SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........... to ...........
Commission file number 1-10245
RCM TECHNOLOGIES, INC.
Exact name of registrant as specified in its charter
Nevada 95-1480559
State of incorporation IRS Employer Identification No.
2500 McClellan Avenue, Suite 350, Pennsauken,
New Jersey 08109-4613 Address of principal
executive offices
Registrant's telephone number, including area code: (609) 486-1777
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.05
Class C Warrants
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Common Stock held by non-affiliates of
the Registrant on January 12, 1998 was approximately $103,363,829 based upon the
closing price of the Common Stock on such date on The Nasdaq National Market of
$16.25. The information provided shall in no way be construed as an admission
that any person whose holdings are excluded from the figure is an affiliate or
that any person whose holdings are included is not an affiliate and any such
admission is hereby disclaimed. The information provided is included solely for
record keeping purposes of the Securities and Exchange Commission.
The number of shares of Registrant's Common Stock (par value five cents
per share) outstanding as of January 12, 1998: 7,620,052.
Documents Incorporated by Reference
Portions of the Proxy Statement for the Registrant's 1998 Annual
Meeting of Stockholders ("1998 Proxy Statement") are incorporated by reference
into Items 10,11,12 and 13 in Part III. If the 1998 Proxy Statement is not filed
by February 28, 1998, an amendment to this Annual Report on Form 10-K setting
forth this information will be duly filed with the Securities and Exchange
Commission.
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PART I
Cautionary Statement for Purposes of the "Safe Harbor" of the Private Securities
Litigation Reform Act of 1995
When used in this Annual Report on Form 10-K and in other public statements
by the Company and Company Officers, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and similar
expressions are intended to identify forward-looking statements regarding
events and financial trends which may affect the Company's future operating
results and financial position. Such statements are subject to risks and
uncertainties that could cause the Company's actual results and financial
position to differ materially. Such factors include, among others: (i) the
sensitivity of the Company's business to unemployment and general economic
conditions associated with the placement of temporary staffing personnel;
(ii) the Company's ability to continue to attract, train and retain
personnel who possess skills in the areas necessary to meet the staffing
requirements of its clients; (iii) the Company's ability to identify
appropriate acquisition candidates, complete acquisitions on satisfactory
terms, and successfully integrate acquired businesses, which acquisitions
may involve special risks, including risks associated with unanticipated
problems, liabilities and contingencies, diversion of management attention
and possible adverse effects on earnings resulting from increased goodwill
amortization, increased interests costs and the issuance of additional
securities; (iv) the possibility that the market price of the Company's
Common Stock could be adversely affected by the resale into the market of
significant amounts of Common Stock that were originally issued by the
Company in private transactions (pursuant to which such shares were not
eligible for public sale), and that are either presently, or may in the
future, (by virtue of Rule 144 promulgated under the Securities Act of
1933, as amended, and a current Registration Statement on Form S-3;
Registration #333-37423) be eligible for resale into the market; (v) the
potential adverse effect a decrease in the trading price of the Company's
Common Stock would have upon the Company's ability to continue acquisitions
of businesses through the issuance of its securities and the dilutive
effect of such issuances on the Company, and upon the likelihood of
conversion of outstanding options, warrants and other convertible
securities; (vi) the Company's ability to obtain financing on satisfactory
terms and the degree to which the company is leveraged, including the
extent to which currently outstanding options, warrants and other
convertible securities are exercised; (vii) the reliance of the Company
upon the continued service of its executive officers; (viii) the Company's
ability to remain competitive in national, regional and local markets in an
industry which is highly competitive with limited barriers to entry,
including remaining competitive in light of pricing issues which could
adversely affect earnings and the operations of the Company; (ix) the
Company's ability to retain several of its key clients which account for a
significant portion of the Company's revenue, which a loss or a material
reduction in the revenue generated from such clients could have a material
adverse effect on the Company's business; (x) the Company's ability to
maintain at a minimum its unemployment insurance premiums and workers
compensation which it provides for its temporary employees; (xi) the risk
of claims associated with providing temporary staffing services, including
discrimination and harassment, violation of wage and hourly requirements,
misuse of client proprietary information, misappropriation of funds, other
criminal activity or tort and other similar claims; (xii) the Company's
ability to store, retrieve, process and manage significant amounts of
information, and periodically expand and upgrade its information processing
capabilities; (xiii) the Company's ability to remain in compliance with
numerous federal and state wage and hour laws and regulations; and (xiv)
other economic, competitive and governmental factors affecting the
Company's operations, market, products and services. Additional factors are
described in the Company's other public reports and registration statements
filed with the Securities and Exchange Commission. Readers are cautioned
not to place undue reliance on these forward-looking statements, which
speak only as of the date made. The Company undertakes no obligation to
publicly release the results of any revision of these forward-looking
statements to reflect these ends or circumstances after the date they are
made or to reflect the occurrence of unanticipated events.
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Item 1. Business
General
The Company is a multi-regional provider of specialty professional staffing
services through its 38 branch offices located in 17 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, 1997, the Company provided an
average of approximately 3,000 contract and temporary staffing employees on
a daily basis to 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.
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:
o Growth Through Expansion and Acquisition
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 earn-outs based on
meeting certain growth and profitability targets.
The Company's growth strategy has resulted in the acquisition of eleven staffing
companies since fiscal 1995, of which six acquisitions were completed since the
beginning of fiscal 1997. See "Acquisition Program."
o Concentration on Sectors Producing Higher Margins
The Company's growth strategy also focuses on the development of higher
margin sectors of the business, a departure from the historic origins
of the staffing industry in low margin clerical personnel. The Company
intends to implement this aspect of its growth strategy in several
ways. First, the Company has expanded its range of services, in part
through acquisitions, to include higher margin specialty services such
as information technology, health care services and professional
engineering services. The Company intends to continue to develop its
capability to provide qualified employees to the information technology
sector, one of the fastest growing segments of the temporary staffing
industry. Second, the Company has continued its efforts to market
temporary staffing services to higher margin accounts. The Company had
de-emphasized marketing to accounts where competitive pricing makes
margins unacceptable or to accounts where workers' compensation costs
adversely affect profitability.
The Company's efforts to produce higher margin business have resulted in an
increase in the Company's gross profits as a percentage of revenues from 16.9%
in fiscal 1995 to 23.8% in fiscal 1997. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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Item 1. Business - (Continued)
o Provide Branch Offices with Strong Central Support
The Company's branch offices are supported by strong central functions
at corporate headquarters that include marketing, recruiting and
retention programs, workers' compensation and other insurance services,
training, accounts payable, purchasing, credit, collection, system and
a software system that provides information on customer requirements,
available applicants, temporary staffing employees on assignment and
other information which facilitates efficient response to customer job
orders.
The Company has established budgets and quality performance standards
which are utilized at all offices. A substantial portion of region,
area, district and office manager compensation is incentive-based and
focused on meeting budgets and quality standards. Managers are also
given considerable discretion to respond to specific customer
requirements.
o Focus on Internal Growth
One of the Company's principal operating strategies is to focus on
opportunities to increase revenues and profitability from its organic
growth. 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 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's efforts to achieve internal growth have resulted in a pro
forma internal growth rate (determined as if all acquisitions completed
since fiscal 1995 had occurred on November 1, 1995) during fiscal 1997
of 27.9%.
o Rapidly Integrate Acquisitions
The Company believes that it can increase its operational efficiencies
by integrating the general and administrative functions of each of its
branch offices at the corporate level and by reducing or eliminating
any redundant functions and facilities at the acquired companies.
Management's policy is to achieve 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.
o Foster a Decentralized Entrepreneurial Environment
A key element of the Company's acquisition criteria is to acquire a
target company that has 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.
o 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.
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Item 1. Business - (Continued)
o Emphasis upon Service and Value
The Company focuses on providing service and value to its customers.
The Company's staff employees seek to establish and maintain long-term
relationships with customers by developing knowledge of customers'
businesses, responding promptly to customer orders and monitoring job
performance and customer satisfaction. The Company has implemented this
strategy by targeting customer accounts where service and quality are
perceived to be as important as pricing of services, which allows the
Company to be more selective and to provide higher quality staffing
while maintaining desired profit margins.
Acquisition Program
Since the beginning of fiscal 1995, the Company has completed the
acquisition of eleven staffing companies which had aggregate revenues of
approximately $109 million during the fiscal year prior to the acquisition.
These acquisitions have resulted in a significant shifting of the focus of
the Company's business from traditional general support functions 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.
The following information provides a summary of the acquisitions completed
by the Company during fiscal 1997. All acquisitions have been accounted for
under the purchase method of accounting.
On January 7, 1997, the Company acquired Programming Alternatives of
Minnesota, Inc. ("PAMI"), a Minneapolis, Minnesota-based specialty provider
of information technology consultants, particularly those with high demand
client-server skills. The acquisition was completed through a stock
purchase transaction pursuant to which PAMI, through an exchange of all of
its outstanding shares of stock, became a wholly-owned subsidiary of the
Company. The purchase price consisted of : (i) cash of $4,500,000; (ii) a
three year promissory note, principal amount $1,625,000, payable upon
attaining certain earnings targets within the three year period; and (iii)
additional consideration to the extent that during the three year period,
PAMI exceeds the earnings targets. PAMI generated revenue of approximately
$10 million during the fiscal year prior to the date of acquisition.
On April 1, 1997, the Company acquired certain operating assets of
Programming Resources Unlimited ("PRU"), a Wayne, Pennsylvania-based
provider of information technology staffing services, for a purchase price
consisting of: (i) $600,000 in cash; (ii) a three year promissory note,
principal amount $300,000, payable upon attaining certain earnings targets
within the three year period; and (iii) additional consideration to the
extent that during the three year period, PRU exceeds the earnings targets.
During 1996, PRU generated revenues of approximately $2.4 million.
On September 25, 1997, the Company acquired Camelot Contractors Limited
("Camelot"), a Manchester, New Hampshire-based specialty provider of
information technology personnel. The acquisition was completed through a
stock purchase transaction pursuant to which Camelot, through an exchange
of all of its outstanding shares of stock, became a wholly-owned subsidiary
of the Company. The purchase price consisted of : (i) cash of $9.0 million;
(ii) a three year promissory note, principal amount $3.5 million, payable
upon attaining certain earnings targets within the three year period; and
(iii) additional consideration to the extent that during the three year
period, Camelot exceeds the earnings targets. Camelot generated revenue of
approximately $16.2 million during the fiscal year prior to the date of
acquisition.
On October 23, 1997, the Company acquired Austin Nichols Technical
Temporaries, Inc. ("Austin"), a Kansas City, Missouri-based specialty
provider of information technology systems professionals and engineers. The
acquisition was completed through a stock purchase transaction pursuant to
which Austin, through an exchange of all of its outstanding shares of
stock, became a wholly-owned subsidiary of the Company. The purchase price
consisted of: (i) cash of $2.5 million; (ii) a three year promissory note,
principal amount $900,000, payable upon attaining certain earnings targets
within the three year period; and (iii) additional consideration to the
extent that during the three year period, Austin exceeds the earnings
targets. Austin generated revenue of approximately $4.9 million
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Item 1. Business - (Continued)
during the fiscal year prior to the date of acquisition.
On October 30, 1997, the Company acquired J.D. Karin Consulting Services,
Inc. ("J.D. Karin"), a Flanders, New Jersey-based specialty provider of
information technology systems professionals and engineers. The acquisition
was completed through a stock purchase transaction pursuant to which J.D.
Karin, through an exchange of all of its outstanding shares of stock,
became a wholly-owned subsidiary of the Company. The purchase price
consisted of: (i) cash of $1.8 million; (ii) a three year promissory note,
principal amount $1.2 million, payable upon attaining certain earnings
targets within the three year period; and (iii) additional consideration to
the extent that during the three year period, J.D. Karin exceeds the
earnings targets. J.D. Karin generated revenue of approximately $5.0
million during the fiscal year prior to the date of acquisition.
On January 5, 1998, the Company purchased Northern Technical Services, Inc.
("NTS"), a Milwaukee, Wisconsin-based, provider of technical professional
and information technology personnel. The acquisition was completed through
a stock purchase transaction pursuant to which NTS, through an exchange of
all of its outstanding shares of stock, became a wholly-owned subsidiary of
the Company. The purchase price consisted of: (i) cash of $3.1 million;
(ii) a two year promissory note, principal amount $1.5 million, payable
upon attaining certain earnings targets within the two year period; and
(iii) additional consideration to the extent that during the two year
period, NTS exceeds the earnings targets. NTS generated revenue of
approximately $12.6 million during the fiscal year prior to the date of
acquisition.
Operation-Service Groupings
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.
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 mid-range 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 Information Technology group generated approximately 45% and 30.2% of
the Company's revenues for the fiscal years ended October 31, 1997, and
1996, respectively. Based upon the composition of the Company's revenues
during the fourth quarter of its fiscal year ended October 31, 1997, on an
annualized basis, the Information Technology group would have accounted for
61% of the Company's revenues for the fiscal year ended October 31, 1997.
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.
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Item 1. Business - (Continued)
The Professional Engineering and Technical group generated approximately
28% and 46% of the Company's revenues, respectively, for the fiscal years
ended October 31, 1997, and 1996.
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 a medical rehabilitation therapy
division and a 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. 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. A managed care unit also provides
permanent placement services of registered nurses, nurse practitioners,
utilization review nurses and other managed care professionals. A critical
care unit provides emergency room and medical/surgical nurses for staff
relief.
The Specialty Healthcare group generated approximately 5% and 6% of the
Company's revenues, respectively, for the fiscal years ended October 31,
1997, and 1996.
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 as AT&T, First National
Bank of Chicago, Mellon Bank and Sears.
The General Support group generated approximately 22% and 29% of the
Company's revenues, respectively, for the fiscal years ended October 31,
1997, and 1996.
Overview-The Temporary Staffing Industry
The temporary staffing industry has grown rapidly in recent years as
companies have utilized temporary employees to control personnel costs and
to meet specialized or fluctuating personnel needs. Historically, the
demand for temporary staffing services has been driven primarily by a need
to temporarily replace full-time employees due to illness, vacation or
termination. More recently, competitive pressures have forced businesses to
focus on reducing costs, including converting fixed, permanent labor costs
to variable or flexible costs.
The effective use of temporary staffing employees enables businesses to
staff their organizations with a core level of regular employees and
augment their work force as needed. By utilizing temporary staffing
employees, businesses avoid the management and administrative costs
incurred in hiring, training and terminating regular employees. A business
pays only for the actual hours worked by temporary staffing employees and
may terminate their services upon completion of the assignment without the
adverse effects of layoffs. An ancillary benefit, particularly for smaller
businesses, is that the usage of temporary staffing employees shifts
employment costs and risks (e.g., workers' compensation and unemployment
insurance) to the temporary staffing company, which can spread the costs
and risks over a larger pool of employees.
The range of temporary staffing services has expanded substantially since
the early days of the industry. Technological advances, as well as changing
attitudes towards workforce management, have resulted in a proliferation of
new temporary staffing positions in such challenging areas as engineering,
health care, information technology and other specialized industry
segments. Furthermore, businesses have begun using temporary staffing
employees to reduce administrative overhead by outsourcing operations that
were formerly core business functions. In particular, information
technology staffing services, one of the Company's primary operating
groups, has become one of the fastest growing sectors of the temporary
staffing industry. Over the last decade, the increased
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Item 1. Business - (Continued)
use of technology has led to dramatic rise in demand for technical project
support, software development, and other computer-related services.
The Company believes that the temporary staffing industry is highly
fragmented and is currently experiencing a trend toward consolidation
primarily due to the increasing demand by large companies for centralized
staffing services and the difficulties faced by many smaller staffing
companies in today's staffing market. The growth of national and regional
accounts resulting from the centralization of staffing decisions by
national and larger regional companies has increased the importance of
staffing companies being able to offer a wide range of services over a
broad geographic area. In addition, many smaller staffing companies are
experiencing increased difficulties due to factors such as significant
working capital requirements, limited management resources, and an
increasingly competitive environment.
Customers and Marketing
The Company derives its revenues from a diversified customer base,
including a number of Fortune 500 companies, as well as small to medium
sized retail, manufacturing and service businesses and governmental units.
During fiscal 1997, the Company had one major customer, Northeast
Utilities, that accounted for approximately 11.5% of revenues. This is
comparable to fiscal 1996, when Northeast Utilities accounted for
approximately 12.7% of revenues. During fiscal 1997 and 1996, no other
customers accounted for over 10% of the Company's revenues.
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.
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.
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Item 1. Business - (Continued)
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
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.
Employees
As of October 31, 1997, the Company employed on its permanent staff
approximately 237 persons, including licensed professional engineers who,
from time to time, participate in engineering and design projects
undertaken by the Company. During the twelve months ended October 31, 1997,
approximately 900 engineering and technical personnel and 1,700 information
technology personnel were employed by the Company to work on client
projects for various periods. The Company also employed approximately 9,300
temporary personnel during the year. None of the Company's employees,
including its temporary employees, are represented by a collective
bargaining agreement. The Company considers its relationship with its
employees to be good.
Item 2. Properties
Presently, the Company provides temporary staffing services through 38
offices in 17 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 $11.50 per square foot per month for a term ending on January 31,
2003.
Item 3. Legal Proceedings
From time to time, disagreements with individual employees and
disagreements as to the interpretation, effect or nature of individual
agreements arise in the ordinary course of business and may result in legal
proceedings being commenced against the Company. The Company is not
currently involved in any litigation or proceedings which are material,
either individually or in the aggregate, and, to the Company's knowledge,
no other legal proceedings of a material nature involving the Company are
currently contemplated by any individuals, entities or governmental
authorities.
The principal risks that the Company insures against are workers'
compensation, personal injury, property damage, professional malpractice,
errors and omissions, and fidelity losses. The Company maintains insurance
in such amounts and with such coverages and deductibles as management
believes are reasonable and prudent.
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Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the vote of security holders during the
fourth quarter ended October 31, 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Since June 11, 1997, the Company's Common Stock has traded on The Nasdaq
National Market under the NASDAQ Symbol "RCMT". Prior to June 11, 1997, the
Company's Common Stock traded on The Nasdaq Small Cap Market. The following
table sets forth approximate high and low sales prices by calendar quarters
for the periods indicated:
<TABLE>
<CAPTION>
Common Stock
Fiscal 1996 High Low
<S> <C> <C>
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
Third Quarter 11.75 6.88
Fourth Quarter 16.63 11.88
</TABLE>
Holders
As of January 12, 1998, the approximate number of holders of record of the
Company's Common Stock was 1,800. 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 4,700.
Dividends
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 Company's 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.
Uses of Proceeds From Registered Securities
On June 13, 1997, the Company completed an underwritten public offering
(the "Offering") of 2,875,000 shares of Common Stock at a price of $9.50
per share (the "Offering"). The Offering was managed by Legg Mason Wood
Walker, Incorporated and co-managed by Janney Montgomery Scott, Inc.
(Registration Statement #333-23753; Effective Date - June 9, 1997), and
generated aggregate proceeds of $27,312,500. Of the shares covered by the
Offering, 2,698,187 shares were sold by the Company and 176,813 shares were
sold by certain stockholders. Net of underwriting commissions and discounts
of $1,753,750 and expenses of the Offering of $690,000, and net of that
portion of the Offering proceeds allocable to the selling stockholders, the
Company yielded net proceeds of $23,271,723 from the Offering. The net
proceeds were utilized by the Company to retire bank indebtedness
($7,658,000) and to finance acquisitions ($15,613,723)
10
<PAGE>
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters - (Continued)
Recent Sale of Unregistered Securities
1) On August 1, 1997, the Company issued and sold 20,938 share of Common
Stock to Peter Kaminsky in connection with the acquisition of The
Consortium of Maryland, Inc. The shares were issued in a private
placement transaction exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Act").
2) On September 25, 1997, the Company issued and sold an aggregate of
22,409 shares of Common Stock to Amarly Corporation, Angela Trotman,
Richard Serodio and Michael D. O'Keefe in connection with the
acquisition of Camelot Contractors Limited. The shares were issued in a
private placement transaction exempt from the registration requirements
of the Act.
3) On September 22, 1997, the Company issued and sold 20,825 shares to
Alumax Corporation in connection with a Settlement Agreement entered
into between the parties. The shares were issued in a private placement
transaction exempt from the registration requirements of the Act.
11
<PAGE>
Item 6. Selected Consolidated Financial Data
The selected historical consolidated financial data was derived from the
Company's Consolidated Financial Statements The selected historical
consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company, and
notes thereto, included elsewhere herein. The pro forma consolidated
financial data give effect to all businesses acquired by the Company
through October 31, 1997, as if such acquisitions were consummated as of
the beginning of the period. 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 or that
might be attained in the future.
<TABLE>
<CAPTION>
Historical Year Ended October 31,
Pro Forma
1997 1997 1996 1995 1994 1993
---------------- ----------------- ---------------------------------------------------------------
Income Statement
<S> <C> <C> <C> <C> <C> <C>
Revenues $136,384,000 $113,959,093 $61,039,173 $26,915,737 $29,238,995 $28,633,408
Income from
continuing operations $ 5,608,500 $ 4,839,933 $ 2,367,939 $ 849,105 1,426,005 $ 733,025
Loss from discontinued
operations ($ 362,500) ($ 362,500)
Net income $ 5,246,000 $ 4,477,433 $ 2,367,939 $ 849,105 $ 1,426,005 $ 733,025
Earnings (loss) Per Share
Income from
continuing operations $.85 $.74 $.55 (2) $.28 (2) $.49 (2) $.25 (2)
Loss from
discontinued operations ($.05 ) ($.06 )
Fully diluted (1) $.80 $.68 $.55 (2) $.28 (2) $.49 (2) $.25 (2)
Primary $.82 $.70 $.55 (2) $.28 (2) $.49 (2) $.25 (2)
Balance Sheet
Working capital $17,279,115 $ 6,771,434 $ 3,327,904 $5,200,609 $3,736,073
Total assets $54,082,596 $24,406,620 $10,301,555 $6,546,839 $5,333,939
Long term liabilities $ 308,129 $ 562,312 $ 35,496 $ 74,397
Total liabilities $ 9,471,611 $ 8,186,510 $ 2,774,970 $1,069,359 $1,287,932
Shareholders' equity $44,611,985 $16,220,110 $ 7,526,585 $5,477,480 $4,046,007
<FN>
(1) Based on average number of common stock outstanding during the years
ended October 31, 1997, 1996, 1995, 1994 and 1993 of 6,563,905, 4,320,571,
3,007,969, 2,930,276, and 2,878,411, respectively (net of treasury stock).
(2) The net income for the years ended October 31, 1996, 1995, 1994 and 1993
has been calculated after taking into account the effect of the then
available net operating loss carryforward (NOL). Without giving effect to the
NOL, the Company's earnings per share, on a fully taxed basis would have been
$.38, $.18, $.32, and $.17, respectively.
</FN>
</TABLE>
Item 7. 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.
12
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (Continued)
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 eleven 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 21.8% during during the
year ended October 31, 1997 ("Fiscal 1997"). Correspondingly, revenues from the
Company's specialty professional services accounted for 78.2% of the Company's
revenues during Fiscal 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 1997, the Company's
revenues and operating income were $114 million and $8.5 million, respectively.
On a pro forma basis, after giving effect to the acquisitions that occurred
during Fiscal 1997, as if they had occurred on November 1, 1996, the Company's
revenues and operating income increased to $136.4 million and $10.8 million,
respectively.
The Company realizes revenues from the placement of contract and temporary
staffing personnel. Revenues are recognized when the services are provided.
Principally all of 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. In some instances, the Company derives revenues on a fixed fee basis
in connection with 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.
Costs of services, which entail the principal cost associated with operations,
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 a small segment 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 $26.7
million which is being amortized over a 40 year period currently resulting in
amortization expense aggregating approximately $668,000 annually.
13
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (Continued)
Results of Operations
<TABLE>
<CAPTION>
Years Ended October 31,
1997 1996 1995
---------------------------------------------------------------------------------
% of % of % of
Amount Revenue Amount Revenue Amount Revenue
<S> <C> <C> <C> <C> <C> <C>
Revenues $113,959,093 100.0% $61,039,173 100.0% $26,915,737 100.0%
Cost of Services 86,832,348 76.2 48,779,886 79.9 22,378,817 83.1
------------- ------ ----------- ------ ----------- ------
Gross Profit 27,126,745 23.8 12,259,287 20.1 4,536,920 16.9
Selling, general and
administrative 18,068,899 15.9 8,914,102 14.6 3,549,810 13.2
Depreciation and amortization 572,279 .5 329,680 .5 130,397 .5
Interest expense,
net of interest income 184,645 .2 163,695 .3 104,652 .4
--------------- -------- ------------- -------- ------------- --------
Income before income taxes 8,300,922 7.3 2,821,478 4.6 942,605 3.5
Income taxes 3,460,989 3.0 453,539 .7 93,500 .3
-------------- ------- ------------- -------- -------------- --------
Income from continuing
operations 4,839,933 4.3 2,367,939 3.9 849,105 3.2
Loss from discontinued
operations 362,500 .4
--------------- --------
Net income $ 4,477,433 3.9% $2,367,939 3.9% $ 849,105 3.2%
============= ======= ========== ======= ============ =======
Earnings per share:
Income from continuing
operations $.74 $.55(1) $.28(1)
Loss from discontinued
operations (.06)
Net income $.68 $.55(1) $.28(1)
<FN>
==== ==== ====
(1) The net income for the years ended October 31, 1996 and 1995 has been
calculated after taking into account the effect of the then available net
operating loss carryforward (NOL). Without giving effect to the NOL, the
Company's earnings per share, on a fully taxed basis would have been $.38 and
$.18, respectively.
</FN>
</TABLE>
Year Ended October 31, 1997 Compared to October 31, 1996
Revenues. Revenues increased 86.7%, or $52.9 million, for the year ended October
31, 1997 ("Fiscal 1997"), as compared to the comparable prior year period. The
increase was due to the acquisition of five companies during Fiscal 1997 and
strong internal growth also achieved during the year. The pro forma internal
growth rate (as if all acquisitions occurred as of November 1, 1996) for Fiscal
1997, was 27.9%.
Cost of Services. Cost of services increased 78.0% , or $38.0 million, for
Fiscal 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 76.2% for Fiscal 1997 from 79.9% for the
comparable prior year period. This decline was primarily attributable to a
greater percentage of the Company's revenues being derived from specialty
staffing services.
14
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (Continued)
Results of Operations - Continued
Year Ended October 31, 1997 Compared to October 31, 1996 - Continued
Selling, General and Administrative. Selling, general and administrative
expenses increased 102.7%, or $9.2 million, for Fiscal 1997 as compared to the
comparable prior year period. This increase resulted from the change in the mix
of the business during the period 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 15.9% for Fiscal 1997 from 14.6% 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.
Depreciation and Amortization. Depreciation and amortization increased 73.6%, or
$242,600, for Fiscal 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.
Interest Expense, Net of Interest Income. Actual interest expense of $444,300
for Fiscal 1997 was partially offset by $259,700 of interest income, that was
earned from the investment in interest bearing deposits of the net proceeds of
the Company's recent public offering, after the retirement of bank debt.
Interest expense increased 171.3%, or $280,500, for Fiscal 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 663.1%, or $3.0 million for Fiscal
1997, as compared to the comparable prior year period. This increase was due to
an increase in the effective tax rate from 16.1% to 41.7% 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.
Loss From Discontinued Operations. In Fiscal 1997, the Company incurred a
one-time charge of $362,500 in connection with the settlement of a claim
relating to the Company's former operation of a materials recovery facility
prior to 1977. This segment of the Company's business was otherwise discontinued
in Fiscal 1992.
Year Ended October 31, 1996 Compared to October 31, 1995
Revenues. Revenues increased 126.8%, or $34.1 million, for the year ended
October 31, 1996 ("Fiscal 1996") as compared to the year ended October 31, 1995
("Fiscal 1995"). The increase was primarily due to the acquisition of three
companies in Fiscal 1996. 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 151.1%, 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 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.
15
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (Continued)
Year Ended October 31, 1996 Compared to October 31, 1995 - (Continued)
Depreciation and Amortization. Depreciation and amortization increased
152.8%, or $199,300, 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.
Liquidity and Capital Resources
Operating activities used $3.8 million and $1.9 million of cash during Fiscal
1997 and Fiscal 1996, respectively. The increased use of cash was primarily
attributable to an increase in accounts receivable which was partially offset by
increased levels of profitability, depreciation and amortization associated with
the acquisitions that were completed during Fiscal 1997.
Investing activities utilized $17.9 million and $1.2 million in the fiscal years
1997 and 1996, respectively. During Fiscal 1997, the Company purchased five
staffing companies which required the use of $17.4 million in cash. During
Fiscal 1996, the Company purchased three staffing companies which required the
use of $1.0 million in 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 $26.7 million
which is being amortized at approximately $668,000 per year.
Financing activities provided $22.5 million and $2.8 million Fiscal 1997 and
1996, respectively.
The Company has historically funded its capital requirements with cash generated
from operations and advances under its outstanding credit facility. On June 13,
1997, the Company completed a public offering of 2,875,000 shares of Common
Stock, of which, 2,698,187 shares were offered and sold by the Company and
176,813 shares were offered by certain selling stockholders ("the Public
Offering"). The Public Offering was undertaken pursuant to the terms of a
Registration Statement on Form S-1 originally filed with the Securities and
Exchange Commission on March 21, 1997 and a final Prospectus dated June 10,
1997. The net proceeds to the Company after offering costs was $23,271,723. The
Company at October 31, 1997, had approximately $1 million in cash and
equivalents and approximately $14.0 million in loan availability on its
revolving line of credit. The net offering proceeds through October 31, 1997,
have been used to retire bank debt and fund acquisitions (requiring $15.6
million).
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, 1997, the Company
and its subsidiaries were in compliance with all financial covenants contained
within the Revolving Credit Facility.
16
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (Continued)
Liquidity and Capital Resources - (Continued)
Borrowings 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.
Borrowings under the Revolving Credit Facility bear interest at the Company's
option, at LIBOR (London Interbank's Offered Rate) or the bank's prime rate,
plus applicable margin. At October 31, 1997, there was approximately $14.0
million loan availability under the Revolving Credit Facility.
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 has fully utilized the net proceeds made available through the
Public Offering. Accordingly, funding for further acquisitions will be deriv-
ed from the Revolving Credit Facility, funds generated through operations,
or future financing transactions.
The Company's business strategy is to achieve growth both internally through
operations and externally through strategic acquisitions. The Company's
liquidity and capital resources may be affected in the future as the Company
continues to grow through implementation of this strategy which may involve
acquisitions facilitated through the use of cash and/or debt and equity
securities.
The Company does not currently have material commitments for capital
expenditures and does not anticipate entering into any such commitments during
the next twelve months. The Company continues to evaluate acquisitions of
various businesses which are complementary to its current operations. The
Company's current commitments consist primarily of lease obligations for office
space. The Company believes that its capital resources are sufficient to meet
its present obligations and those to be incurred in the normal course of
business for the next twelve months.
The Company may derive up to approximately $2.3 million of proceeds from the
issuance of up to approximately 157,000 shares of Common Stock that may occur
upon the exercise of all of its outstanding Class C Warrants. At October 31,
1997 there were 786,709 Class C Warrants outstanding. These Warrants were issued
in a public offering undertaken by the Company during 1989, and after several
extensions, are scheduled to expire on April 30, 1998. As adjusted by a
subsequent recapitalization of the Company, each five Class C Warrants entitle
the holder to purchase one share of Common Stock at an exercise price of $15.00.
Seasonal Variations
The Company's quarterly operating results are affected primarily by the number
of billing days in the quarter and the seasonality of its customers' businesses.
The Company usually experiences higher revenues in its fourth quarter due to
increased economic activity and experiences lower revenues in the first four
months of the following year, showing gradual improvement over the remainder of
the year.
New Standards
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" ("EPS"),
which is effective for financial statements issued after December 31, 1997. Once
effective, the new standard eliminates primary and fully diluted EPS and instead
requires presentation of basic and diluted EPS in conjunction with the
disclosure of the methodology used in computing such EPS. Basic EPS excludes
dilution and is computed by dividing income available to common shareholders by
the weighted-average common shares outstanding during the period. Diluted EPS
takes into consideration the potential dilution that could occur if securities
or other contracts to issue common stock were exercised and converted into
common stock. The effect of adopting this new standard is not expected to be
material.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which is effective for all periods
beginning after December 15, 1997. SFAS 131 requires that public business
enterprises report certain information about operating segments in complete sets
of financial statements of the enterprise and in condensed financial statements
of interim periods issued to shareholders. It also requires that public business
enterprises report certain information about their products and services, the
geographic areas in which they operate, and their major customers. Management is
currently evaluating the impact of the disclosure requirements of this
statement.
17
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (Continued)
Impact of Inflation
The effects of inflation on the Company's operations were not significant
during the periods presented.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 8. Financial Statements and Supplemental Data
The Company's financial statements, together with the report of the Company's
independent auditors, begins on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
18
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with regard to this item is incorporated by reference to the
definitive 1998 Proxy Statement under the caption "ELECTION OF DIRECTORS"
and "OTHER INFORMATION - Executive Officers of the Registrant," or in an
Amendment to this Report to be filed with the Securities and Exchange
Commission.
Item 11. Executive Compensation
Information with regard to this item is incorporated herein by reference to
the definitive 1998 Proxy Statement under the caption "ADDITIONAL
INFORMATION - Management Compensation," or in an Amendment to this Report
to be filed with the Securities and Exchange Commission.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with regard to this item is incorporated herein by reference to
the definitive 1998 Proxy Statement under the caption "PRINCIPAL
STOCKHOLDERS," or in an Amendment to this Report to be filed with the
Securities and Exchange Commission.
Item 13. Certain Relationships and Related Transactions
Information with regard to this item is incorporated herein by reference to
the definitive 1998 Proxy Statement under the caption "ADDITIONAL
INFORMATION - Certain Transactions," or in an Amendment to this Report to
be filed with the Securities and Exchange Commission.
19
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. and 2. Financial Statement Schedules -- See "Index to Financial
Statements and Schedules" on F-1.
(b) Reports on Form 8-K
1. RCM Technologies, Inc. Current Report on Form 8-K dated September 25,
1997 and filed October 7, 1997.
2. RCM Technologies, Inc. Current Report on Form 8-K dated September 26,
1997 and filed October 8, 1997.
(c) Exhibits
(3)(a) Articles of Incorporation, as amended, incorporated by reference
to Exhibit 3(a) of the Registrant's Form 10-K dated October 31,
1994, filed with the Commission on January 4, 1995 (Commission
File No. 1- 10245).
(3)(b) Bylaws, as amended on February 22, 1996; incorporated by
reference to Exhibit 3 of the Quarterly Report on Form 10-Q
dated January 31, 1996.
(4)(a) Warrant Agreement dated September 1, 1989, with respect to Class C
Warrants between the Registrant and American Stock Transfer and
Trust Company; incorporated by reference to Exhibit 4 (b) of the
Registrant's Form S-1 Registration Statement dated July 25, 1989,
as amended August 16, 1989 and May 14, 1990 (Commission File No.
33-30109).
(4)(b) Rights Agreement dated as of March 14, 1996, between RCM
Technologies, Inc. and American Stock Transfer & Trust Company, as
Rights Agent; incorporated by reference to Exhibit 4 of the
Registrant's Current Report on Form 8-K dated March 19, 1996.
(10)(a) Amended and Restated Loan and Security Agreement dated August 30,
1995 as amended on December 19, 1996 between, the Registrant,
Intertec Design, Inc., Cataract, Inc., The Consortium and The
Consortium of Maryland, Inc. and Mellon Bank, N.A.; incorporated
by reference to Exhibit 10(a) of the Annual Report on Form 10-K
dated October 31, 1996 (the "1996 10-K").
(10)(b) RCM Technologies, Inc. 1986 Incentive Stock Option Plan;
incorporated by reference to Exhibit 10(d) of the Registrant's
Annual Report on Form 10-K dated October 31, 1986, filed with the
Commission on February 13, 1987 (Commission File No. 1-10245).
(10)(c) RCM Technologies, Inc. 1992 Incentive Stock Option Plan;
incorporated by reference to Exhibit A of the Registrant's Proxy
Statement dated April 23, 1992, filed with the Commission on March
9, 1992 (Commission File No. 1-10245).
(10)(d) RCM Technologies, Inc. 1994 Non-employee Director Stock Option
Plan; incorporated by reference to Exhibit A of the Registrant's
Proxy Statement dated May 19, 1994, filed with the Commission on
June 22, 1994 (Commission File No. 33-80590).
(10)(e) RCM Technologies, Inc. 1996 Executive Stock Option Plan dated
August 15, 1996; incorporated by reference to Exhibit 10(l) of the
1996 10-K.
(10)(f)(1) Stock Option Agreement (pursuant to the 1996 Executive Stock
Option Plan) between the Registrant and Leon Kopyt dated November
30, 1996; incorporated by reference to Exhibit 10(m) of the 1996
10-K.
* (10)(f)(2) Amendment to Stock Option Agreement (pursuant to the
1996 Executive Stock Option Plan) between the Registrant and Leon
Kopyt, effective as of March 18, 1997.
20
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K -
(Continued)
* (10)(g) Stock Option Agreement (pursuant to the 1996 Executive Stock
Option Plan) between the Registrant and
Barry Meyers dated June 21, 1997.
* (10)(h) Stock Option Agreement (pursuant to the 1996 Executive Stock
Option Plan) between the Registrant and Martin Blaire dated
June 21, 1997.
* (10)(i) Stock Option Agreement (pursuant to the 1996 Executive Stock
Option Plan) between the Registrant and Stanton Remer dated
June 21, 1997.
* (10)(j) Stock Option Agreement (pursuant to the 1996 Executive Stock
Option Plan) between the Registrant and Norman S. Berson dated
June 21, 1997.
* (10)(k) Stock Option Agreement (pursuant to the 1996 Executive Stock
Option Plan) between the Registrant and Robert B. Kerr dated
June 21, 1997.
* (10)(l) Stock Option Agreement (pursuant to the 1996 Executive Stock
Option Plan) between the Registrant and Woodrow B. Moats, Jr.
dated June 21, 1997.
* (10)(l)(a) Stock Option Agreement (pursuant to the 1994 Nonemployee Director
Stock Option Plan) between the Registrant and
Woodrow B. Moats, Jr. dated June 21, 1997.
(10)(m) Second Amended and Restated Termination Benefits Agreement dated
March 18, 1997 between the Registrant and Leon Kopyt; incorporated
by reference to Exhibit 10(g) of the Registration Statement on
Form S-1 dated March 21, 1997 (Commission File No. 333-23753)
(the"1997 S-1").
(10)(n) Amended and restated Employment Agreement dated November 30, 1996
between the Registrant, Intertec Design, Inc. and Leon Kopyt;
incorporated by reference to Exhibit 10(g) of the 1996 10-K.
(10)(o) Merger Agreement among RCM Technologies, Inc., CI Acquisition
Corp. and Cataract, Inc. dated July 31, 1995; incorporated by
reference to Exhibit (c)(1) of the Registrant's Current Report on
Form 8-K dated August 30, 1995 ("Cataract 8-K").
(10)(p) Registration Rights Agreement dated August 30, 1995; incorporated
by reference to Exhibit (c)(2) of the Cataract 8-K.
(10)(q) Voting Trust Agreement dated August 30, 1995; incorporated
by reference to Exhibit (c)(3) of the Cataract 8-K.
(10)(r) Stock Pledge Agreement dated August 30, 1995; incorporated by
reference to Exhibit (c)(5) of the Cataract 8-K.
(10)(s) Stock Purchase Agreement among RCM Technologies, Inc., The
Consortium and The Shareholders of The Consortium dated as of
March 1, 1996; incorporated by reference to Exhibit (c)(1) of the
Registrant's Current Report on Form 8-K dated March 19, 1996
("Consortium 8-K").
(10)(t) Registration Rights Agreement dated March 11, 1996; incorporated
by reference to Exhibit (c)(2) of the Consortium 8-K.
(10)(u) Escrow Agreement dated March 11, 1996; incorporated by reference
to Exhibit (c)(3) of the Consortium 8-K.
(10)(v) Standstill and Shareholders Agreement dated March 11, 1996;
incorporated by reference to Exhibit (c)(5) of the Consortium 8-K.
(10)(w) Employment Agreement of Martin Blaire dated March 11, 1996;
incorporated by reference to Exhibit (c)(6) of the Consortium 8-K.
21
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K -
(Continued)
(10)(x) Employment Agreement of Barry Meyers dated March 11, 1996;
incorporated by reference to Exhibit (c)(7) of the Consortium 8-K.
(10)(y) Subscription Agreement dated January 12, 1996; incorporated by
reference to Exhibit (a)(10) of the Registrant's Quarterly Report
on Form 10-Q for the quarterly period ended January 31, 1996
("January 10-Q")
(10)(z) Registration Rights Agreement dated February 5, 1996; incorporated
by reference to Exhibit (a)(10.1) of the January 10-Q.
(10)(aa) Merger Agreement among RCM Technologies, Inc., Sort Acquisition
Corp., The Consortium of Maryland, Inc. and Peter Kaminsky dated
April 23, 1996; incorporated by reference to Exhibit (2) of the
Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended April 30, 1996 ("April 10-Q")
(10)(ab) Registration Rights Agreement dated May 2, 1996; incorporated by
reference to Exhibit (10.1) of the April 10-Q.
(10)(ac) Escrow Agreement dated May 2, 1996; incorporated by reference
to Exhibit (10.2) of the April 10-Q.
(10)(ad) Standstill and Shareholders Agreement dated May 2, 1996;
incorporated by reference to Exhibit (10.3) of the April 10-Q.
(10)(ae) Kaminsky Employment Agreement dated May 2, 1996;
incorporated by reference to Exhibit (10.4) of the April 10-Q.
(10)(af) Stock Purchase Agreement dated September 25, 1997, relative to the
acquisition of Camelot Contractors Limited ("Camelot");
incorporated by reference to Exhibit (c)(i) of Current Report on
Form 8-K filed October 7, 1997 (the "October 1997 8-K").
(10)(ag) Escrow Agreement relative to the acquisition of Camelot;
incorporated by reference to Exhibit (c)(2) of the October 1997
8-K.
(10)(ah) Form of Employment Agreement with Michael O'Keefe and Richard
Serodio; incorporated by reference to Exhibit (c)(3) of the
October 1997 8-K.
(10)(ai) Registration Right Agreement in connection with the acquisition of
Camelot; incorporated by reference to Exhibit (c)(4) of the
October 1997 8-K.
* (11) Computation of Earnings Per Share.
* (21) Subsidiaries of the Registrant.
* (27) Financial Data Schedule.
* Filed herewith
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RCM Technologies, Inc.
(Registrant)
<TABLE>
<CAPTION>
Date: January 14, 1998 By:/s/ Leon Kopyt
--------------
<S> <C>
Leon Kopyt
Chairman, President, Chief Executive Officer and
Director
Date: January 14, 1998 By:/s/ Stanton Remer
-----------------
Stanton Remer
Chief Financial Officer, (Principal Accounting
Officer), Treasurer, Secretary and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: January 14, 1998 By: /s/ Leon Kopyt
---------------
Leon Kopyt
Chairman, President, Chief Executive Officer and
Director
Date: January 14, 1998 By: /s/ Barry S. Meyers
--------------------
Barry S. Meyers
Chief Operating Officer and Director
Date: January 14, 1998 By: /s/ Martin Blaire
------------------
Martin Blaire
Executive Vice President and Director
Date: January 14, 1998 By:/s/ Stanton Remer
-----------------
Stanton Remer
Chief Financial Officer, Treasurer, Secretary and
Director
Date: January 14, 1998 By: /s/ Norman S. Berson
---------------------
Norman S. Berson
Director
Date: January 14, 1998 By: /s/ Robert B. Kerr
-------------------
Robert B. Kerr
Director
Date: January 14, 1998 By: /s/ Woodrow B. Moats, Jr.
--------------------------
Woodrow B. Moats, Jr.
Director
</TABLE>
23
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-K
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Balance Sheets, October 31, 1997 and 1996 F-2
Consolidated Statements of Income,
Years Ended October 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Changes in Shareholders' Equity,
Years Ended October 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows,
Years Ended October 31, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-8
Independent Auditors' Report F-21
Schedules I and II F-22
</TABLE>
F-1
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
---------------- ----------
Current assets
<S> <C> <C>
Cash and cash equivalents $ 918,028 $ 5,989
Accounts receivable, net of allowance for doubtful accounts
of $315,748 and $76,000 in 1997 and 1996, respectively 24,850,304 13,985,445
Prepaid expenses and other current assets 673,265 404,198
------- -------
Total current assets 26,441,597 14,395,632
---------- ----------
Property and equipment, at cost
Equipment and leasehold improvements 2,508,680 1,644,831
Less: accumulated depreciation and amortization 1,373,275 1,142,740
--------- ---------
1,135,405 502,091
--------- -------
Other assets
Deposits 94,149 88,039
Intangible assets (net of accumulated amortization
of $804,640 and $366,337 in 1997 and 1996,
respectively) 26,411,445 9,420,858
---------- ---------
26,505,594 9,508,897
---------- ---------
Total assets $ 54,082,596 $ 24,406,620
= ========== = ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-2
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
October 31, 1997 and 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1997 1996
---------------- ----------
Current liabilities
<S> <C> <C>
Note payable - bank $ 2,000,000 $ 2,746,636
Accounts payable and accrued expenses 1,315,937 734,791
Accrued payroll 4,501,502 2,789,725
Taxes other than income taxes 665,106 432,607
Income taxes payable 679,937 920,439
------- -------
Total current liabilities 9,162,482 7,624,198
--------- ---------
Income taxes payable 308,129 562,312
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; 7,582,206 and
4,878,476 shares issued in 1997 and
1996, respectively 379,110 243,924
Additional paid-in capital 40,877,540 17,161,105
Treasury stock, at cost 62,800 shares ( 62,821 )
Retained earnings (accumulated deficit) 3,355,335 ( 1,122,098 )
--------- ---------
44,611,985 16,220,110
Total liabilities and shareholders' equity $ 54,082,596 $ 24,406,620
= ========== = ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-3
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended October 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ----------
<S> <C> <C> <C>
Revenues $ 113,959,093 $ 61,039,173 $ 26,915,737
Cost of services 86,832,348 48,779,886 22,378,817
---------- ---------- ----------
Gross profit 27,126,745 12,259,287 4,536,920
---------- ---------- ---------
Operating costs and expenses
Selling, general and administrative 18,068,899 8,914,102 3,549,810
Depreciation and amortization 572,279 329,680 130,397
------- ------- -------
18,641,178 9,243,782 3,680,207
---------- --------- ---------
Operating income 8,485,567 3,015,505 856,713
--------- --------- -------
Other income (expense)
Interest expense, net of interest income ( 184,645 ) ( 163,695) ( 104,652
Other, net ( 30,332) ( 18,760 )
------ ------
( 184,645) ( 194,027) 85,892
------- ------- ------
Income before income taxes 8,300,922 2,821,478 942,605
Income taxes 3,460,989 453,539 93,500
--------- ------- ------
Income from continuing operations 4,839,933 2,367,939 849,105
Loss from discontinued operations, net
of income tax benefit of $262,500 (Note 2) 362,500
-------
Net income $ 4,477,433 $ 2,367,939 $ 849,105
= ========= = ========= = =======
Earnings per share: (Note 1)
Income from continuing operations $.74 $.55 $.28
Loss from discontinued operations (.06)
----
Net income $.68 $.55 $.28
==== ==== ====
Weighted average shares outstanding 6,563,905 4,320,571 3,007,969
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-4
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Retained
Additional Earnings
Common Stock Paid-in (Accumulated Treasury
Shares Amount Capital Deficit) Stock
<S> <C> <C> <C> <C> <C>
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)
Retirement of Treasury Stock ( 62,800 )( 3,140) ( 59,681) 62,821
Exercise of stock options 4,171 209 23,031
Sale of common stock 2,698,187 134,909 23,136,814
Issuance of common stock
in connection with acquisitions 43,347 2,167 317,312
Issuance of common stock
in connection with legal settlement 20,825 1,041 298,959
Net Income 4,477,433
---------
Balance, October 31, 1997 7,582,206 $379,110 $40,877,540 $3,355,335 $
========= ======== =========== ========== =
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-5
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ----------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 4,477,433 $ 2,367,939 $ 849,105
- --------- - --------- - -------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 572,279 329,680 130,397
Non cash portion of legal settlement 300,000
Provision for losses on accounts
receivable 239,748 61,000
Changes in assets and liabilities:
Accounts receivable ( 11,104,607) ( 8,522,460) 854,552
Prepaid expenses and other
current assets ( 137,067) 267,464 ( 405,116 )
Accounts payable and accrued expenses 581,146 262,684 ( 10,064 )
Accrued payroll 1,711,777 1,606,791 ( 151,348 )
Billings in excess of costs and
estimated earnings ( 148,229 )
Taxes other than income taxes 232,499 227,113 ( 18,938 )
Income taxes payable ( 626,685) 1,482,751
------- ---------
( 8,230,910) ( 4,284,977) 251,254
--------- --------- -------
Net cash provided by (used in) operating activities ( 3,753,477) ( 1,917,038) 1,100,359
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-6
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years Ended October 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ----------
Cash flows from investing activities:
<S> <C> <C> <C> <C> <C> <C>
Property and equipment acquired ( 450,350) ( 128,264) ( 68,189 )
Increase in deposits ( 6,110) ( 44,965) ( 6,643 )
Cash paid for acquisitions,
net of cash acquired ( 17,426,351) ( 1,049,433) ( 2,345,966 )
---------- --------- ---------
Net cash used in investing activities ( 17,882,811) ( 1,222,662) ( 2,420,798 )
---------- --------- ---------
Cash flows from financing activities:
Net borrowing (repayments) under
short term debt arrangements ( 746,636) 1,832,201 176,278
Repayments of long term debt ( 1,092,362 )
Sale of common stock 23,271,723 1,000,000
Exercise of stock options 23,240 15,938
------ ------
Net cash provided by (used in) financing activities 22,548,327 2,848,139 ( 916,084 )
---------- --------- -------
Net increase (decrease) in cash
and cash equivalents 912,039 ( 291,561) ( 2,236,523 )
Cash and cash equivalents at beginning of year 5,989 297,550 2,534,073
----- ------- ---------
Cash and cash equivalents at end of year $ 918,028 $ 5,989 $ 297,550
= ======= = ===== = =======
Supplemental cash flow information:
Cash paid for:
Interest expense $ $444,347 $ 163,811 $ 36,738
Income taxes $ 3,$25,174 $ 726,332 $ 220,498
Acquisitions:
Fair value of assets acquired $ 20,9$9,663 $ 7,302,476 $ 5,218,694
Liabilities assumed 3,503,312 6,253,043 2,872,728
-------------- --------- ---------
Cash paid, net of cash acquired $ 17,4$6,351 $ 1,049,433 $ 2,345,966
============= ========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-7
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
1. Summary of Significant Accounting Policies
Business
RCM Technologies, Inc. (the "Company"), through its wholly-owned
subsidiaries, is a multi-regional provider of professional staffing
services. 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.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany accounts and
transactions have been eliminated.
Gross Profit
The Company has realigned its Statement of Income presentation format to be
consistent with industry practices. Under the new format, gross profit
represents the difference between revenues and direct costs. The principal
components of direct costs are the wages and employee payroll taxes and
benefits associated with employees directly providing services to
customers. Operating and administrative costs, both variable and fixed, are
shown below the gross profit line. Prior period Statements of Income have
been reclassified to be consistent with the new format.
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 five 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 and its wholly-owned subsidiaries file a consolidated federal
income tax return. 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.
F-8
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
1. Summary of Significant Accounting Policies - (Continued)
Profit Sharing Plan
The Company maintains 401(k) plans as of October 31, 1997, for the benefit
of eligible employees. The plans are profit-sharing plans, 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. Contributions charged to operations by the Company for fiscal
years ended October 31, 1997, 1996 and 1995 were $6,246, $0 and $0,
respectively.
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 years. No further dilution
resulted from a computation of fully diluted earnings per share. The number
of shares used to compute earnings per share was 6,563,905; 4,320,571 and
3,007,969 for the years ended October 31, 1997, 1996, and 1995,
respectively.
The net income for the years ended October 31, 1996 and 1995 has been
calculated after taking into account the effect of the then available net
operating loss carryforward (NOL). Without giving effect to the NOL, the
Company's earnings per share, on a fully taxed basis would have been $.38
and $.18, respectively.
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 intangible assets for fiscal years 1997, 1996 and 1995 was
$411,213, $211,337 and $48,928, respectively.
F-9
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
1. Summary of Significant Accounting Policies - (Continued)
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.
2. Discontinued Operations
In fiscal 1992, the Company discontinued the operations of an environmental
technology development business. In connection with the discontinued
operations, on September 26, 1997, the Company and Alumax, Inc. entered
into a Settlement Agreement, whereby the Company agreed to settle the
potential controversy by paying $300,000 and issuing 20,825 restricted
shares of its common stock, valued at $300,000 to Alumax, Inc. Professional
fees associated with the settlement were approximately $25,000. The charge
to operations was $625,000 and the tax effected result was $362,500, or
$.06 per share.
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. The President
of the Company, Leon Kopyt, has been granted certain voting rights over the
remaining 138,313 shares as long as they remain owned by Limeport
Investments, LLC.
On June 13, 1997, the Company completed a public offering of 2,875,000
shares of Common Stock, of which, 2,698,187 shares were offered and sold by
the Company and 176,813 shares were offered by certain selling
stockholders. The public offering was undertaken pursuant to the terms of a
Registration Statement on Form S-1 originally filed with the Securities and
Exchange Commission on March 21, 1997 and a final Prospectus dated June 10,
1997. The net proceeds to the Company after offering costs was $23,271,723.
The Company did not receive any of the proceeds from the sale of the shares
by the selling stockholders.
4. Acquisitions
During the three year period ended October 31, 1997, the Company acquired
ten 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 over a period of two years, $50,000 in cash and certain earnout
provisions. 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 had 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."
F-10
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
4. Acquisitions - (Continued)
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.
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. In connection with the public offering of common stock
(note 3), 36,000 shares of restricted shares having a value of $342,000,
were sold by a selling shareholder of The Consortium. The Company filed a
registration statement on October 29, 1997, permitting the sale of $258,000
in value of securities 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
consisted of $621,500 in cash and 55,265 restricted shares of the Company's
common stock valued at $378,638. The Company filed a registration statement
on October 29, 1997, permitting the sale of the restricted shares on or
after May 1, 1998.
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. The
restricted shares were sold in the public offering referred to in note 3.
F-11
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
4. Acquisitions - (Continued)
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.
The Purchase consideration paid to the former shareholders of PAMI
consisted of $4,500,000 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 during the term
of the note. An additional earn-out payment may be made to the former
shareholders of PAMI at the end of the third anniversary of the Purchase to
the extent that operating income during this period exceeds these base
levels. The Purchase has been accounted for under the purchase method of
accounting. The cost in excess of net assets acquired of $5,045,486 is
included in the Company's Consolidated Balance Sheet as "Intangible Assets"
and is being amortized over a 40 year period.
On April 1, 1997, the Company acquired certain operating assets of
Programming Resources Unlimited ("PRU"), a provider of information
technology staffing services, for $600,000 cash plus $300,000 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 shareholders of
PRU in the event that during the three-year period the performance of PRU
exceeds the established earnings targets. The cost in excess of net assets
acquired of $621,800 is included in the Company's Consolidated Balance
Sheet as "Intangible Assets" and is being amortized over a 40 year period.
On September 25, 1997, the Company acquired Camelot Contractors Limited
("Camelot"), a Manchester, New Hampshire-based specialty provider of
information technology personnel. The acquisition was completed effective
as of August 1, 1997, through a stock purchase transaction (the "Purchase")
pursuant to which Camelot, through an exchange of all of its outstanding
shares of stock with the Company became a wholly-owned subsidiary of the
Company.
The Purchase consideration paid to the former shareholders of Camelot
consisted of $9,000,000 cash, 22,409 shares of common stock of the
Registrant valued at $318,433 and a $3,500,000 three year promissory note
payable contingent upon Camelot achieving certain base levels of operating
income for each of the three twelve month periods following the Purchase.
An additional earn-out payment may be made to the former shareholders at
the end of each of the three twelve month periods following the Purchase,
to the extent that operating income exceeds these base levels. The Purchase
has been accounted for under the purchase method of accounting. The cost in
excess of net assets acquired of $7,451,600 is included in the Company's
Consolidated Balance Sheet as "Intangible Assets" and is being amortized
over a 40 year period.
As part of the Purchase, all of the 22,409 shares of common stock issued to
the former shareholders of Camelot were delivered into escrow as collateral
to secure the performance of certain financial conditions. The shares held
in escrow are subject to certain restrictions on resale, however, the
Company filed a registration statement on October 29, 1997 permitting the
resale of such shares after January 21, 1998.
On October 23, 1997, the Company acquired Austin Nichols Technical
Temporaries, Inc. ("Austin"), a Kansas City, Missouri-based specialty
provider of information technology systems professionals and engineers. The
acquisition was completed through a stock purchase transaction pursuant to
which Austin, through an exchange of all of its outstanding shares of stock
with the Company, became a wholly-owned subsidiary of the Company.
F-12
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
4. Acquisitions - (Continued)
The Purchase consideration paid to the former shareholders of Austin
consisted of $2,500,000 cash, and a $900,000 three year promissory note
payable contingent upon Austin achieving certain base levels of operating
income for each of the three twelve month periods following the Purchase.
An additional earn-out payment may be made to the former shareholders at
the end of each of the three twelve month periods following the Purchase,
to the extent that operating income exceeds these base levels. The Purchase
has been accounted for under the purchase method of accounting. The cost in
excess of net assets acquired of $2,520,400 is included in the Company's
consolidated Balance Sheet as "Intangible Assets" and is being amortized
over a 40 year period.
On October 30, 1997, the Company acquired J.D. Karin Consulting Services,
Inc.("J.D. Karin"), a Flanders, New Jersey-based specialty provider of
information technology systems professionals and engineers. The
acquisition was completed through a stock purchase transaction pursuant
to which J.D. Karin, through an exchange of all of its outstanding
shares of stock with the Company, became a wholly-owned subsidiary of the
Company.
The Purchase consideration paid to the former shareholders of J.D. Karin
consisted of $1,800,000 cash, and a $1,225,000 three year promissory note
payable contingent upon J.D. Karin achieving certain base levels of
operating income for each of the three twelve month periods following the
Purchase. An additional earn-out payment may be made to the former
shareholders at the end of each of the three twelve month periods following
the Purchase, to the extent that operating income exceeds these base
levels. The Purchase has been accounted for under the purchase method of
accounting. The cost in excess of net assets acquired of $1,795,900 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 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.
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996
------------------ -----------
<S> <C> <C>
Revenues $136,384,000 $106,616,000
Operating income 10,804,000 6,789,000
Income from continuing operations 5,609,000 3,475,000
Loss from discontinued operations (363,000)
Net income 5,246,000 3,475,000
Earnings per share from continuing operations .85 .72
Loss per share from discontinued operations (.05)
Earnings per share $.80 $.72
<FN>
The net income for the year ended October 31, 1996 has been calculated
after taking into account the effect of the then available net operating
loss carryforward (NOL). Without giving effect to the NOL, the Company's
earnings per share Pro forma, on a fully taxed basis, would have been $.59.
</FN>
</TABLE>
F-13
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
5. Property and Equipment
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
October 31,
1997 1996
---------------- ----------
<S> <C> <C>
Office equipment $ 2,294,906 $ 1,453,711
Capitalized lease 174,873 174,873
Leasehold improvements 38,901 16,247
------------ ------
2,508,680 1,644,831
Less: accumulated depreciation and amortization 1,373,275 1,142,740
--------- ---------
$ 1,135,405 $ 502,091
============= = =======
</TABLE>
6. Note Payable - Bank
On December 19, 1996, the Company and its subsidiaries entered into an
amended and restated agreement with Mellon Bank, N.A. providing for a
credit facility of up to $20,000,000, increased from $10,000,000 at October
31, 1996, (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 with
respect to financial ratios and earnings. At October 31, 1997, the Company
and its subsidiaries were in compliance with all financial covenants
contained within the Revolving Credit Facility.
Borrowing under the Revolving Credit Facility is based on 85% of accounts
receivable on which not more than ninety days have elapsed since the date
of invoicing. Borrowings under the Revolving Credit Facility bear interest,
at the Company's option, at LIBOR (London Interbank Offered Rate) or the
bank's prime rate, plus the applicable margin. The weighted average
interest rate at October 31, 1997 was 9.10%. The interest rate charged by
the bank at October 31, 1996 was the prime rate of 8.25%. At October 31,
1997, there was $13,985,000 available under the Revolving Credit Facility.
7. Shareholders' Equity
Common shares reserved
Shares of unissued common stock were reserved for the following purposes:
<TABLE>
<CAPTION>
October 31,
1997 1996
-------------- ---------
<S> <C> <C>
Exercise of warrants 157,342 157,342
Exercise of options outstanding 1,087,400 214,400
Future grants of options 382,300 760,300
---------- ----------
Total 1,627,042 1,132,042
========= =========
</TABLE>
F-14
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
7. Shareholders' Equity - (Continued)
Warrants
At October 31, 1997 and 1996, the Company had 786,709 warrants outstanding
to purchase 157,342 shares of the Company's common stock. As a result of a
1 for 5 reverse stock split in April 1996, 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 December 31,
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.
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, (amended on January 15, 1997) 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 shares of Common Stock to officers and key employees of the
Company and its subsidiaries.
The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
(SFAS 123). It applies APB Opinion No. 25 and related interpretations in
accounting for its plans and does not recognize compensation expense for is
stock-based compensation plans. Had compensation cost been determined based
on the fair value of the options at the grant date consistent with SFAS
123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996
---------------- ----------
Net earnings:
<S> <C> <C>
As reported $ 4,477,433 $ 2,367,939
Pro forma $ 2,542,196 $ 2,235,750
Earnings per share:
As reported $.68 $.55
Pro forma $.39 $.52
</TABLE>
F-15
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
7. Shareholders' Equity - (Continued)
Incentive Stock Option Plans - (Continued)
These pro forma amounts may not be representative of future disclosures
because they do not take into effect proforma compensation expense related
to grants before November 1, 1995. The fair value of these options is
estimated on the date of grant using the Black-sScholes option-pricing
model with the following weighted-average assumptions for grants in fiscal
year 1997 and 1996, respectively: expected volatility of 30% for both
years; risk-free interest rates of 6.43% and 6.32%; and expected lives of 5
years for both years. The weighted-average fair value of options granted
during fiscal years 1997 and 1996 was $3.46 and $2.16, respectively.
The net income for the year ended October 31, 1996 has been calculated
after taking into account the effect of the then available net operating
loss carryforward (NOL). Without giving effect to the NOL, the Company's
earnings per share as reported and Pro forma, on a fully taxed basis, would
have been $.38 and $.35, respectively.
Transactions related to all stock options are as follows:
<TABLE>
<CAPTION>
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
1997 Price 1996 Price 1995 Price
---------- ------------------------- ------------------------- ----------
Outstanding options
<S> <C> <C> <C> <C> <C> <C>
at beginning of year 214,400 $3.54 163,300 $2.63 173,300 $3.11
Granted 883,200 8.40 61,100 5.64 50,300 2.66
Forfeited ( 6,029 ) 6.68 ( 60,300) 4.01
Exercised ( 4,171 ) 5.57 ( 10,000) 1.59
------------ --------
Outstanding options
at end of year 1,087,400 $7.46 214,400 $3.54 163,300 $2.63
========= ======= =======
Exercisable options
at October 31, 708,900 141,300 87,000
========== ======= ========
Option grant price
per share $1.09 $1.09 $1.09
to $10.625 to $8.13 to $8.13
</TABLE>
<TABLE>
<CAPTION>
The following table summarizes information about stock options outstanding
at October 31, 1997:
Weighted-Average
Range of Number of Remaining Weighted-Average
Exercise Prices Outstanding Options Contractual Life Exercise Price
<S> <C> <C> <C> <C> <C>
$1.09 - $ 1.64 22,000 5.3 years $ 1.24
$2.46 - $ 3.69 130,300 7.0 years $ 2.96
$3.69 - $ 5.54 45,020 8.3 years $ 5.00
$5.54 - $ 8.31 516,880 9.0 years $ 7.14
$8.31 - $ 12.46 373,200 9.7 years $10.14
</TABLE>
F-16
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
8. 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 September 30, 2000. 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, 1997, excluding bonuses, was $2,754,500.
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.
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
October 31, 1997, Mr. Kopyt would have been entitled to cash payments of
approximately $1.6 million (representing salary and excise tax payments).
Operating leases
The Company leases office facilities and various equipment under
noncancellable leases expiring at various dates through February 2007.
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:
<TABLE>
<CAPTION>
Year ending October 31, Amount
----------------------- ------
<S> <C> <C>
1998 $888,700
1999 635,000
2000 492,000
2001 437,500
2002 405,900
Thereafter 932,400
-------
Total $3,791,500
===========
</TABLE>
Rent expense for the years ended October 31, 1997, 1996 and 1995 was
$814,000, $498,000 and $354,000, respectively.
F-17
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
9. Major Customers
Sales to major clients for the years ended October 31, 1997, 1996 and 1995
were as follows:
For the year ended October 31, 1997, one client contributed $13,069,000
or 11.5% of total sales. Accounts receivable from the client
represented 4.4% of the total trade accounts receivable at October 31,
1997.
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.
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.
10. 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.
11. Income Taxes
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Year ended October 31,
1997 1996 1995
-------------- -------------- ---------
Current
<S> <C> <C> <C>
Federal $2,282,603 $ 48,000 $ 10,000
State and local 915,886 405,539 83,500
------------ --------- ----------
Total income tax expense - current $3,198,489 $453,539 $ 93,500
========== ======== =========
</TABLE>
The income tax provisions reconciled to the tax computed at the statutory
Federal rate was:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -------
<S> <C> <C> <C>
Tax at statutory rate 34.0% 34.0 % 34.0%
State income taxes, net of Federal
income tax benefit 7.9 9.4 5.8
Net operating loss carry-overs ( 1.9) ( 32.4 ) ( 32.3)
Other, net 1.7 5.1 2.4
------ ------ ------
41.7% 16.1 % 9.9%
==== ===== ======
</TABLE>
F-18
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
Significant components of the Company's deferred tax assets at October 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------ --------
Deferred tax assets due to:
<S> <C>
Net operating loss carry-over $ $102,000
Tax credit carry-over 73,100
Depreciation of property and equipment 20,000
Allowance for doubtful accounts 132,000
---------
132,000 195,100
Less: 100% valuation allowance 195,100
---------- ---------
Total net deferred tax assets $132,000 $
======== =========
</TABLE>
The valuation allowance was decreased during 1997 and 1996 by $195,100 and
$967,887, respectively, due to the utilization of net operating loss
carry-overs and the reversal of temporary differences.
12. Selected Quarterly Financial Information (Unaudited)
Year Ended October 31, 1997
<TABLE>
<CAPTION>
Gross Net Income
Sales Profit Net Income Per Share (a)
<S> <C> <C> <C> <C> <C>
1st Quarter $ 21,150,721 $ 5,099,404 $ 780,987 $.16
2nd Quarter 27,379,979 6,246,111 917,333 .18
3rd Quarter 28,009,367 6,918,940 1,205,928 .19
4th Quarter 37,419,026 8,862,290 1,573,185 .20
-------------- ------------- ----------- -----
Total $113,959,093 $27,126,745 $4,477,433 $.68
============ =========== ========== ====
Year Ended October 31, 1996
Gross Net Income
Sales Profit Net Income Per Share (a)(b)
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>
(a) Total of quarterly amounts do not agree to the annual amount due to
separate quarterly calculations of weighted average shares outstanding.
(b) The net income for the year ended October 31, 1996 has been calculated
after taking into account the effect of the then available net operating
loss carryforward (NOL). Without giving effect to the NOL, the Company's
earnings per share, on a fully taxed basis would have been $.38.
F-19
<PAGE>
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1997, 1996 and 1995
13. Interest Expense, Net of Interest Income
Interest expense, net of interest income consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- ---------
<S> <C> <C> <C>
Interest expense ( $444,347) ( $163,811) ( $ 38,158 )
Interest income 259,702 116 142,810
--------- ------------ ---------
( $184,645) ( $163,695) $104,652
======== ======== ========
</TABLE>
14. New Standards
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share"
("EPS"), which is effective for financial statements issued after December
31, 1997. Once effective, the new standard eliminates primary and fully
diluted EPS and instead requires presentation of basic and diluted EPS in
conjunction with the disclosure of the methodology used in computing such
EPS. Basic EPS excludes dilution and is computed by dividing income
available to common shareholders by the weighted-average common shares
outstanding during the period. Diluted EPS takes into consideration the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised and converted into common stock. Had the
principles of Statement 128 been applied for the year ended October 31,
1997 and 1996, basic earnings per share would have been .74 and .56,
respectively, and diluted earnings per share would have been .70 and .55,
respectively.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which is effective for all periods
beginning after December 15, 1997. SFAS 131 requires that public business
enterprises report certain information about operating segments in complete
sets of financial statements of the enterprise and in condensed financial
statements of interim periods issued to shareholders. It also requires that
public business enterprises report certain information about their products
and services, the geographic areas in which they operate, and their major
customers. Management is currently evaluating the impact of the disclosure
requirements of this statement.
15. Subsequent Event (Unaudited)
On January 5, 1998, the Company purchased Northern Technical Services, Inc.
("NTS"), a privately-held, provider of technical professional and
information technology personnel. The purchase price was $3,125,000 plus
$1,500,000 of contingent consideration in the form of a two year promissory
note. The agreement provides for additional purchase consideration upon the
attainment of certain earnings targets at the end of each twelve month
period following the closing, for a period of two years. Any additional
consideration paid will be recorded as additional purchase price. Revenues
for the year ended November 30, 1997, provided by the management of NTS,
were $12.6 million.
F-20
<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,
1997 and 1996 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, 1997. 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 audit provides 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, 1997 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1997 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, 1997. In our opinion, these schedules present fairly, in all material
respects, the information required to be set forth therein.
/s/ Grant Thornton LLP
Grant Thornton LLP
Philadelphia, Pennsylvania
December 12, 1997
(Except for Note 15 as to
which the date is January 5, 1998)
F-21
<PAGE>
SCHEDULE I
RCM TECHNOLOGIES, INC. (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
October 31, 1997 and 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
---------------- ----------
Current assets
<S> <C> <C>
Cash $ 29,803 $ 8,586
Prepaid expenses and other assets 1,601 132,663
----- -------
Total current assets 31,404 141,249
------ -------
Other assets
Deposits 5,695 5,695
Long-term receivables from affiliates 44,619,656 16,073,166
---------- ----------
44,625,351 16,078,861
Total assets $ 44,656,755 $ 16,220,110
= ========== = ==========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities
<S> <C>
Accounts payable and accrued expenses 43,770
------
Shareholders' equity
Common stock 379,110 243,924
Additional paid in capital 40,877,540 17,161,105
Retained earnings (accumulated deficit) 3,355,335 ( 1,122,098 )
--------- ---------
44,611,985 16,282,931
Less: treasury stock 62,821
Total shareholders' equity 44,611,985 16,220,110
---------- ----------
Total liabilities and shareholders' equity $ 44,656,755 $ 16,220,110
= ========== = ==========
</TABLE>
The "Notes to Consolidated Financial Statements" of RCM Technologies, Inc. and
subsidiaries are an integral part of these statements.
F-22
<PAGE>
SCHEDULE I
RCM TECHNOLOGIES, INC. (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF OPERATIONS
Years Ended October 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ----------
Operating expenses
<S> <C> <C> <C>
Administrative $ 166,110 $ 139,280 $ 31,780
- ------- - ------- - ------
Operating loss ( 166,110) ( 139,280) ( 31,780 )
------- ------- ------
Other expense
Non recurring charge ( 625,000)
Miscellaneous expense ( 10,261) ( 3,678 )
------ -----
( 625,000) ( 10,261) ( 3,678 )
------ -----
Loss before management fee income ( 791,110) ( 149,541) ( 35,458 )
Management fee income 791,110 149,541 35,458
------- ------- ------
Income before income taxes
Income taxes
Income before income in subsidiaries
Equity in earnings in subsidiaries 4,477,433 2,367,939 849,105
--------- --------- -------
Net income $ 4,477,433 $ 2,367,939 $ 849,105
= ========= = ========= = =======
</TABLE>
The "Notes to Consolidated Financial Statements" of RCM Technologies, Inc. and
subsidiaries are an integral part of these statements.
F-23
<PAGE>
SCHEDULE I
RCM TECHNOLOGIES, INC. (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
Years Ended October 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ----------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 4,477,433 $ 2,367,939 $ 849,105
- --------- - --------- - -------
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in operating assets and liabilities:
Prepaid expenses and other assets 131,062 2,274 ( 2,625 )
Accounts payable and accrued expenses 43,770 ( 11,108 )
174,832 2,274 ( 13,733 )
------- ----- ------
Net cash provided by operating activities 4,652,265 2,370,213 835,372
--------- --------- -------
Cash flows from investing activities:
Share in deficiency in assets of
subsidiaries ( 4,477,433) ( 2,367,939) ( 849,105 )
Decrease (increase) in long-term
receivables from subsidiaries ( 23,448,518) ( 1,025,065) 8,042
---------- --------- -----
Net cash used in
investing activities ( 27,926,011) ( 3,393,004) ( 841,063 )
---------- --------- -------
Cash flows from financing activities:
Sale of common stock 23,271,723 1,000,000
Exercise of stock options 23,240 15,938
------ ------
Net cash provided by financing activities 23,294,963 1,015,938
---------- ---------
Net increase (decrease) in cash and equivalents 21,217 ( 6,853) ( 5,691 )
Cash and equivalents at beginning of year 8,586 1,733 7,424
----- ----- -----
Cash and equivalents at end of year $ 29,803 $ 8,586 $ 1,733
= ====== = ===== = =====
</TABLE>
The "Notes to Consolidated Financial Statements" of RCM Technologies, Inc. and
subsidiaries are an integral part of these statements.
F-24
<PAGE>
SCHEDULE II
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended October 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ---------- ---------- ---------------------------------- ---------- ---------
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deduction Period
Year Ended October 31, 1997
Allowance for doubtful
accounts on trade
<S> <C> <C> <C> <C>
receivables $ 76,000 $ 324,581 $ 84,833 $ 315,748
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
</TABLE>
F-25
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
* (10)(f)(2) Amendment to Stock Option Agreement (pursuant to the
1996 Executive Stock Option Plan) between the Registrant and Leon
Kopyt, effective as of March 18, 1997.
<S> <C>
* (10)(g) Stock Option Agreement (pursuant to the 1996 Executive Stock Option Plan) between the Registrant and
Barry Meyers dated June 21, 1997.
* (10)(h) Stock Option Agreement (pursuant to the 1996 Executive Stock Option Plan) between the Registrant and
Martin Blaire dated June 21, 1997.
* (10)(i) Stock Option Agreement (pursuant to the 1996 Executive Stock Option Plan) between the Registrant and
Stanton Remer dated June 21, 1997.
* (10)(j) Stock Option Agreement (pursuant to the 1996 Executive Stock Option Plan) between the Registrant and
Norman S. Berson dated June 21, 1997.
* (10)(k) Stock Option Agreement (pursuant to the 1996 Executive Stock Option Plan) between the Registrant and
Robert B. Kerr dated June 21, 1997.
* (10)(l) Stock Option Agreement (pursuant to the 1996 Executive Stock Option Plan) between the Registrant and
Woodrow B. Moats, Jr. dated June 21, 1997.
* (10)(l)(a) Stock Option Agreement (pursuant to the 1994 Nonemployee Director Stock Option Plan) between the Registrant
and Woodrow B. Moats, Jr. dated June 21, 1997.
(11) Computation of Earnings Per Share.
(21) Subsidiaries
(24)(a) Consent of Independent Certified Public Accountants.
(27) Financial Data Schedule
</TABLE>
<PAGE>
AMENDMENT TO OPTION AGREEMENT
This Amendment Agreement ("Amendment") to the Option Agreement dated November
30, 1996, between RCM Technologies, Inc., a Nevada corporation (the "Company")
and Leon Kopyt (the "Holder"), is effective as of March 18, 1997.
RECITALS
WHEREAS, the Holder has received certain options to purchase shares of common
stock of the Company pursuant to an Option Agreement dated November 30, 1996
(the "Option Agreement");
WHEREAS, the last paragraph of Section 2.5 of the Option Agreement makes
reference to the Amended and Restated Termination Benefits Agreement, dated
November 30, 1996, between the Company and the Holder and the Amended and
Restated Employment Agreement, dated November 30, 1996, between the Company and
the Holder; and
WHEREAS, the parties hereto desire to amend such paragraph to reflect that the
Amended and Restated Termination Benefits Agreement dated November 30, 1996 has
been amended pursuant to the terms of the Second Amended and Restated
Termination Benefits Agreement dated March 18, 1997, between the Company and the
Holder and that the referenced agreements may be amended from time to time and,
therefore, any reference to these agreements would include any and all
amendments thereto.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. The last paragraph of Section 2.5 of the Option Agreement shall be amended,
in its entirety, to read as follows:
The term Change in Control (hereafter a "Change in Control") shall have the
meaning ascribed thereto in the Second Amended and Restated Termination Benefits
Agreement between the Company and the Holder dated March 18, 1997, as such
agreement may be amended from time to time (the "Termination Benefits
Agreement"). The term "good and sufficient cause" (hereafter "good and
sufficient cause") shall have the meaning ascribed thereto in the Amended and
Restated Employment Agreement between the Company and the Holder dated November
30, 1996, as such agreement may be amended from time to time (the "Employment
Agreement").
2. All other terms and provisions of the Option Agreement shall remain unchanged
and unaffected by this Amendment.
<PAGE>
IN WITNESS WHEREOF, the Holder and the Company have caused this Amendment to be
executed, effective as of the date first written above.
HOLDER:
- ------------------------------------
Leon Kopyt
RCM TECHNOLOGIES, INC.
By:_________________________________
Executive Officer
Acknowledged and Ratified by:
- ------------------------------
Chairman of the Compensation
Committee
<PAGE>
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 20th day of June, 1997, by and
between RCM TECHNOLOGIES, INC., a corporation organized and existing under the
laws of the State of Nevada ( the "Company") and Stanton Remer ("Remer").
W I T N E S E T H
WHEREAS, the Company considers it desirable and in its best interests
to grant to Remer an added incentive to advance the interests of the Company by
possessing an option to purchase additional shares of common stock, $.05 par
value in accordance with the 1996 Executive Stock Option Plan adopted by the
directors of the Company on August 15, 1996.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
COVENANTS CONTAINED IN THIS AGREEMENT AND INTENDING TO BE
LEGALLY BOUND HEREBY, THE COMPANY AND REMER AGREE AS FOLLOWS:
1. Grant of Option
The Company hereby grants to Remer, an option (the "Option") to
purchase 50,000 shares of the Company's common stock, $.05 par value, fully paid
and nonassessable (the "Shares") at the purchase price of 10.125 (the "Option
Price") effective June 20, 1997 in the manner and subject to the conditions
hereinafter provided.
1
<PAGE>
2. Time of Exercise of Option
Provided Remer has been continuously employed by the Company for a minimum
period of one (1) year since the date of this agreement, the Option may be
exercised at any time, and from time to time, in whole or in part, until the
termination thereof as provided in Paragraph 4 below, provided, however, that
the administrators of the Plan, The Compensation Committee (the "Committee"),
may limit the number of Shares that he may exercise in any one year.
3. Method of Exercise
The Option shall be exercised by written notice to the Company at the
Company's principal place of business. Payment of the Option Price shall be made
in full in cash or by check at the time of exercise of the Option.
As soon as practicable after receipt by the Company of Remer's written
notice of exercise and payment of the Option Price for all Shares with respect
to which an Option has been exercised, a certificate representing such Shares
shall be delivered to him at his address as it appears in the payroll records of
the Company or such other address as may be designated by him.
4. Termination of Option
Except as herein otherwise stated, the Option to the extent not
heretofore exercised shall terminate upon the first to occur of the following
dates:
(a) the expiration of three months after the date of which Remer's
employment with the Company is terminated for any reason except disability and
death;
2
<PAGE>
(b) if Remer's employment with the Company is terminated by reason of
disability (within the meaning of Internal Revenue Code Section 105(d) (4) ),
his Option may be exercised at any time within twelve months from the date of
such termination;
(c) if Remer's employment with the Company is terminated by reason of
death, his Option may be exercised by his legal representative within twelve
months after his death;
(d) June 20, 2007 (being the expiration of ten years from the grant
of this Option).
5. Condition to Exercise of Option
As a condition precedent to the exercise of the Option and issuance of
Shares, the Company shall be satisfied that registration of such Shares is not
required under the Securities Act of 1933 or any other applicable securities law
including that all of the requirements to establish an exemption from any such
registration requirements have been met. The Company shall not be required to
register the Option or the Shares under the Securities Act of 1933 (the "Act")
or any other securities law. 6. Restrictions on Disposition of Shares Issued
Upon Exercise
No disposition of Shares acquired pursuant to the exercise of this
Option shall be made within two years of the date hereof.
7. Adjustments Upon Changes in Common Stock
In the event there is a stock dividend paid in shares of the Company's
common stock or a recapitalization, a reclassification, stock split or a
combination of shares with respect to such stock, the Committee shall have the
power as provided in Section 6.9 of the 1996 Executive Stock Option Plan to make
appropriate adjustments of the Option Price and/or of
3
<PAGE>
the numbers of Shares as to which such Option is then exercisable, to the end
that Remer's proportionate interest shall be maintained as before the occurrence
of such event.
Upon any adjustment made pursuant to this Section 7, the Company will,
upon request, deliver to him, a certificate of the Company's Secretary or an
Assistant Secretary setting forth the Option Price thereafter in effect and the
number and kind of shares, other securities or other property thereafter
purchasable on the exercise of such Option.
8. Event of Liquidation, Dissolution, Merger or Consolidation
In the event the Company shall liquidate or dissolve, or shall be a
party to a merger or consolidation as provided in Section 6.9 (a) of the 1996
Executive Stock Option Plan, the Company shall give written notice to him at
least thirty (30) days prior to the effective date thereof, and he shall have
the right within said thirty (30) day period to exercise his Option in full to
the extent not previously exercised; provided, however, that in no event shall
such options be exercised after June 20, 2007. To the extent that he shall not
have exercised his options on or prior to the effective date of any liquidation,
dissolution, merger or consolidation, Remer's Options shall terminate on the
date of such liquidation, dissolution, merger or consolidation. 9. Remer
Represents and Warrants as Follows:
(a) Remer is familiar with the business and financial condition of the
Company and all reasonable requests for information with respect thereto made by
him to the Company have been fulfilled to the satisfaction of him; (b) he has
been advised that the proceeds realized by the Company from the sale of any
shares purchased pursuant hereto will be used
4
<PAGE>
for general corporate purposes; (c) he has been advised that the Board of
Directors has the right at any time to issue additional shares of stock and the
issuance thereof would dilute the percentage of the outstanding stock of the
Company represented by the Shares to be purchased hereto; (d) in connection with
the Option granted hereby and any Shares subscribed for hereunder, Remer has not
received any public media advertisements and has not been solicited by any form
of mass mailing solicitation; (e) any Shares when acquired will be acquired by
him for investment and not with a view to the distribution or resale thereof;
(f) Remer is able to bear the economic risk of his investment; and (g) Remer
understands that the share certificates issued to him upon the exercise of his
Option will be appropriately legended to indicate the restrictions on transfer
in accordance with this Section.
Remer further warrants that upon the grant of this Option: (i) the
number of common shares then subject to all options to purchase held by Remer,
plus the common shares then owned by Remer will not constitute more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or a parent or a subsidiary of the Company; and (ii) the aggregate fair
market value (determined as of the time an option is granted) of the common
shares with respect to which incentive stock options are exercisable for the
first time by Remer during any calendar year (under the 1996 Executive Stock
Option Plan and any other incentive stock option plans of the Company and a
parent or a subsidiary of the Company) will not exceed $350,000.00.
5
<PAGE>
Remer agrees to hold harmless and indemnify the Company, its directors and
officers from and against any and all liabilities resulting to it through
violation by Remer of the above warranties and representations.
10. Rights Prior to Exercise of Option
This Option is nontransferable by Remer, except in the event of his death
as provided in Paragraph 4(c) above, and during his lifetime is exercisable only
by him. Remer shall have no rights as stockholder with respect to the Option
Shares until payment of the Option Price and delivery to him of such shares as
herein provided.
11. Binding Effect
This agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
12. Notices
Any and all notices, designations, consents, offers, acceptances or any
other communications provided for herein shall be given in writing by registered
or certified mail, return receipt requested, which will be addressed, in the
case of the Company, to its principal office and in the case of Remer to his
address appearing in the payroll records of the Company or to such other address
as may be designated by him.
6
<PAGE>
13. Governing Law
This Agreement shall be construed and governed in accordance with the
laws of the State of Nevada.
( SEAL)
RCM TECHNOLOGIES, INC.
Attest:_____________________ By:_________________________________
Woodrow B. Moats,
Chairman, Compensation Committee
Witness:____________________ _________________________________
Stanton Remer
7
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 20th day of June, 1997, by and
between RCM TECHNOLOGIES, INC., a corporation organized and existing under the
laws of the State of Nevada ( the "Company") and Barry S. Meyers ("Meyers").
W I T N E S E T H
WHEREAS, the Company considers it desirable and in its best interests
to grant to Meyers an added incentive to advance the interests of the Company by
possessing an option to purchase additional shares of common stock, $.05 par
value in accordance with the 1996 Executive Stock Option Plan adopted by the
directors of the Company on August 15, 1996.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
COVENANTS CONTAINED IN THIS AGREEMENT AND INTENDING TO BE
LEGALLY BOUND HEREBY, THE COMPANY AND MEYERS AGREE AS FOLLOWS:
1. Grant of Option
The Company hereby grants to Meyers, an option (the "Option") to
purchase 50,000 shares of the Company's common stock, $.05 par value, fully paid
and nonassessable (the "Shares") at the purchase price of 10.125 (the "Option
Price") effective June 20, 1997 in the manner and subject to the conditions
hereinafter provided.
8
<PAGE>
2. Time of Exercise of Option
Provided Meyers has been continuously employed by the Company for a minimum
period of one (1) year since the date of this agreement, the Option may be
exercised at any time, and from time to time, in whole or in part, until the
termination thereof as provided in Paragraph 4 below, provided, however, that
the administrators of the Plan, The Compensation Committee (the "Committee"),
may limit the number of Shares that he may exercise in any one year.
3. Method of Exercise
The Option shall be exercised by written notice to the Company at the
Company's principal place of business. Payment of the Option Price shall be made
in full in cash or by check at the time of exercise of the Option.
As soon as practicable after receipt by the Company of Meyers' written
notice of exercise and payment of the Option Price for all Shares with respect
to which an Option has been exercised, a certificate representing such Shares
shall be delivered to him at his address as it appears in the payroll records of
the Company or such other address as may be designated by him.
4. Termination of Option
Except as herein otherwise stated, the Option to the extent not
heretofore exercised shall terminate upon the first to occur of the following
dates:
(a) the expiration of three months after the date of which Meyers'
employment with the Company is terminated for any reason except disability and
death;
2
<PAGE>
(b) if Meyers' employment with the Company is terminated by reason of
disability (within the meaning of Internal Revenue Code Section 105(d) (4) ),
his Option may be exercised at any time within twelve months from the date of
such termination;
(c) if Meyers' employment with the Company is terminated by reason of
death, his Option may be exercised by his legal representative within twelve
months after his death;
(d) June 20, 2007 (being the expiration of ten years from the grant
of this Option).
5. Condition to Exercise of Option
As a condition precedent to the exercise of the Option and issuance of
Shares, the Company shall be satisfied that registration of such Shares is not
required under the Securities Act of 1933 or any other applicable securities law
including that all of the requirements to establish an exemption from any such
registration requirements have been met. The Company shall not be required to
register the Option or the Shares under the Securities Act of 1933 (the "Act")
or any other securities law. 6. Restrictions on Disposition of Shares Issued
Upon Exercise
No disposition of Shares acquired pursuant to the exercise of this
Option shall be made within two years of the date hereof.
7. Adjustments Upon Changes in Common Stock
In the event there is a stock dividend paid in shares of the Company's
common stock or a recapitalization, a reclassification, stock split or a
combination of shares with respect to such stock, the Committee shall have the
power as provided in Section 6.9 of the 1996 Executive Stock Option Plan to make
appropriate adjustments of the Option Price and/or of
3
<PAGE>
the numbers of Shares as to which such Option is then exercisable, to the end
that Meyers' proportionate interest shall be maintained as before the occurrence
of such event.
Upon any adjustment made pursuant to this Section 7, the Company will,
upon request, deliver to him, a certificate of the Company's Secretary or an
Assistant Secretary setting forth the Option Price thereafter in effect and the
number and kind of shares, other securities or other property thereafter
purchasable on the exercise of such Option.
8. Event of Liquidation, Dissolution, Merger or Consolidation
In the event the Company shall liquidate or dissolve, or shall be a
party to a merger or consolidation as provided in Section 6.9 (a) of the 1996
Executive Stock Option Plan, the Company shall give written notice to him at
least thirty (30) days prior to the effective date thereof, and he shall have
the right within said thirty (30) day period to exercise his Option in full to
the extent not previously exercised; provided, however, that in no event shall
such options be exercised after June 20, 2007. To the extent that he shall not
have exercised his options on or prior to the effective date of any liquidation,
dissolution, merger or consolidation, Meyers' Options shall terminate on the
date of such liquidation, dissolution, merger or consolidation. 9. Meyers
Represents and Warrants as Follows:
(a) Meyers is familiar with the business and financial condition of the
Company and all reasonable requests for information with respect thereto made by
him to the Company have been fulfilled to the satisfaction of him; (b) he has
been advised that the proceeds realized by the Company from the sale of any
shares purchased pursuant hereto will be used
4
<PAGE>
for general corporate purposes; (c) he has been advised that the Board of
Directors has the right at any time to issue additional shares of stock and the
issuance thereof would dilute the percentage of the outstanding stock of the
Company represented by the Shares to be purchased hereto; (d) in connection with
the Option granted hereby and any Shares subscribed for hereunder, Meyers has
not received any public media advertisements and has not been solicited by any
form of mass mailing solicitation; (e) any Shares when acquired will be acquired
by him for investment and not with a view to the distribution or resale thereof;
(f) Meyers is able to bear the economic risk of his investment; and (g) Meyers
understands that the share certificates issued to him upon the exercise of his
Option will be appropriately legended to indicate the restrictions on transfer
in accordance with this Section.
Meyers further warrants that upon the grant of this Option: (i) the
number of common shares then subject to all options to purchase held by Meyers,
plus the common shares then owned by Meyers will not constitute more than thirty
percent (30%) of the total combined voting power of all classes of stock of the
Company, or a parent or a subsidiary of the Company; and (ii) the aggregate fair
market value (determined as of the time an option is granted) of the common
shares with respect to which incentive stock options are exercisable for the
first time by Meyers during any calendar year (under the 1996 Executive Stock
Option Plan and any other incentive stock option plans of the Company and a
parent or a subsidiary of the Company) will not exceed $1,000,000.00.
5
<PAGE>
Meyers agrees to hold harmless and indemnify the Company, its directors and
officers from and against any and all liabilities resulting to it through
violation by Meyers of the above warranties and representations.
10. Rights Prior to Exercise of Option
This Option is nontransferable by Meyers, except in the event of his death
as provided in Paragraph 4(c) above, and during his lifetime is exercisable only
by him. Meyers shall have no rights as stockholder with respect to the Option
Shares until payment of the Option Price and delivery to him of such shares as
herein provided.
11. Binding Effect
This agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
12. Notices
Any and all notices, designations, consents, offers, acceptances or any
other communications provided for herein shall be given in writing by registered
or certified mail, return receipt requested, which will be addressed, in the
case of the Company, to its principal office and in the case of Meyers to his
address appearing in the payroll records of the Company or to such other address
as may be designated by him.
6
<PAGE>
13. Governing Law
This Agreement shall be construed and governed in accordance with the
laws of the State of Nevada.
( SEAL)
RCM TECHNOLOGIES, INC.
Attest:_____________________ By:_________________________________
Woodrow B. Moats,
Chairman, Compensation Committee
Witness:____________________ _________________________________
Barry S. Meyers
7
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 20th day of June, 1997, by and
between RCM TECHNOLOGIES, INC., a corporation organized and existing under the
laws of the State of Nevada ( the "Company") and Martin Blaire ("Blaire").
W I T N E S E T H
WHEREAS, the Company considers it desirable and in its best interests
to grant to Blaire an added incentive to advance the interests of the Company by
possessing an option to purchase additional shares of common stock, $.05 par
value in accordance with the 1996 Executive Stock Option Plan adopted by the
directors of the Company on August 15, 1996.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
COVENANTS CONTAINED IN THIS AGREEMENT AND INTENDING TO BE
LEGALLY BOUND HEREBY, THE COMPANY AND BLAIRE AGREE AS FOLLOWS:
1. Grant of Option
The Company hereby grants to Blaire, an option (the "Option") to
purchase 50,000 shares of the Company's common stock, $.05 par value, fully paid
and nonassessable (the "Shares") at the purchase price of 10.125 (the "Option
Price") effective June 20, 1997 in the manner and subject to the conditions
hereinafter provided.
8
<PAGE>
2. Time of Exercise of Option
Provided Blaire has been continuously employed by the Company for a minimum
period of one (1) year since the date of this agreement, the Option may be
exercised at any time, and from time to time, in whole or in part, until the
termination thereof as provided in Paragraph 4 below, provided, however, that
the administrators of the Plan, The Compensation Committee (the "Committee"),
may limit the number of Shares that he may exercise in any one year.
3. Method of Exercise
The Option shall be exercised by written notice to the Company at the
Company's principal place of business. Payment of the Option Price shall be made
in full in cash or by check at the time of exercise of the Option.
As soon as practicable after receipt by the Company of Blaire's written
notice of exercise and payment of the Option Price for all Shares with respect
to which an Option has been exercised, a certificate representing such Shares
shall be delivered to him at his address as it appears in the payroll records of
the Company or such other address as may be designated by him.
4. Termination of Option
Except as herein otherwise stated, the Option to the extent not
heretofore exercised shall terminate upon the first to occur of the following
dates:
(a) the expiration of three months after the date of which Blaire's
employment with the Company is terminated for any reason except disability and
death;
2
<PAGE>
(b) if Blaire's employment with the Company is terminated by reason of
disability (within the meaning of Internal Revenue Code Section 105(d) (4) ),
his Option may be exercised at any time within twelve months from the date of
such termination;
(c) if Blaire's employment with the Company is terminated by reason of
death, his Option may be exercised by his legal representative within twelve
months after his death;
(d) June 20, 2007 (being the expiration of ten years from the grant
of this Option).
5. Condition to Exercise of Option
As a condition precedent to the exercise of the Option and issuance of
Shares, the Company shall be satisfied that registration of such Shares is not
required under the Securities Act of 1933 or any other applicable securities law
including that all of the requirements to establish an exemption from any such
registration requirements have been met. The Company shall not be required to
register the Option or the Shares under the Securities Act of 1933 (the "Act")
or any other securities law. 6. Restrictions on Disposition of Shares Issued
Upon Exercise
No disposition of Shares acquired pursuant to the exercise of this
Option shall be made within two years of the date hereof.
7. Adjustments Upon Changes in Common Stock
In the event there is a stock dividend paid in shares of the Company's
common stock or a recapitalization, a reclassification, stock split or a
combination of shares with respect to such stock, the Committee shall have the
power as provided in Section 6.9 of the 1996 Executive Stock Option Plan to make
appropriate adjustments of the Option Price and/or of
3
<PAGE>
the numbers of Shares as to which such Option is then exercisable, to the end
that Blaire's proportionate interest shall be maintained as before the
occurrence of such event.
Upon any adjustment made pursuant to this Section 7, the Company will,
upon request, deliver to him, a certificate of the Company's Secretary or an
Assistant Secretary setting forth the Option Price thereafter in effect and the
number and kind of shares, other securities or other property thereafter
purchasable on the exercise of such Option.
8. Event of Liquidation, Dissolution, Merger or Consolidation
In the event the Company shall liquidate or dissolve, or shall be a
party to a merger or consolidation as provided in Section 6.9 (a) of the 1996
Executive Stock Option Plan, the Company shall give written notice to him at
least thirty (30) days prior to the effective date thereof, and he shall have
the right within said thirty (30) day period to exercise his Option in full to
the extent not previously exercised; provided, however, that in no event shall
such options be exercised after June 20, 2007. To the extent that he shall not
have exercised his options on or prior to the effective date of any liquidation,
dissolution, merger or consolidation, Blaire's Options shall terminate on the
date of such liquidation, dissolution, merger or consolidation. 9. Blaire
Represents and Warrants as Follows:
(a) Blaire is familiar with the business and financial condition of the
Company and all reasonable requests for information with respect thereto made by
him to the Company have been fulfilled to the satisfaction of him; (b) he has
been advised that the proceeds realized by the Company from the sale of any
shares purchased pursuant hereto will be used
4
<PAGE>
for general corporate purposes; (c) he has been advised that the Board of
Directors has the right at any time to issue additional shares of stock and the
issuance thereof would dilute the percentage of the outstanding stock of the
Company represented by the Shares to be purchased hereto; (d) in connection with
the Option granted hereby and any Shares subscribed for hereunder, Blaire has
not received any public media advertisements and has not been solicited by any
form of mass mailing solicitation; (e) any Shares when acquired will be acquired
by him for investment and not with a view to the distribution or resale thereof;
(f) Blaire is able to bear the economic risk of his investment; and (g) Blaire
understands that the share certificates issued to him upon the exercise of his
Option will be appropriately legended to indicate the restrictions on transfer
in accordance with this Section.
Blaire further warrants that upon the grant of this Option: (i) the
number of common shares then subject to all options to purchase held by Blaire,
plus the common shares then owned by Blaire will not constitute more than thirty
percent (30%) of the total combined voting power of all classes of stock of the
Company, or a parent or a subsidiary of the Company; and (ii) the aggregate fair
market value (determined as of the time an option is granted) of the common
shares with respect to which incentive stock options are exercisable for the
first time by Blaire during any calendar year (under the 1996 Executive Stock
Option Plan and any other incentive stock option plans of the Company and a
parent or a subsidiary of the Company) will not exceed $1,000,000.00.
5
<PAGE>
Blaire agrees to hold harmless and indemnify the Company, its directors and
officers from and against any and all liabilities resulting to it through
violation by Blaire of the above warranties and representations.
10. Rights Prior to Exercise of Option
This Option is nontransferable by Blaire, except in the event of his death
as provided in Paragraph 4(c) above, and during his lifetime is exercisable only
by him. Blaire shall have no rights as stockholder with respect to the Option
Shares until payment of the Option Price and delivery to him of such shares as
herein provided.
11. Binding Effect
This agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
12. Notices
Any and all notices, designations, consents, offers, acceptances or any
other communications provided for herein shall be given in writing by registered
or certified mail, return receipt requested, which will be addressed, in the
case of the Company, to its principal office and in the case of Blaire to his
address appearing in the payroll records of the Company or to such other address
as may be designated by him.
6
<PAGE>
13. Governing Law
This Agreement shall be construed and governed in accordance with the
laws of the State of Nevada.
( SEAL)
RCM TECHNOLOGIES, INC.
Attest:_____________________ By:_________________________________
Woodrow B. Moats,
Chairman, Compensation Committee
Witness:____________________ _________________________________
Martin Blaire
7
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 20th day of June, 1997, by and
between RCM TECHNOLOGIES, INC., a corporation organized and existing under the
laws of the State of Nevada ( the "Company") and Norman S. Berson ("Berson").
W I T N E S E T H
WHEREAS, the Company considers it desirable and in its best interests
to grant to Berson an added incentive to advance the interests of the Company by
possessing an option to purchase additional shares of common stock, $.05 par
value in accordance with the 1996 Executive Stock Option Plan adopted by the
directors of the Company on August 15, 1996.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
COVENANTS CONTAINED IN THIS AGREEMENT AND INTENDING TO BE
LEGALLY BOUND HEREBY, THE COMPANY AND BERSON AGREE AS FOLLOWS:
1. Grant of Option
The Company hereby grants to Berson, an option (the "Option") to
purchase 50,000 shares of the Company's common stock, $.05 par value, fully paid
and nonassessable (the "Shares") at the purchase price of 10.125 (the "Option
Price") effective June 20, 1997 in the manner and subject to the conditions
hereinafter provided.
8
<PAGE>
2. Time of Exercise of Option
Provided Berson has been a member of the Board of Directors of the Company
for a minimum period of one (1) year since the date of this agreement, the
Option may be exercised at any time, and from time to time, in whole or in part,
until the termination thereof as provided in Paragraph 4 below, provided,
however, that the administrators of the Plan, The Compensation Committee (the
"Committee"), may limit the number of Shares that he may exercise in any one
year.
3. Method of Exercise
The Option shall be exercised by written notice to the Company at the
Company's principal place of business. Payment of the Option Price shall be made
in full in cash or by check at the time of exercise of the Option.
As soon as practicable after receipt by the Company of Berson's written
notice of exercise and payment of the Option Price for all Shares with respect
to which an Option has been exercised, a certificate representing such Shares
shall be delivered to him at his address as it appears in the payroll records of
the Company or such other address as may be designated by him.
4. Termination of Option
Except as herein otherwise stated, the Option to the extent not
heretofore exercised shall terminate upon the first to occur of the following
dates:
(a) when the Optionee ceases to be a nonemployee Director of the
Company or the Subsidiaries for any reason except disability and death;
2
<PAGE>
(b) one year after the date of termination of service as a Director by
reason of the permanent or total disability of the Optionee (within the meaning
of Section 105(d) (4) of the Code);
(c) June 20, 2007 (being the expiration of ten years from the grant
of this Option).
5. Condition to Exercise of Option
As a condition precedent to the exercise of the Option and issuance of
Shares, the Company shall be satisfied that registration of such Shares is not
required under the Securities Act of 1933 or any other applicable securities law
including that all of the requirements to establish an exemption from any such
registration requirements have been met. The Company shall not be required to
register the Option or the Shares under the Securities Act of 1933 (the "Act")
or any other securities law. 6. Restrictions on Disposition of Shares Issued
Upon Exercise
No disposition of Shares acquired pursuant to the exercise of this
Option shall be made within two years of the date hereof.
7. Adjustments Upon Changes in Common Stock
In the event there is a stock dividend paid in shares of the Company's
common stock or a recapitalization, a reclassification, stock split or a
combination of shares with respect to such stock, the Committee shall have the
power as provided in Section 6.9 of the 1996 Executive Stock Option Plan to make
appropriate adjustments of the Option Price and/or of the numbers of Shares as
to which such Option is then exercisable, to the end that Berson's proportionate
interest shall be maintained as before the occurrence of such event.
3
<PAGE>
Upon any adjustment made pursuant to this Section 7, the Company will,
upon request, deliver to him, a certificate of the Company's Secretary or an
Assistant Secretary setting forth the Option Price thereafter in effect and the
number and kind of shares, other securities or other property thereafter
purchasable on the exercise of such Option.
8. Event of Liquidation, Dissolution, Merger or Consolidation
In the event the Company shall liquidate or dissolve, or shall be a
party to a merger or consolidation as provided in Section 6.9 (a) of the 1996
Executive Stock Option Plan, the Company shall give written notice to him at
least thirty (30) days prior to the effective date thereof, and he shall have
the right within said thirty (30) day period to exercise his Option in full to
the extent not previously exercised; provided, however, that in no event shall
such options be exercised after June 20, 2007. To the extent that he shall not
have exercised his options on or prior to the effective date of any liquidation,
dissolution, merger or consolidation, Berson's Options shall terminate on the
date of such liquidation, dissolution, merger or consolidation. 9. Berson
Represents and Warrants as Follows:
(a) Berson is familiar with the business and financial condition of the
Company and all reasonable requests for information with respect thereto made by
him to the Company have been fulfilled to the satisfaction of him; (b) he has
been advised that the proceeds realized by the Company from the sale of any
shares purchased pursuant hereto will be used for general corporate purposes;
(c) he has been advised that the Board of Directors has the right at any time to
issue additional shares of stock and the issuance thereof would dilute the
4
<PAGE>
percentage of the outstanding stock of the Company represented by the Shares to
be purchased hereto; (d) in connection with the Option granted hereby and any
Shares subscribed for hereunder, Berson has not received any public media
advertisements and has not been solicited by any form of mass mailing
solicitation; (e) any Shares when acquired will be acquired by him for
investment and not with a view to the distribution or resale thereof; (f) Berson
is able to bear the economic risk of his investment; and (g) Berson understands
that the share certificates issued to him upon the exercise of his Option will
be appropriately legended to indicate the restrictions on transfer in accordance
with this Section.
Berson further warrants that upon the grant of this Option: (i) the
number of common shares then subject to all options to purchase held by Berson,
plus the common shares then owned by Berson will not constitute more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or a parent or a subsidiary of the Company; and (ii) the aggregate fair
market value (determined as of the time an option is granted) of the common
shares with respect to which incentive stock options are exercisable for the
first time by Berson during any calendar year (under the 1996 Executive Stock
Option Plan and any other incentive stock option plans of the Company and a
parent or a subsidiary of the Company) will not exceed $350,000.00.
5
<PAGE>
Berson agrees to hold harmless and indemnify the Company, its directors and
officers from and against any and all liabilities resulting to it through
violation by Berson of the above warranties and representations.
10. Rights Prior to Exercise of Option
This Option is nontransferable by Berson, except in the event of his death
as provided in Paragraph 4(c) above, and during his lifetime is exercisable only
by him. Berson shall have no rights as stockholder with respect to the Option
Shares until payment of the Option Price and delivery to him of such shares as
herein provided.
11. Binding Effect
This agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
12. Notices
Any and all notices, designations, consents, offers, acceptances or any
other communications provided for herein shall be given in writing by registered
or certified mail, return receipt requested, which will be addressed, in the
case of the Company, to its principal office and in the case of Berson to his
address appearing in the payroll records of the Company or to such other address
as may be designated by him.
6
<PAGE>
13. Governing Law
This Agreement shall be construed and governed in accordance with the
laws of the State of Nevada.
( SEAL)
RCM TECHNOLOGIES, INC.
Attest:_____________________ By:_________________________________
Leon Kopyt, President and CEO
Witness:____________________ _________________________________
Norman S. Berson
7
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 20th day of June, 1997, by and
between RCM TECHNOLOGIES, INC., a corporation organized and existing under the
laws of the State of Nevada ( the "Company") and Robert B. Kerr ("Kerr").
W I T N E S E T H
WHEREAS, the Company considers it desirable and in its best interests
to grant to Kerr an added incentive to advance the interests of the Company by
possessing an option to purchase additional shares of common stock, $.05 par
value in accordance with the 1996 Executive Stock Option Plan adopted by the
directors of the Company on August 15, 1996.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
COVENANTS CONTAINED IN THIS AGREEMENT AND INTENDING TO BE
LEGALLY BOUND HEREBY, THE COMPANY AND KERR AGREE AS FOLLOWS:
1. Grant of Option
The Company hereby grants to Kerr, an option (the "Option") to purchase
50,000 shares of the Company's common stock, $.05 par value, fully paid and
nonassessable (the "Shares") at the purchase price of 10.125 (the "Option
Price") effective June 20, 1997 in the manner and subject to the conditions
hereinafter provided.
8
<PAGE>
2. Time of Exercise of Option
Provided Kerr has been a member of the Board of Directors of the Company
for a minimum period of one (1) year since the date of this agreement, the
Option may be exercised at any time, and from time to time, in whole or in part,
until the termination thereof as provided in Paragraph 4 below, provided,
however, that the administrators of the Plan, The Compensation Committee (the
"Committee"), may limit the number of Shares that he may exercise in any one
year.
3. Method of Exercise
The Option shall be exercised by written notice to the Company at the
Company's principal place of business. Payment of the Option Price shall be made
in full in cash or by check at the time of exercise of the Option.
As soon as practicable after receipt by the Company of Kerr's written
notice of exercise and payment of the Option Price for all Shares with respect
to which an Option has been exercised, a certificate representing such Shares
shall be delivered to him at his address as it appears in the payroll records of
the Company or such other address as may be designated by him.
4. Termination of Option
Except as herein otherwise stated, the Option to the extent not
heretofore exercised shall terminate upon the first to occur of the following
dates:
(a) when the Optionee ceases to be a nonemployee Director of the
Company or the Subsidiaries for any reason except disability and death;
2
<PAGE>
(b) one year after the date of termination of service as a Director by
reason of the permanent or total disability of the Optionee (within the meaning
of Section 105(d) (4) of the Code);
(c) June 20, 2007 (being the expiration of ten years from the grant
of this Option).
5. Condition to Exercise of Option
As a condition precedent to the exercise of the Option and issuance of
Shares, the Company shall be satisfied that registration of such Shares is not
required under the Securities Act of 1933 or any other applicable securities law
including that all of the requirements to establish an exemption from any such
registration requirements have been met. The Company shall not be required to
register the Option or the Shares under the Securities Act of 1933 (the "Act")
or any other securities law. 6. Restrictions on Disposition of Shares Issued
Upon Exercise
No disposition of Shares acquired pursuant to the exercise of this
Option shall be made within two years of the date hereof.
7. Adjustments Upon Changes in Common Stock
In the event there is a stock dividend paid in shares of the Company's
common stock or a recapitalization, a reclassification, stock split or a
combination of shares with respect to such stock, the Committee shall have the
power as provided in Section 6.9 of the 1996 Executive Stock Option Plan to make
appropriate adjustments of the Option Price and/or of the numbers of Shares as
to which such Option is then exercisable, to the end that Kerr's proportionate
interest shall be maintained as before the occurrence of such event.
3
<PAGE>
Upon any adjustment made pursuant to this Section 7, the Company will,
upon request, deliver to him, a certificate of the Company's Secretary or an
Assistant Secretary setting forth the Option Price thereafter in effect and the
number and kind of shares, other securities or other property thereafter
purchasable on the exercise of such Option.
8. Event of Liquidation, Dissolution, Merger or Consolidation
In the event the Company shall liquidate or dissolve, or shall be a
party to a merger or consolidation as provided in Section 6.9 (a) of the 1996
Executive Stock Option Plan, the Company shall give written notice to him at
least thirty (30) days prior to the effective date thereof, and he shall have
the right within said thirty (30) day period to exercise his Option in full to
the extent not previously exercised; provided, however, that in no event shall
such options be exercised after June 20, 2007. To the extent that he shall not
have exercised his options on or prior to the effective date of any liquidation,
dissolution, merger or consolidation, Kerr's Options shall terminate on the date
of such liquidation, dissolution, merger or consolidation. 9. Kerr Represents
and Warrants as Follows:
(a) Kerr is familiar with the business and financial condition of the
Company and all reasonable requests for information with respect thereto made by
him to the Company have been fulfilled to the satisfaction of him; (b) he has
been advised that the proceeds realized by the Company from the sale of any
shares purchased pursuant hereto will be used for general corporate purposes;
(c) he has been advised that the Board of Directors has the right at any time to
issue additional shares of stock and the issuance thereof would dilute the
4
<PAGE>
percentage of the outstanding stock of the Company represented by the Shares to
be purchased hereto; (d) in connection with the Option granted hereby and any
Shares subscribed for hereunder, Kerr has not received any public media
advertisements and has not been solicited by any form of mass mailing
solicitation; (e) any Shares when acquired will be acquired by him for
investment and not with a view to the distribution or resale thereof; (f) Kerr
is able to bear the economic risk of his investment; and (g) Kerr understands
that the share certificates issued to him upon the exercise of his Option will
be appropriately legended to indicate the restrictions on transfer in accordance
with this Section.
Kerr further warrants that upon the grant of this Option: (i) the
number of common shares then subject to all options to purchase held by Kerr,
plus the common shares then owned by Kerr will not constitute more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or a parent or a subsidiary of the Company; and (ii) the aggregate fair
market value (determined as of the time an option is granted) of the common
shares with respect to which incentive stock options are exercisable for the
first time by Kerr during any calendar year (under the 1996 Executive Stock
Option Plan and any other incentive stock option plans of the Company and a
parent or a subsidiary of the Company) will not exceed $350,000.00.
5
<PAGE>
Kerr agrees to hold harmless and indemnify the Company, its directors and
officers from and against any and all liabilities resulting to it through
violation by Kerr of the above warranties and representations.
10. Rights Prior to Exercise of Option
This Option is nontransferable by Kerr, except in the event of his death as
provided in Paragraph 4(c) above, and during his lifetime is exercisable only by
him. Kerr shall have no rights as stockholder with respect to the Option Shares
until payment of the Option Price and delivery to him of such shares as herein
provided.
11. Binding Effect
This agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
12. Notices
Any and all notices, designations, consents, offers, acceptances or any
other communications provided for herein shall be given in writing by registered
or certified mail, return receipt requested, which will be addressed, in the
case of the Company, to its principal office and in the case of Kerr to his
address appearing in the payroll records of the Company or to such other address
as may be designated by him.
6
<PAGE>
13. Governing Law
This Agreement shall be construed and governed in accordance with the
laws of the State of Nevada.
( SEAL)
RCM TECHNOLOGIES, INC.
Attest:_____________________ By:_________________________________
Leon Kopyt, President and CEO
Witness:____________________ _________________________________
Robert B. Kerr
7
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 20th day of June, 1997, by and between
RCM TECHNOLOGIES, INC., a corporation organized and existing under the laws of
the State of Nevada ( the "Company") and Woodrow B. Moats, Jr. ("Moats").
W I T N E S E T H
WHEREAS, the Company considers it desirable and in its best interests
to grant to Moats an added incentive to advance the interests of the Company by
possessing an option to purchase additional shares of common stock, $.05 par
value in accordance with the 1994 Non Employee Director Stock Option Plan
adopted by the directors of the Company on February 24, 1994 and approved by the
stockholders at the annual meeting held on May 19, 1994.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
COVENANTS CONTAINED IN THIS AGREEMENT AND INTENDING TO BE
LEGALLY BOUND HEREBY, THE COMPANY AND MOATS AGREE AS FOLLOWS:
1. Grant of Option
The Company hereby grants to Moats, an option (the "Option") to
purchase 10,000 shares of the Company's common stock, $.05 par value, fully paid
and nonassessable (the "Shares") at the purchase price of 10.125 (the "Option
Price") effective June 20, 1997 in the manner and subject to the conditions
hereinafter provided.
8
<PAGE>
2. Time of Exercise of Option
Provided Moats has been a member of the Board of Directors of the Company
for a minimum period of one (1) year since the date of this agreement, the
Option may be exercised at any time, and from time to time, in whole or in part,
until the termination thereof as provided in Paragraph 4 below, provided,
however, that the administrators of the Plan, The Compensation Committee (the
"Committee"), may limit the number of Shares that he may exercise in any one
year.
3. Method of Exercise
The Option shall be exercised by written notice to the Company at the
Company's principal place of business. Payment of the Option Price shall be made
in full in cash or by check at the time of exercise of the Option.
As soon as practicable after receipt by the Company of Moats's written
notice of exercise and payment of the Option Price for all Shares with respect
to which an Option has been exercised, a certificate representing such Shares
shall be delivered to him at his address as it appears in the payroll records of
the Company or such other address as may be designated by him.
4. Termination of Option
Except as herein otherwise stated, the Option to the extent not
heretofore exercised shall terminate upon the first to occur of the following
dates:
(a) when the Optionee ceases to be a nonemployee Director of the
Company or the Subsidiaries for any reason except disability and death;
2
<PAGE>
(b) one year after the date of termination of service as a Director by
reason of the permanent or total disability of the Optionee (within the meaning
of Section 105(d) (4) of the Code);
(c) June 20, 2007 (being the expiration of ten years from the grant of this
Option). 5. Condition to Exercise of Option
As a condition precedent to the exercise of the Option and issuance of
Shares, the Company shall be satisfied that registration of such Shares is not
required under the Securities Act of 1933 or any other applicable securities law
including that all of the requirements to establish an exemption from any such
registration requirements have been met. The Company shall not be required to
register the Option or the Shares under the Securities Act of 1933 (the "Act")
or any other securities law. 6. Restrictions on Disposition of Shares Issued
Upon Exercise
No disposition of Shares acquired pursuant to the exercise of this Option
shall be made within two years of the date hereof.
7. Adjustments Upon Changes in Common Stock
In the event there is a stock dividend paid in shares of the Company's
common stock or a recapitalization, a reclassification, stock split or a
combination of shares with respect to such stock, the Committee shall have the
power as provided in Section 6.9 of the 1994 Non Employee Director Stock Option
Plan to make appropriate adjustments of the Option Price and/or of the numbers
of Shares as to which such Option is then exercisable, to the end that Moats's
proportionate interest shall be maintained as before the occurrence of such
event.
3
<PAGE>
Upon any adjustment made pursuant to this Section 7, the Company will,
upon request, deliver to him, a certificate of the Company's Secretary or an
Assistant Secretary setting forth the Option Price thereafter in effect and the
number and kind of shares, other securities or other property thereafter
purchasable on the exercise of such Option.
8. Event of Liquidation, Dissolution, Merger or Consolidation
In the event the Company shall liquidate or dissolve, or shall be a
party to a merger or consolidation as provided in Section 6.9 (a) of the 1994
Non Employee Director Stock Option Plan, the Company shall give written notice
to him at least thirty (30) days prior to the effective date thereof, and he
shall have the right within said thirty (30) day period to exercise his Option
in full to the extent not previously exercised; provided, however, that in no
event shall such options be exercised after June 20, 2007. To the extent that he
shall not have exercised his options on or prior to the effective date of any
liquidation, dissolution, merger or consolidation, Moats's Options shall
terminate on the date of such liquidation, dissolution, merger or consolidation.
9. Moats Represents and Warrants as Follows:
(a) Moats is familiar with the business and financial condition of the
Company and all reasonable requests for information with respect thereto made by
him to the Company have been fulfilled to the satisfaction of him; (b) he has
been advised that the proceeds realized by the Company from the sale of any
shares purchased pursuant hereto will be used for general corporate purposes;
(c) he has been advised that the Board of Directors has the right at any time to
issue additional shares of stock and the issuance thereof would dilute the
4
<PAGE>
percentage of the outstanding stock of the Company represented by the Shares to
be purchased hereto; (d) in connection with the Option granted hereby and any
Shares subscribed for hereunder, Moats has not received any public media
advertisements and has not been solicited by any form of mass mailing
solicitation; (e) any Shares when acquired will be acquired by him for
investment and not with a view to the distribution or resale thereof; (f) Moats
is able to bear the economic risk of his investment; and (g) Moats understands
that the share certificates issued to him upon the exercise of his Option will
be appropriately legended to indicate the restrictions on transfer in accordance
with this Section.
Moats further warrants that upon the grant of this Option: (i) the
number of common shares then subject to all options to purchase held by Moats,
plus the common shares then owned by Moats will not constitute more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or a parent or a subsidiary of the Company; and (ii) the aggregate fair
market value (determined as of the time an option is granted) of the common
shares with respect to which incentive stock options are exercisable for the
first time by Moats during any calendar year (under the 1994 Non Employee
Director Stock Option Plan and any other incentive stock option plans of the
Company and a parent or a subsidiary of the Company) will not exceed
$350,000.00.
5
<PAGE>
Moats agrees to hold harmless and indemnify the Company, its directors and
officers from and against any and all liabilities resulting to it through
violation by Moats of the above warranties and representations.
10. Rights Prior to Exercise of Option
This Option is nontransferable by Moats, except in the event of his death
as provided in Paragraph 4(c) above, and during his lifetime is exercisable only
by him. Moats shall have no rights as stockholder with respect to the Option
Shares until payment of the Option Price and delivery to him of such shares as
herein provided.
11. Binding Effect
This agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
12. Notices
Any and all notices, designations, consents, offers, acceptances or any
other communications provided for herein shall be given in writing by registered
or certified mail, return receipt requested, which will be addressed, in the
case of the Company, to its principal office and in the case of Moats to his
address appearing in the payroll records of the Company or to such other address
as may be designated by him.
6
<PAGE>
13. Governing Law
This Agreement shall be construed and governed in accordance with the
laws of the State of Nevada.
( SEAL)
RCM TECHNOLOGIES, INC.
Attest:_____________________ By:_________________________________
Leon Kopyt, President and CEO
Witness:____________________ _________________________________
Woodrow B. Moats, Jr.
7
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 20th day of June, 1997, by and between
RCM TECHNOLOGIES, INC., a corporation organized and existing under the laws of
the State of Nevada ( the "Company") and Woodrow B. Moats, Jr. ("Moats").
W I T N E S E T H
WHEREAS, the Company considers it desirable and in its best interests
to grant to Moats an added incentive to advance the interests of the Company by
possessing an option to purchase additional shares of common stock, $.05 par
value in accordance with the 1996 Executive Stock Option Plan adopted by the
directors of the Company on August 15, 1996.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND
COVENANTS CONTAINED IN THIS AGREEMENT AND INTENDING TO BE
LEGALLY BOUND HEREBY, THE COMPANY AND MOATS AGREE AS FOLLOWS:
1. Grant of Option
The Company hereby grants to Moats, an option (the "Option") to
purchase 40,000 shares of the Company's common stock, $.05 par value, fully paid
and nonassessable (the "Shares") at the purchase price of 10.125 (the "Option
Price") effective June 20, 1997 in the manner and subject to the conditions
hereinafter provided.
8
<PAGE>
2. Time of Exercise of Option
Provided Moats has been a member of the Board of Directors of the Company
for a minimum period of one (1) year since the date of this agreement, the
Option may be exercised at any time, and from time to time, in whole or in part,
until the termination thereof as provided in Paragraph 4 below, provided,
however, that the administrators of the Plan, The Compensation Committee (the
"Committee"), may limit the number of Shares that he may exercise in any one
year.
3. Method of Exercise
The Option shall be exercised by written notice to the Company at the
Company's principal place of business. Payment of the Option Price shall be made
in full in cash or by check at the time of exercise of the Option.
As soon as practicable after receipt by the Company of Moats's written
notice of exercise and payment of the Option Price for all Shares with respect
to which an Option has been exercised, a certificate representing such Shares
shall be delivered to him at his address as it appears in the payroll records of
the Company or such other address as may be designated by him.
4. Termination of Option
Except as herein otherwise stated, the Option to the extent not
heretofore exercised shall terminate upon the first to occur of the following
dates:
(a) when the Optionee ceases to be a nonemployee Director of the
Company or the Subsidiaries for any reason except disability and death;
2
<PAGE>
(b) one year after the date of termination of service as a Director by
reason of the permanent or total disability of the Optionee (within the meaning
of Section 105(d) (4) of the Code);
(c) June 20, 2007 (being the expiration of ten years from the grant of this
Option).
5. Condition to Exercise of Option
As a condition precedent to the exercise of the Option and issuance of
Shares, the Company shall be satisfied that registration of such Shares is not
required under the Securities Act of 1933 or any other applicable securities law
including that all of the requirements to establish an exemption from any such
registration requirements have been met. The Company shall not be required to
register the Option or the Shares under the Securities Act of 1933 (the "Act")
or any other securities law. 6. Restrictions on Disposition of Shares Issued
Upon Exercise
No disposition of Shares acquired pursuant to the exercise of this Option
shall be made within two years of the date hereof.
7. Adjustments Upon Changes in Common Stock
In the event there is a stock dividend paid in shares of the Company's
common stock or a recapitalization, a reclassification, stock split or a
combination of shares with respect to such stock, the Committee shall have the
power as provided in Section 6.9 of the 1996 Executive Stock Option Plan to make
appropriate adjustments of the Option Price and/or of the numbers of Shares as
to which such Option is then exercisable, to the end that Moats's proportionate
interest shall be maintained as before the occurrence of such event.
3
<PAGE>
Upon any adjustment made pursuant to this Section 7, the Company will,
upon request, deliver to him, a certificate of the Company's Secretary or an
Assistant Secretary setting forth the Option Price thereafter in effect and the
number and kind of shares, other securities or other property thereafter
purchasable on the exercise of such Option.
8. Event of Liquidation, Dissolution, Merger or Consolidation
In the event the Company shall liquidate or dissolve, or shall be a
party to a merger or consolidation as provided in Section 6.9 (a) of the 1996
Executive Stock Option Plan, the Company shall give written notice to him at
least thirty (30) days prior to the effective date thereof, and he shall have
the right within said thirty (30) day period to exercise his Option in full to
the extent not previously exercised; provided, however, that in no event shall
such options be exercised after June 20, 2007. To the extent that he shall not
have exercised his options on or prior to the effective date of any liquidation,
dissolution, merger or consolidation, Moats's Options shall terminate on the
date of such liquidation, dissolution, merger or consolidation. 9. Moats
Represents and Warrants as Follows:
(a) Moats is familiar with the business and financial condition of the
Company and all reasonable requests for information with respect thereto made by
him to the Company have been fulfilled to the satisfaction of him; (b) he has
been advised that the proceeds realized by the Company from the sale of any
shares purchased pursuant hereto will be used for general corporate purposes;
(c) he has been advised that the Board of Directors has the right at any time to
issue additional shares of stock and the issuance thereof would dilute the
4
<PAGE>
percentage of the outstanding stock of the Company represented by the Shares to
be purchased hereto; (d) in connection with the Option granted hereby and any
Shares subscribed for hereunder, Moats has not received any public media
advertisements and has not been solicited by any form of mass mailing
solicitation; (e) any Shares when acquired will be acquired by him for
investment and not with a view to the distribution or resale thereof; (f) Moats
is able to bear the economic risk of his investment; and (g) Moats understands
that the share certificates issued to him upon the exercise of his Option will
be appropriately legended to indicate the restrictions on transfer in accordance
with this Section.
Moats further warrants that upon the grant of this Option: (i) the
number of common shares then subject to all options to purchase held by Moats,
plus the common shares then owned by Moats will not constitute more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or a parent or a subsidiary of the Company; and (ii) the aggregate fair
market value (determined as of the time an option is granted) of the common
shares with respect to which incentive stock options are exercisable for the
first time by Moats during any calendar year (under the 1996 Executive Stock
Option Plan and any other incentive stock option plans of the Company and a
parent or a subsidiary of the Company) will not exceed $350,000.00.
5
<PAGE>
Moats agrees to hold harmless and indemnify the Company, its directors and
officers from and against any and all liabilities resulting to it through
violation by Moats of the above warranties and representations.
10. Rights Prior to Exercise of Option
This Option is nontransferable by Moats, except in the event of his death
as provided in Paragraph 4(c) above, and during his lifetime is exercisable only
by him. Moats shall have no rights as stockholder with respect to the Option
Shares until payment of the Option Price and delivery to him of such shares as
herein provided.
11. Binding Effect
This agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
12. Notices
Any and all notices, designations, consents, offers, acceptances or any
other communications provided for herein shall be given in writing by registered
or certified mail, return receipt requested, which will be addressed, in the
case of the Company, to its principal office and in the case of Moats to his
address appearing in the payroll records of the Company or to such other address
as may be designated by him.
6
<PAGE>
13. Governing Law
This Agreement shall be construed and governed in accordance with the
laws of the State of Nevada.
( SEAL)
RCM TECHNOLOGIES, INC.
Attest:_____________________ By:_________________________________
Leon Kopyt, President and CEO
Witness:____________________ _________________________________
Woodrow B. Moats, Jr.
RCM TECHNOLOGIES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Years Ended October 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- ---------
Fully diluted earnings
<S> <C> <C> <C>
Net income applicable to common stock $ 4,477,433 $ 2,367,939 $ 849,105
= ========= = ========= = =======
Shares
Weighted average number of common
shares outstanding 6,068,713 4,247,907 29,338,818
Common stock equivalents 495,192 72,664 74,151
------- ------ ------
Total 6,563,905 4,320,571 3,007,969
========= ========= =========
Fully diluted earnings per common share $.68 $.55 $.28
==== ==== ====
Primary earnings
Net income applicable to common stock $ 4,477,433 $ 2,367,939 $.849,105
= ========= = ========= =========
Shares
Weighted average number of common
shares outstanding 6,068,713 4,247,907 2,933,818
Common stock equivalents 292,468 72,664 74,151
------- ------ ------
Total 6,361,181 4,320,571 3,007,969
========= ========= =========
Primary earnings per common share $.70 $.55 $.28
==== ==== ====
</TABLE>
EXHIBIT 21
SUBSIDIARIES
Intertec Design, Inc.
Cataract, Inc.
The Consortium
The Consortium of Maryland, Inc.
Programming Alternatives of Minnesota, Inc.
Camelot Contractors, Limited
Austin Nichols Technical Temporaries, Inc.
J. D. Karin Consulting Services, Inc.
EXHIBIT 23
Consent of Independent Certified Public Accountants
Board of Directors
RCM Technologies, Inc.
We have issued our report dated December 12, 1997 accompanying the
consolidated financial statements and schedules included in the Annual Report of
RCM Technologies, Inc. and Subsidiaries on Form 10-K for the year ended October
31, 1997. We hereby consent to the incorporation by reference of said report in
the Registration Statements of RCM Technologies, Inc. on Forms S-8 (File No.
33-12405, effective March 24, 1987, File No. 33-12406, effective March 24, 1987,
File No. 33-61306, effective April 21, 1993, and File No. 33-80590, effective
June 22, 1994).
/s/ Grant Thornton LLP
Grant Thornton LLP
Philadelphia, Pennsylvania
December 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR THE YEAR ENDED OCTOBER 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH STATMENTS.
</LEGEND>
<CIK> 0000700841
<NAME> RCM TECHNOLOGIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.00
<CASH> 918,028
<SECURITIES> 0
<RECEIVABLES> 25,166,052
<ALLOWANCES> 315,748
<INVENTORY> 0
<CURRENT-ASSETS> 26,441,597
<PP&E> 2,508,680
<DEPRECIATION> 1,373,275
<TOTAL-ASSETS> 54,082,596
<CURRENT-LIABILITIES> 9,162,482
<BONDS> 0
0
0
<COMMON> 379,110
<OTHER-SE> 44,232,875
<TOTAL-LIABILITY-AND-EQUITY> 54,082,596
<SALES> 113,959,093
<TOTAL-REVENUES> 113,959,093
<CGS> 86,832,348
<TOTAL-COSTS> 105,473,526
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 184,645
<INCOME-PRETAX> 8,300,922
<INCOME-TAX> 3,460,989
<INCOME-CONTINUING> 4,839,933
<DISCONTINUED> 362,500
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,477,433
<EPS-PRIMARY> .70
<EPS-DILUTED> .68
</TABLE>
