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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2007
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _______ to _______
Commission file number 1-8496
THINKENGINE NETWORKS, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 20-8058881
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Nickerson Road, Marlborough, MA 01752
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 508-624-7600
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one): Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer
[x]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [x]
The Registrant has 6,677,403 shares of common stock outstanding at April 30,
2007.
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1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THINKENGINE NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
March 31, December 31,
ASSETS 2007 2006
---------- ----------
Current assets
Cash and cash equivalents $ 3,620 $ 2,764
Accounts receivable, net 1,201 1,354
Inventories, net 1,218 1,439
Other current assets 238 270
---------- ----------
Total current assets 6,277 5,827
Loans to officers 34 444
Property, plant and equipment, net 901 970
Intangible assets, net 3,239 3,356
Other assets 162 49
---------- ----------
Total assets $ 10,613 $ 10,646
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 382 $ 114
Notes payable - current portion 291 --
Accrued compensation and benefits 982 932
Deferred service revenues 617 522
Other accrued expenses 869 966
---------- ----------
Total current liabilities 3,141 2,534
Long-term debt 1,463 300
Other liabilities 741 664
Commitments and contingencies -- --
Stockholders' equity
Common stock, par value $.001 per share;
authorized 20,000,000 shares, issued 6,957,183 7 7
Additional paid-in capital 14,949 14,938
Accumulated deficit (8,371) (6,876)
Accumulated other comprehensive loss (529) (529)
---------- ----------
6,056 7,540
Less cost of 279,780 and 179,356 common shares in treasury (788) (392)
---------- ----------
Total stockholders' equity 5,268 7,148
---------- ----------
Total liabilities and stockholders' equity $ 10,613 $ 10,646
========== ==========
See Notes to Consolidated Interim Financial Statements.
2
THINKENGINE NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands except per share data)
Three Months Ended March 31,
2007 2006
----------- -----------
Revenues:
Product $ 932 $ 3,062
Service 1,121 403
----------- -----------
2,053 3,465
Cost of revenues 683 1,396
----------- -----------
Gross margin 1,370 2,069
Other costs and expenses
Research and development 1,381 1,513
Selling, general and administrative 1,490 1,397
Interest expense 59 --
Other (income) expense, net (65) (106)
----------- -----------
2,865 2,804
Pretax loss (1,495) (735)
Provision for income taxes -- 15
----------- -----------
Net loss before cumulative effect of change in accounting principle (1,495) (750)
Cumulative effect of change in accounting principle, net of tax -- 36
----------- -----------
Net loss and comprehensive loss $ (1,495) $ (714)
=========== ===========
Loss per share - basic and diluted:
Net loss before cumulative effect of change
in accounting principle $ (0.23) $ (0.11)
Cumulative effect of change in accounting principle, net of tax -- 0.01
Net loss $ (0.23) $ (0.10)
Weighted average number of basic and diluted shares outstanding 6,513,794 7,145,218
See Notes to Consolidated Interim Financial Statements.
3
THINKENGINE NETWORKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands) Three Months Ended March 31,
2007 2006
---------- ----------
Operating Activities
Net loss before cumulative effect of change in accounting principle $ (1,495) $ (750)
Adjustments to reconcile loss from operations to net
cash used by operating activities:
Deferred income taxes -- 15
Depreciation and amortization 210 292
Amortization of deferred financing costs 9 --
Amortization of debt discount 3 --
Cumulative effect of change in accounting principle -- (36)
Stock-based compensation 104 261
Net (increase) decrease in:
Accounts receivable 153 2,165
Inventories 221 253
Other assets 48 (156)
Net increase (decrease) in:
Accounts payable 268 (299)
Accrued compensation and benefits (23) 40
Deferred services revenue 95 (1,873)
Other accrued liabilities (97) --
---------- ----------
Net cash used by operating activities (504) (88)
---------- ----------
Investing Activities
Purchases of marketable securities -- (2,800)
Sale of marketable securities -- 2,813
Additions to property, plant and equipment (21) (208)
---------- ----------
Net cash used by investing activities (21) (195)
---------- ----------
Financing Activities
Shares purchased for treasury (150) --
Shares issued pursuant to stock plans 31 --
Proceeds from term loan 1,500 --
---------- ----------
Net cash provided by financing activities 1,381 --
---------- ----------
Increase (decrease) in cash and cash equivalents 856 (283)
Cash and cash equivalents - beginning of period 2,764 1,750
---------- ----------
Cash and cash equivalents - end of period $ 3,620 $ 1,467
========== ==========
Supplemental Disclosures of Cash Flow Information Cash paid during the period
for:
Interest $ 29 --
Income taxes, net -- $ 2
Non-cash activity:
Repayment of loans to officers and accumulated interest with common stock $ 431 $ 674
Cashless exercise of stock options in satisfaction
of loan due from employee $ 42 $ 38
Increase in deferred financing fees and other non-current liabilities in
connection with term loan financing fee $ 150 --
Debt discount - stock warrants issued in connection with term loan $ 49 --
See Notes to Consolidated Interim Financial Statements
4
THINKENGINE NETWORKS, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2007
(dollars in thousands except per share data)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information and the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 2007 are not necessarily
indicative of the results that may be expected for any other interim period or
for the year ending December 31, 2007. The balance sheet at December 31, 2006
has been derived from the audited consolidated financial statements at that
date. For further information, refer to the consolidated financial statements
and footnotes thereto and the quarterly financial data included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2006.
Certain prior period amounts have been reclassified to conform to the current
year presentation.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In the preparation of financial statements in conformity with accounting
principles generally accepted in the United States, management must make
critical decisions regarding accounting policies and judgments regarding their
application. Materially different amounts could be reported under different
circumstances and conditions.
REVENUE
The Company generally recognizes product revenue, net of sales discounts and
allowances, when persuasive evidence of an arrangement exists, shipment or
delivery (dependent upon the terms of the sale) has occurred, all significant
contractual obligations have been satisfied, the amount is fixed or determinable
and collection is considered probable. Sales of services and system support are
deferred and recognized ratably over the contract period.
INVENTORIES
March 31, December 31,
2007 2006
------ ------
Finished and in process $ 685 $ 885
Materials and purchased parts 533 554
------ ------
$1,218 $1,439
====== ======
Netted in the above amounts is the Company's reserve for slow moving and
obsolete inventories totaling $3,367 and $3,337 at March 31, 2007 and December
31, 2006, respectively.
NON-CURRENT LIABILITIES
March 31, December 31,
2007 2006
------ ------
Accrued supplemental pension plan $ 238 $ 254
Accrued deferred compensation 128 139
Accrued pension expense 561 634
Financing fee payable 150 --
------ ------
1,077 1,027
Less current portion 336 363
------ ------
$ 741 $ 664
====== ======
5
BORROWINGS
On January 16, 2007, the Company borrowed $1,500 under a term loan agreement.
The loan bears interest at the rate of 13% per annum, matures on February 10,
2010 and requires an additional $150 financing fee (included in other
liabilities) payable to the lender on the maturity date. The loan is to be
repaid in six interest-only monthly installments followed by thirty monthly
installments of principal and interest. The Company pledged as collateral
substantially all of its non-intellectual property assets. In connection with
the loan agreement, the Company issued a ten-year common stock warrant to the
lender to purchase 35,000 shares of the Company's common stock at an exercise
price of $3.47 which was the closing market price on January 16, 2007. The fair
value of the warrants is estimated to be $49, based on the assumptions that they
will be exercised at the termination of the loan and thus have an estimated life
of three years, dividend yield of 0.0%, weighted average volatility of 53.4%,
and a risk-free interest rate of 4.79%.
INCOME PER SHARE
In computing basic earnings per share, the dilutive effect of stock options and
warrants are excluded, whereas for diluted earnings per share they are included.
For all periods presented, options and warrants were anti-dilutive and therefore
were not included in the determination of net loss per share.
STOCK-BASED COMPENSATION
Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123(R)
"Share-Based Payment", which establishes accounting for equity instruments
exchanged for employee services. Under the provisions of SFAS No. 123(R),
share-based compensation cost is measured at the grant date, based on the fair
value of the award, and is recognized as an expense over the employee's
requisite service period (generally the vesting period of the equity grant).
The Company has stock-based compensation plans under which directors, officers
and other eligible employees receive stock options and other equity-based
awards. The plans provide for the grant of stock options and restricted stock
awards.
Stock options are granted with an exercise price equal to the market value of a
share of common stock on the date of grant. Stock option grants generally expire
in 10 years. Restricted stock awards generally vest over four to six years.
The following table summarizes stock option activity:
Inducement 1990 Stock Directors'
Options Option Plan Option Plan
------- ----------- -----------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
Outstanding at December 31, 2006 566,666 $2.62 973,133 $3.62 166,750 $2.84
Granted -- -- 305,000 $2.85 2,500 $3.00
Exercised -- -- (58,166) $1.97 (14,500) $1.93
Forfeited/expired (6,666) $3.25 (95,717) $4.58 --
-------- --------
Outstanding at March 31, 2007 560,000 $2.61 1,124,250 $3.42 154,750 $2.93
======= ========= ========
Shares available for future grant 0 381,450 168,250
======= ========= ========
Weighted average remaining term 8.9 years 6.8 years 7.0 years
Intrinsic value:
Outstanding $34 $161 $50
Exercisable $14 $161 $40
The intrinsic value for stock options is calculated based on the exercise price
of the underlying awards and the market price of our common stock as of the
reporting date.
The following table summarizes non-vested restricted stock activity:
6
Restricted
Stock Plan Inducement
Shares Shares
-------- --------
Unvested as of December 31, 2006 22,500 275,000
Granted -- --
Vested -- --
Forfeited (17,200) --
-------- --------
Unvested as of March 31, 2007 5,300 275,000
======== ========
Shares available for future grant 412,400 0
======== ========
The following table summarizes the components and classification of stock-based
compensation expense included in the Statement of Operations:
Three Months Ended
March 31,
2007 2006
-------- --------
Stock options $ 96 $ 244
Restricted stock 8 29
Other -- 9
-------- --------
Total stock-based compensation expense $ 104 $ 282
======== ========
Cost of revenues $ 6 $ 12
Selling, general and administrative 57 156
Research and development 41 114
-------- --------
Total stock-based compensation expense $ 104 $ 282
======== ========
No tax benefits were attributed to the stock-based compensation expense because
a valuation allowance is maintained for substantially all net deferred tax
assets. We elected to adopt the alternative method of calculating the historical
pool of windfall tax benefits as permitted by FASB Staff Position (FSP) No. SFAS
123(R)-3, "Transition Election Related to Accounting for the Tax Effects of
Share-Based Payment Awards." This is a simplified method to determine the pool
of windfall tax benefits that is used in determining the tax effects of stock
compensation in the results of operations and cash flow reporting for awards
that were outstanding as of the adoption of SFAS 123(R).
The Company estimates the fair value of stock options using the Black-Scholes
valuation model. Key input assumptions used to estimate the fair value of stock
options include the exercise price of the award, the expected option term, the
expected volatility of the Company's stock over the option's expected term, the
risk-free interest rate over the option's expected term, and the Company's
expected annual dividend yield. The Company believes that the valuation
technique and the approach utilized to develop the underlying assumptions are
appropriate in calculating the fair values of the Company's stock options
granted in the three months ended March 31, 2007. Estimates of fair value are
not intended to predict actual future events or the value ultimately realized by
persons who receive equity awards. The following table summarizes the
assumptions used to compute the weighted average fair value of stock option
grants of $1.15 for the three months ended March 31, 2007.
Dividend yield 0.0%
Weighted average volatility 51.4%
Risk-free interest rate 4.8%
Expected holding period (in years) 2.5
No dividend yield was assumed because the Company has never paid a cash
dividend.
The weighted average volatility assumption for the current period was developed
using historical volatility.
The risk-free interest rate assumption was developed using the U.S. Treasury
yield for periods equal to the expected life of the options on the grant date.
An increase in the risk-free interest rate will increase stock compensation
expense.
The expected holding period assumption was developed after considering vesting
schedules, life of the option, historical experience and estimates of future
exercise behavior patterns. An increase in the expected holding period will
increase stock compensation expense.
SFAS 123R requires the recognition of stock-based compensation for the number of
awards that are ultimately expected to vest. As a result, for most awards,
recognized stock compensation was reduced for estimated forfeitures prior to
vesting primarily based on historical annual forfeiture rates of approximately
5%. Estimated forfeitures will be reassessed in subsequent periods and may
change based on new facts and circumstances.
As of March 31, 2007, approximately $1.2 million of unrecognized stock
compensation related to unvested awards (net of estimated forfeitures) is
expected to be recognized over a weighted-average period of 3.1 years.
7
PENSION PLAN
The Company's defined benefit pension plan is reported in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 158 "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans - an
amendment of SFAS No.'s 87, 88, 106 and 132(R)", issued in September 2006. This
statement requires balance sheet recognition of the over-funded or under-funded
status of pension and postretirement benefit plans. Under SFAS 158, actuarial
gains and losses, prior service costs or credits, and any remaining transition
assets or obligations that have not been recognized under previous accounting
standards must be recognized in accumulated other comprehensive loss, net of tax
effects, until they are amortized as a component of net periodic benefit cost.
In addition, the measurement date, the date at which plan assets and the benefit
obligation are measured, is required to be the Company's fiscal year end. The
Company adopted the recognition and measurement provisions of SFAS 158 effective
December 31, 2006. The adoption of SFAS 158 did not have a material effect on
the consolidated financial statements since all future benefit accruals under
the Company's defined benefit plan were curtailed as of 1994.
In 2006 the Company applied to the Pension Benefit Guaranty Corporation and the
Internal Revenue Service for permission to terminate the Company's defined
benefit plan. While approval was received, the Company decided not to proceed
with the termination of the plan in 2006. The Company may reapply for permission
in 2007; reflecting this, the Company adjusted the discount rate used to
calculate plan liabilities to 4.7% for year ended December 31, 2006.
The Company has a defined benefit pension plan. No additional service cost
benefits were earned subsequent to June 30, 1994. The Company's funding policy
is to contribute amounts to the plan sufficient to meet the minimum funding
requirements set forth in the Employee Retirement Income Security Act of 1974,
plus such additional amounts as the Company may determine to be appropriate from
time to time.
The components of net periodic benefit cost of the plan for the three months
ended March 31 are as follows:
2007 2006
------ ------
Interest cost on projected benefit obligation $ 22 $ 23
Expected return on plan assets (19) (15)
Amortization of net loss 12 7
------ ------
Net periodic pension cost $ 15 $ 15
====== ======
The Company expects funding requirements of $245 in 2007 of which $88 was funded
during the quarter ended March 31, 2007.
RELATED PARTY TRANSACTION
In February 2007, a former officer repaid loans and accumulated interest of
$431. Repayment consisted of 140,813 shares of the Company's common stock,
valued at the closing market price at the date of the repayment of the loans.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109" (SFAS
No. 109). The interpretation contains a two step approach to recognizing and
measuring uncertain tax positions accounted for in accordance with SFAS No. 109.
The first step is to evaluate the tax position for recognition by determining if
the weight of available evidence indicates it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or
litigation processes, if any. The second step is to measure the tax benefit as
the largest amount which is more than 50% likely of being realized upon ultimate
settlement. The provisions are effective for the Company beginning in the first
quarter of fiscal 2007. The adoption of this statement by the Company did not
have any material impact on its financial statements.
In February 2007, the FASB issued Statement of Financial Accounting Standard No.
159 (SFAS No. 159), "The Fair Value Option for financial assets and financial
liabilities - including an amendment of FASB statement No. 115" which is
effective for fiscal years beginning after November 15, 2007. SFAS 159 permits
entities to choose to measure many financial instruments and certain other items
at fair value. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS No. 159 is expected to expand the use
of fair value measurement, which is consistent with the long-term measurement
objectives for accounting for financial instruments. The Company is currently
evaluating the potential impact of this statement.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Factors That May Affect Future Results
--------------------------------------
This Form 10-Q contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements include management's
expectations for future operations, financial position and operating results, as
well as statements regarding the strategy, plans and objectives of the Company.
Our actual experience may differ materially from that discussed in the
forward-looking statements. Factors that might cause such a difference or
otherwise affect our future results of operations include limited customers and
products; developments with our primary customers' business, networks and
multi-vendor relationships; development of our direct sales capabilities and
channel relationships; restructuring effects; risks associated with competition
and competitive pricing pressures; our ability to stabilize revenues and manage
costs; our ability to obtain component parts; our reliance on contract
manufacturers and our ability to forecast manufacturing requirements; customer
purchasing patterns and commitments; potential liability for defects or errors
in our products; the size, timing and recognition of revenue from customers; our
ability to develop new products and product enhancements; market acceptance of
new product offerings and enhancements to our products and our ability to
predict and respond to market developments; failure to keep pace with the
rapidly changing requirements of our customers; our ability to attract and
retain key personnel; risks associated with international sales and operations;
our ability to identify, analyze and consummate strategic alternatives; the
sufficiency of our intellectual property rights; our ability to obtain
additional financing; any failure to comply with the internal control
requirements of Sarbanes-Oxley; as well as risks of a downturn in economic
conditions generally, and in the telecommunications industry specifically. For a
more detailed description of the risk factors associated with the Company,
please refer to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2006 as filed with the Securities and Exchange Commission on
March 27, 2007.
Results of Operations
---------------------
Total revenue decreased $1.4 million in the first quarter of 2007 versus 2006.
Product revenue decreased $2.1 million primarily due to the fact that the first
quarter of 2006 included $1.9 million related to shipments made to one customer
in August 2005 that were not recognized as revenue until the first quarter of
2006. Service revenue increased $0.7 million primarily due to increased sales of
spare parts and an increase in the deferred maintenance revenue recognized
during the first quarter of 2007.
Gross margin was 67% in 2007, and 60% in 2006. The 2007 increase was due to
lower personnel costs than in the first quarter of 2006.
Research and development expense decreased $0.1 million (9%) in the first
quarter of 2007 versus 2006, due to lower personnel costs.
Selling, general and administrative expense increased $0.1 million (7%) in 2007
versus 2006, primarily due to increased personnel costs.
Other income decreased due to lower interest income due to lower balances
available for investment in 2007 versus 2006. Interest expense increased from $0
to $59 due to loan interest in the first quarter of 2007 related to the
Company's term loan which commenced in January 2007.
No tax benefit was provided for the losses incurred in 2007 or 2006 since the
Company cannot determine that the realization of the net deferred tax asset is
more likely than not.
Liquidity and Sources of Capital
--------------------------------
Net cash used by operations for the three months ended March 31, 2007 was $0.5
million versus $0.1 million in the comparable period of 2006; this increase from
the prior year is primarily attributable to the increase in loss from
operations. Cash used by investing activities reflects a lower level of capital
expenditures in 2007. Cash provided by financing activities of $1.4 million in
2007 is due to the Company borrowing $1.5 million under a term loan agreement.
Working capital and the ratio of current assets to current liabilities was $3.1
million and 2.0:1 at March 31, 2007 compared to $3.3 million and 2.3:1 at
December 31, 2006. The decrease in working capital is primarily due to the net
losses incurred.
During the remainder of 2007, the Company anticipates making capital
expenditures of approximately $0.2 million, and increasing the current level of
expenditures for sales and marketing. To ensure that the Company will have
sufficient working capital to execute its operating plan, the Company borrowed
$1.5 million in January 2007 under a three-year term loan agreement. Management
believes that with the funds provided by this loan the Company will have
sufficient funds to meet the Company's cash requirements for 2007.
9
However, if the Company's operations deteriorate due to increased competition,
loss of a large customer or other adverse events, it may be required to obtain
additional sources of funds through asset sales, capital market transactions or
financing from third parties or a combination thereof. The Company cannot
provide assurances that these additional sources of funds will be available or,
if available, what the terms would be.
Contractual Obligations
-----------------------
At March 31, 2007, the Company's contractual obligations were as follows:
PAYMENTS DUE BY PERIOD
------------------------------------------
LESS THAN 1 YEAR 1-3 YEARS 3-5 YEARS
---------------- --------- ---------
Operating Leases $ 384 $ 745 $ --
Purchase Commitments $ 845 $ 116 $ 49
Payments made under operating leases are treated as rent expense. Purchase
commitments are in relation to purchasing inventory from an outsource
manufacturer and assembler of certain of our products.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not use derivatives and has no financial instruments subject to
market rates.
ITEM 4 T. CONTROLS AND PROCEDURES
ThinkEngine Networks' management, including the Chief Executive Officer and
Chief Financial Officer, have conducted an evaluation of the effectiveness of
disclosure controls and procedures as of March 31, 2007, pursuant to Exchange
Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures are
effective as of the end of the period covered by this report in ensuring that
all material information required to be disclosed in this quarterly report and
all information required to be disclosed by the Company under the Securities
Exchange Act of 1934 has been made known to them in a timely fashion.
During the quarterly period covered by this Form 10-Q, the Company made changes
to its internal controls, designed to centralize its financial reporting in
light of recent changes made to the organizational structure of the Company as
reported in Form 10-K for the year-ended December 31, 2006. There were no other
changes in the Company's internal control over financial reporting that have
materially affected, or reasonably likely to materially affect the Company's
internal controls over financial reporting.
10
PART II. OTHER INFORMATION
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
On February 16, 2007, the Company accepted 140,813 shares of its common stock
(valued at $3.06 a share) in repayment of loans to a former officer of $431,000.
ITEM 6. EXHIBITS
Index to Exhibits
Exhibit
31.1 Certification of the Chief Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer 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 the Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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 thereunto duly authorized.
ThinkEngine Networks, Inc.
(Registrant)
Date: May 1, 2007 By /s/ John E. Steinkrauss
-----------------------------
John E. Steinkrauss
Vice President, Treasurer
and Chief Financial Officer