|Issuance of treasury shares as consideration
    for acquisition   |  |                  |            |  |                    |   |       |            |  |  | (1,092,442    | ) |  |                 | 12,315,935  |   |                   |   |             |          |  |   |            |  
|Excess tax benefit
    derived from stock award exercises          |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   | (147,380    | )        |  |   |            |  
|Stock based compensation
    expense                               |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   | 5,351,572   |          |  |   |            |  
|                                                                   |  |                  |            |  |                    |   |       |            |  |  |               |   |  |                 |             |   |                   |   |             |          |  |   |            |  
|Balance at December 31, 2014                                       |  |                  | 61,851,709 |  |                    | $ | 6,185 |            |  |  | 9,020,867     |   |  | $               | (49,996,166 | ) |                   | $ | 207,428,962 |          |  | $ | (5,401,135 | )





See accompanying notes to the consolidated
financial statements.



9







InnerWorkings,
Inc. and subsidiaries



Consolidated Statements of Cash Flows





|                                                                                                   |  | Year Ended December 31, |            
|-------------------------------------------------------------------------------------------------- |  | ----------------------- | -----------
|                                                                                                   |  | 2012                    |            
|Cash flows from operating activities                                                               |  |                         |            
|Net income (loss)                                                                                  |  | $                       | 38,794,022 
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                         |            
|Depreciation and amortization                                                                      |  |                         | 10,790,452 
|Stock-based compensation expense                                                                   |  |                         | 6,192,870  
|Deferred income taxes                                                                              |  |                         | (995,218   
|Gain on sale of investment                                                                         |  |                         | (1,196,196 
|Bad debt provision                                                                                 |  |                         | 1,681,942  
|Excess tax benefit from exercise of stock awards                                                   |  |                         | (6,666,884 
|Change in fair value of contingent consideration liability                                         |  |                         | (27,688,774
|Goodwill impairment charge                                                                         |  |                         | -          
|Intangible asset impairment charges                                                                |  |                         | -          
|Reduction of prepaid commissions                                                                   |  |                         | -          
|Other operating activities                                                                         |  |                         | 533,842    
|Change in assets, net of acquisitions:                                                             |  |                         |            
|Accounts receivable and unbilled revenue                                                           |  |                         | (14,846,005
|Inventories                                                                                        |  |                         | (3,089,909 
|Prepaid expenses and other                                                                         |  |                         | (13,077,541
|Change in liabilities, net of acquisitons:                                                         |  |                         |            
|Accounts payable                                                                                   |  |                         | 14,818,713 
|Accrued expenses and other                                                                         |  |                         | 4,160,421  
|Net cash provided by (used in) operating activities                                                |  |                         | 9,411,735  
|                                                                                                   |  |                         |            
|Cash flows from investing activities                                                               |  |                         |            
|Purchases of property and equipment                                                                |  |                         | (11,823,646
|Payments for acquisitions, net of cash acquired                                                    |  |                         | (1,127,954 
|Payments to seller for acquisitions closed prior to 2009                                           |  |                         | (3,000,000 
|Proceeds from sale of marketable securities                                                        |  |                         | 1,213,501  
|Other investing activities                                                                         |  |                         | 31,566     
|Net cash used in investing activities                                                              |  |                         | (14,706,533
|                                                                                                   |  |                         |            
|Cash flows from financing activities                                                               |  |                         |            
|Net borrowings from revolving credit facility and short-term debt                                  |  |                         | 5,000,000  
|Payments of contingent consideration                                                               |  |                         | (7,178,407 
|Secured borrowing arrangements                                                                     |  |                         | -          
|Proceeds from exercise of stock options                                                            |  |                         | 5,458,981  
|Excess tax benefit from exercise of stock awards                                                   |  |                         | 6,666,884  
|Payment of debt issuance costs                                                                     |  |                         | (356,700   
|Other financing activities                                                                         |  |                         | (7,270     
|Net cash provided by (used in) financing activites                                                 |  |                         | 9,583,488  
|                                                                                                   |  |                         |            
|Effect of exchange rate changes on cash and cash equivalents                                       |  |                         | (289,176   
|Increase in cash and cash equivalents                                                              |  |                         | 3,999,514  
|Cash and cash equivalents, beginning of period                                                     |  |                         | 13,219,385 
|Cash and cash equivalents, end of period                                                           |  | $                       | 17,218,899 
|                                                                                                   |  |                         |            
|Supplemental disclosure of cash flow information                                                   |  |                         |            
|Cash paid for interest                                                                             |  | $                       | 2,229,525  
|Cash paid for income taxes, net of refunds                                                         |  |                         | 4,208,970  



See accompanying
notes to the consolidated financial statements.





10







InnerWorkings, Inc.
and subsidiaries



Notes to Consolidated Financial Statements



|1. | Description of the Business
|-- | ---------------------------





InnerWorkings, Inc.
(together with its subsidiaries, “the Company”) was incorporated in the state of Delaware on January 3, 2006. The Company
is a leading global marketing execution firm for Fortune 500 brands across a wide range of industries. As a comprehensive outsourced
enterprise solution, the Company leverages proprietary technology, an extensive supplier network and deep domain expertise to streamline
the creation, production, and distribution of marketing and promotional materials, signage and displays, retail experiences, events
and promotions, and packaging across every major market worldwide. The items the Company sources are generally procured through
the marketing supply chain, and are referred to collectively as marketing materials. The Company’s technology and database
of information is designed to capitalize on excess manufacturing capacity and other inefficiencies in the traditional marketing
and print supply chain to obtain favorable pricing and to deliver high-quality products and services.





The Company is organized
and managed as three business segments, North America, Latin America and EMEA, and is viewed as three operating segments by the
chief operating decision maker for purposes of resource allocation and assessing performance. See Note 17 for further information
about the Company’s reportable segments.





|2. | Summary of Significant Accounting Policies
|-- | ------------------------------------------





Basis of Presentation and Consolidation



The consolidated financial
statements include the accounts of InnerWorkings, Inc. and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.





Reclassifications



Certain prior year amounts
have been reclassified to conform to the current presentation. These reclassifications have not been material and have not affected
net income.





Preparation of Financial Statements
and Use of Estimates





The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an
ongoing basis, the Company evaluates its estimates, including those related to product returns, allowance for doubtful accounts,
inventories and inventory valuation, valuation and impairments of goodwill and long-lived assets, income taxes, contingencies,
stock-based compensation and litigation. The Company bases its estimates on historical experience and on other assumptions that
its management believes are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying
value of assets and liabilities when those values are not readily apparent from other sources. Actual results can differ from those
estimates.





Foreign Currency Translation





The Company determines
the functional currency for its parent company and each of its subsidiaries by reviewing the currencies in which their respective
operating activities occur. Assets and liabilities of these operations are translated into U.S. currency at the rates of exchange
at the balance sheet date. Income and expense items are translated at average monthly rates of exchange. The resulting translation
adjustments are included in accumulated other comprehensive income (loss), a separate component of stockholders’ equity.
Transaction gains and losses arising from activities in other than the applicable functional currency are calculated using average
exchange rates for the applicable period and reported in net income as a non-operating item in each period. Non-monetary balance
sheet items denominated in a currency other than the applicable functional currency are translated using the historical rate.







The net realized gains
(losses) on foreign currency transactions were $0.1 million, $(0.3) million and $(0.8) million for the years ended December 31,
2012, 2013 and 2014, respectively.









Revenue Recognition



The Company recognizes
revenue upon meeting all of the following revenue recognition criteria, which is typically met upon shipment or delivery of our
products to customers: (i) persuasive evidence of an arrangement exists through customer contracts and orders, (ii) the customer
takes title and assumes the risks and rewards of ownership, (iii) the sales price charged is fixed or determinable as evidenced
by customer contracts and orders, and (iv) collectability is reasonably assured. Unbilled revenue relates to shipments that
have been made to customers for which the related account receivable has not yet been billed.



11









InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------





In accordance with Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-45, Revenue Recognition
– Principal Agent Considerations, the Company generally reports revenue on a gross basis because the Company is the primary
obligor in its arrangements to procure marketing materials and other products for its customers. Under these arrangements, the
Company is responsible for the fulfillment, including the acceptability, of the printed materials and other products. In addition,
the Company (i) determines which suppliers are included in its network, (ii) has discretion to select from among the suppliers
within its network, (iii) is obligated to pay its suppliers regardless of whether it is paid by its customers, and (iv) has reasonable
latitude to establish exchange price. In some transactions, the Company also has general inventory risk and is involved in the
determination of the nature or characteristics of the printed materials and products. When the Company is not the primary obligor,
revenues are reported on a net basis.





The Company recognizes
revenue for creative, design, installation, warehousing and other services provided to its customers which may be delivered in
conjunction with the procurement of marketing materials at the time when delivery and customer acceptance occur and all other revenue
recognition criteria are met. When provided on a stand-alone basis, the Company recognizes revenue for these services upon completion
of the service. Service revenue has not been material to the Company’s overall revenue to date.



The Company records
taxes collected from customers and remitted to governmental authorities on a net basis.



Cash and Cash Equivalents



The Company considers
all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.



Accounts Receivable







Accounts receivable
are uncollateralized customer obligations due under normal trade terms. Invoices generally require payment within 30 to 90 days
from the invoice date. Accounts receivable are stated at the amount billed to the customer, less an estimate for amounts deemed
uncollectible. Interest is not generally accrued on outstanding balances.



The carrying amount
of accounts receivable is reduced by an allowance that reflects management’s best estimate of the amounts that will not be
collected. The Company estimates the collectability of its accounts receivable based on a combination of factors including, but
not limited to, customer credit ratings and historical experience. In circumstances where the Company is aware of a specific customer’s
inability to meet its financial obligations to the Company (e.g., bankruptcy filings or substantial downgrading of credit ratings),
the Company provides allowances for bad debts against amounts due to reduce the net recognized receivable to the amount it reasonably
believes will be collected. Fully reserved receivables are reviewed on a monthly basis and uncollectible accounts are written off
when all reasonable collection efforts have been exhausted.







Inventories





Inventories are stated
at the lower of cost or market. Cost is determined by the first-in, first-out method. Market value is based upon an estimated average
selling price reduced by estimated costs of disposal. Inventories primarily consist of purchased finished goods. Finished goods
inventory includes consigned inventory held on behalf of customers as well as inventory held at third-party fulfillment centers
and subcontractors.





Property and Equipment





Property and equipment
are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful
lives of the respective assets. The estimated useful lives, by asset class, are as follows:





|Computer equipment                        |  | 3 years      | 
|----------------------------------------- |  | ------------ | 
|Software, including internal-use software |  | 1 to 6 years | 
|Office equipment                          |  | 5 years      | 
|Furniture and fixtures                    |  | 7 years      | 



Leasehold improvements
are depreciated using the straight-line method over the shorter of their estimated useful lives or the terms of the related leases.



12









InnerWorkings, Inc. and subsidiaries



Notes to Consolidated Financial Statements



|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------



Internal-Use Software





In accordance with ASC
350-40, Intangibles—Goodwill and Other, Internal-Use Software, certain costs incurred in the planning and evaluation
stage of internal-use computer software are expensed as incurred. Certain costs incurred during the application development stage
are capitalized and included in property and equipment. Capitalized internal-use software costs are depreciated over the expected
economic life of three to six years using the straight-line method. Capitalized internal-use software asset depreciation expense
for the years ended December 31, 2012, 2013 and 2014 was $4.3 million, $3.9 million and $7.2 million, respectively, and is included
in total depreciation expense. At December 31, 2013 and 2014, the net book value of internal-use software was $17.3 million and
$23.5 million, respectively.





Goodwill and Other Intangibles



Goodwill represents
the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of
businesses acquired. In accordance with ASC 350, Intangibles—Goodwill and Other, goodwill is not amortized, but instead
is tested for impairment annually, or more frequently if circumstances indicate a possible impairment may exist. Absent any interim
indicators of impairment, the Company tests for goodwill impairment as of the first day of the fourth fiscal quarter of each year.



Under ASC 350, an entity
is permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting
unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment
test. If the quantitative test is required, in the first step, the fair value for each reporting unit is compared to its book value
including goodwill. In the case that the fair value is less than the book value, a second step is performed which compares the
implied fair value of goodwill to the book value of goodwill. The fair value for the goodwill is determined based on the difference
between the fair value of the reporting unit and the net fair values of the identifiable assets and liabilities. If the implied
fair value of the goodwill is less than the book value of the goodwill, the difference is recognized as an impairment.



The Company defines
its three reporting units as North America, Latin America and EMEA. At October 1, 2014, the Company elected to perform the quantitative
impairment test for each of its three reporting units. In performing this test, the Company determined the fair value of the reporting
units based on the income approach. Under the income approach, the fair value of a reporting unit is calculated based on the present
value of estimated future cash flows. No impairment was identified as of October 1, 2014 as a result of this test. The Company
does not believe that goodwill is impaired as of December 31, 2014.



In the third quarter
of 2013, the Company recorded a non-cash, goodwill impairment charge of $37.9 million. For additional information related to the
goodwill impairment, see Note 4.





In accordance with ASC
350, Intangibles—Goodwill and Other, the Company amortizes its intangible assets with finite lives over their respective
estimated useful lives and reviews for impairment whenever impairment indicators exist. Impairment indicators could include significant
under-performance relative to the historical or projected future operating results, significant changes in the manner of use of
assets, significant negative industry or economic trends or significant changes in the Company’s market capitalization relative
to net book value. Any changes in key assumptions used by the Company, including those set forth above, could result in an impairment
charge and such a charge could have a material adverse effect on the Company’s consolidated results of operations. The Company’s
intangible assets consist of customer lists, noncompete agreements, trade names and patents. The Company’s customer lists,
which have an estimated weighted-average useful life of fourteen years, are being amortized using the economic life method. The
Company’s noncompete agreements, trade names and patents are being amortized on the straight-line basis over their estimated
weighted-average useful lives of approximately four years, twelve years and nine years, respectively.





In the fourth quarter
of 2014, the Company recorded a non-cash, intangible asset impairment charge of $2.7 million. For additional information related
to the intangible asset impairment, see Note 5.



Shipping and Handling Costs





Shipping and handling
costs are classified in cost of goods sold in the consolidated statements of operations.







13









InnerWorkings, Inc. and subsidiaries



Notes to Consolidated Financial Statements



|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------







Income Taxes



The Company accounts
for income taxes in accordance with ASC 740, Income Taxes, under which deferred tax assets and liabilities are recognized
based upon anticipated future tax consequences attributable to differences between financial statement carrying values of assets
and liabilities and their respective tax bases. A valuation allowance is established to reduce the carrying value of deferred tax
assets if it is considered more likely than not that such assets will not be realized. Any change in the valuation allowance would
be charged to income in the period such determination was made.





The Company recognizes the tax benefit from an uncertain tax
position only if it is “more likely than not” the tax position will be sustained on examination by the taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are
then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.





The Company’s
policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. There
was no interest or penalties related to unrecognized tax benefits for the years ended December 31, 2012, 2013 and 2014.



Based on the Company’s
evaluation, it was concluded that there are no significant uncertain tax positions requiring recognition in its financial statements.
The evaluation was performed for the tax years ended December 31, 2011, 2012, 2013 and 2014, the tax years which remain subject
to examination by major tax jurisdictions as of December 31, 2014.





Advertising





Costs of advertising,
which are expensed as incurred by the Company, were $0.8 million, $0.7 million and $0.5 million for the years ended December 31,
2012, 2013 and 2014, respectively, and are included in selling, general and administrative expenses in the consolidated statement
of operations.





Comprehensive Income





The components of accumulated
comprehensive income (loss) included in the Consolidated Balance Sheets at December 31, 2013 and 2014 are as follows:





|                                                    |  | Foreign currency |            |   | Unrealized holding gains on available-
for-sale securities |   |        | Total accumulated  other comprehensive  income | 
|--------------------------------------------------- |  | ---------------- | ---------- | - | ---------------------------------------------------------- | - | ------ | ---------------------------------------------- | 
|Balance at December 31, 2012                        |  | $                | 271,583    |   |                                                            | $ | 1,338  |                                                | 
|                                                    |  |                  |            |   |                                                            |   |        |                                                | 
|Other comprehensive income before reclassifications |  |                  | 2,505,417  |   |                                                            |   | -      |                                                | 
|Amounts reclassified from AOCI                      |  |                  |            |   |                                                            |   | (1,338 | )                                              | 
|Net current-period other comprehensive income       |  |                  | 2,505,417  |   |                                                            |   | (1,338 | )                                              | 
|                                                    |  |                  |            |   |                                                            |   |        |                                                | 
|Balance at December 31, 2013                        |  |                  | 2,777,000  |   |                                                            |   | -      |                                                | 
|                                                    |  |                  |            |   |                                                            |   |        |                                                | 
|Other comprehensive income before reclassifications |  |                  | (8,178,135 | ) |                                                            |   | -      |                                                | 
|Amounts reclassified from AOCI                      |  |                  |            |   |                                                            |   | -      |                                                | 
|Net current-period other comprehensive income       |  |                  | (8,178,135 | ) |                                                            |   | -      |                                                | 
|                                                    |  |                  |            |   |                                                            |   |        |                                                | 
|Balance at December 31, 2014                        |  | $                | (5,401,135 | ) |                                                            | $ | -      |                                                | 



Stock-Based Compensation



The Company accounts for
stock-based compensation awards in accordance with ASC 718, Compensation-Stock Compensation. Compensation expense is measured
by determining the fair value using the Black-Scholes option valuation model and is then recognized over the requisite service
period of the awards, which is generally the vesting period, on a straight-line basis for the entire award.





Stock-based compensation
cost recognized during the period is based on the portion of the share-based payment awards that are ultimately expected to vest.
Accordingly, stock-based compensation cost recognized has been reduced for estimated forfeitures. Forfeitures are estimated at
the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based
compensation expense is included in selling, general and administrative expenses in the consolidated statement of operations.







14









InnerWorkings, Inc. and subsidiaries



Notes to Consolidated Financial Statements



|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------







Recent Accounting
Pronouncements



In May 2014, the FASB
issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”),
which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition
of revenue at an amount an entity expects to be entitled when products are transferred to customers. ASU 2014-09 will be effective
for the Company beginning on January 1, 2017. Early adoption is not permitted. The new revenue standard may be applied retrospectively
to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company
is currently evaluating the impact of adopting the new revenue standard on its consolidated financial statements.





In April 2014, the FASB
issued Accounting Standards Update No. 2014-08 Reporting Discontinued Operations and Disclosures of Disposals of Components
of an Entity (“ASU 2014-08”). ASU 2014-08 provides a narrower definition of discontinued operations than under
existing GAAP. The standard update requires that only disposals of components of an entity (or groups of components) that represent
a strategic shift that has or will have a major effect on the reporting entity’s operations are reported in the financial
statements as discontinued operations. The standard also provides guidance on the financial statement presentations and disclosures
of discontinued operations. The standard is effective prospectively for disposals (or classifications of businesses as held-for-sale)
of components of an entity that occur in annual or interim periods beginning after December 15, 2014.









In July 2013, FASB issued
Accounting Standards Update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward,
a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”) to provide guidance on the presentation
of unrecognized tax benefits. This update requires that companies net their unrecognized tax benefits against all same-jurisdiction
net operating losses or tax credit carryforwards that would be used to settle the position with a tax authority. The Company adopted
ASU 2013-11 on January 1, 2014, and it did not have an effect on its consolidated financial statements.







In August 2014, the
FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (“ASU 2014-15”).
This standard requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity's
ability to continue as a going concern and to provide disclosures in certain circumstances. The standard is effective for annual
and interim periods beginning after December 15, 2016. The Company does not expect this guidance to have a material impact on its
consolidated financial statements.







Voluntary Change in Accounting Policy



During the quarter ended
September 30, 2014, the Company voluntarily changed the date of its annual goodwill impairment test from the last day of the fiscal
year to the first day of the fourth quarter. This voluntary change is preferable under the circumstances as it provides the Company
with additional time to complete its annual goodwill impairment testing in advance of its year-end reporting and results in better
alignment with the Company’s strategic forecasting and budgeting process. The voluntary change in accounting principle related
to the annual testing date did not delay, accelerate or avoid an impairment charge. This change was not applied retrospectively
as it is impracticable to do so because retrospective application would require application of significant estimates and assumptions
with the use of hindsight. Accordingly, the change has been applied prospectively.





15









InnerWorkings, Inc. and subsidiaries



Notes to Consolidated Financial Statements





|3. | Acquisitions
|-- | ------------



Contingent Consideration





In connection
with certain of the Company’s acquisitions, contingent consideration is payable in cash or common stock upon the achievement
of certain performance measures over future periods. The Company has recorded the acquisition date fair value of the contingent
consideration liability as additional purchase price. The Company has recorded $32.6 million in contingent consideration at December
31, 2014 related to these arrangements. Any adjustments made to the fair value of the contingent consideration liability subsequent
to the acquisition date will be recorded in the Company’s results of operations. During the years ended December 31, 2012,
2013 and 2014, the Company recorded income of $27.7 million, $31.3 million and $37.9 million for changes in the fair value of contingent
consideration, reflecting the net reductions in the liability for each of those periods.





For the years ended
December 31, 2012, 2013 and 2014, the Company’s fair value adjustment to the contingent consideration liability includes
adjustments of $25.4 million, $26.6 million and $7.2 million, respectively, to reduce the liability relating to the Productions
Graphics acquisition in 2011. As of December 31, 2014, the fair value of the potential remaining $41.9 million contingent consideration
payments was zero as the Company believes the likelihood of making any future payments is remote. See Note 9 for more information
on Productions Graphics.



For the year ended December
31, 2014, the Company’s fair value adjustment to the contingent consideration liability also included an adjustment of $30.4
million to reduce the liability relating to the DB Studios acquisition in 2013 due to a decrease in forecasted results. As of December
31, 2014, the fair value of the potential remaining $44.3 million contingent consideration payments was estimated to be $5.2 million.



As of December 31, 2014,
the potential maximum contingent payments are payable as follows:





|     |  | Cash |            |  | Common Stock |   |             | Total | 
|---- |  | ---- | ---------- |  | ------------ | - | ----------- | ----- | 
|2015 |  | $    | 402,499    |  |              | $ | 31,094,284  |       | 
|2016 |  |      | 29,354,325 |  |              |   | 34,061,635  |       | 
|2017 |  |      | -          |  |              |   | 45,751,700  |       | 
|     |  | $    | 29,756,824 |  |              | $ | 110,907,619 |       | 







If the performance
measures required by the purchase agreements are not achieved, the Company may pay less than the maximum amounts as presented in
the table above, depending on the terms of the agreement. While the maximum potential payments shown in the table are $140.7 million,
the Company estimates the fair value of the payments that will be made is $32.6 million.







16









InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|4. | Goodwill
|-- | --------



The following is a
summary of the goodwill balance for each operating segment as of December 31:





|                                                                     |  | North
    America |             |   | Latin
    America |   |           | EMEA |  |   | Total       |  
|-------------------------------------------------------------------- |  | ----------------- | ----------- | - | ----------------- | - | --------- | ---- |  | - | ----------- | -
|Balance as of December 31, 2012                                      |  | $                 | 119,162,735 |   |                   | $ | 9,656,417 |      |  | $ | 83,977,270  |  
|Goodwill acquired related to 2013 acquisitions                       |  |                   | 52,025,837  |   |                   |   | -         |      |  |   | 20,576,957  |  
|Finalization of purchase accounting for prior 
    year acquisitions |  |                   | (34,120     | ) |                   |   | 218,819   |      |  |   | (40,940     | )
|Impairment charge                                                    |  |                   | -           |   |                   |   | -         |      |  |   | (37,908,000 | )
|Foreign exchange impact                                              |  |                   | (59,876     | ) |                   |   | -         |      |  |   | 3,653,599   |  
|Balance as of December 31, 2013                                      |  |                   | 171,094,576 |   |                   |   | 9,875,236 |      |  |   | 70,258,886  |  
|Finalization of purchase accounting
    for prior year acquisitions  |  |                   | (167,922    | ) |                   |   | -         |      |  |   | 692,839     |  
|Foreign exchange impact                                              |  |                   | (67,233     | ) |                   |   | -         |      |  |   | (4,738,482  | )
|Balance as of December 31, 2014                                      |  | $                 | 170,859,421 |   |                   | $ | 9,875,236 |      |  | $ | 66,213,243  |  





As discussed in Note
2, the Company performed its annual impairment test as of October 1, 2014 and did not identify an impairment in any of its three
reporting units. The Company does not believe that goodwill is impaired as of December 31, 2014.





2013 Goodwill Impairment
Charge



In the third quarter
of 2013, a change in the Company’s identified reporting units along with a decline in forecasted financial performance in
fiscal year 2013 compelled management to perform an interim goodwill impairment test for these reporting units as of September
30, 2013. In the first step of the impairment test, the Company concluded that the carrying amount of the EMEA reporting unit exceeded
its fair value, requiring the Company to perform the second step of the impairment test to measure the amount of impairment loss,
if any. The fair values of the North America and Latin America reporting units exceeded their carrying values, and the second step
was not necessary.



Based upon fair value
estimates of long-lived assets and discounted cash flows of the EMEA reporting unit, the Company compared the implied fair value
of the goodwill in this reporting unit with the carrying value. The test resulted in a $37.9 million non-cash, goodwill impairment
charge which was recognized in the third quarter of 2013. No tax benefit is recognized on the goodwill impairment. This charge
had no impact on the Company’s cash flows or compliance with debt covenants.



The fair value estimates
used in the goodwill impairment analysis required significant judgment. The Company's fair value estimates for purposes of determining
the goodwill impairment charge are considered Level 3 fair value measurements. The fair value estimates were based on assumptions
that management believes to be reasonable, but that are inherently uncertain, including estimates of future revenues and operating
margins and assumptions about the overall economic climate and the competitive environment for the business.



|5. | Other Intangible Assets
|-- | -----------------------



The following is a summary
of the Company’s other intangible assets as of December 31:



|                              |  | 2013 |             |   | 2014 |   |             | Weighted  Average Life
|----------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ----------------------
|Customer lists                |  | $    | 77,244,427  |   |      | $ | 75,113,728  |                       
|Noncompete agreements         |  |      | 1,077,349   |   |      |   | 1,077,349   |                       
|Trade names                   |  |      | 3,467,655   |   |      |   | 3,467,655   |                       
|Patents                       |  |      | 56,896      |   |      |   | 56,896      |                       
|                              |  |      | 81,846,327  |   |      |   | 79,715,628  |                       
|Less accumulated amortization |  |      | (25,270,793 | ) |      |   | (34,796,055 | )                     
|Intangible assets, net        |  | $    | 56,575,534  |   |      | $ | 44,919,573  |                       



17







InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|5. | Other Intangible Assets (Continued)
|-- | -----------------------------------



Amortization expense
related to these intangible assets was $4.6 million, $6.9 million and $7.4 million for the years ended December 31, 2012, 2013
and 2014, respectively.



The estimated amortization
expense for the next five years is as follows:



|2015       |  | $ | 6,123,124  | 
|---------- |  | - | ---------- | 
|2016       |  |   | 5,779,756  | 
|2017       |  |   | 5,302,817  | 
|2018       |  |   | 4,799,594  | 
|2019       |  |   | 4,473,976  | 
|Thereafter |  |   | 18,440,306 | 
|           |  | $ | 44,919,573 | 



Customer List Impairment
Charge



In the fourth quarter
of 2014, the Company recognized a $2.7 million non-cash, intangible asset impairment charge related to certain customer lists acquired
in prior year business combinations. Due to the loss of specific customers included in the lists, the undiscounted projected cash
flows from those customers did not exceed the recorded book value of the customer lists as of December 31, 2014. As such, the Company
recorded an impairment charge of $2.7 million to reduce the customer lists to their respective fair values. Of the total charge,
$2.4 million related to customer lists in the North America segment, and $0.3 million related to customers lists in the EMEA segment.



|6. | Restructuring Activities and Other Charges
|-- | ------------------------------------------



2014: No restructuring
charges were incurred during the year ended December 31, 2014.



2013: During
the third quarter of 2013, the Company commenced various restructuring actions which resulted in charges of $3.0 million during
the quarter. These actions consisted of terminating 49 employees and providing them with severance benefits in accordance with
benefit plans previously communicated to the affected employee group or local employment laws.



The following table
summarizes the restructuring charges by reportable segment. All restructuring charges were incurred during the three months ended
September 30, 2013, and the obligations were paid prior to December 31, 2013. There were no new charges recognized during the year
ended December 31, 2014.



|                                                    |  | North America |            |   | EMEA |   |          | Total | 
|--------------------------------------------------- |  | ------------- | ---------- | - | ---- | - | -------- | ----- | 
|Employee terminations and other benefits            |  | $             | 2,745,373  |   |      | $ | 260,407  |       | 
|Cash payments                                       |  |               | (121,482   | ) |      |   | (260,407 | )     | 
|Write-off of prepaid commissions balance (1)        |  |               | (2,623,891 | ) |      |   | -        |       | 
|Accrued restructuring costs as of December 31, 2013 |  | $             | -          |   |      | $ | -        |       | 



|(1) | Prepaid commission balances represent cash paid to our account executives in advance of commissions earned and is recorded in prepaid expenses on the balance sheet. For employees who had a balance and were affected by the restructuring actions, which primarily includes Small and Medium Business (“SMB”) account executives, the Company included these balances as part of the severance paid to these individuals.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company’s
SMB division was one of the principal groups affected by the restructuring actions noted above.  In addition to these restructuring
charges, the Company changed its compensation structure during the third quarter so that remaining employees of SMB are paid
a fixed salary. This change in compensation structure resulted in the recording of an additional charge of $ 1.3 million for these
employees in 2013.



18









InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|7. | Property and Equipment
|-- | ----------------------



Property and equipment
at December 31, 2013 and 2014 consisted of the following:



|                                          |  | 2013 |             |   | 2014 |  
|----------------------------------------- |  | ---- | ----------- | - | ---- | -
|Computer equipment                        |  | $    | 7,889,630   |   |      | $
|Software, including internal use software |  |      | 41,987,111  |   |      |  
|Office equipment and furniture            |  |      | 2,136,168   |   |      |  
|Leasehold improvements                    |  |      | 1,468,841   |   |      |  
|                                          |  |      | 53,481,750  |   |      |  
|Less accumulated depreciation             |  |      | (29,757,000 | ) |      |  
|                                          |  | $    | 23,724,750  |   |      | $



Depreciation expense
was $6.2 million, $6.7 million and $10.4 million for the years ended December 31, 2012, 2013 and 2014, respectively.



|8. | Revolving Credit Facility
|-- | -------------------------



The Company entered
into a Credit Agreement, dated as of August 2, 2010, subsequently amended most recently as of September 25, 2014, among the Company,
the lenders party thereto and Bank of America, N.A., as Administrative Agent (the “Credit Agreement”). The Credit Agreement
includes a revolving commitment amount of $175 million in the aggregate with a maturity date of September 25, 2019, and provides
the Company the right to increase the aggregate commitment amount by an additional $50 million. Outstanding borrowings under the
revolving credit facility are guaranteed by the Company’s material domestic subsidiaries. The Company’s obligations
under the Credit Agreement and such domestic subsidiaries’ guaranty obligations are secured by substantially all of their
respective assets. The ranges of applicable rates charged for interest on outstanding loans and letters of credit are 125-250 basis
point spread for letter of credit fees and loans based on the Eurodollar rate and 25-150 basis point spread for loans based on
the base rate.





The terms of the Credit
Agreement include various covenants, including covenants that require the Company to maintain a maximum leverage ratio and a minimum
interest coverage ratio. The Credit Agreement requires the Company to maintain a leverage ratio of no more than 3.25 to 1.0 for
the quarters ended December 31, 2014, March 31, 2015 and June 30, 2015 and 3.00 to 1.0 for each period thereafter. The Company
is also required to maintain an interest coverage ratio of no less than 5.00 to 1.0. The Company is in compliance with all debt
covenants as of December 31, 2014.





At December 31, 2014,
the Company had $28.8 million of unused availability under the Credit Agreement and $0.7 million of letters of credit which have
not been drawn upon.



The fair value of the
debt under this Credit Agreement is not materially different from its book value as of December 31, 2014.





19









InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|9. | Transactions Involving  Former Owner of Productions Graphics
|-- | ------------------------------------------------------------





The Company removed
the former owner of Productions Graphics from his role as President of the Company’s French subsidiary in October 2013 for
performance-related reasons, and he is no longer an employee of the Company. This individual had served in such role since
the Company’s acquisition in 2011 of Productions Graphics, a European business then owned by this individual and an
organization affiliated with him (collectively, the “Seller”). As of December 31, 2014, the Company had paid to the
Seller €5.8 million in fixed consideration and €7.1 million in contingent earn-out consideration.





There are certain
potential disputes between the former owner of Productions Graphics and the Company relating to, among other things, the termination
of his employment and the Productions Graphics acquisition agreement. In connection with such disputes, the Company initiated a
review of this individual’s conduct in connection with certain transactions impacting the earn-out payments made to the Seller
(collectively, the “Transactions”). As a result of the review, the Company concluded it was the victim of a fraud perpetrated
by the former owner of Productions Graphics. Specifically, the Company concluded that the former owner of Productions Graphics artificially
inflated the financial results of Productions Graphics in order to induce the Company to make earn-out payments of €1.2 and
€5.9 million for the 2011 and 2012 earn-out measurement periods, respectively. He inflated the results by directing the issuance
of fraudulent invoices to purported third-party customers and then, indirectly or directly, funded or reimbursed the third parties’
payments in respect of such invoices. The Company estimates that he issued approximately €6.9 million of fraudulent invoices
in 2011 and 2012, collectively, of which €5.7 million was subsequently received by the Company. The Company has accounted
for these aggregate payments of €5.7 million as a partial refund of the €7.1 million in earn-out consideration unduly
paid to the Seller.



The Company intends
to seek to redress the harm caused by conduct of the former owner of Productions Graphics through appropriate legal proceedings.
See Note 10 for further discussion of the legal matters relating to the former owner of Productions Graphics.



|10. | Commitments and Contingencies
|--- | -----------------------------



Lease Commitments





The Company leases many
of its office facilities for various terms under long-term, noncancelable operating lease agreements. The leases expire at various
dates from fiscal year 2015 through fiscal year 2021. Future minimum lease payments are presented below:





|                             |  | Operating Leases |           
|---------------------------- |  | ---------------- | ----------
|2015                         |  | $                | 7,013,184 
|2016                         |  |                  | 6,112,734 
|2017                         |  |                  | 4,656,062 
|2018                         |  |                  | 3,437,026 
|2019                         |  |                  | 2,978,252 
|Thereafter                   |  |                  | 3,567,247 
|Total minimum lease payments |  | $                | 27,764,505





The Company recognizes
rental expense on a straight-line basis over the term of the lease. The total rent expense for the years ended December 31, 2012,
2013 and 2014 was $7.7 million, $9.1 million and $10.0 million, respectively.





Secured Borrowing Arrangements



Certain international
subsidiaries are party to short-term secured borrowing arrangements which allow the Company to borrow against the value of a pool
of current accounts receivable. The Company retains possession of the accounts receivable which are pledged as collateral. The
pledged amounts are immaterial to the consolidated accounts receivable balance.



20









InnerWorkings, Inc. and subsidiaries



Notes to Consolidated Financial Statements



|10. | Commitments and Contingencies (Continued)
|--- | -----------------------------------------



Legal Contingencies



In December 2010, e-Lynxx
Corporation filed a complaint against the Company and numerous other defendants for patent infringement in the United States District
Court for the Middle District of Pennsylvania. As to the Company, the complaint alleges, among other things, that certain aspects
of the Company’s PPM4 technology infringe on two patents owned by e-Lynxx purporting to cover a system and method for competitive
pricing and procurement of customized goods and services, and seeks monetary damages, interest, costs, attorneys’ fees, punitive
damages and a permanent injunction. In May 2013, e-Lynxx asserted that the monetary damages it seeks from the Company are in the
range of $35 million to $88 million for the period from May 2009 through December 2012; e-Lynxx has not yet specified damages sought
for 2013 and future periods. The Company disputes the allegations contained in e-Lynxx’s complaint and intends to vigorously
defend this matter. Specifically, the Company contends that the patents at issue are invalid and not infringed, and, therefore,
e-Lynxx is not entitled to any relief and the complaint should be dismissed. Further, even if e-Lynxx could establish liability,
the Company contends that e-Lynxx is not entitled to the excessive monetary relief it seeks. On July 25, 2013, the court granted
the Company’s motion for summary judgment, finding that the Company did not infringe the patents-in-suit. E-Lynxx filed a
motion for reconsideration, which was denied. On March 5, 2014, e-Lynxx filed an appeal from the judgment entered in favor of the
Company. On February 9, 2015, the Federal Circuit Court of Appeals affirmed the judgment entered in favor of the Company. Absent
further appellate review, the judgment will become final, and the Company will have no liability in the matter. If e-Lynxx seeks
further appellate review, the Company would vigorously defend any such proceedings. The Company believes that the likelihood of
an unfavorable outcome is remote.



In October 2012,
a former sales employee of the Company filed an arbitration claim against the Company arising from the Company’s termination
of his employment in November 2011. He alleged disability discrimination, defamation, breach of employment agreement, invasion
of privacy, and wage payment claims, and sought monetary damages in excess of $9.0 million, interest, punitive damages, injunctive
relief, declaratory relief, and attorneys’ fees and costs. An arbitration hearing was held in this matter in November 2013.
The Company disputed these allegations and vigorously defended itself in the matter. Specifically, the Company contended that it
lawfully terminated his employment for cause, and, therefore, that he is not entitled to any relief and his claims should be dismissed.
On May 7, 2014, the Arbitrator issued a final decision in favor of the Company on all of the alleged claims. Therefore, the Company
has no liability to the claimant, and the matter is closed.





In October 2013,
the Company removed the former owner of Productions Graphics from his role as President of Productions Graphics, the Company’s
French subsidiary. He had been in that role since the Company’s 2011 acquisition of Productions Graphics, a European business
then principally owned by him. In December 2013, the former owner of Productions Graphics initiated a wrongful termination claim
in the Commercial Court of Paris seeking approximately €0.7 million in fees and damages. In anticipation of this claim, in
November 2013, he also obtained a judicial asset attachment order in the amount of €0.7 million as payment security; the attachment
order was confirmed in January 2014, and the Company filed an appeal of the order, which is currently pending. The Company disputes
the allegations of the former owner of Productions Graphics and intends to vigorously defend these matters. In February 2014, based
on a review the Company initiated into certain transactions associated with the former owner of Productions Graphics, the Company
concluded that he had engaged in fraud by inflating the results of the Productions Graphics business in order to induce the Company
to pay him €7.1 million in contingent consideration pursuant to the acquisition agreement. In light of those findings, in
February 2014 the Company filed a criminal complaint in France seeking to redress the harm caused by his conduct. In addition to
these pending matters, there may be other potential disputes between the Company and the former owner of Productions Graphics relating
to the acquisition agreement. As of December 31, 2014, the Company had paid €5.8 million in fixed consideration and €7.1
million in contingent consideration to the former owner of Productions Graphics; the remaining maximum contingent consideration
for the earn-out period ending in 2015 is €34.5 million.





In February 2014, following the Company’s February 2014 announcement of its intention to restate
certain historical financial statements, an individual filed a putative securities class action complaint in the United States
District Court for the Northern District of Illinois entitled Van Noppen v. InnerWorkings et al. The complaint, as amended
in July 2014, alleges that the Company and certain executive officers violated federal securities laws by making materially false
or misleading statements or omissions, and by engaging in a scheme to defraud purchasers of securities, relating to the Company’s
financial results and prospects. The purported misstatements and scheme relate to the Company’s inside sales initiative and
the Productions Graphics business based in France. The complaint seeks unspecified damages, interest, attorneys’ fees and
other costs. The Company and individual defendants dispute the claims and intend to vigorously defend the matter. On September
29, 2014, the Company and individual defendants filed a motion to dismiss the complaint for failure to state a claim, and this
motion is currently pending. On December 12, 2014, the Company received a derivative demand letter on behalf of Tom Turberg, a
purported stockholder, demanding that the Company’s Board of Directors investigate and take action on behalf of the Company
against the executive officers named in the Van Noppen action as well as certain past and current members of the Audit Committee
of the Board of Directors. The demand letter’s allegations relate to (i) the Company’s restatement of financial statements
for the fourth quarter of 2011 through the third quarter of 2013, (ii) the Company’s use of gross revenue accounting, (iii)
incentive compensation paid to executive officers in 2011 and 2012, (iv) allegations in the Van Noppen action, and (v) typographical
errors in the 2013 Form 10-K. The demand letter has been forwarded to the Company’s Board of Directors for its review and
handling. Any loss that the Company and individual defendants may incur as a result of these matters cannot be estimated.



21











InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|11. | Income Taxes
|--- | ------------



The Company accounts
for income taxes in accordance with ASC 740, Income Taxes, under which deferred assets and liabilities are recognized based
upon anticipated future tax consequences attributable to differences between financial statement carrying values of assets and
liabilities and their respective tax bases.



The provision for income
taxes consisted of the following components for the years ended December 31, 2012, 2013 and 2014:





|                             |  | Year Ended December 31, |           
|---------------------------- |  | ----------------------- | ----------
|                             |  | 2012                    |           
|Current                      |  |                         |           
|Federal                      |  | $                       | 5,364,247 
|State                        |  |                         | 703,380   
|Foreign                      |  |                         | 801,212   
|Total current                |  |                         | 6,868,839 
|Deferred                     |  |                         |           
|Federal                      |  |                         | 1,494,274 
|State                        |  |                         | 206,125   
|Foreign                      |  |                         | (2,695,617
|Total deferred               |  |                         | (995,218  
|Income tax expense (benefit) |  | $                       | 5,873,621 





The provision for income
taxes for the years ended December 31, 2012, 2013 and 2014 differs from the amount computed by applying the U.S. federal income
tax rate of 35% to pretax income because of the effect of the following items:





|                                                                           |  | Year Ended December 31, |           
|-------------------------------------------------------------------------- |  | ----------------------- | ----------
|                                                                           |  | 2012                    |           
|Tax expense at U.S. federal income tax rate                                |  | $                       | 15,633,675
|State income taxes, net of federal income tax effect                       |  |                         | 747,802   
|Effect of non-US operations                                                |  |                         | (1,294,217
|Foreign valuation allowances                                               |  |                         | -         
|Nontaxable contingent liability fair value changes and goodwill impairment |  |                         | (8,737,329
|Research and development credit                                            |  |                         | -         
|199 Domestic production activities deduction                               |  |                         | (141,376  
|Nondeductible (benefit) and other                                          |  |                         | (334,934  
|Income tax expense (benefit)                                               |  | $                       | 5,873,621 





22











InnerWorkings, Inc. and subsidiaries



Notes to Consolidated Financial Statements



|11. | Income Taxes (Continued)
|--- | ------------------------





Deferred income taxes
reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax return reporting purposes. At December 31, 2013 and 2014, the Company’s deferred
tax assets and liabilities consisted of the following:







|                                                                             |  | December 31, |            
|---------------------------------------------------------------------------- |  | ------------ | -----------
|                                                                             |  | 2013         |            
|Current deferred tax assets:                                                 |  |              |            
|Reserves and allowances not currently deductible                             |  | $            | 1,452,133  
|Other                                                                        |  |              | 19,561     
|Total current deferred tax assets                                            |  |              | 1,471,694  
|Noncurrent deferred tax assets:                                              |  |              |            
|Income tax basis in excess of financial statement basis in intangible assets |  |              | 6,140,517  
|Deductible stock-based compensation                                          |  |              | 3,974,354  
|Net operating loss carryforward                                              |  |              | 10,002,615 
|Tax credit carryforwards                                                     |  |              | 1,353,589  
|Other                                                                        |  |              | 46,303     
|                                                                             |  |              | 21,517,378 
|Valuation allowance                                                          |  |              | (762,123   
|Total noncurrent deferred tax assets                                         |  |              | 20,755,255 
|Total deferred tax assets                                                    |  |              | 22,226,949 
|                                                                             |  |              |            
|Total current deferred tax liability:                                        |  |              |            
|Prepaid & other expenses                                                     |  |              | (352,361   
|Total current deferred tax liability                                         |  |              | (352,361   
|Noncurrent deferred tax liabilities:                                         |  |              |            
|Fixed assets                                                                 |  |              | (5,085,865 
|Intangible assets                                                            |  |              | (22,411,410
|Total noncurrent deferred tax liabilities                                    |  |              | (27,497,275
|Total deferred tax liabilities                                               |  |              | (27,849,636
|Net deferred tax liability                                                   |  | $            | (5,622,687 
|                                                                             |  |              |            
|Net current deferred tax asset                                               |  | $            | 1,119,333  
|Net noncurrent deferred tax liability                                        |  |              | (6,742,020 
|Net deferred tax liability                                                   |  | $            | (5,622,687 







23











InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|11. | Income Taxes (Continued)
|--- | ------------------------





The realizability of
deferred income tax assets is based on a more likely than not standard. If it is determined that it is more likely than not that
deferred income tax assets will not be realized, a valuation allowance must be established against the deferred income tax assets.
Realization of deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for
a valuation allowance the Company considers historical, as well as, future projected taxable income along with other positive and
negative evidence in assessing the realizability of its deferred tax assets.



For the years ended
December 31, 2013 and 2014, the Company recorded net increases in its valuation allowances of $0.6 million and $0.8 million, respectively.





As of December 31, 2014,
the Company has gross federal and state net operating loss (“NOLs”) carryforwards of $20.5 million and $16.5 million,
respectively. The federal carryovers begin to expire in 2025, and the state carryovers begin to expire in 2022. Section 382 of
the Internal Revenue Code imposes an annual limitation on the utilization of net operating loss carryforwards related to acquired
corporations based on a statutory rate of return (usually the “applicable federal funds rate” as defined in the Internal
Revenue Code) and the value of the corporation at the time of a “change in ownership” as defined by Section 382. The
Company’s total federal NOL as of December 31, 2014 includes $2.0 million of NOLs from acquired corporations. These acquired
NOLs have an annual limitation under Section 382 of the Internal Revenue Code of $0.2 million.





As of December 31, 2014,
the Company had gross NOLs in France, Italy, Chile and Brazil of $17.1 million, $1.4 million, $2.7 million and $0.5 million, respectively,
which have an indefinite carryover period.



As of December 31, 2014,
the Company had gross federal and state research and development credit carryforwards of approximately $1.2 million and $0.5 million,
respectively. The federal carryovers begin to expire in 2031, and the state carryovers begin to expire in 2015.



As a result of certain
realization requirements of ASC 718, Stock-Based Compensation, the Company has not recorded certain deferred tax assets
that arose directly from tax deductions related to equity compensation that are greater than the compensation recognized for financial
reporting. As of December 31, 2014, the Company has $13.4 million and $11.4 million in federal and state tax deductions, respectively,
related to these stock option exercises which have not been recorded but are available to reduce taxable income in future periods.
These deductions will be recorded to additional paid in capital in the period in which they are realized.







The Company's intention
is to permanently reinvest the undistributed earnings of its foreign subsidiaries in accordance with ASC 740.  Deferred income
taxes were not calculated on undistributed earnings of foreign subsidiaries, which were $3.1 million and $8.9 million at
December 31, 2013 and 2014, respectively. Determination of the amount of unrecognized deferred tax liability on the undistributed
earnings considered permanently reinvested is not practicable.  If the undistributed earnings were to be remitted to the Company,
foreign tax credits would be available to reduce any U.S. tax due upon repatriation.



The
Company's income (loss) before taxes on foreign operations was $23.8 million, $(13.8) million and $15.4 million for the years ended
December 31, 2012, 2013 and 2014, respectively.



24









InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|12. | Fair Value Measurement
|--- | ----------------------



ASC 820 includes a fair
value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures.
The fair value hierarchy is based on observable or unobservable inputs to valuation techniques that are used to measure fair value.
Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained
from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions.



The fair value hierarchy
consists of the following three levels:



| | • | Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.
| | - | ----------------------------------------------------------------------------------------



| | • | Level 2: Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Level 3: Inputs that are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.
| | - | -------------------------------------------------------------------------------------------------------------------------------------



The Company's potential
contingent consideration payments relating to acquisitions occurring subsequent to January 1, 2009 are its only Level 3 liabilities
as of December 31, 2013 and 2014.  The fair value of the liabilities determined by this analysis is primarily driven by the
probability of reaching the performance measures required by the purchase agreements and the associated discount rate.  Probabilities
are estimated by reviewing financial forecasts and assessing the likelihood of reaching the required performance measures based
on factors specific to each acquisition as well as the Company’s historical experience with similar arrangements. If an acquisition
reaches the required performance measure, the estimated probability would be increased to 100%, and if the measure is not reached,
the probability would be reduced to reflect the amount earned, if any, depending on the terms of the agreement. Discount rates
are estimated by using the local government bond yields plus the Company’s credit spread. A one percentage point increase
in the discount rate across all contingent consideration liabilities would result in a decrease to the fair value of approximately
$0.5 million.



The following tables
set forth the Company’s financial assets and financial liabilities measured at fair value on a recurring basis and the basis
of measurement at December 31, 2013 and 2014, respectively:



|At December 31, 2013     |  | Total Fair Value Measurement |             |   | Quoted Prices in Active Markets for Identical Assets (Level 1) |   |         | Significant Other
    Observable Inputs 
(Level 2) |  |   | Significant
    Unobservable Inputs (Level 3) | 
|------------------------ |  | ---------------------------- | ----------- | - | -------------------------------------------------------------- | - | ------- | -------------------------------------------------- |  | - | --------------------------------------------- | 
|Assets:                  |  |                              |             |   |                                                                |   |         |                                                    |  |   |                                               | 
|Money market funds(1)    |  | $                            | 667,122     |   |                                                                | $ | 667,122 |                                                    |  | $ | -                                             | 
|Liabilities:             |  |                              |             |   |                                                                |   |         |                                                    |  |   |                                               | 
|Contingent consideration |  | $                            | (87,332,461 | ) |                                                                | $ | -       |                                                    |  | $ | -                                             | 



|At December 31, 2014     |  | Total Fair Value Measurement |             |   | Quoted Prices in Active Markets for Identical Assets (Level 1) |   |         | Significant Other
    Observable Inputs 
(Level 2) |  |   | Significant Unobservable Inputs (Level 3) | 
|------------------------ |  | ---------------------------- | ----------- | - | -------------------------------------------------------------- | - | ------- | -------------------------------------------------- |  | - | ----------------------------------------- | 
|Assets:                  |  |                              |             |   |                                                                |   |         |                                                    |  |   |                                           | 
|Money market funds(1)    |  | $                            | 667,127     |   |                                                                | $ | 667,127 |                                                    |  | $ | -                                         | 
|Liabilities:             |  |                              |             |   |                                                                |   |         |                                                    |  |   |                                           | 
|Contingent consideration |  | $                            | (32,582,574 | ) |                                                                | $ | -       |                                                    |  | $ | -                                         | 



| | (1) | Included in cash and cash equivalents on the balance sheet.
| | --- | -----------------------------------------------------------



25











InnerWorkings, Inc. and subsidiaries



Notes to Consolidated Financial Statements



|12. | Fair Value Measurement (Continued)
|--- | ----------------------------------



The following table
provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable
inputs (Level 3):



|                                                |  | Fair Value Measurements at Reporting Date Using Significant Unobservable Inputs (Level 3) |            
|----------------------------------------------- |  | ----------------------------------------------------------------------------------------- | -----------
|                                                |  | Contingent Consideration                                                                  |            
|Balance at December 31, 2012                    |  | $                                                                                         | (54,497,824
|Contingent consideration from 2013 acquisitions |  |                                                                                           | (68,165,674
|Contingent consideration payments paid in cash  |  |                                                                                           | 4,297,803  
|Contingent consideration payments paid in stock |  |                                                                                           | 614,216    
|Change in fair value (1)                        |  |                                                                                           | 31,330,567 
|Foreign exchange impact (2)                     |  |                                                                                           | (911,549   
|                                                |  |                                                                                           |            
|Balance as of December 31, 2013                 |  |                                                                                           | (87,332,461
|Contingent consideration payments paid in cash  |  |                                                                                           | 5,768,591  
|Contingent consideration payments paid in stock |  |                                                                                           | 9,132,682  
|Change in fair value (1)                        |  |                                                                                           | 37,873,588 
|Reclass to Due to seller                        |  |                                                                                           | 402,499    
|Foreign exchange impact (2)                     |  |                                                                                           | 1,572,527  
|                                                |  |                                                                                           |            
|Balance as of December 31, 2014                 |  | $                                                                                         | (32,582,574



| | (1) | Adjustments to original contingent consideration obligations recorded were the result of using revised
financial forecasts and updated fair value measurements. These changes are recognized within operating expenses on the consolidated
statements of operations.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Changes in the contingent consideration liability which are caused by foreign exchange rate fluctuations
are recognized in other comprehensive income.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------





26











InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|13. | Earnings Per Share
|--- | ------------------



Basic earnings per common
share is calculated by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share
is calculated by dividing net income by the weighted average shares outstanding plus share equivalents that would arise from the
exercise of stock options and vesting of restricted common shares. For the years ended December 31, 2012, 2013 and 2014, respectively,
1,099,604, 4,288,084 and 2,427,089 options and restricted common shares were excluded from the calculation as these options and
restricted common shares were anti-dilutive.



The computation of basic
and diluted earnings per common share for the years ended December 31, 2012, 2013, and 2014, is as follows:





|                                                                             |  | Year Ended December 31, |           
|---------------------------------------------------------------------------- |  | ----------------------- | ----------
|                                                                             |  | 2012                    |           
|Numerator:                                                                   |  |                         |           
|Net income (loss)                                                            |  | $                       | 38,794,022
|                                                                             |  |                         |           
|Denominator:                                                                 |  |                         |           
|Denominator for basic earnings per share—weighted-average shares outstanding |  |                         | 48,811,218
|Effect of dilutive securities:                                               |  |                         |           
|Employee stock options and restricted common shares                          |  |                         | 2,411,260 
|Contingently issuable shares                                                 |  |                         | 17,598    
|                                                                             |  |                         |           
|Denominator for dilutive earnings per share                                  |  |                         | 51,240,076
|                                                                             |  |                         |           
|Basic earnings (loss) per share                                              |  | $                       | 0.79      
|Diluted earnings (loss) per share                                            |  | $                       | 0.76      





|14. | Stock-Based Compensation Plans
|--- | ------------------------------



In 2006, the Company
adopted the 2006 Stock Incentive Plan (the Plan). Upon adoption, all previously existing plans were merged into the Plan and ceased
to separately exist. The Plan was amended and restated effective June 2014 resulting in an increase in the maximum number of shares
of common stock that may be issued under the Plan by 2,200,000, from 5,650,000 to 7,850,000. The Company’s policy is to issue
shares resulting from the exercise of stock options and conversion of restricted stock as new shares.





The Company recorded
$6.2 million, $4.7 million and $5.4 million in compensation expense related to stock-based compensation, for the years ended December
31, 2012, 2013 and 2014, respectively. All stock-based compensation expense is recorded net of an estimated forfeiture rate and
adjusted to reflect actual forfeiture activity. The estimated forfeiture rates applied as of December 31, 2014 ranged from 7.0%
to 8.0% for various types of employees. The Company recorded $2.0 million, $0.5 million and $0.5 million of additional stock-based
compensation expense for the years ended December 31, 2012, 2013 and 2014, respectively, for awards vested which exceeded the expense
recorded using the estimated forfeiture rate.







27









InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|14. | Stock-Based Compensation Plans (Continued)
|--- | ------------------------------------------



Stock Options





Eligible employees receive
non-qualified stock options as a portion of their total compensation. The options vest over various time periods depending upon
the grant, but generally vest ratably over a four to five year service period. Vested options may be exercised and converted to
one share of the Company’s common stock in exchange for the exercise price which is generally equal to the share price on
the grant date. The Company measures the compensation cost based on the Black-Scholes option valuation model at the grant date.
The stock-based compensation expense related to stock options for the years ended December 31, 2012, 2013 and 2014 was $3.0 million,
$2.1 million and $1.7 million, respectively.







A summary of stock option
activity for the years ended December 31, 2012, 2013 and 2014 is as follows:



|                                    |  | Outstanding Options |            |   | Weighted- Average 
Exercise Price |   |       | Aggregate Intrinsic
    Value | 
|----------------------------------- |  | ------------------- | ---------- | - | --------------------------------- | - | ----- | ----------------------------- | 
|Outstanding at December 31, 2011    |  |                     | 5,950,481  |   |                                   | $ | 5.07  |                               | 
|Granted                             |  |                     | 538,933    |   |                                   |   | 12.15 |                               | 
|Exercised                           |  |                     | (2,474,713 | ) |                                   |   | 2.23  |                               | 
|Forfeited                           |  |                     | (93,519    | ) |                                   |   | 7.35  |                               | 
|                                    |  |                     |            |   |                                   |   |       |                               | 
|Outstanding at December 31, 2012    |  |                     | 3,921,182  |   |                                   |   | 5.07  |                               | 
|Granted                             |  |                     | 226,971    |   |                                   |   | 14.60 |                               | 
|Exercised                           |  |                     | (415,480   | ) |                                   |   | 4.83  |                               | 
|Forfeited                           |  |                     | (179,139   | ) |                                   |   | 8.97  |                               | 
|                                    |  |                     |            |   |                                   |   |       |                               | 
|Outstanding at December 31, 2013    |  |                     | 3,553,534  |   |                                   |   | 8.52  |                               | 
|Granted                             |  |                     | 778,906    |   |                                   |   | 7.23  |                               | 
|Exercised                           |  |                     | (161,486   | ) |                                   |   | 4.82  |                               | 
|Forfeited                           |  |                     | (125,370   | ) |                                   |   | 4.11  |                               | 
|                                    |  |                     |            |   |                                   |   |       |                               | 
|Outstanding at December 31, 2014    |  |                     | 4,045,584  |   |                                   | $ | 8.35  |                               | 
|                                    |  |                     |            |   |                                   |   |       |                               | 
|Options vested at December 31, 2014 |  |                     | 2,702,753  |   |                                   | $ | 7.95  |                               | 



The weighted-average
fair values and ranges of exercise prices for stock options granted during the years ended December 31, 2012, 2013 and 2014, which
vest ratably from one to five years, are as follows:



|     |  | Options Granted |         |  | Weighted-Average Fair Value |   |      | Exercise Prices
|---- |  | --------------- | ------- |  | --------------------------- | - | ---- | ---------------
|2012 |  |                 | 538,933 |  |                             | $ | 5.99 |                
|2013 |  |                 | 226,971 |  |                             |   | 5.58 |                
|2014 |  |                 | 778,906 |  |                             |   | 3.57 |                





Vested options totaled
2.5 million, 2.6 million and 2.7 million as of December 31, 2012, 2013 and 2014, respectively.





The aggregate intrinsic
value of options outstanding and exercisable represents the total pre-tax intrinsic value (the difference between the Company’s
closing stock price on the last trading day of each fiscal year and the exercise price, multiplied by the number of in-the-money
options) that would have been received by the option holders had all option holders exercised their options in 2012, 2013 and 2014,
respectively. These amounts change based on the fair market value of the Company’s stock which was $13.78, $7.79 and $7.79
on the last business day of the years ended December 31, 2012, 2013 and 2014, respectively.



28









InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|14. | Stock-Based Compensation Plans (Continued)
|--- | ------------------------------------------





The following assumptions
were utilized in the Black-Scholes valuation model for options granted in 2012, 2013 and 2014:







|                        | 2012       |   |  | 2013       |   |  | 2014       |  
|----------------------- | ---------- | - |  | ---------- | - |  | ---------- | -
|Dividend yield          | —          | % |  | —          | % |  | —          | %
|Risk-free interest rate | 1.03%-1.67 | % |  | 1.32%-1.41 | % |  | 1.32%-2.17 | %
|Expected life           | 6-7 years  |   |  | 6 years    |   |  | 6 years    |  
|Volatility              | 38.0%-47.5 | % |  | 38         | % |  | 38.0%-50.0 | %



Expected term is estimated
based on historical experience related to similar awards, giving consideration to the contractual terms of the stock-based awards,
vesting schedules and expectations of future employee behavior. The Company believes that its historical experience provides the
best estimate of future expected life. The risk-free interest rate is based on actual U.S. Treasury zero-coupon rates for bonds
commensurate with the expected term.  The expected volatility assumption is based on the historical volatility of the Company’s
common stock over a period commensurate with the expected term.



There was $3.9 million,
$2.9 million and $5.8 million of unrecognized compensation costs related to the stock options granted under the Plan as of December
31, 2012, 2013 and 2014, respectively. This cost was expected to be recognized over a weighted average period of 3.1, 2.6 and 2.4
years, respectively.



The following table
summarizes information about all stock options outstanding for the Company as of December 31, 2014:



|Options Outstanding |  | Options Vested     |          
|------------------- |  | ------------------ | ---------
|Exercise Price      |  | Number Outstanding |          
|$0.65 - $4.92       |  |                    | 662,258  
|$5.19 - $7.86       |  |                    | 1,730,266
|$8.07 - $11.97      |  |                    | 628,607  
|$12.10 - $16.41     |  |                    | 1,024,453
|                    |  |                    |          
|                    |  |                    | 4,045,584



Restricted Common Shares





Eligible employees receive
restricted common shares as a portion of their total compensation. The restricted common shares vest over various time periods
depending upon the grant, but generally vest from zero to five years and convert to common stock at the conclusion of the vesting
period. The Company measures the compensation cost based on the closing market price of the Company’s common stock at the
grant date. The stock-based compensation expense related to restricted common shares for the years ended December 31, 2012, 2013
and 2014 was $3.2 million, $2.6 million and $3.6 million, respectively.





29









InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|14. | Stock-Based Compensation Plans (Continued)
|--- | ------------------------------------------



A summary of restricted
share activity is as follows:



|                                                        |  | Outstanding  Restricted Common Shares |           |   | Weighted- Average Grant- Date Fair Value |  
|------------------------------------------------------- |  | ------------------------------------- | --------- | - | ---------------------------------------- | -
|Nonvested Restricted Common Shares at December 31, 2011 |  |                                       | 783,816   |   |                                          | $
|Granted                                                 |  |                                       | 306,296   |   |                                          |  
|Vested and transferred to unrestricted common stock     |  |                                       | (362,116  | ) |                                          |  
|Forfeited                                               |  |                                       | (35,864   | ) |                                          |  
|                                                        |  |                                       |           |   |                                          |  
|Nonvested Restricted Common Shares at December 31, 2012 |  |                                       | 692,132   |   |                                          |  
|Granted                                                 |  |                                       | 448,158   |   |                                          |  
|Vested and transferred to unrestricted common stock     |  |                                       | (278,461  | ) |                                          |  
|Forfeited                                               |  |                                       | (127,279  | ) |                                          |  
|                                                        |  |                                       |           |   |                                          |  
|Nonvested Restricted Common Shares at December 31, 2013 |  |                                       | 734,550   |   |                                          |  
|Granted                                                 |  |                                       | 736,238   |   |                                          |  
|Vested and transferred to unrestricted common stock     |  |                                       | (361,650  | ) |                                          |  
|Forfeited                                               |  |                                       | (19,077   | ) |                                          |  
|                                                        |  |                                       |           |   |                                          |  
|Nonvested Restricted Common Shares at December 31, 2014 |  |                                       | 1,090,061 |   |                                          | $



There was $3.6 million,
$4.5 million $8.9 of total unrecognized compensation costs related to the restricted common shares as of December 31, 2012, 2013
and 2014, respectively. This cost was expected to be recognized over a weighted average period of 2.8, 2.9 and 2.4 years, as of
December 31, 2012, 2013 and 2014, respectively.



|15. | Benefit Plans
|--- | -------------



The Company adopted
a 401(k) savings plan effective February 1, 2005, covering all of the Company’s employees upon completion of 90 days
of service. Employees may contribute a percentage of eligible compensation on both a before-tax basis and after-tax basis. The
Company has the right to make discretionary contributions to the plan. For the years ended December 31, 2012, 2013 and 2014, total
costs incurred from the Company’s contributions to the 401(k) plan were $0.5 million, $0.1 million and $1.0 million, respectively.



|16. | Related Party Transactions
|--- | --------------------------



Agreements and Services with Related
Parties



The Company provides
print procurement services to Arthur J. Gallagher & Co. J. Patrick Gallagher, Jr., a member of the Company’s Board of
Directors since August 2011, is the Chairman, President and Chief Executive Officer of Arthur J. Gallagher & Co. and has a
direct ownership interest in Arthur J. Gallagher & Co. The total amount billed for such print procurement services during the
years ended December 31, 2012, 2013 and 2014 was $0.6 million, $0.7 million and $1.7 million, respectively. Additionally, Arthur
J. Gallagher & Co. provides insurance brokerage and risk management services to the Company. As consideration for these services,
Arthur J. Gallagher & Co. billed the Company $0.4 million, $0.5 million and $0.6 million for the years ended December 31, 2012,
2013 and 2014, respectively. The net amounts payable to Arthur J. Gallagher & Co. as of December 31, 2013 and 2014 were immaterial.



30







InnerWorkings, Inc. and subsidiaries



Notes to Consolidated Financial Statements



|17. | Business Segments
|--- | -----------------



Segment information
is prepared on the same basis that our CEO, who is our chief operating decision maker (“CODM”), manages the segments,
evaluates financial results, and makes key operating decisions. The Company is organized and managed as three business segments:
North America, Latin America, and EMEA. The North America segment includes operations in the United States and Canada; the Latin
America segment includes operations in Mexico, South America and Central America; and the EMEA segment includes operations in the
United Kingdom, continental Europe, the Middle East, Africa and Asia. “Other” consists of intersegment eliminations,
shared service activities and unallocated corporate expenses. All transactions between segments are presented at their gross amounts
and eliminated through Other.



Management evaluates
the performance of its operating segments based on net revenues and Adjusted EBITDA, which is a non-GAAP financial measure. The
accounting policies of each of the operating segments are the same as those described in the summary of significant accounting
policies in Note 2. Adjusted EBITDA represents income from operations excluding depreciation and amortization, stock-based compensation
expense, income/expense related to changes in the fair value of contingent consideration liabilities and other items as described
below. Management does not evaluate the performance of its operating segments using asset measures. The identifiable assets by
segment disclosed in this note are those assets specifically identifiable within each segment and include cash, accounts receivable,
inventory, goodwill and intangible assets. Shared service assets are primarily comprised of short-term investments, capitalized
internal-use software and net property and equipment of the corporate headquarters.



The table below presents
financial information for our reportable operating segments and Other for the fiscal years noted (in thousands):



|                                 |  | North America |         |  | Latin America |   |         | EMEA |  |   | Other   |   |  | Total |        
|-------------------------------- |  | ------------- | ------- |  | ------------- | - | ------- | ---- |  | - | ------- | - |  | ----- | -------
|Fiscal 2014:                     |  |               |         |  |               |   |         |      |  |   |         |   |  |       |        
|Net revenues from third parties  |  | $             | 688,942 |  |               | $ | 99,734  |      |  | $ | 211,457 |   |  | $     | -      
|Net revenues from other segments |  |               | 48      |  |               |   | 429     |      |  |   | 5,160   |   |  |       | (5,637 
|Total net revenues               |  |               | 688,990 |  |               |   | 100,163 |      |  |   | 216,617 |   |  |       | (5,637 
|Adjusted EBITDA (1)              |  |               | 57,662  |  |               |   | 5,273   |      |  |   | 5,893   |   |  |       | (25,990
|Total assets                     |  |               | 443,530 |  |               |   | 30,488  |      |  |   | 135,257 |   |  |       | 21,975 
|Fiscal 2013:                     |  |               |         |  |               |   |         |      |  |   |         |   |  |       |        
|Net revenues from third parties  |  |               | 657,989 |  |               |   | 88,016  |      |  |   | 144,955 |   |  |       | -      
|Net revenues from other segments |  |               | 33      |  |               |   | 1,270   |      |  |   | 75      |   |  |       | (1,378 
|Total net revenues               |  |               | 658,022 |  |               |   | 89,286  |      |  |   | 145,030 |   |  |       | (1,378 
|Adjusted EBITDA (1)              |  |               | 51,873  |  |               |   | 3,098   |      |  |   | 764     |   |  |       | (28,834
|Total assets                     |  |               | 431,562 |  |               |   | 29,841  |      |  |   | 119,531 |   |  |       | 33,733 
|Fiscal 2012:                     |  |               |         |  |               |   |         |      |  |   |         |   |  |       |        
|Net revenues from third parties  |  |               | 648,732 |  |               |   | 57,575  |      |  |   | 83,278  |   |  |       | -      
|Net revenues from other segments |  |               | 68      |  |               |   | 1,625   |      |  |   | 27      |   |  |       | (1,720 
|Total net revenues               |  |               | 648,800 |  |               |   | 59,200  |      |  |   | 83,305  |   |  |       | (1,720 
|Adjusted EBITDA (1)              |  |               | 61,890  |  |               |   | 1,745   |      |  |   | (2,664  | ) |  |       | (23,754
|Total assets                     |  |               | 330,159 |  |               |   | 23,219  |      |  |   | 139,466 |   |  |       | 21,936 





|(1) | Adjusted EBITDA, which represents income from operations with the addition of depreciation and amortization, stock-based compensation expense, income/expense related to changes in the fair value of contingent consideration liabilities, goodwill and intangible asset impairment charges, restructuring and other charges and legal fees from patent infringement defense, is considered a non-GAAP financial measure under SEC regulations. Income from operations is the most directly comparable financial measure calculated in accordance with GAAP. The Company presents this measure as supplemental information to help investors better understand trends in its business results over time. The Company's management team uses Adjusted EBITDA to evaluate the performance of the business. Adjusted EBITDA is not equivalent to any measure of performance required to be reported under GAAP, nor should this data be considered an indicator of the Company's overall financial performance and liquidity. Moreover, the Adjusted EBITDA definition the Company uses may not be comparable to similarly titled measures reported by other companies.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





31







InnerWorkings, Inc. and subsidiaries





Notes to Consolidated Financial Statements



|17. | Business Segments (Continued)
|--- | -----------------------------



The table below reconciles the total of
the reportable segments' Adjusted EBITDA and the Adjusted EBITDA included in Other to consolidated income before income taxes (in
thousands):



|                                                                        |  | Year Ended December 31, |        
|----------------------------------------------------------------------- |  | ----------------------- | -------
|                                                                        |  | 2012                    |        
|Adjusted EBITDA                                                         |  | $                       | 37,217 
|Depreciation and amortization                                           |  |                         | (10,791
|Stock-based compensation                                                |  |                         | (6,193 
|Change in fair value of contingent consideration                        |  |                         | 27,689 
|Preference claim charge (1)                                             |  |                         | (1,099 
|VAT settlement charge (2)                                               |  |                         | (1,485 
|Payments to former owner of Productions Graphics, net of cash recovered |  |                         | 411    
|Goodwill impairment charge                                              |  |                         | -      
|Intangible asset impairment charges                                     |  |                         | -      
|Restructuring and other charges                                         |  |                         | -      
|Legal fees in connection with patent infringement                       |  |                         | -      
|Restatement-related professional fees                                   |  |                         | -      
|Secured asset reserve                                                   |  |                         | -      
|Total other expense                                                     |  |                         | (1,081 
|                                                                        |  |                         |        
|Income (loss) before income taxes                                       |  | $                       | 44,668 



| | (1) | In the fourth quarter of 2012, the Company recognized a $1.1 million charge related to the settlement of a lawsuit filed by
the Trustee of the Circuit City Liquidating Trust (the “Trust”) in connection with the Circuit City Stores, Inc. bankruptcy
proceedings. A settlement agreement was entered in January 2013 with the Trust resolving this preference claim as well the administrative
and general unsecured claims against the Trust.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | In the fourth quarter of 2012, the Company accrued a loss reserve of $1.5 million relating to a VAT assessment issued by Her
Majesty’s Revenue and Customs (“HMRC”) InnerWorkings Europe Limited (formerly Etrinsic). In July 2013, the Company
finalized settlement with the HMRC and received a refund of the amounts paid to HMRC in July 2012 less the settlement amount which
was not materially different than the estimated reserve.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





The Company had long-lived assets, consisting
of net property and equipment, in the United States of $13.9 million, $18.1 million and $21.5 million at December 31, 2012, 2013
and 2014, respectively.  Long-lived assets in foreign countries were $3.2 million, $5.6 million and $8.3 million at December
31, 2012, 2013 and 2014, respectively.





32









InnerWorkings, Inc. and subsidiaries



Notes to Consolidated Financial Statements





|18. | Subsequent Event
|--- | ----------------





On February 12, 2015, the Company announced that its Board of Directors approved a share repurchase program
providing it authorization to repurchase up to an aggregate of $20 million of its common stock through open market and privately
negotiated transactions over a two-year period. The timing and amount of any share repurchases will be determined based on market
conditions, share price and other factors, and the program may be discontinued or suspended at any time. Repurchases will be made
in compliance with SEC rules and other legal requirements





|19. | Quarterly Financial Data (Unaudited)
|--- | ------------------------------------







The tables below are
a condensed summary of the Company’s unaudited quarterly statements of operations and quarterly earnings per share data for
the years ended December 31, 2013 and 2014 (in thousands):







|                             |  | Year Ended December 31, 2014          |        
|---------------------------- |  | ------------------------------------- | -------
|                             |  | First                                 |        
|                             |  | Quarter                               |        
|                             |  | (In thousands, except per share data) |        
|Revenue                      |  | $                                     | 241,490
|Gross profit                 |  |                                       | 54,584 
|Net income (loss)            |  |                                       | 289    
|Net income (loss) per share: |  |                                       |        
|Basic                        |  | $                                     | 0.01   
|Diluted                      |  | $                                     | 0.01   



|                             |  | Year Ended December 31, 2013          |        
|---------------------------- |  | ------------------------------------- | -------
|                             |  | First                                 |        
|                             |  | Quarter(1)                            |        
|                             |  | (In thousands, except per share data) |        
|Revenue                      |  | $                                     | 204,577
|Gross profit                 |  |                                       | 46,350 
|Net income (loss)            |  |                                       | (2,801 
|Net income (loss) per share: |  |                                       |        
|Basic                        |  | $                                     | (0.06  
|Diluted                      |  | $                                     | (0.06  



| | (1) | The Company acquired DB Studios, Inc. in March 2013. Financial results for this acquisition are included in the Consolidated
Financial Statements beginning in March 2013.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The Company made acquisitions during the second quarter of 2013 which were not material to the Company’s operations.
Financial results for these acquisitions are included in the Consolidated Financial Statements beginning at the respective acquisition
dates.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The Company acquired U.S. and international businesses of EYELEVEL in July 2013 as well as one other company which was not
material to the Company’s operations. Financial results for these acquisitions are included in the Consolidated Financial
Statements beginning at the respective acquisition dates.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





33







SCHEDULE II—VALUATION AND QUALIFYING
ACCOUNTS



Valuation and Qualifying Accounts



|Description                                                         |  | Balance at Beginning of  Period |           |  | Charged to Expense |   |           | (Uncollectible
    Accounts Written Off,  Net of 
Recoveries) |  |   | Other      |   |  | Balance at End of Period |  
|------------------------------------------------------------------- |  | ------------------------------- | --------- |  | ------------------ | - | --------- | ------------------------------------------------------------- |  | - | ---------- | - |  | ------------------------ | -
|Fiscal year ended December 31, 2014 Allowance for doubtful accounts |  | $                               | 2,128,790 |  |                    | $ | 1,983,928 |                                                               |  | $ | (1,427,221 | ) |  | $                        | -
|Fiscal year ended December 31, 2013 Allowance for doubtful accounts |  | $                               | 1,553,926 |  |                    | $ | 1,285,326 |                                                               |  | $ | (710,462   | ) |  | $                        | -
|Fiscal year ended December 31, 2012 Allowance for doubtful accounts |  | $                               | 3,293,241 |  |                    | $ | 1,681,942 |                                                               |  | $ | (3,421,257 | ) |  | $                        | -



34







PART IV



|Item 15. | Exhibits, Financial Statement Schedules
|-------- | ---------------------------------------



(a) (1)  Financial
Statements: Reference is made to the Index to Financial Statements and Financial Statement Schedule
in the section entitled “Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report
on Form 10-K.



(2) Financial Statement
Schedule: Reference is made to the Index to Financial Statements and Schedule II - Valuation and Qualifying
Accounts in the section entitled “Financial Statements and Supplementary Data” in Part II, Item 8 of this
Annual Report on Form 10-K. Schedules not listed above are omitted because they are not required or because the required information
is given in the consolidated financial statements or notes thereto.



(3) Exhibits:
Exhibits are as set forth in the section entitled “Exhibit Index” which follows the section entitled “Signatures”
in this Annual Report on Form 10-K. Certain of the exhibits listed in the Exhibit Index have been previously filed with the
Securities and Exchange Commission pursuant to the requirements of the Securities Act of 1933, as amended, and the Securities Exchange
Act of 1934, as amended. Such exhibits are identified by the parenthetical references following the listing of each such exhibit
and are incorporated by reference.



Exhibits which are incorporated
herein by reference can be inspected and copied at the public reference rooms maintained by the SEC in Washington, D.C., New York,
New York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. SEC
filings are also available to the public from commercial document retrieval services and at the Web site maintained by the SEC
at http://www.sec.gov .



35







SIGNATURES



Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.



|               | INNERWORKINGS, INC.
|-------------- | -------------------
|March 10, 2016 |                    
|               | By:                
|               |                    
|               |                    





36







EXHIBIT
INDEX



|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Second Amended and Restated Certificate of Incorporation.(1)                                                                                                                                                                                                                                                    
|            |  |                                                                                                                                                                                                                                                                                                                 
|3.2         |  | Amended and Restated By-Laws.(1)                                                                                                                                                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                                 
|4.1         |  | Specimen Common Stock Certificate.(2)                                                                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.1        |  | InnerWorkings, LLC 2004 Unit Option Plan.(2)†                                                                                                                                                                                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.2        |  | InnerWorkings, Inc. 2006 Stock Incentive Plan, as amended and restated effective June 13, 2014.(4)†                                                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.3        |  | Form of InnerWorkings Restricted Stock Award Agreement.(3)†                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.4        |  | Form of Stock Option Award Agreement.(1)†                                                                                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.5        |  | InnerWorkings, Inc. Annual Incentive Plan.(2)†                                                                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.6        |  | Stock Option Grant Agreement dated October 1, 2005 between InnerWorkings, Inc. and Jack M. Greenberg.(3)†                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.7        |  | Form of Indemnification Agreement.(2)                                                                                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.8        |  | Amended and Restated Employment Agreement entered into as of December 19, 2013 by and between Eric D. Belcher and InnerWorkings, Inc.(5)†                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.9        |  | Amended and Restated Employment Agreement effective as of April 30, 2012 by and between Joseph Busky and InnerWorkings, Inc.(6)†                                                                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.10       |  | Credit Agreement, dated as of August 2, 2010, by and among InnerWorkings, Inc., as borrower, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A., as syndication agent, PNC Bank, National Association, as documentation agent, and the other lenders party thereto. (7)                  
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.11       |  | First Amendment to Credit Agreement, dated as of April 20, 2012, by and among InnerWorkings, Inc., as borrower, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A., as syndication agent, PNC Bank, National Association, as documentation agent, and the other lenders party hereto. (8)
|            |  |                                                                                                                                                                                                                                                                                                                 
|10.12       |  | Fourth Amendment to Credit Agreement, dated as of September 25, 2014, by and among InnerWorkings, Inc.,
the lenders party thereto and Bank of America, N.A., as Administrative Agent. (9)                                                                                                                       



37







|Exhibit No. |  | Description                                                                                                                                                                   
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13       |  | Employment Agreement entered into as of September 6, 2011 by and between InnerWorkings, Inc. and John Eisel.(9)†                                                              
|            |  |                                                                                                                                                                               
|21.1        |  | Subsidiaries of InnerWorkings, Inc.(10)                                                                                                                                       
|            |  |                                                                                                                                                                               
|23.1        |  | Consent of Ernst & Young LLP.                                                                                                                                                 
|            |  |                                                                                                                                                                               
|31.1        |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act 2002.                                                                              
|            |  |                                                                                                                                                                               
|31.2        |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                           
|            |  |                                                                                                                                                                               
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|            |  |                                                                                                                                                                               



| | (1)  | Incorporated by reference to Form S-1 Registration Statement (File No. 333-139811).        | 
| | ---- | ------------------------------------------------------------------------------------------ | 
| | (2)  | Incorporated by reference to Form S-1 Registration Statement (File No. 333-133950).        | 
| | (3)  | Incorporated by reference to Current Report on Form 8-K filed on January 28, 2008.         | 
| | (4)  | Incorporated by reference to 2014 Proxy Statement on Schedule 14A filed on April 24, 2014. | 
| | (5)  | Incorporated by reference to Current Report on Form 8-K filed on December 20, 2013.        | 
| | (6)  | Incorporated by reference to Current Report on Form 8-K filed on May 3, 2012.              | 
| | (7)  | Incorporated by reference to Quarterly Report on Form 10-Q filed on August 6, 2010.        | 
| | (8)  | Incorporated by reference to Current Report on Form 8-K filed on April 26, 2012.           | 
| | (9)  | Incorporated by reference to Current Report on Form 8-K filed on October 1, 2014.          | 
| | (10) | Incorporated by reference to Annual Report on Form 10-K filed on March 6,
    2015.        | 
| | †    | Management contract or compensatory plan or arrangement of the Company.                    | 
| |      |                                                                                            | 



38