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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, 2008
 Commission File Number: 0-16284
 TECHTEAM GLOBAL, INC.
  Delaware
    
    38-2774613(State or other jurisdiction of incorporation)
    
    (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(Do not check if a smaller reporting company)
Smaller reporting company o o þ
 ®
  DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TECHTEAM GLOBAL, INC.
 FORM 10-K
 TABLE OF CONTENTS
 PageNumberPART IItem 1 Business
    
    3Item 1A Risk Factors
    
    12Item 1B Unresolved Staff Comments
    
    21Item 2 Properties
    
    22Item 3 Legal Proceedings
    
    22Item 4 Submission of Matters to a Vote of Security Holders
    
    22PART IIItem 5 Market for Registrants Common Equity and Related Stockholder Matters
    
    23Item 6 Selected Financial Data
    
    25Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    27Item 7A Quantitative and Qualitative Disclosures about Market Risk
    
    42Item 8 Financial Statements and Supplementary Data
    
    44Item 9 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    80Item 9A Controls and Procedures
    
    80Item 9B Other Information
    
    80PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    81Item 11 Executive Compensation
    
    81Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    82Item 13 Certain Relationships and Related Transactions, and Director Independence
    
    82Item 14 Principal Accountant Fees and Services
    
    82PART IVItem 15 Exhibits and Financial Statement Schedules
    
    83SIGNATURES
    
    87FINANCIAL STATEMENT SCHEDULE
    
    89EX-10.4EX-10.8EX-10.12EX-10.13EX-10.20EX-10.25EX-10.26EX-10.28EX-10.30EX-10.33EX-10.34EX-10.35EX-10.36EX-10.37EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2EX-99.1
  2




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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 global economic crisis; 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
  3




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Services and Information about Operating Segments
  1. IT Outsourcing Services
  Enterprise Support Services
     4




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Business Processing Outsourcing (BPO) Services
  Global IT Outsourcing Delivery Model
    5




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




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4. Other Services
  Impact of Business with Major Clients
  7




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Ford Motor Company
       U.S. Federal Government
   8




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Competition
  Magic Quadrant for Help Desk Outsourcing, North America Magic Quadrant for
Desktop Outsourcing Services, North America
   9




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Sales and Marketing
   Seasonality
  Intellectual Property
  Employees
  10




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European Operations
     Asia/Pacific Operations
  Discontinued Operations  Leasing
  11




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Item 1A. RISK FACTORS
 Factors Influencing Future Results
   The recent global economic and financial market crisis has had and may continue to have a negative
effect on our business and operations.
     12




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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 or we are unable to replace revenue
lost as a result of recent contract losses.
  The competitive pressures we face could harm our revenue, gross margin and business prospects.
    We are subject to contract risks inherent in our business.
   13




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We are subject to risks inherent in the provision of technology services to governmental entities.
     14




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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 customer service management personnel could
have an adverse effect on our ability to meet our organic growth targets.
  15




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Capital markets are currently experiencing a period of dislocation and instability, which has had
and could continue to have a negative impact on the availability and cost of capital.
  Credit market developments may reduce availability under our credit agreement.
  Implementation of our strategy to grow through complementary business acquisitions is subject to
numerous risks and difficulties.
  16




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Inasmuch as the Company has a market capitalization lower than its current book value, the Company
will need to continue to perform interim impairment testing under Statement of Financial Accounting
Standards 142 Goodwill and Other Intangible Assets, which may require the Company to record a
goodwill impairment charge.
  We are subject to numerous risks relating to our international operations.
   
    
    changes in a countrys or regions economic or political conditions, including
inflation, recession, interest rate fluctuations, terrorism and religious extremism 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.
  17




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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.
    18




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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.
  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.
   19




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Our financial results may be adversely affected by increases in business costs.
  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.
   20




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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.
   
 Item 1B. UNRESOLVED STAFF COMMENTS
  21




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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  09/30/09
    
    
    25,284Bucharest, Romania
    
    Help Desk Facility
    
    09/01/04  05/13/15
    
    
    33,146Ann Arbor, MI
    
    Sales and Administrative Office
    
    05/31/07  03/31/13
    
    
    17,766Chantilly, 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 TechTeam Akela SRL
    
    10/01/06  07/01/09
    
    
    9,903Stockholm, Sweden
    
    Headquarters of TechTeam SQM AB
    
    02/14/07  12/31/13
    
    
    8,966Dresden, Germany
    
    Help Desk Facility
    
    04/01/08  04/01/14
    
    
    5,475Bethesda, MD
    
    Sales and Administrative Office
    
    06/01/01  10/31/13
    
    
    5,428Alexandria, VA
    
    Sales and Administrative Office
    
    05/31/07  03/31/09
    
    
    5,258Portsmouth, RI
    
    Sales and Administrative Office
    
    06/01/01  05/31/09
    
    
    4,200Sibiu, 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
    
    
    1,270Manila, Philippines
    
    Help Desk Facility
    
    05/01/08  11/30/09
    
    
    3,003
  
 Item 3. LEGAL PROCEEDINGS
  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  22




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PART II
 
 Item 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 ® ®
 Year and Quarter
    
    High
    
    Low2008First Quarter
    
    $
    12.60
    
    
    $
    7.80Second Quarter
    
    
    10.85
    
    
    
    8.45Third Quarter
    
    
    10.65
    
    
    
    7.15Fourth Quarter
    
    
    7.31
    
    
    
    3.342007First Quarter
    
    $
    12.87
    
    
    $
    10.50Second Quarter
    
    
    13.75
    
    
    
    11.42Third Quarter
    
    
    12.23
    
    
    
    9.66Fourth Quarter
    
    
    14.08
    
    
    
    11.42
    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 Program
    
    the ProgramOctober 1, 2008 to October 31, 2008
    
    
    666
    
    
    $
    6.01
    
    
    
    
    
    
    
    1,000,000November 1, 2008 to November 30, 2008
    
    
    708
    
    
    $
    5.56
    
    
    
    12,258
    (b)
    
    
    987,742December 1, 2008 to December 31, 2008
    
    
    2,606
    
    
    $
    4.62
    
    
    
    
    
    
    
    987,742
 
 (a)
    
    3,980 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. These purchases were not made pursuant to publicly
announced plans and were made in the open market.(b)
    
    12,258 shares were purchased by the Company has part of the stock repurchase
program announced on October 30, 2008. Under the program, the Company is authorized to
repurchase up to one million shares of its common stock in the open market as the
Company deems appropriate in a manner consistent with the Credit Agreement. The stock
repurchase program expires on December 31, 2011.  23




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Performance Graph
   
 Total Return IndexDec 2003
    
    Dec 2004
    
    Dec 2005
    
    Dec 2006
    
    Dec 2007
    
    Dec 2008NASDAQ U.S.
    
    $
    100
    
    
    $
    109
    
    
    $
    111
    
    
    $
    122
    
    
    $
    132
    
    
    $
    64NASDAQ Computer
    
    $
    100
    
    
    $
    110
    
    
    $
    114
    
    
    $
    128
    
    
    $
    156
    
    
    $
    90TechTeam Global
    
    $
    100
    
    
    $
    145
    
    
    $
    144
    
    
    $
    161
    
    
    $
    180
    
    
    $
    84
 24




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Item 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Statements of Operations Data
    
    (In thousands, except per share data)RevenueCommercialIT Outsourcing Services
    
    $
    120,166
    
    
    $
    104,659
    
    
    $
    86,461
    
    
    $
    76,845
    
    
    $
    77,205IT Consulting and Systems Integration
    
    
    27,064
    
    
    
    28,064
    
    
    
    24,013
    
    
    
    24,483
    
    
    
    14,641Other Services
    
    
    24,110
    
    
    
    20,219
    
    
    
    9,497
    
    
    
    9,010
    
    
    
    8,000Total Commercial
    
    
    171,340
    (a)
    
    
    152,942
    (c)
    
    
    119,971
    
    
    
    110,338
    (e)
    
    
    99,846
    (g)Government Technology Services
    
    
    88,615
    
    
    
    69,254
    (d)
    
    
    47,393
    
    
    
    56,159
    (f)
    
    
    28,142
    (h)Total revenue
    
    $
    259,955
    
    
    $
    222,196
    
    
    $
    167,364
    
    
    $
    166,497
    
    
    $
    127,988Restructuring charges
    
    $
    5,719
    (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income before income taxes
    
    $
    7,150
    
    
    $
    9,639
    
    
    $
    2,750
    (i)
    
    $
    7,796
    
    
    $
    7,175
    (j)Income tax provision
    
    
    4,182
    
    
    
    3,343
    
    
    
    873
    
    
    
    2,402
    
    
    
    2,547Income from continuing operations
    
    
    2,968
    
    
    
    6,296
    
    
    
    1,877
    
    
    
    5,394
    
    
    
    4,628Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (43
    )
    
    
    74
    
    
    
    97Net income
    
    $
    2,968
    
    
    $
    6,296
    
    
    $
    1,834
    
    
    $
    5,468
    
    
    $
    4,725Diluted earnings per common shareIncome from continuing operations
    
    $
    0.28
    
    
    $
    0.60
    
    
    $
    0.18
    
    
    $
    0.54
    
    
    $
    0.48Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    0.01Net income per share
    
    $
    0.28
    
    
    $
    0.60
    
    
    $
    0.18
    
    
    $
    0.54
    
    
    $
    0.49Weighted average common shares and
common share equivalents outstanding
    
    
    10,555
    
    
    
    10,506
    
    
    
    10,176
    (k)
    
    
    9,832
    (k)
    
    
    8,904Weighted average preferred shares outstanding
    
    
    
    
    
    
    
    
    
    
    
    (k)
    
    
    244
    (k)
    
    
    690
 
 (a)
    
    On May 30, 2008, we acquired 100% of the outstanding stock of Onvaio LLC. On
October 31, 2008, the Company completed the sale of TechTeam A.N.E NV/SA, the results
of which were included in continuing operations through the date of the sale.(b)
    
    On May 28, 2008 and December 30, 2008, we announced corporate-wide organizational
realignment and restructuring actions.(c)
    
    On February 9, 2007, we acquired 100% of the outstanding stock of SQM Sverige AB.(d)
    
    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.(e)
    
    On October 3, 2005, we acquired 100% of the outstanding stock of Akela Informatique SRL.(f)
    
    On January 3, 2005, we acquired 100% of the outstanding stock of Sytel, Inc.(g)
    
    On May 13, 2004, we acquired 100% of the outstanding stock of Advanced Network Engineering NV/SA.(h)
    
    On December 31, 2003, we acquired 100% of the outstanding stock of Digital Support Corporation.(i)
    
    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.(j)
    
    During 2004, we recorded an asset impairment charge of $485,000 related to a software asset.(k)
    
    In May 2005, the holder of our preferred stock converted all outstanding shares of
preferred stock into 689,656 shares of common stock. 25




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As of December 31,Balance Sheet Data
    
    2008 (a)
    
    2007 (b)
    
    2006
    
    2005 (c)
    
    2004 (d)(In thousands)Total assets
    
    $
    167,363
    
    
    $
    182,169
    
    
    $
    117,930
    
    
    $
    123,010
    
    
    $
    88,987Long-term obligations
    
    
    30,156
    
    
    
    33,963
    
    
    
    5,426
    
    
    
    14,115
    
    
    
    1,699Redeemable convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Total shareholders equity
    
    $
    98,733
    
    
    $
    97,031
    
    
    $
    86,308
    
    
    $
    78,240
    (e)
    
    $
    66,660
 
 (a)
    
    On May 30, 2008, we acquired 100% of the outstanding stock of Onvaio LLC. On
October 31, 2008, the Company completed the sale of TechTeam A.N.E NV/SA.(b)
    
    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.(c)
    
    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.(d)
    
    On May 13, 2004, we acquired 100% of the outstanding stock of Advanced Network
Engineering NV/SA.(e)
    
    In May 2005, the holder of our preferred stock converted all outstanding shares of
preferred stock into 689,656 shares of common stock. 26




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Item 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(MD&A)
 Overview
       27




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Results of Operations  Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007
 Revenue
 Year Ended December 31,
    
    
    Increase
    
    
    %2008
    
    
    2007
    
    
    (Decrease)
    
    
    Change(In thousands)RevenueCommercial BusinessIT Outsourcing Services
    
    $
    120,166
    
    
    $
    104,659
    
    
    $
    15,507
    
    
    
    14.8
    %IT Consulting and Systems Integration
    
    
    27,064
    
    
    
    28,064
    
    
    
    (1,000
    )
    
    
    (3.6
    )%Other Services
    
    
    24,110
    
    
    
    20,219
    
    
    
    3,891
    
    
    
    19.2
    %Total Commercial
    
    
    171,340
    
    
    
    152,942
    
    
    
    18,398
    
    
    
    12.0
    %Government Technology Services
    
    
    88,615
    
    
    
    69,254
    
    
    
    19,361
    
    
    
    28.0
    %Total revenue
    
    $
    259,955
    
    
    $
    222,196
    
    
    $
    37,759
    
    
    
    17.0
    %
  IT Outsourcing Services
   28




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IT Consulting and Systems Integration
  Government Technology Services
  Gross Profit and Gross Margin
 Year Ended December 31,2008
    
    
    2007Gross
    
    
    
    
    
    
    Gross
    
    
    Increase
    
    
    %Amount
    
    
    Margin %
    
    
    Amount
    
    
    Margin %
    
    
    (Decrease)
    
    
    Change(In thousands, except percentages)Gross ProfitCommercialIT Outsourcing Services
    
    $
    30,008
    
    
    
    25.0
    %
    
    $
    26,888
    
    
    
    25.7
    %
    
    $
    3,120
    
    
    
    11.6
    %IT Consulting and Systems
Integration
    
    
    6,427
    
    
    
    23.7
    %
    
    
    6,187
    
    
    
    22.0
    %
    
    
    240
    
    
    
    3.9
    %Other Services
    
    
    5,427
    
    
    
    22.5
    %
    
    
    4,789
    
    
    
    23.7
    %
    
    
    638
    
    
    
    13.3
    %Total Commercial
    
    
    41,862
    
    
    
    24.4
    %
    
    
    37,864
    
    
    
    24.8
    %
    
    
    3,998
    
    
    
    10.6
    %Government Technology
Services
    
    
    24,428
    
    
    
    27.6
    %
    
    
    18,978
    
    
    
    27.4
    %
    
    
    5,450
    
    
    
    28.7
    %Total gross profit
    
    $
    66,290
    
    
    
    25.5
    %
    
    $
    56,842
    
    
    
    25.6
    %
    
    $
    9,448
    
    
    
    16.6
    %
  29




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IT Outsourcing Services
  IT Consulting and Systems Integration
 .
 Government Technology Services
  Geographic Market Discussion
 Year Ended December 31,
    
    
    Increase
    
    
    %2008
    
    
    2007
    
    
    (Decrease)
    
    
    Change(In thousands)RevenueCommercialAmericas
    
    $
    72,375
    
    
    $
    68,022
    
    
    $
    4,353
    
    
    
    6.4
    %Europe
    
    
    98,965
    
    
    
    84,920
    
    
    
    14,045
    
    
    
    16.5
    %Total Commercial
    
    
    171,340
    
    
    
    152,942
    
    
    
    18,398
    
    
    
    12.0
    %Government
    
    
    88,615
    
    
    
    69,254
    
    
    
    19,361
    
    
    
    28.0
    %Total revenue
    
    $
    259,955
    
    
    $
    222,196
    
    
    $
    37,759
    
    
    
    17.0
    %Gross MarginCommercialAmericas
    
    
    26.2
    %
    
    
    23.0
    %Europe
    
    
    23.2
    %
    
    
    26.1
    %Total Commercial
    
    
    24.4
    %
    
    
    24.8
    %Government
    
    
    27.6
    %
    
    
    27.4
    %Total Gross Margin
    
    
    25.5
    %
    
    
    25.6
    %
 30




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##### Table of Contents



Americas
  Europe
  Operating Expenses and Other
 Year Ended December 31,
    
    Increase
    
    %2008
    
    2007
    
    (Decrease)
    
    Change(In thousands)Operating Expenses and OtherSelling, general and administrative expense
    
    $
    52,774
    
    
    $
    46,547
    
    
    $
    6,227
    
    
    
    13.4
    %Restructuring charges
    
    $
    5,719
    
    
    $
    
    
    
    $
    5,719
    
    
    NM
    %Net interest expense
    
    $
    (1,712
    )
    
    $
    (572
    )
    
    $
    (1,140
    )
    
    NM
    %Foreign currency transaction gain (loss)
    
    $
    910
    
    
    $
    (84
    )
    
    $
    994
    
    
    NM
    %Other income, net
    
    $
    155
    
    
    $
    
    
    
    $
    155
    
    
    NM
    %Income tax provision
    
    $
    4,182
    
    
    $
    3,343
    
    
    $
    839
    
    
    
    25.1
    %
   31




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##### Table of Contents



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
    %
  32




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##### Table of Contents



IT Outsourcing Services
   IT Consulting and Systems Integration
  Government Technology Services
  33




---



##### Table of Contents



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 Systems Integration
    
    
    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
    %
  IT Outsourcing Services
  IT Consulting and Systems Integration
  34




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##### Table of Contents



Government Technology Services
  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
   35




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##### Table of Contents



Europe
   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
    %
    36




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##### Table of Contents



Impact of Business with Major Clients
  Ford Motor Company
       37




---



##### Table of Contents



U.S. Federal Government
     New Accounting Pronouncements
    38




---



##### Table of Contents



Liquidity and Capital Resources
      Material Commitments
  OperatingMaturities of Material Contractual Obligations
    
    Debt
    
    
    LeasesLess than one year
    
    $
    
    
    
    $
    4,9411-3 years
    
    
    35,189
    
    
    
    7,7634-5 years
    
    
    
    
    
    
    2,556Thereafter
    
    
    
    
    
    
    1,730Total
    
    $
    35,189
    
    
    $
    16,990
 39




---



##### Table of Contents



Critical Accounting Policies and Estimates
  Revenue Recognition
    40




---



##### Table of Contents



Deferred Income Taxes
   Accounts Receivable
   Goodwill Impairment
   41




---



##### Table of Contents



Long-Lived Assets and Identifiable Intangible Asset Impairment
    Business Combinations
  
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    42




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##### Table of Contents



43




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##### Table of Contents



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  PageManagement Report on Internal Control over Financial Reporting
    
    
    45Report of Independent Registered Public Accounting Firm
    
    
    45Report of Independent Registered Public Accounting Firm
    
    
    46Consolidated Statements of Income  Years Ended December 31, 2008, 2007 and 2006
    
    
    47Consolidated Statements of Comprehensive Income (Loss) 
Years Ended December 31, 2008, 2007 and 2006
    
    
    48Consolidated Balance Sheets  As of December 31, 2008 and 2007
    
    
    49Consolidated Statements of Shareholders Equity  Years Ended December 31, 2008, 2007 and 2006
    
    
    50Consolidated Statements of Cash Flows  Years Ended December 31, 2008, 2007 and 2006
    
    
    51Notes to the Consolidated Financial Statements
    
    
    52
    44




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##### Table of Contents



Management Report on Internal Control over Financial Reporting
   
 Report of Independent Registered Public Accounting Firm
      .
   
 
 45




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
        
 46




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
  Year Ended December 31,2008
    
    
    2007
    
    
    2006RevenueCommercialIT Outsourcing Services
    
    $
    120,166
    
    
    $
    104,659
    
    
    $
    86,461IT Consulting and Systems Integration
    
    
    27,064
    
    
    
    28,064
    
    
    
    24,013Other Services
    
    
    24,110
    
    
    
    20,219
    
    
    
    9,497Total Commercial
    
    
    171,340
    
    
    
    152,942
    
    
    
    119,971Government Technology Services
    
    
    88,615
    
    
    
    69,254
    
    
    
    47,393Total revenue
    
    
    259,955
    
    
    
    222,196
    
    
    
    167,364Cost of revenueCommercialIT Outsourcing Services
    
    $
    90,158
    
    
    $
    77,771
    
    
    $
    65,359Asset impairment loss
    
    
    
    
    
    
    
    
    
    
    580Total IT Outsourcing Services
    
    
    90,158
    
    
    
    77,771
    
    
    
    65,939IT Consulting and Systems Integration
    
    
    20,637
    
    
    
    21,877
    
    
    
    18,272Other Services
    
    
    18,683
    
    
    
    15,430
    
    
    
    7,887Total Commercial
    
    
    129,478
    
    
    
    115,078
    
    
    
    92,098Government Technology Services
    
    
    64,187
    
    
    
    50,276
    
    
    
    34,789Total cost of revenue
    
    
    193,665
    
    
    
    165,354
    
    
    
    126,887Gross profitCommercial
    
    
    41,862
    
    
    
    37,864
    
    
    
    27,873Government Technology Services
    
    
    24,428
    
    
    
    18,978
    
    
    
    12,604Total gross profit
    
    
    66,290
    
    
    
    56,842
    
    
    
    40,477Selling, general and administrative expense
    
    
    52,774
    
    
    
    46,547
    
    
    
    38,317Restructuring charges
    
    
    5,719
    
    
    
    
    
    
    
    Operating income
    
    
    7,797
    
    
    
    10,295
    
    
    
    2,160Net interest income (expense)
    
    
    (1,712
    )
    
    
    (572
    )
    
    
    776Foreign currency transaction gain (loss)
    
    
    910
    
    
    
    (84
    )
    
    
    (186
    )Other income, net
    
    
    155
    
    
    
    
    
    
    
    Income before income taxes
    
    
    7,150
    
    
    
    9,639
    
    
    
    2,750Income tax provision
    
    
    4,182
    
    
    
    3,343
    
    
    
    873Income from continuing operations
    
    
    2,968
    
    
    
    6,296
    
    
    
    1,877Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (43
    )Net income
    
    $
    2,968
    
    
    $
    6,296
    
    
    $
    1,834Basic earnings per common shareIncome from continuing operations
    
    $
    0.28
    
    
    $
    0.61
    
    
    $
    0.19Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    Net income per common share
    
    $
    0.28
    
    
    $
    0.61
    
    
    $
    0.18Diluted earnings per common shareIncome from continuing operations
    
    $
    0.28
    
    
    $
    0.60
    
    
    $
    0.18Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    Net income per common share
    
    $
    0.28
    
    
    $
    0.60
    
    
    $
    0.18Weighted average number of common shares and
common share equivalents outstandingBasiccommon
    
    
    10,529
    
    
    
    10,355
    
    
    
    10,092Dilutedcommon
    
    
    10,555
    
    
    
    10,506
    
    
    
    10,176
  47




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Net income, as set forth in the consolidated
statements of operations
    
    $
    2,968
    
    
    $
    6,296
    
    
    $
    1,834Other comprehensive income (loss)Foreign currency translation adjustment
    
    
    (3,525
    )
    
    
    1,487
    
    
    
    2,839Unrealized loss on derivative instrument
    
    
    (318
    )
    
    
    (755
    )
    
    
    Comprehensive income (loss)
    
    $
    (875
    )
    
    $
    7,028
    
    
    $
    4,673
  48




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
  December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    16,881
    
    
    $
    19,431Accounts receivable (less allowance of $986 at December 31, 2008
and $611 at December 31, 2007)
    
    
    59,705
    
    
    
    70,901Prepaid expenses and other current assets
    
    
    4,315
    
    
    
    4,016Total current assets
    
    
    80,901
    
    
    
    94,348Property, equipment and software, net
    
    
    8,327
    
    
    
    10,562Goodwill and other intangible assets, net
    
    
    77,361
    
    
    
    76,686Other assets
    
    
    774
    
    
    
    573Total assets
    
    $
    167,363
    
    
    $
    182,169LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    7,987
    
    
    $
    5,850Accounts payable
    
    
    6,340
    
    
    
    20,952Accrued payroll and related taxes
    
    
    12,477
    
    
    
    14,237Accrued expenses
    
    
    9,054
    
    
    
    8,317Deferred revenue
    
    
    1,435
    
    
    
    1,445Other current liabilities
    
    
    1,181
    
    
    
    374Total current liabilities
    
    
    38,474
    
    
    
    51,175Long-term liabilitiesLong-term debt, less current portion
    
    
    27,202
    
    
    
    31,167Deferred income taxes
    
    
    1,966
    
    
    
    1,738Other long-term liabilities
    
    
    988
    
    
    
    1,058Total long-term liabilities
    
    
    30,156
    
    
    
    33,963Shareholders equityPreferred stock, 5,000,000 shares authorized, no shares issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 45,000,000 shares authorized,
10,884,998 and 10,693,488 shares issued and outstanding at
December 31, 2008 and 2007, respectively
    
    
    109
    
    
    
    107Additional paid-in capital
    
    
    77,939
    
    
    
    75,364Retained earnings
    
    
    21,359
    
    
    
    18,391Accumulated other comprehensive income (loss)
    
    
    (674
    )
    
    
    3,169Total shareholders equity
    
    
    98,733
    
    
    
    97,031Total liabilities and shareholders equity
    
    $
    167,363
    
    
    $
    182,169
  49




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##### Table of Contents



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, 2006
    
    $
    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
    
    
    
    97,031Proceeds from issuance of shares
under stock option plans
    
    
    1
    
    
    
    408
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    409Common stock issued to directors
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160Purchase of common stock
    
    
    
    
    
    
    (61
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61
    )Issuance of restricted stock
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    2,157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,157Net income for 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,968
    
    
    
    
    
    
    
    2,968Unrealized loss on derivative instrument
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (318
    )
    
    
    (318
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,525
    )
    
    
    (3,525
    )Other
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88
    )Balance at December 31, 2008
    
    $
    109
    
    
    $
    77,939
    
    
    $
    
    
    
    $
    21,359
    
    
    $
    (674
    )
    
    $
    98,733
  50




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Operating activitiesNet income
    
    $
    2,968
    
    
    $
    6,296
    
    
    $
    1,834Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    4,076
    
    
    
    3,383
    
    
    
    3,146Amortization
    
    
    3,859
    
    
    
    3,623
    
    
    
    2,002Asset impairment loss
    
    
    
    
    
    
    
    
    
    
    580Non-cash expense related to stock options and issuance
of common stock and restricted common stock
    
    
    2,317
    
    
    
    1,387
    
    
    
    462Gain on disposition of business
    
    
    (155
    )
    
    
    
    
    
    
    Credit for deferred income taxes
    
    
    (187
    )
    
    
    (1,148
    )
    
    
    (938
    )Provision for uncollectible accounts
    
    
    479
    
    
    
    145
    
    
    
    232Other
    
    
    (21
    )
    
    
    8
    
    
    
    30Changes in assets and liabilities, net of acquisitions Accounts receivable
    
    
    6,595
    
    
    
    (18,329
    )
    
    
    3,690Prepaid expenses and other assets
    
    
    379
    
    
    
    1,259
    
    
    
    (1,455
    )Accounts payable
    
    
    (13,840
    )
    
    
    11,059
    
    
    
    (4,628
    )Accrued payroll and related taxes
    
    
    (477
    )
    
    
    (1,084
    )
    
    
    (905
    )Income taxes receivable and accrued income taxes
    
    
    1,442
    
    
    
    721
    
    
    
    (1,629
    )Deferred revenue
    
    
    37
    
    
    
    (415
    )
    
    
    918Accrued expenses and other liabilities
    
    
    1,336
    
    
    
    (974
    )
    
    
    (53
    )Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    43Net operating cash flow from discontinued operations
    
    
    
    
    
    
    (3
    )
    
    
    62Net cash provided by operating activities
    
    
    8,808
    
    
    
    5,928
    
    
    
    3,391Investing activitiesDisposition of business, net of cash disposed
    
    
    953
    
    
    
    
    
    
    
    Purchases of property, equipment and software
    
    
    (2,475
    )
    
    
    (3,882
    )
    
    
    (4,182
    )Cash paid for acquisitions, net of cash acquired
    
    
    (6,084
    )
    
    
    (47,160
    )
    
    
    (494
    )Net cash used in investing activities
    
    
    (7,606
    )
    
    
    (51,042
    )
    
    
    (4,676
    )Financing activitiesProceeds from issuance of long-term debt
    
    
    5,000
    
    
    
    38,900
    
    
    
    Proceeds from issuance of common stock
    
    
    348
    
    
    
    1,085
    
    
    
    2,542Purchase of common stock
    
    
    (61
    )
    
    
    
    
    
    
    Tax (expense) benefit from stock options
    
    
    (28
    )
    
    
    570
    
    
    
    497Payments on long-term debt
    
    
    (6,873
    )
    
    
    (6,299
    )
    
    
    (7,763
    )Net cash provided by (used in) financing activities
    
    
    (1,614
    )
    
    
    34,256
    
    
    
    (4,724
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (2,138
    )
    
    
    207
    
    
    
    1,335Decrease in cash and cash equivalents
    
    
    (2,550
    )
    
    
    (10,651
    )
    
    
    (4,674
    )Cash and cash equivalents at beginning of year
    
    
    19,431
    
    
    
    30,082
    
    
    
    34,756Cash and cash equivalents at end of year
    
    $
    16,881
    
    
    $
    19,431
    
    
    $
    30,082
  51




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##### Table of Contents



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
   52




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##### Table of Contents



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
   53




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
      54




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##### Table of Contents



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, 2006
    
    $
    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
    
    
    
    61,523Goodwill acquired
    
    
    4,216
    
    
    
    146
    
    
    
    23
    
    
    
    5
    
    
    
    4,390Disposition of business
    
    
    
    
    
    
    
    
    
    
    (742
    )
    
    
    
    
    
    
    (742
    )Balance as of December 31, 2008
    
    $
    5,462
    
    
    $
    53,949
    
    
    $
    2,693
    
    
    $
    3,067
    
    
    $
    65,171
  Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedDecember 31, 2008
    
    
    Average
    
    
    December 31, 2007
    
    
    AverageAccumulated
    
    
    Amortization
    
    
    
    
    
    
    Accumulated
    
    
    AmortizationCost
    
    
    Amortization
    
    
    Period
    
    
    Cost
    
    
    Amortization
    
    
    Period(In thousands)
    
    
    
    
    
    (In thousands)Customer-related assets
    
    $
    22,407
    
    
    $
    10,533
    
    
    7.3 years
    
    $
    22,094
    
    
    $
    7,447
    
    
    7.4 yearsNoncompete agreement
    
    
    1,175
    
    
    
    907
    
    
    3.8 years
    
    
    975
    
    
    
    609
    
    
    4.2 yearsTrademark and other
    
    
    443
    
    
    
    395
    
    
    4.1 years
    
    
    443
    
    
    
    293
    
    
    4.1 years$
    24,025
    
    
    $
    11,835
    
    
    
    
    
    
    $
    23,512
    
    
    $
    8,349
    55




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
 Deferred Income Taxes
   Foreign Currency Translation
  Revenue Recognition
   56




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##### Table of Contents



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
  57




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##### Table of Contents



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
   58




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Summary of Significant Accounting Policies
  Note 2  Earnings Per Share
    Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands, except per share data)Income from continuing operations
    
    $
    2,968
    
    
    $
    6,296
    
    
    $
    1,877Basic weighted average common shares
    
    
    10,529
    
    
    
    10,355
    
    
    
    10,092Common stock equivalents
    
    
    26
    
    
    
    151
    
    
    
    84Diluted weighted average common shares
    
    
    10,555
    
    
    
    10,506
    
    
    
    10,176Earnings per share from continuing operations:Basic earnings per common share
    
    $
    0.28
    
    
    $
    0.61
    
    
    $
    0.19Diluted earnings per common share
    
    $
    0.28
    
    
    $
    0.60
    
    
    $
    0.18
 59




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 3  Property, Equipment and Software
  December 31,2008
    
    
    2007(In thousands)Computer equipment and office furniture
    
    $
    30,575
    
    
    $
    29,670Software
    
    
    15,187
    
    
    
    15,480Leasehold improvements
    
    
    6,495
    
    
    
    6,349Transportation equipment
    
    
    373
    
    
    
    46452,630
    
    
    
    51,963Less  Accumulated depreciation and amortization
    
    
    (44,303
    )
    
    
    (41,401
    )Net property, equipment and software
    
    $
    8,327
    
    
    $
    10,562
 Note 4  Restructuring
   AccruedRestructuring
    
    
    Adjustments
    
    
    
    
    
    
    AccruedCharges at
    
    
    to Accrued
    
    
    
    
    
    
    RestructuringDecember 31,
    
    
    Restructuring
    
    
    Cash
    
    
    Charges at2007
    
    
    Charges
    
    
    Payments
    
    
    December 31, 2008(In thousands)Workforce reductions
    
    $
    
    
    
    $
    3,960
    
    
    $
    (3,601
    )
    
    $
    359Other
    
    
    
    
    
    
    1,759
    
    
    
    (372
    )
    
    
    1,387Total
    
    $
    
    
    
    $
    5,719
    
    
    $
    (3,973
    )
    
    $
    1,746
 60




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4  Restructuring
  AccruedRestructuring
    
    
    Adjustments
    
    
    
    
    
    
    AccruedCharges at
    
    
    to Accrued
    
    
    
    
    
    
    RestructuringDecember 31,
    
    
    Restructuring
    
    
    Cash
    
    
    Charges at2007
    
    
    Charges
    
    
    Payments
    
    
    December 31, 2008(In thousands)Restructuring chargesCommercial IT Outsourcing Services
    
    $
    
    
    
    $
    791
    
    
    $
    (751
    )
    
    $
    40IT Consulting and Systems Integration
    
    
    
    
    
    
    106
    
    
    
    (56
    )
    
    
    50Other Services
    
    
    
    
    
    
    111
    
    
    
    (31
    )
    
    
    80Total Commercial
    
    
    
    
    
    
    1,008
    
    
    
    (838
    )
    
    
    170Government Technology Services
    
    
    
    
    
    
    789
    
    
    
    (422
    )
    
    
    367Selling, general and administrative expense
    
    
    
    
    
    
    3,922
    
    
    
    (2,713
    )
    
    
    1,209Total restructuring charges
    
    $
    
    
    
    $
    5,719
    
    
    $
    (3,973
    )
    
    $
    1,746
 Note 5  Acquisitions and Dispositions
 Onvaio LLC
  61




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 5  Acquisitions and Dispositions
 RL Phillips, Inc.
  NewVectors LLC
  SQM Sverige AB
  62




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 5  Acquisitions and Dispositions
 Summary of Acquisition Purchase Price
  Onvaio
    
    
    RL Phillips
    
    
    NewVectors
    
    
    SQM(In thousands)Goodwill
    
    $
    4,213
    
    
    $
    1,604
    
    
    $
    32,675
    
    
    $
    4,382Amortizable intangible assets
    
    
    1,225
    
    
    
    162
    
    
    
    6,230
    
    
    
    2,936Property, equipment and software
    
    
    27
    
    
    
    
    
    
    
    386
    
    
    
    86Other current and non-current assets, net of cash acquired
    
    
    42
    
    
    
    993
    
    
    
    7,458
    
    
    
    2,232Accounts payable and accrued liabilities assumed
    
    
    (470
    )
    
    
    (389
    )
    
    
    (6,176
    )
    
    
    (4,436
    )Accrued purchase price
    
    
    
    
    
    
    (50
    )
    
    
    
    
    
    
    Notes payable assumed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95
    )Issuance of equity instruments
    
    
    
    
    
    
    (300
    )
    
    
    
    
    
    
    Net cash used
    
    $
    5,037
    
    
    $
    2,020
    
    
    $
    40,573
    
    
    $
    5,105
 Disposition of TechTeam A.N.E. NV/SA
  63




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 5  Acquisitions and Dispositions
 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
 Note 6  Notes Payable and Line of Credit
 Long-Term Debt Agreement
  64




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 6  Notes Payable and Line of Credit
     Interest Rate Swap Agreement
   65




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 7  Income Taxes
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands)Current:U.S. federal
    
    $
    1,498
    
    
    $
    1,568
    
    
    $
    499State
    
    
    695
    
    
    
    365
    
    
    
    201Foreign
    
    
    1,386
    
    
    
    1,710
    
    
    
    1,111Total current provision
    
    
    3,579
    
    
    
    3,643
    
    
    
    1,811Deferred
    
    
    603
    
    
    
    (300
    )
    
    
    (938
    )Total income tax provision from continuing operations
    
    $
    4,182
    
    
    $
    3,343
    
    
    $
    873
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands)Domestic income (loss)
    
    $
    7,730
    
    
    $
    3,984
    
    
    $
    (1,208
    )Foreign income (loss)
    
    
    (580
    )
    
    
    5,655
    
    
    
    3,958Income from continuing operations before income taxes
    
    $
    7,150
    
    
    $
    9,639
    
    
    $
    2,750
  Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands)Income tax provision at federal statutory rate of 34%
    
    $
    2,431
    
    
    $
    3,277
    
    
    $
    920State taxes, net of federal benefit
    
    
    459
    
    
    
    241
    
    
    
    133Permanent differences
    
    
    84
    
    
    
    75
    
    
    
    66Foreign operating losses not benefited
    
    
    1,083
    
    
    
    274
    
    
    
    40Effect of foreign tax rates
    
    
    (76
    )
    
    
    (487
    )
    
    
    (116
    )Utilization of foreign operating loss carryforwards
    
    
    
    
    
    
    
    
    
    
    (159
    )Other
    
    
    201
    
    
    
    (37
    )
    
    
    (11
    )Total income tax provision from continuing operations
    
    $
    4,182
    
    
    $
    3,343
    
    
    $
    873
 66




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 7  Income Taxes
  As of December 31,2008
    
    
    2007Assets
    
    
    Liabilities
    
    
    Assets
    
    
    Liabilities(In thousands)Net operating loss carryforwards
    
    $
    1,756
    
    
    $
    
    
    
    $
    1,330
    
    
    $
    Accruals and reserves
    
    
    466
    
    
    
    
    
    
    
    431
    
    
    
    Accelerated tax depreciation
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    101Intangible assets
    
    
    
    
    
    
    3,357
    
    
    
    
    
    
    
    2,996Prepaid expenses
    
    
    
    
    
    
    320
    
    
    
    
    
    
    
    278Other
    
    
    1,331
    
    
    
    
    
    
    
    882
    
    
    
    Total deferred income taxes
    
    
    3,553
    
    
    
    3,752
    
    
    
    2,643
    
    
    
    3,375Less  Valuation allowance
    
    
    (1,639
    )
    
    
    
    
    
    
    (503
    )
    
    
    Net deferred income taxes
    
    $
    1,914
    
    
    $
    3,752
    
    
    $
    2,140
    
    
    $
    3,375
   Major Jurisdiction
    
    Open YearsU.S. Federal income taxes
    
    2005 through 2008U.S. State income taxes
    
    2004 through 2008Foreign income taxes
    
    2002 through 2008
  67




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 7  Income Taxes
  December 31,2008
    
    
    2007(In thousands)Balance at beginning of period
    
    $
    52,000
    
    
    $
    26,000Additions based on tax positions related to the current year
    
    
    
    
    
    
    4,000Additions for tax positions of prior years
    
    
    77,100
    
    
    
    22,000Reductions for tax positions of prior years
    
    
    
    
    
    
    Settlements
    
    
    (22,000
    )
    
    
    Balance at end of period
    
    $
    107,100
    
    
    $
    52,000
  Note 8  Employee Retirement Plans
  68




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 9  Leases
   LeaseYear
    
    Payments(In thousands)2009
    
    $
    4,9402010
    
    
    3,5762011
    
    
    2,2172012
    
    
    1,9692013
    
    
    1,5222014 and thereafter
    
    
    2,766Total
    
    $
    16,990
  Note 10  Stock-Based Compensation
    69




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10  Stock-Based Compensation
 Stock Options
      Year Ended December 31,2008
    
    2007
    
    2006Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Weighted average volatility
    
    
    37
    %
    
    
    35
    %
    
    
    38
    %Risk free interest rate
    
    
    1.2-3.4
    %
    
    
    3.4-5.0
    %
    
    
    4.5-4.7
    %Expected term (in years)
    
    
    3.1
    
    
    
    3.0
    
    
    
    2.9
 70




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10  Stock-Based Compensation
  Weighted
    
    
    WeightedAverage
    
    
    AverageExercise
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Price per
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Share
    
    
    Term
    
    
    ValueOutstanding at January 1, 2006
    
    
    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
    
    
    $
    11.02Granted
    
    
    981,500
    
    
    $
    8.73Exercised
    
    
    (45,500
    )
    
    $
    8.98Canceled
    
    
    (205,626
    )
    
    $
    11.80Outstanding at December 31, 2008
    
    
    2,241,974
    
    
    $
    9.99
    
    
    8.2 Years
    
    $
    4,945Vested and expected to vest in the future
at December 31, 2008
    
    
    2,230,974
    
    
    $
    9.99
    
    
    8.2 Years
    
    $
    4,945Exercisable at December 31, 2008
    
    
    982,317
    
    
    $
    10.24
    
    
    7.0 Years
    
    $
    
   Restricted Common Stock
 General
  71




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10  Stock-Based Compensation
  Executive Long-Term Incentive Plan
      72




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10  Stock-Based Compensation
  WeightedAverageNumber of
    
    
    Grant-DateRestricted Shares
    
    Shares
    
    
    Fair ValueNonvested at January 1, 2006
    
    
    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
    
    
    $
    12.20Granted
    
    
    178,388
    
    
    $
    8.61Vested
    
    
    (78,919
    )
    
    $
    11.05Forfeited
    
    
    (36,107
    )
    
    $
    12.09Nonvested at December 31, 2008
    
    
    285,565
    
    
    $
    10.01
 Note 11  Common Stock
   Note 12  Preferred Stock
   73




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 13  Segment Reporting
  IT Outsourcing Services
 Government Technology Services
 IT Consulting and Systems Integration
 Other Services
 74




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 13  Segment Reporting
   Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands)RevenueCommercialIT Outsourcing Services
    
    $
    120,166
    
    
    $
    104,659
    
    
    $
    86,461IT Consulting and Systems Integration
    
    
    27,064
    
    
    
    28,064
    
    
    
    24,013Other Services
    
    
    24,110
    
    
    
    20,219
    
    
    
    9,497Total Commercial
    
    
    171,340
    
    
    
    152,942
    
    
    
    119,971Government Technology Services
    
    
    88,615
    
    
    
    69,254
    
    
    
    47,393Total revenue
    
    $
    259,955
    
    
    $
    222,196
    
    
    $
    167,364Gross ProfitCommercialIT Outsourcing Services
    
    $
    30,008
    
    
    $
    26,888
    
    
    $
    21,102Asset impairment loss
    
    
    
    
    
    
    
    
    
    
    (580
    )Total IT Outsourcing Services
    
    
    30,008
    
    
    
    26,888
    
    
    
    20,522IT Consulting and Systems Integration
    
    
    6,427
    
    
    
    6,187
    
    
    
    5,741Other Services
    
    
    5,427
    
    
    
    4,789
    
    
    
    1,610Total Commercial
    
    
    41,862
    
    
    
    37,864
    
    
    
    27,873Government Technology Services
    
    
    24,428
    
    
    
    18,978
    
    
    
    12,604Total gross profit
    
    
    66,290
    
    
    
    56,842
    
    
    
    40,477Selling, general and administrative expense
    
    
    (52,774
    )
    
    
    (46,547
    )
    
    
    (38,317
    )Restructuring charge
    
    
    (5,719
    )
    
    
    
    
    
    
    Net interest income (expense)
    
    
    (1,712
    )
    
    
    (572
    )
    
    
    776Foreign currency transaction gain (loss)
    
    
    910
    
    
    
    (84
    )
    
    
    (186
    )Other income, net
    
    
    155
    
    
    
    
    
    
    
    Income from continuing operations before income taxes
    
    $
    7,150
    
    
    $
    9,639
    
    
    $
    2,750
 75




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 13  Segment Reporting
 Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands)Depreciation and AmortizationIT Outsourcing Services
    
    $
    1,794
    
    
    $
    1,555
    
    
    $
    1,715IT Consulting and Systems Integration
    
    
    173
    
    
    
    158
    
    
    
    169Government Technology Services
    
    
    
    
    
    
    34
    
    
    
    70Other Services
    
    
    42
    
    
    
    1
    
    
    
    1Unallocated depreciation and amortization
    
    
    5,926
    
    
    
    5,258
    
    
    
    3,193Total depreciation and amortization
    
    $
    7,935
    
    
    $
    7,006
    
    
    $
    5,148
  Geographic Information2008
    
    
    2007
    
    
    2006Long-Lived
    
    
    
    
    
    
    Long-Lived
    
    
    
    
    
    
    Long-LivedRevenue
    
    
    Assets
    
    
    Revenue
    
    
    Assets
    
    
    Revenue
    
    
    Assets(In thousands)United States
    
    $
    160,990
    
    
    $
    72,629
    
    
    $
    137,276
    
    
    $
    71,497
    
    
    $
    110,887
    
    
    $
    32,659Europe:Belgium
    
    
    43,557
    
    
    
    1,928
    
    
    
    44,272
    
    
    
    3,697
    
    
    
    37,537
    
    
    
    3,488Rest of Europe
    
    
    55,408
    
    
    
    11,905
    
    
    
    40,648
    
    
    
    12,627
    
    
    
    18,940
    
    
    
    5,416Total Europe
    
    
    98,965
    
    
    
    13,833
    
    
    
    84,920
    
    
    
    16,324
    
    
    
    56,477
    
    
    
    8,904Total
    
    $
    259,955
    
    
    $
    86,462
    
    
    $
    222,196
    
    
    $
    87,821
    
    
    $
    167,364
    
    
    $
    41,563
  Year Ended December 31,2008
    
    2007
    
    2006U.S. Federal Government
    
    
    29.7
    %
    
    
    27.1
    %
    
    
    24.9
    %Ford Motor Company
    
    
    15.9
    %
    
    
    20.1
    %
    
    
    26.4
    %Total
    
    
    45.6
    %
    
    
    47.2
    %
    
    
    51.3
    %
 76




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 13  Segment Reporting
    Note 14  Fair Value Measurements
  Level 1 
    
    Observable inputs such as quoted prices (unadjusted) in active markets for
identical assets or liabilities.Level 2 
    
    Inputs other than quoted prices that are observable for the asset or liability,
either directly or indirectly. These include quoted prices for similar assets or
liabilities in active markets and quoted prices for identical or similar assets or
liabilities in markets that are not active.Level 3 
    
    Unobservable inputs that reflect the reporting entitys own assumptions.
  Basis of Fair Value MeasurementsQuoted Prices
    
    Significantin Active
    
    Other
    
    SignificantMarkets for
    
    Observable
    
    UnobservableBalance at
    
    Identical Items
    
    Inputs
    
    InputsDecember 31, 2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)(In thousands)Interest rate swap derivative
financial instrument.
    
    $
    (1,074
    )
    
    N/A
    
    $
    (1,074
    )
    
    N/A
  77




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TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 15  Related Party Transactions
  Note 16  Contingencies
  Note 17  Discontinued Operations
   Year Ended December 31,2008
    
    2007
    
    2006(In thousands)Revenue
    
    $
    
    
    
    $
    
    
    
    $
    Loss before income taxes
    
    $
    
    
    
    $
    
    
    
    $
    (43
    )
 78




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##### Table of Contents



TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 18  Subsequent Event
  Note 19  Selected Quarterly Financial Data (Unaudited)
  Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 31(In thousands, except per share data)2008Revenue
    
    $
    65,964
    
    
    $
    67,876
    
    
    $
    64,184
    
    
    $
    61,930Gross profit
    
    
    16,397
    
    
    
    17,132
    
    
    
    16,159
    
    
    
    16,601Net income(loss)
    
    $
    1,691
    
    
    $
    (1,838
    )
    
    $
    1,909
    
    
    $
    1,207Earnings (loss) per share:Basic per common
    
    $
    0.16
    
    
    $
    (0.17
    )
    
    $
    0.18
    
    
    $
    0.11Diluted per common
    
    $
    0.16
    
    
    $
    (0.17
    )
    
    $
    0.18
    
    
    $
    0.11
 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
    
    
    
    16,015Net income
    
    $
    904
    
    
    $
    1,512
    
    
    $
    2,075
    
    
    $
    1,805Earnings per share:Basic per common
    
    $
    0.09
    
    
    $
    0.15
    
    
    $
    0.20
    
    
    $
    0.17Diluted per common
    
    $
    0.09
    
    
    $
    0.14
    
    
    $
    0.20
    
    
    $
    0.17
 79




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##### Table of Contents



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
  80




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##### Table of Contents



PART III
 
 Item 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors and Executive Officers
 
  Code of Ethics
 
  Corporate Governance
  ®
 
 Item 11.
    
    EXECUTIVE COMPENSATION
  81




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##### Table of Contents



Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
   Equity Compensation Plan Information(a)
    
    
    (b)
    
    
    (c)Number of securitiesNumber of securities
    
    
    
    
    
    
    remaining available forto be issued upon
    
    
    Weighted-average
    
    
    future issuance underexercise of outstanding
    
    
    exercise price of
    
    
    equity 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
    
    
    1,791,974
    
    
    $
    10.58
    
    
    
    812,240Equity compensation plans not
approved by security holders
    
    
    450,000
    
    
    $
    7.62
    
    
    
    Total
    
    
    2,241,974
    
    
    $
    9.99
    
    
    
    812,240
 
 (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
  82




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##### Table of Contents



PART IV
 
 Item 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 a)
    
    Certain documents are filed as part of this Report on Form 10-K.
 (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, 2008,
2007 and 2006(3)
    
    Exhibits.
 ExhibitNumber
    
    Exhibit
    
    Reference *2.1
    
    Share Purchase Agreement between TechTeam Global AB and SQM Nordic AB dated January
19, 2007.
    
    *102.2
    
    First Amendment of Share Purchase Agreement between TechTeam Global AB and SQM
Nordic AB dated as of February 9, 2007.
    
    *102.3
    
    Membership Interest Purchase Agreement between TechTeam Government Solutions, Inc.,
NewVectors Holding LLC, Altarum Supporting Organization, Inc. and Altarum Institute
dated May 23, 2007.
    
    *123.1
    
    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.
    
    *810.1
    
    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.
    
    *910.3
    
    Lease for office space in Dearborn, Michigan between the Company and Dearborn Atrium
Associates Limited Partnership dated November 18, 1996.
    
    *310.4
    
    Fourth Amendment to Lease between the Company and Dearborn Atrium Acquisition,
L.L.C. (successor in interest of Dearborn Atrium Associates Limited Partnership)
dated September 25, 2008.10.5
    
    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.
    
    *410.6
    
    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.
    
    *6
 83




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##### Table of Contents



ExhibitNumber
    
    Exhibit
    
    Reference *10.8
    
    Amendment to Contract between EVERE
REAL ESTATE (successor in interest to IMMOBILIERE DE LA RUE
STRASBOURG SA) and TechTeam Global NV/SA, as
amended, dated May 10, 200410.9
    
    Office Building Lease between Elizabethean Court Associates III L.P., as landlord,
and TechTeam Global, Inc., as tenant, dated May 18, 2006.
    
    *1110.10
    
    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.
    
    *710.11
    
    1990 Nonqualified Stock Option Plan.
    
    *110.12
    
    2004 Incentive Stock and Awards Plan.10.13
    
    2006 Incentive Stock and Awards Plan.10.14
    
    TechTeam Global, Inc. Non-Employee Directors Equity Fee Guidelines under 2006
Incentive Stock and Awards Plan.
    
    *1310.15
    
    TechTeam Global, Inc. Non-Employee Directors Deferred Compensation Plan.
    
    *1310.16
    
    TechTeam Global, Inc. Compensation Policy for Non-Employee Directors.
    
    *1310.17
    
    TechTeam Global, Inc. Executive Annual Incentive Plan.
    
    *1810.18
    
    TechTeam Global, Inc. Executive Long Term Incentive Program.
    
    *1810.19
    
    Supplemental Retirement Plan dated October 1, 2000.
    
    *410.20
    
    Employment Agreement Relating to Change of Control.10.21
    
    Employment Agreement between TechTeam Europe, NV and Christoph Neut dated October 2,
1996.
    
    *610.22
    
    Employment and Noncompetition Agreement between TechTeam Global, Inc. and William C.
Brown, dated February 3, 2006.
    
    *810.23
    
    Amendment to Employment and Noncompetition Agreement between TechTeam Global, Inc.
and William C. Brown.
    
    *1410.24
    
    Employment and Noncompetition Agreement between TechTeam Global, Inc. and Gary J.
Cotshott, dated February 11, 2008.
    
    *1510.25
    
    Amendment to Employment and Noncompetition Agreement between TechTeam Global, Inc.
and Gary J. Cotshott10.26
    
    Option Agreement between TechTeam Global, Inc. and Gary J. Cotshott10.27
    
    Employment and Non-Competition Agreement of Kamran Sokhanvari
    
    *1610.28
    
    Amendment to Employment and Non-Competition Agreement of Kamran Sokhanvari10.29
    
    Employment and Non-Competition Agreement of Armin Pressler
    
    *1610.30
    
    Amendment to Employment and Non-Competition Agreement of Armin Pressler10.31
    
    Employment Separation Agreement and Release of Marc J. Lichtman
    
    *1810.32
    
    Employment and Non-Competition Agreement of Margaret M. Loebl
    
    *1910.33
    
    Amendment to Employment and Non-Competition Agreement of Margaret M. Loebl10.34
    
    Option Agreement between TechTeam Global, Inc. and Margaret M. Loebl
 84




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##### Table of Contents



ExhibitNumber
    
    Exhibit
    
    Reference *10.35
    
    Employment Agreement Relating to Change of Control of Michael A. Sosin10.36
    
    Employment Agreement Relating to Change of Control of Christopher Donohue10.37
    
    Employment Agreement Relating to Change of Control of David A. Kriegman10.38
    
    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.
    
    *1210.39
    
    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.
    
    *1210.40
    
    First Amendment to Credit Agreement and Consent
    
    *1710.41
    
    Second Amendment Credit Agreement
    
    *1821.1
    
    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 Margaret M. Loebl 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 Margaret M. Loebl Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    
    Strategy Committee Charter
  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 Annual Report on Form 10-K dated March 16, 2006.*9
    
    Incorporated by reference to our Report on Form 10-Q dated November 9, 2006. 85




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##### Table of Contents



Exhibit
 
 *10
    
    Incorporated by reference to our Report on Form 8-K dated February 9, 2007.*11
    
    Incorporated by reference to our Annual Report on Form 10-K dated March 16, 2007.*12
    
    Incorporated by reference to our Report on Form 8-K dated June 5, 2007.*13
    
    Incorporated by reference to our Report on Form 10-Q dated August 9, 2007.*14
    
    Incorporated by reference to our Report on Form 8-K dated November 7, 2007.*15
    
    Incorporated by reference to our Report on Form 8-K dated February 14, 2008.*16
    
    Incorporated by reference to our Report on Form 8-K dated June 5, 2008.*17
    
    Incorporated by reference to our Report on Form 8-K dated June 11, 2008.*18
    
    Incorporated by reference to our Report on Form 8-K dated June 18, 2008.*19
    
    Incorporated by reference to our Report on Form 8-K dated October 7, 2008.*20
    
    Incorporated by reference to our Report on Form 10-Q dated November 10, 2008. 86




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##### Table of Contents



SIGNATURES
  TechTeam Global, Inc.Date: March 16, 2009
    By:
    /s/ Gary J. CotshottGary J. CotshottChariman of the Board, President and Chief Executive Officer (Principal Executive Officer)By:
    /s/ Margaret M. LoeblMargaret M. LoeblVice President, Chief
Financial Officer and
Treasurer (Principal
Financial Officer) 87




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##### Table of Contents



/s/ Gary J. Cotshott
    
    DirectorGary J. Cotshott/s/ Charles Frumberg
    
    DirectorCharles Frumberg/s/ Seth W. Hamot
    
    DirectorSeth W. Hamot/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. RocheDirectorAndrew R. Siegel/s/ Richard R. Widgren
    
    DirectorRichard R. Widgren
 88




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##### Table of Contents



SCHEDULE II  Valuation and Qualifying Accounts
 for the Years Ended December 31, 2008, 2007 and 2006
 Charged toBalance at
    
    (Reduction of)
    
    
    
    
    
    BalanceBeginning
    
    Costs and
    
    
    
    
    
    at EndDescription
    
    of Period
    
    Expenses
    
    Deductions
    
    of Period(In thousands)2008Allowance for doubtful accounts
    
    $
    611
    
    
    $
    375
    
    
    $
    
    
    
    $
    986Valuation allowance for deferred taxes
    
    $
    503
    
    
    $
    (213
    )
    
    $
    
    
    
    $
    2902007Allowance 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
    )
    
    $
    
    
    
    $
    290
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##### Table of Contents



INDEX OF EXHIBITS
 ExhibitNumber
    
    Exhibit10.4
    
    Fourth Amendment to Lease between the Company and Dearborn Atrium Acquisition, L.L.C. (successor in
interest of Dearborn Atrium Associates Limited Partnership) dated November 30, 2004.10.9
    
    Amendment to Contract between EVERE REAL ESTATE (successor in interest to IMMOBILIERE DE LA RUE
STRASBOURG SA) and TechTeam Global NV/SA, as amended, dated May 10, 200410.12
    
    2004 Incentive Stock and Awards Plan.10.13
    
    2006 Incentive Stock and Awards Plan.10.20
    
    Employment Agreement Relating to Change of Control.10.25
    
    Amendment to Employment and Noncompetition Agreement between TechTeam Global, Inc. and Gary J.
Cotshott10.26
    
    Option Agreement between TechTeam Global, Inc. and Gary J. Cotshott10.28
    
    Amendment to Employment and Non-Competition Agreement of Kamran Sokhanvari10.30
    
    Amendment to Employment and Non-Competition Agreement of Armin Pressler10.33
    
    Amendment to Employment and Non-Competition Agreement of Margaret M. Loebl10.34
    
    Option Agreement between TechTeam Global, Inc. and Margaret M. Loebl10.35
    
    Employment Agreement Relating to Change of Control of Michael A. Sosin10.36
    
    Employment Agreement Relating to Change of Control of Christopher Donohue10.37
    
    Employment Agreement Relating to Change of Control of David A. Kriegman21.1
    
    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 Margaret M. Loebl 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 Margaret M. Loebl Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.99.1
    
    Strategy Committee Charter.
 90