UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
March 29, 2007
THE MANAGEMENT NETWORK GROUP, INC.
(Exact name of company as specified in its charter)
Delaware 0-27617 48-1129619
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
7300 College Boulevard, Suite 302, Overland Park, Kansas 66210
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(Address of principal executive offices) (Zip code)
(913) 345-9315
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.06 MATERIAL IMPAIRMENTS
On March 29, 2007, management concluded that a material charge for impairment in
the value of the goodwill, other intangible assets and long-lived assets
acquired as part of the April 3, 2006 acquisition of Adventis Limited was
required to be recorded in accordance with accounting principles generally
accepted in the United States of America. The estimated amount of the impairment
charge is under review; however, it is expected to be approximately $1.8 million
to $2.2 million. The impairment charge is the result of lower than expected
operating results coupled with a reduction in the size and scope of operations
that impacted our assessment of future cash flows of the Adventis business.
ITEM 3.01 NOTICE OF DELISTING OR FAILURE TO SATISFY CONTINUED RULE OR
LISTING; TRANSFER OF LISTING
As previously announced, on November 15, 2006, we received a letter from the
staff of the Nasdaq Stock Market stating that we were not in compliance with
Nasdaq Marketplace Rule 4310(c)(14) because we did not file our September 30,
2006 Form 10-Q by the due date therefor. Following a hearing that we requested,
on February 26, 2007, a Nasdaq Listing Qualifications Panel granted our request
for continued listing on the Nasdaq Stock Market, conditioned in part upon the
filing of our September 30, 2006 Form 10-Q on or before May 14, 2007. We
anticipate filing the September 30, 2006 Form 10-Q by that date.
As discussed in Item 8.01 below, we have filed a Form 12b-25 with the Securities
and Exchange Commission ("SEC") disclosing that we were not able to file our
Annual Report on Form 10-K for the year ended December 30, 2006 by the due date
therefor and will not be able to file the Form 10-K within the 15-day extension
period under Rule 12b-25 due to the planned restatement of our historical
financial statements. Our inability to file our 2006 Form 10-K on a timely basis
may be deemed a material noncompliance with Nasdaq Marketplace Rule 4310(c)(14).
We intend to file the 2006 Form 10-K with the required restatements at
approximately the same time as we file our September 30, 2006 Form 10-Q.
ITEM 8.01 OTHER EVENTS
Special committee review
As previously announced, a special committee of our Board of Directors, together
with its independent legal counsel and forensic accountants, have conducted a
review of our historical practices regarding our stock option programs and
related accounting. The special committee and its counsel have received full
cooperation from management, were given complete access to all electronic and
other documents, and interviewed numerous persons involved in the stock option
granting process at the Company, as well as the Company's advisors.
For additional information about this and related matters, see our current
reports on Form 8-K filed on November 13, 2006, November 20, 2006, January 19,
2007, February 15, 2007 and February 28, 2007.
The special committee has completed its review and delivered its preliminary
report to the Board of Directors. The special committee reviewed the facts and
circumstances surrounding all 856 stock option and restricted stock grants made
by the Company from November 1, 1999 (prior to the Company's initial public
offering) through October 2, 2006. The special committee determined that 582 of
those stock option and restricted stock grants had measurement dates different
than the recorded grant dates.
The special committee found no evidence of intentional filing of misleading
financial statements or other public disclosures. None of the current executive
officers or directors who received stock options that were incorrectly dated
(seven grants in total during the seven years reviewed) exercised those stock
options. The special committee did not find that incorrect dating of stock
options resulted in any direct financial gain to executive officers or
directors. All seven incorrectly dated stock option grants made to current
executive officers or directors are being voluntarily surrendered and cancelled.
The special committee did not recommend the termination or resignation of any
member of management or the Board of Directors.
The grant dates for the option grants identified by the special committee in its
report appear to have been selected to reflect the Company's stock price at a
date prior to the actual grant date or measurement date, when the Company's
stock price was lower. The vast majority of these options were granted to
non-management employees. On a preliminary pre-tax basis, the special committee
estimated that the cumulative intrinsic value of misdated options (net of
forfeitures) during the seven year period reviewed by the special committee was
approximately $9.7 million. The actual cumulative after-tax non-cash
compensation expense over the period may be higher or lower than the special
committee's preliminary estimate.
The special committee made recommendations to the Board of Directors for
improvements in our corporate governance practices, disclosure controls and
procedures and internal controls. Management and the Board are considering those
and other recommendations.
Based upon the special committee review and recommendations and its own
evaluation, management has concluded that our disclosure controls and procedures
were not effective to provide reasonable assurance that information required to
be disclosed in reports we file under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), is recorded, processed, summarized and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures, due to the existence of a material weakness in internal control
over financial reporting. Specifically, the Company did not maintain effective
controls over the determination of the accounting measurement dates for granting
stock options and restricted stock awards. This material weakness led to the
planned restatement of our historical financial statements as discussed below.
In light of this conclusion, we are adopting compensating procedures and
processes as necessary to ensure the reliability of our financial reporting. We
intend to remediate the material weakness described above and to implement other
measures to address the key results of the special committee review.
Late 10-K filing; restatement of previously issued financial statements
Management has determined to restate the Company's historical financial
statements to record additional non-cash charges for compensation expense
relating to previously issued stock option and restricted stock grants. The
effects of related accounting errors on previously issued financial statements
will be included in the Company's Annual Report on Form 10-K for the year ended
December 30, 2006, in its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2006 and in amended Quarterly Reports on Form 10-Q for the
quarters ended April 1, 2006 and July 1, 2006, in accordance with applicable
generally accepted accounting standards and SEC rules, regulations and guidance.
The Company intends to complete the above referenced reports as soon as
practicable; however, it may not be in a position to file such reports within
the 15-day extension period granted under Rule 12b-25 without unreasonable
effort or expense. We have filed a Form 12b-25 with the SEC notifying them that
the 2006 Form 10-K will be delayed and will not be filed within the 15-day
extension period. We anticipate that we will file our 2006 Form 10-K, including
such restatements, prior to the May 14, 2007 deadline for filing our September
30, 2006 Form 10-Q set by the Nasdaq Listing Qualifications Panel referred to in
Item 3.01 of this report. We anticipate filing our September 30, 2006 Form 10-Q
at approximately the same time as the 2006 Form 10-K is filed.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99.1 Press release dated April 4, 2007.
Cautionary note regarding forward-looking statements
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve risks and uncertainties. In particular, any statements contained in this
report regarding the special committee's review, the planned restatement of the
Company's financial statements, the potential impact of such restatement, the
identification of accounting errors or corrections, and/or recommendations of
the special committee or measures adopted by management and the Board of
Directors are subject to known and unknown risks, uncertainties and
contingencies. Factors that might affect actual results, performance or
achievements include, among other things, the matters discussed in this report,
the restatement of the Company's financial statements, legal, accounting and
regulatory developments relating to our stock option grants and accounting for
those grants, potential claims or liability that may arise as a result of these
matters, that the anticipated accounting adjustments could have negative tax
implications for the Company, the potential for delisting of our common stock on
the Nasdaq Stock Market, the effectiveness of remedial measures adopted by
management and our Board of Directors, and other actions that may be taken as a
result of the special committee review. In addition to the matters described in
this report, risks and uncertainties are described from time to time in our
filings with the Securities and Exchange Commission. You should not place undue
reliance on any forward-looking statements, which speak only as of the date on
which they are made. We undertake no responsibility to update any of these
forward-looking statements to reflect events or circumstances occurring after
the date of this report.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE MANAGEMENT NETWORK GROUP, INC.
Date: April 4, 2007 By: /s/ Donald E. Klumb
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Donald E. Klumb
Vice President and Chief Financial Officer
Exhibit 99.1
[GRAPHIC OMITTED]
CONTACT:
The Management Network Group, Inc. Brainerd Communicators
Janet Hall Michele Clarke (Media)
Janet.Hall@tmng.com clarke@braincomm.com
800.876.5329 212.986.6667
Corey Kinger (Investors)
kinger@braincomm.com
212.986.6667
TMNG GLOBAL ANNOUNCES CONCLUSION OF SPECIAL COMMITTEE REVIEW
OF HISTORICAL STOCK OPTIONS PRACTICES
Overland Park, KS - April 4, 2007 - TMNG Global (Nasdaq: TMNG), a leading
provider of management consulting services to the global communications, media
and entertainment industries, today announced that a special committee composed
of independent members of its Board of Directors has completed its previously
announced independent review of historical options granting practices.
The comprehensive review was conducted with the assistance of independent legal
counsel and forensic accountants. The special committee reviewed the facts and
circumstances surrounding all 856 stock option and restricted stock grants made
by the Company from November 1, 1999 (prior to the Company's initial public
offering) through October 2, 2006. The special committee determined that 582 of
those stock option and restricted stock grants had measurement dates different
than the recorded grant dates.
The special committee found no evidence of intentional filing of misleading
financial statements or other public disclosures. None of the current executive
officers or directors who received stock options that were incorrectly dated
(seven grants in total during the seven years reviewed)
exercised those stock options. The special committee did not find that incorrect
dating of stock options resulted in any direct financial gain to executive
officers or directors. All seven incorrectly dated stock option grants made to
current executive officers or directors are being voluntarily surrendered and
cancelled.
On a preliminary pre-tax basis, the special committee estimated that the
cumulative intrinsic value (net of forfeitures) of the misdated options was
approximately $9.7 million. The actual cumulative after-tax non-cash
compensation expense over the period may be higher or lower than the special
committee's preliminary estimate. The effects of errors related to misdated
options on previously issued financial statements will be included in the
Company's Annual Report on Form 10-K for the year ended December 30, 2006, in
its Quarterly Report on Form 10Q for the quarter ended September 30, 2006 and in
amended Quarterly Reports on Form 10-Q for the quarters ended April 1, 2006 and
July 1, 2006. The Company is working to complete its restatement and become
current with its public filings as soon as possible. Presently, the Company
anticipates meeting all filing requirements prior to the May 14, 2007 deadline
for filing its third quarter 2006 Form 10-Q set by the Nasdaq Listing
Qualifications Panel.
About TMNG Global
TMNG Global (NASDAQ: TMNG) is a leading provider of professional services to the
converging communications industry. Its companies, TMNG, CSMG Adventis, and
Cartesian, and its base of over 500 consultants, provide strategy, management,
and technical consulting, as well as products and services, to more than 1200
communications service providers, entertainment, media, and technology companies
and financial services firms worldwide. The company is headquartered in Overland
Park, Kansas, with offices in Berlin, Boston, Chicago, London, New York,
Shanghai and Washington, D. C.
This release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve risks and uncertainties. In particular, any statements contained herein
regarding the special committee's review, the planned restatement of the
Company's financial statements, the potential impact of such restatement, the
identification of accounting errors or corrections, and/or recommendations of
the special committee or measures adopted by management and the Board of
Directors are subject to known and unknown risks, uncertainties, and
contingencies. Factors that might affect actual results, performance, or
achievements include, among other things, the matters discussed
in this release, the restatement of the Company's financial statements, legal,
accounting and regulatory developments relating to our stock option grants and
accounting for those grants, potential claims or liability that may arise as a
result of these matters, that the anticipated accounting adjustments could have
negative tax implications for the Company, the potential for delisting of our
common stock on the Nasdaq Stock Market, the effectiveness of remedial measures
adopted by management and our Board of Directors, and other actions that may be
taken as a result of the special committee review. In addition to the matters
described in this release, risks and uncertainties are described from time to
time in our filings with the Securities and Exchange Commission. You should not
place undue reliance on any forward-looking statements, which speak only as of
the date on which they are made. We undertake no responsibility to update any of
these forward-looking statements to reflect events or circumstances occurring
after the date of this release.
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