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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 30, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission File Number:
    000-27617
  THE MANAGEMENT NETWORK GROUP,
    INC.
 (Exact name of registrant as
    specified in its charter)
  DELAWARE

48-1129619(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    identification number)   7300 COLLEGE BOULEVARD,
 SUITE 302, OVERLAND PARK, KANSAS 66210
 (Address of principal executive
    offices) (Zip Code)
  REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE:
 (913) 345-9315
 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
    ACT:
  Title of Each Class

Name of Each Exchange on Which RegisteredCOMMON STOCK, $.001 PAR VALUE PER
    SHARE

The NASDAQ STOCK MARKET, LLC   SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
    ACT:
 NONE.
  o þ
  o þ
  o þ Form 10-K Form 10-Q
  Regulation S-K Form 10-K Form 10-K. o
  non-accelerated Rule 12-b o o þ
  Rule 12b-2 o þ
    DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




---



##### 



THE
    MANAGEMENT NETWORK GROUP, INC.
  FORM 10-K
  
  TABLE OF
    CONTENTS
  PagePART IItem 1.


Business


5Item 1A.


Risk
    Factors


12Item 1B.


Unresolved Staff
    Comments


22Item 2.


Properties


22Item 3.


Legal
    Proceedings


22Item 4.


Submission of
    Matters to a Vote of Security Holders


23PART IIItem 5.


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


23Item 6.


Selected
    Consolidated Financial Data


27Item 7.


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


29Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


43Item 8.


Consolidated
    Financial Statements


44Item 9.


Changes in and
    Disagreements With Accountants on Accounting and Financial
    Disclosure


76Item 9A.


Controls and
    Procedures


76Item 9A(T).


Controls and
    Procedures


78Item 9B.


Other
    Information


78PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance


78Item 11.


Executive
    Compensation


78Item 12.


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


78Item 13.


Certain
    Relationships, Related Transactions and Director
    Independence


78Item 14.


Principal
    Accountant Fees and Services


79PART IVItem 15.


Exhibits and
    Financial Statement Schedules


79Third Amended Lease AgreementThird Additional Space Commencement Date AgreementList of SubsidiariesConsent of Independent Registered Public Accounting FirmCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certifications Furnished Pursuant to Section 906   2




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EXPLANATORY
    NOTE
  Form 10-K Form 10-K),
  Form 10-Q
    Form 10-Q Form 10-Q) Form 10-K. Form 10-Q, Form 10-Q/A Forms 10-Q/A). Forms 10-Q/A, Forms 10-Q/A Forms 10-Q/A, Form 10-K Form 10-Q
 3




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##### Table of Contents



Special
    Committees Independent Investigation
          Measurement
    Date Analysis
      de facto
 4




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Form 10-K
 PART I  DISCLOSURE
    REGARDING FORWARD LOOKING STATEMENTS
  Cautionary
    statement regarding forward-looking information
  Form 10-K
  Website
    Access to Exchange Acts Reports
  Form 10-K, Form 10-Q, Form 8-K,
  ITEM 1.
    BUSINESS    GENERAL
  Form 10-K
 5




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tm
     6




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MARKET
    OVERVIEW
     7




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##### Table of Contents



BUSINESS
    STRATEGY
    -
    Develop and evolve existing offerings, solutions and thought
    leadership
  end-to-end and/or
  -
    Continue to build the TMNG Global brand
   8




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##### Table of Contents



end-to-end end-to-end
  -
    Focused and effective recruitment and retention
      -
    Enhancing our global presence
    -
    Leveraging knowledge and skills through partner
    channels
    SERVICES
    -
    Strategy and Business Case Development
   9




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##### Table of Contents



-
    Product Development and Management
    -
    Customer Acquisition and Retention
  e-marketing,
  -
    Revenue and Cost Management
  tm tm . tm
  -
    Program Management, Business and Operations Process Redesign and
    Reengineering
    -
    Corporate Investment Services
  tm tm e-commerce tm tm
 10




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- TMNG
    Resources
    COMPETITION
      EMPLOYEES
     11




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BUSINESS
    SEGMENTS
    MAJOR
    CUSTOMERS
    INTELLECTUAL
    PROPERTY
      SEASONALITY
    ITEM 1A.
    RISK
    FACTORS  Form 10-K
 12




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RISKS
    RELATED TO OUR STOCK OPTION PRACTICES AND RELATED
    ACCOUNTING
  The
    matters relating to the investigation by the Special Committee
    of the Board of Directors and the restatement of the
    Companys consolidated financial statements may result in
    litigation and governmental enforcement actions.
  Form 10-Q Form 10-K
    de facto
  Form 10-K Form 10-Q Form 10-Q/A
     13




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We
    have identified a material weakness in our disclosure controls
    and procedures and internal controls.
    Planned
    improvements in our corporate governance, equity compensation
    practices and internal controls may not be
    effective.
    RISKS
    RELATED TO OUR BUSINESS
  Our
    business is dependent on conditions in the communications
    industry, which may effect the demand for our
    services.
  and/or
  IP-centric
  We
    have experienced losses from operations, negative cash flow and
    reductions in our cash reserves.
   14




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We are
    dependent on a limited number of large clients for a major
    portion of our revenues, and the loss of a major client or the
    cancellation of a significant contract could substantially
    reduce revenues and harm our business and
    liquidity.
    Our
    revenues and operating results may fluctuate significantly from
    quarter-to-quarter,
    which could adversely affect our stock price.
  quarter-to-quarter
  
    developments in the communications industry and economic
    conditions;
    fluctuations in the value of foreign currencies versus the
    U.S. dollar;
    global economic, industry and political conditions and related
    risks, including acts of terrorism;
    the beginning and ending of significant contracts during a
    quarter;
    the size and scope of assignments;
    the potential loss of key clients or cancellation or deferral of
    significant engagements;
    the form of customer contracts changing primarily from time and
    materials to fixed price or contingent fee, based on project
    results;
    the loss of key management or consultants, which could cause
    clients to end their relationships with us;
    the ability of clients to terminate engagements without penalty;
    fluctuations in demand for our services resulting from client
    budget cuts, or project delays, industry consolidations or
    downturns or similar events;
    reductions in the prices of services offered by our competitors;
    seasonality during the summer, vacation and holiday periods,
    especially in Europe;
    consultant utilization and billing rates;
    expenses incurred in the independent investigation and the
    restatement of our financial statements; and,
    our ability to integrate our Adventis and Cartesian
    acquisitions, and any impairment in the value of those
    investments.  quarter-to-quarter
 15




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There
    can be no assurance our investment in new offerings will yield
    the intended results.
    A
    significant portion of our business is represented by fixed fee
    contracts, which expose us to additional risks.
    Our
    acquisitions entail risks that could harm our financial
    performance or stock price.
    
    difficulty in integrating and managing the personnel and
    operations of acquired companies;
    failure of the acquisition to achieve expected return on
    investments and planned synergies;
    potential disruption of our existing business;
    further reductions in our cash reserves; and,
    adverse effects on our financial statements, including
    impairments, write-offs and assumption of liabilities of the
    acquired businesses.  Any
    future decrease in revenues of acquired businesses may result in
    asset impairments and adversely affect our
    profitability.
    We
    implemented significant cost reductions which could adversely
    affect our ability to obtain and perform consulting
    engagements.
   16




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The
    market in which we operate is intensely competitive, and actions
    by competitors could render our services less competitive,
    causing revenues and income to decline.
    
    Accenture;
    Booz-Allen & Hamilton;
    Cap Gemini;
    DiamondCluster International, Inc.;
    IBM;
    EDS;
    Computer Science Corporation;
    Infosys Technologies, Ltd.; and
    McKinsey & Company.    
    the prices at which others offer competitive services, including
    aggressive price competition and discounting on individual
    engagements which may become increasingly prevalent in the
    current industry environment;
    the ability and willingness of our competitors to finance
    customers projects on favorable terms;
    the ability of our competitors to undertake more extensive
    marketing campaigns than we can;
    the extent, if any, to which our competitors develop proprietary
    tools that improve their ability to compete with us;
    the ability of our customers to perform the services
    themselves; and
    the extent of our competitors responsiveness to customer
    needs.   17




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We
    must continually enhance our services to meet the changing needs
    of the convergence of communications customers with media and
    entertainment, or we may lose future business to our
    competitors.
    If we
    are not able to effectively recruit and retain management and
    consulting personnel that provide us with new talent sets
    enabling the implementation of new strategic offerings in a
    rapidly changing market, our financial performance may be
    negatively impacted.
      Our
    engagements with clients may not be profitable or may be
    terminated by our clients on short notice.
      engagement-by-engagement
 18




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Our
    profitability will suffer if we are not able to maintain our
    pricing and utilization rates and control costs.
    Our
    international operations expose us to a number of business and
    economic risks, which could result in increased expenses and
    declining profitability.
    
    unfavorable foreign currency exchange rates or fluctuations;
    difficulties in staffing and managing foreign operations;
    seasonal reductions in business activity;
    competition from local and foreign-based consulting companies;
    ability to protect our intellectual property;
    unexpected changes in trading policies and regulatory
    requirements;
    legal uncertainties inherent in transnational operations such as
    export and import regulations, tariffs and other trade barriers;
    the impact of foreign laws, regulations and trade customs;
    U.S. and foreign taxation issues;
    operational issues such as longer customer payment cycles and
    greater difficulties in collecting accounts receivable;
    language and cultural differences;
    changes in foreign communications markets;
    increased cost of marketing to and servicing international
    clients;
    potential limits on our ability to repatriate foreign profits;
    general political and economic trends, including the potential
    impact of terrorist attack or international hostilities; and
    expropriations of assets, including bank accounts, intellectual
    property and physical assets by foreign governments. 19




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We are
    dependent on a limited number of key personnel, and the loss of
    these individuals could harm our competitive position and
    financial performance.
    If we
    fail to perform effectively on project engagements, our
    reputation, and therefore our competitive position and financial
    performance, could be harmed.
    If we
    fail to develop and maintain long-term relationships with our
    customers, our success would be jeopardized.
    We
    classify a large number of subcontractors as independent
    contractors for tax and employment law purposes. If these firms
    or personnel were to be reclassified as employees, we could be
    subject to back taxes, interest, penalties and other legal
    claims.
    We
    could be subject to claims for professional liability, which
    could harm our financial performance.
   20




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Our
    inability to protect our intellectual property could harm our
    competitive position and financial performance.
    RISKS
    RELATED TO OUR STOCK PRICE
  The
    market price of our common stock is volatile, and investors may
    experience investment losses.
    
    any failure to achieve sustained profitable operations and
    positive cash flow;
    matters involving the independent investigation and restatement
    of our financial statements;
    variations in quarterly operating results;
    announcements of technological innovations that could render our
    talent outdated;
    any failure of our acquisitions to achieve their intended
    results;
    market perceptions of and future trends in the communications
    industry;
    future acquisitions or strategic alliances by us or others in
    the industry;
    failure to achieve financial analysts or our own estimates
    of revenues or operating results;
    our relatively small public float and the relatively low volume
    at which our stock trades;
    changes in estimates of performance or recommendations by
    financial analysts;
    any future reduction in our revenues; and
    any future adverse market conditions in the communications
    industry or the economy as a whole.    Principal
    stockholders, executive officers and directors have substantial
    control over our voting stock.
   21




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We may
    seek to raise additional funds, which may be dilutive to
    stockholders or impose operational restrictions.
    Anti-takeover
    provisions and our right to issue preferred stock could make a
    third party acquisition difficult.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    LeaseLocation

Sq. Feet


ExpirationMcLean, Virginia


7,575


June 2009Boston, Massachusetts


10,344


January 2011London, England


3,900


December 2007Berlin, Germany


4,174


June 2016Shanghai, China


1,511


April 2009     ITEM 3.
    LEGAL
    PROCEEDINGS   22




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ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Form 10-Q Form 10-K
  Form 10-Q Form 10-K
  Form 10-Q Form 10-K
 23




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High


LowFirst quarter, fiscal year 2006

$
2.82


$
2.18Second quarter, fiscal year 2006

$
2.46


$
1.92Third quarter, fiscal year 2006

$
2.21


$
1.53Fourth quarter, fiscal year 2006

$
1.68


$
1.29   High


LowFirst quarter, fiscal year 2005

$
2.57


$
2.20Second quarter, fiscal year 2005

$
2.52


$
1.83Third quarter, fiscal year 2005

$
2.59


$
2.06Fourth quarter, fiscal year 2005

$
2.78


$
2.24   mark-up,
     24




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STOCK
    PERFORMANCE GRAPH
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
    Among The Management Network Group, Inc., The NASDAQ Composite
    Index
    And The Russell 2000 Index
  
   Cumulative Total Return12/29/01

12/28/02

1/3/04

1/1/05

12/31/05

12/30/06THE MANAGEMENT NETWORK GROUP, INC.


100.00



24.29



46.71



33.57



34.14



23.14NASDAQ COMPOSITE INDEX


100.00



68.85



101.86



112.16



115.32



127.52RUSSELL 2000 INDEX


100.00



79.52



117.09



138.55



144.86



171.47    *
    
    $100 invested on 12/29/01 in stock or on 12/31/01 in
    index-including reinvestment of dividends. Indexes calculated on
    month-end basis. 25




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##### Table of Contents



EQUITY
    COMPENSATION PLAN INFORMATION
  (a)





(c)Number of





Number of SecuritiesSecurities to be Issued





Remaining AvailableUpon Exercise of


(b)


for Future IssuanceOutstanding Options


Weighted Average


Under Equity Compensationor Vesting of Nonvested


Exercise Price of


Plans (Excluding SecuritiesStock


Outstanding Options


Reflected in Column (a))PLANS APPROVED BY SECURITY
    HOLDERS(1) 1998 Equity Incentive
    Plan  Stock Options


5,465,594


$
3.78



3,492,931
(1) 1998 Equity Incentive
    Plan  Nonvested Stock


221,750



n/a



1,052,000PLANS NOT APPROVED BY SECURITY
    HOLDERS 2000 Supplemental
    Stock Plan


1,121,972


$
4.02



2,660,822     (1)
    
    The amounts in the table do not include up to
    226,569 shares that may be purchased under the 1999
    Employee Stock Purchase Plan.    ISSUER
    PURCHASES OF EQUITY SECURITIES
    Purchases of Equity Securities(1)Total Number of


Maximum Number ofShares Purchased as


Shares that May YetPart of Publicly


be Purchased UnderTotal Number of


Average Price Paid


Announced Plans or


the Plans orPeriod

Shares Purchased


per Share


Programs


ProgramsOctober 1, 2006 through
    October 28, 2006


63,398


$
1.63



63,398



1,800,000     (1)
    
    In September 2006, our Board of Directors authorized a share
    repurchase program, pursuant to which we are authorized, but not
    required, to repurchase up to an aggregate of two million
    shares of our common stock during the period expiring on
    September 1, 2008. In connection with the internal review
    and investigation discussed in Note 2 to the Consolidated
    Financial Statements, the Companys Board of Directors in
    October 2006 suspended further share repurchase activity until
    further notice. 26




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ITEM 6.
    SELECTED
    CONSOLIDATED FINANCIAL DATA  Form 10-K. Form 10-K.
  Fiscal Year Ended(1)(2)December 30,


December 31,


January 1,


January 3,


December 28,2006


2005


2005


2004


2002As


As


As


Asrestated(3)


restated(3)


restated(4)


restated(4)(In thousands, except per share data)CONSOLIDATED STATEMENTS OF
    OPERATIONS DATA:Revenues

$
34,013


$
30,378


$
23,704


$
23,245


$
33,057Cost of services


17,549



15,092



12,955



11,857



17,721Gross profit


16,464



15,286



10,749



11,388



15,336Operating expenses:Selling, general and administrative


28,163



19,274



17,839



19,713



25,385Legal settlement


(31
)


95



(1,294
)Real estate restructuring






75



1,545Goodwill, intangible and long-lived
    asset impairment


2,074











19,484



25,165Intangible asset amortization


686



336



992



2,343



2,887Total operating expenses


30,892



19,780



19,082



41,540



53,437Operating loss from continuing
    operations


(14,428
)


(4,494
)


(8,333
)


(30,152
)


(38,101
)Other income (expense):Interest income


2,111



1,632



718



624



996Other, net


(1
)


126



(30
)


(51
)


(37
)Total other income


2,110



1,758



688



573



959Loss from continuing operations
    before income tax (provision) benefit and cumulative effect of a
    change in accounting principle


(12,318
)


(2,736
)


(7,645
)


(29,579
)


(37,142
)Income tax (provision) benefit


(52
)


(36
)


(49
)


(14,979
)


13,232Loss from continuing operations
    before cumulative effect of a change in accounting principle


(12,370
)


(2,772
)


(7,694
)


(44,558
)


(23,910
)Cumulative effect of a change in
    accounting principle, net of taxes


















(1,140
)Loss from continuing operations


(12,370
)


(2,772
)


(7,694
)


(44,558
)


(25,050
)Discontinued operations:Net (loss) income from discontinued
    operations










(2,276
)


34



380Net loss

$
(12,370
)

$
(2,772
)

$
(9,970
)

$
(44,524
)

$
(24,670
)Net loss from continuing operations
    before cumulative effect of a change in accounting principle per
    common share
    Basic and Diluted

$
(0.35
)

$
(0.08
)

$
(0.22
)

$
(1.33
)

$
(0.73
)Cumulative effect of a change in
    accounting principle per common share
    Basic and Diluted

















$
(0.03
)Net (loss) income from discontinued
    operations per common share
    Basic and Diluted









$
(0.07
)





$
0.01Net loss per common share
    Basic and Diluted

$
(0.35
)

$
(0.08
)

$
(0.29
)

$
(1.33
)

$
(0.75
)Weighted average common shares
    outstanding
    Basic and Diluted


35,699



35,175



34,619



33,545



32,734   27




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##### Table of Contents



Fiscal Year Ended(2)(3)December 30,


December 31,


January 1,


January 3,


December 28,2006


2005


2005


2004


2002As


As


As


Asrestated


restated


restated(4)


restated(4)(In thousands)CONSOLIDATED BALANCE SHEET DATA:Net working capital

$
42,579


$
52,497


$
55,121


$
57,231


$
63,478Total assets

$
65,296


$
73,549


$
75,353


$
81,582


$
128,039Total capital lease obligations





$
4


$
200


$
493


$
885Total stockholders equity

$
56,757


$
66,048


$
66,747


$
73,369


$
118,306     (1)
    
    We report our operating results on a
    52/53-week
    fiscal year basis. All years above include 52 weeks, with
    the exception of the fiscal year ended January 3, 2004,
    which includes 53 weeks.(2)
    
    During 2006, we acquired Adventis Ltd. See Note 3,
    Business Combinations, in Notes to Consolidated
    Financial Statements of this Form
    10-K. In
    addition, on March 6, 2002, we completed our acquisition of
    CSMG, a Delaware corporation. The CSMG acquisition resulted in a
    total purchase price of approximately $48.8 million
    consisting of $35.3 million cash (including transaction
    costs) and $13.5 million in common stock.(3)
    
    See the Explanatory Note immediately preceding
    Part I, Item I and Note 2, Restatement of
    Consolidated Financial Statements, in Notes to
    Consolidated Financial Statements of this
    Form 10-K.(4)
    
    The Selected Consolidated Financial Data for the years ended
    January 3, 2004 and December 28, 2002 have been
    restated to reflect the impact of share-based compensation
    expense as described in Note 2, Restatement of
    Consolidated Financial Statements, in Notes to
    Consolidated Financial Statements of this
    Form 10-K.
    As a result of these adjustments, net loss was increased by
    $2,200 and $1,267, respectively as follows:  Fiscal Year Ended January 3, 2004


Fiscal Year Ended December 28, 2002As





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


Restated(In thousands, except per share data)Cost of services

$
11,870


$
(13
)

$
11,857


$
16,832


$
889


$
17,721Gross profit


11,375



13



11,388



16,225



(889
)


15,336Selling, general and administrative


19,501



212



19,713



24,164



1,221



25,385Total operating expenses


41,328



212



41,540



52,216



1,221



53,437Loss from operations


(29,953
)


(199
)


(30,152
)


(35,991
)


(2,110
)


(38,101
)Loss from continuing operations
    before income tax (provision) benefit and cumulative effect of
    change in accounting principle


(29,380
)


(199
)


(29,579
)


(35,032
)


(2,110
)


(37,142
)Income tax (provision) benefit


(12,978
)


(2,001
)


(14,979
)


12,389



843



13,232Loss from continuing operations
    before cumulative effect of change in accounting principle


(42,358
)


(2,200
)


(44,558
)


(22,643
)


(1,267
)


(23,910
)Loss from continuing operations


(42,358
)


(2,200
)


(44,558
)


(23,783
)


(1,267
)


(25,050
)Net Loss

$
(42,324
)

$
(2,200
)

$
(44,524
)

$
(23,403
)

$
(1,267
)

$
(24,670
)Net Loss from continuing operations
    before cumulative effect of change in accounting principle per
    common shareBasic and Diluted

$
(1.26
)

$
(0.07
)

$
(1.33
)

$
(0.69
)

$
(0.04
)

$
(0.73
)Net Loss per common shareBasic and Diluted

$
(1.26
)

$
(0.07
)

$
(1.33
)

$
(0.71
)

$
(0.04
)

$
(0.75
)   December 28, 2002As





AsReported


Adjustments


RestatedTotal assets

$
125,459


$
2,580


$
128,039Total stockholders equity

$
115,726


$
2,580


$
118,306  28




---



##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Form 10-K. Form 10-K
    Special
    Committee Review into Stock Option Grant Practices and
    Restatement
  Form 10-Q
  
    the originally assigned and recorded grant dates for 582 of the
    856 grants made during the review period were not the proper
    measurement dates;
    these grants constituted approximately 8,479,129 stock options
    and shares of nonvested stock (57% of the total of the stock
    options and shares of nonvested stock) granted during the review
    period;
    the cumulative effect of misdated options and nonvested stock
    (after taxes and net of forfeitures) was $8.6 million as of
    December 31, 2005, including an impact on the statement of
    operations, after tax, of $0.4 million and
    $1.3 million in fiscal years 2005 and 2004, respectively;
    approximately 94% of the misdated grants, in terms of both
    number of grants and number of options and shares of nonvested
    stock, were made prior to 2004;
    there was no evidence of intent to defraud or fraudulent
    misconduct or intentional filing of misleading financial
    statements or other public disclosures;
    no improperly dated options received by executive officers or
    directors were exercised (these were limited to seven grants
    which were voluntarily surrendered and cancelled in April 2007);
    incorrect dating of stock options did not result in any direct
    financial gain to current executive officers or
    directors; and
    major contributing factors to the Companys stock
    option-related errors included: (i) accounting controls and
    procedures that were inadequate to ensure the accurate reporting
    of expenses related to stock option grants and nonvested stock
    awards; (ii) inadequate communication between the Board,
    management, 29




---



##### Table of Contents



accounting personnel, and non-accounting personnel;
    (iii) inadequate training of both accounting and
    non-accounting personnel; (iv) non-accounting staff were
    not provided sufficient guidance with respect to the proper
    recording of grant dates; (v) accounting staff were not
    provided sufficient information with respect to the actual grant
    dates or measurement dates of stock options;
    (vi) accounting staff placed undue reliance on the
    information recorded by the Companys non-accounting staff
    in the Companys stock plan management and reporting
    software, and (vii) many of the grants, other than grants
    to executive officers and directors, were made by management
    without Board of Director approval of the specific terms of each
    individual grant.                   30




---



##### Table of Contents



EXECUTIVE
    FINANCIAL OVERVIEW
    and/or
       31




---



##### Table of Contents



tm tm
  OPERATIONAL
    OVERVIEW
  52/53-week
       32




---



##### Table of Contents



CRITICAL
    ACCOUNTING POLICIES
      
    Allowance for Doubtful Accounts;
    Fair Value of Acquired Businesses;
    Impairment of Goodwill and Long-lived Intangible Assets;
    Revenue Recognition;
    Share-based Compensation Expense; and
    Deferred Income Tax Assets.  Allowances for Doubtful Accounts
   33




---



##### Table of Contents



Fair Value of Acquired Businesses
  Impairment of Goodwill, Long-lived Intangible Assets and
    Other Long-Lived Assets
        Revenue Recognition
   34




---



##### Table of Contents



Share-Based Compensation Expense
    Form 10-K.
       35




---



##### Table of Contents



Deferred Income Tax Assets
  RECENT
    ACCOUNTING PRONOUNCEMENTS
  06-3, How Sales Taxes Collected from Customers and Remitted
    to Governmental Authorities Should Be Presented in the Income
    Statement 
 36




---



##### Table of Contents



RESULTS
    OF OPERATIONS
  Form 10-K.
   37




---



##### Table of Contents



Form 10-K,
  FISCAL
    2006 COMPARED TO FISCAL 2005
  REVENUES
      COST OF
    SERVICES
    OPERATING
    EXPENSES
     38




---



##### Table of Contents



OTHER
    INCOME AND EXPENSES
    INCOME
    TAXES
    NET
    LOSS
   39




---



##### Table of Contents



FISCAL
    2005 COMPARED TO FISCAL 2004
  REVENUES
      COST OF
    SERVICES
      OPERATING
    EXPENSES
         40




---



##### Table of Contents



OTHER
    INCOME AND EXPENSES
    INCOME
    TAXES
    NET
    LOSS
    LIQUIDITY
    AND CAPITAL RESOURCES
       41




---



##### Table of Contents



FINANCIAL
    COMMITMENTS
    Less Than





More ThanOne Year

1-3 Years

3-5 Years

Five Years

TotalOperating leases

$
2,111


$
3,830


$
1,915


$
332


$
8,188         TRANSACTIONS
    WITH RELATED PARTIES
     42




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  available-for-sale
   43




---



##### Table of Contents



ITEM 8.
    CONSOLIDATED
    FINANCIAL STATEMENTS  REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  TO THE BOARD OF DIRECTORS OF
           Share-Based
    Payment,
    /s/
    DELOITTE &
    TOUCHE LLP     44




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  CONSOLIDATED
    BALANCE SHEETS
   December 30,


December 31,2006


2005As restated(1)(In thousands, except share data)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
11,133


$
10,951Short-term investments


27,200



38,700Receivables:Accounts receivable


5,063



3,886Accounts receivable 
    unbilled


3,654



2,5598,717



6,445Less: Allowance for doubtful
    accounts


(378
)


(296
)8,339



6,149Prepaid and other assets


2,257



1,379Total current assets


48,929



57,179Property and equipment, net


846



900Goodwill


13,365



13,365Licenses and other identifiable
    intangible assets, net


1,189



1,651Other assets


967



454Total Assets

$
65,296


$
73,549CURRENT LIABILITIES:Trade accounts payable

$
1,446


$
1,025Accrued payroll, bonuses and
    related expenses


1,965



1,136Other accrued liabilities


2,290



1,893Unfavorable and other lease
    obligations


649



628Total current liabilities


6,350



4,682Unfavorable and other lease
    obligations


2,189



2,819Commitments and contingencies
    (Notes 11 and 16)STOCKHOLDERS EQUITY:Common stock:Voting  $.001 par
    value, 100,000,000 shares authorized; 35,989,081 (including
    200,000 treasury shares) and 35,705,520 shares issued and
    outstanding on December 30, 2006, and December 31,
    2005, respectively


36



36Preferred stock 
    $.001 par value, 10,000,000 shares authorized; no
    shares issued or outstandingAdditional paid-in capital


171,117



168,338Accumulated deficit


(114,321
)


(101,951
)Treasury stock, at cost


(345
)Accumulated other comprehensive
    income Foreign currency translation
    adjustment


270



147Unearned compensation






(522
)Total stockholders equity


56,757



66,048Total Liabilities and
    Stockholders Equity

$
65,296


$
73,549     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.   45




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC. 
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
  Fiscal Year EndedDecember 30,


December 31,


January 1,2006


2005


2005As restated(1)


As restated(1)(In thousands, except per share data)Revenues

$
34,013


$
30,378


$
23,704Cost of services (includes
    non-cash share-based compensation expense of $560, $258 and $636
    for the 2006, 2005 and 2004 fiscal years, respectively)


17,549



15,092



12,955Gross Profit


16,464



15,286



10,749Operating expenses:Selling, general and
    administrative (includes non-cash share-based compensation
    expense of $2,297, $812 and $1,802 for the 2006, 2005 and 2004
    fiscal years, respectively)


28,163



19,274



17,839Legal settlement


(31
)


95



(1,294
)Real estate restructuring






75



1,545Goodwill, intangible and
    long-lived asset impairment


2,074Intangible asset amortization


686



336



992Total operating expenses


30,892



19,780



19,082Operating loss from continuing
    operations


(14,428
)


(4,494
)


(8,333
)Other income (expense):Interest income


2,111



1,632



718Other, net


(1
)


126



(30
)Total other income


2,110



1,758



688Loss from continuing operations
    before income tax provision


(12,318
)


(2,736
)


(7,645
)Income tax provision


(52
)


(36
)


(49
)Loss from continuing operations


(12,370
)


(2,772
)


(7,694
)Discontinued operations:Net loss from discontinued
    operations (including a charge for impairment of goodwill of
    $2,163)










(2,276
)Net loss


(12,370
)


(2,772
)


(9,970
)Other comprehensive income
    (loss) Foreign currency translation
    adjustment


123



(205
)


176Comprehensive loss

$
(12,247
)

$
(2,977
)

$
(9,794
)Loss from continuing operations
    per common shareBasic and diluted

$
(0.35
)

$
(0.08
)

$
(0.22
)Net loss from discontinued
    operations per common shareBasic and diluted









$
(0.07
)Net loss per common shareBasic and diluted

$
(0.35
)

$
(0.08
)

$
(0.29
)Shares used in calculation of loss
    from continuing operations, net loss from discontinued
    operations, and net loss per common shareBasic and diluted


35,699



35,175



34,619     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.   46




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
   Fiscal Year EndedDecember 30,


December 31,


January 1,2006


2005


2005As restated(1)


As restated(1)(In thousands)CASH FLOWS FROM OPERATING
    ACTIVITIES:Net loss

$
(12,370
)

$
(2,772
)

$
(9,970
)Loss from discontinued operations










2,276Adjustments to reconcile net loss
    to net cash used in operating activities:Goodwill, intangible and long-lived
    asset impairment


2,074Real estate restructuring charge










1,545Depreciation and amortization


1,094



822



1,672Share-based compensation


2,857



1,070



2,438Bad debt expense


263



(59
)


399Loss on retirement of assets










39Other changes in operating assets
    and liabilities:Accounts receivable


(354
)


736



61Accounts receivable 
    unbilled


(1,095
)


(648
)


229Prepaid and other assets


(1,163
)


413



1,073Trade accounts payable


(495
)


180



211Accrued liabilities


305



(559
)


(563
)Cash flow used in operating
    activities from continuing operations


(8,884
)


(817
)


(590
)Cash flow used in operating
    activities


(8,884
)


(817
)


(703
)CASH FLOWS FROM INVESTING
    ACTIVITIES:Purchases of short-term investments


(15,750
)


(9,300
)


(6,850
)Proceeds from maturities/sales of
    short-term investments


27,250



11,900



9,600Acquisition of business, net of
    cash acquired


(1,509
)Investment in S3 license






(1,500
)Acquisition of property and
    equipment, net


(553
)


(491
)


(188
)Cash flow provided by investing
    activities


9,438



609



2,562CASH FLOWS FROM FINANCING
    ACTIVITIES:Issuance of common stock through
    employee stock purchase plan


135



158



131Repurchase of common stock


(345
)Payments made on unfavorable lease
    obligations


(594
)


(726
)


(710
)Exercise of stock options


309



1,050



601Cash flow (used in) provided by
    financing activities


(495
)


482



22Effect of exchange rate on cash and
    cash equivalents


123



(205
)


176Net increase in cash and cash
    equivalents


182



69



2,057Cash and cash equivalents,
    beginning of period


10,951



10,882



8,825Cash and cash equivalents, end of
    period

$
11,133


$
10,951


$
10,882Supplemental disclosure of cash
    flow information:Cash paid during period for interest

$
1


$
3


$
30Cash paid during period for taxes

$
20


$
36


$
49Accrued property and equipment
    additions

$
11


$
8


$
16     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.   47




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
  Common Stock











Accumulated$.001 Par


Additional








OtherVoting


Paid-In


Accumulated


Treasury


Comprehensive


UnearnedShares


Amount


Capital


Deficit


Stock


Income


Compensation


Total(In thousands, except share data)Balance, January 3, 2004 as
    previously reported


34,371,068


$
34


$
157,292


$
(82,190
)

$



$
176


$
(1,943
)

$
73,369Cumulative effective of restatement
    (1)










9,198



(7,019
)










(2,179
)Balance, January 3, 2004 (as
    restated)


34,371,068



34



166,490



(89,209
)






176



(4,122
)


73,369Exercise of options


338,165



1



601



















602Employee stock purchase plan


98,529







131



















131Stock option grants










86















(86
)Stock option cancellations










(306
)














306Share-based compensation


























2,424



2,424Nonvested stock grants


15,000







30















(30
)Nonvested stock cancellations


(77,000
)






(244
)














244Stock bonus


4,800







15



















15Other comprehensive
    income  Foreign currency translation adjustment






















176







176Net loss














(9,970
)














(9,970
)Balance, January 1, 2005 (as
    restated)


34,750,562



35



166,803



(99,179
)






352



(1,264
)


66,747Exercise of options


602,329



1



1,049



















1,050Employee stock purchase plan


115,629







158



















158Stock option cancellations










(150
)














150Share-based compensation


























1,070



1,070Nonvested stock grants


300,000







695















(695
)Nonvested stock cancellations


(63,000
)






(217
)














217Other comprehensive
    income  Foreign currency translation adjustment






















(205
)






(205
)Net loss














(2,772
)














(2,772
)Balance, December 31, 2005 (as
    restated)


35,705,520



36



168,338



(101,951
)






147



(522
)


66,048Purchases of treasury stock


















(345
)










(345
)Reclassification of unearned
    compensation related to the adoption of Statement of Financial
    Accounting Standards No. 123R (Note 5)










(522
)














522Exercise of options


189,198







309



















309Employee stock purchase plan


91,363







135



















135Non-vested stock grants


10,000Share-based compensation










2,857



















2,857Nonvested stock cancellations


(7,000
)Other comprehensive
    income  Foreign currency translation adjustment






















123







123Net loss














(12,370
)














(12,370
)Balance, December 30, 2006


35,989,081


$
36


$
171,117


$
(114,321
)

$
(345
)

$
270


$



$
56,757     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.   48




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    ORGANIZATION
    AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Nature of Operations 
  Restatement 
  Principles of Consolidation 
  Fiscal Year  52/53-week 13-week
  Revenue Recognition 
    Cash and Cash Equivalents 
  Short-Term Investments 
 49




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair Value of Financial Instruments 
  Property and Equipment 
  Research and Development Costs 
  Goodwill 
  Intangible Assets 
    Income Taxes 
  Use of Estimates 
 50




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Foreign Currency Transactions and Translation 
  Share-Based Compensation 
               51




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              Earnings (Loss) Per Share 
  Recent Accounting Pronouncements  06-3, How Sales Taxes Collected from Customers and Remitted
    to Governmental Authorities Should Be Presented in the Income
    Statement.
   52




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          2.
    RESTATEMENT
    OF CONSOLIDATED FINANCIAL STATEMENTS  Form 10-Q
  
    the originally assigned and recorded grant dates for 582 of the
    856 grants made during the review period were not the proper
    measurement dates;
    these grants constituted approximately 8,479,129 stock options
    and shares of nonvested stock (57% of the total of the stock
    options and shares of nonvested stock) granted during the review
    period;
    the cumulative effect of misdated options and nonvested stock
    (after taxes and net of forfeitures) was $8.6 million as of
    December 31, 2005, including an impact on the statement of
    operations, after tax, of $0.4 million and
    $1.3 million in fiscal years 2005 and 2004, respectively;
    approximately 94% of the misdated grants, in terms of both
    number of grants and number of option and shares of nonvested
    stock, were made prior to 2004; 53




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    there was no evidence of intent to defraud or fraudulent
    misconduct or intentional filing of misleading financial
    statements or other public disclosures;
    no improperly dated options received by executive officers or
    directors were exercised (these were limited to seven grants
    which were voluntarily surrendered and cancelled in April 2007);
    incorrect dating of stock options did not result in any direct
    financial gain to current executive officers or directors;
    major contributing factors to the Companys stock
    option-related errors included: (i) accounting controls and
    procedures were inadequate to ensure the accurate reporting of
    expenses related to stock option grants and nonvested stock
    awards (ii) inadequate communication between the Board,
    management, accounting personnel, and non-accounting personnel;
    (iii) inadequate training of both accounting and
    non-accounting personnel; (iv) non-accounting staff were
    not provided sufficient guidance with respect to the proper
    recording of grant dates; (v) accounting staff were not
    provided sufficient information with respect to the actual grant
    dates or measurement dates of stock options;
    (vi) accounting staff placed undue reliance on the
    information recorded by the Companys non-accounting staff
    in the Companys stock plan management and reporting
    software, and (vii) many of the grants, other than grants
    to executive officers and directors, were made by management
    without Board of Directors approval of the specific terms of
    each individual grant.      Share-Based CompensationAs PreviouslyAdjustments


Reported,


As Restated,Pre-Tax


Tax Effect


Net of Tax


Net of Tax


Net of Tax1998

$
46


$
(19
)

$
27


$
157


$
1841999


(30
)


12



(18
)


2,602



2,5842000


2,617



(1,045
)


1,572



2,556



4,1282001


3,263



(1,292
)


1,971



853



2,8242002


2,110



(843
)


1,267



269



1,5362003


199



2,001



2,200



2,337



4,537Sub-total,
    1998-2003










7,0192004


1,275







1,275



1,163



2,4382005


352







352



718



1,070Total

$
9,832


$
(1,186
)

$
8,646  54




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31, 2005


Year Ended January 1, 2005As





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedCost of services

$
14,934


$
158


$
15,092


$
12,524


$
431


$
12,955Gross profit


15,444



(158
)


15,286



11,180



(431
)


10,749Selling, general and administrative


19,080



194



19,274



16,995



844



17,839Total operating expenses


19,586



194



19,780



18,238



844



19,082Operating loss from continuing
    operations


(4,142
)


(352
)


(4,494
)


(7,058
)


(1,275
)


(8,333
)Loss from continuing operations
    before income tax provision


(2,384
)


(352
)


(2,736
)


(6,370
)


(1,275
)


(7,645
)Loss from continuing operations


(2,420
)


(352
)


(2,772
)


(6,419
)


(1,275
)


(7,694
)Net loss


(2,420
)


(352
)


(2,772
)


(8,695
)


(1,275
)


(9,970
)Comprehensive loss

$
(2,625
)

$
(352
)

$
(2,977
)

$
(8,519
)

$
(1,275
)

$
(9,794
)Net loss from continuing
    operations per common share:Basic and diluted

$
(0.07
)

$
(0.01
)

$
(0.08
)

$
(0.18
)

$
(0.04
)

$
(0.22
)Net loss per common share:Basic and diluted

$
(0.07
)

$
(0.01
)

$
(0.08
)

$
(0.25
)

$
(0.04
)

$
(0.29
)     December 31, 2005As Reported


Adjustments


As RestatedAdditional paid-in capital

$
159,586


$
8,752


$
168,338Accumulated deficit

$
(93,305
)

$
(8,646
)

$
(101,951
)Unearned compensation

$
(416
)

$
(106
)

$
(522
)     Year Ended December 31, 2005


Year Ended January 1, 2005As





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedNet loss

$
(2,420
)

$
(352
)

$
(2,772
)

$
(8,695
)

$
(1,275
)

$
(9,970
)Share-based compensation

$
718


$
352


$
1,070


$
1,163


$
1,275


$
2,438   3.
    BUSINESS
    COMBINATIONS   55




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      At April 3,2006(In thousands)Current assets

$
1,393Property, plant and equipment


126Employment agreements


35Customer backlog


168Trade name


102Goodwill


1,496Total assets acquired


3,320Current liabilities assumed


1,825Net assets acquired

$
1,495      56




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         Fiscal Year EndedDecember 30,


December 31,2006


2005(Unaudited)(In thousands, exceptper share amounts)Total revenues

$
35,597


$
42,970Net loss

$
(13,289
)

$
(2,643
)Basic and diluted net loss per
    common share

$
(0.37
)

$
(0.08
)     4.
    GOODWILL
    AND OTHER INTANGIBLE ASSETS      ManagementConsultingSegmentBalance as of December 31,
    2005

$
13,365Acquisition of Adventis Ltd. (See
    Note 3)


1,4962006 impairment loss on Adventis
    goodwill (See Note 3)


(1,496
)Balance as of December 30,
    2006

$
13,365  57




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 30, 2006


December 31, 2005Accumulated





AccumulatedCost


Amortization


Cost


AmortizationCustomer relationships

$
1,908


$
(1,879
)

$
1,908


$
(1,709
)S3 license agreement


1,500



(340
)


1,500



(48
)Total

$
3,408


$
(2,219
)

$
3,408


$
(1,757
)       5.
    SHARE-BASED
    COMPENSATION        FAS 123(R)-3:
   58




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Prior
    to Adoption of SFAS No. 123R
          Fiscal


FiscalYear


Year2005


2004As


Asrestated(1)


restated(1)Net loss, as reported:

$
(2,772
)

$
(9,970
)Add: Share-based employee
    compensation expense included in reported net loss, net of
    related tax effects


1,070



2,438Deduct: Total share-based
    compensation expense determined under fair value based method
    for all awards, net of related tax effects


(2,248
)


(4,240
)Pro forma net loss

$
(3,950
)

$
(11,772
)Loss per shareBasic and diluted, as reported

$
(0.08
)

$
(0.29
)Basic and diluted, pro forma

$
(0.11
)

$
(0.34
)     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements. 59




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Subsequent
    to Adoption of SFAS No. 123R
    Fiscal Year

Fiscal Year

Fiscal Year2006

2005

2004Risk-free interest rate

4.8%

4.2%

3.7%Expected life

6.2 years

5.0 years

5.0 yearsExpected volatility factor

82%

86%

91%Expected dividend rate

0%

0%

0%         1998
    EQUITY INCENTIVE PLAN
  Stock
    Options
  de facto
 60




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       WeightedWeighted


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term


ValueOutstanding at December 31,
    2005


5,052,405


$
4.50Granted


1,466,500


$
2.20Exercised


(183,865
)

$
1.62Forfeited/cancelled


(869,446
)

$
5.76Outstanding at December 30,
    2006


5,465,594


$
3.78



7.2 years


$
67,000Options vested and expected to be
    vested at December 30, 2006


4,888,144


$
3.96



6.9 years


$
65,000Options exercisable at
    December 30, 2006


3,048,836


$
4.96



5.7 years


$
60,000Weighted average fair value of
    options granted during the period





$
1.63     Nonvested
    Stock
      WeightedAverageGrant DateShares


Fair ValueOutstanding at December 31,
    2005


310,500


$
2.31Granted


10,000


$
2.10Vested


(91,750
)

$
2.29Forfeited/cancelled


( 7,000
)

$
2.30Outstanding at December 30,
    2006


221,750


$
2.30    61




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2000
    SUPPLEMENTAL STOCK PLAN
      WeightedWeighted


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term


ValueOutstanding at December 31,
    2005


957,040


$
4.63Granted


517,500


$
2.19Exercised


(5,333
)

$
2.02Forfeited/cancelled


(347,235
)

$
3.01Outstanding at December 30,
    2006


1,121,972


$
4.02



6.9 years


$
2,000Options vested and expected to be
    vested at December 30, 2006


1,008,620


$
4.21



6.6 years


$
2,000Options exercisable at
    December 30, 2006


643,797


$
5.33



5.1 years


$
1,000Weighted average fair value of
    options granted during the period





$
1.61     EMPLOYEE
    STOCK PURCHASE PLAN
    6.
    DISCONTINUED
    OPERATIONS   62




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Fiscal Year2004Revenue

$
13Goodwill impairment and severance
    charge

$
(2,213
)Operating loss


(63
)Loss from discontinued operations

$
(2,276
)   7.
    BUSINESS
    SEGMENTS, MAJOR CUSTOMERS AND SIGNIFICANT GROUP CONCENTRATIONS
    OF CREDIT RISK    Form 10-K).
    Revenues


Accounts ReceivableFiscal


Fiscal


FiscalYear


Year


Year


December 30,


December 31,2006


2005


2004


2006


2005Customer A

$
467


$
6,098


$
34






$
709Customer B

$
387


$
372


$
2,894


$
3


$
4Customer C

$
5,200


$
6,998


$
3,465


$
513


$
1,149      63




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Fiscal


FiscalYear


Year2006


2005Beginning balance

$
296



396Bad debt expense (benefit)


263



(59
)Account write-offs


(181
)


(41
)Ending balance

$
378


$
296     Revenue


Loss from Continuing Operations Before Income Tax
    ProvisionFY


FY


FY


FY


FY


FY2006


2005


2004


2006


2005


2004United States

$
26,815


$
29,179


$
18,427


$
(9,711
)

$
(2,627
)

$
(5,943
)International:United Kingdom


4,631



1,153



2,296



(1,677
)


(104
)


(741
)Germany


1,686











(611
)Japan


668











(242
)China


141











(51
)The Netherlands


38



40



891



(14
)


(4
)


(287
)Canada


26







245



(9
)






(79
)Belize










173











(56
)Portugal










1,124











(363
)Australia










386











(124
)Other


8



6



162



(3
)


(1
)


(52
)Total

$
34,013


$
30,378


$
23,704


$
(12,318
)

$
(2,736
)

$
(7,645
)   8.
    PROPERTY
    AND EQUIPMENT  December 30,


December 31,2006


2005(In thousands)Furniture and fixtures

$
714


$
660Software and computer equipment


2,321



2,140Leasehold improvements


823



7743,858



3,574Less: Accumulated depreciation and
    amortization


3,012



2,674$
846


$
900    64




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     9.
    INCOME
    TAXES    Fiscal


Fiscal


FiscalYear


Year


Year2006


2005


2004FederalCurrent

$



$



$Deferred tax benefit


(1,896
)


(837
)


(2,438
)Change in valuation allowance


1,896



837



2,438







StateCurrent


45



36



49Deferred tax benefit


(472
)


(253
)


(767
)Change in valuation allowance


472



253



76745



36



49ForeignCurrent


7Deferred tax expense


(1,307
)


14



99Change in valuation allowance


1,307



(14
)


(99
)7







Total

$
52


$
36


$
49    65




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Fiscal Year 2006


Fiscal Year 2005


Fiscal Year 2004Amount


%


Amount


%


Amount


%Computed expected federal income
    tax benefit

$
(4,311
)


35.0


$
(958
)


35.0


$
(2,675
)


35.0State income tax expense, net of
    federal benefit


(278
)


2.3



(155
)


5.7



(365
)


4.8Adjustment to estimated tax loss
    carryforward


544



(4.4
)Other


422



(3.4
)


73



(2.7
)


(17
)


0.2Valuation allowance


3,675



(29.9
)


1,076



(39.3
)


3,106



(40.6
)Total

$
52



(0.4
)

$
36



(1.3
)

$
49



(0.6
)     Fiscal


Fiscal


FiscalYear


Year


Year2006


2005


2004Goodwill

$
1,409


$
1,349


$
1,402Bad debt reserve


3



22



100Stock compensation expense


272



126



(548
)Intangible assets


243



113



(156
)Valuation allowance


3,675



1,076



3,106Net operating loss carryforward


(5,960
)


(2,785
)


(3,479
)Unfavorable lease liability


239



206



(359
)Other


119



(107
)


(66
)Total

$



$



$
  66




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 30,


December 31,2006


2005Current deferred tax assets:Accounts receivable

$
115


$
118Accrued expenses


366



118Unfavorable lease liability


250



239Valuation allowance


(731
)


(475
)Current deferred tax asset

$



$
Non-current deferred tax assets:Goodwill

$
9,121


$
10,530Stock compensation expense


3,287



3,559Unfavorable lease liability


846



1,096Net operating loss carryforward


16,261



10,301Intangible assets


2,341



2,584Reserves


33



395Other


266



271Valuation allowance


(32,155
)


(28,736
)Non-current deferred tax asset

$



$
     Amount


Year$
2,177



20165,602



20239,094



20247,432



202512,931



2026Total

$
37,236     10.
    REAL
    ESTATE RESTRUCTURING   67




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    11.
    LEASE
    COMMITMENTS      OperatingFiscal Year

Leases2007

$
2,1112008


1,9642009


1,8662010


1,7122011


203Thereafter


332Total minimum lease payments


8,188Future minimum rentals to be
    received under non-cancellable subleases


(1,160
)Minimum lease payments net of
    amounts to be received under subleases

$
7,028       12.
    LOANS TO
    OFFICERS    13.
    LETTER OF
    CREDIT   68




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##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    14.
    RELATED
    PARTY TRANSACTIONS    15.
    SIGNIFICANT
    CUSTOMER CONTRACT SETTLEMENT        16.
    CONTINGENCIES   69




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         70




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  17.
    QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
    2006 Quarters EndedApril 1,


July 1,


September 30,


December 30,As


As





(3)restated(1)


restated(1)(In thousands except share and per share amounts)Revenues

$
7,163


$
9,541


$
8,691


$
8,618Cost of services


3,552



4,890



4,687



4,420Gross profit


3,611



4,651



4,004



4,198Operating Expenses:Selling, general and administrative


5,607



7,516



7,455



7,585Legal settlement


31







(62
)Goodwill, intangible and
    long-lived asset impairment














2,074Intangible asset amortization


115



236



215



120Total operating expenses


5,753



7,752



7,608



9,779Loss from operations


(2,142
)


(3,101
)


(3,604
)


(5,581
)Other income:Interest income


535



546



528



502Other, net






(1
)Total other income


535



545



528



502Loss before income tax provision


(1,607
)


(2,556
)


(3,076
)


(5,079
)Income tax provision


(21
)


(13
)


(5
)


(13
)Net loss


(1,628
)


(2,569
)


(3,081
)


(5,092
)Other comprehensive
    item Foreign currency translation
    adjustment


4



46



(23
)


96Comprehensive loss

$
(1,624
)

$
(2,523
)

$
(3,104
)

$
(4,996
)Net loss per common shareBasic and diluted(2)

$
(0.05
)

$
(0.07
)

$
(0.09
)

$
(0.14
)Shares used in calculation of net
    loss per common shareBasic and diluted


35,625



35,731



35,764



35,677     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.(2)
    
    Loss per share was computed independently for each of the
    quarters presented. The sum of quarters may not equal the total
    year amount due to the impact of changes in average quarterly
    shares outstanding.(3)
    
    During the 2006 fourth quarter, the Company adjusted its
    estimated forfeiture rate for share-based awards due to the
    termination of certain employees. As a result of this change in
    estimate, the Company recognized reductions of cost of services
    and selling, general and administrative expenses of $107,000 and
    $455,000, respectively. 71




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Thirteen Weeks Ended April 1, 2006


Thirteen Weeks Ended July 1, 2006As





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedCost of services

$
3,544


$
8


$
3,552


$
4,854



36


$
4,890Gross profit


3,619



(8
)


3,611



4,687



(36
)


4,651Selling, general and administrative


5,550



57



5,607



7,443



73



7,516Total operating expenses


5,696



57



5,753



7,679



73



7,752Loss from operations


(2,077
)


(65
)


(2,142
)


(2,992
)


(109
)


(3,101
)Loss from operations before income
    tax provision


(1,542
)


(65
)


(1,607
)


(2,447
)


(109
)


(2,556
)Net loss


(1,563
)


(65
)


(1,628
)


(2,460
)


(109
)


(2,569
)Comprehensive loss

$
(1,559
)

$
(65
)

$
(1,624
)


(2,414
)


(109
)


(2,523
)Net loss per common share:Basic and diluted

$
(0.04
)

$
(0.01
)

$
(0.05
)

$
(0.07
)





$
(0.07
)Basic and diluted shares used in
    calculation of net loss per share


35,625







35,625



35,731







35,731   72




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2005 Quarters EndedApril 2,


July 2,


October 1,


December 31,As


As


As


Asrestated(1)


restated(1)


restated(1)


restated(1)(In thousands except share and per share amounts)Revenues

$
7,067


$
9,017


$
8,057


$
6,237Cost of services


3,488



4,606



3,888



3,110Gross profit


3,579



4,411



4,169



3,127Operating Expenses:Selling, general and administrative


4,417



4,948



4,533



5,376Legal settlement














95Real estate restructuring


75Intangible asset amortization


160



43



42



91Total operating expenses


4,652



4,991



4,575



5,562Loss from operations


(1,073
)


(580
)


(406
)


(2,435
)Other income:Interest income


324



379



424



505Other, net


15



95







16Total other income


339



474



424



521(Loss) income before income tax
    provision


(734
)


(106
)


18



(1,914
)Income tax provision


(15
)


(3
)


(13
)


(5
)Net (loss) income


(749
)


(109
)


5



(1,919
)Other comprehensive
    item Foreign currency translation
    adjustment


(70
)


(121
)


26



(40
)Comprehensive income (loss)

$
(819
)

$
(230
)

$
31


$
(1,959
)Net (loss) income per common shareBasic and diluted (2)

$
(0.02
)

$
(0.00
)

$
0.00


$
(0.05
)Shares used in calculation of net
    (loss) income per common shareBasic


34,977



35,104



35,156



35,476Diluted


34,977



35,104



35,481



35,476     (1)
    
    See Note 2, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.(2)
    
    Loss per share was computed independently for each of the
    quarters presented. The sum of quarters may not equal the total
    year amount due to the impact of changes in average quarterly
    shares outstanding. 73




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Thirteen Weeks Ended April 2, 2005


Thirteen Weeks Ended July 2,  2005As





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedCost of services

$
3,429


$
59


$
3,488


$
4,553



53


$
4,606Gross profit


3,638



(59
)


3,579



4,464



(53
)


4,411Selling, general and administrative


4,335



82



4,417



4,862



86



4,948Total operating expenses


4,570



82



4,652



4,905



86



4,991Loss from operations


(932
)


(141
)


(1,073
)


(441
)


(139
)


(580
)Loss from operations before income
    tax provision


(593
)


(141
)


(734
)


33



(139
)


(106
)Net loss


(608
)


(141
)


(749
)


30



(139
)


(109
)Comprehensive loss

$
(678
)

$
(141
)

$
(819
)

$
(91
)

$
(139
)

$
(230
)Net (loss) income per common share:Basic and diluted

$
(0.02
)





$
(0.02
)

$
0.00






$
(0.00
)Diluted shares used in calculation
    of net (loss) income per share


34,977







34,977



35,461



(357
)


35,104   Thirteen Weeks Ended October 1, 2005


Thirteen Weeks Ended December 31, 2005As





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedCost of services

$
3,858


$
30


$
3,888


$
3,094


$
16


$
3,110Gross profit


4,199



(30
)


4,169



3,143



(16
)


3,127Selling, general and administrative


4,544



(11
)


4,533



5,339



37



5,376Total operating expenses


4,586



(11
)


4,575



5,525



37



5,562Loss from operations


(387
)


(19
)


(406
)


(2,382
)


(53
)


(2,435
)(Loss) income from operations
    before income tax provision


37



(19
)


18



(1,861
)


(53
)


(1,914
)Net (loss) income


24



(19
)


5



(1,866
)


(53
)


(1,919
)Comprehensive (loss) income

$
50


$
(19
)

$
31


$
(1,906
)

$
(53
)

$
(1,959
)Net (loss) income per common share:Basic and diluted

$
0.00






$
0.00


$
(0.05
)





$
(0.05
)Diluted shares used in calculation
    of net (loss) income per share


35,525



(44
)


35,481



35,476







35,476   18.
    SHARE
    REPURCHASE PROGRAM   74




---



##### Table of Contents



THE
    MANAGEMENT NETWORK GROUP, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Treasury SharesBalance as of December 31,
    2005


Purchases of treasury stock


200,000Balance as of December 30,
    2006


200,000   19.
    EMPLOYEE
    BENEFIT PLAN    20.
    SUBSEQUENT
    EVENT   75




---



##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Special
    Committee Review into Stock Option Grant Practices and
    Restatement
                Evaluation
    of Disclosure Controls and Procedures and Changes in Internal
    Control Over Financial Reporting
     76




---



##### Table of Contents



Material
    Weakness in Internal Control Over Financial
    Reporting
      Changes
    in Internal Control Over Financial Reporting
      
    Board Issuance of Share-based
    Awards.  In the future, all share-based awards
    will be granted only by the full Board of Directors in
    compliance with terms of the equity compensation plans and
    insider trading restrictions of the Company and the SEC.
    Human Resources Procedures.  In the
    future, the human resources department may only process grant
    paperwork and record grants in the equity compensation database
    upon receiving approval of the grants through minutes of the
    Board of Directors provided by the Secretary of the Board.
    Stock Option Accounting
    Procedures.  Each quarter, members of the
    accounting department must verify the validity and terms of each
    new grant by comparing the terms of the grant to minutes of the
    Board of Directors provided by the Secretary of the Board.    
    Ensuring Adequacy of Internal Controls and
    Procedures.  TMNG has hired a national
    consulting firm to assist the Company with the planning for and
    implementation of a program for compliance with Section 404
    of the Sarbanes-Oxley Act and to help ensure that the Company
    has properly designed and tested internal control structure and
    procedures for financial reporting.
    Addition of Accounting Personnel, Combined with Enhanced
    Training.  TMNG has hired additional
    accounting personnel to assist the Company with its accounting
    needs. Training for accounting and non-accounting personnel will
    be enhanced. Management and the Board will assess the need for
    additional personnel
    and/or
    training going forward. 77




---



##### Table of Contents




    Hiring of Legal Staff.  TMNG has hired a
    General Counsel and a paralegal to internally support SEC
    compliance and other matters.
    Responsibilities of Chief Financial
    Officer.  The Chief Financial Officers
    duties and responsibilities that are not directly related to
    managing the financial affairs of the Company are being
    reassigned so that his primary responsibility going forward will
    be to manage the financial affairs of the Company and he will
    have very limited assignments and responsibilities outside of
    this role. The Chief Financial Officers performance in
    implementing new controls and procedures, ensuring compliance
    with Section 404 of the Sarbanes-Oxley Act, and performing
    his other responsibilities will be reassessed by the Special
    Committee and the Board of Directors.
    Reports to Special Committee on Implementation of
    Recommendations.  Management has been directed
    to provide monthly reports to the Special Committee on the
    implementation of the corporate governance changes and other
    changes and actions mandated by the Board of Directors.  Form 10-K
 ITEM 9A(T).  CONTROLS
    AND PROCEDURES    ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Form 10-K,
  ITEM 11.
    EXECUTIVE
    COMPENSATION  Form 10-K,
  ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Form 10-K,
  ITEM 13.
    CERTAIN
    RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE  Form 10-K,
 78




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##### Table of Contents



ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES  Form 10-K,
 PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Form 10-K:
         79




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##### Table of Contents



SIGNATURES
  Form 10-K
  THE MANAGEMENT NETWORK GROUP, INC.
  By:
    /s/  RICHARD
    P. NESPOLA       POWER OF
    ATTORNEY
  attorney-in-fact, Form 10-K,
  Form 10-K
  Signature

Title

Date/s/  RICHARD
    P. NESPOLARichard
    P. Nespola

Chairman of the Board, 
    President and Chief Executive Officer (Principal executive
    officer)

May 14, 2007/s/  DONALD
    E. KLUMBDonald
    E. Klumb

Chief Financial Officer and 
    Treasurer (Principal financial officer and principal accounting
    officer)

May 14, 2007/s/  MICKY
    K. WOOMicky
    K. Woo

Director

May 14, 2007/s/  GRANT
    G. BEHRMANGrant
    G. Behrman

Director

May 14, 2007/s/  WILLIAM
    M. MATTHESWilliam
    M. Matthes

Director

May 14, 2007 80




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##### Table of Contents



Signature

Title

Date/s/  ROBERT
    J. CURREYRobert
    J. Currey

Director

May 14, 2007/s/  ANDREW
    LIPMANAndrew
    Lipman

Director

May 14, 2007/s/  ROY
    A. WILKENSRoy
    A. Wilkens

Director

May 14, 2007/s/  FRANK
    SISKOWSKIFrank
    Siskowski

Director

May 14, 2007  81




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##### Table of Contents



INDEX TO
    EXHIBITS
    ExhibitNumber

Description of Document3
.1

Certificate of Incorporation,
    filed as Exhibit 3.1 to the Companys Registration
    Statement on
    Form S-1
    originally filed September 20, 1999 (Registration
    No. 333-87383),
    as amended (the
    1999 S-1
    Registration Statement), is incorporated herein by
    reference as Exhibit 3.1.3
.2

By-laws, as amended, filed as
    Exhibit 3.2 to the Companys
    Form 10-K
    for the fiscal year ended December 28, 2002, are
    incorporated herein by reference as Exhibit 3.2.4
.1

Specimen Common Stock Certificate,
    filed as Exhibit 4.1 to the
    1999 S-1
    Registration Statement, is incorporated herein by reference as
    Exhibit 4.1.4
.2

Registration Rights Agreement,
    dated February 12, 1998, among the Company and certain
    holders of the Companys common stock (the
    Registration Rights Agreement), filed as
    Exhibit 10.1 to the
    1999 S-1
    Registration Statement, is incorporated herein by reference as
    Exhibit 4.2.10
.1

Registration Rights Agreement.
    (See Exhibit 4.2).10
.2

Form of Indemnification Agreement
    between the Company and each of its Directors and Officers,
    filed as Exhibit 10.2 to the
    1999 S-1
    Registration Statement, is incorporated herein by reference as
    Exhibit 10.2.10
.3

1998 Equity Incentive Plan, as
    amended and restated on September 7, 1999, and the Form of
    Agreements thereunder, filed as Exhibit 10.3 to the
    1999 S-1
    Registration Statement, is incorporated herein by reference as
    Exhibit 10.3.10
.4

1999 Employee Stock Purchase Plan
    and Form of Agreements thereunder, filed as Exhibit 10.4 to
    the
    1999 S-1
    Registration Statement, is incorporated herein by reference as
    Exhibit 10.4.10
.5

2000 Supplemental Stock Plan and
    Form of Agreements thereunder, filed as Exhibit 10.16 to
    the Companys
    Form 10-K
    for the fiscal year ended December 30, 2000, is
    incorporated herein by reference as Exhibit 10.5.10
.6

Employment Agreement between the
    Company and Richard Nespola, dated January 5, 2004, filed
    as Exhibit 10.19 to the Companys
    Form 10-K
    for the fiscal year ended January 3, 2004, is incorporated
    herein by reference as Exhibit 10.6.10
.7

Sublease between Best Doctors,
    Inc. and Cambridge Strategic Management Group Inc. (formerly
    TMNG Strategy, Inc.), dated December 30, 2004, filed as
    Exhibit 10.21 to the Companys
    Form 10-K
    for the fiscal year ended January 1, 2005, is incorporated
    herein by reference as Exhibit 10.7.10
.8

Asset Purchase Agreement, dated
    April 2, 2006, among Wilbass Limited, Adventis Limited, and
    Adventis Corporation, filed as Exhibit 10 to the
    Companys
    Form 10-Q
    for the quarter ended April 1, 2006, is incorporated herein
    by reference as Exhibit 10.8.**10
.9

Share Purchase Agreement, dated
    December 22, 2006, between the Company and Janos Sivo, Alan
    Strong, William Hill and James Baker, regarding the acquisition
    of the outstanding common stock of Cartesian Limited, filed as
    Exhibit 10.1 to the Companys
    Form 10-Q
    for the quarter ended September 30, 2006, is incorporated
    herein by reference as Exhibit 10.9.10
.10

Third Amended Lease Agreement
    between NewTower Trust Company Multi-Employer Property Trust and
    the Company, dated August 30, 2005, is attached to this
    Form 10-K
    as Exhibit 10.10.10
.11

Third Additional Space
    Commencement Date Agreement between NewTower Trust Company
    Multi-Employer Property Trust and the Company, dated
    February 28, 2006, is attached to this
    Form 10-K
    as Exhibit 10.11.21
.1

List of subsidiaries of the
    Company, prepared pursuant to Item 601(b)(21) of
    Regulation S-K
    is attached to this
    Form 10-K
    as Exhibit 21.1.23
.1

Consent of independent registered
    public accounting firm is attached to this
    Form 10-K
    as Exhibit 23.1.24
.1

Power of attorney (see signature
    page)31
.1

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 is attached to this
    Form 10-K
    as Exhibit 31.1. 82




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##### Table of Contents



ExhibitNumber

Description of Document31
.2

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 is attached to this
    Form 10-K
    as Exhibit 31.2.32
.1

Certifications furnished pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002 are
    attached to this
    Form 10-K
    as Exhibit 32.1.     **
    
    Portions of this document have been redacted pursuant to a
    Request for Confidential Treatment filed with the Securities and
    Exchange Commission pursuant to
    Rule 24b-2
    under the Securities Exchange Act of 1934, as amended. Redacted
    portions are indicated with the notation [***]. 83