##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2007
 Commission File Number: 0-16284
 TECHTEAM GLOBAL, INC.
  Delaware
(State or other jurisdiction of incorporation)
    
    38-2774613
(I.R.S. Employer Identification No.)
 27335 West 11 Mile Road, Southfield, MI 48033
 (248) 357-2866
 None
 Title of Each Class
    
    Name of each exchange on which registeredCommon Stock, $.01 par value
    
    NASDAQ® Global Market
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
 ®
  DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



TECHTEAM GLOBAL, INC.
 FORM 10-K
 TABLE OF CONTENTS
 PageNumberPART IItem 1
    
    Business
    
    
    3Item 1A
    
    Risk Factors
    
    
    10Item 1B
    
    Unresolved Staff Comments
    
    
    18Item 2
    
    Properties
    
    
    18Item 3
    
    Legal Proceedings
    
    
    19Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    19PART IIItem 5
    
    Market for Registrant's Common Equity and Related Stockholder Matters
    
    
    20Item 6
    
    Selected Financial Data
    
    
    22Item 7
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 7A
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    39Item 8
    
    Financial Statements and Supplementary Data
    
    
    41Item 9
    
    Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    75Item 9A
    
    Controls and Procedures
    
    
    75Item 9B
    
    Other Information
    
    
    75PART IIIItem 10
    
    Directors, Executive Officers and Corporate Governance
    
    
    76Item 11
    
    Executive Compensation
    
    
    76Item 12
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    77Item 13
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    77Item 14
    
    Principal Accountant Fees and Services
    
    
    77PART IVItem 15
    
    Exhibits and Financial Statement Schedules
    
    
    78SIGNATURES
    
    
    
    
    81FINANCIAL STATEMENT SCHEDULE
    
    
    82
 2




---



##### 



Forward-Looking Statements
 This Annual Report on Form 10-K , including Item 7  Managements Discussion and Analysis of
Financial Condition and Results of Operations, contains forward-looking statements that involve
risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect,
could cause the results of TechTeam Global, Inc. and its consolidated subsidiaries (TechTeam) to
differ materially from those expressed or implied by such forward-looking statements. All
statements other than statements of historical fact are statements that could be deemed
forward-looking statements, including any projections of revenue, gross margin, expenses, earnings
or losses from operations, synergies or other financial items; any statements of the plans,
strategies and objectives of management for future operations; any statements concerning
developments or performance relating to our services; any statements regarding future economic
conditions or performance; any statements of expectation or belief; and any statements of
assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to
above include the performance of contracts by suppliers, customers and partners; employee
management issues; the difficulty of aligning expense levels with revenue changes; complexities of
global political and economic developments; and other risks that are described herein, including
but not limited to the items discussed in Item 1A  Risk Factors of this report, and that are
otherwise described from time to time in TechTeams reports filed with the United States Securities
and Exchange Commission. TechTeam assumes no obligation and does not intend to update these
forward-looking statements.
 PART I
 Item 1. BUSINESS
 General
 TechTeam Global, Inc.
 ® TEAM
  Services and Information about Operating Segments
  3




---



##### 



1. IT Outsourcing Services
  Enterprise Support Services
      4




---



##### 



BPO Services
  Global IT Outsourcing Delivery Model
      5




---



##### 



2. IT Consulting and Systems Integration
   3. Government Technology Services
     6




---



##### 



4. Other Services
  Impact of Business with Major Clients
  Ford Motor Company
   7




---



##### 



U.S. Federal Government
    Competition
    8




---



##### 



Sales and Marketing
   Seasonality
  Intellectual Property
 ®
 9




---



##### 



Employees
  European Operations
     Discontinued Operations  Leasing
  Item 1A. RISK FACTORS
 Factors Influencing Future Results
  10




---



##### 



Our revenue and gross profit may suffer if we are not able to maintain our relationship with
significant customers for whom we have contracts up for renewal.
   The competitive pressures we face could harm our revenue, gross margin and business prospects.
    We are subject to contract risks inherent in our business.
   11




---



##### 



We are subject to risks inherent in the provision of technology services to governmental entities.
      12




---



##### 



If we lose key personnel or are unable to recruit additional qualified personnel, our business,
financial condition and results of operations could be adversely affected.
  Our inability to attract and retain qualified employees could have a material adverse effect on our
business, financial condition and results of operations.
  Our inability to attract and retain qualified sales and account management personnel could have an
adverse effect on our ability to meet our organic growth targets.
  Implementation of our strategy to grow through complementary business acquisitions is subject to
numerous risks and difficulties.
  13




---



##### 



We are subject to numerous risks relating to our international operations.
   
    
    changes in a country or regions economic or political conditions, including inflation,
recession, interest rate fluctuations and unanticipated military conflicts;
    
    currency fluctuations, particularly in the European euro, which contribute to variations
in the sale of services in impacted jurisdictions and also affect our reported results
expressed in U.S. dollars;
    
    longer accounts receivable cycles and financial instability among customers;
    
    local labor conditions and regulations;
    
    differences in cultures and languages, which can impair our ability to work as an
effective global team;
    
    differing political and social systems;
    
    changes in the regulatory or legal environment;
    
    differing technology standards or customer requirements;
    
    difficulties associated with repatriating cash generated or held abroad in a
tax-efficient manner;
    
    changes in tax laws in international jurisdictions; and
    
    natural and man-made disasters.
  There are substantial risks associated with expanding our business into offshore markets.
    14




---



##### 



We are subject to currency risks as a result of our international operations.
  Our inability to properly manage projects and capacity could have a material adverse effect on our
business, financial condition and results of operations.
     We are increasingly selling our services through channel partners and our inability to effectively
manage a channel partner or customer relationship may have an adverse affect on our business,
financial condition and results of operations.
  15




---



##### 



We are highly dependent upon technology, and our inability to keep pace with technological advances
in our industry, or our failure or inability to protect and maintain our existing systems, could
have a material adverse effect on our business, financial condition and results of operations.
    Our business is dependent upon general economic conditions, which may affect our financial
performance and the price of our common stock.
  16




---



##### 



Our financial results may be adversely affected by increases in business costs.
  There is uncertainty inherent in the transition between Chief Executive Officers.
  We may be subject to risks associated with terrorist acts or other events beyond our control.
  We are subject to risks associated with our use of intellectual property.
   We may experience volatility in our stock price that could affect your investment.
  
    
    the depth and liquidity of the trading market for our common stock;
    
    general economic conditions;
    
    developments in the industries or markets in which we operate;
    
    announcements by competitors;
    
    actual or anticipated variations in quarterly or annual operating results;
    
    speculation in the press or investment community;
    
    sales of large blocks of our common stock or sales of our common stock by insiders;
    
    regulatory actions or litigation; and
    
    departures of our key personnel.
 17




---



##### 



Item 1B. UNRESOLVED STAFF COMMENTS
  Item 2. PROPERTIES
  Lease Term Beginning
    
    SquareLocation
    
    Function
    
    and End (mm/dd/yr)
    
    FootageSouthfield, MI
    
    World Headquarters and Help Desk Facility
    
    11/01/93  08/31/16
    
    
    73,622Brussels, Belgium
    
    European Headquarters and Help Desk Facility
    
    08/01/97  12/31/13
    
    
    45,420Dearborn, MI
    
    Help Desk Facility and Training Center
    
    04/01/97  09/30/08
    
    
    30,184Bucharest, Romania
    
    Help Desk Facility
    
    09/01/04  08/31/14
    
    
    30,139Ann Arbor, MI
    
    Sales and Administrative Office
    
    05/31/07  03/31/08
    
    
    18,544Chantilly, VA
    
    Headquarters of TechTeam Government
Solutions, Inc.
    
    06/12/04  05/31/11
    
    
    18,000Davenport, IA
    
    Help Desk Facility
    
    10/15/99  10/14/09
    
    
    17,346Bucharest, Romania
    
    Headquarters of Akela SRL
    
    10/01/06  09/30/11
    
    
    8,944Stockholm, Sweden
    
    Headquarters of TechTeam SQM AB
    
    02/14/07  09/30/09
    
    
    6,598Dresden, Germany
    
    Help Desk Facility
    
    04/01/08  04/01/14
    
    
    5,475Bethesda, MD
    
    Sales and Administrative Office
    
    06/01/01  12/31/13
    
    
    5,428Alexandria, VA
    
    Sales and Administrative Office
    
    05/31/07  03/31/08
    
    
    5,258Portsmouth, RI
    
    Sales and Administrative Office
    
    06/01/01  05/31/09
    
    
    4,200Gent, Belgium
    
    Headquarters of TechTeam A.N.E. NV/SA
    
    01/01/06  11/30/14
    
    
    4,090Sibiu, Romania
    
    Help Desk Facility
    
    03/07/08  03/06/11
    
    
    3,659Alexandria, VA
    
    Sales and Administrative Office
    
    04/01/08  03/31/13
    
    
    3,142San Diego, CA
    
    Sales and Administrative Office
    
    05/31/07  12/31/09
    
    
    3,139Galati, Romania
    
    Sales and Administrative Office
    
    05/01/07  04/30/10
    
    
    1,270Gothenburg, Sweden
    
    Sales and Administrative Office
    
    09/01/02  03/31/08
    
    
    1,022Gothenburg, Sweden
    
    Sales and Administrative Office
    
    02/14/07  02/28/08
    
    
    613
 18




---



##### 



Item 3. LEGAL PROCEEDINGS
  Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  19




---



##### 



PART II
 Item 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 ® ®
 Year and Quarter
    
    High
    
    Low2007First Quarter
    
    $
    12.87
    
    
    $
    10.50Second Quarter
    
    
    13.75
    
    
    
    11.42Third Quarter
    
    
    12.23
    
    
    
    9.66Fourth Quarter
    
    
    14.08
    
    
    
    11.422006First Quarter
    
    $
    11.59
    
    
    $
    9.00Second Quarter
    
    
    11.23
    
    
    
    8.72Third Quarter
    
    
    9.26
    
    
    
    7.07Fourth Quarter
    
    
    11.30
    
    
    
    7.82
    Total Number of
    
    Maximum Number ofTotal Number
    
    Average
    
    Shares Purchased as
    
    Shares that May Yetof Shares
    
    Price Paid
    
    Part of Publicly
    
    Be Purchased UnderPeriod
    
    Purchased (a)
    
    per Share
    
    Announced Programs
    
    the ProgramsOctober 1, 2007 to October 31, 2007
    
    
    2,323
    
    
    $
    13.11
    
    
    
    
    
    
    
    November 1, 2007 to November 30, 2007
    
    
    1,757
    
    
    $
    12.37
    
    
    
    
    
    
    
    December 1, 2007 to December 31, 2007
    
    
    3,209
    
    
    $
    12.09
    
    
    
    
    
    
    
    
 
 (a)
    
    All shares were purchased by the TechTeam Global Retirement Savings Plan (one of
the Companys 401(k) plans) using employer matching contributions made in cash or
through the use of plan forfeitures. The purchases were not made pursuant to publicly
announced plans and were made in the open market.   20




---



##### 



Performance Graph
   
 Total
Return IndexDec 2002
    
    
    Dec 2003
    
    
    Dec 2004
    
    
    Dec 2005
    
    
    Dec 2006
    
    
    Dec 2007NASDAQ U.S.
    
    
    $
    100
    
    
    
    $
    150
    
    
    
    $
    163
    
    
    
    $
    166
    
    
    
    $
    183
    
    
    
    $
    198NASDAQ Computer
    
    
    $
    100
    
    
    
    $
    132
    
    
    
    $
    145
    
    
    
    $
    150
    
    
    
    $
    169
    
    
    
    $
    206TechTeam Global
    
    
    $
    100
    
    
    
    $
    94
    
    
    
    $
    137
    
    
    
    $
    135
    
    
    
    $
    151
    
    
    
    $
    170
 21




---



##### 



Item 6. SELECTED FINANCIAL DATA
  Year Ended December 31,Statements of Operations Data
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(In thousands, except per share data)RevenueCommercialIT Outsourcing Services
    
    $
    104,659
    
    
    $
    86,461
    
    
    $
    76,845
    
    
    $
    77,205
    
    
    $
    67,669IT Consulting and Systems Integration
    
    
    28,064
    
    
    
    24,013
    
    
    
    24,483
    
    
    
    14,641
    
    
    
    8,195Other Services
    
    
    20,219
    
    
    
    9,497
    
    
    
    9,010
    
    
    
    8,000
    
    
    
    9,969Total Commercial
    
    
    152,942
    (a)
    
    
    119,971
    
    
    
    110,338
    (c)
    
    
    99,846
    (e)
    
    
    85,833Government Technology Services
    
    
    69,254
    (b)
    
    
    47,393
    
    
    
    56,159
    (d)
    
    
    28,142
    (f)
    
    
    Total revenue
    
    $
    222,196
    
    
    $
    167,364
    
    
    $
    166,497
    
    
    $
    127,988
    
    
    $
    85,833Income before income taxes
    
    $
    9,639
    
    
    $
    2,750
    (g)
    
    $
    7,796
    
    
    $
    7,175
    (h)
    
    $
    1,248Income tax provision
    
    
    3,343
    
    
    
    873
    
    
    
    2,402
    
    
    
    2,547
    
    
    
    1,438Income (loss) from continuing operations
    
    
    6,296
    
    
    
    1,877
    
    
    
    5,394
    
    
    
    4,628
    
    
    
    (190
    )Income (loss) from discontinued operations
    
    
    
    
    
    
    (43
    )
    
    
    74
    
    
    
    97
    
    
    
    (856
    )Net income (loss)
    
    $
    6,296
    
    
    $
    1,834
    
    
    $
    5,468
    
    
    $
    4,725
    
    
    $
    (1,046
    )Diluted earnings (loss) per common shareIncome (loss) from continuing operations
    
    $
    0.60
    
    
    $
    0.18
    
    
    $
    0.54
    
    
    $
    0.48
    
    
    $
    (0.02
    )Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    (0.09
    )Net income (loss) per share
    
    $
    0.60
    
    
    $
    0.18
    
    
    $
    0.54
    
    
    $
    0.49
    
    
    $
    (0.10
    )Weighted average common shares and
common share equivalents outstanding
    
    
    10,506
    
    
    
    10,176
    (i)
    
    
    9,832
    (i)
    
    
    8,904
    
    
    
    10,066Weighted average preferred shares outstanding
    
    
    
    
    
    
    
    (i)
    
    
    244
    (i)
    
    
    690
    
    
    
    503
 
 (a)
    
    On February 9, 2007, we acquired 100% of the outstanding stock of SQM Sverige AB.(b)
    
    On May 31, 2007, we acquired 100% of the membership interest in NewVectors LLC, and
on August 31, 2007, we acquired 100% of the outstanding stock of RL Phillips, Inc.(c)
    
    On October 3, 2005, we acquired 100% of the outstanding stock of Akela Informatique
SRL.(d)
    
    On January 3, 2005, we acquired 100% of the outstanding stock of Sytel, Inc.(e)
    
    On May 13, 2004, we acquired 100% of the outstanding stock of Advanced Network
Engineering NV/SA.(f)
    
    On December 31, 2003, we acquired 100% of the outstanding stock of Digital Support
Corporation.(g)
    
    During 2006, we recorded expenses totaling $1.4 million for legal and professional
fees associated with a proxy contest initiated by a shareholder, an asset impairment
charge of $580,000 related to a software asset and $650,000 for the settlement of
claims against the Company by certain former Company officers.(h)
    
    During 2004, we recorded an asset impairment charge of $485,000 related to a
software asset.(i)
    
    In May 2005, the holder of our preferred stock converted all outstanding shares of
preferred stock into 689,656 shares of common stock. 22




---



##### 



As of December 31,Balance Sheet Data
    
    2007 (a)
    
    2006
    
    2005 (b)
    
    2004 (c)
    
    2003 (d)(In thousands)Total assets
    
    $
    182,169
    
    
    $
    117,930
    
    
    $
    123,010
    
    
    $
    88,987
    
    
    $
    77,700Long-term obligations
    
    
    33,963
    
    
    
    5,426
    
    
    
    14,115
    
    
    
    1,699
    
    
    
    408Redeemable convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    5,000Total shareholders equity
    
    $
    97,031
    
    
    $
    86,308
    
    
    $
    78,240
    (e)
    
    $
    66,660
    
    
    $
    60,770
 
 (a)
    
    On February 9, 2007, we acquired 100% of the outstanding stock of SQM Sverige AB.
On May 31, 2007, we acquired 100% of the membership interest in NewVectors LLC. On
August 31, 2007, we acquired 100% of the outstanding stock of RL Phillips, Inc.(b)
    
    On October 3, 2005, we acquired 100% of the outstanding stock of Akela Informatique
SRL. On January 3, 2005, we acquired 100% of the outstanding stock of Sytel, Inc.(c)
    
    On May 13, 2004, we acquired 100% of the outstanding stock of Advanced Network
Engineering NV/SA.(d)
    
    On December 31, 2003, we acquired 100% of the outstanding stock of Digital Support
Corporation.(e)
    
    In May 2005, the holder of our preferred stock converted all outstanding shares of
preferred stock into 689,656 shares of common stock. 23




---



##### 



Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(MD&A)
 Overview
      24




---



##### 



Results of Operations  Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006
 Revenue
 Year Ended December 31,
    
    
    Increase
    
    
    %2007
    
    
    2006
    
    
    (Decrease)
    
    
    Change(In thousands)RevenueCommercial BusinessIT Outsourcing Services
    
    $
    104,659
    
    
    $
    86,461
    
    
    $
    18,198
    
    
    
    21.0
    %IT Consulting and Systems Integration
    
    
    28,064
    
    
    
    24,013
    
    
    
    4,051
    
    
    
    16.9
    %Other Services
    
    
    20,219
    
    
    
    9,497
    
    
    
    10,722
    
    
    
    113
    %Total Commercial
    
    
    152,942
    
    
    
    119,971
    
    
    
    32,971
    
    
    
    27.5
    %Government Technology Services
    
    
    69,254
    
    
    
    47,393
    
    
    
    21,861
    
    
    
    46.1
    %Total revenue
    
    $
    222,196
    
    
    $
    167,364
    
    
    $
    54,832
    
    
    
    32.8
    %
  IT Outsourcing Services
    25




---



##### 



IT Consulting and Systems Integration
  Government Technology Services
  Gross Profit and Gross Margin
 Year Ended December 31,2007
    
    
    2006Gross
    
    
    
    
    
    
    Gross
    
    
    Increase
    
    
    %Amount
    
    
    Margin %
    
    
    Amount
    
    
    Margin %
    
    
    (Decrease)
    
    
    Change(In thousands, except percentages)Gross ProfitCommercialIT Outsourcing Services
    
    $
    26,888
    
    
    
    25.7
    %
    
    $
    21,102
    
    
    
    24.4
    %
    
    $
    5,786
    
    
    
    27.4
    %Asset impairment loss
    
    
    
    
    
    
    
    
    
    
    (580
    )
    
    
    
    
    
    
    580
    
    
    
    Total IT
Outsourcing Services
    
    
    26,888
    
    
    
    25.7
    %
    
    
    20,522
    
    
    
    23.7
    %
    
    
    6,366
    
    
    
    31.0
    %IT Consulting and SystemsIntegration
    
    
    6,187
    
    
    
    22.0
    %
    
    
    5,741
    
    
    
    23.9
    %
    
    
    446
    
    
    
    7.8
    %Other Services
    
    
    4,789
    
    
    
    23.7
    %
    
    
    1,610
    
    
    
    17.0
    %
    
    
    3,179
    
    
    
    198
    %Total Commercial
    
    
    37,864
    
    
    
    24.8
    %
    
    
    27,873
    
    
    
    23.2
    %
    
    
    9,991
    
    
    
    35.8
    %Government
Technology Services
    
    
    18,978
    
    
    
    27.4
    %
    
    
    12,604
    
    
    
    26.6
    %
    
    
    6,374
    
    
    
    50.6
    %Total gross profit
    
    $
    56,842
    
    
    
    25.6
    %
    
    $
    40,477
    
    
    
    24.2
    %
    
    $
    16,365
    
    
    
    40.4
    %
  26




---



##### 



IT Outsourcing Services
  IT Consulting and Systems Integration
  Government Technology Services
  27




---



##### 



Geographic Market Discussion
 Year Ended December 31,
    
    
    Increase
    
    
    %2007
    
    
    2006
    
    
    (Decrease)
    
    
    Change(In thousands)RevenueCommercialAmericas
    
    $
    68,022
    
    
    $
    63,494
    
    
    $
    4,528
    
    
    
    7.1
    %Europe
    
    
    84,920
    
    
    
    56,477
    
    
    
    28,443
    
    
    
    50.4
    %Total Commercial
    
    
    152,942
    
    
    
    119,971
    
    
    
    32,971
    
    
    
    27.5
    %Government
    
    
    69,254
    
    
    
    47,393
    
    
    
    21,861
    
    
    
    46.1
    %Total revenue
    
    $
    222,196
    
    
    $
    167,364
    
    
    $
    54,832
    
    
    
    32.8
    %Gross MarginCommercialAmericas
    
    
    23.0
    %
    
    
    20.3
    %Europe
    
    
    26.1
    %
    
    
    26.5
    %Total Commercial
    
    
    24.8
    %
    
    
    23.2
    %Government
    
    
    27.4
    %
    
    
    26.6
    %Total Gross Margin
    
    
    25.6
    %
    
    
    24.2
    %
 Americas
   Europe
   28




---



##### 



Operating Expenses and Other
 Year Ended December 31,
    
    Increase
    
    %2007
    
    2006
    
    (Decrease)
    
    Change(In thousands)Operating Expenses and OtherSelling, general and administrative expense
    
    $
    46,547
    
    
    $
    38,317
    
    
    $
    8,230
    
    
    
    21.5
    %Net interest income (expense)
    
    $
    (572
    )
    
    $
    776
    
    
    $
    (1,348
    )
    
    
    (174
    )%Foreign currency transaction loss
    
    $
    (84
    )
    
    $
    (186
    )
    
    $
    102
    
    
    
    (54.8
    )%Income tax provision
    
    $
    3,343
    
    
    $
    873
    
    
    $
    2,470
    
    
    
    283
    %
     29




---



##### 



Results of Operations  Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005
 Revenue
 Year Ended December 31,
    
    
    Increase
    
    
    %2006
    
    
    2005
    
    
    (Decrease)
    
    
    Change(In thousands)RevenueCommercialIT Outsourcing Services
    
    $
    86,461
    
    
    $
    76,845
    
    
    $
    9,616
    
    
    
    12.5
    %IT Consulting and Systems Integration
    
    
    24,013
    
    
    
    24,483
    
    
    
    (470
    )
    
    
    (1.9
    )%Other Services
    
    
    9,497
    
    
    
    9,010
    
    
    
    487
    
    
    
    5.4
    %Total Commercial
    
    
    119,971
    
    
    
    110,338
    
    
    
    9,633
    
    
    
    8.7
    %Government Technology Services
    
    
    47,393
    
    
    
    56,159
    
    
    
    (8,766
    )
    
    
    (15.6
    )%Total revenue
    
    $
    167,364
    
    
    $
    166,497
    
    
    $
    867
    
    
    
    0.5
    %
  IT Outsourcing Services
   IT Consulting and Systems Integration Services
  30




---



##### 



Government Technology Services
  Gross Profit and Gross Margin
 Year Ended December 31,2006
    
    
    2005Gross
    
    
    
    
    
    
    Gross
    
    
    Increase
    
    
    %Amount
    
    
    Margin %
    
    
    Amount
    
    
    Margin %
    
    
    (Decrease)
    
    
    Change(In thousands, except percentages)Gross ProfitCommercialIT Outsourcing Services
    
    $
    21,102
    
    
    
    24.4
    %
    
    $
    18,415
    
    
    
    24.0
    %
    
    $
    2,687
    
    
    
    14.6
    %Asset impairment loss
    
    
    (580
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (580
    )
    
    
    Total IT Outsourcing
Services
    
    
    20,522
    
    
    
    23.7
    %
    
    
    18,415
    
    
    
    24.0
    %
    
    
    2,107
    
    
    
    11.4
    %IT Consulting and SystemsIntegration
    
    
    5,741
    
    
    
    23.9
    %
    
    
    6,068
    
    
    
    24.8
    %
    
    
    (327
    )
    
    
    (5.4
    )%Other Services
    
    
    1,610
    
    
    
    17.0
    %
    
    
    1,820
    
    
    
    20.2
    %
    
    
    (210
    )
    
    
    (11.5
    )%Total Commercial
    
    
    27,873
    
    
    
    23.2
    %
    
    
    26,303
    
    
    
    23.8
    %
    
    
    1,570
    
    
    
    6.0
    %Government Technology
Services
    
    
    12,604
    
    
    
    26.6
    %
    
    
    14,880
    
    
    
    26.5
    %
    
    
    (2,276
    )
    
    
    (15.3
    )%Total gross profit
    
    $
    40,477
    
    
    
    24.2
    %
    
    $
    41,183
    
    
    
    24.7
    %
    
    $
    (706
    )
    
    
    (1.7
    )%
  31




---



##### 



IT Outsourcing Services
  IT Consulting and Systems Integration Services
  Government Technology Services
  Geographic Market Discussion
 Year Ended December 31,
    
    
    Increase
    
    
    %2006
    
    
    2005
    
    
    (Decrease)
    
    
    Change(In thousands)RevenueCommercialAmericas
    
    $
    63,494
    
    
    $
    60,349
    
    
    $
    3,145
    
    
    
    5.2
    %Europe
    
    
    56,477
    
    
    
    49,989
    
    
    
    6,488
    
    
    
    13.0
    %Total Commercial
    
    
    119,971
    
    
    
    110,338
    
    
    
    9,633
    
    
    
    8.7
    %Government
    
    
    47,393
    
    
    
    56,159
    
    
    
    (8,766
    )
    
    
    (15.6
    )%Total revenue
    
    $
    167,364
    
    
    $
    166,497
    
    
    $
    867
    
    
    
    0.5
    %Gross MarginCommercialAmericas
    
    
    20.3
    %
    
    
    24.9
    %Europe
    
    
    26.5
    %
    
    
    24.1
    %Total Commercial
    
    
    23.2
    %
    
    
    23.8
    %Government
    
    
    26.6
    %
    
    
    26.5
    %Total Gross Margin
    
    
    24.2
    %
    
    
    24.7
    %
 32




---



##### 



Americas
   Europe
   Operating Expenses and Other
 Year Ended December 31,
    
    Increase
    
    %2006
    
    2005
    
    (Decrease)
    
    Change(In thousands)Operating Expenses and OtherSelling, general and administrative expense
    
    $
    38,317
    
    
    $
    33,992
    
    
    $
    4,325
    
    
    
    12.7
    %Net interest income
    
    $
    776
    
    
    $
    390
    
    
    $
    386
    
    
    
    99.0
    %Foreign currency transaction gain (loss)
    
    $
    (186
    )
    
    $
    215
    
    
    $
    (401
    )
    
    
    (187
    )%Income tax provision
    
    $
    873
    
    
    $
    2,402
    
    
    $
    (1,529
    )
    
    
    (63.7
    )%
  33




---



##### 



Impact of Business with Major Clients
  Ford Motor Company
   34




---



##### 



U.S. Federal Government
    New Accounting Pronouncements
   35




---



##### 



Liquidity and Capital Resources
      Material Commitments
  OperatingMaturities of Contractual Obligations
    
    Debt
    
    
    LeasesLess than one year
    
    $
    
    
    
    $
    4,2091-3 years
    
    
    
    
    
    
    10,2524-5 years
    
    
    37,017
    
    
    
    5,702Thereafter
    
    
    
    
    
    
    3,166Total
    
    $
    37,017
    
    
    $
    23,329
 36




---



##### 



Critical Accounting Policies and Estimates
  Revenue Recognition
    37




---



##### 



Deferred Income Taxes
   Accounts Receivable
   Goodwill Impairment
  st
 38




---



##### 



Long-Lived Assets and Identifiable Intangible Asset Impairment
    Business Combinations
  Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    39




---



##### 



40




---



##### 



Item 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  PageManagement Report on Internal Control over Financial Reporting
    
    
    42Report of Independent Registered Public Accounting Firm
    
    
    42Report of Independent Registered Public Accounting Firm
    
    
    43Consolidated Statements of Operations  Years Ended December 31, 2007, 2006 and 2005
    
    
    44Consolidated Statements of Comprehensive Income 
Years Ended December 31, 2007, 2006 and 2005
    
    
    45Consolidated Balance Sheets  As of December 31, 2007 and 2006
    
    
    46Consolidated Statements of Shareholders Equity  Years Ended December 31, 2007, 2006 and 2005
    
    
    47Consolidated Statements of Cash Flows  Years Ended December 31, 2007, 2006 and 2005
    
    
    48Notes to the Consolidated Financial Statements
    
    
    49
    41




---



##### 



Management Report on Internal Control over Financial Reporting
   Report of Independent Registered Public Accounting Firm
       42




---



##### 



Report of Independent Registered Public Accounting Firm
         
 43




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
  Year Ended December 31,2007
    
    
    2006
    
    
    2005RevenueCommercialIT Outsourcing Services
    
    $
    104,659
    
    
    $
    86,461
    
    
    $
    76,845IT Consulting and Systems Integration
    
    
    28,064
    
    
    
    24,013
    
    
    
    24,483Other Services
    
    
    20,219
    
    
    
    9,497
    
    
    
    9,010Total Commercial
    
    
    152,942
    
    
    
    119,971
    
    
    
    110,338Government Technology Services
    
    
    69,254
    
    
    
    47,393
    
    
    
    56,159Total revenue
    
    
    222,196
    
    
    
    167,364
    
    
    
    166,497Cost of revenueCost of revenue
    
    
    165,354
    
    
    
    126,307
    
    
    
    125,314Asset impairment loss
    
    
    
    
    
    
    580
    
    
    
    Total cost of revenue
    
    
    165,354
    
    
    
    126,887
    
    
    
    125,314Gross profit
    
    
    56,842
    
    
    
    40,477
    
    
    
    41,183Selling, general and administrative expense
    
    
    46,547
    
    
    
    38,317
    
    
    
    33,992Operating income
    
    
    10,295
    
    
    
    2,160
    
    
    
    7,191Net interest income (expense)
    
    
    (572
    )
    
    
    776
    
    
    
    390Foreign currency transaction gain (loss)
    
    
    (84
    )
    
    
    (186
    )
    
    
    215Income before income taxes
    
    
    9,639
    
    
    
    2,750
    
    
    
    7,796Income tax provision
    
    
    3,343
    
    
    
    873
    
    
    
    2,402Income from continuing operations
    
    
    6,296
    
    
    
    1,877
    
    
    
    5,394Income (loss) from discontinued operations, net of tax
    
    
    
    
    
    
    (43
    )
    
    
    74Net income
    
    $
    6,296
    
    
    $
    1,834
    
    
    $
    5,468Basic earnings per common shareIncome from continuing operations
    
    $
    0.61
    
    
    $
    0.19
    
    
    $
    0.55Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.01Net income per common share
    
    $
    0.61
    
    
    $
    0.18
    
    
    $
    0.56Basic earnings per preferred shareIncome from continuing operations
    
    $
    N/A
    
    
    $
    N/A
    
    
    $
    0.55Income from discontinued operations
    
    
    N/A
    
    
    
    N/A
    
    
    
    0.01Net income per preferred share
    
    $
    N/A
    
    
    $
    N/A
    
    
    $
    0.56Diluted earnings per common shareIncome from continuing operations
    
    $
    0.60
    
    
    $
    0.18
    
    
    $
    0.54Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.01Net income per common share
    
    $
    0.60
    
    
    $
    0.18
    
    
    $
    0.54Weighted average number of common shares and
common share equivalents outstandingBasiccommon
    
    
    10,355
    
    
    
    10,092
    
    
    
    9,508Basicpreferred
    
    
    
    
    
    
    
    
    
    
    244Dilutedcommon
    
    
    10,506
    
    
    
    10,176
    
    
    
    9,832
  44




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Net income, as set forth in the consolidated
statements of operations
    
    $
    6,296
    
    
    $
    1,834
    
    
    $
    5,468Other comprehensive income (loss)Foreign currency translation adjustment
    
    
    1,487
    
    
    
    2,839
    
    
    
    (3,277
    )Unrealized loss on derivative instrument
    
    
    (755
    )
    
    
    
    
    
    
    Comprehensive income
    
    $
    7,028
    
    
    $
    4,673
    
    
    $
    2,191
  45




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
  December 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    19,431
    
    
    $
    30,082Accounts receivable (less allowance of $611 at December 31, 2007
and $466 at December 31, 2006)
    
    
    69,627
    
    
    
    41,189Prepaid expenses and other current assets
    
    
    5,290
    
    
    
    5,096Total current assets
    
    
    94,348
    
    
    
    76,367Property, equipment and software, net
    
    
    10,562
    
    
    
    9,117Goodwill and other intangible assets, net
    
    
    76,686
    
    
    
    31,703Other assets
    
    
    573
    
    
    
    743Total assets
    
    $
    182,169
    
    
    $
    117,930LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    5,850
    
    
    $
    Accounts payable
    
    
    20,952
    
    
    
    8,350Accrued payroll and related taxes
    
    
    14,237
    
    
    
    9,512Accrued expenses
    
    
    8,317
    
    
    
    7,102Deferred revenue
    
    
    1,445
    
    
    
    1,232Other current liabilities
    
    
    374
    
    
    
    Total current liabilities
    
    
    51,175
    
    
    
    26,196Long-term liabilitiesLong-term debt, less current portion
    
    
    31,167
    
    
    
    3,174Deferred income taxes
    
    
    1,738
    
    
    
    1,690Other long-term liabilities
    
    
    1,058
    
    
    
    562Total long-term liabilities
    
    
    33,963
    
    
    
    5,426Shareholders equityPreferred stock, 5,000,000 shares authorized, no shares issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 45,000,000 shares authorized,
10,693,488 and 10,385,993 shares issued and outstanding at
December 31, 2007 and 2006, respectively
    
    
    107
    
    
    
    104Additional paid-in capital
    
    
    75,364
    
    
    
    71,672Retained earnings
    
    
    18,391
    
    
    
    12,095Accumulated other comprehensive income
    
    
    3,169
    
    
    
    2,437Total shareholders equity
    
    
    97,031
    
    
    
    86,308Total liabilities and shareholders equity
    
    $
    182,169
    
    
    $
    117,930
  46




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
  AccumulatedUnamortized
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Additional
    
    
    Deferred
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Paid-in Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance at January 1, 2005
    
    $
    88
    
    
    $
    59,437
    
    
    $
    (533
    )
    
    $
    4,793
    
    
    $
    2,875
    
    
    $
    66,660Proceeds from issuance of shares
under stock option plans
    
    
    4
    
    
    
    3,030
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,034Common stock issued to directors
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70Issuance of restricted stock
    
    
    
    
    
    
    440
    
    
    
    (440
    )
    
    
    
    
    
    
    
    
    
    
    Conversion of preferred stock into
common stock
    
    
    7
    
    
    
    4,993
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Equity instruments issued in
connection with acquisitions
    
    
    
    
    
    
    842
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    107Net income for 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,468
    
    
    
    
    
    
    
    5,468Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,277
    )
    
    
    (3,277
    )Other
    
    
    
    
    
    
    336
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    336Balance at December 31, 2005
    
    
    99
    
    
    
    69,148
    
    
    
    (866
    )
    
    
    10,261
    
    
    
    (402
    )
    
    
    78,240Proceeds from issuance of shares
under stock option plans
    
    
    4
    
    
    
    2,538
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,542Common stock issued to directors
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19Issuance of restricted stock
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    443
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    443Reclassification of deferred
compensation
    
    
    
    
    
    
    (866
    )
    
    
    866
    
    
    
    
    
    
    
    
    
    
    
    Net income for 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,834
    
    
    
    
    
    
    
    1,834Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,839
    
    
    
    2,839Other
    
    
    
    
    
    
    391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    391Balance at December 31, 2006
    
    
    104
    
    
    
    71,672
    
    
    
    
    
    
    
    12,095
    
    
    
    2,437
    
    
    
    86,308Proceeds from issuance of shares
under stock option plans
    
    
    1
    
    
    
    1,093
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,094Common stock issued to directors
    
    
    
    
    
    
    219
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219Issuance of restricted stock
    
    
    2
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares issued in connection with
acquisitions
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300Share-based compensation
    
    
    
    
    
    
    1,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,521Net income for 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,296
    
    
    
    
    
    
    
    6,296Unrealized loss on derivative instrument
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (755
    )
    
    
    (755
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,487
    
    
    
    1,487Other
    
    
    
    
    
    
    561
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    561Balance at December 31, 2007
    
    $
    107
    
    
    $
    75,364
    
    
    $
    
    
    
    $
    18,391
    
    
    $
    3,169
    
    
    $
    97,031
  47




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Operating activitiesNet income
    
    $
    6,296
    
    
    $
    1,834
    
    
    $
    5,468Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    3,383
    
    
    
    3,146
    
    
    
    3,670Amortization
    
    
    3,623
    
    
    
    2,002
    
    
    
    1,819Asset impairment loss
    
    
    
    
    
    
    580
    
    
    
    Non-cash expense related to stock options and issuance
of common stock and restricted common stock
    
    
    1,387
    
    
    
    462
    
    
    
    513Provision (credit) for deferred income taxes
    
    
    (1,148
    )
    
    
    (938
    )
    
    
    (809
    )Provision (credit) for uncollectible accounts
    
    
    145
    
    
    
    232
    
    
    
    (286
    )Other
    
    
    8
    
    
    
    30
    
    
    
    39Changes in assets and liabilities, net of acquisitions Accounts receivable
    
    
    (17,055
    )
    
    
    3,690
    
    
    
    (4,867
    )Prepaid expenses and other assets
    
    
    (15
    )
    
    
    (1,455
    )
    
    
    (21
    )Accounts payable
    
    
    11,059
    
    
    
    (4,628
    )
    
    
    1,475Accrued payroll and related taxes
    
    
    (1,084
    )
    
    
    (905
    )
    
    
    1,096Income taxes receivable and accrued income taxes
    
    
    721
    
    
    
    (1,629
    )
    
    
    (671
    )Deferred revenue
    
    
    (415
    )
    
    
    918
    
    
    
    (1,132
    )Accrued expenses and other liabilities
    
    
    (974
    )
    
    
    (53
    )
    
    
    4,726(Income) loss from discontinued operations
    
    
    
    
    
    
    43
    
    
    
    (74
    )Net operating cash flow from discontinued operations
    
    
    (3
    )
    
    
    62
    
    
    
    65Net cash provided by operating activities
    
    
    5,928
    
    
    
    3,391
    
    
    
    11,011Investing activitiesPurchases of property, equipment and software
    
    
    (3,882
    )
    
    
    (4,182
    )
    
    
    (3,669
    )Cash paid for acquisitions, net of cash acquired
    
    
    (47,160
    )
    
    
    (494
    )
    
    
    (25,232
    )Net cash used in investing activities
    
    
    (51,042
    )
    
    
    (4,676
    )
    
    
    (28,901
    )Financing activitiesProceeds from issuance of long-term debt
    
    
    38,900
    
    
    
    
    
    
    
    18,033Proceeds from issuance of common stock
    
    
    1,085
    
    
    
    2,542
    
    
    
    3,006Tax benefit from stock options
    
    
    570
    
    
    
    497
    
    
    
    Payments on long-term debt
    
    
    (6,299
    )
    
    
    (7,763
    )
    
    
    (7,122
    )Net financing cash flow from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (11
    )Net cash provided by (used in) financing activities
    
    
    34,256
    
    
    
    (4,724
    )
    
    
    13,906Effect of exchange rate changes on cash and cash equivalents
    
    
    207
    
    
    
    1,335
    
    
    
    (1,696
    )Decrease in cash and cash equivalents
    
    
    (10,651
    )
    
    
    (4,674
    )
    
    
    (5,680
    )Cash and cash equivalents at beginning of year
    
    
    30,082
    
    
    
    34,756
    
    
    
    40,436Cash and cash equivalents at end of year
    
    $
    19,431
    
    
    $
    30,082
    
    
    $
    34,756
  48




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
 Nature of Business and Basis of Presentation
    Use of Estimates
  Cash and Cash Equivalents
   49




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
 Accounts Receivable
  Property, Equipment and Software
    Goodwill and Other Intangible Assets
   50




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
     ITConsultingIT
    
    
    Government
    
    
    andOutsourcing
    
    
    Technology
    
    
    Systems
    
    
    OtherServices
    
    
    Services
    
    
    Integration
    
    
    Services
    
    
    Total(In thousands)Balance as of January 1, 2005
    
    $
    371
    
    
    $
    3,830
    
    
    $
    567
    
    
    $
    
    
    
    $
    4,768Goodwill acquired
    
    
    
    
    
    
    15,840
    
    
    
    1,567
    
    
    
    
    
    
    
    17,407Effect of exchange rate changes
    
    
    
    
    
    
    
    
    
    
    (71
    )
    
    
    
    
    
    
    (71
    )Balance as of December 31, 2005
    
    
    371
    
    
    
    19,670
    
    
    
    2,063
    
    
    
    
    
    
    
    22,104Goodwill acquired
    
    
    
    
    
    
    
    
    
    
    297
    
    
    
    
    
    
    
    297Effect of exchange rate changes
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    57Balance as of December 31, 2006
    
    
    371
    
    
    
    19,670
    
    
    
    2,417
    
    
    
    
    
    
    
    22,458Goodwill acquired
    
    
    875
    
    
    
    34,133
    
    
    
    995
    
    
    
    3,062
    
    
    
    39,065Balance as of December 31, 2007
    
    $
    1,246
    
    
    $
    53,803
    
    
    $
    3,412
    
    
    $
    3,062
    
    
    $
    61,523
 51




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
  Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedDecember 31, 2007
    
    
    Average
    
    
    December 31, 2006
    
    
    AverageAccumulated
    
    
    Amortization
    
    
    
    
    
    
    Accumulated
    
    
    AmortizationCost
    
    
    Amortization
    
    
    Period
    
    
    Cost
    
    
    Amortization
    
    
    Period(In thousands)
    
    
    
    
    
    (In thousands)Customer-related assets
    
    $
    22,094
    
    
    $
    7,447
    
    
    7.4 years
    
    $
    12,702
    
    
    $
    4,139
    
    
    7.8 yearsNoncompete agreement
    
    
    975
    
    
    
    609
    
    
    4.2 years
    
    
    885
    
    
    
    399
    
    
    4.3 yearsTrademark and other
    
    
    443
    
    
    
    293
    
    
    4.1 years
    
    
    384
    
    
    
    188
    
    
    3.9 years$
    23,512
    
    
    $
    8,349
    
    
    
    
    
    
    $
    13,971
    
    
    $
    4,726
    Deferred Income Taxes
   Foreign Currency Translation
  52




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
 Revenue Recognition
     53




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
  Fair Value of Financial Instruments
  Supplemental Disclosure of Cash Flow Information
  Derivatives
    54




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
 Stock-Based Compensation
  Reclassifications
  Recently Issued Accounting Pronouncements
    55




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2  Earnings Per Share
     Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands, except per share data)Income from continuing operations
    
    $
    6,296
    
    
    $
    1,877
    
    
    $
    5,394Less  Income from continuing operations allocated
to preferred shareholders
    
    
    
    
    
    
    
    
    
    
    135Income from continuing operations available to
common shareholders
    
    $
    6,296
    
    
    $
    1,877
    
    
    $
    5,259Basic weighted average common shares
    
    
    10,355
    
    
    
    10,092
    
    
    
    9,508Common stock equivalents
    
    
    151
    
    
    
    84
    
    
    
    324Diluted weighted average common shares
    
    
    10,506
    
    
    
    10,176
    
    
    
    9,832Weighted average preferred shares
    
    
    
    
    
    
    
    
    
    
    244Earnings per share from continuing operations:Basic earnings per common share
    
    $
    0.61
    
    
    $
    0.19
    
    
    $
    0.55Basic earnings per preferred share
    
    
    N/A
    
    
    
    N/A
    
    
    $
    0.55Diluted earnings per common share
    
    $
    0.60
    
    
    $
    0.18
    
    
    $
    0.54
 56




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 3  Property, Equipment and Software
  December 31,2007
    
    
    2006(In thousands)Computer equipment and office furniture
    
    $
    29,670
    
    
    $
    26,516Software
    
    
    15,480
    
    
    
    13,891Leasehold improvements
    
    
    6,349
    
    
    
    5,584Transportation equipment
    
    
    464
    
    
    
    46251,963
    
    
    
    46,453Less  Accumulated depreciation and amortization
    
    
    (41,401
    )
    
    
    (37,336
    )Net property, equipment and software
    
    $
    10,562
    
    
    $
    9,117
 Note 4  Acquisitions
 RL Phillips, Inc.
   NewVectors LLC
  57




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4  Acquisitions
 SQM Sverige AB
  Akela Informatique SRL
  Advanced Network Engineering NV/SA
  58




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4  Acquisitions
 Summary of Acquisition Purchase Price
  RL Phillips
    
    
    NewVectors
    
    
    SQM(In thousands)Goodwill
    
    $
    1,318
    
    
    $
    32,668
    
    
    $
    3,719Amortizable intangible assets
    
    
    375
    
    
    
    6,230
    
    
    
    2,936Property, equipment and software
    
    
    
    
    
    
    386
    
    
    
    86Other current and non-current assets, net of cash acquired
    
    
    993
    
    
    
    7,458
    
    
    
    2,232Accounts payable and accrued liabilities assumed
    
    
    (326
    )
    
    
    (6,176
    )
    
    
    (4,436
    )Accrued purchase price
    
    
    (100
    )
    
    
    
    
    
    
    Notes payable assumed
    
    
    
    
    
    
    
    
    
    
    (95
    )Issuance of equity instruments
    
    
    (300
    )
    
    
    
    
    
    
    Net cash used
    
    $
    1,960
    
    
    $
    40,566
    
    
    $
    4,442
 Pro Forma Results of Operations
  Year Ended December 31,2007
    
    2006(In thousands,except per share data)RevenueAs reported
    
    $
    222,196
    
    
    $
    167,364Pro forma
    
    $
    236,327
    
    
    $
    200,440Income from continuing operationsAs reported
    
    $
    6,296
    
    
    $
    1,877Pro forma
    
    $
    6,761
    
    
    $
    1,630Net incomeAs reported
    
    $
    6,296
    
    
    $
    1,834Pro forma
    
    $
    6,761
    
    
    $
    1,630Diluted earnings per common shareAs reported
    
    $
    0.60
    
    
    $
    0.18Pro forma
    
    $
    0.64
    
    
    $
    0.16
 59




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 5  Notes Payable and Line of Credit
 Long-Term Debt Agreement
    Interest Rate Swap Agreement
   60




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 6  Income Taxes
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Current:U.S. federal
    
    $
    1,568
    
    
    $
    499
    
    
    $
    1,980State
    
    
    365
    
    
    
    201
    
    
    
    255Foreign
    
    
    1,710
    
    
    
    1,111
    
    
    
    976Total current provision
    
    
    3,643
    
    
    
    1,811
    
    
    
    3,211Deferred
    
    
    (300
    )
    
    
    (938
    )
    
    
    (809
    )Total income tax provision from continuing operations
    
    $
    3,343
    
    
    $
    873
    
    
    $
    2,402
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Domestic income (loss)
    
    $
    3,984
    
    
    $
    (1,208
    )
    
    $
    4,055Foreign income
    
    
    5,655
    
    
    
    3,958
    
    
    
    3,741Income from continuing operations before income taxes
    
    $
    9,639
    
    
    $
    2,750
    
    
    $
    7,796
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Income tax provision at federal statutory rate of 34%
    
    $
    3,277
    
    
    $
    920
    
    
    $
    2,651State taxes, net of federal benefit
    
    
    241
    
    
    
    133
    
    
    
    168Permanent differences
    
    
    75
    
    
    
    66
    
    
    
    53Foreign operating losses not benefited
    
    
    274
    
    
    
    40
    
    
    
    14Effect of foreign tax rates
    
    
    (487
    )
    
    
    (116
    )
    
    
    (174
    )Utilization of operating loss carryforwards
    
    
    
    
    
    
    (159
    )
    
    
    (160
    )Other
    
    
    (37
    )
    
    
    (11
    )
    
    
    (150
    )Total income tax provision from continuing operations
    
    $
    3,343
    
    
    $
    873
    
    
    $
    2,402
 61




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 6  Income Taxes
  As of December 31,2007
    
    
    2006Assets
    
    
    Liabilities
    
    
    Assets
    
    
    Liabilities(In thousands)Net operating loss carryforwards
    
    $
    1,330
    
    
    $
    
    
    
    $
    1,117
    
    
    $
    Accruals and reserves
    
    
    431
    
    
    
    
    
    
    
    430
    
    
    
    Accelerated tax depreciation
    
    
    
    
    
    
    101
    
    
    
    172
    
    
    
    Intangible assets
    
    
    
    
    
    
    2,996
    
    
    
    
    
    
    
    2,888Prepaid expenses
    
    
    
    
    
    
    278
    
    
    
    
    
    
    
    288Other
    
    
    882
    
    
    
    
    
    
    
    212
    
    
    
    Total deferred income taxes
    
    
    2,643
    
    
    
    3,375
    
    
    
    1,931
    
    
    
    3,176Less  Valuation allowance
    
    
    (503
    )
    
    
    
    
    
    
    (290
    )
    
    
    Net deferred income taxes
    
    $
    2,140
    
    
    $
    3,375
    
    
    $
    1,641
    
    
    $
    3,176
   Major Jurisdiction
    
    Open YearsU.S. Federal income taxes
    
    2004 through 2006U.S. State income taxes
    
    2003 through 2006Foreign income taxes
    
    2002 through 2006
  62




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 6  Income Taxes
  Amount(In thousands)Balance at January 1, 2007
    
    $
    26,000Additions based on tax positions related to the current year
    
    
    4,000Additions for tax positions of prior years
    
    
    22,000Reductions for tax positions of prior years
    
    
    Settlements
    
    
    Balance at December 31, 2007
    
    $
    52,000
  Note 7  Employee Retirement Plans
  Note 8  Leases
  63




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 8  Leases
  LeaseYear
    
    Payments(In thousands)2008
    
    $
    4,2092009
    
    
    3,7032010
    
    
    3,3942011
    
    
    3,1562012
    
    
    2,9022013 and thereafter
    
    
    5,965Total
    
    $
    23,329
  Note 9  Stock-Based Compensation
    64




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 9  Stock-Based Compensation
 Stock Options
      Year Ended December 31,2007
    
    2006
    
    2005Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Weighted average volatility
    
    
    35
    %
    
    
    38
    %
    
    
    39
    %Risk free interest rate
    
    
    3.4-5.0
    %
    
    
    4.5-4.7
    %
    
    
    3.3-4.5
    %Expected term (in years)
    
    
    3.0
    
    
    
    2.9
    
    
    
    3.1
 65




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 9  Stock-Based Compensation
  Weighted
    
    
    WeightedAverage
    
    
    AverageExercise
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Price per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term
    
    
    ValueOutstanding at January 1, 2005
    
    
    1,196,244
    
    
    $
    8.05Granted
    
    
    651,900
    
    
    $
    10.64Exercised
    
    
    (409,174
    )
    
    $
    7.42Canceled
    
    
    (31,000
    )
    
    $
    9.16Outstanding at December 31, 2005
    
    
    1,407,970
    
    
    $
    9.41Granted
    
    
    174,000
    
    
    $
    9.82Exercised
    
    
    (391,336
    )
    
    $
    6.50Canceled
    
    
    (256,667
    )
    
    $
    13.03Outstanding at December 31, 2006
    
    
    933,967
    
    
    $
    9.71Granted
    
    
    884,000
    
    
    $
    11.98Exercised
    
    
    (127,767
    )
    
    $
    8.53Canceled
    
    
    (178,600
    )
    
    $
    10.67Outstanding at December 31, 2007
    
    
    1,511,600
    
    
    $
    11.02
    
    
    8.6 Years
    
    $
    2,551,780Vested and expected to vest in the future
at December 31, 2007
    
    
    1,489,200
    
    
    $
    11.01
    
    
    8.6 Years
    
    $
    2,521,000Exercisable at December 31, 2007
    
    
    719,700
    
    
    $
    9.74
    
    
    7.5 Years
    
    $
    2,068,863
   Restricted Common Stock
 General
  66




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 9  Stock-Based Compensation
  Executive Long-Term Incentive Plan
      67




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 9  Stock-Based Compensation
  WeightedAverageNumber of
    
    
    Grant-DateRestricted Shares
    
    Shares
    
    
    Fair ValueNonvested at January 1, 2005
    
    
    
    
    
    $
    Granted
    
    
    46,460
    
    
    $
    11.35Nonvested at December 31, 2005
    
    
    46,460
    
    
    $
    11.35Granted
    
    
    88,306
    
    
    $
    10.24Forfeited
    
    
    (38,546
    )
    
    $
    10.94Nonvested at December 31, 2006
    
    
    96,220
    
    
    $
    10.50Granted
    
    
    146,483
    
    
    $
    12.95Vested
    
    
    (9,000
    )
    
    $
    8.47Forfeited
    
    
    (11,500
    )
    
    $
    8.88Nonvested at December 31, 2007
    
    
    222,203
    
    
    $
    12.20
 Pro Forma Employee Share-Based Compensation Expense
  Year EndedDecember 31, 2005(In thousands,except per share data)Reported net income
    
    $
    5,468Add: Total stock-based compensation expense included
in reported net income, net of tax
    
    
    117Deduct: Total stock-based compensation expense determined
under the fair value method for all awards, net of tax.
    
    
    (1,247
    )Pro forma net income
    
    $
    4,338Basic earnings per common share:As reported
    
    $
    0.56Pro forma
    
    $
    0.44Diluted earnings per common share:As reported
    
    $
    0.54Pro forma
    
    $
    0.43
 68




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 10  Common Stock
  Note 11  Preferred Stock
   Note 12  Preferred Share Purchase Rights
  Note 13  Segment Reporting
  IT Outsourcing Services
 Government Technology Services
 69




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 13  Segment Reporting
 IT Consulting and Systems Integration
 Other Services
   Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)RevenueCommercialIT Outsourcing Services
    
    $
    104,659
    
    
    $
    86,461
    
    
    $
    76,845IT Consulting and Systems Integration
    
    
    28,064
    
    
    
    24,013
    
    
    
    24,483Other Services
    
    
    20,219
    
    
    
    9,497
    
    
    
    9,010Total Commercial
    
    
    152,942
    
    
    
    119,971
    
    
    
    110,338Government Technology Services
    
    
    69,254
    
    
    
    47,393
    
    
    
    56,159Total revenue
    
    $
    222,196
    
    
    $
    167,364
    
    
    $
    166,497Gross ProfitCommercialIT Outsourcing Services
    
    $
    26,888
    
    
    $
    21,102
    
    
    $
    18,415Asset impairment loss
    
    
    
    
    
    
    (580
    )
    
    
    Total IT Outsourcing Services
    
    
    26,888
    
    
    
    20,522
    
    
    
    18,415IT Consulting and Systems Integration
    
    
    6,187
    
    
    
    5,741
    
    
    
    6,068Other Services
    
    
    4,789
    
    
    
    1,610
    
    
    
    1,820Total Commercial
    
    
    37,864
    
    
    
    27,873
    
    
    
    26,303Government Technology Services
    
    
    18,978
    
    
    
    12,604
    
    
    
    14,880Total gross profit
    
    
    56,842
    
    
    
    40,477
    
    
    
    41,183Selling, general and administrative expense
    
    
    (46,547
    )
    
    
    (38,317
    )
    
    
    (33,992
    )Net interest income (expense)
    
    
    (572
    )
    
    
    776
    
    
    
    390Foreign currency transaction gain (loss)
    
    
    (84
    )
    
    
    (186
    )
    
    
    215Income from continuing operations before income taxes
    
    $
    9,639
    
    
    $
    2,750
    
    
    $
    7,796
 70




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 13  Segment Reporting
 Year Ended December 31,2007
    
    
    2006
    
    
    2005(In thousands)Depreciation and AmortizationIT Outsourcing Services
    
    $
    1,555
    
    
    $
    1,715
    
    
    $
    2,034IT Consulting and Systems Integration
    
    
    158
    
    
    
    169
    
    
    
    209Government Technology Services
    
    
    34
    
    
    
    70
    
    
    
    105Other Services
    
    
    1
    
    
    
    1
    
    
    
    Unallocated depreciation and amortization
    
    
    5,258
    
    
    
    3,193
    
    
    
    3,141Total depreciation and amortization
    
    $
    7,006
    
    
    $
    5,148
    
    
    $
    5,489
  Geographic Information2007
    
    
    2006
    
    
    2005Long-Lived
    
    
    
    
    
    
    Long-Lived
    
    
    
    
    
    
    Long-LivedRevenue
    
    
    Assets
    
    
    Revenue
    
    
    Assets
    
    
    Revenue
    
    
    Assets(In thousands)United States
    
    $
    137,276
    
    
    $
    71,083
    
    
    $
    110,887
    
    
    $
    32,659
    
    
    $
    116,508
    
    
    $
    33,543Europe:Belgium
    
    
    44,272
    
    
    
    3,697
    
    
    
    37,537
    
    
    
    3,488
    
    
    
    35,631
    
    
    
    3,601Rest of Europe
    
    
    40,648
    
    
    
    11,677
    
    
    
    18,940
    
    
    
    5,416
    
    
    
    14,358
    
    
    
    4,676Total Europe
    
    
    84,920
    
    
    
    15,374
    
    
    
    56,477
    
    
    
    8,904
    
    
    
    49,989
    
    
    
    8,277Total
    
    $
    222,196
    
    
    $
    86,457
    
    
    $
    167,364
    
    
    $
    41,563
    
    
    $
    166,497
    
    
    $
    41,820
  Year Ended December 31,2007
    
    2006
    
    2005U.S. Federal Government
    
    
    27.1
    %
    
    
    24.9
    %
    
    
    30.0
    %Ford Motor Company
    
    
    20.1
    %
    
    
    26.4
    %
    
    
    27.4
    %Total
    
    
    47.2
    %
    
    
    51.3
    %
    
    
    57.4
    %
 71




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 13  Segment Reporting
    Note 14  Related Party Transactions
   Note 15  Contingencies
  Note 16  Discontinued Operations
  72




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 16  Discontinued Operations
  Year Ended December 31,2007
    
    2006
    
    2005(In thousands, except per share data)Revenue
    
    $
    
    
    
    $
    
    
    
    $
    87Income (loss) before income taxes
    
    $
    
    
    
    $
    (43
    )
    
    $
    74
 Note 17  Subsequent Event
  Note 18  Selected Quarterly Financial Data (Unaudited)
  Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 31(In thousands, except per share data)2007Revenue
    
    $
    46,194
    
    
    $
    52,544
    
    
    $
    59,151
    
    
    $
    64,308Gross profit
    
    
    11,576
    
    
    
    13,610
    
    
    
    15,642
    
    
    
    16,015Income from continuing operations
    
    
    904
    
    
    
    1,512
    
    
    
    2,075
    
    
    
    1,805Net income
    
    $
    904
    
    
    $
    1,512
    
    
    $
    2,075
    
    
    $
    1,805Earnings per share from continuing
operations:Basic per common
    
    $
    0.09
    
    
    $
    0.15
    
    
    $
    0.20
    
    
    $
    0.17Diluted per common
    
    $
    0.09
    
    
    $
    0.14
    
    
    $
    0.20
    
    
    $
    0.17Earnings per share:Basic per common
    
    $
    0.09
    
    
    $
    0.15
    
    
    $
    0.20
    
    
    $
    0.17Diluted per common
    
    $
    0.09
    
    
    $
    0.14
    
    
    $
    0.20
    
    
    $
    0.17
 73




---



##### 



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 18  Selected Quarterly Financial Data (Unaudited)
 Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 31(In thousands, except per share data)2006Revenue
    
    $
    40,598
    
    
    $
    40,869
    
    
    $
    42,027
    
    
    $
    43,871Gross profit
    
    
    9,815
    (1)
    
    
    9,506
    
    
    
    10,138
    
    
    
    11,019Income (loss) from continuing operations
    
    
    337
    (2)
    
    
    (75
    )(3)
    
    
    381
    (4)
    
    
    1,234Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (11
    )
    
    
    (32
    )Net income (loss)
    
    $
    337
    (2)
    
    $
    (75
    )(3)
    
    $
    370
    (4)
    
    $
    1,202Earnings (loss) per share from continuing
operations:Basic per common
    
    $
    0.03
    (2)
    
    $
    (0.01
    )(3)
    
    $
    0.04
    (4)
    
    $
    0.12Diluted per common
    
    $
    0.03
    (2)
    
    $
    (0.01
    )(3)
    
    $
    0.04
    (4)
    
    $
    0.12Earnings (loss) per share:Basic per common
    
    $
    0.03
    (2)
    
    $
    (0.01
    )(3)
    
    $
    0.04
    (4)
    
    $
    0.12Diluted per common
    
    $
    0.03
    (2)
    
    $
    (0.01
    )(3)
    
    $
    0.04
    (4)
    
    $
    0.12
 
 (1)
    
    Includes a pre-tax loss of $580,000 from the write-down of a software asset.(2)
    
    Includes an after-tax loss of $383,000 from the write-down of a software asset and
after-tax expenses of $329,000 for legal and professional fees associated with a proxy
contest initiated by a shareholder.(3)
    
    Includes after-tax expenses of $568,000 for legal and professional fees associated
with the proxy contest.(4)
    
    Includes after-tax expenses of $30,000 for legal and professional fees associated
with the proxy contest and after-tax expenses of $429,000 for settlement of claims
against the Company by certain former Company officers. 74




---



##### 



Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  Item 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    Changes in Internal Control over Financial Reporting
  Item 9B. OTHER INFORMATION
  75




---



##### 



PART III
 Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors and Executive Officers
   Code of Ethics
   Corporate Governance
  ®
 Item 11. EXECUTIVE COMPENSATION
  76




---



##### 



Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
   Equity Compensation Plan Information(c)(a)
    
    
    
    
    
    
    Number of securitiesNumber of securities
    
    
    (b)
    
    
    remaining available for futureto be issued upon
    
    
    Weighted-average
    
    
    issuance under equityexercise of outstanding
    
    
    exercise price of
    
    
    compensation plansoptions, warrants
    
    
    outstanding options,
    
    
    (excluding securitiesPlan Category
    
    and rights(1)
    
    
    warrants and rights
    
    
    reflected in column (a))Equity compensation plans approved
by security holders
    
    
    1,511,600
    
    
    $
    11.02
    
    
    
    1,360,480Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,511,600
    
    
    $
    11.02
    
    
    
    1,360,480
 
 (1)
    
    Represents options to purchase shares of the Companys common stock. Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  Director Independence
  Related Party Transactions
  Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  77




---



##### 



PART IV
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  (1)
    
    See Item 8  Financial Statements and Supplementary Data beginning at page 41.(2)
    
    Financial Statement SchedulesSchedule II  Valuation and Qualifying Accounts for the years ended December 31, 2007,
2006 and 2005(3)
    
    Exhibits.
 ExhibitNumber
    
    Exhibit
    
    Reference *2.1
    
    Share Purchase Agreement, dated May 13, 2004, in respect of the Shares in Advance
Network Engineering NV, between Peter De Gendt, Werner Meynaerts, Pascal Claessens,
Wim De Geetere, and Christophe Gesqueire, as Sellers, and TechTeam Global NV as
Purchaser (excluding Exhibits and Schedules thereto).
    
    *62.2
    
    First Amendment to Share Purchase Agreement between Peter De Gendt, Werner
Meynaerts, Pascal Claessens, Wim De Geetere, and Christophe Gesqueire, as Sellers,
and TechTeam Global NV as Purchaser, dated December 31, 2006.
    
    *122.3
    
    Share Purchase Agreement, dated October 3, 2005, by and between TechTeam Global,
Inc., TechTeam Global NV/SA and Akela Informatique SRL, Lucian Ionut Butnaru, Peter
Andrei Ungureanu, Sabin Girlea, Philippe Bouzier, Alain Joseph Maurice Kremer and
George Tudor.
    
    *82.4
    
    Share Purchase Agreement between TechTeam Global AB and SQM Nordic AB dated January
19, 2007.
    
    *112.5
    
    First Amendment of Share Purchase Agreement, dated as of February 9, 2007.
    
    *112.6
    
    Membership Interest Purchase Agreement between TechTeam Government Solutions, Inc.,
NewVectors Holding LLC, Altarum Supporting Organization, Inc. and Altarum Institute
dated May 23, 2007.
    
    *143.1
    
    Certification of Incorporation of TechTeam Global, Inc. filed with the Delaware
Secretary of State on September 14, 1987.
    
    *53.2
    
    Certificate of Amendment dated November 27, 1987 to our Certificate of Incorporation.
    
    *53.3
    
    Certificate of Amendment dated May 8, 2002 to Certificate of Incorporation.
    
    *53.4
    
    Bylaws of TechTeam Global, Inc. as Amended and Restated February 13, 2006.
    
    *910.1
    
    Lease Agreement for office space in Southfield, Michigan known as the Cumberland
Tech Center between the Company and Eleven Inkster Associates dated September 27,
1993.
    
    *210.2
    
    Seventh Amendment dated August 24, 2006 to the Lease Agreement for office space in
Southfield, Michigan between Eleven Inkster L.L.C. and the Company.
    
    *1010.3
    
    Lease for office space in Dearborn, Michigan between the Company and Dearborn Atrium
Associates Limited Partnership dated November 18, 1996.
    
    *310.4
    
    Third Amendment to Lease between the Company and Dearborn Tech, L.L.C. (owner of
interest of Dearborn Atrium Associates Limited Partnership) dated November 30, 2004.
    
    *610.5
    
    Lease Agreement for office space in Davenport, Iowa known as the 1010 Shopping
Center between the Company and Partnership 1010, L.L.P. dated August 28, 1999.
    
    *4
 78




---



##### 



ExhibitNumber
    
    Exhibit
    
    Reference *10.6
    
    Office Lease Agreement by and between FJ Dulles Business Park II, L.L.C.,
as Landlord, and TechTeam Government Solutions, Inc., (formerly known as
Digital Support Corporation) as Tenant, dated December 21, 2000.
    
    *610.7
    
    Lease Contract between IMMOBILIERE DE LA RUE DE STRASBOURG SA and
TechTeam Global NV/SA, as amended, dated April 4, 2003.
    
    *610.8
    
    Office Building Lease between Elizabethean Court Associates III L.P., as
landlord, and TechTeam Global, Inc., as tenant, dated May 18, 2006.
    
    *1210.9
    
    Lease Agreement for office space in Bucharest, Romania between S.C.
Italian-Romanian Industrial Development Enterprises  IRIDE SA and
TechTeam Global SRL dated February 2, 2005.
    
    *710.10
    
    1990 Nonqualified Stock Option Plan.
    
    *110.11
    
    2004 Incentive Stock and Awards Plan.
    
    *710.12
    
    2006 Incentive Stock and Awards Plan.
    
    *1310.13
    
    TechTeam Global, Inc. Non-Employee Directors Equity Fee Guidelines under
2006 Incentive Stock and Awards Plan.
    
    *1510.14
    
    TechTeam Global, Inc. Non-Employee Directors Deferred Compensation Plan.
    
    *1510.15
    
    TechTeam Global, Inc. Compensation Policy for Non-Employee Directors.
    
    *1510.16
    
    TechTeam Global, Inc. Executive Annual Incentive Plan.10.17
    
    TechTeam Global, Inc. Executive Long Term Incentive Program.
    
    *1210.18
    
    Supplemental Retirement Plan dated October 1, 2000.
    
    *410.19
    
    Employment Agreement Relating to Change of Control.
    
    *610.20
    
    Employment Agreement between TechTeam Europe, NV and Christoph Neut dated
October 2, 1996.
    
    *610.21
    
    Employment and Noncompetition Agreement between TechTeam Global, Inc. and
William C. Brown, dated February 3, 2006.
    
    *910.22
    
    Amendment to Employment and Noncompetition Agreement between TechTeam
Global, Inc. and William C. Brown.
    
    *1610.23
    
    Employment and Noncompetition Agreement between TechTeam Global, Inc. and
Gary J. Cotshott, dated February 11, 2008.
    
    *1710.24
    
    Ford Global SPOC Agreement with Ford Motor Company dated December 1, 2005.
    
    *910.25
    
    Credit Agreement dated as of June 1, 2007 among TechTeam Global, Inc.,
the Lenders Party Hereto, JPMorgan Chase Bank, NA, as Administrative
Agent and J.P. Morgan Securities, Inc., as Sole Bookrunner and Sole Lead
Arranger.
    
    *1410.26
    
    Pledge and Security Agreement dated June 1, 2007 between TechTeam Global,
Inc., TechTeam Cyntergy, LLC, TechTeam Government Solutions, Inc., Sytel,
Inc. and JPMorgan Chase Bank, N.A. as Administrative Agent.
    
    *1421.1
    
    List of subsidiaries of TechTeam Global, Inc.23.1
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Certification of Gary J. Cotshott Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Marc J. Lichtman Pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
 79




---



##### 



ExhibitNumber
    
    Exhibit
    
    Reference *32.1
    
    Certification of Gary J. Cotshott Pursuant
to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Marc J. Lichtman Pursuant
to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
  Exhibit*1
    
    Incorporated by reference to our Annual Report on Form 10-K for the year ended December 31,
1990, filed as Exhibit 4.14 thereto.*2
    
    Incorporated by reference to our Annual Report on Form 10-KSB for the year ended December 31,
1993.*3
    
    Incorporated by reference to our Annual Report on Form 10-K dated December 31, 1996.*4
    
    Incorporated by reference to our Annual Report on Form 10-K dated March 31, 2001.*5
    
    Incorporated by reference to our Annual Report on Form 10-K dated March 18, 2003.*6
    
    Incorporated by reference to our Report on Form 10-K dated March 24, 2004.*7
    
    Incorporated by reference to our Annual Report on Form 10-K dated March 18, 2005.*8
    
    Incorporated by reference to our Report on Form 8-K dated October 5, 2005.*9
    
    Incorporated by reference to our Annual Report on Form 10-K dated March 16, 2006.*10
    
    Incorporated by reference to our Report on Form 10-Q dated November 9, 2006.*11
    
    Incorporated by reference to our Report on Form 8-K dated February 9, 2007.*12
    
    Incorporated by reference to our Annual Report on Form 10-K dated March 16, 2007.*13
    
    Incorporated by reference to our Proxy Statement Pursuant to Section 14(a) dated March 29, 2007.*14
    
    Incorporated by reference to our Report on Form 8-K dated June 5, 2007.*15
    
    Incorporated by reference to our Report on Form 10-Q dated August 9, 2007.*16
    
    Incorporated by reference to our Report on Form 8-K dated November 7, 2007.*17
    
    Incorporated by reference to our Report on Form 8-K dated February 14, 2008.
 80




---



##### 



SIGNATURES
  TechTeam Global, Inc.
 Date:
    
    March 17, 2008
    
    
    
    By:
    
    /s/ Gary J. Cotshott
    
    
    
    Gary J. CotshottPresident and Chief Executive
Officer (Principal Executive Officer)By:
    
    /s/ Marc J. Lichtman
    
    
    
    Marc J. LichtmanVice President, Chief
Financial Officer and
Treasurer (Principal
Financial Officer)
  /s/ William C. Brown

William C. Brown
    
    Director/s/ Kent Heyman
    
    DirectorKent Heyman/s/ John P. Jumper
    
    DirectorGeneral John P. Jumper (USAF Retired)/s/ James A. Lynch
    
    DirectorJames A. Lynch/s/ Alok Mohan
    
    DirectorAlok Mohan/s/ James G. Roche
    
    DirectorJames
G. Roche/s/ Andrew R. Siegel
    
    DirectorAndrew R. Siegel/s/ Richard R. Widgren
    
    DirectorRichard R. Widgren
 81




---



##### 



SCHEDULE II  Valuation and Qualifying Accounts
for the Years Ended December 31, 2007, 2006 and 2005
 Charged toBalance at
    
    (Reduction of)
    
    
    
    
    
    BalanceBeginning
    
    Costs and
    
    
    
    
    
    at EndDescription
    
    of Period
    
    Expenses
    
    Deductions
    
    of Period(In thousands)2007Allowance for doubtful accounts
    
    $
    466
    
    
    $
    145
    
    
    $
    
    
    
    $
    611Valuation allowance for deferred taxes
    
    $
    290
    
    
    $
    213
    
    
    $
    
    
    
    $
    5032006Allowance for doubtful accounts
    
    $
    757
    
    
    $
    232
    
    
    $
    (523
    )
    
    $
    466Valuation allowance for deferred taxes
    
    $
    505
    
    
    $
    (215
    )
    
    $
    
    
    
    $
    2902005Allowance for doubtful accounts
    
    $
    912
    
    
    $
    (286
    )
    
    $
    131
    
    
    $
    757Valuation allowance for deferred taxes
    
    $
    765
    
    
    $
    (260
    )
    
    $
    
    
    
    $
    505
 82




---



##### 



INDEX OF EXHIBITS
 ExhibitNumber
    
    Exhibit10.16
    
    TechTeam Global, Inc. Executive Annual Incentive Plan.21.1
    
    List of subsidiaries to TechTeam Global, Inc.23.1
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Certification of Gary J. Cotshott Pursuant to Rule 13a-14(a) of
the Securities Exchange Act of 1934, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Marc J. Lichtman Pursuant to Rule 13a-14(a) of
the Securities Exchange Act of 1934, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Gary J. Cotshott Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2
    
    Certification of Marc J. Lichtman Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
 83