SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1995
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 1-10245
RCM TECHNOLOGIES, INC.
Exact name of registrant as specified in its charter
Nevada 95-1480559
State of incorporation IRS Employer Identification No.
2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613
address of principal executive offices
Registrant's telephone number, including area code: (609) 486-1777
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.05
Class C Warrants
(Title of Class)
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of Common Stock (par value five cents per share)
held by non-affiliates of the Registrant (see Item 12 hereof) on January 5,
1996:$10,666,572.
The number of shares of Registrant's Common Stock (par value five cents per
share) outstanding as of January 5, 1996: 15,961,118.
<PAGE>
PART I
Item 1. Business
General
The Company, through its wholly-owned operating subsidiaries, Intertec
Design, Inc. and Cataract, Inc. is a nationwide provider of temporary and
contract personnel to businesses, professional and service organizations,
manufacturers and public utilities. The Company provides a broad range of
services to national, regional and local clients through 18 branch offices (as
of October 31, 1995). The Company's business is organized into two primary
groups: Technical Services Group and the Temporary Services Group.
Effective August 31, 1995, the Company completed the acquisition of
Cataract,Inc., a Pennsylvania corporation ("Cataract") pursuant to a Merger
Agreement, dated July 31, 1995 (by and among the Company, CI Acquisition Corp.,
a Pennsylvania corporation and wholly-owned subsidiary of the Company ("CI"),
Cataract and the shareholders of Cataract ("Merger Agreement").
Cataract engages in approximately the same business as the Technical
Services Group of the Company, in supplying contract technical personnel to U.S.
corporations. Cataract's focus has been primarily in supplying such technical
personnel to public utilities nationwide. Cataract's audited financial
statements for the year ended September 30, 1994 reported gross revenues of over
$20 million and an operating profit of over $1.1 million before interest,
depreciation, amortization and taxes. Cataract's unaudited interim results for
the nine months ended July 2, 1995, the period immediately preceding the
acquisition, reflected a net income of $360,587.
Upon the closing of the Merger Agreement, and upon the filing of the
Articles of Merger, Cataract was merged with and into CI and the separate
corporate existence of Cataract ceased to exist, at which time CI remained as
the surviving corporation, subsequently changing its name to "Cataract, Inc."
Upon completion of the merger, all rights, title and interest to all
property owned by Cataract was allocated to and vested in CI. Upon the Cataract
shareholders tendering 100% of the Cataract shares to CI, the Company, as
consideration pursuant to the terms of the Merger Agreement, caused to be issued
and paid the following: (i) share certificates of the Company in the name of
each of the Cataract shareholders representing, in the aggregate, $1,200,000
shares worth of the Company's common stock (equal to 1,561,553 shares of the
common stock of the Company); and (ii) the sum of $2,000,000 in cash.
The Cataract shareholders were required to pledge the Company's stock they
received pursuant to a Pledge Agreement, dated August 30, 1995 (the "Pledge
Agreement") in order to guarantee certain performance criteria of Cataract
established in the Merger Agreement. The Pledge Agreement is for a period of
three years and three months from August 31, 1995, during which time the
Company, as pledgee, has the right to exercise all voting rights with respect to
the pledged stock. Upon completion of the pledge period, the remaining pledge
shares, if any, shall be placed in a voting trust ("Trust Shares") pursuant to
Voting Trust Agreement, dated August 30, 1995 (the "Voting Trust Agreement").
The shares of common stock of the Company held by the Cataract shareholders
pursuant to the Voting Trust Agreement will be held in trust until the earlier
of: (i) the public or private sale of the Trust Shares in an open market
transaction to an Unaffiliated Third Party, as such term is defined in the
Voting Trust Agreement; or (ii) the resignation, removal from office or if for
any other reason Leon Kopyt ceases to serve as Chairman, Chief Executive Officer
and President of the Company.
2
<PAGE>
Item 1. Business (Continued)
General (Contined)
The Voting Trust Agreement also provides that notwithstanding the
expiration of the Voting trust Agreement, one-third of the Trust Shares shall be
released from trust on August 30, 2000, and thereafter an additional on-third of
the Trust Shares shall be released on each of August 30, 2001 and August 30,
2002, at which time all of the Trust Shares will have been released from the
voting trust, thereby causing the termination of the Voting Trust Agreement.
The Technical Services Group, which provides on a fee basis, personnel to
perform engineering, design, drafting or other functions either at the site of
the client or, less frequently, at its own facilities, generated approximately
55%, 49% and 56.7% of the revenues for fiscal years ended October 31, 1995, 1994
and 1993, respectively. Revenues generated by the Technical Services Group are
provided through Intertec Design, Inc. and Cataract, Inc.. Cataract, Inc,
acquired on August 30, 1995, is a supplier of management, engineering, design
and technical services to the nuclear power, fossil fuel, electric utilities and
process industries.
The Temporary Services Group, which provides office, clerical and light
industrial personnel operated as a division of Intertec Design, Inc. provided
45% and 51% of the revenues for fiscal years ended October 31, 1995 and 1994,
respectively.
The Company's fees are based upon the number of hours worked by personnel
assigned to a client (for either a designated or an indefinite term of
engagement) or, in a few instances, an amount equal to the Company's actual
direct costs and related overhead expenses plus a fixed fee. The rates per hour
differ among the categories of personnel and are affected by the prevailing
direct labor rates in the area of assignment. Billings by the Company are
usually on a weekly basis, with invoices payable within thirty days of the date
of the invoice.
Engagements of personnel vary in duration. The average length of engagement
for a project is nine months, and assignments of individuals have ranged from
four months to more than three years. Clients typically invite several companies
to bid on requests for proposals and sometimes grant contracts to more than one
company to provide personnel for the same project. Contracts with certain
clients prohibit the Company and the client from hiring the employees of the
other during the contract period and for a specified time thereafter.
Management believes that there are a sufficient number of engineering,
technical, professional and other personnel available to the Company to satisfy
the requirements of its principal clients. The number and type of personnel
available to the Company are affected by many factors including general economic
conditions, and have fluctuated widely from time to time.
Major Customers
The Company has reduced its reliance on major customers in fiscal year
1995. United Technologies was the only customer which contributed sales greater
than or equal to 10% of revenues. The sales to United Technologies were
approximately $3,300,000 or 12.3% of revenues. The Company does not anticipate
significant revenues from United Technologies in the foreseeable future.
3
<PAGE>
Item 1. Business (Continued)
Facilities
The Company presently operates 18 offices in 9 states including 6 in
California, 3 in Michigan, 3 in Connecticut, 1 in New York, 1 in Pennsylvania, 1
in South Carolina, 1 in Alabama, 1 in New Jersey, and 1 in Kentucky. Each of the
offices operates as an independent profit center with each manager having
overall responsibility for sales and marketing, recruiting and retention of
temporary staffing employees and customer relations.
An office staff typically consists of the manager and up to four regular
staff personnel who market to the Company's customers, process applicants, match
customer needs with available temporary staffing employees and monitor staffing
employee performance. Where possible, the offices are grouped around a hub
office in a key metropolitan center supervised by an area or district manager.
Seasonal Variations
The Company's quarterly operating results are affected primarily by the
number of billing days in the quarter and the seasonality of its customers'
businesses. The Company usually experiences higher revenues in its fourth
quarter due to increased economic activity and experiences lower revenues in its
first quarter through February of the following year, showing gradual
improvement over the remainder of the year.
Expansion Plans
The Company has adopted a long-term business strategy to increase its
profitability through expansion of its existing operations and acquisitions of
businesses that are strategically located or positioned to diversify the
Company's customer base and geographical accessibility. The Company continues to
carefully select acquisition candidates that meet specified criteria and that
management believes will meet certain financial performance goals when
integrated into the Company's proven operating model. The Company's acquisition
of Great Lakes Design, Inc and Cataract, Inc. in December 1994 and August 1995,
respectively, is consistent with this ongoing activity, and the Company
periodically engages in discussions with possible acquisition candidates.
On January 5, 1995 the Company entered into a non-binding letter of intent
regarding the possible acquisition of The Consortium, Inc. ("Consortium"), a
privately-held provider of temporary technical employees based in Fairfield N J.
The letter of intent contemplates the exchange of 6.5 million shares of the
Company's common stock for all of the outstanding shares of Consortium. Revenues
for the year ended December 31, 1995 of Consortium approximated $26 million.
Closing of the transaction is dependent on negotiation of definitive agreements
and completion of due diligence. Because of these and other factors, there can
be no assurance that the Consortium transaction will be successfully completed.
Competition
The temporary services industry is fragmented and highly competitive,
with limited barriers to entry. Within local markets, smaller firms actively
compete with the Company for business, and in most of these markets, no single
company has a dominant share of the market. The Company also competes with
larger full-service and specialized competitors in national, regional and local
markets, which have significantly greater marketing, financial and other
resources than the Company.
4
<PAGE>
Item 1. Business (Continued)
Competition (Continued)
The Company believes that the primary competitive factors in obtaining and
retaining clients are the ability to provide a wide range of staffing services
and service an expansive geographic area, an understanding of clients specific
job requirements, the ability to provide personnel with the appropriate skills
in a timely manner, the monitoring of quality of job performance, and the
pricing of services. The Company believes its strong emphasis on providing
service and value to its customers and temporary staffing employees are
important competitive advantages.
Employees
As of October 31, 1995, the Company employed on its permanent staff 68
persons, including 4 licensed professional engineers who, from time to time,
participate in engineering and design projects undertaken by the Company. During
the twelve months ended October 31, 1995, approximately 550 engineering and
technical personnel were employed by the Company and provided to its clients to
work on their projects for various periods. The Company has also employed
approximately 5,700 temporary personnel during the year. None of the Company's
employees, including its temporary employees, are represented by a collective
bargaining agreement. The Company considers its relationship with its employees
to be good.
Quarterly Results
Information pertaining to quarterly results can be found in footnote
#12 to the financial statements.
Item 2. Properties
The Company maintains its principal executive offices in Pennsauken,
New Jersey. In addition, the Company leases branch offices in states listed
under the caption "Facilities" in Item 1 hereof. The Company anticipates that it
will not experience difficulties in renewing any of its current leases upon
their expiration or obtaining different space on comparable terms if such leases
cannot be renewed.
Item 3. Legal Proceedings
From time to time disagreements with individual employees and disagreements
as to the interpretation, effect or nature of individual agreements arise in the
ordinary course of business and may result in legal proceedings being commenced
against the Company. The Company is not currently involved in any litigation or
proceedings which are material, either individually or in the aggregate, and, to
the Company's knowledge, no other legal proceedings of a material nature
involving the Company are currently contemplated by any individuals, entities or
governmental authorities.
The principal risks that the Company insures against are workers'
compensation, personal injury, property damage, professional malpractice, errors
and omissions, and fidelity losses. The Company maintains insurance in such
amounts and with such coverages and deductibles as management believes are
reasonable and prudent.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the vote of security holders during the
fiscal year ended October 31, 1995.
5
<PAGE>
PART II
Item 5. Market Price for Registrant's Common Equity,
Warrants and Related Stockholder Matters
The Company's Common Stock and Class C Warrants are traded in the
over-the-counter market under the NASDAQ Symbols RCMT and RCMTZ, respectively.
The following table sets forth high and low bid prices by calendar quarters for
the periods indicated, as reported by the National Association of Securities
Dealers, Inc. Bid quotations represent prices between dealers; they do not
include retail markups, markdowns or other fees or commissions and do not
necessarily represent actual transactions.
Common Stock
Fiscal Quarter High Low
First 1994 1.21 23/32
Second 1.00 21/32
Third 25/32 5/8
Fourth 3/4 19/32
First 1995 3/4 19/32
Second 25/32 21/32
Third 11/16 1/2
Fourth 13/16 19/32
The Company had approximately 5,400 beneficial stockholders of record
as of January 5, 1996.
Class C Warrants
Fiscal Quarter High Low
First 1994 3/16 3/16
Second 3/16 3/16
Third 3/16 3/16
Fourth 3/16 3/16
First 1995 3/16 3/16
Second 3/16 3/16
Third 3/16 3/16
Fourth 3/16 1/8
The Company had approximately 42 warrant holders of record as of January 5,
1996.
The Company has never declared or paid a cash dividend on its Common Stock.
It is the current policy of the Company's Board of Directors to retain all
earnings to finance the development and expansion of the Company's business. The
Company's Revolving Credit Facility prohibits the payment of dividends or the
making distributions on account of the capital stock without the consent of
Mellon Bank, N.A..
6
<PAGE>
Item 6. Selected Financial Data
Year Ended October 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Income Statement
Sales of Services $26,915,737 $29,238,995 $28,633,408 $26,864,305 $23,169,403
Income (loss)
from continuing
operations $849,105 $1,426,005 $733,025 $91,879 ($1,211,490)
Loss from
discontinued
operations ($1,029,186) ($706,794)
Net income (loss) $849,105 $1,426,005 $733,025 ($937,307) ($1,918,284)
Earnings (Loss) per Share
Income (loss)
from continuing
operations $.06 $.10 $.05 $.00 ($.08)
Loss from discontinued
operations ($.07) ($.05)
Total primary (1) $.06 $.10 $.05 ($.07) ($.13)
Fully diluted $.06 $.10 $.05 ($.07) ($.13)
Balance Sheet
Working capital $3,347,994 $5,200,609 $3,736,073 $2,942,756 $3,063,177
Total assets $10,301,555 $6,546,839 $5,333,939 $5,096,528 $5,503,171
Long term debt $20,090 $35,496 $74,397 $128,600 $173,321
Total liabilities $2,774,970 $1,069,359 $1,287,932 $1,802,140 $1,338,976
Shareholders' equity $7,526,585 $5,477,480 $4,046,007 $3,294,338 $4,164,195
<FN>
(1) Based on average number of common stock outstanding during the years
ended October 31, 1995, 1994, 1993, 1992 and 1991 of 15,039,847,
14,651,381, 14,392,057, 14,339,565 and 14,322,541, respectively (net of
treasury stock).
</FN>
</TABLE>
7
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company continues to direct its resources and streamline its operations
in response to changing economic conditions. The Company has developed an
operating model which consists of a strong balanced approach to management,
while maintaining an entrepreneurial spirit. Corporate management focuses on the
overall performance of the Company. It establishes and maintains financial
controls and provides financial data processing and administrative assistance to
all its operating offices. It develops the business strategy, goals, and general
operating guidelines for the Company, maintains strong relationships with the
Company's principal customers, and oversees local management of operations. The
Company believes that its performance-based compensation structure is a key
factor to its success.
The present downsizing of U.S. Corporations is a "permanent phenomenon" and
management believes is essential in order to achieve productivity improvements,
payroll cost reduction and work force flexibility.
1995 Compared To 1994
As a result of the current year acquisitions, the Company expects to
increase future profitability. This is expected to be achieved by the increased
sales generated by the Cataract, Inc. acquisition, cost savings related to the
elimination of duplicate operating costs of the combined companies, the
spreading of the Company's fixed expenses over a larger revenue base, as well as
management's ability to control expenses during a period of revenue growth.
On January 5, 1995 the Company entered into a non-binding letter of intent
regarding the possible acquisition of The Consortium, Inc. ("Consortium"), a
privately-held provider of temporary technical employees based in Fairfield, NJ.
The letter of intent contemplates the exchange of 6.5 million shares of the
Company's common stock for all of the outstanding shares of Consortium. Revenues
for the year ended December 31, 1995 of Consortium approximated $26 million.
Closing of the transaction is dependent on negotiation of definitive agreements
and completion of due diligence. Because of these and other factors, there can
be no assurance that the Consortium transaction will be successfully completed.
The Company's net sales decreased $2,323,258 or 7.9% from 1994. This
results principally from a reduction of services provided to a major customer
who in turn has reduced its requirements for contract technical workers.
Management believes the loss of this contract is not representative of current
or future business conditions. Sales to the major customer decreased by
$4,511,000 or 57.8% from 1994. The reduction in sales to the major customer was
partially offset by sales generated from the current year acquisitions of Great
Lakes Design, Inc. and Cataract, Inc.
Cost of sales decreased $1,485,072 or 6.2% from 1994. The gross profit
percentage for 1995 was 16.9% as compared to 18.4% for 1994. This was a
consequence of the reduction in higher gross profit sales mix which was
attributed to the decline in sales to the major customer.
Selling, general and administrative expenses decreased $124,292 or 3.4%
from 1994. This resulted from continuing efforts to streamline operating
expenses as well as efforts to increase productivity of administrative and
support activities.
8
<PAGE>
1995 Compared To 1994 (Continued)
Depreciation and amortization increased $37,256 or 40.0% from 1994. This
resulted principally from the amortization of intangible assets attributable to
the business acquisitions completed in 1995.
Interest expense increased $3,962 or 11.6% from 1994. This resulted from
the use of the Company's credit facility in the two months following the
acquisition of Cataract, Inc.
Other, net included in the caption Other Income (Expense) consisting
principally of interest income increased $86,669 or 215% from 1994 due to the
short term placement of the Company's cash reserves prior to the acquisition of
Cataract, Inc.
Income tax expense decreased $93,543 as a result of the lower level of
pre-tax profit in the current year.
Accounts receivable increased $1,633,583 at October 31, 1995 as compared to
October 31, 1994. This results from the acquisition of Cataract, Inc. on August
30, 1995 and the increased level of sales in the fourth quarter of fiscal year
1995 as compared to fiscal year 1994. Property and equipment and intangible
assets increased $458,651 and $3,568,932, respectively at October 31, 1995 as
compared to October 31, 1994. This results principally from the Company's
business acquisitions in fiscal 1995.
Cash flows used in investing activities for the years ended October 31,
1995 and 1994 were $2,420,798 and $21,176, respectively. Most of the cash used
in investing activities in 1995 was for acquisitions ($2,345,966). Cash flows
used in financing activities for the years ended October 31, 1995 and 1994 were
$916,084 and $34,463, respectively. The principal use of cash in 1995 was the
repayment of $1,000,000 of long-term debt assumed with the acquisition of
Cataract, Inc.
1994 Compared To 1993
The Company, with continued implementation of its strategic business plan,
continued to show operational improvements. Results of operations reflected a
net income of $1,426,005 ($.10 per share) in 1994 as compared to $733,025 ($.05
per share) in 1993. The continuing focus on operational improvements has
improved profitability by $692,980 or 94.5% over the results for 1993.
Sales increased $605,587 or approximately 2.1% from sales for 1993. Sales
by IDI Personnel Services increased $1,870,000. Sales to offices servicing Dow
Chemical and Dow Corning decreased by $1,116,000. Sales to Sikorsky Aircraft
decreased by $569,053. This reduction in sales resulted from reduced personnel
demand on the part of Dow Chemical, Dow Corning and Sikorsky Aircraft.
Cost of sales decreased $522,636 or approximately 2.1% from 1993. This was
achieved along with an increase in sales of $605,587. This results from an
increase in gross profit margin of 3.9%.
Gross profit increased by $1,128,223 or approximately 26.6% from 1993. This
increase occurred as a direct result of the Company's continuing efforts to
control its workmen's compensation and payroll related costs as well as its
efforts to increase mark-ups with new and existing clients.
Operating costs increased by $373,268 or approximately 11.0% from 1993. The
1994 increase in operating costs resulted from the addition of two offices in
the New England area as well as bad debts of approximately $93,000. The two
additional offices were merged together on April 1, 1994 to achieve efficiency
and cost effectiveness.
9
<PAGE>
1994 Compared To 1993 (Continued)
Interest expense decreased by $21,079 or approximately 38.2% from 1993. The
majority of this decrease resulted from the reduction of financing and interest
costs associated with the Company's line of credit.
Income tax expense increased by $109,178 or approximately 140.2% from 1993.
This is the result of the expiration of net operating loss carryforwards on the
state level in 1994 and the Company's becoming subject to the alternative
minimum tax on the federal level.
Liquidity and Capital Resources
Key indicators of liquidity, balance sheet strength and capital resources are as
shown in the following table:
<TABLE>
<CAPTION>
October 31, October 31,
1995 1994
<S> <C> <C>
Current assets $6,102,874 $6,234,472
Current liabilities 2,754,880 1,033,863
--------- ---------
Working capital $3,347,994 $5,200,609
========== ==========
Current ratio 2.21 to 1 6.03 to 1
Borrowed capital $132,035 $ 74,397
Shareholders' equity $7,526,585 $5,477,480
Borrowed capital/
Shareholders' equity 1.7% 1.4%
Common shares outstanding 15,961,118 14,399,565
Book value per common share .47 .38
<FN>
During the year ended October 31, 1995, working capital decreased by
$1,852.615. This was due to the use of $2,000,000 of cash to acquire Cataract,
Inc. on August 30, 1995. The Company, at October 31, 1995 had $20,090 in
long-term debt and the Company held $297,550 of cash (along with $3,240,883 of
loan availability on its line of credit of $6,000,000).
</FN>
</TABLE>
10
<PAGE>
Liquidity and Capital Resources (continued)
On August 31, 1995, the Company entered into an agreement with Mellon Bank,
N.A. for providing a credit facility in the maximum amount of $6,000,000. The
agreement expires on June 30, 1998. The credit facility is collateralized by
Intertec's and Cataract's accounts receivable, contract rights and furniture and
fixtures with unlimited guarantees from RCM Technologies, Inc. The credit
facility is used to supply Intertec and Cataract with the cash requirements
needed to finance payroll relating to the provision of services to clients by
Intertec and Cataract personnel prior to the time that Intertec and Cataract is
paid by its customers. The loan requires both Intertec Design, Inc., Cataract,
Inc., and RCM Technologies, Inc. to meet certain objectives with respect to
financial ratios and earnings. Credit facility advances are to be used to meet
cash flow requirements for Intertec Design, Inc., and Cataract, Inc. as well as
operating expenses for RCM Technologies, Inc. Advances to RCM Technologies, Inc.
in excess of its operating expenses must have prior bank approval. The Company
believes this will sufficiently support the operations of both Intertec Design,
Inc., Cataract, Inc., and RCM Technologies, Inc.
Borrowings under the credit facility are based on 85% of accounts
receivable on which not more than ninety days have elapsed since the date of
invoicing. The interest rate charged is the prime rate of the Bank (effective
rate of 8.75% and 9.00% at October 31, 1995 and 1994, respectively). At October
31, 1995 the outstanding borrowings under the credit facility was $914,435.
The Company does not currently have material commitments for capital
expenditures and does not anticipate entering into any such commitments during
the next twelve months. The Company continues to evaluate for acquisition
various businesses which are complementary to its current operations. The
Company's current commitments consist primarily of lease obligations for office
space. The Company believes that its capital resources are sufficient to meet
its obligations incurred in the normal course of business for at least the next
twelve months.
Seasonality
The Company's quarterly operating results are affected primarily by the
number of billing days in the quarter and the seasonality of its customers'
businesses.
The Company usually experiences higher revenues in its fourth quarter due
to increased economic activity and experiences lower revenues in its first
quarter through February of the following year, showing gradual improvement over
the remainder of the year.
Impact of Inflation
The effects of inflation on the Company's operations were not significant
during the periods presented in the financial statements.
Item 8. Financial Statements and Supplemental Data
The Company's financial statements, together with the report of the
Company's independent auditors, are contained on pages F-1 through F-26.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
11
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Certain information concerning the directors and executive officers
of the Company is set forth below:
Name Age Office
---- --- ------
Leon Kopyt 49 Chairman, Chief Executive Officer,
President and Director
Stanton Remer 44 Chief Financial Officer,
Treasurer and Director
Norman S. Berson 69 Director
Robert B. Kerr 53 Director
Woodrow B. Moats, Jr. 63 Director
Leon Kopyt
Leon Kopyt was elected President and Chief Executive Officer on January 23,
1992 and from May 1, 1990 to that date served as Chief Operating Officer of the
Company. His prior positions with the Company were that of Chief Financial
Officer and Treasurer. Mr. Kopyt's prior experience includes serving as a Board
Member of MTS Corporation, Philadelphia, and Socimi International, Milan, Italy,
sister companies which manufacture transportation and defense products. Mr.
Kopyt holds a B.S. degree in Electrical Engineering and has attended MBA course
work at Wharton. Mr. Kopyt has been a Director since 1991.
Stanton Remer
Stanton Remer was elected Chief Financial Officer and Treasurer on May 19,
1994. Mr. Remer is a Certified Public Accountant with an MBA in Finance from
Temple University and a B.S. in Textile Science from the Philadelphia College of
Textiles & Science. Mr. Remer has a diverse accounting and financial background.
Prior experiences include Chief Financial Officer for Sterling Supply
Corporation (1991-1992)and Managing Partner of a regional accounting firm
(1983-1991). Mr. Remer has been a Director since 1992.
Norman S. Berson
Norman S. Berson has been a shareholder in the law firm of Fineman & Bach,
P.C., of Philadelphia, Pennsylvania, and its predecessors since 1981. The
Company has retained Fineman & Bach, P.C. to represent it on various legal
matters. From 1967 to 1982, Mr. Berson was a member of the House of
Representatives of the Commonwealth of Pennsylvania. Mr. Berson has been a
Director since 1987.
12
<PAGE>
Item 10. Directors and Executive Officers of the Registrant (Continued)
Robert B. Kerr
Robert B. Kerr is founder and partner of Everingham & Kerr, Inc., a
merger and acquisition consulting firm located in Haddon Heights, New
Jersey, which provides professional intermediary services and other
consulting services to small and middle market manufacturing, distribution
and service businesses. From 1974 to 1987, Mr. Kerr was Vice President,
Sales, for Shieldalloy Corporation, a specialty metals producer. Mr. Kerr
received a B.S. in Mechanical Engineering and a B.A. in Arts and Sciences
from Pennsylvania State University in 1965 and an MBA in Management from
Wayne State University in 1970. Mr. Kerr has been a Director since February
1994.
Woodrow B. Moats, Jr.
Woodrow B. Moats, Jr. is President of W.B. Moats & Associates, Berwyn,
Pennsylvania, a marketing communications organization specializing in
business to business marketing. From 1975 to 1980, he was Senior Vice
President - Corporate Marketing and Public Relations of National Railway
Utilization Corporation. Mr. Moats is a graduate of the University of
Miami, Florida, as a marketing major specializing in advertising. Mr. Moats
has been a Director since February 1994.
Directors
The By-Laws of the Company were amended by the Board of Directors on
January 25, 1995 to provide for three classes of directors whose terms will
expire in consecutive years. The Board determined that establishing
staggered terms was an effective way to provide stability and continuity in
the governance of the Company. Each nominee as a Class A director will be
elected to serve a term expiring at the Annual Meeting in 1997 or until his
successor has been elected and qualified. Each nominee as a Class B
director will be elected to serve a term expiring at the Annual Meeting in
1998 or until his successor has been elected and qualified. Each nominee as
a Class C director will be elected to serve a term expiring at the Annual
Meeting in 1999 or until his successor has been elected and qualified.The
current terms of all incumbent directors will end at the Annual Meeting in
1996.
Committees
The Board of Directors has established an Executive Committee, an Audit
Committee and a Compensation Committee which meet periodically. The
Executive Committee is responsible for the operation of the Company between
formal meetings of the full Board of Directors. Mr. Kopyt and Mr. Remer
have been designated by the Board to serve on the Executive Committee. Mr.
Kerr and Mr. Berson serve on the Audit Committee which reviews the
Company's financial and accounting practices and controls. The Compensation
Committee is responsible for determining the compensation of the officers,
directors and key employees of the Company. Mr. Moats and Mr. Kerr
currently serve on the Compensation Committee. The Audit Committee and
Compensation Committee met 1 time and 2 times, respectively during fiscal
1995.
13
<PAGE>
Item 10. Directors and Executive Officers of the Registrant (Continued)
Officers
Officers are elected for one (1) year by the directors at the first meeting
of the Board of Directors immediately following the Annual Meeting of the
Shareholders. Any officer shall hold office until his successors are chosen
and qualified. Any officer elected or chosen by the Board of Directors may
be removed at any time, with or without cause, by the affirmative vote of a
majority of the Board of Directors.
No family relationship exists between any director or executive officer and
any other director or executive officer of the Company.
Compliance with Section 16(a) of the Exchange Act
The Company is unaware of any untimely filing of Forms 4 and 5 filings.
14
<PAGE>
Item 11. Executive Compensation
The following table sets forth the compensation of the Company's
principal executive officers for the fiscal year ended October 31, 1995.
Further, the Company was not a party to any plans or arrangements providing
cash or non-cash forms of compensation to its principal executive officers,
other than as listed below.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
------------------- ------------
Name and Securities All Other
Principal Underlying Options Compensation
Position Year Salary Bonus Options SARs (#) ($)
-------- ---- ------ ----- ---------------- ---
Leon Kopyt
President, CEO,
(Principal Executive
Officer)
<S> <C> <C> <C> <C> <C> <C>
1995 $249,161 $26,300 201,500 $11,062 (1)
1994 $209,955 $40,500 150,000 $ 9,262 (1)
1993 $172,536 $17,582 100,000 $ 7,336 (1)
Stanton Remer
Chief Financial
Officer, Treasurer
(Principal
Accounting Officer(2)
1995 $ 83,078 50,000 $ 2,345 (1)
1994 $ 36,347 50,000 $ 2,334 (1)
<FN>
(1) Represents premiums paid for life and disability insurance.
(2) Employment commenced May 28, 1994.
</FN>
</TABLE>
15
<PAGE>
Item 11. Executive Compensation (Continued)
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realized Value
of Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
----------------- ---------------
Number of
Securities % of Total
Underlying Options/SARs
Options/ Granted to Exercise
SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) (1) Year ($/Sh) Date 5% 10%
- ---- --- --- ---- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Leon Kopyt 201,500 80.1% $.53125 7/15/05 $67,321 $170,605
Stanton Remer 50,000 19.9% $.53125 7/15/05 $16,705 $ 42,334
<FN>
(1) Options are exercisable one year from the date of the grant. Shares
received upon exercise of the option may not be sold for at least one year
from the date of exercise.
</FN>
</TABLE>
<TABLE>
<CAPTION>
OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
Number of
Securities
Underlying
Exercised Value of Unexercised
Options/SARs In-the-Money
at FY-End Options/SARs
(#) Shares at FY-End ($)
Shares
Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
---- ------------ --- ------------- -------------
<S> <C> <C> <C> <C>
Leon Kopyt 0 0 260,000/ $ 31,250/
201,500 $ 31,485
Stanton Remer 0 0 75,000/ $ 7,813/
75,000 $ 7,813
</TABLE>
16
<PAGE>
Item 11. Executive Compensation (Continued)
<TABLE>
<CAPTION>
Details of number of shares and value of unexercised "in the money" options
follows:
Name # Shares Option Price Price 10/31/95 Per Share Total Value
---- -------- ------------ -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Leon Kopyt 461,500 $.25 - $3.97 $.6875 $.156 - $.438 $62,735
Stanton Remer 150,000 $.531 - $.688 $.6875 $.156 $15,626
</TABLE>
Standard Arrangements
Members of the Board of Directors who are nonsalaried receive $750 for each
Directors meeting they attend and $300 for each special committee meeting
or special assignment. The following table sets forth amounts payable to
members of the Board of Directors for the fiscal year ended October 31,
1995
<TABLE>
<CAPTION>
Board of Directors Special
Director Meetings Assignments (a)
-------- -------- ---------------
<S> <C> <C>
Leon Kopyt $ $
Stanton Remer
Norman S. Berson (b)
Robert B. Kerr 750 10,960
Woodrow B. Moats, Jr. 750 1,800
--- -----
$1,500 $12,760
====== =======
<FN>
(a) Special assignments are duties performed by Board Members in addition
to regularly assigned tasks as Board Members.
(b) Mr. Berson does not receive fees for Directors' or Committee meetings.
</FN>
</TABLE>
17
<PAGE>
Item 11. Executive Compensation (Continued)
Employment Agreement
Pursuant to an Employment Agreement dated April 15, 1994, the Company has
agreed to employ Mr. Kopyt as President and Chief Executive Officer for a
period of two years with a base annual salary of $235,000 and $260,000 per
annum and an annual auto expense allowance of $14,400 for the twelve months
ended April 30, 1995 and 1996, respectively. In addition to the
compensation provided for under the Agreement, Mr. Kopyt is to receive a
bonus based on the consolidated operating profits before taxes for fiscal
years ending October 31, 1994 and 1995 as follows: 1) up to $750,000 - 3%
bonus, 2) in excess of $750,000 - 2% bonus. The bonus earned for fiscal
1995 amounted to $26,300.
Termination Benefits Agreement
The Company has a termination benefits agreement with the President which
grants the right to receive up to 2.99 times the average aggregate annual
compensation as reported for federal income tax purposes for the past five
years plus continuation of certain benefits, and provides for the surrender
of stock options in exchange for the payment by the Company of the
difference between the option price and the share price on the date of
change of control (as defined) within a period of five years thereafter or
termination (as defined), whichever is higher. The maximum contingent
liability as of October 31, 1995 for salary and incentive compensation is
approximately $684,500.
Compensation Pursuant to Plans
401K Retirement Plans
The Company maintains two 401K plans as of October 31, 1995 which consists
of a plan for the eligible employees of Intertec Design, Inc. and a plan
for the eligible employees of Cataract, Inc., both wholly owned
subsidiaries of the Company. Both plans are substantially identical. Each
of the plans is a profit-sharing plan, including a cash or deferred
arrangement pursuant to Section 401(k) of the Internal Revenue Code of
1986, as amended, sponsored by the Company for purposes of providing
eligible employees an opportunity to defer compensation and have such
deferred amounts contributed to the 401K Plan on a pre-tax basis, subject
to certain limitations. The Company may, in the discretion of the Board of
Directors, make contributions of cash to match deferrals of compensation by
participants.
The Company made no contributions of cash to the 401K Plans to match
deferrals of compensation by participants in the fiscal years ending
October 31, 1995, 1994, or 1993. Amounts contributed to the 401K Plans by
executive officers during the fiscal years ended October 31, 1995, 1994 and
1993 were $11,035, $0 and $0 respectively. The amounts contributed by all
employee participants, excluding officers, during the period November 1,
1992 to October 31, 1995 totaled $641,298.
18
<PAGE>
Item 11. Executive Compensation (Continued)
Item 11. Executive Compensation (Continued)
Report of the Compensation Committee
The compensation committee annually reviews the compensation of the
Company's executive officers, Messrs. Kopyt (Chairman, President and Chief
Executive Officer) and Remer (Chief Financial Officer and Treasurer).
As noted above, Mr. Kopyt has an employment agreement which commenced
April 15, 1994 which provides for base compensation, an auto allowance and
a bonus calculated as a percentage of the Company's consolidated operating
profits before taxes. Annual increases in base compensation were provided
for based upon expected inflation. As of the date of this report, Mr. Remer
does not have an employment agreement, and his compensation is set annually
by the Board based upon the Compensation committee's recommendation.
In addition to compensation provided pursuant to their employment
agreements, the executive officers were granted stock options pursuant to
the Company's Incentive Stock Option Plan. Grants of options are intended
to be a significant portion of total executive compensation and are
intended to align the executive's interest with those of the Company's
stockholders. In light of the relatively limited trading volume in the
Company's common stock, the compensation committee believes that financial
performance is a better indicator of executive performance than the
Company's share price. In assessing such performance, the compensation
committee examines a number of financial indicators, such as net sales,
operating income, net income and earnings per share. However, compensation
decisions are not based upon any precise formula and no factor is accorded
any greater weight than the other factors.
During the fiscal year ended October 31, 1994, the Company achieved
records in each of the four indicators of financial performance. In light
of these results, the Board, with the Compensation Committee's approval,
provided Mr. Kopyt with an increase in the number of options granted to
201,500 from 150,000 the year before. In addition, Mr. Remer's base salary
was increased to $100,000 per year from the prior level of $80,000.
19
<PAGE>
Item 11. Executive Compensation (Continued)
Comparison of Five -Year Cumulative Total Returns
The following graph compares the performance of the Company's Common Stock
with the performance of the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500 Index") and a peer group index by measuring the changes in
common stock prices from October 31, 1990, plus assumed reinvested
dividends. The Securities and Exchange Commission's rules require, if a
published peer group does not exist, that a company create a peer group
index with which to compare its stock performance by selecting a group of
companies in lines of business similar to its own. The Company has found no
published peer group which accurately mirrors the Company's business.
Accordingly, the Company has created a special peer group index that
includes companies in the principal lines of business in which the Company
does business. The common stocks of the following companies have been
included in the Peer Group Index: Amserv Healthcare, Inc., General
Employment Enterprises, C.H. Heist Corp., Joule, Inc., National Technical
Systems, Inc., Right Management Consultants, Winston Resources, Brandon
Systems Corp., GTS Duratek, Inc., Keane, Inc., On Assignment, Inc.,
Uniforce Temp Personnel, Inc. and Care Group, Inc. The chart assumes that
$100 was invested on October 31, 1990 in the Company's Common Stock, the
S&P 500 Index and the peer group index, and that all dividends were
reinvested. In addition, the graph weighs the peer group on the basis of
its respective market capitalization, measured at the beginning of each
relevant time period.
<TABLE>
[GRAPHIC OMITTED - GRAPH APPEARS HERE]
<CAPTION>
Total Return Analysis
<S> <C> <C> <C> <C> <C> <C>
10/31/90 10/31/91 10/31/92 10/31/93 10/31/94 10/31/95
-------- -------- -------- -------- -------- --------
RCM Technologies, Inc $100 $49.12 $7.89 $16.67 $18.42 $19.30
Peer Group $100 $133.16 $109.42 $211.64 $285.25 $375.92
Nasdaq Composite (US) $100 $169.20 $190.79 $245.84 $247.20 $332.07
</TABLE>
20
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of January 5, 1996, the shares of the
Company's common stock owned of record or beneficially by (i) each person known
to the Company to own more than five percent of the outstanding shares; (ii)
each director; and (iii) all officers and directors of the Company as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED AT JANUARY 5, 1996
Title of Number of Percent of
Directors and Officers Class Shares (a) Class (b)
---------------------- ----- ------ --- ----- ---
<S> <C> <C> <C>
Leon Kopyt (c)
447 Waring Street
Philadelphia, PA 19116 Common 461,600 2.9%
Stanton Remer (d) (e)
113 Beverly Road
Wynnewood, PA 19096 Common 165,000 1.0
Norman S. Berson (d)
2421 Spruce Street
Philadelphia, PA 19103 Common 50,000 *
Robert B. Kerr (d)(f)
115 White Horse Pike
Haddon Heights, NJ 08035 Common 50,000 *
Woodrow B. Moats, Jr. (d)(f)
745 Old State Road
Berwyn, PA 19312 Common 50,000 *
All Directors and Officers
as a group (5 persons) 776,600 4.9%
<FN>
* Represents less than 1% of the Company's outstanding Common Stock.
</FN>
</TABLE>
21
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management (Continued)
(a) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations of the Securities and Exchange Act of 1934 and,
accordingly, may include securities owned by or for, among others, the
spouse and/or minor children of the individual and any other relative
who has the same home as such individual, as well as other securities
as to which the individual has or shares voting or investment power.
Beneficial ownership may be disclaimed as to certain of the securities.
(b) 314,000 shares of Common Stock held in treasury were deducted from the
total Common Stock outstanding at January 5, 1996 when computing the
percentage of Common Stock.
(c) Includes presently exercisable options under the 1986 Plan to purchase
10,000 shares at an exercise price of $3.9688 per share granted on
April 24, 1991, exercisable options under the 1986 Plan to purchase
77,000 shares at an exercise price of $.25 per share granted on April
20, 1993, exercisable options under the 1992 Plan to purchase 23,000
shares at an exercise price of $.25 per share granted on April 22,
1993, exercisable options under the 1992 Plan to purchase 50,000 at an
exercise price of $.6875 granted on April 15, 1994, exercisable options
under the 1992 Plan to purchase 100,000 at an exercise price of $.53125
granted on July 15, 1994, not presently exercisable options under the
1992 Plan to purchase 251,000 shares at an exercise price of $.53125
per share granted on July 15, 1995.
(d) Includes options under the 1994 Nonemployee Director Stock Option Plan
to purchase 50,000 shares (25,000) shares are not exercisable) at an
exercise price of $.6875 per share granted on May 19, 1994.
(e) Includes exercisable options under the 1992 Plan to purchase 50,000
shares at an exercise price of $.53125 granted on July 15, 1994 and
includes options under the 1994 Nonemployee Director Stock Option Plan
to purchase 50,000 shares (25,000 are not exercisable) at an exercise
price of $.6875 per share granted on May 19, 1994 and includes not
presently exercisable options under the 1992 Plan to purchase 50,000
shares at an exercise price of $.53125 granted on July 15, 1995.
(f) Includes options under the 1994 Nonemployee Director Stock Option Plan
to purchase 50,000 shares (40,000 shares are not exercisable) at an
exercise price of $.6875 per share granted on May 19, 1994.
Cataract Voting Agreement
Pursuant to the terms and provisions of the Cataract Merger Agreement, the
Cataract shareholders pledged, pursuant to the Pledge Agreement, the Company's
stock they received, (1,561,553 shares), in order to guarantee certain
performance criteria of Cataract established in the Merger Agreement. The Pledge
Agreement expires on November 30, 1998, during which time the Company, as
pledgee, has the right to exercise all voting rights with respect to the pledged
stock.
Upon completion of the pledge period, the remaining pledged shares will
then be placed in a voting trust ("Trust Shares") pursuant to the Voting Trust
Agreement. The Trust Shares will be held in trust until the earlier of: (i) the
public or private sale of the trust Shares in an open market transaction to an
Unaffiliated Third Party, as such term is defined in the Voting Trust Agreement;
or (ii) the resignation, removal from office or if for any other reason Leon
Kopyt ceases to serve as Chairman, Chief Executive Officer and
22
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
(Continued)
President of the Company. The Voting Trust Agreement also provides that
notwithstanding the expiration of the Voting Trust Agreement, one-third of the
Trust Shares shall be released from trust on August 30, 2000, and thereafter an
additional one-third of the Trust Shares shall be released on each August 30,
2001 and August 30, 2002, at which time all of the Trust Shares will have been
released from the voting trust, thereby causing the termination of the Voting
Trust Agreement.
Item 13. Certain Relationships and Related Transactions
Mr. Berson, a Director of the Company, is a shareholder in the law firm of
Fineman & Bach, P.C., which serves as counsel to the Company. The Company paid
consulting fees of $12,760 during 1995 to outside Directors of the Company.
Transactions with Affiliates
The Company has adopted a policy which requires that all transactions with
affiliates of the Company be approved by a majority of the disinterested
Directors of the Company and be on terms no less favorable to the Company than
can be obtained from unaffiliated persons. There have been no transactions in
excess of $60,000 with affiliates during 1995, 1994 or 1993.
23
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. and 2. Financial Statement Schedules -- See "Index to Financial
Statements, Schedules on F-1.
(b) Reports on Form 8-K
Form 8-K was filed with the Commission on September 12, 1995.
On August 30, 1995, RCM Technologies, Inc. ("Registrant") acquired
Cataract, Inc., a supplier of management, engineering, design and technical
services to the nuclear power, fossil fuel, electric utilities and process
industries. The acquisition was completed through a merger transaction (the
"Merger") pursuant to which Cataract, Inc. was merged with and into a
newly-created subsidiary of the Registrant, which then concurrently changed its
name to "Cataract, Inc."
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED (Filed as part of the Form 8-K.)
Audited Balance Sheets, October 2, 1994 and October 1, 1993
Audited Statement of Income,
Years ended October 2, 1994, October 1, 1993 and September 25, 1992
Audited Statement of Changes in Stockholders' Equity, Years ended
October 2, 1994, October 1, 1993 and September 25, 1992
Audited Statements of Cash Flows,
Years ended October 2, 1994, October 1, 1993, and September 25, 1992
Unaudited Balance Sheet, July 2, 1995
Unaudited Statements of Income for the Three Month Periods
Ended July 2, 1995 and July 3, 1994
Unaudited Statements of Income for the Nine Month Periods
Ended July 2, 1995 and July 3, 1994
Unaudited Statement of Changes in Shareholders' Equity for the Nine
Month Period Ended July 2, 1995
Unaudited Statements of Cash Flows for the Nine Month Periods Ended
July 2, 1995 and July 3, 1994
PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Combined Balance Sheets, October 31,
1994 and July 31, 1995
Unaudited Pro Forma Condensed Combined Statements of Income for
the year ended October 31, 1994 and the nine months ended July 31,
1995.
24
<PAGE>
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(Continued)
(c) Exhibits
(3)(a) Articles of Incorporation, as amended, incorporated by reference to
Exhibit 3(a) of the Registrant's Form 10-K dated October 31, 1994,
filed with the Commission on January 4, 1995 (Commission File No.
1-10245) .
(3)(b) Bylaws, as amended: incorporated by reference to an Exhibit of the
Registrant's Form 10-Q dated January 31, 1995 filed with the Commission on
February 16, 1995 (Commission File No. 1-10245). (4)(a) Warrant Agreement dated
September 1, 1989, with respect to Class C
Warrants between the Registrant and American Stock Transfer and Trust
Company; incorporated by reference to Exhibit 4 (b) of the Registrant's
Form S-1 Registration Statement dated July 25, 1989, as amended August
16, 1989 and May 14, 1990 (Commission File No. 33-30109).
(10)(a) Amended and Restated Loan and Security Agreement dated August 30, 1995
between Intertec Design, Inc., Cataract, Inc. and Mellon Bank, N.A.;
incorporated by reference to Exhibit 10 of the Registrant's Quarterly
Report on Form 10-Q as of July 31, 1995 filed with the Commission on
September 8, 1995 (Commission File No. (1-10245).
(10)(b) RCM Technologies, Inc. 1982 Incentive Stock Option Plan; incorporated
by reference to Exhibit 10(d) of the Registrant's Form S-1 Registration
Statement dated August 2, 1982, as amended September 27, 1982, October
26, 1982, December 7, 1982, April 14, 1987 and May 27, 1987 (Commission
File No. 33-78670).
(10)(c) RCM Technologies, Inc. 1986 Incentive Stock Option Plan; incorporated
by reference to Exhibit 10(d) of the Registrant's Annual Report on Form
10-K dated October 31, 1986, filed with the Commission on February 13,
1987 (Commission File No. 1-10245).
(10)(d) RCM Technologies, Inc. 1992 Incentive Stock Option Plan; incorporated
by reference to Exhibit A of the Registrant's Proxy Statement dated
April 23, 1992, filed with the Commission on March 9, 1992 (Commission
File No. 1-10245).
(10)(e) RCM Technologies, Inc. 1994 Nonemployee Director Stock Option Plan;
incorporated by reference to Exhibit A of the Registrant's Proxy
Statement dated May 19, 1994, filed with the Commission on June 22,
1994 (Commission File No. 33-80590).
(10)(f) Termination benefits agreement dated December 30, 1993 between the
Registrant and Leon Kopyt; incorporated by reference to Exhibit (10)
(e) (iv) of the Registrant's Annual Report on Form 10-K as filed with
the Commission on February 11, 1994 (Commission File No. 1-10245)
(10)(g) Employment Agreement dated April 15, 1994 between the Registrant,
Intertec Design, Inc. and Leon Kopyt; incorporated by reference to Exhibit 10(g)
of the Registrant's Annual Report on Form 10-K as filed with the Commission on
January 4, 1995 (Commission File No. 1-10245).
(10)(h) Stock Option Agreement dated April 25, 1991 between the Registrant and
Leon Kopyt; incorporated by reference to Exhibit 10(f)(v) to the
Registrant's Annual Report on Form 10-K dated October 31, 1991, filed
with the Commission on February 4, 1992 (Commission File No. 1-10245).
25
<PAGE>
Item 14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K (Continued)
(10)(i) Stock Option Agreement dated April 20, 1993 between the Registrant and
Leon Kopyt; incorporated by reference to Exhibit (10) (f) (i) of the
Registrant's Annual Report on Form 10-K as filed with the Commission on
February 11, 1994 (Commission File No. 1-10245)
(10)(j) Stock Option Agreement dated April 22, 1993 between the Registrant and
Leon Kopyt; incorporated by reference to Exhibit (10) (f) (ii) of the
Registrant's annual report on Form 10-K as filed with the Commission on
February 11, 1994 (Commission File No. 1-10245)
(10)(k) Stock Option Agreement dated April 15, 1994 between the Registrant and
the Nonemployee Directors the Registrant; incorporated by reference to
Exhibit 10(k) of the Registrant's Annual Report on Form 10-K as filed
with the Commission on January 4, 1995 (Commission File No. 1- 10245).
*(11) Computation of Earnings Per Share.
(22) Subsidiaries of the Registrant; incorporated by reference to Exhibit 22
to the Registrant's Form S-1 Registration Statement dated September 24,
1987, as amended November 17, 1987, March 14, 1988, April 5, 1988,
December 2, 1988, February 13, 1989, March 7, 1989 and March 29, 1989
(Commission File No. 33-17439).
*(24)(a)Consent of Independent Certified Public Accountants.
*(27) Financial Data Schedule
- ----------------
* Filed herewith
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
RCM Technologies, Inc.
(Registrant)
Date: January 5, 1996 By:/s/ Leon Kopyt
Leon Kopyt
Chairman, President, Chief Executive Officer and Director
Date: January 5, 1996 By:/s/ Stanton Remer
Stanton Remer
Chief Financial Officer, Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: January 5, 1996 By: /s/ Leon Kopyt
Leon Kopyt
Chairman, President, Chief Executive Officer
and Director
Date: January 5, 1996 By:/s/ Stanton Remer
Stanton Remer
Chief Financial Officer, Treasurer and Director
Date: January 5, 1996 By: /s/ Norman S. Berson
Norman S. Berson
Director
Date: January 5, 1996 By: /s/ Robert B. Kerr
Robert B. Kerr
Director
Date: January 5, 1996 By: /s/Woodrow B. Moats, Jr.
Woodrow B. Moats, Jr.
Director
27
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-K
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
----
Consolidated Balance Sheets, October 31, 1995 and 1994 F-2
Consolidated Statements of Income,
Years Ended October 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Changes in Shareholders' Equity,
Years Ended October 31, 1995, 1994 and 1993 F-5
Consolidated Statements of Cash Flows,
Years Ended October 31, 1995, 1994 and 1993 F-6
Notes to Consolidated Financial Statements F-8
Independent Auditors' Report F-20
Schedules III, VIII and IX F-21
F - 1
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 31,
ASSETS
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current assets
Cash and cash equivalents $ 297,550 $2,534,073
Accounts receivable, net of allowance for doubtful accounts
of $15,000 5,133,662 3,500,079
Prepaid expenses and other current assets 671,662 200,320
------- -------
Total current assets 6,102,874 6,234,472
--------- ---------
Property and equipment, at cost
Equipment and leasehold improvements 1,208,317 749,666
Less: accumulated depreciation and amortization 763,966 616,054
------- -------
444,351 133,612
------- -------
Other assets
Deposits 43,074 36,431
Intangible assets (net of accumulated amortization
of $73,492 and $23,111 in 1995 and 1994,
respectively) 3,711,256 142,324
--------- -------
3,754,330 178,755
--------- -------
Total assets $10,301,555 $6,546,839
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F - 2
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
October 31,
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current liabilities
Note payable - bank $914,435 $
Current maturities of long-term lease obligations 111,945 38,901
Accounts payable and accrued expenses 340,072 73,915
Accrued payroll 1,182,934 589,218
Billings in excess of costs and estimated earnings 148,229
Taxes other than income taxes 205,494 183,600
------- -------
Total current liabilities 2,754,880 1,033,863
--------- ---------
Long term debt 20,090 35,496
------ ------
Shareholders' equity
Common stock, $0.05 par value; 40,000,000 shares authorized; 16,275,118 and
14,713,565 shares issued in 1995 and
1994, respectively 813,756 735,678
Additional paid-in capital 10,265,687 9,143,765
Accumulated deficit ( 3,490,037) ( 4,339,142)
------------ -----------
7,589,406 5,540,301
Less: treasury stock, at cost, 314,000 shares 62,821 62,821
------- ------ ------
7,526,585 5,477,480
--------- ---------
Total liabilities and shareholders' equity $10,301,555 $6,546,839
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F - 3
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended October 31,
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues $26,915,737 $29,238,995 $28,633,408
----------- ----------- -----------
Operating Costs and Expenses
Cost of services 22,378,817 23,863,889 24,386,525
Selling, general and administrative 3,549,810 3,674,102 3,281,460
Depreciation and amortization 130,397 93,141 112,515
------- ------ -------
26,059,024 27,631,132 27,780,500
---------- ---------- ----------
Operating Income 856,713 1,607,863 852,908
Other Income (Expense)
Interest expense ( 38,158) ( 34,196) ( 55,293)
Other, net 124,050 39,381 13,275
------- ------ ------
85,892 5,185 ( 42,018)
------ ----- - ------
Income Before Income Taxes 942,605 1,613,048 810,890
Income Taxes 93,500 187,043 77,865
------ ------- ------
Net Income $ 849,105 $ 1,426,005 $ 733,025
=========== =========== ===========
Net Income Per Share $.06 $.10 $.05
==== ==== ====
Weighted average number of
shares outstanding 15,039,847 14,651,381 14,392,057
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F - 4
<PAGE>
RCM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated Treasury
------ ----- ------- ----------- --------
Shares Amount Capital Deficit Stock
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1992 14,653,565 $732,678 $9,122,703 ($6,498,172) ($62,821)
Issuance of common stock 35,000 1,750 16,844
Net income 733,025
---------- ------- -------- --------- -------
Balance, October 31, 1993 14,688,565 734,428 9,139,547 ( 5,765,147) ( 62,821)
Exercise of stock options 25,000 1,250 4,218
Net income 1,426,005
---------- ------- --------- --------- -------
Balance, October 31, 1994 14,713,565 735,678 9,143,765 (4,339,142) ( 62,821)
Issuance of common stock
in connection with Acquisition
of Cataract, Inc. 1,561,553 78,078 1,121,922
Net Income 849,105
--------- ------- ---------- ---------- -------
Balance, October 31, 1995 16,275,118 $813,756 $10,265,687 ($3,490,037) ($62,821)
=== ==== ========== ======== =========== =========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
F - 5
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31,
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 849.105 $1,426,005 $ 733,025
---------- ---------- ----------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 130,397 93,141 112,515
Provision for losses on accounts
receivable 5,000 ( 37,677)
Gain on sale of equipment 1,600
Common stock issued on settlement of
claim by former consultant 18,594
Changes in assets and liabilities:
Accounts receivable 854,552 286,638 164,289
Prepaid expenses and other
current assets ( 405,116) ( 11,443) ( 16,635)
Current assets of discontinued
operations 4,316
Accounts payable and accrued expenses ( 10,064) ( 3,807) ( 52,165)
Accrued payroll ( 151,348) 36,325 25,745
Billings in excess of costs and
estimated earnings ( 148,229) ( 157,509) 305,738
Taxes other than income taxes ( 18,938) 1,827 ( 8,704)
Current liabilities of discontinued
operations ( 89,092)
---------- ------- --------
251,254 250,172 428,524
------- ------- -------
Net cash provided by operating activities 1,100,359 1,676,177 1,161,549
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements
F - 6
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years Ended October 31,
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from investing activities:
Property and equipment acquired ($ 68,189) ($ 20,619) ($ 14,267)
Increase in deposits ( 6,643) ( 557) ( 3,947)
Cash paid for acquisitions,
net of cash acquired ( 2,345,966)
---------- ---------- ----------
Net cash used in investing activities ( 2,420,798) ( 21,176) ( 18,214)
---------- ---------- ----------
Cash flows from financing activities:
Debt related:
Net borrowing (repayments) under
short term debt arrangements 176,278 ( 4,703) ( 644,841)
Repayments of long term debt ( 1,092,362) ( 35,228) ( 57,493)
Equity related:
Exercise of stock options 5,468
---------- ---------- -----------
Net cash used in financing activities ( 916,084) ( 34,463) ( 702,334)
---------- ---------- -----------
Net increase (decrease) in cash
and cash equivalents ( 2,236,523) 1,620,538 441,001
Cash and cash equivalents at beginning of year 2,534,073 913,535 472,534
--------- ------- -------
Cash and cash equivalents at end of year $ 297,550 $ 2,534,073 $ 913,535
=========== =========== ===========
Supplemental cash flow information:
Cash paid for:
Interest expense $ 36,738 $ 34,196 $ 55,435
Income taxes $ 220,498 $ 123,049 $ 68,645
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 7
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
1. Summary of Significant Accounting Policies
Business
RCM Technologies, Inc. (the "Company"), through its wholly owned
subsidiaries, Intertec Design, Inc. (IDI), and Cataract, Inc. (CAT)
provides contract technical services and the furnishing of engineering and
technical personnel to and performing of engineering projects for other
companies throughout the country, principally those in the aerospace,
electronics, energy and public utility industries. The Company also
provides temporary office, clerical and industrial personnel through IDI
Personnel Services, a division of Intertec Design, Inc.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
Property, equipment and capital leases
Depreciation of equipment is provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated useful
lives on the straight line basis. Estimated useful lives range from three
to ten years. Leasehold improvements are amortized over the lives of the
respective leases or the service lives of the improvements, whichever is
shorter.
Leases which meet certain criteria are classified as capital leases and
assets and liabilities are recorded at amounts equal to the lesser of the
present value of the minimum future lease payments or the fair value of the
leased properties at the inception of the respective lease terms. Assets
are amortized using the straight-line method over the shorter of the
related lease terms or their economic lives. Interest expense relating to
the lease obligations is recorded to effect constant rates of interest over
the terms of the leases. Leases not meeting the criteria of capital leases
are classified as operating leases and rentals are charged to expense as
incurred.
Income taxes
The Company follows the liability method of accounting for income taxes.
Under this method, deferred income tax assets and liabilities are
determined based on differences between the financial statement and income
tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to
the amount expected to be realized. Income tax expense is the tax payable
for the period and the change during the period in deferred tax assets and
liabilities.
F - 8
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
1. Summary of Significant Accounting Policies (Continued)
Revenue recognition
Revenue is recognized concurrently with the performance of services.
When the Company enters into long-term contracts for the supply of
temporary personnel, billings are rendered for employee hours worked
according to contractual billing rates. Billings in excess of costs and
estimated earnings on cost plus fixed fee contracts represents billings in
excess of revenue recognized. Labor and overhead costs, and earnings on
contracts with government contractors are subject to audit by the primary
contractor or a division of the United States government.
Profit sharing plan
The Company sponsors a defined contribution plan (401-K Plan).
Participation in the plan is available to all eligible employees as defined
in the plan. Company contributions to the plan are based on a percentage of
the employee's contributions to the plan subject to management's election
to make a contribution. There were no contributions charged to operations
by the Company for fiscal years ended October 31, 1995, 1994 and 1993.
Cash Equivalents
For purposes of presenting the consolidated statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Reclassification
Certain reclassification have been made to the 1994 and 1993 financial
statements to conform to the 1995 presentation.
Income per share
Income per share is based on the weighted average number of common shares
outstanding during the periods. For fiscal years ended October 31, 1995,
1994 and 1993 common stock equivalents of 370,754, 275,995 and 47,506
shares, respectively, computed under the treasury stock method were
included as common shares outstanding.
F - 9
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
1. Summary of Significant Accounting Policies (Continued)
Intangible Assets
Intangible assets primarily consist of goodwill associated with the
acquired businesses. Goodwill is amortized on a straight-line basis over 40
years. The carrying value of goodwill is reviewed if the facts and
circumstances suggest that it may be impaired. If this review indicates
that goodwill will not be recoverable, as determined based on the
undiscounted cash flows of the entity acquired over the remaining
amortization period, the Company's carrying value of the goodwill is
reduced by the estimated shortfall of cash flows.
Other intangible assets consist primarily of a noncompete agreement, which
is amortized over the term of the agreement.
The FASB issued a new standard, SFAS No. 121, "Accounting for Impairment of
Long-Lived Assets to be Disposed of," which provides guidance on when to
recognize and how to measure impairment losses of long-lived assets and
certain identifiable intangibles and how to value long-lived assets to be
disposed of. The Company anticipates that adoption of this new statement
will not have a material impact on the Company's financial position or
results of operations. The Company is required to adopt this new standard
for its year ended October 31, 1997.
Concentration of credit risk
The Company has invested its excess cash in commercial paper and money
market funds and in deposits with a major bank. The Company has not
experienced any losses on its investments.
The Company provides credit in the normal course of business to each of its
customers. The Company performs ongoing credit evaluations of its customers
and maintains adequate allowances for potential credit losses.
The AICPA's Accounting Standards Executive Committee issued Statement of
Position (SOP) 94-6, "Disclosures of Certain Significant Risks and
Uncertainties," which requires disclosures addressing an entities unique
risks and uncertainties, as well as increased "early warning disclosures"
identifying possible risks and uncertainties. The Company has provided
these disclosures in the financial statements for the year ended October
31, 1995.
2. Acquisitions
During fiscal year ended October 31, 1995, the Company had acquired two
businesses in the staffing services industry. These acquisitions, which are
described below, have been accounted for as purchases and, accordingly, the
results of operations of the acquired companies have been included in the
consolidated results of operations of the Company from the date of
acquisition.
On December 15, 1994, the Company purchased certain operating assets of
Great Lakes Design, Inc. for $200,000 in the form of a $150,000 note
payable and $50,000 in cash. In addition, the Company will share with the
seller a portion of the operating income for a period of five years. Costs
in excess of assets acquired of $52,800 are being amortized over a period
of forty years.
F - 10
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
2. Acquisitions - (Continued)
A covenant not to compete of $107,100 is being amortized over a five year
period. The note payable is uncollateralized, bears interest at 8% per
annum and is payable in quarterly installments of $20,490 including
interest with a final maturity date of December 1, 1996.On August 30, 1995,
RCM Technologies, Inc. ("Registrant") acquired Cataract, Inc., a supplier
of management, engineering, design and technical services to the nuclear
power, fossil fuel, electric utilities and process industries. The
acquisition was completed through a merger transaction (the "Merger")
pursuant to which Cataract, Inc. was merged with and into a newly-created
subsidiary of the Registrant, which then concurrently changed its name to
"Cataract, Inc."
The Merger consideration payable to the former shareholders of Cataract,
Inc. consisted of $2,000,000 cash and 1,561,553 restricted shares of the
Registrant's common stock (the "Shares") valued at $1,200,000 (based upon
the average closing bid price of the Registrant's common stock for the 30
calendar days immediately preceding the closing date). The cost in excess
of net assets acquired was $3,385,966. The cost in excess of net assets
acquired is being amortized over a 40 year period.
The shares issued to the former Cataract, Inc. shareholders have been
pledged to the Company for a period of three years to secure the
performance of certain conditions subsequent to the Merger relating to the
achievement of certain levels of sales revenues that have been warranted by
the former Cataract, Inc. shareholders.
Following the expiration of the pledge period, the Shares are to be placed
in a voting trust until the earlier of: (i) the public or private sale of
such Shares in open market transactions to unaffiliated third parties; or
(ii) the resignation or removal from office of Leon Kopyt, currently Chief
Executive Officer and President of the Registrant. Notwithstanding the
above, one-third of the Shares shall be released from trust commencing upon
the fifth anniversary of the closing, and thereafter an additional
one-third of the Shares shall be released from trust upon each of the sixth
and seventh annual anniversaries of the closing date.
During the period in which the Shares are subject to pledge and the voting
trust, the Shares are to be voted by the Registrant's Board of Directors on
behalf of the former shareholders of Cataract, Inc.
The following unaudited results of operations have been prepared assuming
the acquisitions had occurred as of the beginning of the periods presented.
Those results are not necessarily indicative of results of future
operations nor of results that would have occurred had the 1995
acquisitions been consummated as of the beginning of the periods presented.
Year Ended October 31,
----------------------
1995 1994 1993
Revenues $44,656,755 $53,241,317 $52,279,428
Net income $ 1,104,145 $ 1,980,522 $ 1,142,352
Income per common share $.07 $.12 $.07
F - 11
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
3. Property and Equipment
<TABLE>
<CAPTION>
Property and equipment are comprised of the following:
October 31,
-----------
<S> <C> <C>
1995 1994
---- ----
Office equipment $1,017,197 $ 558,546
Capitalized lease 174,873 174,873
Leasehold improvements 16,247 16,247
------ ------
1,208,317 749,666
Less: accumulated depreciation and amortization 763,966 616,054
------- -------
$ 444,351 $ 133,612
========== ==========
</TABLE>
4. Long-Term Lease
<TABLE>
<CAPTION>
The following is a summary of assets capitalized under a long-term lease:
October 31,
<S> <C> <C>
1995 1994
---- ----
Office equipment, capitalized cost $ 174,873 $ 174,873
Less: accumulated amortization 145,870 110,895
------- -------
$ 29,003 $ 63,978
========== ==========
The future minimum lease payments under the capitalized lease and the
present value of the net minimum lease payments as of October 31, 1995 are
as follows:
</TABLE>
<TABLE>
<CAPTION>
Year Ending Amount
----------- ------
<S> <C>
October 31, 1996 $ 37,165
Less: amount representing interest 1,669
-----
Present value of net minimum lease payments including current maturities of $35,496,
with an interest rate of 10% through August 1996. $ 35,496
=========
</TABLE>
F - 12
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
5. Long-Term Debt
<S> <C> <C>
Long-term debt consists of the following:
1995 1994
---- ----
Note payable on business acquisition, uncollaterialized, bearing interest
at 8% per annum, payable in quarterly installments of principal and
interest of $20,490 with a
final maturity of December 1, 1996. $ 96,539 $
Capitalized lease obligation, collateralized by equipment, bearing interest
at 10% per annum, payable in monthly installments of $4,267
including principal, interest and maintenance costs 35,496 74,397
------ ------
with a final maturity of August 1, 1996 132,035 74,397
Less: current maturities 111,945 38,901
------- ------
$ 20,090 $35,496
======== =======
Maturities of long-term debt are as follows:
1996 $111,945
1997 20,090
---- ------
$132,035
========
</TABLE>
6. Note Payable - Bank
The Company maintains a $6,000,000 credit facility with Mellon Bank, N.A.
with a maturity date of June 1998. The credit facility is collateralized by
accounts receivable, contract rights, and furniture and fixtures with
unlimited guarantees from RCM Technologies, Inc. The credit facility
requires both IDI and CAT and RCM Technologies, Inc. to meet certain
covenants with respect to financial ratios and earnings. Advances to RCM
Technologies, Inc. in excess of its operating expenses must have prior bank
approval.
Borrowings under the credit facility are based on 85% of receivables on
which not more than ninety days have elapsed since the date of invoicing.
The current interest rate charged is the prime rate of the bank. The
previous rate was 1.25% above the prime rate at October 31, 1994. The
effective rates were 8.75% and 9.00% at October 31, 1995 and 1994,
respectively. The bank charges a fee of .25% per annum on the unused
portion of the credit facility. At October 31, 1995, there was $3,240,883
available under the credit facility.
F - 13
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
7. Shareholders' Equity
Common shares reserved
<TABLE>
<CAPTION>
Shares of common stock were reserved for the following purposes:
October 31,
<S> <C> <C>
1995 1994
---- ----
Exercise of warrants 786,709 786,709
Exercise of options outstanding 816,500 866,500
Future grants of options 357,000 407,000
------- -------
Total 1,960,209 2,060,209
========= =========
</TABLE>
Warrants
At October 31, 1995 and 1994, the Company had warrants outstanding to
purchase 786,709 shares of the Company's common stock at an exercise price
of $3.00 per share. The warrants expire on October 1, 1996 unless otherwise
extended by the Board of Directors.
Incentive Stock Option Plans
On April 20, 1982, the shareholders approved the RCM Technologies, Inc.
1982 Incentive Stock Option Plan ("1982 Plan") which authorized the
issuance not later than April 13, 1992 of up to 500,000 shares of Common
Stock to officers, directors and key employees of the Company and its
subsidiaries. On February 27, 1986, the shareholders approved the RCM
Technologies, Inc. 1986 Incentive Stock Option Plan ("1986 Plan") which
authorizes the issuance not later than October 30, 1995 of up to 300,000
shares of Common Stock to officers, directors and key employees of the
Company and its subsidiaries.
On April 23, 1992, the shareholders approved the RCM Technologies, Inc.
1992 Incentive Stock Option Plan ("1992 Plan") which authorizes the
issuance not later than February 13, 2002 of up to 500,000 shares of Common
Stock to officers, directors and key employees of the Company and its
subsidiaries.
The 1986 and 1992 Plans contain substantially the same terms as the 1982
Plan. Options under all plans are intended to be incentive stock options
pursuant to Section 422A of the Internal Revenue Code. The option terms for
all plans cannot exceed ten years and the exercise price cannot be less
than 100% of the fair market value of the shares at the time of grant.
On May 19, 1994, the shareholders approved the RCM Technologies, Inc. 1994
Nonemployee Directors Stock Option Plan ("1994 Plan") as a means of
recruiting and retaining nonemployee directors of the Company. There are
400,000 shares of Common Stock reserved under the plan for issuance no
later than July 19, 2004. All director stock options are granted at fair
market value at the date of grant. The exercise of options granted is
contingent upon service as a director for a period of one year. If the
optionee ceases to be a director of the Company, any option granted shall
terminate.
F - 14
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
7. Shareholders' Equity (Continued)
<TABLE>
<CAPTION>
Transactions related to all stock options are as follows:
<S> <C> <C> <C>
1995 1994 1993
---- ---- ----
Outstanding options at beginning of year 866,500 530,000 328,000
Granted 251,500 400,000 202,000
Forfeited (301,500) ( 38,500)
Exercised ($0.21875 per share) ( 25,000)
------- ------- -------
Outstanding options at end of year 816,500 866,500 530,000
======= ======= =======
Exercisable options at October 31, 435,000 466,500 328,000
Option price per share $.021875 $0.21875 $0.21875
to $3.9688 to $3.9688 to $3.9688
</TABLE>
The FASB issued a new standard, SFAS No. 123, "Accounting for Stock-Based
Compensation," which contains a fair value-based method for valuing
stock-based compensation which measures compensation that entities may use,
and compensation cost at the grant date based on the fair value of the
award. Compensation is then recognized over the service period, which is
usually the vesting period. Alternatively, the standard permits entities to
continue accounting for employee stock options and similar equity
instruments under APB Opinion 25, "Accounting for Stock Issue to
Employees." Entities that continue to account for stock options using APB
Opinion 25 are required to make pro forma disclosures of net income and
income per share, as if the fair value-based method of accounting defined
in SFAS No. 123 had been applied. The Company has not determined which
method it will follow in the future, but anticipates following APB Opinion
25. The Company will be required to adopt the new standard for its year
ended October 31, 1997.
8. Commitments
Employment Contract and Termination Benefits Agreement
The Company has an employment agreement with its President which expires on
April 30, 1996. In addition to a base salary, the agreement provides for a
bonus based on pre-tax earnings. No maximum compensation limit exists. The
aggregate commitment for future salaries at October 31, 1995, excluding
bonuses, was $130,000. In addition to the above compensation, an option
plan is available for all employees to receive stock options resulting from
recommendations by the Compensation Committee of the Board of Directors.
The Company has a termination benefits agreement with the President which
grants the right to receive up to 2.99 times the average aggregate annual
compensation as reported for federal income tax purposes for the past five
years plus continuation of certain benefits, and provides for the surrender
of stock options in exchange for the payment by the Company of the
difference between the option price and the share price on the date of
change of control (as defined) within a period of five years thereafter or
termination (as defined), which ever is higher. The maximum contingent
liability for salary and incentive compensation is approximately $684,500.
F - 15
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
8. Commitments (Continued)
Operating leases
The Company's future minimum annual rental commitments at October 31, 1995
under operating leases for various offices are as follows:
Year ending October 31, Amount
----------------------- ------
1996 $259,300
1997 141,300
1998 79,100
1999 33,300
2000 31,800
---- ------
Total $544,800
========
Rent expense for the years ended October 31, 1995, 1994 and 1993 was
$354,267, $336,662, and $332,274, respectively.
9. Major Customers
Sales to major clients for the years ended October 31, 1995, 1994 and 1993
were as follows:
For the year ended October 31, 1995, three clients contributed
$3,300,000, $2,061,000 and $1,347,000, respectively (an aggregate of
$6,708,000 or 24.9% of total sales). Accounts receivable from these
three clients represented 8.1% of the total trade accounts receivable
at October 31, 1995.
For the year ended October 31, 1994, three clients contributed
$7,811,000, $2,950,000 and $2,095,000, respectively (an aggregate of
$12,856,000 or 44.0% of total sales).
For the year ended October 31, 1993, three clients contributed
$8,380,000, $4,417,000 and $1,744,000, respectively (an aggregate of
$14,541,000 or 50.8% of total sales).
10. Related Party Transactions
A director of the Company is a shareholder in a law firm that rendered
various legal services for the Company. Fees paid to the law firm have not
been significant.
11. Income Taxes
The components of income tax expense are as follows:
Year ended October 31,
----------------------
1995 1994 1993
---- ---- ----
Current
Federal $10,000 $ 27,000 $
State and local 83,500 160,043 77,865
------ ------- ------
Total income tax expense - current $93,500 $187,043 $77,865
======= ======== =======
F - 16
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
11. Income Taxes (Continued)
<TABLE>
<CAPTION>
The income tax provisions reconciled to the tax computed at the statutory
Federal rate was:
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Tax at statutory rate 34% 34.0% 34.0%
State income taxes, net of Federal
income tax benefit 5.8 6.5 6.3
Provision for doubtful accounts .1 ( 1.6)
Net operating loss carry-overs (32.3) ( 31.3) ( 31.8)
Other, net 2.4 2.3 2.7
--- --- ---
9.9% 11.6% 9.6%
=== ==== ===
</TABLE>
<TABLE>
<CAPTION>
At October 31, 1995, the net operating loss carry-overs available to offset
regular taxable income and tax credit carry-overs available to offset
regular or alternative minimum federal taxes are as follows:
Expiration Net Operating Tax
Date Loss Credits
---- ---- -------
<S> <C> <C>
1997-2004 $ 53,100
2005 $ 144,000 20,000
2006 1,628,500
2007 1,226,200
--------- -------
Total $2,998,700 $ 73,100
========== ============
</TABLE>
Should there be a change in control as defined in the Internal Revenue
Code, utilization of such losses could be limited. Net operating losses for
alternative minimum tax purposes at October 31, 1995 was approximately
$2,700,000.
<TABLE>
<CAPTION>
Significant components of the Company's deferred tax assets at October 31,
1995 and 1994 are as follows:
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets due to:
Net operating loss carry-over $1,019,800 $1,350,513
Tax credit carry-over 73,100 73,100
Depreciation of property and equipment 23,200 26,960
Other 46,887 28,700
------ ------
1,162,987 1,479,273
Less: 100% valuation allowance 1,162,987 1,479,273
--------- ---------
Total net deferred tax assets $ $
=========== =========
</TABLE>
The valuation allowance was decreased during 1995 and 1994 by $316,286 and
$553,753, respectively, due to the utilization of net operating loss
carry-overs and the reversal of temporary differences.
F - 17
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
12 Selected Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Year Ended October 31, 1995
Gross Net Income
Sales Profit Net Income Per Share
----- ------ ---------- ---------
<S> <C> <C> <C> <C>
1st Quarter $6,692,756 $1,150,362 $229,015 $.01
2nd Quarter 6,280,172 1,155,413 277,724 .02
3rd Quarter 5,015,376 894,096 69,716 .01
4th Quarter 8,927,433 1,337,049 272,650 .02
--------- --------- ------- ---
Total $26, 915,737 $4,536,920 $849,105 $.06
============ ========== ======== ====
Year Ended October 31, 1994
1st Quarter $6,789,667 $1,077,194 $201,070 $.01
2nd Quarter 7,068,220 1,294,373 301,440 .02
3rd Quarter 7,527,585 1,419,005 431,845 .03
4th Quarter 7,853,523 1,584,534 491,650 .04
--------- --------- ------- ---
Total $29,238,995 $5,375,106 $1,426,005 $.10
=========== ========== ========== ====
</TABLE>
13. Other Income (Expense)
Included in Other Income (Expense) is Interest Income in the amount of
$142,810, $57,810 and $21,675, respectively for years ended October 31,
1995, 1994 and 1993.
14. Self-Funded Group Medical Insurance
Cataract, Inc. provides group medical insurance to its employees on a
self-funded basis up to $30,000 per insured individual to annual aggregate
limitation of $322,000. Amounts in excess of these thresholds are covered
by insurance. Management believes that adequate reserves have been recorded
to cover claims incurred but not reported as of October 31, 1995.
F - 18
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
15. Subsequent Event (Unaudited)
On January 5, 1995 the Company entered into a non-binding letter of intent
regarding the possible acquisition of The Consortium, Inc. ("Consortium"), a
privately-held provider of temporary technical employees based in Fairfield, NJ.
The letter of intent contemplates the exchange of 6.5 million shares of the
Company's common stock for all of the outstanding shares of Consortium. Revenues
for the year ended December 31, 1995 of Consortium approximated $26 million.
Closing of the transaction is dependent on negotiation of definitive agreements
and completion of due diligence. Because of these and other factors, there can
be no assurance that the Consortium transaction will be successfully completed.
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
RCM Technologies, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of RCM
Technologies, Inc. and Subsidiaries (a Nevada corporation) as of October 31,
1995 and 1994 and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended October 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to in the
first paragraph present fairly, in all material respects, the consolidated
financial position of RCM Technologies, Inc. and Subsidiaries as of October 31,
1995 and 1994 and the results of their operations and their cash flows for each
of the three years in the period ended October 31, 1995 in conformity with
generally accepted accounting principles.
We have also audited Schedules III, VIII and IX of RCM Technologies, Inc.
and Subsidiaries as of and for each of the three years in the period ended
October 31, 1995. In our opinion, these schedules present fairly, in all
material respects, the information required to be set forth therein.
/s/ Grant Thornton LLP
- ----------------------
Grant Thornton LLP
Philadelphia, Pennsylvania
December 11, 1995, except
for Note 15 as to which the
date is January 9, 1996
F - 20
<PAGE>
SCHEDULE III
RCM TECHNOLOGIES, INC. (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
October 31,
ASSETS
<TABLE>
<CAPTION>
1995 1994
---- ----
Current assets
<S> <C> <C>
Cash $ 1,733 $ 7,424
Prepaid expenses and other assets 134,937 132,312
------- -------
Total current assets 136,670 139,736
------- -------
Other assets
Deposits 5,495 5,495
Long-term receivables from affiliates 8,188,366 6,997,408
--------- ---------
8,193,861 7,002,903
--------- ---------
Total assets $8,330,531 $7,142,639
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ $ 11,108
--------- ---------
Total current liabilities 11,108
--------- ---------
Share in deficiency in assets of subsidiaries 803,946 1,654,051
------- ---------
Shareholders' equity
Common stock 813,756 735,678
Additional paid in capital 10,265,687 9,143,765
Accumulated deficit (3,490,037) (4,339,142)
---------- ----------
7,589,406 5,540,301
Less: treasury stock 62,821 62,821
------ ------
Total shareholders' equity 7,526,585 5,477,480
--------- ---------
Total liabilities and shareholders' equity $8,330,531 $7,142,639
========== ==========
</TABLE>
The "Notes to Consolidated Financial Statements" of RCM Technologies, Inc. and
subsidiaries are an integral part of these statements.
F - 21
<PAGE>
SCHEDULE III
RCM TECHNOLOGIES, INC. (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF OPERATIONS
Years Ended October 31,
1995 1994 1993
---- ---- ----
Operating expenses
Administrative ................ $ 31,780 $ 116,418 $ 126,609
---------- ---------- ----------
Operating loss ..................... ( 31,780) ( 116,418) ( 126,609)
---------- --------- ---------
Other income (expense)
Interest (net of intercompany
charges) ...................... ( 261)
Miscellaneous ................. ( 3,678) ( 7,299) ( 7,384)
----- ----- -----
( 3,678) ( 7,299) ( 7,645)
----- ----- -----
Loss before management fee income .. ( 35,458) ( 123,717) ( 134,254)
Management fee income .............. 35,458 123,820 136,264
------ ------- -------
Income before income taxes ......... 103 2,010
Income taxes ....................... 103 2,010
------ ------ -------
Income before income in subsidiaries
Equity in earnings in subsidiaries 849,105 1,426,005 733,025
------- --------- -------
Net income ......................... $ 849,105 $1,426,005 $ 733,025
========== ========== ==========
The "Notes to Consolidated Financial Statements" of RCM Technologies, Inc. and
subsidiaries are an integral part of these statements.
F - 22
<PAGE>
SCHEDULE III
RCM TECHNOLOGIES, INC. (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
Years Ended October 31,
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 849,105 $ 1,426,005 $ 733,025
------------- ------------ -------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Issuance of common stock on settlement
of claim by former consultant 18,594
Changes in operating assets and liabilities:
Prepaid expenses and other assets ( 2,625) 530 25,942
Accounts payable and accrued expenses ( 11,108) ( 4,681) ( 27,170)
Income taxes payable ( 1,800) 850
------------- ----------- ------------
( 13,733) ( 5,951) 18,216
------------- ----------- ------
Net cash provided by operating activities 835,372 1,420,054 751,241
------- --------- -------
</TABLE>
The "Notes to Consolidated Financial Statements" of RCM Technologies, Inc. and
subsidiaries are an integral part of these statements.
F - 23
<PAGE>
SCHEDULE III
RCM TECHNOLOGIES, INC. (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS - Continued
YEARS ENDED OCTOBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Cash flows from investing activities:
<S> <C> <C> <C>
Increase in deposits $ ($ 95) $
Share in deficiency in assets of
subsidiaries ( 849,105) ( 1,426,005) ( 733,025)
Decrease (increase) in long-term
receivables from subsidiaries 8,042 399 ( 32,030)
----- --- ------
Net cash used in
investing activities ( 841,063) ( 1,425,701) ( 765,055)
------- --------- -------
Cash flows from financing activities:
Exercise of stock options 5,468
------- --------- -------
Net cash provided by financing activities 5,468
------- --------- -------
Net decrease in cash and equivalents ( 5,691) ( 179) ( 13,814)
Cash and equivalents at beginning of year 7,424 7,603 21,417
----- ----- ------
Cash and equivalents at end of year $ 1,733 $ 7,424 $ 7,603
=========== ============ ==========
</TABLE>
The "Notes to Consolidated Financial Statements" of RCM Technologies, Inc. and
subsidiaries are an integral part of these statements.
F - 24
<PAGE>
SCHEDULE VIII
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended October 31,
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
---------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deduction Period
----------- --------- -------- -------- --------- ------
Year Ended October 31, 1995
- ---------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful
accounts on trade
receivables $ 15,000 $ 40,310 $ 40,310 $ 15,000
Year Ended October 31, 1994
- ---------------------------
Allowance for doubtful
accounts on trade
receivables $ 10,000 $ 92,707 $ 97,707 $ 15,000
Year Ended October 31, 1993
- ---------------------------
Allowance for doubtful
accounts on trade
receivables $ 47,677 $ 49,858 $ 87,535 $ 10,000
</TABLE>
F - 25
<PAGE>
SCHEDULE IX
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
Years Ended October 31,
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Maximum Average
Category of Weighted Amount Amount Highest
Aggregate Balance Average Outstanding Outstanding Interest Rate
Short-term at End of Interest During the During the During the
Borrowing Period Rate(2)(4) Period Period(3) Period
<S> <C> <C> <C> <C> <C>
Year Ended October 31,
1995
Bank $ 914,435(1) 11.57% $1,042,260 $ 978,348 8.75%
Year Ended October 31,
1994
Bank $ % $ $ %
Year Ended October 31,
1993
Bank $ 4,703(1) 9.98% $ 775,430 $ 420,082 8.00%
<FN>
(1) Intertec Design, Inc. and Cataract, Inc's. borrowing.
(2) The weighted average interest rate during the period was calculated by
dividing the actual interest expense incurred on short-term borrowing by
the average amount outstanding during the period.
(3) The average amount outstanding during the period was calculated by dividing
the borrowing outstanding at the end of the months by the number of months
such balances were outstanding.
(4) Includes loan interest costs and unused line fees.
</FN>
</TABLE>
F - 26
<PAGE>
RCM Technologies, Inc.
Computation of Earnings Per Common Share
Years Ended October 31,
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Income
<S> <C> <C> <C>
Income applicable to common stock $ 849,105 $ 1,426,005 $ 733,025
============= =========== ===========
Shares
Weighted average number of common
shares outstanding 14,669,093 14,375,386 14,344,551
Common stock equivalents 370,754 275,995 47,506
------- ------- ------
Total 15,039,847 14,651,381 14,392,057
========== ========== ==========
Primary income per share $.06 $.10 $.05
==== ==== ====
Fully diluted earnings per share $.06 $.10 $.05
==== ==== ====
</TABLE>
Consent of Independent Certified Public Accountants
Board of Directors
RCM Technologies, Inc.
We have issued our report dated December 11, 1995 accompanying the consolidated
financial statements and schedules included in the Annual Report of RCM
Technologies, Inc. and Subsidiaries on Form 10-K for the years ended October 31,
1995, 1994 and 1993. We hereby consent to the incorporation by reference of said
report in the Prospectus constituting part of the Registration Statement on
Forms S-8 (File No. 33- 12405, effective March 24, 1987, File No. 33-12406,
effective March 24, 1987, File No. 33-61306, effective April 21, 1993, and File
No. 33-80590, effective June 22, 1994).
/s/ Grant Thornton LLP
- ----------------------
Grant Thornton LLP
Philadelphia, Pennsylvania
December 11, 1995, except
for Note 15 as to which the
date is January 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR THE YEAR ENDED OCTOBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH STATEMENTS
</LEGEND>
<CIK> 0000700841
<NAME> RCM TECHNOLOGIES, INC.
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<EXCHANGE-RATE> 1.000
<CASH> 397,550
<SECURITIES> 0
<RECEIVABLES> 5,148,662
<ALLOWANCES> 15,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,102,874
<PP&E> 1,208,317
<DEPRECIATION> 763,966
<TOTAL-ASSETS> 10,301,555
<CURRENT-LIABILITIES> 2,754,880
<BONDS> 0
<COMMON> 813,756
0
0
<OTHER-SE> 6,712,829
<TOTAL-LIABILITY-AND-EQUITY> 10,301,555
<SALES> 26,915,737
<TOTAL-REVENUES> 26,915,737
<CGS> 22,378,817
<TOTAL-COSTS> 26,059,024
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,158
<INCOME-PRETAX> 942,605
<INCOME-TAX> 93,500
<INCOME-CONTINUING> 849,105
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 849,105
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
