RCM TECHNOLOGIES INC, 424B1, 1997-06-11

RCM TECHNOLOGIES INC
424B1, 1997-06-11
HELP SUPPLY SERVICES

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PROSPECTUS
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2,500,000 SHARES

[ LOGO ]

COMMON STOCK

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Of the 2,500,000 shares of Common Stock being offered hereby (the
"Offering"), 2,323,187 are being sold by RCM Technologies, Inc. (the "Company")
and 176,813 are being sold by certain stockholders of the Company (the "Selling
Stockholders"). The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders. See "Principal and Selling Stockholders."

Prior to the date of this Prospectus, the Company's Common Stock was
included on The Nasdaq SmallCap Market under the symbol "RCMT." The Common Stock
has been approved for inclusion on The Nasdaq National Market under the symbol
"RCMT" subject to completion of this Offering and official notice of issuance.
On June 9, 1997, the last reported sale price of the Common Stock was
approximately $10.19 per share. See "Price Range of Common Stock and Dividend
Policy."

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PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON
PAGE 6.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

==================================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share....................................... $9.50 $0.61 $8.89 $8.89
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Total (3)....................................... $23,750,000 $1,525,000 $20,653,132 $1,571,868
==================================================================================================================
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated to be $500,000.

(3) The Company has granted to the Underwriters an option, exercisable for 30
days from the date of the Offering, to purchase up to 375,000 shares of
Common Stock, solely to cover over-allotments, if any. If the Underwriters
exercise this option in full, the Price to Public will total $27,312,500,
the Underwriting Discounts and Commissions will total $1,753,750, and the
Proceeds to Company will total $23,986,882. See "Underwriting."

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The shares of Common Stock are offered by the Underwriters subject to prior
sale, when, as and if issued to and accepted by them, subject to their right to
reject any order in whole or in part and to certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject offers in whole or in part. It is expected that delivery of certificates
for the shares will be made at the offices of Legg Mason Wood Walker,
Incorporated, Baltimore, Maryland, on or about June 13, 1997.

LEGG MASON WOOD WALKER JANNEY MONTGOMERY SCOTT INC.
INCORPORATED

June 10, 1997

<PAGE>

[RCM LOGO]

Professional Staffing Specialists

<TABLE>

[INTERTEC LOGO] [THE CONSORTIUM LOGO]

Professional Engineering Information Technology
Technical & Scientific PA Specialty Health Care
General Support [THE CONSORTIUM LOGO] [PROGRAMMING LOGO] General Support
Of Maryland ALTERNATIVES Executive Search
Of Minnesota, Inc.

SPECIALTIES SPECIALTIES

Petrochemical Information Technology C Information Technology Client Server Skills
Aeronautical CATARACT, INC. Network Engineering
Electronics Oracle/Sybase
Automotive SPECIALTIES SPECIALTIES UNIX/C/C++
Electro/Mechanical Professional Engineering PowerBuilder
Structural Client Server Skills Technical & Scientific Client Server Skills OT/PT, Speech Therapists
CAD/CAM Network Engineering Network Engineering Nursing
Oracle/Sybase SPECIALTIES Oracle/Sybase
UNIX/C/C++ UNIX/C/C++
PowerBuilder Nuclear Utilities PowerBuilder
Fossil Fuel Utilities
Process Control
Power Generation

</TABLE>

OPERATIONS CONDUCTED THROUGH 30 BRANCHES IN 12 STATES

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING, MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF THE COMMON STOCK PRIOR TO THE
PRICING OF THE OFFERING FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON
STOCK, THE PURCHASE OF COMMON STOCK FOLLOWING THE PRICING OF THE OFFERING TO
COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK OR FOR THE PURPOSE OF
MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS.
fOR A DESCRIPTION OF THESE ACTIVITIES SEE "UNDERWRITING." IN CONNECTION WITH
THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ SMALLCAP MARKET IN ACCORDANCE
WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934 (THE
"EXCHANGE ACT"). SEE "UNDERWRITING."

<PAGE>

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus does not give effect to the exercise of the Underwriters'
over-allotment option or an acquisition that occurred after January 31, 1997 as
described under "Recent Developments." Investors should carefully consider the
information set forth under the caption "Risk Factors." Unless the context
otherwise requires, the "Company" or "RCM" refers to RCM Technologies, Inc. and
its wholly owned subsidiaries. References to fiscal years are to the respective
fiscal years of the Company which end October 31.

THE COMPANY

The Company is a multi-regional provider of specialty professional staffing
services through its 30 branch offices located in 12 states. The Company
provides contract and temporary personnel in the information technology,
professional engineering and technical, specialty healthcare and general support
sectors of the staffing industry to a diversified base of national, regional and
local customers. During fiscal 1996, the Company provided an average of 2,600
contract and temporary staffing employees on a daily basis to approximately 700
customers, including a number of Fortune 500 companies, governmental units and
public utilities, as well as small to medium-size retail, manufacturing,
professional and service organizations. Customers include Air Products &
Chemicals, AT&T, Consolidated Edison, Deloitte & Touche, Mt. Sinai Hospital,
Northeast Utilities, Sandoz Pharmaceuticals, Sears and United Technologies.

In fiscal 1995, the Company implemented an aggressive growth strategy based
on management's belief in the expanding market demand and the competitive
advantages offered by the Company's blend of specialized professional services.
A key element of this strategy is to identify acquisition candidates within
specialty professional service sectors which offer higher margins and greater
growth potential than traditional staffing services. Since the beginning of
fiscal 1995 and through January 31, 1997, the Company has achieved significant
revenue growth primarily through the acquisition of six staffing companies with
combined revenues of approximately $67.7 million in their respective fiscal
years prior to the acquisition. These acquisitions shifted the Company's
business toward the higher margin information technology and specialty
healthcare sectors. During this time, the Company also elected to discontinue
providing certain lower margin general support services. General support
services, which from fiscal 1992 to 1994 accounted for approximately 51.0% of
the Company's revenues, decreased as a percentage of the Company's revenues to
20.5% during the three months ended January 31, 1997. Correspondingly, revenues
from the Company's specialty professional services accounted for 79.5% of the
Company's revenues during the three months ended January 31, 1997. Prior to
implementation of its growth strategy, in fiscal 1994 the Company's revenues and
operating income were $29.2 million and $1.6 million, respectively. In fiscal
1996, on a pro forma basis which gives effect to the acquisitions as if they had
occurred on November 1, 1995, the Company's revenues and operating income
increased to $84.7 million and $4.7 million, respectively.

According to the National Association of Temporary Staffing Services, from
1991 to 1995, the U.S. market for temporary staffing services grew at a compound
annual rate of approximately 16.0%. Industry revenues during this period
increased from approximately $21.5 billion to approximately $45.1 billion. While
the staffing industry has grown rapidly in recent years, in 1996 temporary
employment represented only 2.2% of the average daily employment of the total
U.S. workforce and industry sources anticipate it will increase to 4.0% by the
year 2000. The increase in historic and anticipated industry revenues reflects a
growing acceptance of contract and temporary work assignments among employers
and employees. The Company believes that the demand for specialty staffing
services will increase at a faster rate than the staffing industry as a whole,
as companies continue to use skilled specialty personnel to provide rapid
responses to complex technological challenges without incurring the fixed
overhead costs associated with permanent employees.

The Company's objective is to become a leading provider of specialty
professional staffing services in selected regional markets throughout the
United States. Management has designed the Company's blend of service offerings,
particularly within the information technology and niche professional
engineering sectors, to meet the staffing requirements of many medium and large
corporations. The Company intends to expand internally and to make acquisitions
both in its existing

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<PAGE>

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markets and in markets that are determined by management to have strong growth
and specialty staffing requirements. Additionally, the Company believes it can
maximize the benefits of its acquisitions by rapidly integrating the general and
administrative functions of the acquired companies and fostering a decentralized
entrepreneurial environment, thereby allowing existing management to focus on
relationships with both its customers and personnel. Service to the general
support sector, while not intended as a primary focus of the Company's
operations, is expected to continue to supplement the Company's specialty
professional services and provide diversification to the Company's customer base
and geographic presence.

The executive offices of the Company are located at 2500 McClellan Avenue,
Suite 350, Pennsauken, New Jersey 08109, and its telephone number is (609)
486-1777.

RECENT DEVELOPMENTS

The Company's revenues for the six months ended April 30, 1997 were $48.5
million on an actual basis and $49.5 million on a pro forma basis, compared to
revenues for the six months ended April 30, 1996 of $23.6 million on an actual
basis and $40.6 million on a pro forma basis. For the six months ended April 30,
1997, net income was $1.7 million on an actual basis and $1.7 million on a pro
forma basis, compared to net income of $0.9 million for the six months ended
April 30, 1996 on an actual basis and $1.1 million on a pro forma basis. The
increase in actual revenues and net income was attributable to internal growth
and the acquisition of The Consortium in March 1996, The Consortium of Maryland,
Inc. in May 1996, Performance Staffing, Inc. in September 1996, Programming
Alternatives of Minnesota, Inc. in November 1996 and Programming Resources in
April 1997. Such operating information is preliminary and subject to further
review and possible revision by the Company. The preliminary results for the six
months ended April 30, 1997 are not necessarily indicative of the results to be
expected for the full year. See "Acquisition Program," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Pro Forma
Condensed Consolidated Statements of Operations."

During April 1997, the Company acquired the operating assets of Programming
Resources Unlimited, Inc., ("Programming Resources"), a Wayne,
Pennsylvania-based provider of information technology staffing services. For the
year ended December 31, 1996, Programming Resources generated revenues of
approximately $2.4 million.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered:
By the Company.................................................. 2,323,187 shares
By the Selling Stockholders..................................... 176,813 shares
Total........................................................... 2,500,000 shares
Common Stock to be outstanding after the Offering................. 7,139,863 shares(1)
Use of Proceeds................................................... For repayment of bank debt, working capital
and general corporate purposes, primarily to
finance future acquisitions. See "Use of
Proceeds."
Nasdaq National Market symbol..................................... RCMT
</TABLE>

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(1) Does not include an aggregate of 1,490,000 shares of Common Stock reserved
for issuance under the Company's stock option plans. As of June 9, 1997,
options to acquire 709,000 shares of Common Stock at exercise prices ranging
from $1.09 to $8.13 were outstanding, including options to acquire 250,000
shares which were not exercisable as of the date of this Prospectus. Also
does not include 157,342 shares of Common Stock issuable upon the exercise
of Class C Warrants of the Company at an exercise price of $15.00 per share.
See "Management -- Stock Option Plans" and "Description of Securities --
Class C Warrants."

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<PAGE>

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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, THREE MONTHS ENDED JANUARY 31,
---------------------- ----------------------------------------------
1996 1996 1997
---------------------- --------------------- ----------------------
1994 1995 ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1)
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.................... $29,239 $26,916 $61,039 $ 84,665 $9,777 $ 19,072 $21,151 $ 21,151
Gross profit................ 5,375 4,537 12,259 19,147 1,791 4,141 5,100 5,100
Operating income............ 1,608 857 3,015 4,715 592 943 1,355 1,355
Net income $ 1,426 $ 849 $ 2,368 $ 3,688 $ 502 $ 737 $ 781 $ 757
------- ------- ------- -------- ------ -------- ------- --------
------- ------- ------- -------- ------ -------- ------- --------
Net income per share........ $ 0.49 $ 0.28 $ 0.55 $ 0.68 $ 0.15 $ 0.14 $ 0.16 $ 0.14
------- ------- ------- -------- ------ -------- ------- --------
------- ------- ------- -------- ------ -------- ------- --------
Supplemental net income per
share (2)................. $ 0.18 $ 0.38 $ 0.48 $ 0.10 $ 0.10 $ 0.15 $ 0.14
------- ------- -------- ------ -------- ------- --------
------- ------- -------- ------ -------- ------- --------
Weighted average number of
shares outstanding........ 2,930 3,008 4,321 5,441 3,277 5,246 4,971 5,603
</TABLE>

<TABLE>
<CAPTION>
JANUARY 31, 1997
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OCTOBER 31, 1996 ACTUAL AS ADJUSTED(3)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 6 $ 125 $ 15,278
Working capital, exclusive of notes payable-bank.................... 9,518 9,919 25,072
Total assets........................................................ 24,407 30,191 45,344
Long-term debt...................................................... -- -- --
Shareholders' equity................................................ 16,220 17,001 37,154
</TABLE>

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(1) Assumes that the acquisitions which occurred during and subsequent to the
fiscal year ended October 31, 1996 had occurred on November 1, 1995 and
gives effect to the reduction of certain redundant operating costs and
expenses, excess salaries and non-recurring costs that were identified at
the time of the acquisitions. Also gives effect to: (i) the elimination of
interest expense associated with the acquisition related debt assumed to be
repaid with offering proceeds; and (ii) the issuance of 632,340 shares of
Common Stock which, net of estimated underwriting commissions and offering
expenses payable by the Company, would be sufficient to repay the
acquisition related indebtedness as set forth in "Use of Proceeds."

(3) Gives effect to the sale of 2,323,187 shares of Common Stock offered by the
Company hereby and the application of the net proceeds therefrom as set
forth in "Use of Proceeds."

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<PAGE>

RISK FACTORS

An investment in the shares of Common Stock offered by this Prospectus
involves a high degree of risk. Prospective purchasers of the shares of Common
Stock offered hereby should carefully review the following risk factors as well
as the other information set forth in this Prospectus.

This Prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Pro forma information
contained within this Prospectus, to the extent it is predictive of financial
condition and results of operations that would have occurred on the basis of
certain stated assumptions, may also be characterized as forward-looking
statements. Although forward-looking statements are based on assumptions made,
and information believed, by management to be reasonable, no assurance can be
given that such statements will prove to be correct. Such statements are subject
to certain risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated,
projected or expected. Such risks and uncertainties are described under the
headings "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and in the risk factors set forth below.

ABILITY TO ACHIEVE AND MANAGE GROWTH

The Company has experienced significant growth since the beginning of
fiscal 1995, principally through acquisitions. Continued growth could place
additional demands on its administrative, operational and financial resources.
The Company's ability to achieve and manage its growth will depend on a number
of factors, including the availability of working capital to support such
growth, existing and emerging competition, the Company's ability to maintain
sufficient profit margins and the strength of demand for contract and temporary
personnel in the sectors in which the Company operates. There can be no
assurance that the Company will be able to continue to achieve or manage such
growth effectively and the failure to do so could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Business Strategy."

RISKS ASSOCIATED WITH FUTURE ACQUISITIONS

A primary element of the Company's growth strategy is to pursue strategic
acquisitions that expand or complement the Company's business. The Company
regularly reviews various strategic acquisition opportunities and periodically
engages in discussions regarding possible acquisitions. As a result,
negotiations may occur from time to time as appropriate opportunities arise.
There can be no assurance that the Company will be able to identify additional
acquisition candidates on terms favorable to the Company or in a timely manner,
enter into acceptable agreements or close any such transactions, and any failure
to do so could have a material adverse effect on the Company's ability to
sustain its growth. In addition, the Company will compete for acquisitions with
other companies. Increased competition for such acquisition candidates could
have the effect of increasing the cost of pursuing this growth strategy or could
reduce the number of attractive candidates to be acquired. Future acquisitions
could divert management's attention from the daily operations of the Company and
require additional management, operational and financial resources. Moreover,
there is no assurance that the Company will be able to successfully integrate
acquisitions into its business or operate such acquisitions at expected levels
of revenue or profitability. Acquisitions may also have an adverse short-term
effect on the Company's operating results, dependence on retaining key
personnel, amortization of acquired intangible assets and risks associated with
unanticipated problems, liabilities or contingencies. See "Acquisition Program."

The Company may require additional debt or equity financing for future
acquisitions, which may not be available at all, or on terms favorable to the
Company. To the extent the Company uses shares of Common Stock for all or a
portion of the consideration to be paid in future acquisitions, dilution may be
experienced by existing stockholders, including the purchasers of Common Stock
in this Offering. If the Company does not have cash resources sufficient for
such purpose or is not able to use

<PAGE>

its Common Stock as consideration for acquisitions, its growth through
acquisitions could be limited. See "Acquisition Program" and "Management's
Discussion and Analysis of Financial Condition and Results of Operation --
Liquidity and Capital Resources."

DEPENDENCE ON KEY CUSTOMERS AND GEOGRAPHIC CONCENTRATION

Although the Company provides services to a large number of customers,
approximately 24.6% and 21.6% of the Company's revenues in fiscal 1996 and the
three months ended January 31, 1997, respectively, were derived from the
Company's top five revenue producing customers, with one customer accounting for
approximately 12.0% of the Company's revenues in each period. Similarly, a
substantial portion of the Company's revenues are currently derived from
services provided to customers in the Northeast, Midwest and California regions
of the United States. The loss of, or a reduction in, business from any major
customers or a deterioration of general economic conditions in these regions
could adversely affect the Company. See "Business -- Customers and Marketing."

DEPENDENCE ON AVAILABILITY OF QUALIFIED PERSONNEL

The Company depends on its ability to attract, train and retain qualified
personnel who possess the skills and experience necessary to meet the staffing
requirements of its customers. Competition for the services of personnel within
all of its professional specialty groups is intense. Competition for information
technology personnel is particularly intense and demand for their services has,
to date, substantially exceeded their supply. The Company expects such
competition to continue. Factors influencing such competition include
compensation, benefits, growth opportunities, relationships with other specialty
staffing companies and full-time employment opportunities. There can be no
assurance that qualified personnel will continue to be available to the Company
in sufficient numbers and on terms of employment acceptable to the Company. The
inability to attract and retain qualified personnel in sufficient numbers, or to
upgrade its base of qualified personnel to keep pace with changing customer
needs and emerging technologies, could have a material adverse affect on the
Company's business, financial condition and results of operations. See "Business
- -- Operations."

RELIANCE ON KEY PERSONNEL

The Company is highly dependent upon the continued services and experience
of its senior members of management, including Leon Kopyt, Chairman and Chief
Executive Officer. The loss of the services of Mr. Kopyt or other senior members
of management could have a material adverse effect on the Company's business.
The Company has employment agreements with Mr. Kopyt and other senior members of
management. See "Management -- Executive Compensation."

POTENTIAL CLAIMS RELATING TO FORMER OPERATION OF CALIFORNIA FACILITY

Prior to 1977, the Company operated a facility located in Fontana,
California (the "Facility") at which it processed certain materials to recover
aluminum. The property on which the Facility was located (the "Property") was
owned by a former shareholder and officer (the "Former Officer") of the Company.
In 1977, the Company sold certain assets (the "1977 Transaction") utilized in
its operation to a company (the "Purchaser") that continued processing similar
materials at the Facility until 1982. As part of the 1977 Transaction, the
Company was permitted to store on the Property an existing stockpile of aluminum
oxide materials (the "Stockpile") which was available for consumption in the
Purchaser's operations. From 1977 to 1980, the Purchaser utilized a significant
amount of material from the Stockpile in its operations. Materials generated by
the Purchaser's operations were also added to the Stockpile. The Purchaser
acquired the Property in 1985 from the Former Officer.

<PAGE>

Company for its proportionate share of the disposal costs, as well as
anticipated maintenance costs of approximately $700,000, on common law grounds
and pursuant to certain federal and state environmental laws.

Based upon, among other things, an analysis of environmental studies
performed before and after the 1977 Transaction as well as a review of the
compliance records of the state environmental agency, the Company has concluded
that: (i) the Facility was in material compliance with all applicable federal
and state environmental laws at the time of the 1977 Transaction; (ii) the
Purchaser was cited for numerous violations of applicable environmental laws
after the 1977 Transaction, thus, any violations of laws after 1977, including
any consequent remediation and disposal obligations, were likely the
responsibility of the Purchaser; (iii) neither the costs incurred by the
Purchaser, nor the events leading up to the incurrence of these costs, appear to
support a claim under federal environmental laws; (iv) certain actions taken and
costs incurred by the Purchaser may not have been necessary or required to
comply with the Order; (v) liability, if any, would only apply to the minority
percentage of the Stockpile attributable to the Company's operations; and (vi)
the Purchaser's contribution claims for costs incurred in 1992 and earlier in
response to the Order may be barred under the statute of limitations relating to
the state law claims.

The Company believes it has meritorious defenses to the Purchaser's claims
and, in management's opinion, the Company's exposure under the claims is not
likely to have a materially adverse impact on the Company's overall financial
condition. There can be no assurance, however, that the Company will not incur
material expenses and costs in connection with the defense and resolution of any
claims brought by the Purchaser or that the Company will not ultimately be
responsible for certain of the costs incurred by the Purchaser, which may
include pre- and post-judgment interest, in an amount that may be material to
the Company. Furthermore, since the Company has not established any reserves in
connection with such claims, any such liability, if at all, would be recorded as
an expense in the period incurred or estimated. This amount, even if not
material to the Company's overall financial condition, could adversely affect
the Company's results of operations in the period recorded. Management intends
to vigorously oppose any such claims.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company has experienced, and is expected to continue experiencing,
quarterly variations in revenues and operating income as a result of many
factors, including the timing of assignments from customers, future
acquisitions, hiring of personnel and additional selling, general and
administrative expenses incurred to support new business as well as changes in
the Company's revenue mix. In connection with certain engineering projects, the
Company could incur costs in periods prior to recognizing revenues under those
contracts. In addition, the Company must plan its operating expenditures based
on revenue forecasts, and a revenue shortfall below such forecast in any quarter
would likely adversely affect the Company's operating results for the quarter.
While the effects of seasonality of the Company's business have been obscured by
its growth through acquisitions, the Company usually experiences lower revenues
in its first fiscal quarter due to the slowdown in business associated with the
holiday season.

INCREASED COSTS OF EMPLOYMENT

The Company is required to pay unemployment insurance premiums and workers'
compensation benefits for its contract and temporary employees. Unemployment
insurance premiums are set annually by the states in which employees perform
services and could increase periodically. There can be no assurance that the
Company will be able to increase the fees charged to its customers in a timely
manner and by an amount sufficient to cover increased unemployment insurance
premiums. Workers' compensation costs have increased as various states in which
the Company conducts operations have raised benefit levels and liberalized
allowable claims. The Company maintains workers' compensation insurance for its
employees under an insured program in its areas of operation. There can be no
assurance that the Company's actual workers' compensation obligations will not
exceed the amount of

<PAGE>

its insured coverage or that the Company will be able to increase the fees
charged to its customers sufficiently to offset increased employment costs.

LIABILITY FOR EMPLOYEE ACTIONS

Providers of contract and temporary staffing services generally place their
employees in the workplace of other businesses. The risk of employee misconduct
is attendant to the Company's business. These risks could include claims
relating to errors and omissions, misuse of proprietary information,
misappropriation of funds, discrimination and harassment, theft of customer
property, other criminal activity or torts and other claims. While the Company
has not historically experienced any material claims of these types, and has
insurance covering certain of these risks, there can be no assurance that the
Company will not experience such claims, incur costs in connection with such
risks in the future, that insurance coverage will continue to be available or
that it will be adequate to cover such liabilities.

RISKS RELATED TO TAX STATUS OF INDEPENDENT CONTRACTORS

Generally, the Company treats its technical personnel as employees for
federal and state tax purposes and pays all requisite Social Security taxes
(FICA), payroll taxes, unemployment taxes, workers' compensation insurance
premiums and other employee taxes and similar costs. In certain cases, however,
technical personnel desire to be treated as independent contractors for federal
and state tax purposes with respect to their assignments. In such cases, and if
appropriate, the individual is treated as an independent contractor for tax
purposes. Of the technical personnel, during each of the last three fiscal
years, less than 5% were treated as independent contractors for federal and
state tax purposes. The Company believes that it is in material compliance with
all applicable tax regulations concerning the classification of its technical
personnel, and has not, to date, been the subject of any attempt by any federal
or state authority to reclassify any of the personnel it has treated as
independent contractors. There can be no assurance, however, that federal and
state taxing authorities will not challenge the Company's classification of
technical personnel as independent contractors in the future. If successful,
such a challenge could result in the imposition of additional taxes, interest
and penalties, the amount of which could have a material adverse effect on the
Company's financial condition.

RISK OF GOVERNMENT REGULATIONS AND LEGISLATIVE PROPOSALS

The Company's costs of operations could increase if there are any material
changes in government regulations. Recent federal and state legislative
proposals have included provisions seeking to extend health insurance benefits
to employees who do not currently receive such benefits. As a result of the wide
variety of national and state proposals currently under consideration, the
impact of such proposals cannot be predicted. There can be no assurance that the
Company will be able to increase the fees charged to its customers in a timely
manner and sufficient amount to cover increased costs related to any new
benefits that may be extended to temporary employees as a result of such
legislation or regulations. It is not possible to predict whether any other
legislation or regulations affecting the Company's operations will be proposed
or enacted at the federal or state level; however, no assurances can be given
that if enacted, such legislation or regulations would not have a material
adverse effect on the Company.

COMPETITIVE MARKET

The temporary staffing industry is highly competitive, with limited
barriers to entry. The Company competes for customers in the geographic regions
in which it operates with national, regional and local, full service and
specialized staffing providers. Certain of the Company's competitors have
greater marketing, financial and other resources, and more established
operations, than the Company. As a result, they may be better able to respond or
adapt to new or emerging technologies and changes in customer requirements or to
devote greater resources to the development, marketing and sales of their
services than the Company. The Company expects that the level of competition
will remain high in the future, which could limit the Company's ability to
maintain its market share or maintain gross

<PAGE>

margins in the geographic regions or industry sectors in which it operates,
either of which could have a material adverse affect on the Company's business,
financial condition and results of operations. See "Business -- Competition."

GENERAL ECONOMIC RISKS

Demand for professional staffing services is significantly affected by the
general level of economic activity. When economic activity slows, customers may
delay or cancel plans that involve the hiring of permanent or contract technical
personnel. The Company is unable to predict the level of economic activity at
any particular time, and fluctuations in the general economy could adversely
affect the Company's business, operating results and financial condition.

DISCRETION IN USE OF PROCEEDS

The Company intends to use approximately $5.0 million of the net proceeds
from this Offering to repay certain outstanding indebtedness and intends to use
the approximately $15.2 million in remaining net proceeds (approximately $18.5
million if the Underwriters' over-allotment is exercised) for general corporate
purposes, primarily to finance future acquisitions. The Company currently has no
understandings, commitments or agreements with respect to any material
acquisitions; however, as a result of the Company's process of regularly
reviewing acquisition prospects, negotiations may occur from time to time if
appropriate opportunities arise. Consequently, there can be no assurance as to
when or how the remaining net proceeds from the Offering will be used. If the
Company is unable to promptly utilize such proceeds in connection with
acquisitions, or to otherwise use such proceeds in the growth of its business,
the returns realized from temporarily investing such proceeds may be
substantially less than the returns which could be realized if such proceeds
were successfully invested in the business. See "Use of Proceeds."

CONTROL BY EXISTING MANAGEMENT

Following the completion of this Offering, officers and directors of the
Company will have voting rights over approximately 24.7% of the then outstanding
shares of Common Stock (23.5% if the Underwriters' over-allotment option is
exercised) and may be able to exercise effective control over most matters
requiring approval of the Company's stockholders, including the election of the
Company's directors. See "Principal and Selling Stockholders" and "Description
of Securities."

VOLATILITY OF STOCK PRICE

The market price of the Company's Common Stock has recently experienced
volatility. In the future, the market price of the Common Stock could fluctuate
substantially due to a variety of factors, including quarterly operating results
of the Company or other companies in the same or similar industry, changes in
general conditions in the economy, the financial markets or the staffing
services industry, natural disasters or other developments affecting the Company
or its competitors. See "Price Range of Common Stock and Dividend Policy."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

The market price of the Common Stock could be adversely affected by the
sale of substantial amounts of Common Stock in the public market following this
Offering. Of the 7,139,863 shares of Common Stock that will be outstanding
following the Offering, 1,748,950 shares of Common Stock are considered
"restricted securities" for the purpose of Rule 144 under the Securities Act of
1933, as amended (the "Securities Act") and may only be sold if they are
registered under the Securities Act or if an exemption from such registration is
available. All of the Company's directors and executive officers and Limeport
Investments, LLC ("Limeport") have agreed not to sell, otherwise dispose of, or
pledge any shares of the Common Stock for 180 days after the date of this
Prospectus (the "Lock-Up Period") without the prior written consent of Legg
Mason Wood Walker, Incorporated. The Lock-

<PAGE>

Up Period will not apply to the Common Stock offered by Limeport as a Selling
Stockholder. See "Principal and Selling Stockholders" and "Shares Eligible for
Future Sale."

Following expiration of the Lock-Up Period, 163,631 of the restricted
securities will be eligible for public resale either in accordance with Rule 144
under the Securities Act or by operation of the applicable registration rights
agreements between the holders of such restricted securities and the Company. Of
the remaining restricted securities, 1,273,008 may not be sold until April 30,
1998 and 312,311 shares may not be sold until August 30, 1998, each pursuant to
certain registration rights arrangements with the Company.

Sales of additional shares in the public market could also occur upon the
exercise of existing stock options and Class C Warrants. The sales could take
place prior to the expiration of the Lock-Up Period.

The Company is unable to predict the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price for the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock, or the perception that such influx of shares into the
market could occur, could adversely affect the market price for the Common Stock
and could impair the Company's future ability to obtain capital through
offerings of equity securities.

EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Articles of Incorporation, as amended
(the "Articles of Incorporation"), Amended and Restated Bylaws (the "Bylaws"),
the Nevada General Corporation Law, the Company's Stockholder Rights Plan (the
"Rights Plan") and the Second Amended and Restated Termination Benefits
Agreement between the Company and its Chief Executive Officer (the "Benefits
Agreement") could delay or frustrate the removal of incumbent directors and
could make difficult a change in control transaction including a merger, tender
offer or proxy contest involving the Company, even if such events could be
viewed as beneficial by the Company's stockholders. For example, the Articles of
Incorporation provide for a classified Board of Directors and deny the right of
stockholders to amend the Bylaws without the consent of the Board and require
advance notice of stockholder nominations of directors. The Company is also
subject to provisions of the Nevada General Corporation Law that prohibit a
publicly held Nevada corporation from engaging in a broad range of business
combinations with a person who, together with affiliates and associates, owns
10% or more of the corporation's outstanding voting shares (an "interested
stockholder") for three years after the person became an interested stockholder,
unless the business combination is approved in a prescribed manner. In addition,
the Rights Plan provides for substantial dilution of an "acquiring person" as
defined therein in the event a person or group of persons acquires beneficial
ownership of 15% or more of the outstanding Common Stock of the Company or in
the event of a merger or sale of assets which is not approved by the "continuing
directors," of the Company as defined in the Rights Plan. Furthermore, in the
event of a "change in control" (as defined in the Benefits Agreement) which
results in the termination of the Chief Executive Officer, the Company would be
required to make substantial payments and, in certain circumstances, reduce the
exercise price of options issued to the Chief Executive Officer. See "Management
- -- Change in Control Arrangements" and "Description of Securities -- Provisions
Having a Possible Anti-Takeover Effect."

<PAGE>

ACQUISITION PROGRAM

Since the beginning of fiscal 1995 and through January 31, 1997, the
Company has completed the acquisition of six staffing companies with combined
revenues of approximately $67.7 million in their respective fiscal years prior
to the acquisition. These acquisitions shifted the Company's business from
general support to the specialty professional service sectors, such as
information technology, professional engineering and specialty healthcare
services. These acquisitions also increased the Company's geographic presence in
the Northeast and Midwest regions of the United States, thereby allowing the
Company to more effectively provide services to large regional and national
accounts.

Key elements of the Company's growth strategy are to continue to pursue
strategic acquisitions in selected geographic regions and in the specialty
professional service sectors. These acquisitions may serve to strengthen the
Company's presence in existing markets, introduce the Company to new regions
with strong growth opportunities, or add new specialty staffing services. The
Company regularly reviews various strategic acquisition opportunities and
periodically engages in discussions regarding such acquisitions. While the
number, timing, size and terms of such acquisitions may vary, management has
developed the following general guidelines to identify potential acquisitions:

o Regional businesses with revenues of $25.0 million or less.

o Businesses with profitable operations and experienced management
personnel.

o Sellers who are willing to accept a significant portion of the
acquisition price in the form of multi-tiered earnouts based on meeting
certain growth and profitability targets.

Management believes that, in addition to its growth strategy and
acquisition guidelines, the following factors distinguish the Company from
competitive bidders when pursuing acquisitions: (i) the opportunity of the
target management to be key contributors and participants in the growth of a
medium-sized public company; (ii) the rapid integration of general and
administrative functions to allow a greater focus upon sales and marketing
efforts; (iii) operational autonomy which fosters a desirable entrepreneurial
environment; and (iv) the use of substantial performance-based financial
incentives.

The following information provides a summary of the acquisitions completed
by the Company since the beginning of fiscal 1995 and through January 31, 1997.

Great Lakes Design, Inc. ("Great Lakes"). In December 1994, the Company
acquired the operating assets of Great Lakes for $200,000 in the form of a
$150,000 note payable over a period of two years, $50,000 in cash and certain
earnout provisions. Great Lakes generated revenues of approximately $3.2 million
during its fiscal year ended December 31, 1994. Through this transaction, the
Company acquired two branch offices which provide engineering and technical
staffing services.

Cataract, Inc. ("Cataract"). In August 1995, the Company acquired all of
the outstanding stock of Cataract for $2.0 million cash and 312,311 restricted
shares of the Company's Common Stock. The restricted shares have been pledged to
the Company for a period of three years to secure certain levels of sales
revenues that have been warranted by the former Cataract shareholders. Cataract
generated revenues of approximately $20.5 million during its fiscal year ended
December 31, 1994. Through this transaction, the Company acquired five branch
offices which provide engineering staffing services.

The Consortium ("Consortium"). In March 1996, the Company acquired all of
the outstanding stock of Consortium for 1.3 million restricted shares of the
Company's Common Stock. Consortium generated revenues of approximately $26.0
million during its fiscal year ended December 31, 1995. Through this
transaction, the Company acquired five branch offices which provide information
technology, specialty healthcare and general support staffing services. In
addition, the two principal shareholders of Consortium joined the Company's
senior management.

<PAGE>

The Consortium of Maryland, Inc. ("Consort MD"). In May 1996, the Company
acquired all of the outstanding stock of Consort MD for $621,500 cash and 34,327
restricted shares of the Company's Common Stock, plus additional shares of
restricted stock having a value equal to approximately $250,000, based upon a
post-closing verification of financial data warranted at closing. Consort MD
generated revenues of approximately $6.0 million during its fiscal year ended
December 31, 1995. Through this transaction, the Company acquired one branch
office which provides information technology staffing services. In addition, the
sole shareholder of Consort MD joined the Company's senior management.

Performance Staffing, Inc. ("PSI"). In September 1996, the Company acquired
the operating assets of PSI for 2,500 restricted shares of the Company's Common
Stock, and in connection therewith, assumed approximately $110,000 of PSI's
debt. PSI generated revenues of approximately $2.0 million during its fiscal
year ended December 31, 1995. Through this transaction, the Company acquired
three branch offices which provide engineering and general support staffing
services.

Programming Alternatives of Minnesota, Inc. ("PAMI"). Effective as of
November 4, 1996, the Company acquired all of the outstanding stock of PAMI for
approximately $4.5 million cash plus $1.6 million of consideration in the form
of a three year promissory note payable upon attaining certain earnings targets
within the three-year period. The Company also agreed to pay additional
consideration to the former PAMI shareholder in the event that during the
three-year period the performance of PAMI exceeds the established earnings
targets. PAMI generated revenues of approximately $10.0 million during its
fiscal year ended December 31, 1996. Through this transaction, the Company
acquired one branch office which provides information technology staffing
services.

<PAGE>

USE OF PROCEEDS

The net proceeds from the sale of the 2,323,187 shares of Common Stock
offered hereby by the Company are estimated to be approximately $20.2 million
($23.5 million in the event the Underwriters' over-allotment option is
exercised) after deducting estimated underwriting discounts and commissions and
Offering expenses. The Company will not receive any proceeds from the sale of
Common Stock by the Selling Stockholders.

Approximately $5.0 million of the net proceeds will be used to repay
outstanding debt under the Company's Revolving Credit Facility which was
obtained for working capital purposes and acquisition financing. The revolving
credit facility provides a revolving line of credit which permits borrowings of
up to $20.0 million at an interest rate equal to LIBOR plus 2.25% and expires on
June 30, 1999. Borrowings under the Revolving Credit Facility have been used to
fund certain of the Company's acquisitions. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

The Company intends to use the remaining net proceeds of approximately
$15.2 million (approximately $18.5 million if the Underwriters' over-allotment
is exercised) for working capital and other general corporate purposes,
primarily to finance future acquisitions. The Company currently has no
understandings, commitments or agreements with respect to any material
acquisitions; however, as a result of the Company's process of regularly
reviewing acquisition prospects, negotiations may occur from time to time if
appropriate opportunities arise. Pending the uses described above, the Company
intends to invest its net proceeds in short-term, investment-grade securities.

PRICE RANGE OF COMMON STOCK
AND DIVIDEND POLICY

Prior to the date of this Prospectus, the Common Stock was included on The
Nasdaq SmallCap Market under the symbol "RCMT." The Common Stock has been
approved for inclusion on The Nasdaq National Market under the symbol "RCMT"
subject to completion of this Offering and to official notice of issuance. The
following table sets forth approximate high and low sales prices by fiscal
quarters for the periods indicated, as reported on The Nasdaq SmallCap Market.

FISCAL 1995 HIGH LOW
- ----------- ------ -----
First Quarter..................................... $ 3.75 $2.97
Second Quarter.................................... 3.90 3.28
Third Quarter..................................... 3.44 2.50
Fourth Quarter.................................... 4.06 2.97

FISCAL 1996
- -----------
First Quarter..................................... $ 6.25 $2.66
Second Quarter.................................... 13.25 4.22
Third Quarter..................................... 15.38 5.75
Fourth Quarter.................................... 12.88 7.00

FISCAL 1997
- -----------
First Quarter..................................... $10.38 $7.00
Second Quarter.................................... 9.75 6.25

On June 9, 1997 the last reported sale price of the Common Stock on The
Nasdaq SmallCap Market was approximately $10.19 per share.

As of June 6, 1997, the approximate number of holders of record of the
Company's Common Stock was 1,854. Based upon the requests for proxy information
in connection with the Company's most recent Annual Meeting of Stockholders, the
Company believes the number of beneficial owners of its Common Stock exceeds
4,800.

<PAGE>

The Company has never declared or paid a cash dividend on its Common Stock
and does not anticipate paying any cash dividends in the foreseeable future. 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. Any future
payment of dividends will be at the discretion of the Board of Directors and
will depend upon, among other things, the Company's earnings, financial
condition, capital requirements, level of indebtedness, contractual restrictions
and other factors that the Board of Directors deems relevant. The Revolving
Credit Facility prohibits the payment of dividends or distributions on account
of the capital stock without the prior consent of Mellon Bank, N.A.

CAPITALIZATION

The following table sets forth the note payable under the Company's
Revolving Credit Facility and the consolidated capitalization of the Company at
January 31, 1997 on an actual basis and as adjusted, as of such date, to give
effect to the sale by the Company of 2,323,187 shares of Common Stock,the
application of the net proceeds therefrom as set forth in "Use of Proceeds" and
the retirement of treasury stock. This table should be reviewed in conjunction
with the Company's historical and pro forma financial statements and related
notes appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JANUARY 31, 1997
------------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.................................................. $ 125 $15,278
------- -------
------- -------
Notes payable - bank (1)................................................... $ 7,000 $ 2,000
------- -------
------- -------
Long-term debt............................................................. -- --
Shareholders' equity:
Preferred stock, $1.00 par value; 5,000,000 shares authorized; no shares
issued or outstanding................................................. -- --
Common stock, $0.05 par value; 40,000,000 shares authorized; 4,878,476
shares issued, actual and 7,138,863 shares issued, as adjusted........ 244 357
Additional paid-in capital............................................... 17,161 37,138
Treasury stock, at cost 62,800 shares.................................... (63) --
Accumulated deficit...................................................... (341) (341)
------- -------
Total shareholders' equity............................................ 17,001 37,154
------- -------
Total capitalization.................................................. $17,001 $37,154
------- -------
------- -------
</TABLE>

- ------------------
(1) Classified within the Company's Consolidated Financial Statements as a
current liability.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data for, and as of the end of, each of
the years in the four year period ended October 31, 1996 are derived from the
consolidated financial statements of the Company which have been audited by
Grant Thornton LLP, independent auditors. The selected consolidated financial
data for, and as of the end of, the year ended October 31, 1992 are derived from
the consolidated financial statements of the Company which have been audited by
Morris J. Cohen & Co., independent auditors. The selected consolidated financial
data for the three months ended January 31, 1996 and 1997 are derived from the
unaudited consolidated financial statements of the Company, which in the opinion
of management include all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the results of operations and financial
position for such periods. The results of operations for the three months ended
January 31, 1997 are not necessarily indicative of the results of operations to
be expected for the year. The pro forma consolidated financial data presented
below gives effect to all business acquired by the Company through January 31,
1997 as if these acquisitions were consummated as of November 1, 1995. The pro
forma results of operations are not necessarily indicative of the results that
would have occurred had the acquisitions been consummated as of the beginning of
the period presented or that might be attained in the future. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the actual and pro forma
consolidated financial statements of the Company included elsewhere in this
Prospectus.

YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------
1996
------------------------
PRO
1992 1993 1994 1995 ACTUAL FORMA(1)
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................ $ 26,864 $ 28,633 $ 29,239 $ 26,916 $ 61,039 $ 84,665
Cost of services........ 22,858 24,387 23,864 22,379 48,780 65,518
---------- ---------- ---------- ---------- ---------- ----------
Gross profit............ 4,006 4,246 5,375 4,537 12,259 19,147
Operating costs and
expenses
Selling, general and
administrative...... 3,697 3,281 3,674 3,550 8,914 13,957
Depreciation and
amortization........ 125 113 93 130 330 475
---------- ---------- ---------- ---------- ---------- ----------
Operating income........ 184 852 1,608 857 3,015 4,715
Other income (expense).. (29) (41) 5 86 (194) (190)
---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes................. 155 811 1,613 943 2,821 4,525
Income taxes............ 63 78 187 94 453 837
---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations............ 92 733 1,426 849 2,368 3,688
Loss from discontinued
operations............ (1,029) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)....... ($ 937) $ 733 $ 1,426 $ 849 $ 2,368 $ 3,688
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) per
share................. ($ 0.33) $ 0.28 $ 0.49 $ 0.28 $ 0.55 $ 0.68
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Supplemental net income
per share (2)......... $ 0.18 $ 0.38 $ 0.48
---------- ---------- ----------
---------- ---------- ----------
Weighted average shares
outstanding........... 2,868 2,578 2,930 3,008 4,321 5,441

Three Months Ended January 31,
------------------------------------------------------
1996 1997
-------------------------- ------------------------
PRO PRO
ACTUAL FORMA(1) ACTUAL FORMA(1)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................ $ 9,777 $ 19,072 $ 21,151 $ 21,151
Cost of services........ 7,986 14,931 16,051 16,051
---------- ---------- ---------- ----------
Gross profit............ 1,791 4,141 5,100 5,100
Operating costs and
expenses
Selling, general and
administrative...... 1,144 3,079 3,626 3,626
Depreciation and
amortization........ 55 119 119 119
---------- ---------- ---------- ----------
Operating income........ 592 943 1,355 1,355
Other income (expense).. (31) (31) (85) (50)
---------- ---------- ---------- ----------
Income before income
taxes................. 561 912 1,270 1,305
Income taxes............ 59 175 489 548
---------- ---------- ---------- ----------
Income from continuing
operations............ 502 737 781 757
Loss from discontinued
operations............ -- -- -- --
---------- ---------- ---------- ----------
Net income (loss)....... $ 502 $ 737 $ 781 $ 757
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income (loss) per
share................. $ 0.15 $ 0.14 $ 0.16 $ 0.14
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Supplemental net income
per share (2)......... $ 0.10 $ 0.10 $ 0.15 $ 0.14
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average shares
outstanding........... 3,277 5,246 4,971 5,603
</TABLE>

<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................................... $ 473 $ 914 $2,534 $ 298 $ 6
Working capital, exclusive of notes payable - bank................ 3,592 3,741 5,201 4,242 9,518
Total assets...................................................... 5,097 5,334 6,666 10,302 24,407
Long-term debt.................................................... 129 74 35 -- --
Shareholders' equity.............................................. 3,294 4,046 5,477 7,527 16,220

<CAPTION>
JANUARY 31, 1997
--------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................................... $ 125 $ 15,278
Working capital, exclusive of notes payable - bank................ 9,919 25,072
Total assets...................................................... 30,191 45,344
Long-term debt.................................................... -- --
Shareholders' equity.............................................. 17,001 37,154
</TABLE>

- ------------------
(1) Assumes that the acquisitions of Consortium, Consort MD, PSI and PAMI
occurred on November 1, 1995 and gives effect to the reduction of certain
redundant operating costs and expenses, excess salaries and non-recurring
costs that were identified at the time of the acquisitions. Also gives
effect to: (i) the elimination of interest expense associated with the
acquisition related debt assumed to be repaid with offering proceeds; and
(ii) the issuance of 632,340 shares of Common Stock which, net of estimated
underwriting commissions and offering expenses payable by the Company, would
be sufficient to repay the acquisition related indebtedness as set forth in
"Use of Proceeds."

(2) Assumes an effective tax rate of 42%. The Company's effective tax rates for
the years ended October 31, 1995 and 1996 and the three months ended January
31, 1996 and 1997 were 10%, 16%, 11% and 39%, respectively, due to the
utilization of net operating loss carryforwards.
(3) Gives effect to the sale of 2,323,187 shares of Common Stock offered by the
Company hereby and the application of the net proceeds therefrom as set
forth in "Use of Proceeds."

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company provides contract and temporary personnel in the information
technology, professional engineering and technical, specialty healthcare and
general support sectors of the staffing industry to a diversified base of
national, regional and local customers. The Company's business and strategy have
changed dramatically since its inception in 1971. Through 1981, the Company's
business focused on the development of environmental technologies and the
operation of related environmental businesses. In 1981, the Company diversified
its operations through the acquisition of Intertec Design, Inc., a staffing
company that provided technical, clerical and light industrial personnel. In
fiscal 1992 current management chose to discontinue its environmental business
and from 1992 through 1994, repositioned its core staffing business to improve
profitability and to take advantage of consolidating market dynamics.

Significant revenue growth began in fiscal 1995 as the Company implemented
a growth strategy that resulted in the acquisition of six businesses in the
staffing industry. These acquisitions shifted the Company's business toward the
higher margin information technology and specialty healthcare sectors. During
this time, the Company also elected to discontinue providing certain lower
margin general support services. General support services, which from fiscal
1992 to 1994 accounted for approximately 51.0% of the Company's revenues,
decreased as a percentage of the Company's revenues to 20.5% during the three
months ended January 31, 1997. Correspondingly, revenues from the Company's
specialty professional services accounted for 79.5% of the Company's revenues
during the three months ended January 31, 1997. Prior to implementation of its
growth strategy, in fiscal 1994 the Company's revenues and operating income were
$29.2 million and $1.6 million, respectively. In fiscal 1996, on a pro forma
basis giving effect to the acquisitions as if they had occurred on November 1,
1995, the Company's revenues and operating income increased to $84.7 million and
$4.7 million, respectively.

The Company realizes revenues from the placement of contract and temporary
staffing personnel. These services are provided to the customer on a time and
material basis at hourly rates that are established for each of the Company's
staffing personnel, based upon their skill level, experience and type of work
performed. Billable hourly rates range from an average of approximately $55 -
$75 within the information technology group, $30 - $60 in the professional
engineering group, $35 - $65 within the specialty healthcare group and $8 - $15
in the Company's general support group. Approximately 90.0% of the Company's
revenues are currently realized on the basis of agreed upon hourly billing
rates. In some instances, billing rates can be adjusted based upon increases in
workers' compensation, taxes and other agreed upon costs. The remaining 10.0% of
the Company's business is presently derived from consulting projects. In view of
the diversification of the Company's service offerings, and by drawing upon the
skills developed within the Company's engineering and technical group,
management intends to develop project management skills within its information
technology and other groups and believes that an additional percentage of its
business may be derived in the future from larger-scale consulting projects.

Approximately 40.0% of the Company's services are provided under contract.
The remainder are provided under purchase orders. Contracts are utilized on
certain of the more complex assignments where the engagements are for longer
terms or where precise documentation of the nature and scope of the assignment
is necessary. Contracts, although they normally relate to longer-term and more
complex engagements, generally do not obligate the customer to purchase a
minimum level of services and are generally terminable by the customer on 60 -
90 days notice. The average length of engagement varies from three months to one
year within the information technology and engineering sectors, three months to
six months within the specialty healthcare sector and one week to three weeks
within the general support sector. Approximately 70.0% of the Company's services
are billed to customers on a weekly basis. The remainder are billed on a
bi-weekly and monthly basis based upon the type of project and arrangement with
the customer. Revenues are recognized when the services are provided.

17
<PAGE>

Costs of services consist primarily of salaries and compensation related
expenses for billable staffing personnel, including payroll taxes, employee
benefits, worker's compensation and other insurance. Principally all of the
billable personnel are treated by the Company as employees, although
approximately 5.0% of information technology personnel are treated as
independent contractors. Selling, general and administrative expenses consist
primarily of salaries and benefits of personnel responsible for operating
activities and include corporate overhead expenses. Corporate overhead expenses
relate to salaries and benefits of personnel responsible for corporate
activities, including the Company's acquisition program and corporate marketing,
administrative and reporting responsibilities. The Company records these
expenses when incurred. Depreciation relates primarily to the fixed assets of
the Company. Amortization relates principally to the goodwill resulting from the
Company's acquisitions. These acquisitions have been accounted for under the
purchase method of accounting for financial reporting purposes and have created
goodwill estimated at $14.0 million which is being amortized over a 40 year
period currently resulting in amortization expense aggregating approximately
$350,000 annually.

The Company's net income for each of the three fiscal years in the period
ended October 31, 1996, has been determined after giving effect to the
utilization of a net operating loss carryforward. This effectively reduced
federal tax accruals to a minimal amount during those periods and subjected the
Company to composite tax rates of between 9.9% and 16.1%, principally as a
result of state income taxes. Through the three months ended January 31, 1997,
the Company had utilized principally all of its net operating loss carryforward
and, accordingly, expects that for the foreseeable future its net income will be
subject to full federal and state rates of taxation.

RESULTS OF OPERATIONS

The following table sets forth certain income statement data on an
historical and pro forma basis as a percentage of revenue:

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
--------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, THREE MONTHS ENDED JANUARY 31,
---------------------------------------- ------------------------------------------------
1996 1996 1997
---------------------- ---------------------- ----------------------
1994 1995 ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1)
----- ----- ------ ------------ ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services............ 81.6 83.1 79.9 77.4 81.7 78.3 75.9 75.9
----- ----- ----- ------ ----- ------ ----- ------
Gross profit................ 18.4 16.9 20.1 22.6 18.3 21.7 24.1 24.1
Operating costs and expenses
Selling, general and
administrative.......... 12.6 13.2 14.7 16.4 11.7 16.1 17.1 17.1
Depreciation and
amortization............ 0.3 0.5 0.5 0.6 0.6 0.6 0.6 0.6
----- ----- ----- ------ ----- ------ ----- ------
Operating income............ 5.5 3.2 4.9 5.6 6.0 5.0 6.4 6.4
Other income (expense)...... 0.0 0.3 (0.3) (0.2) (0.3) (0.2) (0.4) (0.2)
----- ----- ----- ------ ----- ------ ----- ------
Income before income
taxes..................... 5.5 3.5 4.6 5.4 5.7 4.8 6.0 6.2
Income taxes................ 0.6 0.3 0.7 1.0 0.6 0.9 2.3 2.6
----- ----- ----- ------ ----- ------ ----- ------
Net income.................. 4.9% 3.2% 3.9% 4.4% 5.1% 3.9% 3.7% 3.6%
===== ===== ===== ====== ===== ====== ===== ======
</TABLE>

- ------------------

(1) Assumes that the acquisitions of Consortium, Consort MD, PSI and PAMI
occurred on November 1, 1995 and gives effect to the reduction of certain
redundant operating costs and expenses, excess salaries and non-recurring
costs that were identified at the time of the acquisitions. Also gives
effect to: (i) the elimination of interest expense associated with the
acquisition related debt assumed to be repaid with offering proceeds; and
(ii) the issuance of 632,340 shares of Common Stock which, net of estimated
underwriting commissions and offering expenses payable by the Company, would
be sufficient to repay the acquisition related indebtedness as set forth in
"Use of Proceeds."

18
<PAGE>

The following charts set forth the components of revenues of the Company
for the periods presented:

In the printed version, pie charts set forth the components of revenues of
the Company for the periods presented:

Fiscal 1994 First Quarter Fiscal 1997

51% 40.5%

33.5% 6%

49% 20%

/ / Information Technology
/ / Professional Engineering & Technical
/ / General Support
/ / Specialty Health Care

Pro Forma Compared to Actual Results of Operations

Since the beginning of fiscal 1995 and through January 31, 1997, the
Company has acquired six staffing companies with combined revenues of
approximately $67.7 million in their respective fiscal years prior to the
acquisition. All of these acquisitions have been accounted for using the
purchase method of accounting, and, accordingly, the Company's statements of
income include the operating results of the acquired businesses from the dates
of acquisition. The Company's historical consolidated operating results have
been significantly affected by the number, timing and size of these
acquisitions. Accordingly, pro forma financial data are provided within this
Prospectus for a more meaningful representation of the Company's operating
results.

Pro forma financial data has been prepared and included herein to give
effect to the acquisitions of Consortium, Consort MD, PSI and PAMI as if they
occurred on November 1, 1995. Pro forma adjustments have been made to reflect
the elimination of certain expenses that were identified at the time of these
acquisitions, including excess salaries, and operating and administrative
expenses and personnel. The pro forma financial data are not necessarily
indicative of results of operations that would have occurred had these
acquisitions been consummated as of the beginning of the periods presented or
that might be attained in the future.

Three Months Ended January 31, 1997 Compared to Three Months Ended January 31,
1996

Revenues. Revenues increased 116.0%, or $11.4 million, for the three
months ended January 31, 1997 as compared to the comparable prior year period.
Of this increase, approximately $9.3 million was attributable to revenue growth
through acquisitions that occurred after the first quarter of fiscal 1996 and
approximately $2.1 million was from internal growth. Internal growth was
experienced in the information technology and healthcare sectors and was offset
by discontinued business in the general support sector due to unacceptable
margins and workers' compensation rates.

<PAGE>

Cost of Services. Cost of services increased 101.0%, or $8.1 million, for
the three months ended January 31, 1997 as compared to the equivalent prior year
period. This increase was primarily due to increased salaries and compensation
associated with the increased revenues experienced during this period. Cost of
services as a percentage of revenues decreased to 75.9% for the three months
ended January 31, 1997 from 81.7% for the comparable prior year period. This
decline was primarily due to a greater percentage of the Company's revenues
being derived from specialty staffing services.

Selling, General and Administrative. Selling, general and administrative
expenses increased 217.0%, or $2.5 million, for the three months ended January
31, 1997 as compared to the comparable prior year period. This increase resulted
from the change in the mix of the business during the three months ended January
31, 1997, which required higher marketing, sales, recruiting and administrative
expenses than the comparable prior year period. Selling, general and
administrative expenses as a percentage of revenues increased to 17.1% for the
three months ended January 31, 1997 from 11.7% in the comparable prior year
period, primarily attributable to the increased sales, recruiting and
administrative expenses necessary to support the Company's continued growth
within the information technology sector. Corporate overhead expenses as a
percentage of revenues decreased to 2.1% for the three months ended January 31,
1997 from 3.4% for the three months ended January 31, 1996 as these costs were
spread over a larger revenue base.

Depreciation and Amortization. Depreciation and amortization increased
116.0%, or $63,700, for the three months ended January 31, 1997 as compared to
the comparable prior year period. This increase was primarily due to the
amortization of intangible assets incurred in connection with the acquisitions
that occurred after the first quarter of fiscal 1996.

Other Income (Expense). Other income (expense) consists primarily of
interest expense which increased 262.0%, or $65,300, for the three months ended
January 31, 1997 as compared to the comparable prior year period. This increase
was due to the increased borrowings necessary to provide the funds required for
certain of the Company's acquisitions as well as to refinance the working
capital debt of some of the acquired companies.

Income Tax. Income tax expense increased 733.0%, or $430,000, for the
three months ended January 31, 1997 as compared to the comparable prior year
period. This increase was due to an increase in the effective tax rate from
10.5% to 38.5% and increased levels of net income. The increase in the effective
tax rate was primarily due to the utilization of principally all of the
remaining net operating loss carryforward which offset net income in prior
periods.

Year Ended October 31, 1996 Compared to Year Ended October 31, 1995

Revenues. Revenues increased 126.8%, or $34.1 million, in fiscal 1996 as
compared to fiscal 1995. Of this increase, approximately $32.4 million was
attributable to revenue growth through acquisitions and approximately $1.7
million was from internal growth. Internal growth was experienced in the
information technology and healthcare sectors and was offset by discontinued
business in the general support sector due to unacceptable margins and workers'
compensation rates.

Cost of Services. Cost of services increased 118.0%, or $26.4 million, in
fiscal 1996 as compared to fiscal 1995. This increase was primarily due to
increased salaries and compensation associated with the increased revenues
experienced during this period. Cost of services as a percentage of revenues
decreased to 79.9% for fiscal 1996 from 83.1% for fiscal 1995. This decline was
primarily attributable to a greater percentage of the Company's revenues being
derived from specialty staffing services.

Selling, General and Administrative. Selling, general and administrative
expenses increased 151.0%, or $5.4 million, in fiscal 1996 as compared to fiscal
1995. This increase resulted from the change in the mix of the business during
fiscal 1996, which required higher marketing, sales, recruiting and
administrative expenses than in fiscal 1995. Selling, general and administrative
expenses as a percentage of revenues increased to 14.6% during fiscal 1996 as
compared to 13.2% for fiscal 1995. This increase was primarily attributable to
higher marketing, sales, recruiting and administrative

<PAGE>

expenses necessary to support continued growth within the information technology
sector. Corporate overhead expenses as a percentage of revenues decreased to
2.5% of revenues in fiscal 1996 from 4.6% of revenues in fiscal 1995, as these
costs were spread over a larger revenue base.

Depreciation and Amortization. Depreciation and amortization increased
153.0%, or $199,000, in fiscal 1996 as compared to fiscal 1995. This increase
was primarily due to the amortization of intangible assets incurred in
connection with the acquisitions that occurred or were fully realized during
fiscal 1996.

Other Income (Expense). Other income (expense) consists primarily of
interest income (expense) which changed by $268,000, from $104,000 in fiscal
1995 to ($164,000) in fiscal 1996. This increase was attributable to increased
borrowings necessary to provide the funds required for the acquisitions during
fiscal 1996.

Income Tax. Income tax expense increased 385.0%, or $360,000, in fiscal
1996 as compared to fiscal 1995. This increase was primarily due to the higher
level of profitability for fiscal 1996. The effective tax rates experienced by
the Company in fiscal 1996 and fiscal 1995 were 16.1% and 9.9%, respectively.
During each of these periods, the Company utilized a net operating loss
carryforward to offset current income.

Year Ended October 31, 1995 Compared to Year Ended October 31, 1994

Revenue. The Company's revenues decreased 7.9%, or $2.3 million, in fiscal
1995 as compared to fiscal 1994. This resulted principally from a reduction of
services provided to two major customers who reduced their overall staffing
requirements during the year. This was partially offset by an increase in
revenues from two acquisitions that were completed during fiscal 1995.

Cost of Services. Cost of services decreased 6.2%, or $1.5 million, in
fiscal 1995 as compared to fiscal 1994. This decrease was due to the decline in
services provided to the two previously mentioned major customers. Cost of
services as a percentage of revenues increased to 83.1% for fiscal 1995 from
81.6% for fiscal 1994.

Selling, General and Administrative. Selling, general and administrative
expenses decreased 3.4%, or $124,000, in fiscal 1995 as compared to fiscal 1994.
This decrease was primarily attributable to a reduction in overhead expenses
implemented with the decrease in business from the Company's two major
customers. Selling, general and administrative expenses as a percentage of
revenues increased to 13.2% for fiscal 1995 as compared to 12.6% for fiscal
1994, as reductions in overhead were less than the overall reduction in
revenues.

Depreciation and Amortization. Depreciation and amortization increased
40.0%, or $37,256, in fiscal 1995 as compared to fiscal 1994. This resulted
principally from amortization of intangible assets attributable to the business
acquisitions completed in fiscal 1995.

Other Income (Expense). Other income (expense) increased during fiscal
1995 by $85,000 as compared to fiscal 1994 due to an increase in interest income
from temporary cash balances.

Income Tax. Income tax expense decreased 50.0%, or $94,000, in fiscal 1995
as compared to fiscal 1994. This decrease was primarily due to the lower level
of profitability for fiscal 1995.

Seasonality and Quarterly Results of Operations

The following table presents certain unaudited quarterly statements of
operations data for each of the Company's last nine fiscal quarters. In the
opinion of the Company's management, this quarterly information has been
prepared on the same basis as the audited financial statements appearing
elsewhere in this Prospectus and includes all adjustments (consisting only of
normal recurring adjustments) necessary to fairly present the unaudited
quarterly results set forth herein. The Company's quarterly results may be
subject to fluctuation, thus, the operating results for any quarter are not
necessarily indicative of results for any future period.

21
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------------------------
JAN. 31, APR. 30, JULY 31, OCT. 31, JAN. 31, APR. 30, JULY 31, OCT. 31, JAN. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $6,693 $6,280 $5,015 $8,928 $9,777 $ 13,785 $ 17,378 $ 20,099 $ 21,151
Cost of services........ 5,542 5,125 4,121 7,591 7,986 11,312 13,579 15,903 16,051
------ ------ ------ ------ ------ -------- -------- -------- --------
Gross profit............ 1,151 1,155 894 1,337 1,791 2,473 3,799 4,196 5,100
Operating costs and
expenses
Selling, general and
administrative...... 884 855 800 1,011 1,144 1,932 2,826 3,012 3,626
Depreciation and
amortization........ 29 37 34 30 55 80 101 94 119
------ ------ ------ ------ ------ -------- -------- -------- --------
Operating income........ 238 263 60 296 592 461 872 1,090 1,355
Other income (expense).. 18 42 31 (5) (31) (26) (85) (52) (85)
------ ------ ------ ------ ------ -------- -------- -------- --------
Income before income
taxes................. 256 305 91 291 561 435 787 1,038 1,270
Income taxes............ 27 27 21 19 59 48 102 244 489
------ ------ ------ ------ ------ -------- -------- -------- --------
Net income.............. $ 229 $ 278 $ 70 $ 272 $ 502 $ 387 $ 685 $ 794 $ 781
====== ====== ====== ====== ====== ======== ======== ======== ========

(AS A PERCENTAGE OF REVENUES)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services........ 82.8 81.6 82.2 85.0 81.7 82.1 78.1 79.1 75.9
------ ------ ------ ------ ------ -------- -------- -------- --------
Gross profit............ 17.2 18.4 17.8 15.0 18.3 17.9 21.9 20.9 24.1
Operating costs and
expenses
Selling, general and
administrative...... 13.3 13.7 15.9 11.4 11.7 14.0 16.3 14.9 17.1
Depreciation and
amortization........ 0.4 0.6 0.7 0.3 0.6 0.6 0.6 0.5 0.6
------ ------ ------ ------ ------ -------- -------- -------- --------
Operating income........ 3.5 4.1 1.2 3.3 6.0 3.3 5.0 5.5 6.4
Other income (expense).. 0.3 0.7 0.6 (0.1) (0.3) (0.2) (0.5) (0.3) (0.4)
------ ------ ------ ------ ------ -------- -------- -------- --------
Income before income
taxes................. 3.8 4.8 1.8 3.2 5.7 3.1 4.5 5.2 6.0
Income taxes............ 0.4 0.4 0.4 0.2 0.6 0.3 0.6 1.2 2.3
------ ------ ------ ------ ------ -------- -------- -------- --------
Net income.............. 3.4% 4.4% 1.4% 3.0% 5.1% 2.8% 3.9% 4.0% 3.7%
====== ====== ====== ====== ====== ======== ======== ======== ========

</TABLE>

The Company could experience quarterly variations in revenues and operating
income as a result of many factors, including the timing of assignments from
customers, the timing of future acquisitions, the timing of the hiring of
personnel, the timing of additional selling, general and administrative expenses
incurred to support new business and changes in the Company's revenue mix. In
connection with certain engineering projects, the Company could incur costs in
periods prior to recognizing revenues under those contracts. In addition, the
Company must plan its operating expenditures based on revenue forecasts, and a
revenue shortfall below such forecast in any quarter would likely adversely
affect the Company's operating results for the quarter. While the effects of
seasonality of the Company's business have been obscured by its rapid growth,
the Company usually experiences lower revenues in its first fiscal quarter due
to the slowdown in business associated with the holiday season.

LIQUIDITY AND CAPITAL RESOURCES

Operating activities provided $1.1 million of cash for the three months
ended January 31, 1997 and used $1.9 million of cash during fiscal 1996. The
change was primarily attributable to an increase in accounts receivable which
was offset by increased levels of profitability, depreciation and amortization
associated with the acquisitions. Operating activities provided $1.1 million of
cash during fiscal 1995. The cash generated was largely the result of net
income, adjusted for non-cash expenses and management of working capital
components.

<PAGE>

Investing activities utilized $5.2 million, $1.2 million and $2.4 million
in the three months ended January 31, 1997 and fiscal years 1996 and 1995,
respectively. In January 1997, the Company purchased PAMI for $4.5 million in
cash and a three year contingent promissory note. In addition, the acquisition
of PAMI required the use of $660,000 in working capital funds. During fiscal
1996, the Company purchased three staffing companies which required the use of
$1.0 million of cash. During fiscal 1995, the Company purchased two staffing
companies which required the use of $2.3 million in cash. These acquisitions
collectively resulted in goodwill of approximately $14.0 million which is being
amortized at approximately $350,000 per year.

Financing activities provided $4.2 million and $2.8 million in cash for the
three months ended January 31, 1997 and fiscal 1996, respectively. Cash was
primarily provided under the Company's Revolving Credit Facility. In addition,
during fiscal 1996, the Company secured $1.0 million through a private placement
of its Common Stock. Financing activities used $916,084 in cash during fiscal
1995, primarily due to the repayment of long term debt of an acquired company.

On December 19, 1996, the Company and its subsidiaries entered into an
amended and restated loan agreement with Mellon Bank, N.A. for providing a
credit facility of up to $20.0 million (the "Revolving Credit Facility") which
expires on June 30, 1999. The Revolving Credit Facility is collateralized by
accounts receivable, contract rights and furniture and fixtures together with
unlimited guarantees from the Company. The Revolving Credit Facility requires
the Company and its subsidiaries to meet certain financial objectives and
maintain certain financial covenants with respect to net income, effective net
worth, working capital, senior indebtedness to effective net worth ratios,
capital expenditures, current assets to current liabilities ratios, consolidated
working capital and consolidated tangible net worth. At October 31, 1996 and
January 31, 1997, the Company and its subsidiaries were in compliance with all
financial covenants contained within the Revolving Credit Facility.

Advances under the Revolving Credit Facility are to be used to meet cash
flow requirements for the subsidiaries as well as operating expenses for the
Company. The interest rate charged by the bank, under the amended and restated
agreement will be based on the London Interbank Offered Rate ("LIBOR") plus
2.25%. The Company intends to utilize approximately $5.0 million of the net
proceeds from this Offering to pay down the Revolving Credit Facility which had
a balance of approximately $7.0 million as of January 31, 1997, although the
Company does intend to draw on this line as needed in the future.

The Company anticipates that its primary uses of capital in future periods
will be for acquisitions and the funding of increases in accounts receivables.
The Company believes that the net proceeds from this Offering and borrowings
under the Revolving Credit Facility and any net cash flow from operations will
be sufficient to meet the Company's capital needs for at least the next twelve
months.

Purportedly in response to an order from a state environmental agency
(which, along with a subsequent order, is referred to herein as the "Order")
relating to potential ground water degradation, the Purchaser performed a number
of actions, including, in 1992, disposal of the then existing Stockpile at an
approximate cost of $5.6 million. The Purchaser has sought contribution from the
Company for its proportionate share of the disposal costs, as well as
anticipated maintenance costs of approximately $700,000, on common law grounds
and pursuant to certain federal and state environmental laws.

<PAGE>

Based upon, among other things, an analysis of environmental studies
performed before and after the 1977 Transaction as well as a review of the
compliance records of the state environmental agency, the Company has concluded
that: (i) the Facility was in material compliance with all applicable federal
and state environmental laws at the time of the 1977 Transaction; (ii) the
Purchaser was cited for numerous violations of applicable environmental laws
after the 1977 Transaction, thus, any violations of laws after 1977, including
any consequent remediation and disposal obligations, were likely the
responsibility of the Purchaser; (iii) neither the costs incurred by the
Purchaser, not the events leading up to the incurrence of these costs, appear to
support a claim under federal environmental laws; (iv) certain actions taken and
costs incurred by the Purchaser may not have been necessary or required to
comply with the Order; (v) liability, if any, would only apply to the minority
percentage of the Stockpile attributable to the Company's operations; and (vi)
the Purchaser's contribution claims for costs incurred in 1992 and earlier in
response to the Order may be barred under the statute of limitations relating to
the state law claims.

IMPACT OF INFLATION

The effects of inflation on the Company's operations were not significant
during the periods presented.

RECENTLY ISSUED ACCOUNTING STANDARDS

In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, Accounting for Stock-Based Compensation, which is effective beginning
in 1996. This statement encourages the fair value based method of accounting for
stock options and similar equity instruments granted to employees. This method
requires that the fair value of equity instruments granted to employees be
recorded as compensation expense. However, the statement allows companies to
continue to use the intrinsic value based method which, in most cases, does not
result in a charge to earnings. The Company will not adopt the fair value based
method of accounting for stock options. However, if the fair value based method
of accounting were applied to grants of stock options in 1996, the effect would
not be material.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of ("Statement 121"), which requires
companies to review long-lived assets and certain identifiable intangibles to be
held, used or disposed of, for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company has adopted Statement 121, which had no significant
effect on the financial statements.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share ("Statement 128"). Statement
128 requires the presentation of basic earnings per share and, if applicable,
diluted earnings per share, instead of primary and fully diluted earnings per
share required under Accounting Principles Board Opinion No. 15. See Note 1 to
Notes to Consolidated Financial Statements for the effect of Statement 128 on
earnings per share for the year ended October 31, 1996 and the three months
ended January 31, 1997.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 129, Disclosure of Information About Capital Structure
("Statement 129"). Management believes that the Company is in compliance with
the provisions of Statement 129.

<PAGE>

BUSINESS

INTRODUCTION

The Company is a multi-regional provider of specialty staffing services
through its 30 branch offices located in 12 states. Through its primary
operating groups, the Company provides contract and temporary personnel in the
information technology, professional engineering and technical, specialty
healthcare and general support sectors of the staffing industry to a diversified
base of national, regional and local customers. During its fiscal year ended
October 31, 1996, the Company provided an average of 2,600 contract and
temporary staffing employees on a daily basis to approximately 700 customers,
including a number of Fortune 500 companies, governmental units and public
utilities, as well as small to medium-size retail, manufacturing, professional
and service organizations.

From its inception, the Company focused on the development of environmental
technologies and the operation of related environmental businesses. In 1981, the
Company diversified through the acquisition of Intertec Design, Inc., a staffing
company that provided technical, clerical and light industrial personnel. In
fiscal 1992 current management chose to discontinue its environmental business
and from 1992 through 1994, repositioned its core staffing business to improve
profitability and to take advantage of changing market dynamics.

INDUSTRY OVERVIEW

Competitive pressures are causing businesses to examine all aspects of
their cost structure and the use of contract and temporary staffing employees
has become widely accepted as a valuable tool for managing personnel costs and
for meeting specialized or fluctuating employment requirements. The growth in
the use of temporary staffing services has been driven by three fundamental
shifts in the U.S. economy over the last decade. In the late 1980s and early
1990s, many U.S. corporations made large reductions in their workforces and
reorganized their operations to meet global competition. This action resulted in
a large unemployed and skilled labor force that became willing to relocate and
accept new working standards. In addition, government regulations have
significantly increased the employment costs incurred by employers. The cost to
screen, hire, train and provide benefits to employees combined with heightened
scrutiny upon employee/employer behavior has increased the costs to employers.
Also, competitive market dynamics and the significant rate of change in
information technology has put a strain on businesses to improve productivity
through the use of current networking and information processing technologies.
In response, many companies are looking outside of their organizations to
temporarily utilize individuals with the requisite specialized technical skills
through temporary or project oriented assignments.

According to the National Association of Temporary Staffing Services
("NATSS"), from 1991 to 1995, the U.S. market for temporary staffing services
grew at a compound annual rate of approximately 16.0%. Industry revenue
increased during this period from approximately $21.5 billion to approximately
$45.1 billion. While the staffing industry has grown rapidly in recent years, in
1996, temporary employment represented only 2.2% of the average daily employment
of the total U.S. workforce, and it is anticipated to grow to 4.0% by the year
2000.

The increase in industry revenues also reflects a growing acceptance of
temporary work assignments among employers and employees. Studies show that more
than 90% of all U.S. businesses have used some form of temporary staffing
services. In addition, employees who once viewed temporary staffing assignments
as employment of last resort, are beginning to enjoy the benefits of flexible
work hours, access to varied and challenging work assignments and the absence of
administrative responsibilities typically associated with permanent employment
positions.

The range and duration of services provided on a temporary basis has
expanded substantially. Companies now use skilled specialty personnel for
varying lengths of time to respond to increasingly complex technological
challenges without incurring the fixed overhead costs associated with permanent
employees. This trend has led to the rapid growth of several specialty staffing
sectors. According to Staffing Industry Reports, information technology is the
fastest growing sector within the

<PAGE>

temporary staffing industry. Revenues within the information technology sector
are estimated to have grown from $5.7 billion in 1993 to $9.2 billion in 1995,
and were projected to grow to $11.4 billion in 1996, a 26.0% compound annual
growth rate. Similarly, revenues within the professional/specialty sector, which
includes professional engineering, are estimated to have grown from $2.4 billion
in 1993 to $4.0 billion in 1995, and were projected to grow to $4.8 billion in
1996, also a 26.0% compound annual growth rate.

The temporary staffing industry is highly fragmented, with over 7,000
companies in the United States. The industry is currently experiencing a trend
toward consolidation primarily due to the increasing demand by large companies
to reduce the number of their vendors and the resulting demand for staffing
companies to offer a wide range of services over a broad geographic area.
Currently, however, the demand for employees skilled in new technologies exceeds
the supply of qualified personnel. As employers find it more difficult to locate
full time candidates with special skills, they increasingly turn to temporary
staffing companies to fill these needs. The Company believes these industry
conditions are making it more difficult for small staffing companies to compete
due to limited recruiting and placement capabilities, limited working capital
and limited management resources. These factors are expected to accelerate the
industry's consolidation trend.

BUSINESS STRATEGY

The Company's objective is to be a leading provider of specialty
professional staffing services in selected regions throughout the United States.
The Company has developed an interrelated growth and operating strategy to
achieve this objective. Key elements of its growth and operating strategy are as
follows:

GROWTH STRATEGY

Strengthen Market Presence in Selected Regions Throughout the Country. The
Company intends to develop a strong market presence in the regions it serves and
in other regions with strong growth characteristics. The Company believes that
it competes most often against local staffing companies which have limited
services, resources and capabilities. The Company intends to utilize its
diversity of service offerings, management resources, as well as acquisition,
recruiting and placement capabilities to distinguish itself from its competition
and to achieve significant customer penetration and retention.

Focus on Specialty Professional Staffing Services. The Company intends to
focus on providing specialty professional staffing services, primarily in the
information technology, engineering and specialty healthcare sectors. Demand
continues to expand for professional staffing services, reflecting changing
attitudes toward workforce management and the proliferation of technical skills
required by businesses, industry and the healthcare system. The Company believes
that such services provide higher growth rates and profit margins, and tend to
be less cyclical than traditional contract and temporary staffing services.
Additionally, the Company intends to blend the project design and management
capabilities of its professional engineering personnel with the skills of its
information technology personnel to solicit larger scale consulting projects.

Acquisitions. The Company has acquired six specialty professional staffing
companies since the beginning of fiscal 1995 and intends to continue to pursue
an aggressive acquisition program to strengthen its presence in its existing
markets, expand into new geographic regions or offer new specialty professional
staffing services. In targeting acquisitions, the Company focuses on regional
companies with revenues of $25.0 million or less, a history of profitable
operations, and a strong entrepreneurial management team. The Company generally
structures payment of a significant portion of the acquisition price in the form
of multi-tiered earnouts based on growth and profitability.

Focus on Internal Growth. The Company believes it has substantial
opportunities to increase revenues and profitability from its operations. The
Company intends to continually refine its mix of service offerings to promote
internal growth by increasing sales to existing customers, developing new
customers and providing additional staffing services. Internal growth, which is
a key element in the

<PAGE>

Company's acquisition criteria, is also promoted by integrating the
administrative functions of acquired companies to permit management to focus on
increasing sales and profitability. The Company increased revenues in its
information technology, professional engineering and specialty healthcare
staffing areas by 17.4% in fiscal 1996 compared to fiscal 1995, on a pro forma
basis giving effect to the Company's acquisitions as if they had occurred as of
November 1, 1994.

OPERATING STRATEGY

Rapidly Integrate Acquisitions. The Company believes that it can increase
its operational efficiencies by integrating the general and administrative
functions at the corporate level and by reducing or eliminating any redundant
functions and facilities at the acquired companies. Management's policy is to
perform this integration within three months of an acquisition in order to
quickly realize potential savings and synergies, efficiently control and monitor
its operations and to allow acquired companies to focus exclusively on growing
their sales and operations.

Foster a Decentralized Entrepreneurial Environment. A key element of the
Company's acquisition criteria is an experienced and entrepreneurial management
team. The Company intends to foster this entrepreneurial atmosphere by
continuing to build on the local names, reputations and client familiarity of
the acquired companies and by sharing their operating policies, procedures and
expertise with other branch locations to develop new ideas to best serve the
prospects of the Company. The Company believes an entrepreneurial business
atmosphere allows its branch offices to quickly and creatively respond to local
market demands and enhances the Company's ability to motivate, attract and
retain managers to maximize growth and profitability.

Develop and Maintain Strong Customer Relationships. The Company seeks to
develop and maintain strong interactive customer relationships by anticipating
and focusing on its customers' needs. The Company believes that by partnering
with its customers to design flexible staffing programs that can be expanded,
contracted or redirected into other specialty areas, it can continually generate
new opportunities to service their staffing requirements.

Attract and Retain High Quality Contract and Temporary Personnel. The
Company believes that one of the primary factors in its success has been its
ability to attract and retain qualified contract and temporary personnel. The
Company continually seeks to attract and retain such personnel by: (i) providing
stimulating and challenging work assignments; (ii) offering competitive wages;
(iii) effectively communicating with its candidates; (iv) providing training to
maintain and upgrade skills; and (v) aligning the needs of its customers with
the appropriately skilled personnel.

OPERATIONS

Through its primary operating groups, the Company provides specialty
staffing services in the following industry sectors: Information Technology,
Professional Engineering and Technical, Specialty Healthcare and General
Support.

INFORMATION TECHNOLOGY

The Information Technology group provides staffing and consulting services
in the areas of client server hardware and operating systems, PC applications
and support, database management, network communications, mainframe and midrange
hardware and software, and technical support. The scope of services offered
includes networking and facilities management and communication equipment
service and maintenance, which rely upon varied technical disciplines, such as:
UNIX, MS Windows, Solaris, Windows 95, Novell, Netware, Sybase, Informix, Lotus
Notes, Clipper, Visual Basic, Visual C++, Cobol II, CICS and Fortran.

Typical engagements focus on specific areas of knowledge or are utilized to
supplement the customer's staffing requirements. These engagements average in
duration from three to 12 months. The following are examples of the types of
services that have been provided by the Company's Information Technology group:

<PAGE>

o The Company provided 15 to 20 programming consultants to a multi-national
bank holding company to write custom software for a variety of business
analysis and programming applications. These programs are being developed to
conform to a number of different platforms and environments such as IBM
Mainframe, UNIX, AS400, OS2 and Novell.

o The Company provided 20 to 25 consultants to a national communications
conglomerate to evaluate the viability and advisability of downsizing the
application to the client/server platform. The engagement entailed analyzing
the system against requirements, surveying system users to assess
satisfaction, assessing the system's suitability for client/server
implementation, and preliminary evaluation of off-the-shelf systems.

o The Company provided six to ten consultants to an international
pharmaceutical corporation to assist it in the implementation of a process
by which a standard is proposed, evaluated, tested, accepted and retired. As
part of the methodology, a range of corporate applications have been
identified and benchmarked for use in the test and acceptance process.

PROFESSIONAL ENGINEERING AND TECHNICAL

The Professional Engineering and Technical group provides personnel to
perform project engineering, design, drafting or other technical services either
at the site of the customer or, less frequently, at the Company's own
facilities. Representative services include: electrical engineering design;
system engineering design and analysis; mechanical engineering design;
procurement engineering; civil structural engineering design; computer aided
design; environmental engineering; and code compliance. The Professional
Engineering and Technical group has also developed an expertise in providing
engineering, design and technical services to many customers in the nuclear
power, fossil fuel and electric utility industries.

The Professional Engineering and Technical group's project managers and
operations support personnel work as a team and typically provide a detailed
scope of work analysis, time and material assessment and monitor and control
projects on a turnkey basis. The engagements of the Professional Engineering and
Technical group generally vary in duration from three to 12 months. The
following are examples of the types of services that have been provided by the
Company's Professional Engineering and Technical group:

o The Company provided approximately 115 engineering consultants to a large
regional utility to implement an action plan designed to return its
electrical generating units back to service. The ultimate goal of the plan
is to provide reasonable assurance that the future operation of each unit
will be conducted in accordance with operating license, technical
specifications and updated safety analysis reports. The Company has been
providing these services to this customer for more than ten years.

o The Company provided ten consultants to an international aircraft
manufacturing company to incorporate manual and CAD corrections or revisions
for drawings, as well as new design, at a fixed price for military and
commercial aircraft both in-house and at client site. The Company has been
providing these services to this customer for more than ten years.

o The Company provided 30 consultants to an international chemical company for
engineering and technical, construction management, administration and lab
support. The Company has been providing these services to this customer for
more than ten years.

SPECIALTY HEALTHCARE

The Specialty Healthcare group provides skilled healthcare professionals,
primarily physical therapists, occupational therapists, speech language
pathologists, nursing staff relief personnel and nurses aides. The Specialty
Healthcare group consists of the medical rehabilitation therapy division and the
nursing division, each with typical engagements ranging three to six months and
on a day to day shift basis, respectively. All therapy and nursing personnel
provided by the Company are licensed professionals. Of the total revenues for
the Specialty Healthcare group, for the six months ended April

<PAGE>

30, 1997, approximately 90% was derived from the provision of medical
rehabilitation therapy services and approximately 10% from nursing services.
Contract and permanent placement services are also provided for each of the
divisions.

The medical rehabilitation therapy division provides physical, occupational
and speech therapy services to hospitals, nursing homes, pre-schools, sports
medicine facilities and private practices. These services include: in-patient,
out-patient, sub-acute and acute care, rehabilitation, geriatric, pediatric and
adult day care. The nursing division consists of a managed care and a critical
care unit. The managed care unit provides permanent placement services of
registered nurses, nurse practitioners, utilization review nurses and other
managed care professionals. The critical care unit provides emergency room and
medical/surgical nurses for staff relief. The following are examples of the
types of services provided by the Specialty Healthcare group:

o The Company provided 15 to 20 registered nurses to a large northern New
Jersey hospital on a supplemental staffing basis for various shifts and days
during the year to work in either the emergency room, intensive care units
or radiology departments.

o The Company provided approximately ten to 12 speech language pathologists
for the board of education for a major metropolitan city pursuant to a
multi-year contract to conduct speech and language evaluations.

GENERAL SUPPORT

The General Support group provides contract and temporary services, as well
as permanent placement services, for full time and part time personnel in a
variety of disciplines, including office, clerical, data entry, secretarial,
accounting, light industrial, shipping and receiving and general warehouse.

Contract and temporary assignments range in length from less than one day
to several weeks or months. The General Support group has been awarded
multi-year contracts by such companies including AT&T, First National Bank of
Chicago, Mellon Bank and Sears.

RECRUITING AND TRAINING

The Company devotes a significant amount of time and resources in locating,
training and retaining its personnel. The full-time recruiters utilize the
Company's proprietary UNIX network database system for the sectors in which they
operate. The databases are cross-referenced by skill to match potential
candidates with the specific requirements of the customer.

The individuals in the databases are identified through numerous activities
including: sourcing; networking; referrals; internet; job fairs; newspaper and
trade journal advertising; attendance at industry shows and presentations. The
Company is capable of developing a background profile on any personnel candidate
and routinely performs verification of education and employment, as well as
personal and professional reference checks. The assessment of a potential
candidate is performed and documented by in-house personnel who have knowledge
of the Company's contractual obligations and the methods of developing and
handling this type of personnel information. The screening and selection process
employed by the Company provides the basis for qualifying candidates for
assignments.

As potential candidates are identified, each individual participates in an
extensive qualification process. An in-house interview of the candidate is
typically conducted by both the recruiting and sales staff and candidates are
evaluated and qualified by a member of the Company's technical staff. Upon
placement with the appropriate customer, the employee is continually monitored
and supervised to ensure competent, timely and professional performance. Regular
on-site visits by the Company's representatives are made and the employees and
their supervisors are contacted. Employees complete weekly status reports which
are signed by their supervisor. Employees report regularly on the status of
their projects in order to identify and eliminate potential problems and issues
which may arise. Exit interviews are conducted upon completion of an assignment
and the customer is invited to confirm that

<PAGE>

all parties are satisfied with the work completed. The Company also offers
educational programs to upgrade the skills of its personnel, particularly within
its Information Technology group.

BRANCH OFFICES

The Company offers its services through 30 branch offices located in 12
states as follows:

<TABLE>
<CAPTION>
NUMBER OF
STATE OFFICES SERVICES PROVIDED
- ----- --------- -----------------
<S> <C> <C>
Connecticut 4 Engineering and Technical; General Support
New York 2 Information Technology; Engineering and Technical; Healthcare
New Jersey 4 Information Technology; Engineering and Technical;
Healthcare; General Support
Pennsylvania 3 Engineering and Technical; General Support
Maryland 1 Information Technology
Kentucky 3 Engineering and Technical; General Support
Indiana 1 General Support
South Carolina 1 Engineering and Technical
Georgia 1 Engineering and Technical
Minnesota 1 Information Technology
Michigan 3 Engineering and Technical
California 6 General Support

</TABLE>

The branch offices operate within guidelines established by management of
the Company as independent profit centers with responsibility for sales and
marketing, recruitment and retention of temporary staffing personnel and
customer relations. Branch managers operate with a significant degree of
autonomy and are compensated based upon performance. The compensation system is
designed to motivate the managers to maximize the Company's growth and
profitability. Depending on the size of the region in which a branch office is
located, a regional or general manager may have oversight responsibilities for
two or more branch offices.

The Company supports the operation of its branch offices by providing
payroll, billing and collection, purchasing, cash management, internal audit and
other administrative support services. These services may also include
coordination of marketing and sales efforts to certain national and
multi-regional accounts, recruitment, training and deployment of temporary
personnel.

CUSTOMERS AND MARKETING

The Company derives its revenues from a diversified customer base,
including a number of Fortune 500 companies, governmental units and public
utilities, as well as small to medium-size retail, manufacturing, professional
and service organizations. Northeast Utilities accounted for 12.0% of the
Company's revenues for the three months ended January 31, 1997 and 12.7% of the
Company's revenues during fiscal 1996. No other single customer accounted for
10.0% or more of the Company's revenues during these periods. The Company's
largest five and ten customers accounted for approximately 25.0% and 31.0%,
respectively, of the Company's revenues during fiscal 1996.

<PAGE>

SELECTED CUSTOMERS:

<TABLE>

<S> <C>
Air Products & Chemicals Mellon Bank
Amtrak Mercedes Benz
AT&T Merrill Lynch
Bell Atlantic Mt. Sinai Hospital
Beth Israel Medical Center Paramount Pictures
Boeing PECO Energy
Chase Manhattan Bank Sandoz Pharmaceuticals
Consolidated Edison Sears
Coopers & Lybrand Showtime Networks
Deloitte & Touche Terrence Cardinal Cooke Healthcare Center
Hackensack Medical Center United Technologies
MCI Westinghouse

</TABLE>

Sales and marketing efforts are conducted at the local and regional level
through the Company's network of branch offices. The Company emphasizes
long-term personal relationships with customers which are developed through
regular assessment of customer requirements and proactive monitoring of
personnel performance. Branch managers make regular sales visits to existing and
prospective customers. New customers are obtained through active sales programs
and referrals. The Company encourages branch managers to participate in national
and regional trade associations, local chambers of commerce and other civic
associations. Local employees are encouraged to be active in civic organizations
and industry trade groups to facilitate the development of new customer
relationships.

Sales and marketing efforts directed toward multi-regional or national
accounts are coordinated by the Company's corporate staff. The Company's
information system contains data regarding all of its customers, including the
services and personnel provided to such customers. Accordingly, support in
identifying cross-selling opportunities for certain larger and national accounts
can be provided at the corporate level. By acting as a coordinator of all the
branch offices, the Company assists the branch offices in providing service to
customers, developing a strategy to pursue national account opportunities and
responding to the trend of national companies to work with a limited number of
preferred vendors for their staffing requirements.

INFORMATION SYSTEMS

The Company's internal information system is linked to a majority of the
Company's offices. This system supports Company-wide operations such as payroll,
billing, accounting and sales and management reports. Additionally, each of the
four service groups has separate databases to permit efficient tracking of
available personnel on a local basis. These databases facilitate efficient
matching of customers' requirements with available temporary staffing personnel.
All of the offices and associated personnel acquired by the Company are
integrated into the Company's internal information system and the personnel
databases are updated accordingly. The internal information system has the
capacity to service the Company's anticipated growth without significant capital
expenditures for the foreseeable future.

COMPETITION

The staffing industry is highly competitive and fragmented, consisting of
more than 7,000 businesses. There are limited barriers to entry and new
competitors frequently enter the market. The Company encounters competition from
large international, national and regional companies, but, its principal
competitors are generally local, independent staffing companies that are located
in the Company's various regional markets.

<PAGE>

The Company competes for qualified temporary staffing employees and for
customers who require the services of such employees. The principal competitive
factors in attracting and retaining qualified temporary staffing employees are
competitive salaries and benefits, quality and frequency of assignments and
responsiveness to employee needs. The principal competitive factors in obtaining
customers are providing comprehensive staffing solutions to customer
requirements, the timely availability of qualified temporary staffing employees,
the ability to match customer requirements with available temporary staffing
employees, competitive pricing of services and satisfying work production
requirements. The Company believes its long-term customer relationships and
strong emphasis on providing service and value to its customers and temporary
staffing employees are important competitive advantages.

Additionally, the Company competes for suitable acquisition candidates.
Management believes that, in addition to its growth strategy and acquisition
guidelines, the following factors distinguish it from competitive bidders when
pursuing acquisitions: (i) the opportunity of the acquiree management to be key
contributors and participants in the growth of a medium-sized public company;
(ii) the rapid integration of general and administrative functions to allow a
greater focus upon sales and marketing efforts; (iii) operational autonomy which
fosters a desirable entrepreneurial environment; and (iv) the use of substantial
performance-based financial incentives.

EMPLOYEES

As of April 30, 1997, the Company employed on its permanent staff 191
persons, including 37 administrative and clerical support staff, 42 regional
managers and recruiters, 49 sales and marketing personnel, 31 information
technology personnel, 25 engineers (who participate in engineering and design
projects undertaken by the Company) and seven executive level management
personnel. During the twelve months ended October 31, 1996, the average number
of temporary personnel employed on daily assignments was approximately 2,600,
including approximately 550 engineering and technical personnel, 450 information
technology personnel and 100 health care personnel. None of the Company's
employees, including its temporary employees, is represented by a collective
bargaining agreement. The Company considers its relationship with its employees
to be good.

FACILITIES

Presently, the Company provides temporary staffing services through 30
offices in 12 states. These offices typically consist of 1,500 to 2,500 square
feet and are leased by the Company for terms of one to three years. Offices in
larger or smaller markets may vary in size from the typical office. The Company
does not expect that maintaining or finding suitable lease space at reasonable
rates in its markets or in areas where the Company contemplates expansion will
be difficult.

The Company's executive and administrative offices are located at 2500
McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613. These premises
consist of approximately 8,800 square feet and are leased at a rate of $11.00
per square foot per month for a term ending on January 31, 1998.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings. The Company
has been named in Orders relating to the storage of certain materials at a
former Company facility located in Fontana, California. For additional
information with regard to this matter, see "Risk Factors -- Potential Claims
Relating to Former Operation of California Facility."

<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Certain information concerning the directors and executive officers of the
Company is set forth below:

NAME AGE OFFICE
- ---- --- ------

<S> <C> <C>
Leon Kopyt (1) 50 Chairman, Chief Executive Officer, President and Director

Barry S. Meyers (1) 56 Chief Operating Officer, Executive Vice President and Director

Martin Blaire (1) 55 Executive Vice President and Director

Stanton Remer (1) 46 Chief Financial Officer, Treasurer, Secretary and Director

Peter R. Kaminsky 57 Senior Vice President

Norman S. Berson (2) 70 Director

Robert B. Kerr (2)(3) 54 Director

Woodrow B. Moats, Jr. (3) 64 Director

</TABLE>

- ------------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee

LEON KOPYT was appointed 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. Additionally, Mr. Kopyt served as Chief Financial Officer and
Treasurer of the Company from 1992 to 1994. Mr. Kopyt's prior experience
includes serving as President and Chief Executive Officer of Socimi
International, a European transportation and defense products manufacturing
company from 1981 to 1990. Mr. Kopyt holds a B.S. degree in Electrical
Engineering from Drexel University. Mr. Kopyt has been a director of the Company
since 1991 and Chairman of the Board since 1992.

BARRY S. MEYERS was appointed the Chief Operating Officer in March 1996.
Previously, he was a co-founder of The Consortium and served as its President
since its inception in 1975. Mr. Meyers' prior experience includes serving as
New York branch manager for Informatics Data Services, regional director of
sales and systems with ITT Data Services and serving as a communications
consultant with AT&T. Mr. Meyers holds a B.A. in Psychology from Hunter College.
Mr. Meyers has been a director of the Company since 1996.

MARTIN BLAIRE was appointed an Executive Vice President in March 1996.
Previously, he was a co-founder of The Consortium and served as its Executive
Vice President, Secretary and Treasurer since its inception in 1975. Mr.
Blaire's prior experience includes serving as a branch manager for Stromberg
Datagraphix, a General Dynamics subsidiary and serving as district sales manager
for ITT Data Services. Mr. Blaire holds a B.B.A. in Accounting from the
University of Miami, Florida. Mr. Blaire has been a director of the Company
since 1996.

STANTON REMER was appointed Chief Financial Officer and Treasurer in May
1994. Mr. Remer's prior experience includes serving as an audit manager of a
local accounting firm in 1993, serving as Chief Financial Officer of Sterling
Supply Corporation from 1991 to 1992 and serving as managing partner of a
regional accounting firm from 1983 to 1991. Mr. Remer is a Certified Public
Accountant and holds a M.B.A. in Finance from Temple University and a B.S. in
Textile Science from the Philadelphia College of Textiles & Science. Mr. Remer
has been a director of the Company since 1992.

PETER R. KAMINSKY was appointed Senior Vice President in May 1996. Mr.
Kaminsky was the founder of Consort MD. Mr. Kaminsky's prior experience includes
serving as Assistant to the President of a subsidiary of the Equitable Life
Assurance Society from 1965 to 1974, where his

<PAGE>

responsibilities included management recruitment, acquisitions, marketing
literature development and public relations. Mr. Kaminsky holds a B.S. in
Science from American University.

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 of the Company since 1987.

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. Mr.
Kerr's prior experience includes serving as Vice President-Sales, for
Shieldalloy Corporation, a specialty metals producer, from 1974 to 1987. Mr.
Kerr holds a B.S. in Mechanical Engineering, a B.A. in Arts and Sciences from
Pennsylvania State University and a M.B.A. in Management from Wayne State
University. Mr. Kerr has been a director of the Company since 1994.

WOODROW B. MOATS, JR. is President of W. B. Moats & Associates, Berwyn,
Pennsylvania, a marketing communications organization specializing in
business-to-business marketing. Mr. Moats' prior experience includes serving as
Senior Vice President -- Corporate Marketing and Public Relations of National
Railway Utilization Corporation from 1975 to 1980. 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 1994.

BOARD OF DIRECTORS

The Board of Directors is divided into three classes with respect to term
of office, with each class to include one-third of the whole number of the Board
of Directors or as near thereto as possible. The term of office of Class A
Directors (Norman S. Berson and Barry S. Meyers), Class B Directors (Robert B.
Kerr and Woodrow B. Moats, Jr.) and Class C Directors (Martin Blaire, Leon Kopyt
and Stanton Remer) expires as of the date of the 2000, 1998 and 1999 annual
meetings of the stockholders, respectively. At each annual meeting of the
stockholders, that number of directors whose terms shall then expire shall be
elected to serve for a term of three years and until their successors shall be
duly elected and qualified.

The Board of Directors has established an Executive Committee, an Audit
Committee and a Compensation Committee. The Executive Committee has been
delegated all of the powers of the Board of Directors and is responsible for the
operation of the Company between formal meetings of the Board of Directors. The
Audit Committee is responsible for reviewing the Company's financial and
accounting practices and controls and making recommendations concerning the
engagement of independent auditors. The Compensation Committee is responsible
for determining the compensation of the officers and employees of the Company
and administering the Company's plans. See "Stock Option Plans."

DIRECTOR COMPENSATION

Members of the Board of Directors who are nonsalaried receive $750 for each
meeting they attend and $300 for each special committee meeting, except for Mr.
Berson who does not receive fees for meetings of the directors or committee
meetings.

<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to
compensation awarded to, earned by or paid to the Chief Executive Officer of the
Company and the four other most highly compensated executive officers of the
Company who were serving at the end of the fiscal year ended October 31, 1996
(collectively, the "Named Executive Officers") for all services rendered in all
capacities to the Company and its subsidiaries.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------
AWARDS PAYOUTS
------------ ------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
----------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS (1)
- -------------------------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Leon Kopyt.................................. 1996 $291,923 $50,900 11,720(2) $ 12,068
President and Chief 1995 $249,161 $26,300 40,300 $ 11,062
Executive Officer 1994 $209,955 $40,500 30,000 $ 9,262

Barry S. Meyers............................. 1996 $159,351(3) -- -- $ 9,047
Executive Vice President

Stanton Remer............................... 1996 $120,000 -- -- $ 2,544
Chief Financial Officer 1995 $100,000 -- 10,000 $ 2,345
1994 $ 80,000 -- 10,000 $ 2,334

Martin Blaire............................... 1996 $159,351(3) -- -- $ 8,468
Executive Vice President

Peter R. Kaminsky........................... 1996 $100,000(3) -- -- $ 5,000
Senior Vice President

</TABLE>

- ------------------

(1) Represents premiums paid by the Company for life and disability insurance.

(2) Does not include options to purchase 500,000 shares under the Company's 1996
Executive Stock Plan granted on November 21, 1996, subsequent to fiscal
1996. See "Option/SAR Grants in Last Fiscal Year."

(3) Reflects compensation for partial year employment.

<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
--------------------------- AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS/SARS EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO OR FOR OPTION TERM
OPTION/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5% 10%
- ------------------------------------- ----------- ------------ ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Leon Kopyt........................... 11,720(2) 37.7% $ 5.00 3/1/06 $36,853 $93,393
</TABLE>

OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/SARS IN-THE-MONEY
SHARES AT FY-END OPTIONS/SARS
ACQUIRED SHARES AT FY-END ($)
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED($) UNEXERCISABLE UNEXERCISABLE
- -------------------------------------------------------- -------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Leon Kopyt.............................................. 0 0 92,300/ $ 658,128/
11,720(2) $ 53,443

Stanton Remer........................................... 0 0 30,000/ $ 99,225
0
</TABLE>

- ------------------
(1) Options are exercisable beginning one year after the date of the grant.
Shares received upon exercise of the options may not be sold for at least
one year after the date of exercise.

(2) Does not include options to purchase 500,000 shares under the Company's 1996
Executive Stock Plan granted on November 21, 1996. These options are subject
to exercise for a period of ten years upon payment of an exercise price of
$7.125 per share, which reflects the market value of the Common Stock on the
date of grant. Options to purchase 250,000 shares are vested while the
remaining options are subject to vesting: (i) 50.0% on the earlier of
February 28, 1998 or once the market capitalization of the Company equals or
exceeds $60 million for a period of thirty consecutive trading days; and
(ii) the remaining 50.0% on the earlier of February 28, 1999 or once the
market capitalization of the Company equals or exceeds $75 million for a
period of 30 consecutive trading days. Immediate vesting of all of the
options occurs, however, if a change in control of the Company occurs (as
defined under the Benefits Agreement), or if during the term, Mr. Kopyt's
employment is terminated for other than good and sufficient cause. The
potential realizable value at assumed annual rates of stock price
appreciation of 5.0% and 10.0% during the term of these options, is
$2,240,437 and $5,677,708, respectively. The value of the in-the-money
unexercised options (assuming 100% vesting) as of June 9, 1997, is
approximately $2.3 million. If Mr. Kopyt's total compensation (including
compensation from the exercise of these options) exceeds $1.0 million in any
fiscal year, the income from exercise of these options, to the extent it
exceeds $1.0 million, would not be deductible to the Company for tax
purposes under Section 162(m) of the Code.

EXECUTIVE EMPLOYMENT AGREEMENTS

The Company has employment agreements with each of Messrs. Kopyt, Meyers,
Blaire and Kaminsky which provide each executive officer with an annual base
salary of $300,000, $240,000, $240,000 and $200,000, respectively, vacation time
and other standard benefits. The employment agreements of Messrs. Meyers and
Blaire have terms of two years which commenced in March 1996, and Mr. Kaminsky's
employment agreement has a term of two years which commenced in May 1996. Mr.
Kopyt's agreement provides for a term of three years which commenced in March
1996, with an

<PAGE>

automatic extension for additional periods of one year. Each of the employment
agreements is terminable upon the death of the executive officer or if the
executive officer is discharged for cause. The employment agreements also
include non-disclosure/non-competition provisions governing the conduct of the
executive officer during and after employment.

In addition to base salary, certain of the employment agreements provide
for additional payments. Messrs. Blaire and Meyers' employment agreements
provide that each is to receive severance payments upon the earlier of the
expiration of their employment term or the date they are otherwise terminated
without good and sufficient cause. In such an event, the individual shall be
entitled to continue to receive a salary at the level of his existing salary for
a period of one year. Additionally, under Mr. Kopyt's employment agreement, he
is to receive a bonus based on the consolidated operating profits before taxes
of the Company for each fiscal year as follows: (i) up to $750,000 -- 3% bonus;
(ii) over $750,000 and up to $1,500,000 -- 2% bonus; (iii) in excess of
$1,500,000 -- 1% bonus. Mr. Kopyt earned a bonus of $50,900 during fiscal 1996.

CHANGE IN CONTROL ARRANGEMENTS

In December 1993, the Company entered into a Termination Benefits Agreement
with Mr. Kopyt that was subsequently amended and restated as of March 18, 1997
(the "Benefits Agreement"). Pursuant to the Benefits Agreement, following a
Change in Control (as defined therein) the remaining term of Mr. Kopyt's
employment is extended for five years (the "Extended Term"). If Mr. Kopyt's
employment is terminated thereafter by the Company other than for cause, or by
Mr. Kopyt for good reason (including, among other things, a material change in
Mr. Kopyt's salary, title, reporting responsibilities or a change in office
location which requires Mr. Kopyt to relocate): the Company is obligated to pay
Mr. Kopyt a lump sum equal to his salary and bonus for the remainder of the
Extended Term; the exercise price of the options to purchase 500,000 shares
granted to Mr. Kopyt under the 1996 Executive Stock Plan will be reduced to 50%
of the average market price of the Common Stock for the 60 days prior to the
date of termination if the resulting exercise price is less than the original
exercise price of $7.125 per share; and the Company shall be obligated to pay to
Mr. Kopyt the amount of any excise tax associated with the benefits provided to
Mr. Kopyt under the Benefits Agreement. If such a termination had taken place as
of June 9, 1997, Mr. Kopyt would have been entitled to cash payments of
approximately $2.1 million (representing salary and excise tax payments), and
the equity in Mr. Kopyt's options would have increased by approximately $1.0
million.

PROFIT SHARING PLAN

The Company maintains 401(k) plans as of October 31, 1996 for the benefit
of eligible employees. The plan 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 (the "Code"), sponsored by the Company to provide eligible
employees an opportunity to defer compensation and have such deferred amounts
contributed to the 401(k) plan on a pre-tax basis, subject to certain
limitations. The Company may, at 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 401(k) plans to match
deferrals of compensation by participants in the fiscal years ending October 31,
1996, 1995, or 1994. Amounts contributed to the 401(k) plans by executive
officers during the fiscal years ended October 31, 1996, 1995 and 1994 were
$13,380, $11,035, and $0, respectively. The amounts contributed by all employee
participants, excluding officers, during the period November 1, 1993 to October
31, 1996 totaled $798,436.

STOCK OPTION PLANS

The Company currently has options outstanding under four stock option
plans: (i) the 1986 Incentive Stock Option Plan (the "1986 Plan"); (ii) the 1992
Incentive Stock Option Plan (the "1992 Plan"); (iii) the 1994 Non-Employee
Directors Stock Option Plan (the "1994 Plan"); and (iv) the

<PAGE>

1996 Executive Stock Plan (the "Executive Stock Plan") (collectively, the
"Plans"). The Plans are administered by the Compensation Committee of the Board
of Directors.

Under the 1986 Plan, an aggregate of 60,000 shares was reserved for
issuance upon the exercise of options granted to officers, directors and key
employees of the Company and its subsidiaries. All of the options have been
granted at exercise prices ranging from $1.25 to $2.66. No shares remain
available for issuance.

Under the 1992 Plan, an aggregate of 100,000 shares of Common Stock were
reserved for issuance upon the exercise of options granted to officers,
directors and key employees of the Company and its subsidiaries. Options to
purchase 99,700 shares of Common Stock have been granted at exercise prices
ranging from $1.09 to $8.13. Under the 1992 Plan, 300 shares remain available
for issuance. The 1992 Plan will terminate in 2002, unless terminated at an
earlier date by the Board of Directors.

Under the 1994 Plan, an aggregate of 80,000 shares of common stock were
reserved for issuance upon the exercise of options granted to non-employee
directors of the Company. Options to purchase 70,000 shares of Common Stock have
been granted at exercise prices ranging from $3.44 to $5.00. Under the 1994
Plan, 10,000 shares remain available for issuance. The exercise of such options
is contingent upon service as a director for one year, and the options are
terminated upon the date the optionee ceases to be a director. The 1994 Plan
terminates in 2004, unless terminated at an earlier date by the Board of
Directors.

Each of the 1986 and 1992 Plans provides for the issuance of incentive
stock options, intended to qualify as such under Section 422A of the Code. All
options granted under the Plans have terms which do not exceed ten years and are
subject to exercise prices which are not less than 100% of the fair market value
of the shares at the time of grant.

Under the Executive Stock Plan, an aggregate of 1,250,000 shares of Common
Stock was reserved for issuance upon the exercise of options granted to key
management employees and directors of the Company and its subsidiaries, of which
750,000 shares remain available for issuance. This plan provides for the grant
of incentive stock options, non-qualified stock options, stock appreciation
rights and awards of restricted common stock.

<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 9, 1997 and is adjusted to
reflect the sale of the shares of Common Stock offered hereby by: (i) each
person known by the Company to beneficially own 5% or more of the Company's
outstanding Common Stock; (ii) each of the Company's directors; (iii) each of
the Named Executive Officers; (iv) the Selling Stockholders; and (v) all
directors and executive officers of the Company as a group. Except as otherwise
indicated, each person set forth below has sole voting and investment power on
the shares reported.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE
OWNED PRIOR TO BENEFICIALLY OWNED
OFFERING AFTER OFFERING
--------------------- SHARES ---------------------
NUMBER OF BEING NUMBER OF
NAME AND ADDRESS(2) SHARES(1) PERCENT OFFERED SHARES PERCENT
- ------------------------------------------------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Leon Kopyt (3)................................... 880,745 16.3% 0 742,432 9.5%
Barry S. Meyers.................................. 607,468 12.6% 0 607,468 8.5%
Martin Blaire.................................... 607,468 12.6% 36,000 571,468 8.0%
Stanton Remer (4)................................ 34,000 * 0 34,000 *
Peter R. Kaminsky................................ 59,327 1.1% 0 59,327 *
Norman S. Berson (5)............................. 20,000 * 0 20,000 *
Robert B. Kerr (6)............................... 14,000 * 0 14,000 *
Woodrow B. Moats, Jr. (6)........................ 14,000 * 0 14,000 *
Limeport Investments, LLC (7).................... 276,625 5.7% 138,313 138,312 1.9%
c/o Acquest International
1760 Market Street, 12th Floor
Philadelphia, PA 19103
Mr. and Mrs. Philip J. Hempleman................. 342,500 7.1% 0 342,500 4.8%
& Sanford B. Prater
c/o Ardsley Advisory Partners
646 Steamboat Road
Greenwich, CT 06830
J. Dennis Bodemann............................... 1,500 * 1,500 0 0
5619 Oldham Ct.
Louisville, KY 40291
Harry R. Nelson.................................. 1,000 * 1,000 0 0
2100 Gardner Lane
Suite 216
Louisville, KY 40205
All Directors and Officers as a group
(8 persons).................................... 2,237,008 40.6% 36,000 2,062,695 26.3%

</TABLE>

- ------------------
* Represents less than one percent of the Company's outstanding Common Stock.

(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations promulgated under the Exchange Act, and, accordingly, may
include securities owned by or for, among others, the spouse and/or minor
children of an 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 or which each person has the right to
acquire within 60 days after the date of this Prospectus through the
exercise of options, or otherwise. Beneficial ownership may be disclaimed as
to certain of the securities. This table has been prepared based on
4,816,676 shares of Common Stock outstanding as of June 9, 1997.

<PAGE>

(2) The address of all directors and officers is c/o RCM Technologies, Inc.,
2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109.
(3) Includes vested options to purchase 250,000 shares under the Company's 1996
Executive Stock Plan and vested options to purchase 104,010 shares under the
Company's other option plans. Also includes options to purchase 250,000
shares under the Company's 1996 Executive Stock Plan which vest when the
Company's market capitalization achieves certain levels; and 276,625 shares
held by Limeport over which Mr. Kopyt has voting power with regard to the
election of directors of the Company. Limeport is a Selling Stockholder in
this Offering.
(4) Includes vested options to purchase 30,000 shares under the Company's
outstanding stock option plans and includes 4,000 shares of Common Stock
issuable upon exercise of the Class C Common Stock Warrants.
(5) Includes vested options to purchase 20,000 shares under the Company's
outstanding stock option plans.
(6) Includes vested options to purchase 14,000 shares under the Company's
outstanding stock option plans. Does not include options to purchase 6,000
shares which are not presently exercisable.
(7) Limeport has granted voting rights over these shares to Leon Kopyt with
respect to the election of directors. On all other matters, voting rights
have been retained by Limeport.

CERTAIN VOTING ARRANGEMENTS

On February 5, 1996, the Company issued and sold 276,625 shares of Common
Stock to Limeport in a private placement transaction. In conjunction with this
transaction, Limeport granted Mr. Kopyt an irrevocable proxy entitling him to
vote such shares solely in connection with the election of directors of the
Company, at any regular or special meeting of the stockholders.

Effective August 31, 1995, the Company completed the acquisition of
Cataract, pursuant to a Merger Agreement dated July 31, 1995 (the "Cataract
Merger Agreement"). Pursuant to the terms of the Cataract Merger Agreement, the
former Cataract shareholders pledged until November 30, 1998, approximately
312,311 shares of the Company's common stock ("Cataract Shares") they received
as part of the merger consideration, in order to guarantee certain performance
criteria of Cataract established in the Cataract Merger Agreement. Following the
expiration of the pledge period, the Cataract 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 Company. Notwithstanding the above, one-third of
the Cataract Shares shall be released from trust commencing August 31, 2000, and
thereafter an additional one-third of the Cataract Shares shall be released from
trust upon each of August 31, 2001 and August 31, 2002. During the period in
which the Cataract Shares are subject to pledge and the voting trust, the
Cataract Shares are to be voted by the Company's Board of Directors on behalf of
the former shareholders of Cataract.

Effective March 11, 1996 the Company completed the acquisition of
Consortium pursuant to a Stock Purchase Agreement dated March 1, 1996 (the
"Consortium Purchase Agreement"). Pursuant to the terms of the Consortium
Purchase Agreement, the former Consortium shareholders, which include Messrs.
Blaire and Meyers, directors and officers of the Company, agreed, among other
things, to vote the approximately 1,300,000 shares received by them in the
aggregate, under the Consortium Purchase Agreement ("Consortium Shares") in
connection with the election of directors of the Company for all of the
individuals nominated by a majority of the Board of Directors of the Company
and, unless the Company otherwise consents in writing, on all other matters to
be voted on by the stockholders of the Company, in accordance with the
recommendation of the majority of the Board of Directors; provided that the
Consortium Shares may be voted as such holders determine in their sole
discretion on any "Significant Event." The term "Significant Event" means any:
(i) sale of substantially all of the assets of the Company; (ii) acquisition of
the Company by a third party through a merger transaction in which the Company
is the target company; or (iii) transaction or series of related transactions
which results in the issuance and/or sale by the Company of more than 20% of the
outstanding capitalization on a fully diluted basis, if on a pro forma basis,
the proportionate net stockholders' equity of the former

<PAGE>

Consortium shareholders after such proposed transaction would be diluted. These
provisions shall remain in effect until the earlier of: (i) the date upon which
Mr. Leon Kopyt no longer serves as an officer of the Company; or (ii) six months
following the date upon which both Messrs. Blaire and Meyers cease to be
employees of the Company (the "Termination Date"), provided, however, that the
Termination Date shall be deemed to occur on any such earlier date that the
employment of both of Messrs. Blaire and Meyers is terminated without cause.

Additionally, the Company has agreed to: (i) continue to nominate Messrs.
Blaire and Meyers to the Board of Directors; and (ii) cause Messrs. Blaire and
Meyers to be appointed to the Executive Committee of the Board of Directors, for
so long as: (A) the former Consortium shareholders, in the aggregate, continue
to own, directly or beneficially, 50% or more of the Consortium Shares (as
adjusted by any stock splits, recapitalization or other adjustments to the
capital stock of the Company), and (B) either of Messrs. Blaire or Meyers remain
as a management level employee of the Company; provided, however, that: (x) in
the event only one of Messrs. Blaire or Meyers is a management level employee,
then only that individual shall be entitled to the rights set forth in clauses
(i) and (ii) hereof; and (y) the provisions of clause (B) above shall not be
effective to abrogate the Company's obligations in clauses (i) and (ii) above if
the employment of either or both of Messrs. Blaire and Meyers is terminated by
the Company without cause; in which case the Company shall remain obligated to
undertake those actions identified in clauses (i) and (ii) hereof for the
remaining period of any employment agreements pursuant to which Messrs. Blaire
or Meyers were employed upon such termination.

Effective May 2, 1996, the Company completed the acquisition of Consort MD
pursuant to a Merger Agreement dated April 23, 1996 (the "Consort MD Merger
Agreement"). Pursuant to the terms of the Consort MD Merger Agreement, Peter
Kaminsky, the former sole shareholder of Consort MD and an executive officer of
the Company, agreed, among other things, to vote the 34,327 shares received by
him in connection with all matters to be voted on by the stockholders of the
Company, in accordance with the recommendation of the majority of the Board of
Directors. These provisions shall remain in effect until the earlier of: (i) May
2, 1998; or (ii) the termination of Mr. Kaminsky's employment agreement with the
Company.

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
legal fees of $65,887 during the fiscal year 1996 to Fineman & Bach, P.C.

The Company has adopted a policy which requires that all transactions with
affiliates of the Company be approved by a majority of the non-management
directors of the Company and be on terms no less favorable to the Company that
can be obtained from unaffiliated persons. There have been no transactions in
excess of $60,000 with affiliates during the fiscal year ended October 31, 1996,
1995 or 1994, except as set forth above.

<PAGE>

DESCRIPTION OF SECURITIES

COMMON STOCK

The Company is authorized to issue 40,000,000 shares of Common Stock, $0.05
par value per share, of which 4,816,676 are outstanding as of June 9, 1997. The
holders of Common Stock are entitled to one vote per share on all matters to be
voted upon by stockholders. Subject to preferences that may be applicable to any
then outstanding Preferred Stock, the holders of Common Stock are entitled,
among other things: (i) to share ratably in dividends if, when and as declared
by the Board of Directors out of funds legally available therefor; and (ii) in
the event of liquidation, dissolution or winding-up of the Company, to share
ratably in the distribution of assets legally available therefor, after payment
of debts and expenses. The holders of Common Stock do not have cumulative voting
rights in the election of directors and have no preemptive rights to subscribe
for additional shares of capital stock of the Company. All current outstanding
shares of the Common Stock are, and the shares offered hereby, when sold in the
manner contemplated by this Prospectus will be fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to the
terms of any series of Preferred Stock which the Company may issue in the
future.

PREFERRED STOCK

The Company may issue up to 5,000,000 shares of Preferred Stock from time
to time as authorized by its Board of Directors in any one or more classes or
series. Subject to the provisions of the Company's Articles of Incorporation and
limitations prescribed by law, the Board of Directors is expressly authorized to
adopt resolutions to issue the shares, to fix the number of shares, to change
the number of shares constituting any series, and to provide for or change the
voting powers, designations, preferences and relative, participating, optional
or other special rights, qualifications, limitations or restrictions thereof,
including dividend rights (including whether dividends are cumulative), dividend
rates, terms of redemption (including sinking fund provisions), redemption
prices, conversion rights and liquidation preferences of the shares constituting
any class or series of the Preferred Stock, in each case without any further
action or vote by the stockholders. The Company has no current plans to issue
any shares of Preferred Stock.

CLASS C WARRANTS

There are presently 786,709 Class C Warrants outstanding. The Class C
Warrants were issued pursuant to the terms of a Warrant Agreement between the
Company and American Stock Transfer & Trust Company (the "Warrant Agent"). As
adjusted by subsequent recapitalizations of the Company, each five Class C
Warrants entitle the registered holder thereof to purchase one share of Common
Stock at an exercise price of $15.00 per share. The Class C Warrants were
initially scheduled to expire on January 31, 1990, however, the expiration date
has been extended by the Company's Board of Directors to December 31, 1997. The
exercise price and number of shares issuable upon exercise of the Class C
Warrants is subject to adjustment in the event of a recapitalization, stock
dividend, stock split or merger. The Class C Warrants can be exercised by
surrendering to the Warrant Agent a Class C Warrant Certificate signed by the
holder thereof or his duly authorized agent with the form of election to
purchase on the reverse side of the certificate completed and signed.
Surrendered Warrant Certificates must be accompanied by payment in full of the
aggregate exercise price for the Class C Warrants to be exercised, which payment
may be in the form of cash or certified check.

The Company has reserved out of its authorized but unissued shares a
sufficient number of shares for issuance upon exercise, if at all, of the Class
C Warrants. Upon issuance, the shares of Common Stock issuable upon exercise of
the Class C Warrants will be fully paid, legally issued and non-assessable.
Exercise of the Class C Warrants is not presently possible, since the exercise
thereof is not covered by a current prospectus. Management is uncertain, in view
of the exercise price of such Warrants in relation to the current trading value
of the Company's Common Stock, that the exercise of Class C Warrants will be
facilitated prior to the expiration of such Warrants on December 31, 1997.

<PAGE>

PROVISIONS HAVING A POSSIBLE ANTI-TAKEOVER EFFECT

Nevada General Corporation Law

Nevada's "Combinations with Interested Stockholders" statute, which applies
to a Nevada corporation having at least 200 stockholders, and which, unless the
Articles of Incorporation provide otherwise has a class of voting shares
registered under the Exchange Act, prohibits an "interested stockholder" from
entering into a "combination" with the corporation, unless certain conditions
are met. A "combination" includes (a) any merger with an interested stockholder,
(b) any consolidation, sale, lease, exchange, mortgage, pledge, transfer or
other disposition of assets, in one transaction or a series of transactions, to
an interested stockholder, having: (i) an aggregate market value equal to 5% or
more of the aggregate market value of the corporation's assets; (ii) an
aggregate market value equal to 5% or more of the aggregate market value of all
outstanding shares of the corporation; or (iii) representing 10% or more of the
earning power or net income of the corporation, or (c) any issuance or transfer
of shares of the corporation or its subsidiaries to an interested stockholder
having an aggregate market value equal to 5% or more of the aggregate market
value of all the outstanding shares of the corporation. An "interested
stockholder" is a person who, together with affiliates and associates,
beneficially owns (or within the prior three years, did beneficially own) 10% or
more of the corporation's voting stock. A stockholder who owned 10% or more of
the corporation's stock on January 1, 1991 is not an interested stockholder.

A corporation to which the statute applies may not engage in a
"combination" with the interested stockholder within three years after it
acquired its shares, unless the combination or the interested stockholder's
acquisition of the shares making the stockholder an interested stockholder was
approved by the board of directors before the interested stockholder acquired
such shares. If this prior approval is not obtained, then after the three-year
period expires, the combination may be consummated either by the approval of the
board of directors or a majority of the voting power held by disinterested
stockholders at a meeting called after expiration of the three-year period, or
if the consideration to be paid by the interested stockholder is at least equal
to the higher of: (i) the highest price per share paid by the interested
stockholder within the three years immediately preceding the date of the
announcement of the combination or in the transaction in which it became an
interested stockholder, whichever is higher, plus interest as provided in the
statute; (ii) the market value per common share on the date of announcement of
the combination or the date the interested stockholder acquired the shares,
whichever is higher; or (iii) if higher for the holders of preferred stock, the
highest liquidation preference of the preferred stock plus interest as provided
in the statute.

Nevada's "Acquisition of Controlling Interest" statute prohibits a person
or group owning or offering to acquire voting shares of a corporation, under
certain circumstances, from voting shares of a target corporation's stock after
crossing certain threshold ownership percentages, unless such corporation's
Articles or Bylaws are amended to make the statute inapplicable to the
acquisition or unless the acquiror obtains the approval of the target
corporation's disinterested stockholders. The statute specifies three
thresholds: at least one-fifth but less than one-third, at least one-third but
less than a majority, and a majority or more, of the outstanding voting power.
Once an acquiror crosses one of the above thresholds, shares which it acquired
in the transaction taking it over the threshold or within ninety days become
"Control Shares" which are deprived of the right to vote until a majority of the
disinterested stockholders restore that right. If an acquiror does not make
certain timely demands on the target corporation or if the stockholders fail to
restore voting rights to the acquiror, then the corporation may, if so provided
in its Articles of Incorporation or Bylaws, call certain of the acquiror's
shares for redemption. The Company's Articles of Incorporation and Bylaws do not
currently permit it to call an acquiror's shares for redemption under these
circumstances. The Acquisition of Controlling Interest statute also provides
that in the event the stockholders restore full voting rights to a holder of
Control Shares which owns a majority of the voting stock, then all other
stockholders who do not vote in favor of restoring voting rights to the Control
Shares may demand payment for the "fair value" of their shares (which is
generally equal to the highest price paid in the transaction subjecting the
stockholder to the statute). The Acquisition of Controlling Interest statute
only applies to a Nevada

<PAGE>

corporation with at least 200 stockholders, including at least 100 record
stockholders who are Nevada residents, and which does business directly or
indirectly in Nevada. As of the date of this Prospectus, the Company does not
have 100 record stockholders in Nevada and does not conduct business in Nevada,
although there can be no assurance that in the future the Acquisition of
Controlling Interest statute will not be applicable to the Company.

Under the Nevada General Corporation Law, a director may be removed only by
a vote of the holders of two-thirds of the voting power of the issued and
outstanding shares entitled to vote.

The provisions described above, together with classified Board of
Directors, other provisions of the Articles of Incorporation described below,
the ability of the Board of Directors to issue Preferred Stock as described
under "Preferred Stock," and the Rights Plan may have the effect of delaying or
deterring a change in the control or management of the Company.

Articles of Incorporation

Undesignated Preferred Stock. One of the effects of undesignated Preferred
Stock may be to enable the Board of Directors to render more difficult or to
discourage an attempt to obtain control of the Company by means of a tender
offer, proxy contest, merger or otherwise, and thereby to protect the continuity
of the Company's management. The issuance of shares of the Preferred Stock
pursuant to the Board of Directors' authority described above may adversely
affect the rights of the holders of Common Stock. For example, Preferred Stock
issued by the Company may rank prior to the Common Stock as to dividend rights,
liquidation preference or both, may have full or limited voting rights and may
be convertible into shares of Common Stock. Accordingly, the issuance of shares
of Preferred Stock may discourage bids for the Common Stock or may otherwise
adversely affect the market price of the Common Stock.

Restrictions on Amendments to the Bylaws. The Articles of Incorporation
provide that any amendment to the Bylaws proposed by shareholders must comply
with the requirements for amendments to the Articles of Incorporation, including
the requirement that such amendment be approved by the Board of Directors. This
provision would make it difficult for a stockholder to avoid certain
anti-takeover provisions of the Bylaws by amending the Bylaws.

By-Laws

The Amended and Restated Bylaws of the Company (the "Bylaws") provide for a
classified Board of Directors. The Board of Directors is elected in staggered
terms, allowing each member to serve for three years, generally with one-third
of the directors to be elected each year. The classification system of electing
directors may discourage a third party from making a tender offer or otherwise
attempting to obtain control of the Company and may maintain the incumbency of
the Board of Directors, as it generally makes it more difficult for stockholders
to replace a majority of the Board of Directors.

The Bylaws restrict the ability of a stockholder to nominate a candidate
for director at a meeting of stockholders unless notice of the nomination, along
with specified information, is received by the Company at least 150 days prior
to date of the meeting. The Bylaws also provide that in the event of a "change
in control" of the Company, vacancies in the Board of Directors may only be
filled by the directors who were the directors prior to the change of control. A
"change in control" is defined as a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Exchange Act. Such a change in control shall be deemed
to have occurred if (a) any "person" as such term is used in Sections 13(d) and
14(d) of the Exchange Act, other than the Company or any "person" who is a
director or officer of the Company, is or becomes the "beneficial owner" as
defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities, or (b) during any twelve month
period individuals who at the beginning of such period constitute the Board of
Directors of the Company cease, for any reason, to constitute at least a
majority, unless the election of each director who was not a director at the

<PAGE>

beginning of the period has been approved in advance by directors representing
at least two-thirds of the directors then in office who were directors at the
beginning of the period.

Rights Plan

On March 14, 1996, the Board of Directors of the Company declared a
dividend of one common stock purchase right (the "Right") for each outstanding
share of Common Stock of the Company to stockholders of record as of the close
of business on April 1, 1996 (the "Record Date") and authorized the issuance of
one Right with respect to each share of Common Stock that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date or the Expiration Date (as such terms are defined below);
provided, however, that Rights may be issued with respect to shares of Common
Stock that become outstanding after the Distribution Date and prior to the
earlier of the Redemption Date or the Expiration Date under certain
circumstances. Except as described below, each Right, when exercisable, entitles
the registered holder to purchase from the Company one additional share of
Common Stock, at a price of $3.00 per share (the "Purchase Price") subject to
adjustment. The Rights were issued pursuant to a Rights Agreement dated as of
March 14, 1996 between the Company and American Stock Transfer & Trust Company,
as Rights Agent (the "Rights Agreement").

Initially, the Rights will be evidenced by the certificates for Common
Stock of the Company registered in the names of the holders thereof and not by
separate rights certificates. Subject to certain exceptions, until the earlier
of (i) such time as the Company learns that a person, alone or together with all
affiliates and associates ("Acquiring Person") has acquired the beneficial
ownership of 15% or more of the Common Stock then outstanding; or (ii) the close
of business on such date, if any, as may be designated by the Board of Directors
of the Company following the commencement of, or first public disclosure of an
intent to commence, a tender or exchange offer by any person for outstanding
Common Stock if, upon consummation of such tender or exchange offer, such person
would be the beneficial owner of 15% or more of the outstanding Common Stock
(the close of business on the earlier of such dates being the "Distribution
Date"), no separate rights certificates will be distributed and the Rights,
including the right to receive rights certificates, will be transferable only in
connection with the transfer of Common Stock. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Rights
Certificate") will be mailed to the holders of record of the Common Stock as of
the Distribution Date and, thereafter, the Rights will be evidenced solely by
such Rights Certificates.

The Rights Agreement provides that, until the earliest of the Distribution
Date, the close of business on October 31, 2005 (the "Expiration Date") or any
day set by the Board of Directors of the Company for the redemption of all then
outstanding Rights (the "Redemption Date"), the Rights shall be evidenced by the
certificates representing the Common Stock and will be transferred with the
Common Stock.

At any time prior to the earlier of (i) such time as a person becomes an
Acquiring Person and (ii) the Expiration Date, the Board of Directors of the
Company may order the redemption of all, but not fewer than all, the then
outstanding Rights at a price of $.01 per Right or at a price adjusted by the
Board of Directors of the Company in accordance with the Rights Agreement (the
"Redemption Price") which may, at the option of the Company, be paid in cash or
common stock or other securities of the Company deemed by the Board of Directors
of the Company, in its sole discretion, to be at least equivalent in value to
the Redemption Price. Immediately upon the Board of Directors of the Company
ordering redemption of the Rights, the Rights will terminate and the only right
thereafter of the holder of the Right shall be to receive the Redemption Price.

Until a Right is exercised, the holder thereof shall not be deemed for any
purpose the holder of the Common Stock, or of any other securities of the
Company which may at any time be issuable upon the exercise of the Rights, and
will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or receive dividends.

<PAGE>

The Rights will cause substantial dilution to a person or group that
attempts to acquire the Company without conditioning the offer on the Rights
being redeemed or a substantial number of Rights being acquired, and under
certain circumstances the Rights beneficially owned by such a person or group
may become void. The Rights should not interfere with any merger or other
business combination approved by the Board of Directors of the Company because,
if the Rights would become exercisable as a result of such merger or other
business combination, the Board of Directors may, at its option, prior to the
time that any person becoming an Acquiring Person, redeem all, but not less than
all, of the then outstanding Rights at the Redemption Price.

The foregoing provisions of the Rights Plan could delay or frustrate the
removal of incumbent directors or the assumption of control by the holder of a
large block of Common Stock even if such removal or assumption would be
beneficial, in the short-term, to stockholders of the Company. The provisions
could discourage or make more difficult a merger, tender offer or proxy contest
even if such event would be favorable to the interests of stockholders.

INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE

The Company's Articles of Incorporation provide that the Company shall, to
the full extent permitted by the Nevada General Corporation Law, indemnify all
persons whom it has the power to indemnify pursuant thereto, including officers
and directors of the Company. The Articles of Incorporation also authorize the
Company to maintain insurance to cover such liabilities. The Company recently
purchased Directors' and Officers' Liability Insurance to protect directors and
officers of the Company from any liability asserted against them for acts taken
or omissions occurring in their capacities as such. The Company policy has an
aggregate liability limit of $5.0 million. The Company is not required to
maintain such insurance and there can be no assurance that the Company will
continue to maintain such insurance or coverage in such amounts.

TRANSFER AGENT

The Transfer Agent for the Common Stock is American Stock Transfer & Trust
Company.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have 7,139,863 shares of
Common Stock outstanding. Of these shares, a total of approximately 5,390,913
shares will be tradable without restriction or further registration under the
Securities Act. The remaining 1,748,950 shares of Common Stock are considered
"restricted securities" for the purpose of Rule 144 under the Securities Act and
may only be sold if they are registered under the Securities Act or if an
exemption from such registration is available. All of the Company's directors
and executive officers, and Limeport, have agreed not to sell, otherwise dispose
of, or pledge any shares of the Common Stock for 180 days after the date of this
Prospectus (the "Lock-Up Period") without the prior written consent of Legg
Mason Wood Walker, Incorporated. The Lock-Up Period will not apply to the Common
Stock offered by Limeport as a Selling Stockholder.

In general, under Rule 144, any affiliate of the Company or any person (or
persons whose shares are aggregated) who has beneficially owned restricted
securities for at least one year, but less than two years, would be entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of 1.0% of the outstanding shares of Common Stock and the reported
average weekly trading volume in the Common Stock for the four calendar weeks
preceding the sale. Sales under Rule 144 are also subject to certain
requirements relating to manner of sale, notice and availability of current
public information concerning the Company. Persons who have not been affiliates
of the Company for at least three months and who have held their shares for more
than two years are entitled to sell restricted securities under Rule 144(k)
without regard to the volume, manner of sale, notice and public information
requirements of Rule 144.

<PAGE>

Following expiration of the Lock-Up Period, 163,631 of the restricted
securities will be eligible for public resale either in accordance with Rule 144
or by operation of the applicable registration rights agreements between the
holder of such restricted securities and the Company. Of the remaining
restricted securities, 1,273,008 may not be sold until April 30, 1998, and
312,311 shares may not be sold until August 30, 1998, each pursuant to certain
registration rights arrangements with the Company.

REGISTRATION RIGHTS

The Company has granted certain registration rights to the holders of
1,925,763 shares of Common Stock. 276,625 of these shares were issued in a
private placement transaction in February 1996 to Limeport (the "Limeport
Shares"), 1,300,000 Shares were issued in connection with the acquisition of
Consortium in March 1996 (the "Consortium Shares"), and 2,500 shares were issued
in connection with the acquisition of PSI in September 1996 (the "PSI Shares").
138,313 of the Limeport Shares, 36,000 of the Consortium Shares and all of the
PSI Shares have been included for sale within this Prospectus. Pursuant to these
rights, the Company has agreed to use its best efforts to, on or before 120 days
after the date of this Prospectus file with the Commission a registration
statement permitting the resale of the remainder of the Limeport Shares and the
Consortium Shares no sooner than 180 days after the date of this Prospectus. The
holders of the remaining Consortium Shares, however, have agreed to certain
limitations upon the resale of these shares as follows: (i) through March 11,
1998, resale shall be limited to only those shares with an aggregate value of
$258,000; (ii) from March 11, 1998 to March 11, 1999, resales shall be limited
to that number of shares that could have been sold during this period under Rule
144 (as that Rule was in effect as of the closing of such transaction in March
1996); however, no greater than 50,000 shares per week per holder; and (iii)
after March 11, 1999, resales are unlimited.

The Company has also granted registration rights effective March 2, 1998
covering the resale of the 34,327 shares issued in connection with the
acquisition of Consort MD and commencing August 30, 1998, covering the resale of
up to 312,311 shares of Common Stock issued in connection with the acquisition
of Cataract in August 1995.

LOCK-UP AGREEMENT

The Company and all of the executive officers, directors and Limeport, upon
consummation of this Offering, have agreed with the Underwriters not to sell,
otherwise dispose of or pledge any shares of Common Stock for a period of 180
days after the date of this Prospectus without the prior written consent of Legg
Mason Wood Walker, Incorporated.

<PAGE>

UNDERWRITING

The Underwriters named below, acting through their representatives, Legg
Mason Wood Walker, Incorporated and Janney Montgomery Scott Inc. (the
"Representatives") have severally agreed, subject to the terms and conditions of
the Underwriting Agreement, to purchase a total of 2,323,187 shares of Common
Stock from the Company and 176,813 shares of Common Stock from the Selling
Stockholders. The number of shares of Common Stock that each Underwriter has
agreed to purchase is set forth opposite its name below. The Underwriters are
committed to purchase all of such shares if any are purchased. Under certain
circumstances the commitments of non-defaulting Underwriters may be increased.
The names of the several Underwriters and the respective number of shares to be
purchased by each of them are as follows:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ---------------------------------------------------------------------------------------------------- ---------
<S> <C>
Legg Mason Wood Walker, Incorporated................................................................ 830,000
Janney Montgomery Scott Inc......................................................................... 830,000
Alex. Brown & Sons Incorporated..................................................................... 60,000
A.G. Edwards & Sons, Inc............................................................................ 60,000
Goldman, Sachs & Co................................................................................. 60,000
Montgomery Securities............................................................................... 60,000
Oppenheimer & Co., Inc.............................................................................. 60,000
Unterberg Harris.................................................................................... 60,000
Robert W. Baird & Co. Incorporated.................................................................. 40,000
William Blair & Company, L.L.C...................................................................... 40,000
J.C. Bradford & Co.................................................................................. 40,000
Gerard Klauer Mattison & Co., Inc................................................................... 40,000
Rauscher Pierce Refsnes, Inc........................................................................ 40,000
Raymond James & Associates, Inc..................................................................... 40,000
The Robinson-Humphrey Company, Inc.................................................................. 40,000
Tucker Anthony Incorporated......................................................................... 40,000
Wheat First Butcher Singer.......................................................................... 40,000
Boenning & Scattergood Inc.......................................................................... 30,000
Brean Murray & Co., Inc............................................................................. 30,000
Cleary Gull Reiland & McDevitt Inc.................................................................. 30,000
Hanifen, Imhoff Inc................................................................................. 30,000
---------
Total.......................................................................................... 2,500,000
=========

</TABLE>

The Underwriters propose to offer the shares of Common Stock to the public
initially at the offering price per share set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $0.36 per share, and the Underwriters may allow, and such dealers may
reallow, a concession not in excess of $0.10 per share on sales to other
dealers. After the commencement of the public offering of the shares of Common
Stock, the offering price and concession may be changed.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities which may be incurred in
connection with the Offering, including liabilities under the Securities Act.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to an
aggregate of 375,000 shares of Common Stock from the Company at the same price
per share as the public offering price. The Underwriters may exercise such
option only to cover over-allotments in the sale of the shares of Common Stock
that the Underwriters have agreed to purchase. To the extent the Underwriters
exercise this option, each of the Underwriters has a firm commitment, subject to
certain conditions, to purchase the same percentage of the option shares as the
number of shares to be purchased and offered by that Underwriter as shown in the
above table bears to the 2,500,000 shares of Common Stock initially offered
hereby.

<PAGE>

All of the directors and executive officers of the Company, and Limeport
have agreed with the Representatives not to sell or dispose of any shares owned
by them without the consent of the Representatives for a period of 180 days
after the date of this Prospectus. See "Shares Eligible for Future Sale."

In connection with this Offering, certain Underwriters may engage in
passive market making transactions in the Common Stock in accordance with
Regulation M under the Securities Exchange Act of 1934, as amended, during the
two business day period before the commencement of offers of sales of the Common
Stock. Passive market makers must comply with applicable volume and price
limitations and must be identified as such. In general, a passive market maker
must display its bid at a price not in excess of the highest independent bid for
such security; if all independent bids are lowered below the passive market
maker's bid, however, such bid must then be lowered when certain purchase limits
are exceeded.

Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain Selling
Stockholders, if any, to bid for and purchase the Common Stock. As an exception
to these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions may
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock.

If Underwriters create a short position in the Common Stock in connection
with the offering thereof (i.e., if they sell more shares of Common Stock than
are set forth on the cover page of the Prospectus), the Representatives may
reduce that short position by purchasing Common Stock in the open market. The
Representatives also may elect to reduce any short position by exercising all or
part of the over-allotment option described in the Prospectus.

The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
Common Stock in the open market to reduce the Underwriters' short position or to
stabilize the price of the Common Stock, they may reclaim the amount of the
selling concession from the Underwriters and selling group members who sold
those shares as part of this Offering.

In general, purchases of Common Stock for the purpose of stabilization or
to reduce a syndicate short position could cause the price of the Common Stock
to be higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of the Common
Stock to the extent that it were to discourage resales of the Common Stock by
purchasers in this Offering.

Neither the Company nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor the Underwriters make any representation that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

<PAGE>

LEGAL MATTERS

The validity of the Common Stock offered hereby has been passed upon for
the Company by Buchanan Ingersoll Professional Corporation, Philadelphia,
Pennsylvania. As to matters of Nevada law, Buchanan Ingersoll Professional
Corporation has relied upon the opinion of Schreck Morris, Las Vegas, Nevada.
Certain legal matters in connection with this Offering will be passed upon for
the Underwriters by Wolf, Block, Schorr and Solis-Cohen, Philadelphia,
Pennsylvania.

EXPERTS

The financial statements as of October 31, 1995 and 1996 and for each of
the three years in the period ended October 31, 1996 included in this Prospectus
have been audited by Grant Thornton LLP, independent certified public
accountants, whose report thereon is included herein, in reliance of said firm
as experts in auditing and accounting.

AVAILABLE INFORMATION

The Company is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934, as amended, and in accordance therewith
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information concerning the Company may be
inspected without charge, and copies of all or any part thereof may be obtained
from the Commission's principal office in Washington, D.C. at Room 1024, 450
Fifth Street N.W., Washington, D.C. 20549, and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and at
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials can be obtained upon written request addressed
to the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, the Commission maintains a Web
site at http://www.sec.gov containing reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission, including the Company.

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock being
offered by this Prospectus. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain parts of which have been omitted as permitted by the
rules and regulations of the Commission. For further information with respect to
the Company and the shares of Common Stock offered hereby, reference is made to
the Registration Statement, including the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to herein are not necessarily complete and, where such
contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions of such exhibit,
to which reference is hereby made.

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE REFERENCE
--------------
<S> <C>
Pro Forma Condensed Consolidated Financial Statements (Unaudited):
Pro Forma Condensed Consolidated Statements of Operations:
Year Ended October 31, 1996.................................................................. F-2
Three Months Ended January 31, 1996.......................................................... F-3
Three Months Ended January 31, 1997.......................................................... F-4
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements..................... F-5

Consolidated Financial Statements:

Independent Auditors' Report.................................................................... F-7

Consolidated Balance Sheets
October 31, 1995, 1996 and January 31, 1997 (Unaudited)...................................... F-8

Consolidated Statements of Income
Years ended October 31, 1994, 1995 and 1996
and the three months ended January 31, 1996 and 1997 (Unaudited)............................. F-9

Consolidated Statements of Changes in Shareholders' Equity
Years ended October 31, 1994, 1995 and 1996
and the three months ended January 31, 1997 (Unaudited)...................................... F-10

Consolidated Statements of Cash Flows
Years ended October 31, 1994, 1995 and 1996
and the three months ended January 31, 1996 and 1997 (Unaudited)............................. F-11

Notes to Consolidated Financial Statements...................................................... F-12

Schedules....................................................................................... F-24
</TABLE>

F-1

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
YEAR ENDED OCTOBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ACQUIRED
HISTORICAL COMPANIES ADJUSTMENTS PRO FORMA
---------- --------- ----------- ----------

<S> <C> <C> <C> <C>
Revenues................................................ $ 61,039 $23,626 $ 84,665
---------- ------- ----------

Operating Expenses
Cost of services...................................... 48,780 16,738 65,518
Selling, General
and Administrative................................. 8,914 5,363 ($220)(a) 13,957
(100)(b)
Depreciation and amortization......................... 330 15 130 (c) 475
---------- ------- ----------

Total operating expenses.............................. 58,024 22,116 79,950
---------- ------- ----------

Operating income........................................ 3,015 1,510 4,715

Other expense........................................... (194) 4(d) (190)
---------- ------- ----------

Income before taxes..................................... 2,821 1,510 4,525

Income taxes............................................ 453 384(e) 837
---------- ------- ----- ----------

Net Income.............................................. $ 2,368 $ 1,510 ($190) $ 3,688
========== ======= ===== ==========

Earnings per common share............................... $ 0.55 $ 0.68
========== ==========

Weighted average number of shares
outstanding........................................... 4,320,571 5,441,192
========== ==========
</TABLE>

See notes to pro forma condensed consolidated financial statement.

F-2

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ACQUIRED
HISTORICAL COMPANIES ADJUSTMENTS PRO FORMA
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues................................................ $ 9,777 $ 9,295 $ 19,072
---------- ------- ----------

Operating Expenses
Cost of services...................................... 7,989 6,945 14,931
Selling, General
and Administrative................................. 1,144 2,230 ($220)(a) 3,079
(75)(b)
Depreciation and amortization......................... 55 31 33 (c) 119
---------- ------- ----------

Total operating expenses.............................. 9,185 9,206 18,129
---------- ------- ----------

Operating income........................................ 592 89 943

Other expense........................................... (31) (31)
---------- ------- ----------

Income before taxes..................................... 561 89 912

Income taxes............................................ 59 116(e) 175
---------- ------- ----- ----------

Net Income.............................................. $ 502 $ 89 $ 146 737
========== ======= ===== ==========

Earnings per common share............................... $ 0.15 $ 0.14
========== ==========
Weighted average number of shares
outstanding........................................... 3,276,627 5,245,794
========== ==========

</TABLE>

See notes to pro forma condensed consolidated financial statement.

F-3

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ACQUIRED
HISTORICAL COMPANIES ADJUSTMENTS PRO FORMA
---------- --------- ----------- ----------

<S> <C> <C> <C> <C>
Revenues................................................ $ 21,151 $ 21,151
---------- ----------

Operating Expenses
Cost of services...................................... 16,051 16,051
Selling, General
and Administrative................................. 3,626 3,626
Depreciation and amortization......................... 119 119
---------- ----------

Total operating expenses.............................. 19,796 19,796
---------- ----------

Operating income........................................ 1,355 1,355

Other expense........................................... (85) $ 35(d) (50)
---------- ----------

Income before taxes..................................... 1,270 1,305

Income taxes............................................ 489 59(e) 548
---------- ----- ----------

Net Income.............................................. $ 781 ($ 24) $ 757
========== ====== ==========

Earnings per common share............................... $ 0.16 $ 0.14
========== ==========

Weighted average number of shares
outstanding........................................... 4,970,620 5,602,960
========== ==========

</TABLE>

See notes to pro forma condensed consolidated financial statement.

F-4

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

The accompanying unaudited pro forma condensed consolidated financial
statements (the "Pro Forma Financial Statements") are based on adjustments to
the historical consolidated financial statements of RCM Technologies, Inc.
("RCM" or the "Company") to give effect to the acquisitions described in Note 3
(the "Acquired Companies"). The pro forma condensed consolidated statements of
operations assume all acquisitions described in Note 3 were consummated as of
the November 1, 1995 (beginning of the fiscal year ended October 31, 1996). The
pro forma consolidated statements of income also reflect the assumed issuance of
632,340 shares of Common Stock which, net of estimated underwriting discounts
and offering expenses payable by the Company, would result in sufficient net
proceeds to repay acquisition related debt. These shares are assumed to have
been issued and debt repaid, at the beginning of the periods presented, and thus
interest expense attributable to such debt has been eliminated. The pro forma
condensed consolidated statements of operations are not necessarily indicative
of results that would have occurred had the acquisitions been consummated as of
the beginning of the periods presented or that might be attained in the future.
Certain information normally included in financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The Pro Forma Financial Statements should be read in conjunction
with the historical consolidated financial statements of RCM, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.

(2) EARNINGS PER SHARE

Pro forma earnings per share were computed by dividing net income
applicable to common stock by the average number of shares of common stock and
common stock equivalents outstanding during the period and the dilutive effect
of common stock issued in connection with the acquisition of the Acquired
Companies.

(3) ACQUISITIONS

The Consortium of Maryland, Inc. ("Consort MD"). In May 1996, the Company
acquired all of the outstanding stock of Consort MD for $621,500 cash and 34,327
restricted shares of the Company's Common Stock, plus additional acquisition
consideration consisting of additional shares of restricted stock having a value
equal to approximately $250,000, based upon a post-closing verification of
financial data warranted at closing. Consort MD generated revenues of
approximately $6.0 million during its fiscal year ended December 31, 1995.
Through this transaction, the Company acquired one branch office, which provides
information technology staffing services.

Programming Alternatives of Minnesota, Inc. ("PAMI"). Effective as of
November 4, 1996, the Company acquired all of the outstanding stock of PAMI for
approximately $4.5 million cash plus $1.6

F-5

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

(3) ACQUISITIONS -- (CONTINUED)

million of contingent consideration in the form of a three year promissory note
payable upon attaining certain earnings targets within the three-year period.
The Company also agreed to pay certain bonus consideration to the former PAMI
shareholder in the event that during the three-year earn-out period, the
performance of PAMI exceeds the established earnings targets. PAMI generated
revenues of approximately $10.0 million during its fiscal year ended December
31, 1996. Through this transaction, the Company acquired one branch office which
provides information technology staffing services.

(4) ADJUSTMENTS TO HISTORICAL FINANCIAL STATEMENTS

The following pro forma adjustments have been made to the historical
statements of operations as if all acquisitions described in Note 3 were
consummated as of the beginning of the periods presented:

(a) To reduce salaries for the difference between compensation of
certain sellers prior to consummation of the acquisitions and their
compensation following the acquisitions as stipulated in their respective
employment agreements with RCM.

(b) To reflect the elimination of redundant operating costs and non
recurring expenses that were immediately identifiable at the time of the
acquisitions.

(c) To reflect amortization of goodwill related to the purchase of the
Acquired Companies, which is being amortized on a straight-line basis over
40 years.

(d) To reflect elimination of interest expense on the note payable
assumed to be repaid with the offering proceeds.

(e) To reflect the change in income taxes related to pro forma
adjustments, and (ii) income taxes on Acquired Companies that were S
corporations as if they were C corporations for federal and state income
tax purposes.

F-6

<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
RCM Technologies, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of RCM
Technologies, Inc. (a Nevada corporation) and Subsidiaries as of October 31,
1996 and 1995 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, 1996. 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 above present
fairly, in all material respects, the consolidated financial position of RCM
Technologies, Inc. and Subsidiaries as of October 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1996 in conformity with generally
accepted accounting principles.

We have also audited Schedules I and II of RCM Technologies, Inc. and
Subsidiaries as of and for each of the three years in the period ended October
31, 1996. In our opinion, these schedules present fairly, in all material
respects, the information required to be set forth therein.

[SIGNATURE]

Grant Thornton LLP
Philadelphia, Pennsylvania
December 16, 1996
(Except for Note 6 as to which the date is December 19, 1996, Note 4,
regarding the acquisition of Programming Alternatives of Minnesota, Inc.,
as to which the date is January 7, 1997 and the last paragraph of Note 16,
as to which the date is May 2, 1997).

F-7

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
-------------------------- -----------
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets
Cash and cash equivalents............................................. $ 297,550 $ 5,989 $ 124,856
Accounts receivable, net of allowance for doubtful accounts of
$15,000 -- 1995; $76,000 -- 1996; $157,000 -- 1997.................. 5,133,662 13,985,445 14,749,871
Prepaid expenses and other current assets............................. 671,662 404,198 672,064
----------- ----------- -----------
Total current assets.............................................. 6,102,874 14,395,632 15,546,791
----------- ----------- -----------

Property and equipment, at cost
Equipment and leasehold improvements.................................. 1,208,317 1,644,831 1,975,849
Less: accumulated depreciation and amortization....................... 763,966 1,142,740 1,199,043
----------- ----------- -----------
444,351 502,091 776,806
----------- ----------- -----------

Other assets
Deposits.............................................................. 43,074 88,039 83,706
Intangible assets (net of accumulated amortization of $73,492,
$366,337 and $453,444 in 1995, 1996 and 1997, respectively)......... 3,711,256 9,420,858 13,783,573
----------- ----------- -----------
3,754,330 9,508,897 13,867,279
----------- ----------- -----------
Total assets...................................................... $10,301,555 $24,406,620 $30,190,876
=========== =========== ===========

</TABLE>

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>

<S> <C> <C> <C>
Current liabilities

Note payable -- bank.................................................. $ 914,435 $ 2,746,636 $ 7,000,000
Accounts payable and accrued expenses................................. 472,107 734,791 882,157
Accrued payroll....................................................... 1,182,934 2,789,725 2,949,932
Taxes other than income taxes......................................... 205,494 432,607 712,023
Income taxes payable.................................................. 920,439 1,083,355
----------- ----------- -----------
Total current liabilities......................................... 2,774,970 7,624,198 12,627,467
----------- ----------- -----------

Income taxes payable.................................................... 562,312 562,312

Shareholders' equity
Preferred stock, $1.00 par value; 5,000,000 shares authorized; no
shares issued or outstanding
Common stock, $0.05 par value; 40,000,000 shares authorized; 3,255,024
shares issued in 1995 and 4,878,476 shares issued in 1996 and 1997,
respectively........................................................ 162,751 243,924 243,924
Additional paid-in capital............................................ 10,916,692 17,161,105 17,161,105
Treasury stock, at cost 62,800 shares................................. (62,821) (62,821) (62,821)
Accumulated deficit................................................... (3,490,037) (1,122,098) (341,111)
----------- ----------- -----------
7,526,585 16,220,110 17,001,097
----------- ----------- -----------

Total liabilities and shareholders' equity........................ $10,301,555 $24,406,620 $30,190,876
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-8

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
----------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)

Revenues................................... $29,238,995 $26,915,737 $61,039,173 $ 9,776,507 $21,150,721
----------- ----------- ----------- ----------- -----------

Operating costs and expenses
Cost of services......................... 23,863,889 22,378,817 48,779,886 7,985,878 16,051,317
Selling, general and administrative...... 3,674,102 3,549,810 8,914,102 1,144,116 3,625,653
Depreciation and amortization............ 93,141 130,397 329,680 54,970 118,629
----------- ----------- ----------- ----------- -----------
27,631,132 26,059,024 58,023,668 9,184,964 19,795,599
----------- ----------- ----------- ----------- -----------

Operating income........................... 1,607,863 856,713 3,015,505 591,543 1,355,122

Other income (expense)
Interest expense......................... (34,196) (38,158) (163,811) (24,901) (90,189)
Other, net............................... 39,381 124,050 (30,216) (6,030) 5,388
----------- ----------- ----------- ----------- -----------
5,185 85,892 (194,027) (30,931) (84,801)
----------- ----------- ----------- ----------- -----------

Income before income taxes................. 1,613,048 942,605 2,821,478 560,612 1,270,321

Income taxes............................... 187,043 93,500 453,539 58,749 489,334
----------- ----------- ----------- ----------- -----------

Net income................................. $ 1,426,005 $ 849,105 $ 2,367,939 $ 501,863 $ 780,987
=========== =========== =========== =========== ===========

Net income per share....................... $.49 $.28 $.55 $.15 $.16
==== ==== ==== ==== ====

Weighted average number of shares
outstanding.............................. 2,930,276 3,007,969 4,320,571 3,276,627 4,970,620
=========== =========== =========== =========== ===========

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-9

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1994, 1995, 1996 AND
THREE MONTHS ENDED JANUARY 31, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------- PAID-IN ACCUMULATED TREASURY
SHARES AMOUNT CAPITAL DEFICIT STOCK
--------- -------- ----------- ----------- --------

<S> <C> <C> <C> <C> <C>
Balance, October 31, 1993.......................... 2,937,713 $146,885 $ 9,727,090 ($5,765,147) ($62,821)

Exercise of stock options.......................... 5,000 250 5,218

Net income......................................... 1,426,005
--------- -------- ----------- ----------- --------

Balance, October 31, 1994.......................... 2,942,713 147,135 9,732,308 (4,339,142) (62,821)

Issuance of common stock in connection with
acquisitions..................................... 312,311 15,616 1,184,384

Net Income......................................... 849,105
--------- -------- ----------- ----------- --------

Balance, October 31, 1995.......................... 3,255,024 162,751 10,916,692 (3,490,037) (62,821)

Exercise of stock options.......................... 10,000 500 15,438

Issuance of common stock in connection with
acquisitions..................................... 1,336,827 66,841 5,242,807

Sale of common stock............................... 276,625 13,832 986,168

Net Income......................................... 2,367,939
--------- -------- ----------- ----------- --------

Balance, October 31, 1996.......................... 4,878,476 243,924 17,161,105 (1,122,098) (62,821)

Net Income (Unaudited)............................. 780,987
--------- -------- ----------- ----------- --------

Balance, January 31, 1997 (Unaudited).............. 4,878,476 $243,924 $17,161,105 ($ 341,111) ($62,821)
========= ======== =========== =========== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-10

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
-------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net income..................................... $1,426,005 $ 849,105 $2,367,939 $ 501,863 $ 780,987
---------- ---------- ---------- ---------- ----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................ 93,141 130,397 329,680 54,970 118,629
Provision for losses on accounts
receivable................................. 5,000 61,000 81,000
Changes in assets and liabilities:
Accounts receivable........................ 286,638 854,552 (8,522,460) 6,031 278,442
Prepaid expenses and other current
assets.................................. (11,443) (405,116) 267,464 (81,856) (246,776)
Accounts payable and accrued expenses...... (3,807) (10,064) 262,684 (190,834) (76,269)
Accrued payroll............................ 36,325 (151,348) 1,606,791 (245,606) (215,376)
Billings in excess of costs and estimated
earnings................................ (157,509) (148,229)
Taxes other than income taxes.............. 1,827 (18,938) 227,113 283,621 227,921
Income taxes payable....................... 1,482,751 58,749 162,914
---------- ---------- ---------- ---------- ----------
Total Adjustments................................ 250,172 251,254 (4,284,977) (114,925) 330,485
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) operating
activities..................................... 1,676,177 1,100,359 (1,917,038) 386,938 1,111,472
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Property and equipment acquired................ (20,619) (68,189) (128,264) (29,049) (80,546)
(Increase) decrease in deposits................ (557) (6,643) (44,965) (4,422) 4,333
Cash paid for acquisitions, net of cash
acquired..................................... (2,345,966) (1,049,433) (5,012,394)
Increase in intangible assets.................. (5,065) (137,272)
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities...... (21,176) (2,420,798) (1,222,662) (38,536) (5,225,879)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Net borrowing (repayments) under short term
debt arrangements....................... (4,703) 176,278 1,832,201 (489,796) 4,253,364
Repayments of long term debt............... (35,228) (1,092,362) (28,890) (20,090)
Sale of common stock....................... 1,000,000
Exercise of stock options.................. 5,468 15,938 438
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing
activities..................................... (34,463) (916,084) 2,848,139 (518,248) 4,233,274
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents.................................... 1,620,538 (2,236,523) (291,561) (169,846) 118,867
Cash and cash equivalents at beginning of year... 913,535 2,534,073 297,550 297,550 5,989
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of year......... $2,534,073 $ 297,550 $ 5,989 $ 127,704 $ 124,856
========== ========== ========== ========== ==========
Cash paid for:
Interest expense............................. $ 34,196 $ 36,738 $ 163,811 $ 24,901 $ 90,189
Income taxes................................. $ 123,049 $ 220,498 $ 726,332 $ 197,438
Acquisitions:
Fair value of assets acquired.............. $5,218,694 $7,302,476 $5,641,380
Liabilities assumed........................ 2,872,728 6,253,043 628,986
---------- ---------- ----------
Cash paid, net of cash acquired............ $2,345,966 $1,049,433 $5,012,394
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-11

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

RCM Technologies, Inc. (the "Company"), through its wholly-owned
subsidiaries, is a nationwide provider of temporary and contract personnel to
businesses, professional and service organizations, manufacturers and public
utilities. The Company principally focuses its staffing services in the
Professional Engineering and Technical, Information Technology, Health Care and
General Staff Support sectors.

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.

Interim Unaudited Financial Information

The accompanying interim unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Certain information and footnote
disclosures which are normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to SEC rules and regulations, although management believes that
the disclosures are adequate to make the information presented not misleading.
The information reflects all normal and recurring adjustments which, in the
opinion of Management, are necessary for a fair presentation of the financial
position of the Company and its results of operations for the interim periods
set forth herein. The results for the three months ended January 31, 1997 are
not necessarily indicative of the results to be expected for the full year.

Property and Equipment

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.

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.

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.

F-12

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

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, 1994, 1995 and 1996 and for the three months
ended January 31, 1996 and 1997.

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.

Earnings per Share

Earnings per share of common stock are based on the weighted average number
of shares of common stock and dilutive common share equivalents (which arise
from stock options) outstanding during the periods. No further dilution resulted
from a computation of fully diluted earnings per share.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

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 non-compete agreements, which
are amortized over the term of the respective agreements. Amortization expense
for fiscal years 1994, 1995 and 1996 was $4,136, $48,928 and $211,337,
respectively. Amortization expense for the three months ended January 31, 1996
and 1997 was $29,100 and $87,107, respectively.

Fair Value of Financial Instruments

The carrying value of financial instruments approximates fair value. The
Company's financial instruments are accounts receivable, accounts payable and
long-term debt. The Company does not have any off-balance sheet financial
instruments or derivatives.

New Standards

F-13

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

continue to use the intrinsic value based method which, in most cases, does not
result in a charge to earnings. The Company will not adopt the fair value based
method of accounting for stock options and the Company does not anticipate that
this statement will have a material impact on the financial statements.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128 ("Statement 128"), Earnings per Share. This
statement requires the presentation of basic earnings per share and, if
applicable, diluted earnings per share, instead of primary and fully diluted
earnings per share required under Accounting Principles Board Opinion No. 15.
("Opinion No. 15"). Had the principles of Statement 128 been applied for the
year ended October 31, 1996, and the three months ended January 31, 1997, basic
earnings per share would have been $.56 and $.16, respectively, and diluted
earnings per share would have been $.55 and $.16, respectively.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 129 ("Statement 129"), Disclosure of Information About
Capital Structure. The Company does not anticipate that Statement 129 will have
a material impact on the financial statements.

Pro Forma Net Income and Net Income Per Share (Unaudited)

The Company's pro forma net income and net income per share for the year
ended October 31, 1996, and the three months ended January 31, 1997, are
$2,506,000 and $836,000 and $.54 and $.15, respectively.

The pro forma net income and net income per share reflect the issuance of
shares necessary to retire the average balance of notes payable outstanding of
approximately $2,048,000 and $4,510,000 for the year ended October 31, 1996, and
the three months ended January 31, 1997, respectively, and the resulting
increase in net income in the amount of $185,000 and $55,000 for the year ended
October 31, 1996, and the three months ended January 31, 1997, respectively. The
calculation is based on the weighted average shares outstanding used in the
calculation of net income per share, adjusted for the estimated shares that
would be issued by the Company, i.e. 286,614 and 563,555 shares for year ended
October 31, 1996, and three months ended January 31, 1997, respectively, to
retire these obligations, at actual income tax rates of 16% and 39% for the year
ended October 31, 1996 and the three months ended January 31, 1997,
respectively. This calculation does not reflect the impact of the Company's
acquisitions.

2. STOCK SPLIT

In April 1996, the Board of Directors, with stockholder approval, amended
the Company's Articles of Incorporation to effect a one-for-five reverse split
of common stock whereby each five shares of issued and outstanding common stock
were exchanged for one share of common stock. The amendment had no effect on the
number of authorized shares and the par value of the common stock. All
references in the financial statements to weighted average number of shares
outstanding, earnings per share amounts and stock option data have been restated
to reflect the reverse split.

F-14

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

3. SALE OF COMMON STOCK

On February 5, 1996, the Company issued and sold 276,625 shares of common
stock to Limeport Investments, LLC in a Private Placement transaction for
$1,000,000 ($3.615 per share). The purchase price was based on a twenty percent
discount to the twenty day average closing price prior to the purchase of the
shares. The shares are restricted securities; however, the Company has agreed to
register such shares by filing a shelf registration statement by February 15,
1997. The President of the Company, Leon Kopyt, has been granted certain voting
rights over these shares as long as they remain owned by Limeport Investments,
LLC.

4. ACQUISITIONS

Three Years Ended October 31, 1996

During the three year period ended October 31, 1996, the Company acquired
five 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 dates 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 of the Great Lakes Design operating unit for a period of
five years after acquisition. Costs in excess of assets acquired of $52,800 are
being amortized over a period of forty years. A non-compete covenant 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, the Company 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 pursuant to which Cataract, Inc. was
merged with and into a newly-created subsidiary of the Company, which then
concurrently changed its name to "Cataract, Inc."

The consideration payable to the former shareholders of Cataract, Inc.
consisted of $2,000,000 cash and 312,311 restricted shares of the Registrant's
common stock (the "Shares"), valued at $1,200,000. 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 Company. 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 Company's Board of Directors on behalf
of the former shareholders of Cataract, Inc.

F-15

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

4. ACQUISITIONS -- (CONTINUED)

On March 11, 1996, the Company acquired all of the outstanding shares of
The Consortium, a specialty provider of information technology and health care
personnel servicing private sector and government clients in the greater
metropolitan New York region.

The consideration paid to the former shareholders of The Consortium
consisted of 1.3 million restricted shares of the Company's common stock, valued
at $5,000,000, in exchange for all of the outstanding capital stock of The
Consortium. The Company has agreed to file a shelf registration statement by
February 15, 1997, permitting the sale of $600,000 in value of securities during
the period April 1997 through March 1998. Thereafter, the remainder of these
shares are subject to significant restrictions on resale through March 11, 1999.
The cost in excess of net assets acquired of $4,940,700 is included in the
Company's Consolidated Balance Sheet as "Intangible Assets" and is being
amortized over a 40 year period.

On May 1, 1996, the Company acquired The Consortium of Maryland, Inc.
("Consort MD"), a specialty provider of information technology personnel
services to major U.S. Corporations in the greater metropolitan Washington, D.C.
region. Consort MD was not related or affiliated with The Consortium. The
acquisition was completed through a merger transaction (the "Merger") pursuant
to which Consort MD was merged with and into a newly-created subsidiary of the
Company, which then concurrently changed its name to "The Consortium of
Maryland, Inc."

The Merger consideration paid to the former shareholder of Consort MD at
the closing consisted of $621,500 cash and 34,327 restricted shares of the
Company's common stock valued at $377,597. Additional merger consideration,
consisting of additional shares of stock having value equal to tangible net
worth of Consort MD as of the Merger date, will be paid in the amount of
approximately $250,000 to the former shareholder of Consort MD. The Company has
agreed to file a registration statement by May 1, 1998 permitting the sale of
the restricted shares.

On September 13, 1996, the Company acquired all the assets and assumed all
of the liabilities of Performance Staffing, Inc. ("PSI"). The consideration paid
to the former shareholders of PSI consisted of 2,500 shares of restricted shares
of the Company's common stock valued at $21,000. There is contingent
consideration of $10,000, which is payable upon the collection of not less than
93% of all of the outstanding accounts receivables billed by PSI prior to
acquisition by the Company.

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 acquisitions been consummated as of
the beginning of the periods presented.

YEAR ENDED OCTOBER 31,
--------------------------
1995 1996
----------- -----------
Revenues........................................ $77,883,000 $75,075,000
Net income...................................... $ 2,059,000 $ 2,764,000
Income per common share......................... $ .45 $ .57

Three Months Ended January 31, 1997

On January 7, 1997, the Company acquired Programming Alternatives of
Minnesota, Inc. ("PAMI"), a Minneapolis, Minnesota-based specialty provider of
information technology personnel, particularly those with high demand
client-server skills. The acquisition was completed effective as of November 4,
1996 through a stock purchase transaction (the "Purchase") pursuant to which
PAMI became a wholly-owned subsidiary of the Company.

F-16

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

4. ACQUISITIONS -- (CONTINUED)

The Purchase consideration paid to the former shareholders of PAMI
consisted of $4,490,000 cash and a $1,625,000 three year promissory note payable
contingent upon PAMI achieving certain base levels of operating income for each
twelve month period following the Purchase, for a period of three years. An
additional earn-out payment, to be recorded as additional purchase price, may be
made to the former shareholders at the end of the third anniversary of the
Purchase to the extent that operating income exceeds these base levels. The
acquisition has been accounted for under the purchase method of accounting. The
cost in excess of net assets acquired of $4,483,331 is included in the Company's
Consolidated Balance Sheet as "Intangible Assets" and is being amortized over a
40 year period.

The following unaudited results of operations have been prepared assuming
the acquisition had occurred at November 1, 1995. Those results are not
necessarily indicative of results of future operations nor of results that would
have occurred had the acquisition been consummated at November 1, 1995.

THREE MONTHS ENDED
------------------
JANUARY 31,
-----------
1996
-----------
Revenues.................................................... $19,072,000
Income before income taxes.................................. $ 1,244,000
Net income.................................................. $ 746,000
Income per common share..................................... $ .16

5. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
------------------------ -----------
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Office equipment.................................. $1,017,197 $1,453,711 $ 1,784,729
Capitalized lease................................. 174,873 174,873 174,873
Leasehold improvements............................ 16,247 16,247 16,247
---------- ---------- -----------
1,208,317 1,644,831 1,975,849
Less: accumulated depreciation and amortization... 763,966 1,142,740 1,199,043
---------- ---------- -----------
$ 444,351 $ 502,091 $ 776,806
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

6. NOTE PAYABLE -- BANK

The note payable is the outstanding amount pursuant to a bank revolving
line of credit agreement expiring in 1998. Borrowing under the credit facility
is based on 85% of accounts receivable on which not more than ninety days have
elapsed since the date of invoicing. The credit facility is collateralized by
accounts receivable, contract rights and furniture and fixtures with unlimited
guarantees from the Company. The credit facility requires the subsidiaries and
the Company to meet certain objectives with respect to financial ratios and
earnings. The interest rate charged by the bank at October 31, 1995 and 1996 was
at the prime rate (effective rate of 8.75% and 8.25%, respectively). At October
31, 1996, there was $6,991,000 available under the credit facility.

On December 19, 1996, the Company and its subsidiaries entered into an
amended and restated agreement with Mellon Bank, N.A. for providing a credit
facility in the maximum amount of $20,000,000, increased from $10,000,000 at
October 31, 1996. The agreement expires on June 30, 1999. The weighted average
interest rate charged by the bank, under the amended and restated

F-17

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

6. NOTE PAYABLE -- BANK -- (CONTINUED)

agreement, based on the London Interbank Offered Rate ("LIBOR") plus 2.25%, was
7.82% at January 31, 1997.

7. SHAREHOLDER RIGHTS PLAN

On March 14, 1996, the Board of Directors of the Company declared a
dividend of one Common Share Purchase Right ("Right") for each outstanding share
of common stock of the Company. Each Right entitles stockholders to buy one
share of common stock at an exercise price of $3.00. The Rights will be
exercisable only if a person or group acquires 15% or more of the Company's
common stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 15% or more of the common stock. The
Company will be entitled to redeem the Rights at one cent per Right at any time
before a 15% or greater position has been acquired.

The dividend distribution was made on April 1, 1996, to shareholders of
record at the close of the business on that date. The Rights expire April 1,
2006.

8. SHAREHOLDERS' EQUITY

Common shares reserved

Shares of unissued common stock were reserved for the following purposes:

OCTOBER 31, JANUARY 31,
-------------------- -----------
1995 1996 1997
------- --------- -----------
Exercise of warrants.................... 157,342 157,342 157,342
Exercise of options outstanding......... 163,300 214,400 714,400
Future grants of options................ 74,100 760,300 762,700
------- --------- ---------
Total................................. 394,742 1,132,042 1,634,442
------- --------- ---------
------- --------- ---------

Warrants

At October 31, 1995 and 1996, and January 31, 1997, the Company had 786,709
warrants outstanding to purchase 157,342 shares of the Company's common stock.
As a result of the reverse stock split (see note 2) each warrant continues to
have an exercise price of $3.00 per share, but five warrants are needed to
convert to one share of common stock. The warrants expire on April 1, 1997
unless otherwise extended by the Board of Directors.

Incentive Stock Option Plans

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 60,000 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 100,000 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. 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.

F-18

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

8. SHAREHOLDERS' EQUITY -- (CONTINUED)

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 80,000 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.

On August 15, 1996, the Board of Directors approved the RCM Technologies,
Inc. 1996 Executive Stock Plan ("1996 Plan") which authorizes the issuance not
later than August 15, 2006 of up to 1,250,000 (effective January 15, 1997)
shares of Common Stock to officers and key employees of the Company and its
subsidiaries. Effective November 21, 1996, the Chief Executive Officer, Mr.
Kopyt, was granted 500,000 options pursuant to the 1996 Plan, of which 375,000
options were not exercisable as of January 31, 1997.

Transactions related to all stock options are as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
YEAR ENDED OCTOBER 31, JANUARY 31,
---------------------------------- ------------------
1994 1995 1996 1997
--------- --------- -------- ------------------
<S> <C> <C> <C> <C>
Outstanding options, beginning....................... 106,000 173,300 163,300 214,400
Granted.............................................. 80,000 50,300 61,100 500,000
Forfeited............................................ (7,700) (60,300)
Exercised............................................ (5,000) (10,000)
--------- --------- -------- --------
Outstanding options, end of period................... 173,300 163,300 214,400 714,400
--------- --------- -------- --------
--------- --------- -------- --------
Exercisable options.................................. 93,300 87,000 141,300 266,300
--------- --------- -------- --------
--------- --------- -------- --------
Option grant price per share......................... $1.09 $1.09 $1.09 $1.09
to $19.84 to $19.84 to $8.13 to $8.13
</TABLE>

9. COMMITMENTS

Employment Contract and Termination Benefits Agreement

The Company has employment agreements with its President and certain senior
executives with a latest expiration date of February 28, 1999. The agreement
with the President provides for a bonus based on pre-tax earnings. No maximum
compensation limit exists. The aggregate commitment for future salaries at
October 31, 1996, excluding bonuses, was $1,660,000. In addition, 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 him 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 $1,452,000 and $2,950,000 as of October 31, 1996
and January 31, 1997, respectively.

On March 18, 1997, the Company amended the Agreement whereby, following a
change in control, the remaining term of the President's employment is extended
for five years (the "Extended Term"). If the President's employment is
terminated thereafter by the Company for other than cause,

F-19

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

9. COMMITMENTS -- (CONTINUED)

or by the President for good reason: the Company is obligated to pay the
President an amount equal to his salary and bonus for the remainder of the
Extended Term; the exercise price of 500,000 options granted to the President
will be reduced to 50% of the fair market value of the Common Stock on the date
of termination if the resulting exercise price is less than the original
exercise price of $7.125 per share; and the Company shall be obligated to pay
the President the amount of any excise taxes associated with the benefits
provided under this Agreement. If such termination had taken place on March 18,
1997, the President would have been entitled to a payment of approximately
$2,150,000 and the equity in the options would have increased by approximately
$1,500,000.

Operating leases

The Company leases office facilities and various equipment under
noncancellable leases expiring at various dates through October 29, 2006.
Certain leases are subject to escalation clauses based upon changes in various
factors. The minimum future annual operating lease commitments for leases with
noncancellable terms in excess of one year, exclusive of escalation, are as
follows:

YEAR ENDING
OCTOBER 31, AMOUNT
- ------------ ----------
1997.......................................................... $ 583,800
1998.......................................................... 420,100
1999.......................................................... 264,300
2000.......................................................... 213,900
2001.......................................................... 188,400
Thereafter.................................................... 1,023,000
----------
Total......................................................... $2,693,500
----------
----------

Rent expense for the years ended October 31, 1994, 1995 and 1996 was
$336,662, $354,267, and $498,042, respectively. Rent expense for the three
months ended January 31, 1996 and 1997 was $101,417 and $174,455, respectively.

10. MAJOR CUSTOMERS

Sales to major clients for the years ended October 31, 1994, 1995 and 1996
were as follows:

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, 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, 1996, one client contributed $7,776,000
or 12.7% of total sales. Accounts receivable from the client represented
13.3% of the total trade accounts receivable at October 31, 1996.

Sales to major clients for the three months ended January 31, 1996 and 1997
were as follows:

For the three months ended January 31, 1996, one client contributed
$1,114,000 or 11.4% of the total sales. Accounts receivable from the client
represented 2.1% of the total trade accounts receivable at January 31,
1996.

F-20

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

10. MAJOR CUSTOMERS -- (CONTINUED)

For the three months ended January 31, 1997, one client contributed
$2,482,000 or 11.7% of the total sales. Accounts receivable from the client
represented 4.0% of the total trade accounts receivable at January 31,
1997.

11. RELATED PARTY TRANSACTIONS

A director of the Company is a shareholder in a law firm that rendered
various legal services to the Company. Fees paid to the law firm have not been
significant.

12. INCOME TAXES

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
YEARS ENDED OCTOBER 31, JANUARY 31,
--------------------------------------- --------------------
1994 1995 1996 1996 1997
----------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Current
Federal............................... $ 27,000 $ 10,000 $ 48,000 $ 46,749 $357,911
State and local....................... 160,043 83,500 405,539 12,000 131,423
----------- ---------- ---------- -------- --------
Total income tax expense -- current..... $ 187,043 $ 93,500 $ 453,539 $ 58,749 $489,334
----------- ---------- ---------- -------- --------
----------- ---------- ---------- -------- --------
</TABLE>

The income tax provisions reconciled to the tax computed at the statutory
Federal rate was:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
---------------
YEARS ENDED OCTOBER 31, JANUARY 31,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Tax at statutory rate............................................ 34.0% 34.0% 34.0% 34.0% 34.0%
State income taxes, net of Federal income tax benefit............ 6.5 5.8 9.4 1.4 6.8
Provision for doubtful accounts.................................. .1 .3
Net operating loss carry-overs................................... (31.3) (32.3) (32.4) (24.9) (2.3)
Other, net....................................................... 2.3 2.4 4.8
----- ----- ----- ----- -----
11.6% 9.9% 16.1% 10.5% 38.5%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

At October 31, 1996, 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:

F-21

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

12. INCOME TAXES -- (CONTINUED)

<TABLE>
<CAPTION>
NET
EXPIRATION OPERATING TAX
DATE LOSS CREDITS
- ---------- --------- -------
<S> <C> <C>
1997-2004..................................................................... $ $53,100
2005.......................................................................... 20,000
2007.......................................................................... 300,000
--------- -------
Total......................................................................... $ 300,000 $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, 1996 are approximately $270,000.

Significant components of the Company's deferred tax assets at October 31,
1995 and 1996, and January 31, 1997, are as follows:

<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
---------------------- -----------
1995 1996 1997
---------- -------- -----------
<S> <C> <C> <C>
Deferred tax assets due to:
Net operating loss carry-over.......................................... $1,019,800 $102,000 $ 72,900
Tax credit carry-over.................................................. 73,100 73,100 73,100
Depreciation of property and equipment................................. 23,200 20,000 20,000
Other.................................................................. 46,887
---------- -------- ---------
1,162,987 195,100 166,000
Less: 100% valuation allowance........................................... 1,162,987 195,100 166,000
---------- -------- ---------
Total net deferred tax assets............................................ $ $ $
---------- -------- ---------
---------- -------- ---------
</TABLE>

The valuation allowance was decreased during 1995 and 1996 and 1997 by
$316,286, $967,887 and $29,100, respectively, due to the utilization of net
operating loss carry-overs and the reversal of temporary differences.

13. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Year Ended October 31, 1995

<TABLE>
<CAPTION>
GROSS NET INCOME
SALES PROFIT NET INCOME PER SHARE*
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1st Quarter........................................... $ 6,692,756 $1,150,362 $ 229,015 $.08
2nd Quarter........................................... 6,280,172 1,155,413 277,724 .05
3rd Quarter........................................... 5,015,376 894,096 69,716 .02
4th Quarter........................................... 8,927,433 1,337,049 272,650 .08
----------- ---------- ---------- ----
Total................................................. $26,915,737 $4,536,920 $ 849,105 $.28
----------- ---------- ---------- ----
----------- ---------- ---------- ----
</TABLE>

F-22

<PAGE>

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE THREE MONTHS
ENDED JANUARY 31, 1996 AND 1997 ARE UNAUDITED) -- (CONTINUED)

13. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) -- (CONTINUED)

Year Ended October 31, 1996

<TABLE>
<CAPTION>
GROSS NET INCOME
SALES PROFIT NET INCOME PER SHARE*
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1st Quarter........................................... $ 9,776,507 $ 1,790,629 $ 501,863 $.15
2nd Quarter........................................... 13,785,626 2,473,426 386,736 .09
3rd Quarter........................................... 17,378,155 3,798,231 684,937 .14
4th Quarter........................................... 20,098,885 4,197,002 794,403 .16
----------- ----------- ---------- ----
Total................................................. $61,039,173 $12,259,288 $2,367,939 $.55
----------- ----------- ---------- ----
----------- ----------- ---------- ----
</TABLE>

- ------------------
* Per share data is adjusted to reflect the one for five reverse stock split
(note 2). Total of quarterly amounts do not agree to the annual amount due to
separate quarterly calculations of weighted average shares outstanding.

14. OTHER INCOME (EXPENSE)

Included in Other Income (Expense) is Interest Income in the amount of
$57,810; $142,810 and $116, respectively for years ended October 31, 1994, 1995
and 1996.

15. 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 an annual aggregate
limitation of $242,000. 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, 1996 and January 31,
1997.

16. CONTINGENCY

During the third quarter of 1996, the Company received a request for
contribution in an unspecified amount from the purchaser of a property in 1977
on which the Company had previously conducted the storage and handling of
certain aluminum recovery materials. The purchaser has suggested that, based
upon an order by the California Regional Water Quality Control Board, the
Company's handling and storage of certain materials on the site prior to and
after the sale may have contributed to environmental contamination of the ground
water on and around the site. Any such contamination was discovered years after
the sale.

Based upon the results of a preliminary examination of the matter, which
includes an environmental survey of the property conducted prior to the time of
the sale, the Company believes that the site in question complied with all
environmental rules and regulations at the time of the sale and that any
contamination was likely caused by the operation of the purchaser thereafter.

The Company believes it has meritorious defenses to the purchaser's claims
and, in management's opinion, the Company's exposure under the claims is not
likely to have a materially adverse impact on the Company's overall financial
condition. There can be no assurance, however, that the Company will not incur
material expenses and costs in connection with the defense and resolution of any
claims brought by the purchaser or that the Company will not ultimately be
responsible for certain of the costs incurred by the purchaser, which may
include pre- and post-judgment interest, in an amount that may be material to
the Company. Management intends to vigorously oppose any such claims.

F-23

<PAGE>

SCHEDULE I

RCM TECHNOLOGIES, INC. (PARENT COMPANY)

CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
OCTOBER 31, 1995 AND 1996

1995 1996
---------- -----------
ASSETS
Current assets
Cash ...................................... $ 1,733 $ 8,586
Prepaid expenses and other assets ......... 134,937 132,663
---------- -----------
Total current assets ................... 136,670 141,249
---------- -----------
Other assets
Deposits .................................. 5,495 5,695
Long-term receivables from affiliates ..... 8,188,366 16,073,166
---------- -----------
8,193,861 16,078,861
---------- -----------
Total assets ........................... $8,330,531 $16,220,110
---------- -----------
---------- -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Share in deficiency in assets of subsidiaries 803,946
---------- -----------
Shareholders' equity
Common stock .............................. 813,756 243,924
Additional paid in capital ................ 10,265,687 17,161,105
Accumulated deficit ....................... (3,490,037) (1,122,098)
---------- -----------
7,589,406 16,282,931
Less: treasury stock ...................... 62,821 62,821
---------- -----------
Total shareholders' equity ................ 7,526,585 16,220,110
---------- -----------
Total liabilities and shareholders' equity $8,330,531 $16,220,110
---------- -----------
---------- -----------

The "Notes to Consolidated Financial Statements" of RCM Technologies, Inc. and
subsidiaries are an integral part of these statements.

F-24

<PAGE>

SCHEDULE I

RCM TECHNOLOGIES, INC. (PARENT COMPANY)

CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF OPERATIONS
YEARS ENDED OCTOBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
---------- -------- ----------
<S> <C> <C> <C>
Operating expenses
Administrative................................... $ 116,418 $ 31,780 $ 139,280
---------- -------- ----------
Operating loss..................................... (116,418) (31,780) (139,280)
---------- -------- ----------
Miscellaneous expense.............................. (7,299) (3,678) (10,261)
---------- -------- ----------
(7,299) (3,678) (10,261)
---------- -------- ----------
Loss before management fee income.................. (123,717) (35,458) (149,541)
Management fee income.............................. 123,820 35,458 149,541
---------- -------- ----------
Income before income taxes......................... 103
Income taxes....................................... 103
---------- -------- ----------
Income before income in subsidiaries
Equity in earnings in subsidiaries................. 1,426,005 849,105 2,367,939
---------- -------- ----------
Net income......................................... $1,426,005 $849,105 $2,367,939
---------- -------- ----------
---------- -------- ----------
</TABLE>

The "Notes to Consolidated Financial Statements" of RCM Technologies, Inc. and
subsidiaries are an integral part of these statements.

F-25

<PAGE>

SCHEDULE I

RCM TECHNOLOGIES, INC. (PARENT COMPANY)

CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
---------- -------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................ $1,426,005 $849,105 $2,367,939
---------- -------- ----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Changes in operating assets and liabilities:
Prepaid expenses and other assets................................ 530 (2,625) 2,274
Accounts payable and accrued expenses............................ (4,681) (11,108)
Income taxes payable............................................. (1,800)
---------- -------- ----------
(5,951) (13,733) 2,274
---------- -------- ----------
Net cash provided by operating activities........................... 1,420,054 835,372 2,370,213
---------- -------- ----------
Cash flows from investing activities:
Increase in deposits................................................ (95)
Share in deficiency in assets of subsidiaries....................... (1,426,005) (849,105) (2,367,939)
Decrease (increase) in long-term receivables from subsidiaries........ 399 8,042 (1,011,359)
---------- -------- ----------
Net cash used in investing activities............................... (1,425,701) (841,063) (3,379,298)
---------- -------- ----------
Cash flows from financing activities:
Sale of common stock................................................ 1,000,000
Exercise of stock options........................................... 5,468 15,938
---------- -------- ----------
Net cash provided by financing activities........................... 5,468 1,015,938
---------- -------- ----------
Net increase (decrease) in cash and equivalents....................... (179) (5,691) 6,853
Cash and equivalents at beginning of year............................. 7,603 7,424 1,733
---------- -------- ----------
Cash and equivalents at end of year................................... $ 7,424 $ 1,733 $ 8,586
---------- -------- ----------
---------- -------- ----------
</TABLE>

The "Notes to Consolidated Financial Statements" of RCM Technologies, Inc. and
subsidiaries are an integral part of these statements.

F-26

<PAGE>

SCHEDULE II

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994

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
- ----------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended October 31, 1996
Allowance for doubtful accounts on trade
receivables........................................ $ 15,000 $ 15,320 $76,320 $ 76,000

Year Ended October 31, 1995
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
</TABLE>

F-27

<PAGE>

RCM TECHNOLOGIES, INC.

COMPUTATION OF EARNINGS PER COMMON SHARE
YEARS ENDED OCTOBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Income
Income applicable to common stock.................... $1,426,005 $ 849,105 $2,367,939
---------- ---------- ----------
---------- ---------- ----------
Shares
Weighted average number of common shares
outstanding..................................... 2,875,077 2,933,819 4,247,907
Common stock equivalents........................... 55,199 74,150 72,664
---------- ---------- ----------
Total.............................................. 2,930,276 3,007,969 4,320,571
---------- ---------- ----------
---------- ---------- ----------
Primary income per share............................. $ .49 $ .28 $ .55
Fully diluted earnings per share..................... $ .49 $ .28 $ .55
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

[RCM LOGO]

[In the printed prospectus there is a pie chart which presents the
Company's percent of revenues by product line.*]

Information Technology - 40.5%
Professional Engineering & Technical - 33.5%
Specialty Healthcare - 6%
General Support - 20%

*for the three months ended January 31, 1997.

F-28

<PAGE>

================================================================================

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.

------------------

TABLE OF CONTENTS

PAGE
----
Prospectus Summary............................. 3
Risk Factors................................... 6
Acquisition Program............................ 12
Use of Proceeds................................ 14
Price Range of Common Stock and Dividend
Policy....................................... 14
Capitalization................................. 15
Selected Consolidated Financial Data........... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 17
Business....................................... 25
Management..................................... 33
Principal and Selling Stockholders............. 39
Certain Relationships and Related
Transactions................................. 41
Description of Securities...................... 42
Shares Eligible for Future Sale................ 46
Underwriting................................... 48
Legal Matters.................................. 50
Experts........................................ 50
Available Information.......................... 50
Index to Financial Statements.................. F-1

================================================================================

2,500,000 SHARES

[ LOGO ]

COMMON STOCK

-------------------
PROSPECTUS
-------------------

LEGG MASON WOOD WALKER
INCORPORATED

JANNEY MONTGOMERY SCOTT INC.

JUNE 10, 1997

================================================================================