As filed with the Securities and Exchange Commission on March 29, 2024.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION VIA EDGAR,
ON APRIL 29, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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UNDER
THE SECURITIES ACT OF 1933
RCM TECHNOLOGIES, INC.
(Exact
(Exact Name of Registrant as specifiedSpecified in its charter)
NEVADA 95-1480559
(State or Other jurisdictionIts Charter)
| | Nevada (State or Other Jurisdiction of Incorporation or Organization) | | | 95-1480559 (I.R.S. Employer Identification Number) | |
2500 McClellan Avenue, Suite 350
Pennsauken, NJ 08109-4613
(856) 356-4500
Pennsauken, NJ 08109-4613
(856) 356-4500
(Address, Including Zip Code, and Telephone Number, Including Area Code, of (I.R.S. Employer
incorporation or organization) (Identification Number)
Registrant’s Principal Executive Offices)
Kevin D. Miller
Chief Financial Officer
RCM Technologies, Inc.
2500MCCLELLAN AVENUE
SUITEMcClellan Avenue, Suite 350
PENNSAUKEN, NEW JERSEY
Pennsauken, NJ 08109-4613
(609) 486-1777
(856) 356-4500
Chief Financial Officer
RCM Technologies, Inc.
2500
Pennsauken, NJ 08109-4613
(856) 356-4500
(Name, Address, including zip code,Including Zip Code, and telephone number, including
area code,Telephone Number, Including Area Code, of Registrant's principal executive offices)
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LEON KOPYT
2500 MCCLELLAN AVENUE
SUITE 350
PENNSAUKEN, NEW JERSEY 08109-4613
(609) 486-1777
(Name, address, including zip code, and telephone number,
including area code,Agent for Service)
Copies to:
| | Justin W. Chairman, Esquire Morgan, Lewis & Bockius LLP 2222 Market Street Philadelphia, PA 19103 (215) 963-5000 | |
Approximate date of agent for service)
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Please send a copycommencement of all correspondence to:
MARK K. KESSLER MICHAEL J. SILVER
RICHARD A. SILFEN WALTER G. LOHR, JR.
WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP HOGAN & HARTSON L.L.P.
TWELFTH FLOOR PACKARD BUILDING 111 SOUTH CALVERT STREET
111 SOUTH 15TH STREET SUITE 1600
PHILADELPHIA, PENNSYLVANIA 19102 BALTIMORE, MARYLAND 21202
(215) 977-2000 (410) 659-2700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable following effectiveness ofproposed sale to the public:
From time to time after this Registration Statement.
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registration statement becomes effective.
If the only securities being registered on this Formform are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / /
☐
If any of the securities being registered on this Formform are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / /
☒
If this Formform is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
☐
If this Formform is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
☐
If delivery ofthis form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the prospectus is expected to be madeCommission pursuant to Rule 434462(e) under the Securities Act, please check the following box. / /
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CALCULATION OF REGISTRATION FEE
(1) Includes 405,000 shares subject☐
If this form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Underwriters' over-allotment option.
(2) Estimated solelySecurities Act, check the following box. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | Large accelerated filer ☐ | | | Accelerated filer ☒ | | | Non-accelerated filer ☐ | | | Smaller reporting company ☒ | |
| | | | | | | | | | | Emerging growth company ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the purpose of calculatingSecurities Act. ☐
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration feestatement shall thereafter become effective in accordance with Rule 457(c) underSection 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the basisSecurities and Exchange Commission, acting pursuant to such Section 8(a), may determine.
The information in this prospectus is not complete and may be changed without notice. We may not sell these securities until the registration statement relating to these securities has been declared effective by the Securities and Exchange Commission. This prospectus is neither an offer to sell nor a solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, Dated March 29, 2024
PROSPECTUS
![[MISSING IMAGE: lg_rcmtechnologies-4clr.jpg]](https://capedge.com/proxy/S-3/0001104659-24-041134/lg_rcmtechnologies-4clr.jpg)
$100,000,000
RCM TECHNOLOGIES, INC.
Common Stock
Preferred Stock
Warrants
Rights to Purchase Common Stock, Preferred Stock or Units
Units
RCM TECHNOLOGIES, INC.
Common Stock
Preferred Stock
Warrants
Rights to Purchase Common Stock, Preferred Stock or Units
Units
We may offer and sell from time to time our shares of common stock, shares of preferred stock, warrants and rights to purchase common stock, preferred stock or units, as well as units that include any of these securities. We may sell any combination of these securities in one or more offerings with an aggregate offering price of up to $100,000,000.
This prospectus provides you with a general description of the averagesecurities we may offer. Each time we offer securities pursuant to this prospectus, we will provide a prospectus supplement containing specific terms of the highparticular offering together with this prospectus. You should read this prospectus and low prices reportedthe applicable prospectus supplement carefully before you invest in any securities. The prospectus supplement also may add, update or change information contained in this prospectus. This prospectus may not be used to offer and sell securities unless accompanied by the applicable prospectus supplement.
Our common stock is listed on the Nasdaq National
Market on April 27, 1998.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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SUBJECT TO COMPLETION
APRIL 29, 1998
2,700,000 SHARES
RCM TECHNOLOGIES, INC.
COMMON STOCK
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Of the 2,700,000 shares of Common Stock offered hereby (the "Offering"),
2,509,980 shares are being sold by RCM Technologies, Inc. (the "Company") and
190,020 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any proceeds from the sale
of shares by the Selling Stockholders. See "Principal and Selling Stockholders."
The Company's Common Stock is traded on the Nasdaq NationalCapital Market under the symbol "RCMT."“RCMT.” On AprilMarch 28, 1998,2024, the last reported saleclosing price of our common stock was $21.37.
Investing in our securities involves significant risks. We strongly recommend that you read carefully the Common
Stock was $23.00 per share.risks we describe in this prospectus and in any accompanying prospectus supplement, as well as the risk factors that are incorporated by reference into this prospectus from our filings made with the Securities and Exchange Commission. See "Price Range“Risk Factors” on page 3 of Common Stockthis prospectus.
We may sell the securities directly or to or through underwriters or dealers, and Dividend
Policy."
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(1) Before deducting expensesalso to other purchasers or through agents. The names of any underwriters or agents that are included in a sale of securities to you, and any applicable commissions or discounts, will be stated in an accompanying prospectus supplement. In addition, the underwriters, if any, may over-allot a portion of the Offering, allsecurities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of which will be payable bythese securities or passed upon the Company, estimatedadequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2024
TABLE OF CONTENTS
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”), using a “shelf” registration process. Under this shelf registration process, we may offer and sell from time to time any combination of the securities described in this prospectus in one or more offerings in amounts, at $600,000.
(2) The Company has grantedprices and on terms that we determine at the Underwriters a 30-day option to purchasetime of the offering, with an aggregate offering price of up to 405,000$100,000,000. This prospectus provides you with a general description of the securities we may offer. Each time we offer securities under this registration statement we will provide a prospectus supplement that describes the terms of the relevant offering. The prospectus supplement also may add, update or change information contained in this prospectus. Before making an investment decision, you should read carefully both this prospectus and any prospectus supplement together with the documents incorporated by reference into this prospectus as described below under the heading “Information Incorporated by Reference.”
The registration statement that contains this prospectus, including the exhibits to the registration statement and the information incorporated by reference, provides additional shares of Common Stock solelyinformation about us and our securities. That registration statement can be read at the SEC website (www.sec.gov), as discussed below under the heading “Where You Can Find More Information.”
You should rely only on the information provided in the registration statement, this prospectus and in any prospectus supplement, including the information incorporated by reference. We have not authorized anyone to cover over-allotments,
if any. To the extentprovide you with different information. You should not assume that the optioninformation in this prospectus or any supplement to this prospectus is exercised,accurate at any date other than the Underwriters willdate indicated on the cover page of these documents or the filing date of any document incorporated by reference, regardless of its time of delivery. We are not making an offer to sell the additional shares atsecurities in any jurisdiction where the Priceoffer or sale is not permitted.
We may sell our securities to Public shown above. Ifor through underwriters, initial purchasers, dealers or agents, directly to purchasers or through a combination of any of these methods of sale, as designated from time to time. We and our agents reserve the option is exercised in full, the total Pricesole right to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
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The shares of Common Stock are offered by the several Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters toaccept or reject any order in whole or in part. It is
expected thatpart any proposed purchase of our securities. An applicable prospectus supplement, which we will provide each time we offer the deliverysecurities, will set forth the names of any underwriters, initial purchasers, dealers or agents involved in the sharessale of Common Stock offered hereby will be
made atour securities, and any related fee, commission or discount arrangements. See “Plan of Distribution.”
The terms “RCM,” the offices of BT Alex. Brown Incorporated, Baltimore, Maryland on or
about , 1998.
BT ALEX. BROWN
BANCAMERICA ROBERTSON STEPHENS
LEGG MASON WOOD WALKER
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1998
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE
OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK OR MAINTAIN THE
PRICE OF THE COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES SEE "UNDERWRITING."
IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS AND CERTAIN SELLING
GROUP MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M
UNDER THE SECURITIES EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT"). SEE
"UNDERWRITING."
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information“Company,” “our,” “us,” and financial statements (including the notes thereto) appearing
elsewhere and incorporated by reference“we,” as used in this Prospectus. Unless otherwise
indicated, the information in this Prospectus does not give effect to the
exercise of the Underwriters' over-allotment option. Investors should carefully
consider the information set forth under the caption "Risk Factors." Unless the
context otherwise requires, the "Company" or "RCM" refersprospectus, refer to RCM Technologies, Inc., unless we state otherwise or the context indicates otherwise.
1
RCM TECHNOLOGIES, INC.
Overview
RCM Technologies, Inc. is a premier provider of business and technology solutions designed to enhance and maximize the operational performance of its wholly owned subsidiaries. References to fiscal years are to the
respective fiscal years of the Company which end October 31.
THE COMPANYcustomers. The Company is a multi-regional providerprovides these services through the deployment of specialty health care, engineering, life sciences, information technology services, data management and other professional staffing services through its 41 branch offices located in 17
states. The Company's Information Technology Group offers responsive, timely and
comprehensive information technology staffing solutions to support the entire
systems applications development and implementation process. The Company's
information technology professionals have expertise in a variety of technical
disciplines, including enterprise software, network communications, database
design and development and client server migration. The Company also offers
professional engineering staffing and project management services, through its
Professional Engineering Group, for a variety of engineering disciplines, such
as aeronautical, electro-mechanical, nuclear and computer science. As of April
24, 1998, the Company employed approximately 1,000 information technology and
approximately 500 professional engineering personnel. The Company is also
engaged in the specialty healthcare and general support sectors of the staffing
industry. During fiscal 1997, the Company placed employees with approximately
1,150 customers within a variety of industries. Representative customers include
AT&T, Bell Atlantic, Chase Manhattan Bank, Liberty Mutual Insurance, MCI, Merck,
Merrill Lynch, Northeast Utilities and 3M.
Since fiscal 1995,solutions. For over 50 years, the Company has pursueddeveloped and assembled an aggressive growth strategy
designed to transition the Company's business from general supportextensive portfolio of capabilities, service offerings and delivery options with world class technical talent in key end markets and high-growth industries. This combination, paired with RCM’s efficient pricing structure and global reach, offers clients a compelling value proposition.
RCM consists of three operating segments: Specialty Health Care, Engineering, and Life Sciences and Information Technology services.
•
The Specialty Health Care segment provides staffing services to higher growth, higher margin professional staffing services,
particularlysolutions including medical health care professionals, health information technology. In fiscal 1995, approximately halfmanagement professionals, nurses, paraprofessionals, physicians and therapists for many of the Company's revenues were derived from general support staffinglargest healthcare institutions and the Company
did not offer information technology services. For the three months ended
January 31, 1998, information technology services contributed 57% of the
Company's revenues. Since the beginning of fiscal 1995, the Company has acquired
13 information technology or professional engineering staffing services
companies, aggregating $126.7 million in revenues for their respective latest
twelve months prior to acquisition. Through these acquisitions, the Company has
achieved substantial revenue growth, improved its operating profitability and
repositioned itself as a provider of information technology and other
professional staffing services. The Company's revenues increased from $26.9
million in fiscal 1995 to $114.0 million in fiscal 1997, a compound annual
growth rate of 106%. For the same period, the Company's operating income
increased from $857,000 to $8.5 million, and its operating margin improved from
3.2% to 7.4%. On a pro forma basis (as if all fiscal 1997 and fiscal 1998
acquisitions occurred at the beginning of fiscal 1997), the Company's fiscal
1997 revenues, operating income and operating margins were $165.5 million, $13.3
million and 8.0%, respectively. As a result of this repositioning, the Company
now operates in the fastest growing sector of the staffing industry and is
experiencing strong internal growth. For the three months ended January 31,
1998, the Company's internal revenue growth was 34% over the comparable
prior-year period.
3
The staffing industry has experienced rapid growth in recent years.
According to the Staffing Industry Report, revenues in the domestic temporary
staffing industry have grown from $24.6 billion in 1992 to an estimated $53.7
billion in 1997, a five-year compound annual growth rate of 17%. Temporary
staffing is now considered an effective tool for managing a company's investment
in human resources. Temporary staffing allows companies to expand and contract
employee levels based on current needs, thus converting fixed labor costs into
controllable variable costs while still maintaining a high degree of employee
skill level. Within the staffing industry, information technology staffing
services is the fastest growing sector, having increased from approximately $5.1
billion in 1992 to approximately $14.9 billion in 1997, a five-year compound
annual growth rate of 24%. This growth is a result of numerous factors,
including (i) the increasing importance to companies of information technology,
(ii) the need for companies to continually update and integrate hardware
platforms and software applications, (iii) the difficulties companies have in
sustaining the requisite information technology expertise internally, (iv) the
acceptance by companies of outsourcing information technology needs and (v) an
increasing preference by technical professionals to operate independently,
motivated by a desire to increase personal flexibility and work on a variety of
technologies and projects. The temporary staffing industry is highly fragmented,
with over 7,000 staffing companies in the United States, and is undergoing
significant consolidation.
The Company's objective is to become a leading provider of information
technology and other professional staffing services in selected high growth,
high density regional markets throughoutschool districts across the United States. The Company intendssegment also provides Teletherapy services targeting the education sector with an emphasis on behavioral health.
•
The Engineering segment provides a comprehensive portfolio of engineering and design services across three verticals: (1) Energy Services, (2) Process & Industrial and (3) Aerospace. The segment also offers a complementary suite of consulting solutions and services to achieve this objective by (i) focusing on information technologyaugment its engineering portfolio, including design and supply of high-quality engineered process solutions and equipment, data management, technical writing and digital documentation across marine, locomotive, transportation and aerospace markets, integrated design and construction, and engineering, procurement and construction management (“EPC”), as well as demand side management/energy conservation services. The business segment staffs engineers to design and build critical infrastructure projects for clients with international coverage.
•
The Life Sciences and Information Technology, or LS&IT, segment provides enterprise business solutions, application services, IT infrastructure solutions, life sciences solutions and other professional staffingvertical-specific offerings. The business segment includes data solutions, digitization, recruiting process outsourcing, human capital management solutions, workforce management and consulting services.
The Company services (ii) strengtheningsome of the largest national and international companies in North America as well as a lengthy roster of Fortune 1000 and mid-sized global businesses in such industries as Aerospace/Defense, Educational Institutions, the Energy Sector, Financial Services, Health Care, Life Sciences, Manufacturing & Distribution, the Public Sector and Technology. RCM sells and delivers its market presenceservices through a network of approximately 29 offices in selected regions throughout the country, (iii) making strategic acquisitions in
existingNorth America and new regions, (iv) promoting internal growth and (v) migrating its
product offerings to higher value-added services.Europe. The Company typically enters a region by acquiring a profitable, growing
providerhas staffed key personnel to design and build internationally recognized critical infrastructure projects and retained strategic partners and client accounts for decades.
During the fiscal year ended December 30, 2023, approximately 51.7% of information technology or other professional staffingRCM’s total revenue were derived from Specialty Health Care services, operated by a management team with an interest in joining32.2% from Engineering services, and the Company after the
acquisition. remaining 16.1% from Life Sciences and Information Technology services.
The Company believes its entrepreneurial and decentralized
operating environment is a key attribute in its ability to attract and close
acquisitions, retain the management of acquired companies and promote internal
growth. The Company builds on the names, reputations and customer relationships
of acquired companies and shares operating policies, procedures and expertise
among its branches to enhance operating efficiencies. The Company also focuses
on quickly integrating the administrative functions of acquired companies in
order to realize administrative savings and synergies, integrate and establish
financial controls and relieve management of administrative burdens so that they
can focus on growing sales.
The Company plans to promote internal growth by continuing to cross-sell
its existing mix of specialty professional services and increasing its revenues
from higher margin project management and consulting services. As an example of
cross-selling, the Company has successfully provided the services of its
Information Technology Group to the utility industry customer base of its
Professional Engineering Group. The Company believes the utilities industry iswas incorporated in the early stagesstate of a period of deregulation which will increase the
industry's need for information technology services. Additionally, the Company
plans to use the project management expertise of its Professional Engineering
Group to assist its Information Technology GroupNevada in expanding its sales of
higher value-added project management and consulting services.
The1971. Our principal executive offices of the Company are located at 2500 McClellan Avenue, Suite 350, Pennsauken, New JerseyNJ 08109 and itsour telephone number is (609)
486-1777.
4
THE OFFERING
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(1)(856) 356-4500. Our website address is www.rcmt.com. The Common Stock offeredinformation contained on our website is not incorporated by the Selling Stockholders consists of shares toreference into this prospectus, and you should not consider any information contained on, or that can be issued by the Company upon the exercise of stock options (the "Selling
Stockholder Options") by the Selling Stockholders at a weighted average
exercise price of $3.20 per share.
(2) Does not include an aggregate of 1,959,525 shares of Common Stock reserved
for issuance under the Company's stock option plans. As of April 24, 1998,
options to acquire 1,103,875 shares (including the Selling Stockholder
Options) of Common Stock at exercise prices ranging from $1.09 to $14.50
were outstanding, including options to acquire 403,950 shares which were not
exercisableaccessed through, our website as of the datepart of this Prospectus. Also does not include 55,855
shares of Common Stock issuable upon the exercise of 279,274 Class C
Warrants (the "Warrants") of the Company, at an effective price of $15.00
per share, as of the date of this Prospectus. The Warrants are scheduledprospectus or in deciding whether to expire on April 30, 1998.
5
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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(1) Adjusted to give effect to (i) the acquisitions (and related financing
transactions) which occurred during fiscal 1997 and fiscal 1998 and (ii) the
reduction in interest expense resulting from the anticipated use of the
estimated net proceeds from the Offering (assuming a public offering of
539,785 shares at a price of $23.00 per share), as if all such transactions
had occurred as of the beginning of fiscal 1997. See "Use of Proceeds" and
"Unaudited Pro Forma Consolidated Condensed Statements of Operations."
(2) Adjusted to give effect to (i) the acquisitions (and related financing
transactions) which occurred during fiscal 1998 and (ii) the reduction in
interest expense resulting from the anticipated use of the estimated net
proceeds from the Offering (assuming a public offering of 389,792 shares at
a price of $23.00 per share), as if all such transactions had occurred at
the beginning of fiscal 1998. See "Use of Proceeds" and "Unaudited Pro Forma
Consolidated Condensed Statements of Operations."
(3) Income from continuing operations for fiscal 1997 does not include after tax
loss from discontinued operations of $363,000, or $0.06 per share.
(4) Assumes an effective tax rate of 42% for fiscal 1995, fiscal 1996purchase our common stock.
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, each prospectus supplement and the three months ended January 31, 1997. The Company's effective tax rates for
fiscal 1995, fiscal 1996 and the three months ended January 31, 1997 were
10%, 16% and 39%, respectively, due to the utilization of net operating loss
carryforwards.
(5) Gross margin is gross profit as a percentage of total revenues.
(6) Operating margin is operating income as a percentage of total revenues.
(7) Assumes the acquisitions which occurred subsequent to January 31, 1998 had
occurred on January 31, 1998.
(8) Gives effect to the issuance and sale of 2,509,980 shares of Common Stock
offered by the Company hereby, the issuance of 190,020 shares upon the
exercise of stock options by the Selling Stockholders and the anticipated
application of the estimated net proceeds therefrom (assuming a public
offering price of $23.00 per share). See "Use of Proceeds."
(9) Excludes Note payable-bank.
6
RISK FACTORS
This Prospectus and other reports and statements filed by the Company
(collectively, "Commission Filings") from time to time with the Securities and
Exchange Commission (the "Commission") contain or may contain certain
forward-looking statements and information that are based on the beliefs of the
Company's management as well as estimates and assumptions made by, and
information currently available to, the Company's management. When used in
Commission Filings, the words "anticipate," "believe," "estimate," "expect,"
"future," "intend," "seek," "plan" and similar expressions, as they relate to
the Company or its management, identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions relating
to the Company's operations and results of operations, competitive factors,
shifts in market demand and other risks and uncertainties, including, in
addition to any uncertainties specifically identified in the text surrounding
such statements, uncertainties with respect to changes or developments in
social, economic, business, industry, market, legal and regulatory circumstances
and conditions and actions taken or omitted to be taken by third parties,
including the Company's stockholders, customers, competitors and legislative,
regulatory, judicial and other governmental authorities. Should one or more of
these risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may vary significantly from those anticipated,
believed, estimated, expected, intended, sought or planned. The following risk
factors should be considered carefully in addition to the other information
contained or incorporated by reference in this Prospectus before purchasingprospectus and each prospectus supplement contain forward-looking statements within the Common Stock offered hereby.
Abilitymeaning of Section 27A of the Securities Act of 1933, as amended, which we refer to Achieveas the Securities Act, and Manage Growth. The Company has experienced
significant growth sinceSection 21E of the beginningExchange Act of fiscal 1995, principally through
acquisitions. Continued growth could place additional demands on its
administrative, operational and financial resources. The Company's ability1934, as amended, which we refer to achieve and manage its growth will depend onas the Exchange Act, that involve a number of risks and uncertainties. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on facts and factors including the
Company's abilitycurrently known by us. Consequently, these forward-looking statements are inherently subject to attractknown and retain managementunknown risks, uncertainties and other key personnel, its
ability to adaptfactors that may cause actual results and grow its management information systems, its ability to
maintain sufficient profit marginsoutcomes may differ materially from results and the level of demand for contract and
temporary personneloutcomes discussed in the sectorsforward-looking statements.
Forward-looking statements can generally be identified by the use of forward-looking terms such as “believe,” “hope,” “expect,” “may,” “will,” “should,” “could,” “would,” “seek,” “intend,” “plan,” “estimate,” “anticipate” and “continue,” or other comparable terms (including their use in which the Company operates. There can be
no assurance thatnegative), or by discussions of future matters. These statements include but are not limited to statements under the Company will be able to continue to achieve or manage such
growth effectivelycaptions “Business,” “Risk Factors” and the failure to do so could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” and "Business -- Business Strategy."
Risks of Acquisitionin other sections included in any applicable prospectus supplement or incorporated by reference from our Annual Report on Form 10-K and Integration of Acquired Businesses. As part of
its business strategy,Quarterly Reports on Form 10-Q, as applicable, as well as our other filings with the Company will continue to evaluate opportunities to
acquire local and regional businesses that expand or complement the Company's
business. There canSEC. You should be no assuranceaware that the Company will find attractive
acquisition candidatesoccurrence of any of the events discussed under the heading “Risk Factors” in this prospectus, any applicable prospectus supplement and any documents incorporated by reference herein or effectively manage the integration of acquired
businesses into its existing business. If the expected operating efficiencies
from such transactions do not materialize, if the Company fails to integrate new
businesses in a timely manner into its existingtherein could substantially harm our business, or if the costs of such
integration exceed expectations, the Company's operating results and financial condition would be adversely affected. Future acquisitions by the Company could
result in the incurrence of debt, the potentially dilutive issuance of equity
securities and the incurrence of contingent liabilities and amortization
expenses related to goodwill and other intangible assets,that if any of whichthese events occurs, it could adversely affect the Company'svalue of an investment in our securities.
The cautionary statements made in this prospectus are intended to be applicable to all related forward-looking statements wherever they may appear in this prospectus or in any prospectus supplement or any documents incorporated by reference herein or therein. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except as required by law, we assume no obligation to update our forward-looking statements, even if new information becomes available in the future.
RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully review the risks and uncertainties described under the heading “Risk Factors” contained in any applicable prospectus supplement and any related free writing prospectus, and under similar headings in our Annual Report on Form 10-K for the year ended December 30, 2023, as updated by our annual, quarterly and other reports and documents that are incorporated by reference into this prospectus, before deciding whether to purchase any of the securities being registered pursuant to the registration statement of which this prospectus is a part. Each of the risk factors could adversely affect our business, operating results and financial condition. The
amount allocable to intangible assets on the Company's balance sheet may
increase in connection with acquisitions, which will increase the Company's
amortization expense. The Company had $29.5 million of intangible assetscondition, as of
January 31, 1998. In the event of any sale or liquidation of the Company or a
portion of its assets, there can be no assurance thatwell as adversely affect the value of an investment in our securities, and the Company's
intangible assets will ever be realized. occurrence of any of these risks might cause you to lose all or part of your investment.
The carrying valueprospectus supplement applicable to each type or series of goodwill is
reviewed ifsecurities we offer may contain a discussion of risks applicable to the facts and circumstances suggestparticular types of securities that it may be impaired. If this
review indicateswe are offering under that goodwill would not be recoverable, as determined based onprospectus supplement. Prior to making a decision about investing in our securities, you should carefully consider the undiscounted cash flowsspecific factors discussed under the caption “Risk Factors” in the applicable prospectus supplement, together with all of the entity acquired overother information contained in the remaining
amortization period, the Company's carrying valueprospectus supplement or appearing or incorporated by reference in this prospectus. These risks could materially affect our business, results of the goodwill will be
reduced by the estimated shortfall of cash flows. Any future determination
requiring the write-off of a significant portion of unamortized intangible
7
assets could have a material adverse effect on the Company'soperations or financial condition and resultscause the value of operations.
Dependence on Availability of Qualified Personnel. The Company depends on
its abilityour securities to attract, train and retain qualified personnel who possess the
skills and experience necessary to meet the staffing requirements of its
customers. Competition for information technology personnel is particularly
intense and demand for their services has, to date, substantially exceeded their
supply. The Company expects such competition to continue. Factors influencing
such competition include compensation, benefits, variety of assignments, growth
opportunities, relationships with other staffing companies and full-time
employment opportunities. The Company, like others in the information technology
staffing industry, depends to a significant degree on the recruitment of
personnel from outside the United States. The availability of information
technology personnel from countries outside the United States is affected by the
number of visas granted under current United States immigration laws, and these
laws have made and may continue to make the recruitment of international
information technology personnel more difficult. There can be no assurance that
qualified personnel will continue to be available to the Company in sufficient
numbers and on terms of employment acceptable to the Company. The inability to
attract and retain qualified personnel in sufficient numbers,decline. You could lose all or to upgrade its
base of qualified personnel to keep pace with changing customer needs and
emerging technologies, could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Operations."
Competitive Market. The staffing industry is highly competitive, with
limited barriers to entry. The Company's principal competitors are generally
local or regional independent staffing companies that are located in the
Company's various regional markets. The Company also encounters competition from
international and national companies. Certain of the Company's competitors have
more established operations and greater marketing, financial and other resources
than the Company. In addition, as part of the Company's growth strategy, the
Company competes for suitable acquisition candidates. Increased competition for
such acquisition candidates could have the effect of increasing the price for
acquisitions or reducing the number of suitable candidates for acquisition. The
Company expects that the level of competition will remain high in the future,
which could limit the Company's abilityyour investment. Additional risks not presently known to maintain its market share or maintain
gross margins in the geographic regions or industry sectors in which it
operates, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Competition."
Reliance on Key Personnel. The Company is highly dependent upon the
continued services and experience of its senior members of management, including
Leon Kopyt, Chairman of the Board and Chief Executive Officer. The loss of the
services of Mr. Kopyt or other senior members of management could have a
material adverse effect on the Company's business. The Company has employment
agreements with Mr. Kopyt and certain other members of management.
Liability for Employee Actions. Providers of staffing services generally
place their employees in the workplace of other companies. The risk of employee
misconduct is attendant to the Company's business. These risks could include
claims relating to errors and omissions, misuse of proprietary information,
misappropriation of funds, discrimination and harassment, theft of customer
property, other criminal activity or torts and other claims. The Company has not
historically experienced any material claims of these types, and has insurance
covering certain of these risks. However, there can be no assurance that the
Company will not experience such claims or incur costs in connection with such
risks in the future. Further, there can be no assurance that insurance coverage
for such risks will continue to be available to the Companyus or that coverage
will be adequate to cover such liabilities.
Risk of Government Regulations and Legislative Proposals. The Company's
costs of operations could increase if therewe currently believe are any material changes in
government regulations. Recent federal and state legislative proposals have
included provisions seeking to extend health insurance benefits to employees who
do not currently receive such benefits. As a result ofimmaterial may also significantly impair our business operations. Please also read carefully the wide variety of
national and state proposals currently under consideration, the impact of such
proposals cannot be predicted. There can be no assurance that the Company will
be able to increase the rates charged to its customers in a timely
8
manner and in sufficient amounts to cover increased costs related to any new
benefits that may be extended to temporary employees as a result of such
legislation or regulations. It is not possible to predict whether any other
legislation or regulations affecting the Company's operations will be proposed
or enacted at the federal or state level; however, no assurance can be given
that if enacted, such legislation or regulations would not have a material
adverse effect on the Company.
Broad Discretion in Use of Proceeds. The Company intends to use
approximately $6.7 million of the net proceeds of the Offering to repay
indebtedness and will have broad discretion in using the remaining proceeds of
the Offering. The Company intends to use the balance of the net proceeds for
general corporate purposes, primarily to finance future acquisitions. Although
the Company regularly reviews strategic acquisition opportunities, as of the
date of this Prospectus, the Company has no binding agreements with respect to
any material acquisitions. Consequently, there can be no assurance as to when or
how the remaining net proceeds from the Offering will be used. If the Company is
unable to promptly utilize such proceeds in connection with acquisitions, or to
otherwise use such proceeds in the growth of its business, the returns realized
from temporarily investing such proceeds may be substantially less than the
returns which could be realized if such proceeds were successfully invested in
the business. See "Use of Proceeds."
Dependence on Key Customers. Although the Company provides services to a
large number of customers, approximately 21.9% and 18.8% of the Company's
revenues for fiscal 1997 and the three months ended January 31, 1998,
respectively, were derived from the Company's top five customers. One such
customer accounted for approximately 11.5% and 8.4% of the Company's revenues
over the same periods, respectively. The loss of, or a reduction in, business
from any major customer could adversely affect the Company. See "Business --
Sales and Marketing."
Fluctuations in Quarterly Operating Results. The Company has experienced,
and expects to continue experiencing, quarterly variations in revenues and
operating income as a result of many factors, including the timing of
assignments from customers, acquisitions, selling, general and administrative
expenses to support new business and the incurrence of payroll taxes. In
connection with certain engineering projects, the Company could incur costs in
periods prior to recognizing revenues under those contracts. In addition, the
Company must plan its operating expenditures based on revenue forecasts, and a
revenue shortfall below the forecast for any quarter would likely have an
adverse effect on the Company's operating results for the quarter. While the
effects of seasonality of the Company's business have been obscured by its
growth through acquisitions, the Company's branch offices usually experience
lower revenues in the Company's first fiscal quarter due to the slowdown in
business associated with the calendar year-end holiday season.
Shares Eligible for Future Sale. Sales of substantial amounts of Common
Stock in the public market following the Offering could adversely affect the
market price of the Common Stock. Upon the closing of the Offering, there will
be 10,393,868 shares of Common Stock outstanding, all of which will be freely
tradeable without restriction or further registration under the Securities Act,
unless held by an "affiliate" of the Company as that term is defined in Rule 144
under the Securities Act, which shares will be subject to the resale limitations
of Rule 144 and, except for (i) 1,096,936 shares which have been registered for
resale and may be sold subject to certain contractual restrictions limiting
resales by each of Messrs. Meyers and Blaire, to 50,000 shares, each, per week,
(ii) 55,265 shares which have been registered for resale, but are subject to a
90-Day Lock-Up Period (as defined below), and (iii) 312,311 shares which may not
be sold until November 30, 1998 due to contractual restrictions. The sale of
914,425 shares held by the directors and officers of the Company, is limited by
lock-up agreements. Under the terms of the lock-up agreements, these holders
have agreed that they will not, without the prior written consent of BT Alex.
Brown Incorporated, offer, sell, contract to sell or otherwise dispose of their
shares for a period of 90 days from the date of this Prospectus (the "Lock-Up
Period"). Following expiration of the Lock-Up Period, all of the shares subject
to the lock-up agreement will be eligible for public resale. Sales of additional
shares in the public market could also occur upon the exercise of existing stock
options. The Company is unable to predict the effect, if any, that future sales
of shares, or the availability of shares for future sale, will have on the
market price for the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or
9
the perception that such influx of shares into the market could occur, could
adversely affect the market price for the Common Stock and could impair the
Company's future ability to obtain capital through offerings of equity
securities. See "Shares Eligible for Future Sale."
Effect of Certain Anti-takeover Provisions. Certain provisions of the
Company's Articles of Incorporation, as amended (the "Articles of
Incorporation") and Amended and Restated Bylaws (the "Bylaws"), the Nevada
Revised Statutes, the Company's Stockholder Rights Plan (the "Rights Plan") and
the Second Amended and Restated Termination Benefits Agreement between the
Company and its Chief Executive Officer (the "Benefits Agreement") could delay
or frustrate the removal of incumbent directors and could make difficult a
change in control transaction including a merger, tender offer or proxy contest
involving the Company, even if such events could be viewed as beneficial by the
Company's stockholders. For example, the Articles of Incorporation provide for a
classified Board of Directors and deny the right of stockholders to amend the
Bylaws without the consent of the Board and require advance notice of
stockholder nominations of directors. The Company is also subject to provisions
of the Nevada Revised Statutes, which prohibit a Nevada corporation that has 200
or more stockholders, at least 100 of whom are stockholders of record and Nevada
residents, from engaging in a broad range of business combinations with a person
who, together with affiliates and associates, owns 10% or more of the
corporation's outstanding voting shares (an "interested stockholder") for three
years after the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. In addition, the Rights Plan
provides for substantial dilution of an "acquiring person" (as defined therein)
in the event a person or group of persons acquires beneficial ownership of 15%
or more of the outstanding Common Stock or in the event of a merger or sale of
assets which is not approved by the "continuing directors," of the Company (as
defined in the Rights Plan). Furthermore, in the event of a "change in control"
(as defined in the Benefits Agreement) which results in the termination of the
Chief Executive Officer, the Company would be required to make substantial
payments and, in certain circumstances, reduce the exercise price of options
issued to the Chief Executive Officer.
10
ACQUISITION PROGRAM
Since fiscal 1995, the Company has pursued an aggressive growth strategy
designed to transition the Company's business from general support staffing to
higher growth, higher margin professional staffing services, particularly
information technology. The Company has implemented this strategy through the
acquisition of 13 information technology or professional engineering staffing
services companies, aggregating $126.7 million in revenues for their respective
latest twelve months prior to the acquisition. Through these acquisitions, the
Company has achieved substantial revenue growth, improved its operating
profitability and repositioned itself as a provider of information technology
and other professional staffing services. A key element of the Company's growth
strategy is to continue to pursue strategic acquisitions. The Company believes
that its success in completing acquisitions is due to its entrepreneurial and
decentralized operating philosophy, its strong corporate-level support and
resources, its status as a public company and its ability to offer management of
the acquired companies an opportunity to join and participate in the growth of a
rapidly growing provider of information technology and other professional
staffing services. See "Business -- Growth Strategy."
The following table provides a summary of the acquisitions completed by the
Company since fiscal 1995:
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(1) Services provided are abbreviated as follows:
IT - Information Technology
PE - Professional Engineering
SH - Specialty Healthcare
GS - General Support
(2) Represents approximate revenues in the latest 12 months prior to the date of
acquisition.
11
section above titled “Special Note Regarding Forward-Looking Statements.”
3
USE OF PROCEEDS
The
We will retain broad discretion over the use of the net proceeds from the sale of the 2,509,980 shares of Common Stocksecurities offered by the Company hereby and the issuance of 190,020 shares upon the
exercise of stock options by the Selling Stockholders are estimatedhereby. Except as described in any prospectus supplement or any related free writing prospectus that we may authorize to be approximately $54.9 million ($63.7 million ifprovided to you, we currently intend to use the Underwriters' over-allotment
option is exercised in full), assuming a public offering price of $23.00 per
share and after deducting estimated underwriting discounts and commissions and
expenses of the Offering. The Company will not receive anynet proceeds from the sale of Common Stockthe securities offered by the Selling Stockholders hereby.
The Company intends tohereby for general corporate purposes, which may include capital expenditures, working capital and general and administrative expenses. We may also use a portion of the net proceeds after repayment of $6.7
million of indebtedness, of approximately $48.2 million ($57.0 million if the
Underwriters' over-allotment is exercisedto acquire or invest in full) for working capital and other
general corporate purposes, primarilybusinesses that are complementary to finance future acquisitions. Although
the Company regularly reviews strategic opportunities,our own, although we have no current plans, commitments or agreements with respect to any acquisitions as of the date of this Prospectus,prospectus. We have not yet determined the Company has no binding agreements with respectamount of net proceeds to be used specifically for any material
acquisition.
Approximately $6.7 million of the foregoing purposes. We will set forth in the applicable prospectus supplement or free writing prospectus our intended use for the net proceeds received from the Offering will be
usedsale of any securities sold pursuant to repay indebtedness outstanding under the Company's revolving credit
facility with Mellon Bank, N.A.prospectus supplement or free writing prospectus.
DESCRIPTION OF CAPITAL STOCK
The description below of our capital stock and provisions of our Articles of Incorporation, as amended (the "Revolving Credit Facility"“Articles”) which was
obtained for working capital purposes, and acquisition financing. our Amended and Restated Bylaws (the “Bylaws”), are summaries and are qualified by reference to the Articles and the Bylaws, and the applicable provisions of Nevada law.
General
The Revolving
Credit Facility provides a revolving line of credit, which permits borrowings ofArticles authorize us to issue up to $20.0 million40,000,000 shares of common stock, $0.05 par value per share, and expires on June 30, 1999. Borrowings under5,000,000 shares of preferred stock, $1.00 par value per share.
As of March 13, 2024, there were 7,939,319 shares of common stock outstanding and no shares of preferred stock outstanding.
Common Stock
The holders of our common stock are entitled to one vote for every share standing in the Revolving
Credit Facility bear interest, at the Company's option, at LIBOR (London
Interbank Offered Rate) or the bank's prime rate, in each case plus applicable
margin. The weighted average interest rate at March 31, 1998, was 8.50% and, as
of such date, $8.7 million was outstanding under such facility. The Revolving
Credit Facility has been used to fund certainname of the Company's acquisitions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Pending the uses described above, the Company intends to invest the net
proceeds in short-term, investment-grade securities.
12
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "RCMT." Prior to June 10, 1997, the Company's Common Stock was traded
on The Nasdaq SmallCap Market. The following table sets forth approximate high
and low sales prices by fiscal quarters for the periods indicated, as reported
by the market on which it was traded.
On April 28, 1998, the last reported sale price of the Common Stock on the
Nasdaq National Market was $23.00 per share.
As of April 22, 1998, the approximate number of holders of record of the
Company's Common Stock was 1,736. 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
4,450.
The Company has never declared or paid a cash dividend on the Common Stock
and does not anticipate paying any cash dividendsstockholder in the foreseeable future. It
is the current policy of the Company's Board of Directors to retain all earnings
to finance the development and expansion of the Company's business. Any future
payment of dividends will be at the discretion of the Board of Directors and
will depend upon, among other things, the Company's earnings, financial
condition, capital requirements, level of indebtedness, contractual restrictions
and other factors that the Board of Directors deems relevant. The Revolving
Credit Facility prohibits the payment of dividends or distributions on account
of the capital stock without the prior consent of Mellon Bank, N.A.
13
CAPITALIZATION
The following table sets forth the cash and cash equivalents, short-term
debt and capitalizationbooks of the Company on a consolidated basis, as of January
31, 1998 (i) on an actual basis, (ii) on a pro forma basis to give effect to
acquisitions completed after January 31, 1998, and (iii) as adjusted to give
effectany matter submitted to the Offering, andstockholders, including the anticipated applicationelection of directors. Under Nevada law, holders of the estimated net
proceeds therefrom as set forth in "Use of Proceeds." The table should be
reviewed in conjunction with the Company's historical and pro forma consolidated
financial statements and related notes appearing elsewhere or incorporated by
reference in this Prospectus.
- ------------------
(1) Assumes that the acquisitions which occurred subsequent to January 31, 1998
had occurred on January 31, 1998.
(2) Gives effect to the sale of 2,509,980 shares of Common Stock offered by the
Company hereby, the issuance of 190,020 shares of Common Stock upon exercise
of stock options by the Selling Stockholders, and the application of the
estimated net proceeds therefrom (assuming a public offering price of $23.00
per share). See "Use of Proceeds."
(3) The Note payable-bank reflects amounts outstanding under the Revolving
Credit Facility. Amounts outstanding under the Revolving Credit Facility are
secured, in part, by current assets of the Company and, as a result, are
classified within the Company's Consolidated Financial Statements as current
liabilities. The Revolving Credit Facility requires the Company to maintain
minimum borrowings of $2 million. See Note 6 of Notes to Consolidated
Financial Statements appearing elsewhere in this Prospectus.
(4) Pro forma as adjusted does not include 122,496 shares of Common Stock
issuable upon the exercise of 612,479 Warrants of the Company, at an
effective price of $15.00 per share, as of January 31, 1998. The Warrants
are scheduled to expire on April 30, 1998. Pro forma as adjusted also does
not include 914,425 shares of Common Stock issuable upon the exercise of
outstanding stock options of the Company.
14
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data for, and as of the end of, each of
the years in the five year period ended October 31, 1997 are derived from the
audited consolidated financial statements of the Company included elsewhere or
incorporated by reference in this Prospectus. The selected consolidated
financial data for the three months ended January 31, 1997 and 1998 are derived
from the unaudited consolidated financial statements of the Company, which in
the opinion of management include all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the results of operations and
financial position for such periods. The results of operations for the three
months ended January 31, 1998 are not necessarily indicative of the results of
operations to be expected for the year. The pro forma adjustments are described
in the accompanying notes to the pro forma consolidated financial statements.
The pro forma results of operations are not necessarily indicative of the
results that would have occurred had the acquisitions been consummated as of the
beginning of the period presented or that might be attained in the future. The
following data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the actual and
pro forma consolidated financial statements of the Company included elsewhere or
incorporated by reference in this Prospectus.
- ------------------
(1) Adjusted to give effect to (i) the acquisitions (and related financing
transactions) which occurred during fiscal 1997 and fiscal 1998 and (ii) the
reduction in interest expense resulting from the anticipated use of the
estimated net proceeds from the Offering (assuming a public offering of
539,785 shares at a price of $23.00 per share), as if all such transactions
had occurred as of the beginning of fiscal 1997. See "Use of Proceeds" and
"Unaudited Pro Forma Consolidated Condensed Statements of Operations."
(2) Adjusted to give effect to (i) the acquisitions (and related financing
transactions) which occurred during fiscal 1998 and (ii) the reduction in
interest expense resulting from the anticipated use of the estimated net
proceeds from the Offering (assuming a public offering of 389,792 shares at
a price of $23.00 per share), as if all such transactions had occurred at
the beginning of fiscal 1998. See "Use of Proceeds" and "Unauditied Pro
Forma Consolidated Condensed Statements of Operations."
(3) Assumes an effective tax rate of 42% for fiscal 1993, 1994, 1995 and 1996
and the three months ended January 31, 1997. The Company's effective tax
rates for fiscal 1993, 1994, 1995, 1996 and the three months ended January
31, 1997 were 10%, 12%, 10%, 16% and 39%, respectively, due to the
utilization of net operating loss carryforwards.
(4) Assumes that the acquisitions which occurred subsequent to January 31, 1998
had occurred on January 31, 1998 and gives effect to the sale of 2,509,980
shares of Common Stock offered by the Company hereby, the issuance of
190,020 shares upon the exercise of stock options by the Selling
Stockholders and the anticipated application of the estimated net proceeds
therefrom (assuming a public offering price of $23.00 per share). See "Use
of Proceeds."
(5) Excludes Note payable-bank.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a multi-regional provider of information technology and
other professional staffing services through its 41 branch offices located in 17
states. Since its inception in 1971, the Company's business and strategy have
evolved substantially. Initially, the Company focused on the development of
environmental technologies and, until 1977, operated an aluminum recovery
facility in California. In 1981, the Company diversified its operations through
the acquisition of Intertec Design, Inc., a temporary staffing company that
provided professional engineering, clerical and light industrial personnel. In
fiscal 1992, at the recommendation of the current President and Chief Executive
Officer, Leon Kopyt, the Company discontinued its environmental business. In
fiscal 1994, the Company embarked on a strategy to position staffing services as
its core business.
Since fiscal 1995, the Company has pursued an aggressive growth strategy
designed to transition the Company's business from general support staffing
services to higher growth, higher margin professional staffing services,
particularly information technology. In fiscal 1995, approximately half of the
Company's revenues were derived from general support staffing and the Company
did not offer information technology services. For the three months ended
January 31, 1998, information technology services contributed 57% of the
Company's revenues. Since the beginning of fiscal 1995, the Company has acquired
13 information technology or professional engineering staffing services
companies, aggregating $126.7 million in revenues for their respective latest
twelve months prior to acquisition. Through these acquisitions, the Company has
achieved substantial revenue growth, improved its operating profitability and
repositioned itself as a provider of information technology and other
professional staffing services.
The following table is presented to illustrate the Company's successful
transition of its business mix and sets forth, for the periods indicated, the
Company's (i) sources of revenues as a percentage of total revenues, (ii) gross
profit margin by sources of revenues, and (iii) gross profit by sources of
revenues as a percentage of total gross profit.
16
The Company realizes revenues from the placement of contract and temporary
staffing personnel. These services are primarily provided to the customer at
hourly rates that are established for each of the Company's staffing personnel,
based upon their skill level and experience and the type of work performed.
Hourly billing rates for staffing services range from $60 to $85 for the
Information Technology Group, $50 to $75 for the Professional Engineering Group,
$8 to $18 for the General Support Group, and $40 to $70 for the Specialty
Healthcare Group. The Company also provides project management and consulting
work, primarily in the Professional Engineering Group, which are billed either
by agreed upon fee or hourly rates, or a combination of both. The billing rates
and profit margins for project management and consulting work are higher than
those received for professional staffing services. Hourly billing rates for
project management work range from $125 to $185 within the Information
Technology Group and $110 to $155 within the Professional Engineering Group. The
Company plans to expand its sales of higher margin consulting and project
management services. See "Business -- Growth Strategy."
The majority of the Company's services are provided under purchase orders.
Contracts are utilized on certain of the more complex assignments where the
engagements are for longer terms or where precise documentation on the nature
and scope of the assignment is necessary. Contracts, although they normally
relate to longer-term and more complex engagements, generally do not obligatehave any preemptive rights to acquire any shares, treasury shares or securities convertible into such shares, if the customer to purchase a minimum level of services and are generally
terminable byshares or shares into which the customer on 60 to 90 days notice. Revenues are recognized when
services are provided.
Costs of services consist primarily of salaries and compensation-related
expenses for billable staffing personnel, including payroll taxes, employee
benefits, worker's compensation and other insurance. Principally all of the
billable personnel are treated by the Company as employees. 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 which is being amortized over 40-year
periods.
The Company's net income for fiscal 1995 and 1996 has been determined after
giving effect to the utilization of a net operating loss carryforward. This
effectively reduced federal tax accruals to a minimal amount during those
periods and subjected the Company to composite tax rates of between 9.9% and
16.1%, principally as a result of state income taxes. As of January 31, 1997,
the Company had utilized principally all of its net operating loss carryforward
and, accordingly, expects that for the foreseeable future its net income will be
subject to full federal and state rates of taxation.
17
RESULTS OF OPERATIONS
The following table sets forth certain income statement data on a
historical and pro forma as adjusted basis as a percentage of revenue:
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(1) Adjusted to give effect to (i) the acquisitions (and related financing
transactions) which occurred during fiscal 1997 and fiscal 1998 and (ii) the
reduction in interest expense resulting from the anticipated use of the
estimated net proceeds from the Offering (assuming a public offering of
539,785 shares at a price of $23.00 per share), as if all such transactions
had occurred as of the beginning of fiscal 1997. See "Use of Proceeds" and
"Unaudited Pro Forma Consolidated Condensed Statements of Operations."
(2) Adjusted to give effect to (i) the acquisitions (and related financing
transactions) which occurred during fiscal 1998 and (ii) the reduction in
interest expense resulting from the anticipated use of the estimated net
proceeds from the Offering (assuming a public offering of 389,792 shares at
a price of $23.00 per share), as if all such transactions had occurred at
the beginning of fiscal 1998. See "Use of Proceeds" and "Unauditied Pro
Forma Consolidated Condensed Statements of Operations."
THREE MONTHS ENDED JANUARY 31, 1998 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1997
Revenues. Revenues increased 76.0%, or $16.1 million, for the three months
ended January 31, 1998 as compared to the comparable prior-year period. Of this
increase, approximately $8.8 million was attributable to revenue growth through
acquisitions made during fiscal 1997 and the three months ended January 31,
1998, and approximately $7.3 million was from internal growth. For the three
months ended January 31, 1998 compared to the three months ended January 31,
1997, the Company's internal revenue growth from operations owned during both
periods was 34%. Internal growth was primarily a result of adding new customers
to, and increasing sales to existing customers in, the Company's Information
Technology Group.
Cost of Services. Cost of services increased 74.9%, or $12.0 million, for
the three months ended January 31, 1998 as compared to the equivalent prior-year
period. This increase was primarily due to increased salaries and compensation
associated with the increased revenues experienced during this period. Cost of
services as a percentage of revenues decreased to 75.4% for the three months
ended January 31, 1998 from 75.9% for the comparable prior-year period. This
improvement was primarily due to a greater percentage of the Company's revenues
being derived from specialty staffing services.
Selling, General and Administrative. Selling, general and administrative
expenses increased 60.3%, or $2.2 million, for the three months ended January
31, 1998 as compared to the comparable prior-year period. This increase resulted
from the change in the mix of the business during the three months ended January
31, 1998, which required higher marketing, sales, recruiting and administrative
expenses than the comparable prior-year period. Selling, general and
administrative expenses as a
18
percentage of revenues decreased to 15.6% for the three months ended January 31,
1998 from 17.1% in the comparable prior-year period, primarily attributable to
the sharing of administrative overhead over a larger revenue base.
Depreciation and Amortization. Depreciation and amortization increased
111.8%, or $133,000, for the three months ended January 31, 1998 as compared to
the comparable prior year period. This increase was primarily due to the
amortization of intangible assets acquired in connection with the acquisitions
that occurred after January 31, 1997.
Other Income Expense, Net of Interest Income. Actual interest expense of
$55,000 for three months ended January 31, 1998, was partially offset by $16,000
of interest income, which was earned from the investment in interest-bearing
deposits of the net proceeds of the Company's public offering in June 1997,
after the repayment of bank debt. Interest expense decreased 38.9%, or $35,100,
for three months ended January 31, 1998 as compared to the comparable prior-year
period. This decrease was due to the decreased borrowings necessary to provide
the funds for working capital.
Income Tax. Income tax expense increased 159.7%, or $781,000, for the
three months ended January 31, 1998 as compared to the comparable prior-year
period. This increase was due to increased levels of income and an increase in
the effective tax rate from 38.5% to 41.7%. The increase in the effective tax
rate was primarily due to the non-deductibility of goodwill amortization.
YEAR ENDED OCTOBER 31, 1997 COMPARED TO YEAR ENDED OCTOBER 31, 1996
Revenues. Revenues increased 86.7%, or $52.9 million, for fiscal 1997, as
compared to fiscal 1996. Revenue growth was primarily attributable to
acquisitions. The Company completed five acquisitions in fiscal 1997,
aggregating $37.8 million in revenues for their respective latest twelve months
prior to acquisition.
Cost of Services. Cost of services increased 78.0%, or $38.0 million, for
fiscal 1997 as compared to fiscal 1996. 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 fiscal 1996. This decline was
primarily attributable to a greater percentage of the Company's revenues being
derived from information technology and other professional staffing services.
Selling, General and Administrative. Selling, general and administrative
expenses increased 102.7%, or $9.2 million, for fiscal 1997 as compared to
fiscal 1996. 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 fiscal 1996. Selling, general and administrative
expenses as a percentage of revenues increased to 15.9% for fiscal 1997 from
14.6% in fiscal 1996, primarily attributable to the increased sales, recruiting
and administrative expenses necessary to support the Company's continued growth
within the information technology sector. Corporate overhead expenses as a
percentage of revenues decreased to 3.6% of revenues in fiscal 1997 from 4.0% in
fiscal 1996, as these costs were spread over a larger revenue base.
Depreciation and Amortization. Depreciation and amortization increased
73.6%, or $242,600, for fiscal 1997 as compared to fiscal 1996. This increase
was primarily due to the amortization of intangible assets acquired in
connection with the acquisitions.
Other Income Expense, Net of Interest Income. Actual interest expense of
$444,300 for fiscal 1997 was partially offset by $259,700 of interest income,
which was earned from the investment in interest bearing deposits of the net
proceeds of the Company's public offering in June 1997, after the repayment of
bank debt. Interest expense increased 171.3%, or $280,500, for fiscal 1997 as
compared to fiscal 1996. 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.
19
Income Tax. Income tax expense increased 663.1%, or $3.0 million, for
fiscal 1997 as compared to fiscal 1996. 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 YEAR ENDED OCTOBER 31, 1995
Revenues. Revenues increased 126.8%, or $34.1 million, in fiscal 1996 as
compared to fiscal 1995. Revenue growth was primarily attributable to
acquisitions. Internal growth was experienced in the Information Technology and
Professional Engineering Groups and was offset by discontinued business in the
General Support Group 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 information technology and other professional staffing services.
Selling, General and Administrative. Selling, general and administrative
expenses increased 151.0%, or $5.4 million, in fiscal 1996 as compared to fiscal
1995. This increase resulted from the change in the mix of the business during
fiscal 1996, which required higher marketing, sales, recruiting and
administrative expenses than in fiscal 1995. Selling, general and administrative
expenses as a percentage of revenues increased to 14.6% during fiscal 1996 as
compared to 13.2% for fiscal 1995. This increase was primarily attributable to
higher marketing, sales, recruiting and administrative expenses necessary to
support continued growth within the information technology sector. Corporate
overhead expenses as a percentage of revenues decreased to 4.0% of revenues in
fiscal 1996 from 4.6% of revenues in fiscal 1995, as these costs were spread
over a larger revenue base.
Depreciation and Amortization. Depreciation and amortization increased
152.8%, or $199,000, in fiscal 1996 as compared to fiscal 1995. This increase
was primarily due to the amortization of intangible assets acquired 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.
PRO FORMA COMPARED TO ACTUAL RESULTS OF OPERATIONS
Since the beginning of fiscal 1995 and through the date of this Prospectus,
the Company has acquired 13 staffing companies with combined revenues of
approximately $126.7 million in their respective latest twelve months prior to
acquisition. All of these acquisitions have been accounted for using the
purchase method of accounting, and, accordingly, the Company's statements of
income include the operating results of the acquired businesses from the dates
of acquisition. The Company's
20
historical consolidated operating results have been significantly affected by
the number, timing and size of these acquisitions. Accordingly, pro forma
financial data are provided within this Prospectus for a more meaningful
representation of the Company's operating results.
Pro forma financial data have been prepared and included herein to give
effect to all acquisitions subsequent to October 31, 1997 as if they occurred as
of the beginning of fiscal 1997. Pro forma adjustments have been made to reflect
the elimination of certain non-recurring expenses that were identified at the
time of these acquisitions, primarily salary adjustments. The pro forma
financial data are not necessarily indicative of results of operations that
would have occurred had these acquisitions been consummated as of the beginning
of the periods presented or that might be attained in the future.
LIQUIDITY AND CAPITAL RESOURCES
To support its acquisition program and related working capital
requirements, the Company has historically used borrowings under its Revolving
Credit Facility and proceeds from offerings of Common Stock. On June 13, 1997,
the Company completed a public offering which raised $23.3 million in proceeds
for the Company. The net offering proceeds through January 31, 1998, have been
used to fund acquisitions (requiring $15.6 million) and retire bank debt. At
January 31, 1998, the Company had approximately $557,000 in cash and
approximately $11.7 million in unused loan availability under the Revolving
Credit Facility. During February 1998, the Company completed the acquisition of
two companies which required the use of $6.7 million of loan availability under
the Revolving Credit Facility and, as of March 31, 1998, the Company had
approximately $8.7 million outstanding under the facility.
Cash provided by operating activities was $2.8 million for the three months
ended January 31, 1998 compared to $1.1 million for the three months ended
January 31, 1997. This increase was the result of the increase of $1.1 million
in net income before depreciation and amortization and other non-cash charges
and the increase by $602,000 from changes in working capital, primarily an
increase in taxes payable which was in turn offset by an increase in accounts
receivable. Cash used in investing activities for the three months ended January
31, 1998 was $3.7 million compared to $5.2 million for the three months ended
January 31, 1997. This was principally the result of a larger acquisition in the
three months ended January 31, 1997 as compared to the acquisition completed in
the three months ended January 31, 1998. Cash provided by financing activities
for the three months ended January 31, 1998 was $554,000 compared to $4.2
million for the three months ended January 31, 1997. The increase in cash for
the three months ended January 31, 1998 was principally the result of proceeds
from the exercise of stock warrants. The increase in cash for the three months
ended January 31, 1997 represented a net increase in borrowings under the
Company's credit facility.
Cash used in operating activities was $3.8 million for fiscal 1997. This
was the result of $5.6 million of net income before depreciation and
amortization and other non-cash charges offset by $9.4 million from changes in
working capital, primarily an increase in accounts receivable and income taxes
payable, which was, in turn, offset by an increase in accrued payroll and
accounts payable. These changes were consistent with the Company's higher volume
of business. Cash used in investing activities for fiscal 1997 was $17.9
million, principally the result of acquiring four staffing companies which
required the use of $17.4 million of cash. Cash provided by financing activities
for fiscal 1997 was $22.5 million, principally the result of $23.3 million in
proceeds from the sale of common stock on June 13, 1997.
Cash used in operating activities was $1.9 million for fiscal 1996. This
was the result of $2.8 million of net income before depreciation and
amortization and other non-cash charges offset by $4.7 million from changes in
working capital, primarily an increase in accounts receivable, offset by an
increase in accrued payroll and income taxes payable. These changes were
consistent with the Company's higher volume of business. Cash used in investing
activities for fiscal 1996 was $1.2 million, principally a result of acquiring
three staffing companies which required the use of $1.0 million in cash. Cash
provided by financing activities for fiscal 1996 was $2.8 million, principally
the
21
result of a net increase in borrowings of $1.8 million under the Company's
credit facility and proceeds of $1.0 million from the private placement of its
common stock.
Cash provided from operating activities was $1.1 million for fiscal 1995.
This was the result of $980,000 of net income before depreciation and
amortization and other non-cash charges and an increase by $121,000 from changes
in working capital, primarily a decrease in accounts receivable, offset by an
increase in prepaid expenses and other current assets. Cash used in investing
activities for fiscal 1995 was $2.4 million, principally the result of acquiring
two staffing companies which required the use of $2.3 million of cash. Cash used
by financing activities for fiscal 1995 was $916,000, principally the result of
repayments under the Company's credit facility.
On December 19, 1996, the Company and its subsidiaries entered into an
amended and restated loan agreement with Mellon Bank, N.A. to provide the
Revolving Credit Facility. The Revolving Credit Facility is secured 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 and January 31,
1998, the Company and its subsidiaries were in compliance with all financial
covenants contained within the Revolving Credit Facility.
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 Offered Rate) or the bank's prime
rate, plus applicable margin. At October 31, 1997 and January 31, 1998 there was
approximately $14.0 million and $11.7 million, respectively, of unused loan
availability under the Revolving Credit Facility. The Company intends to utilize
approximately $6.7 million of the net proceeds from the Offering to pay down the
Revolving Credit Facility which had a balance of approximately $8.7 million as
of March 31, 1998, although the Company does intend to draw on this line as
needed in the future.
Following the completion of the Offering, the Company expects to enter into
a new revolving credit agreement to replace the Revolving Credit Facility. Based
on proposals for the new revolving credit agreement received by the Company,
management believes that the Company will have availability under the
replacement facility ranging from $50 million to $75 million, an anticipated
increase of $30 million to $55 million from the current facility, and that
pricing under the new facility will be more favorable to the Company than is
offered under the current facility. Management continues to evaluate the
proposals for the new arrangement and, following the completion of the Offering,
will seek a commitment from the lending group proposing the terms management
believes are most favorable to the Company.
The Company anticipates that its primary uses of capital in future periods
will be for acquisitions and the funding of increases in working capital. The
Company has fully utilized the net proceeds made available through the June 1997
public offering. The Company's business strategy is to achieve growth both
internally through operations and externally through strategic acquisitions. The
Company's liquidity and capital resourcesconvertible securities may be affected in the future as the
Company continuesconverted are upon issuance registered pursuant to grow through implementationsection 12 of this strategy which may
involve acquisitions facilitated through the use of cash and/or debt and equity
securities. Funding for future acquisitions will be obtained from the proceeds
of the Offering, the Revolving Credit Facility, funds generated through
operations and future financing transactions.
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
22
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 Warrants. As of January 31,
1998 and March 31, 1998, there were 612,479 and 377,234 Warrants outstanding,
respectively. 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 Warrants entitle the holder to purchase one share of Common Stock at
an exercise price of $15.00. As of March 31, 1998, the Company had received $1.2
million from the exercise of the Warrants.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000. In connection with this problem (the "Year 2000 Issue"), and in order to
continue to deliver quality customer service and centrally manage its
operations, the Company is currently upgrading its internal information system.
The Company anticipates that the upgrade will be completed by the end of 1998;
however, if such upgrade is not completed in a timely manner, the Year 2000
Issue may have a material effect on the operations of the Company. While the
total cost associated with the upgrade of the Company's system is not known at
this time, it is not expected to be material to the Company's financial position
and is being capitalized as incurred. See "Business -- Information Systems."
IMPACT OF INFLATION
The effects of inflation on the Company's operations were not significant
during the periods presented.
RECENTLY ISSUED ACCOUNTING STANDARDS
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.
23
BUSINESS
The Company is a multi-regional provider of information technology and
other professional staffing services through its 41 branch offices located in 17
states. The Company's Information Technology Group offers responsive, timely and
comprehensive information technology staffing solutions to support the entire
systems applications development and implementation process. The Company's
information technology professionals have expertise in a variety of technical
disciplines, including enterprise software, network communications, database
design and development and client server migration. The Company also offers
professional engineering staffing and project management services, through its
Professional Engineering Group, for a variety of engineering disciplines, such
as aeronautical, electro-mechanical, nuclear and computer science. As of April
22, 1998, the Company employed approximately 1,000 information technology and
approximately 500 professional engineering personnel. The Company is also
engaged in the specialty healthcare and general support sectors of the staffing
industry. During fiscal 1997, the Company placed employees with approximately
1,150 customers within a variety of industries. Representative customers include
AT&T, Bell Atlantic, Chase Manhattan Bank, Liberty Mutual Insurance, MCI, Merck,
Merrill Lynch, Northeast Utilities and 3M.
INDUSTRY OVERVIEW
The staffing industry has experienced rapid growth in recent years.
According to Staffing Industry Report, revenues in the domestic temporary
staffing industry have grown from $24.6 billion in 1992 to an estimated $53.7
billion in 1997, a five-year compound annual growth rate of 17%. This growth has
been driven by a change in the role of temporary staffing in corporations.
Initially thought of as a short-term solution for peak production periods and as
a temporary replacement for full-time personnel, the staffing industry is now
considered an effective tool for helping companies manage their investment in
human resources. Companies now use temporary personnel for varying lengths of
time to respond to increasingly complex assignments. The shift towards contract
personnel allows companies to expand and contract employee levels based on
current needs, thus converting fixed labor costs into controllable variable
costs while still maintaining a high degree of employee skill level. Relying on
temporary staffing companies also reduces the costs associated with recruiting,
training and terminating employees. In addition, changing government regulations
concerning such items as employee benefits, health insurance and retirement
plans have significantly increased employment costs related to permanent
employees. In response, an increasing number of companies are turning to
temporary staffing as an effective method of maintaining high employee skill
level while controlling labor costs.
According to Staffing Industry Report, information technology is the
fastest growing sector within the temporary staffing industry, growing at a 24%
five-year compound annual growth rate from 1992 to 1997. In recent years,
businesses have become increasingly dependent on the use of computer systems to
manage operations, automate routine tasks and disseminate information throughout
the company. As companies have increased their investments in technology in
order to remain competitive, the complexity and rapid development of new
technologies have driven the need for increased levels of technical support.
Faced with the challenge of developing and supporting these updated systems,
companies are turning to information technology staffing services to provide
technical support. Utilizing outside information technology personnel allows a
company to focus on core operations, minimize its investment in its internal
information technology workforce and obtain technical support from professionals
with expertise in current technologies. Many companies have become comfortable
with outsourcing and now look outside of their organizations to utilize
individuals with the requisite specialized technical skills for temporary or
project-oriented assignments.
The staffing industry is highly fragmented, with over 7,000 companies in
the United States. The industry is currently experiencing a trend toward
consolidation as large companies seek to reduce the number of vendors and look
to staffing companies that offer a wide range of services over a broad
geographic area. In addition, the demand for employees skilled in new
technologies exceeds the supply of qualified personnel. As employers find it
more difficult to locate full-time candidates with special
24
skills, they increasingly turn to temporary staffing companies to fill these
needs. The Company believes these industry conditions are making it more
difficult for small staffing companies to compete due to limited recruiting and
placement capabilities, limited working capital and limited management
resources. These factors are expected to accelerate the industry's consolidation
trend.
BUSINESS STRATEGY
RCM is dedicated to providing solutions to meet its customers' information
technology and other professional staffing needs. The Company's objective is to
be a leading provider of these specialty professional staffing services in
selected regions throughout the United States. The Company has developed
interrelated growth and operating strategies to achieve this objective. Key
elements of its growth and operating strategies are as follows:
GROWTH STRATEGY
Focus on Information Technology and Other Professional Staffing
Services. The Company will continue to focus on providing information
technology staffing services, the fastest growing sector of the temporary
staffing industry, as well as other professional staffing services. According to
Staffing Industry Report, revenues from information technology staffing services
grew at a 24% five-year compound annual growth rate from 1992 through 1997. In
addition to high growth rates, the Company believes that information technology
and other professional staffing services offer more attractive profit margins
than traditional staffing services. As the Company has transitioned its business
mix to information technology and other professional staffing services, and away
from general support staffing, it has experienced substantial margin
improvement. The Company's operating profit margin for the three months ended
January 31, 1998 was 8.3% as compared to 3.2% in fiscal 1995, when approximately
half of the Company's revenue was derived from general support staffing and the
Company did not offer information technology staffing services. The Company also
believes that information technology and other professional staffing services
are less cyclical than traditional staffing services.
Strengthen Market Presence in Selected Regions Throughout the Country. The
Company believes that a substantial amount of the total market for information
technology and other professional staffing services is located in certain high
growth regions in the United States. The Company's strategy is to expand into,
and strengthen its existing presence in, such high density, high growth regions.
Once established in a region, the Company concentrates on local and regional
accounts, as opposed to national accounts, and therefore competes primarily
against local and regional staffing companies with limited services, resources
and capabilities. The Company utilizes its mix of information technology and
other professional service offerings, recruiting and placement capabilities and
financial resources to distinguish itself from its competition and to achieve
significant customer penetration and retention. The Company enters new regions
by acquiring strong local or regional companies and improving their ability to
compete through the addition of the Company's resources. In February 1998, the
Company acquired Global Technology Solutions, Inc. of Sacramento, California,
thus establishing its first operations in the Northern California region, an
area characterized by strong demand for information technology and other
professional staffing services.
Continue Strategic Acquisitions. The Company has acquired 13 information
technology and other professional staffing companies since the beginning of
fiscal 1995. The staffing industry continues to be highly fragmented, and the
Company plans to continue its aggressive acquisition program. The Company's
acquisition strategy is designed to strengthen its presence in its existing
markets, expand into new geographic regions and add complementary service
offerings or offer new professional staffing services. In targeting
acquisitions, the Company focuses on companies with (i) annual revenues of $35
million or less, (ii) a history of profitable operations and experienced
management personnel, (iii) substantial growth prospects and (iv) sellers who
desire to join the Company's management team. To retain and provide incentives
for management of its acquired companies, the Company typically structures a
significant portion of the acquisition price in the form of multi-tiered
consideration based on growth of operating profitability of the acquired company
over a
25
two to three-year period. The Company believes its success in completing
acquisitions is due to its entrepreneurial and decentralized operating
philosophy, its strong corporate-level support and resources, its status as a
public company and its ability to offer management of the acquired companies an
opportunity to join and participate in the growth of a rapidly growing provider
of information technology and other professional staffing services.
Promote Internal Growth. The Company is experiencing strong internal
growth. For the three months ended January 31, 1998, the Company's internal
revenue growth was 34% over the comparable prior-year period. The Company
believes its high levels of internal growth are a result of the Company's
transition to information technology and other professional staffing services,
its location in strong operating regions and its strategy of acquiring companies
with strong growth prospects and integrating their administrative functions to
permit management to focus on increasing sales. The Company plans to maintain
high levels of internal growth by increasing sales to existing customers,
developing new customer relationships and cross-selling its professional
staffing services. The Company believes approximately 50% of its current
customers are users of both outsourced information technology and professional
engineering services. The Company has increased its efforts to cross-sell its
information technology and professional engineering services. As an example of
cross-selling, the Company has successfully provided the services of its
Information Technology Group to the utility industry customer base of its
Professional Engineering Group.
Migrate Product Offerings to Higher Value Added Services. The Company's
strategic transition to a provider of information technology and other
professional staffing services was designed to move the Company into higher
growth and higher margin sectors of the staffing industry. For the three months
ended January 31, 1998, 82% of the Company's revenues were generated by
information technology and professional engineering staffing services. The
Company believes it now has the opportunity to offer higher value-added services
such as project management and consulting services to its professional staffing
services customer base. The Company currently derives a substantial percentage
of its professional engineering services revenues from project management work.
The Company plans to use the project management expertise of its Professional
Engineering Group to assist its Information Technology Group in expanding its
sales of higher margin consulting and project management services. The billing
rates and profit margins for project work and consulting services are higher
than those received for staffing services. The Company intends to achieve this
migration to higher value-added services through the internal sharing of its
engineering project management expertise as well as through acquisitions.
OPERATING STRATEGY
Foster a Decentralized Entrepreneurial Environment. A key element of the
Company's operating strategy is to foster a decentralized, entrepreneurial
environment for its employees. The Company fosters this environment by
continuing to build on the names, reputations and customer relationships of
acquired companies and by sharing their operating policies, procedures and
expertise with other branch locations to develop new ideas to best serve the
prospects of the Company. The Company believes an entrepreneurial business
atmosphere allows its branch offices to quickly and creatively respond to local
market demands and enhances the Company's ability to motivate, attract and
retain managers to maximize growth and profitability.
Develop and Maintain Strong Customer Relationships. The Company seeks to
develop and maintain strong interactive customer relationships by anticipating
and focusing on its customers' needs. The Company emphasizes a
relationship-oriented approach to business, rather than the transaction or
assignment-oriented approach used by many of its competitors. To develop close
customer relationships, the Company's branch managers regularly meet with both
existing and prospective clients to help design solutions for, and identify the
resources needed to execute, their strategies. The Company's branch managers
also maintain close communications with their customers during each project and
on an ongoing basis after its completion. The Company believes that this
relationship-oriented approach results in greater customer satisfaction and
reduced business development expense. Additionally, the Company believes that by
partnering with its customers to
26
design flexible staffing programs that can be expanded, contracted or redirected
into other specialty areas, it can generate new opportunities to service their
staffing requirements. The Company focuses on providing customers with qualified
individuals compatible with the needs of such customers and makes a concerted
effort to follow the progress of such relationships to ensure their continued
success.
Attract and Retain High Quality Contract and Temporary Personnel. The
Company believes it has been successful in attracting and retaining qualified
contract and temporary 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. The Company has been successful in retaining
qualified contract and temporary personnel due in part to its use of qualified
personnel designated as "ombudsmen" who are dedicated to maintaining contact
with, and monitoring the satisfaction levels of, the Company's contract and
temporary personnel, while they are on assignment.
Centralize Administrative Functions. The Company seeks to maximize its
operational efficiencies by integrating general and administrative functions at
the corporate level, and reducing or eliminating redundant functions and
facilities at acquired companies, typically within three months of an
acquisition. This enables the Company to quickly realize potential savings and
synergies, efficiently control and monitor its operations and allows acquired
companies to focus on growing their sales and operations.
OPERATIONS
The Company provides information technology and other professional staffing
services through the following groups: Information Technology, Professional
Engineering, General Support and Specialty Healthcare.
INFORMATION TECHNOLOGY
The Company's Information Technology Group offers responsive, timely and
comprehensive information technology staffing solutions to support the entire
systems applications development and implementation process. The Company's
information technology professionals have expertise in a variety of technical
disciplines, including enterprise software, network communications, database
design and development and client server migration.
In the course of a customer's systems applications project, the Information
Technology Group may prepare project plans, assist users in defining high level
functional specifications, perform system analysis and detailed design, select
and configure hardware, create custom application programs, develop migration
plans to move to a new operating platform or system, install and test the
system, obtain user acceptance, draft user documentation, train the customer's
employees to use the system and support, maintain and fine-tune the system on an
ongoing basis. In addition, the Information Technology Group supports a wide
variety of operating systems, programming languages, software tools and database
management applications, including UNIX, Windows, Solaris, Novell, Netware,
Sybase, Informix, Lotus Notes, Clipper, Visual Basic, Visual C++, Cobol II, CICS
and Fortran. The Company believes that its ability to provide information
technology staffing for a full range of such services provides an important
competitive advantage. The Company also strives to ensure that its consultants
have the expertise and skills needed to keep pace with rapidly evolving
information technologies.
27
Customers typically require the Company's services in order to fill gaps in
their range of professional staffing needs or to augment existing personnel in
response to expanded business needs. Engagements average in duration from three
to 12 months. The following are examples of the types of services that have been
provided by the Company's Information Technology Group:
o The Company provided 20 professionals to a large HMO to provide system
development, implementation, support, project management and training for
remote access capability. This system enables the HMO's remote personnel
and customers to access the HMO's main computing systems. The Company is
currently providing eight network engineers to develop and implement a
new high security firewall for the HMO's external network and computing
systems.
o The Company provided five professionals to a major Mid-Atlantic utility
for a project designed to improve internet and intranet connectivity
through site evaluation and design, including security analysis,
installation and support to ensure fully functional transitions. This
relationship was developed through the Company's Professional Engineering
Group.
o The Company provided 20 programming professionals to a multi-national
bank holding company to write custom software for a variety of business
analysis and programming applications. These programs are being developed
to conform to a number of different platforms and environments, including
IBM mainframe, UNIX, AS400, OS2 and Novell.
o The Company provided 25 professionals to a national communications
conglomerate to evaluate the viability and advisability of downsizing an
application to the client/server platform. The engagement entailed
analyzing the system against requirements, surveying system users to
assess satisfaction, assessing the system's suitability for client server
implementation, and preliminary evaluation of off-the-shelf systems.
As of April 22, 1998 approximately 1,000 information technology personnel
were employed by the Company.
PROFESSIONAL ENGINEERING
The Professional Engineering Group provides personnel to perform project
engineering, computer aided design, and other technical services either at the
site of the customer or, less frequently, at the Company's own facilities.
Representative services include utilities process and control, electrical
engineering design, system engineering design and analysis, mechanical
engineering design, procurement engineering, civil structural engineering
design, computer aided design and code compliance. The Professional Engineering
Group has also developed an expertise in providing engineering, design and
technical services to many customers in the aeronautical, paper and paper
products manufacturing industries and the nuclear power, fossil fuel and
electric utility industries.
The Company believes that the deregulation of the utilities industry and
the aging of nuclear power plants offer the Company an opportunity to capture a
significant share of professional staffing and project management requirements
of the utilities industry both in professional engineering services and through
cross-selling of its information technology services. Heightened competition,
deregulation and rapid technological advances are forcing the utilities industry
to make fundamental changes in its business process. These pressures have
compelled the utilities industry to focus on internal operations and maintenance
activities and to increasingly outsource their personnel requirements.
Additionally, the Company believes that increased performance demands from
deregulation should increase the importance of information technology to this
industry. The Company believes that its expertise and strong relationships with
certain customers within the utilities industry position the Company to be a
leading provider of professional services to the utilities industry.
28
The engagements of the Professional Engineering Group generally vary in
duration from three to 12 months. The following are examples of the types of
services that have been provided by the Company's Professional Engineering
Group:
o The Company is providing 50 contract engineers to a New England utility
involved in the restart of three major electrical generating stations.
The Company's engineers are reviewing platform design documentation,
updating safety analysis reports and establishing and documenting correct
plant configuration to be in accordance with applicable regulatory
requirements.
o The Company is providing 30 engineers to a major Canadian power producer
who recently initiated a long-term organizational and plant improvement
program. The Company's engineers are providing their expertise in the
areas of regulatory compliance, performance assurance and emergency
planning. As a result of this initial engagement, the Company also placed
several information technology professionals with this Canadian power
provider.
o The Company is providing 30 engineers to a large manufacturer of personal
hygiene and tissue products. The Company's engineers are designing mill
equipment used to convert paper into products and assisting with
evaluating configuration of management processes to install, operate and
support production facilities.
o The Company provided five engineers to a major Mid-Atlantic based
telecommunications company to provide telecommunication systems redesign.
This relationship was developed through the Company's Information
Technology Group.
As of April 22, 1998, approximately 500 engineering personnel were employed
by the Company.
GENERAL SUPPORT
The General Support Group provides contract and temporary services, as well
as permanent placement services, for full time and part time personnel in a
variety of functional areas, including office, clerical, data entry,
secretarial, 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 customers as AT&T, First National Bank of Chicago, Mellon Bank
and Sears.
SPECIALTY HEALTHCARE
The Specialty Healthcare Group provides skilled, licensed healthcare
professionals, primarily physical therapists, occupational therapists and speech
language pathologists. The Specialty Healthcare Group provides services to
hospitals, nursing homes, pre-schools, sports medicine facilities and private
practices. Services include: in-patient, out-patient, sub-acute and acute care,
rehabilitation, geriatric, pediatric and adult day care. The Specialty
Healthcare Group does not provide nursing or home healthcare services. Typical
engagements range either from three to six months or are on a day-to-day shift
basis.
29
BRANCH OFFICES
The Company's branch organization consists of four operating regions with
41 offices located in 17 states. The region of, and services provided by, each
branch office are set forth in the table below.
- ------------------
(1) Services provided are abbreviated as follows:
IT -- Information Technology
PE -- Professional Engineering
SH -- Specialty Healthcare
GS -- General Support
Branch offices are primarily located in regions which the Company believes
have strong growth prospects for information technology and other professional
staffing services. The Company's branches are operated in a decentralized,
entrepreneurial manner with each branch office as an independent profit center.
The Company's branch managers are given significant autonomy in the daily
operations of their respective offices and, with respect to such offices, are
responsible for overall guidance and supervision, budgeting and forecasting,
sales and marketing strategies, pricing, hiring and training. Branch managers
are paid on a performance-based compensation system designed to motivate the
managers to maximize growth and profitability.
The Company believes that a substantial portion of the buying decisions
made by users of information technology and other professional staffing services
are made on a local or regional basis and that the Company's branch offices most
often compete with local and regional providers. Since the Company's branch
managers are in the best position to understand the local and regional
information technology and other professional staffing markets, and customers
often prefer local providers, the Company believes that a decentralized
operating environment maximizes operating performance and contributes to
employee and customer satisfaction.
30
From its headquarters in Pennsauken, New Jersey, the Company provides its
branch offices with centralized administrative, marketing, finance and legal
support. Centralized administrative functions minimize the administrative
burdens on branch office managers and allow them to spend more time focusing on
sales and marketing activities. The Company believes that its ability to rapidly
integrate the administrative functions of its acquisitions has greatly enhanced
its internal growth.
Most of the branch offices have one branch manager, one sales manager,
three salespersons and three recruiters. The Company's branch managers report to
product-line general managers. General managers meet with branch managers on a
regular basis to identify "best practices" for the various sales and marketing
and recruiting processes and assist the branch managers in implementing these
best practices. The Company's branch managers meet every three to six months to
discuss "best practices" and ways to increase the Company's cross-selling of its
professional services.
SALES AND MARKETING
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. The Company's sales personnel make regular visits to
existing and prospective customers. New customers are obtained through active
sales programs and referrals. The Company encourages its employees to
participate in national and regional trade associations, local chambers of
commerce and other civic associations. The Company seeks to develop strategic
partnering relationships with its customers by providing comprehensive staffing
solutions for all aspects of a customer's information technology and other
professional staffing needs. The Company also concentrates on providing
carefully screened professionals with the appropriate skills in a timely manner
and at competitive prices. The Company constantly monitors the quality of the
services provided by its personnel and obtains feedback from its customers as to
their satisfaction with the services provided.
During fiscal 1997, the Company placed employees with approximately 1,150
customers in a variety of industries. Representative customers include AT&T,
Bell Atlantic, Chase Manhattan Bank, Liberty Mutual Insurance, MCI, Merck,
Merrill Lynch, Northeast Utilities and 3M. Although the Company serves numerous
Fortune 500 companies, the Company's relationships with these customers is
typically formed at the local or regional level as the Company does not actively
solicit national contracts, which typically have lower margins.
Northeast Utilities, for whom the Company provides professional engineering
staffing services, accounted for 8.4% of the Company's revenues for the three
months ended January 31, 1998. No other customer accounted for over 5.0% of the
Company's revenues during these periods. The Company's five and ten largest
customers accounted for approximately 21.9% and 30.3%, respectively, of the
Company's revenues for fiscal 1997 and 18.8% and 27.8%, respectively, of the
Company's revenues for the three months ended January 31, 1998.
RECRUITING AND TRAINING
The Company devotes a significant amount of time and resources, primarily
at the branch level, to locating, training and retaining its professional
staffing personnel. Full-time recruiters utilize the Company's proprietary
database of available personnel, which is cross-indexed by skill to match
potential candidates with the specific requirements of the customer. The
qualified personnel in the databases are identified through numerous activities,
including networking, referrals, the internet, job fairs, newspaper and trade
journal advertising, attendance at industry shows and presentations. The Company
also has several recruiters dedicated to recruiting highly skilled, highly
sought-after information technology personnel from international locations such
as Australia, Canada, England, India, Mexico, New Zealand, South Korea and other
European and Southeast Asian countries. International recruits are available to
all branch office locations through the Company's corporate headquarters.
The Company routinely performs verification of education and employment, as
well as personal and professional reference checks. As potential candidates are
identified, each individual participates in an extensive qualification process.
An in-house interview of the candidate is typically conducted by
31
both the recruiting and sales staff and candidates are evaluated and qualified
by a member of the Company's technical staff. Upon placement with the
appropriate customer, the employee is continually monitored and supervised to
ensure competent, timely and professional performance. Regular on-site visits by
the Company's representatives are made and the employees and their supervisors
are contacted. Professionals complete weekly status reports which are signed by
their supervisors and report regularly on the status of their projects in order
to identify and eliminate potential problems and issues which may arise. Exit
interviews are conducted upon completion of an assignment and the customer is
invited to confirm that all parties are satisfied with the work completed. The
Company also offers educational programs to upgrade the skills of its personnel,
particularly within its Information Technology Group.
The Company believes that a significant element to the Company's success in
retaining qualified contract and temporary personnel is the Company's use of
"ombudsmen." Ombudsmen are qualified Company personnel dedicated to maintaining
contact with, and monitoring the satisfaction levels of the Company's contract
and temporary personnel, while they are on assignment.
INFORMATION SYSTEMS
The Company has invested, and intends to continue to invest, substantial
resources to develop systems that will enable it to deliver quality financial
and operating data to management, provide timely and accurate customer billing
and centrally manage its operations. The Company's internal information system
is linked to all 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. For acquired companies, administrative
functions are integrated into the Company's information system and personnel
databases are updated accordingly. The Company typically completes this process
within three months of the acquisition.
The Company is currently running a beta version of an upgrade to its
current internal information system and it is expecting that the new system will
be fully operational by the end of 1998. The new system is provided by Applied
Datametrics and is currently used by numerous staffing companies. The new system
is year 2000 compliant and will expand management reporting capabilities and
provide the flexibility necessary for the Company's acquisition strategy.
COMPETITION
The staffing industry is highly competitive and fragmented, consisting of
more than 7,000 companies. There are limited barriers to entry and new
competitors frequently enter the market. The Company's principal competitors are
generally local or regional independent staffing companies that are located in
the Company's various regional markets. The Company also encounters competition
from international and national companies. Certain of the Company's competitors
have more established operations and greater marketing, financial and other
resources than the Company.
Additionally, the Company competes for suitable acquisition candidates
based on its entrepreneurial and decentralized operating philosophy, its strong
corporate-level support and resources, its status as a public company and its
ability to offer management of the acquired companies an opportunity to
participate in the growth of a rapidly growing provider of information
technology and other professional staffing services.
PRIOR BUSINESS OPERATIONS
The Company was previously engaged in the development of environmental
technologies and the operation, until 1977, of an aluminum recovery facility in
California. In fiscal 1992, the Company discontinued its environmental business.
On September 26, 1997, the Company settled a potential environmental claim
relating to the discontinued operations. In connection with such settlement, in
fiscal 1997, the Company incurred a loss from discontinued operations of
approximately $363,000. The Company believes, but cannot assure, that all
matters, environmental or otherwise, relating to the discontinued operations
have been concluded.
32
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The Company's executive officers, directors and key employees are as
follows:
- ------------------
(1) Messrs. Kopyt and Remer are Class C directors of the Company and their terms
expire at the annual meeting of stockholders in 1999.
(2) Mr. Berson is a Class A director of the Company and his term expires at the
annual meeting of stockholders in 2000.
(3) Messrs. Kerr and Moats are Class B directors of the Company and their terms
expire at the annual meeting of stockholders in 2001.
Mr. Kopyt was appointed President and Chief Executive Officer in January
1992 and from May 1990 to that date served as Chief Operating Officer of the
Company. Additionally, Mr. Kopyt served as Chief Financial Officer and Treasurer
of the Company from 1992 to 1994. Mr. Kopyt's prior experience includes serving
as President and Chief Executive Officer of Socimi International, a European
transportation and defense products manufacturing company from 1981 to 1990. Mr.
Kopyt holds a B.S. in Electrical Engineering from Drexel University. Mr. Kopyt
has been a director of the Company since 1991 and Chairman of the Board since
1992.
Mr. Remer was appointed Chief Financial Officer and Treasurer in May 1994.
Mr. Remer's prior experience includes serving as an audit manager of a local
accounting firm in 1993, serving as Chief Financial Officer of Sterling Supply
Corporation from 1991 to 1992 and serving as managing partner of a regional
accounting firm from 1983 to 1991. Mr. Remer is a Certified Public Accountant
and holds a M.B.A. in Finance from Temple University and a B.S. in Textile
Engineering from the Philadelphia College of Textiles & Science. Mr. Remer has
been a director of the Company since 1992.
Mr. Delle Donne was appointed Executive Vice President of Operations in
April 1998. Mr. Delle Donne served as President of Knight Facilities Management,
a global planning, engineering and management consulting firm from 1997 to 1998.
Mr. Delle Donne also served as Senior Vice President of Ogden Projects, Inc.,
and President and Chief Operating Officer of Ogden Environmental Services
33
from 1989 to 1997. Mr. Delle Donne also served in various capacities with
Westinghouse Electric Corp. from 1978 to 1989. Mr. Delle Donne holds a B.A. in
Materials Engineering and Economics from Brown University.
Mr. Campanelli was appointed Senior Vice President and General Manager of
Engineering in September 1995. Previously, he was a Senior Vice President of
Operations and Marketing for Cataract, Inc. (acquired by the Company in August
1995). He also held the position of Northeast Regional Manager and Vice
President of Operations since joining Cataract in 1988. Mr. Campanelli's prior
experience includes serving as a Division Manager of Sales and Marketing and
Section Manager of the Management Services Section of Impell Corporation, a
division of Combustion Engineering, from 1976 to 1988. Mr. Campanelli holds a
B.S. in Nuclear Science and Engineering from Maritime College.
Mr. Miller was appointed Senior Vice President of Corporate Development in
July 1997. Mr. Miller's prior experience includes serving as an Associate in the
corporate finance department of Legg Mason Wood Walker, Incorporated from 1996
to 1997, serving as a business consultant for the Wharton Small Business
Development Center from 1995 to 1996 and serving in various capacities in both
the audit and corporate finance groups at Ernst & Young, LLP. Mr. Miller is a
Certified Public Accountant and holds a M.B.A. in Finance from the Wharton
School of the University of Pennsylvania and a B.S. in Accounting from the
University of Delaware.
Mr. Kaminsky was appointed Senior Vice President in May 1996. Mr. Kaminsky
was the founder of Consortium of Maryland, Inc. ("Consortium MD") (acquired by
the Company in May 1996). Mr. Kaminsky founded Consortium MD in 1980. Mr.
Kaminsky holds a B.S. in Science from American University.
Mr. Berson has been a shareholder in the law firm of Fineman & Bach, P.C.,
of Philadelphia, Pennsylvania, and its predecessors since 1981. The Company has
retained Fineman & Bach, P.C. to represent it on various legal matters. From
1967 to 1982, Mr. Berson was a member of the House of Representatives of the
Commonwealth of Pennsylvania. Mr. Berson has been a director of the Company
since 1987.
Mr. Kerr is founder and partner of Everingham & Kerr, Inc., a merger and
acquisition consulting firm located in Haddon Heights, New Jersey, which
provides professional intermediary services and other consulting services to
small and middle market manufacturing, distribution and service businesses. Mr.
Kerr's prior experience includes serving as Vice President-Sales, for
Shieldalloy Corporation, a specialty metals producer, from 1974 to 1987. Mr.
Kerr holds a B.S. in Mechanical Engineering and a B.A. in Arts and Sciences from
Pennsylvania State University and a M.B.A. in Management from Wayne State
University. Mr. Kerr has been a director of the Company since 1994.
Mr. Moats is President of W.B. Moats & Associates, Berwyn, Pennsylvania, a
marketing communications organization specializing in business-to-business
marketing. Mr. Moats' prior experience includes serving as Senior Vice
President-Corporate Marketing and Public Relations of National Railway
Utilization Corporation from 1975 to 1980. Mr. Moats is a graduate of the
University of Miami, Florida, as a marketing major specializing in advertising.
Mr. Moats has been a director of the Company since 1994.
Mr. Farber was appointed Vice President of Information Technology in March
1998 and has been with the Company since January 1996. Mr. Farber has 20 years
experience within the information technology industry in the service, software
and hardware arenas. For the two years prior to joining the Company, Mr. Farber
was President and owner of Management By Objective, an information technology
placement firm. Mr. Farber has previously held positions with Dun & Bradstreet,
where he was Director of Sales, as well as KDI, a manufacturer of multi-media
products, where he was Director of Business Development.
Mr. Lentz was appointed Vice President of Information Technology in
November 1996. Mr. Lentz was the founder of Programming Alternatives of
Minnesota, Inc. ("PAMI") (acquired by the Company in November 1996). Mr. Lentz
came to the Company with thirty years of experience in
34
the staffing industry. For seven years, he held several management positions
with General Employment Enterprises. He then spent ten years with Control Data
Corporation as the Vice President of the Cyber Search Division. He purchased
this division from Control Data in 1983 and formed PAMI.
Mr. Lillund was appointed Vice President of Professional Engineering in
January 1998. Previously, he was an owner of Northern Technical Services ("NTS,"
acquired by the Company in January 1998). Prior to joining NTS in 1994, Mr.
Lillund was a District Finance and Contract Marketing Manager for Xerox
Corporation and held various other sales and management positions from 1981 to
1994. Mr. Lillund holds a B.S. in Political Science and Psychology from the
University of Wisconsin-Oshkosh.
Mr. O'Keefe was appointed Vice President of Information Technology in
October 1997. Previously, he was a founder of Camelot Contractors Limited
(acquired by the Company in August 1997) and served as its Chief Executive
Officer. His prior experience includes serving as Vice President of MAS New
Hampshire and as Vice President and Treasurer of Technology Profiles Inc. MAS
New Hampshire and Technology Profiles Inc. are recruiting firms that serve the
information technology market. Mr. O'Keefe holds a B.A. from St. Anselm College
and a Master of Natural Science Degree from Worcester Polytechnic Institute.
Mr. Saks was appointed Vice President and General Manager of Specialty
Healthcare and General Support in March 1998. Mr. Saks previously served as Vice
President of Specialty Healthcare since May 1997 and joined The Consortium
(acquired by the Company in March 1996) in January 1994. Mr. Saks' prior
experience includes serving as Vice President of M.A. Management Associates, a
New York based Executive Search Firm. Mr. Saks holds a B.S. in Accounting from
Fairleigh Dickenson University.
35
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 24, 1998 and as adjusted to
reflect the sale of the shares of Common Stock offered hereby by: (i) each
person known by the Company to beneficially own 5% or more of the Company's
outstanding Common Stock; (ii) each of the Company's directors; (iii) the
Company's Chief Executive Officer; (iv) the four most highly compensated
executive officers of the Company (other than the Chief Executive Officer) who
were serving as such on October 31, 1997 and received total annual salary and
bonus in fiscal 1997 of more than $100,000; (v) the Selling Stockholders; and
(vi) all directors and executive officers of the Company as a group. Except as
otherwise indicated, each person set forth below has sole voting and investment
power on the shares reported.
- ------------------
* Represents less than one percent of the Company's outstanding Common Stock.
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in
regulations promulgated under the Securities Exchange Act of 1934, as amended. Accordingly,Holders of the common stock do not have any cumulative voting rights. The holders of our common stock are entitled to receive dividends when, as and if declared by our board of directors out of legally available funds. Upon our liquidation or dissolution, the holders of common stock will be entitled to share ratably in those of our assets that are legally available for distribution to stockholders after payment of liabilities and subject to the prior rights of any holders of preferred stock then outstanding. All of the outstanding shares of common stock are fully paid and nonassessable. The rights, preferences and privileges of holders of common stock are subject to the rights of the holders of shares of any series of preferred stock that may be issued in the future.
Blank Check Preferred Stock
We are authorized to issue up to 5,000,000 shares of preferred stock. Subject to limitations prescribed by Nevada law and the Articles, our board of directors has the authority, without further action by our stockholders, to designate one or more classes or series of preferred stock and to fix the voting powers, designations, preferences, limitations, restrictions and relative rights granted to or imposed upon each such class or series, including dividend rights, conversion rights, voting rights, rights and terms of redemption, liquidation preference and sinking fund terms, any or all of which may be preferential to or greater than the rights of our common stock. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our Company and may adversely affect the voting and other rights of the holders of our common stock, which could have an adverse impact on the market price of our common stock.
Anti-Takeover Effects of Certain Provisions of the Articles and Bylaws and of Nevada Law
Nevada law, the Articles and the Bylaws contain provisions that are intended to enhance the likelihood of continuity and stability in the composition of the Company’s board of directors and that could make it
4
more difficult to acquire control of the Company by means of a tender offer, open market purchases, a proxy contest or otherwise. A description of these provisions is set forth below.
Nevada Anti-Takeover Statutes
Business Combinations Statutes
Nevada’s “combinations with interested stockholders” statutes (Nevada Revised Statutes (“NRS”) 78.411 through 78.444, inclusive) provide that specified types of business “combinations” between certain Nevada corporations and any person deemed to be an “interested stockholder” of the corporation are prohibited for two years after such person first becomes an “interested stockholder” unless the corporation’s board of directors approves the combination (or the transaction by which such person becomes an “interested stockholder”) in advance, or unless the combination is approved by the board of directors and sixty percent of the corporation’s voting power not beneficially owned by the interested stockholder, its affiliates and associates. Furthermore, in the absence of prior approval certain restrictions may apply even after such two-year period. For purposes of these statutes, an “interested stockholder” is any person who is (1) the beneficial ownershipowner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation, or (2) an affiliate or associate of the corporation and at any time within the two previous years was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding shares of the corporation. The definition of the term “combination” is sufficiently broad to cover most significant transactions between a corporation and an “interested stockholder”. These laws generally apply to Nevada corporations with 200 or more stockholders of record. However, a Nevada corporation may elect in its articles of incorporation not to be governed by these particular laws, but if such election is not made in the corporation’s original articles of incorporation, the amendment (1) must be approved by the affirmative vote of the holders of stock representing a majority of the outstanding voting power of the corporation not beneficially owned by interested stockholders or their affiliates and associates, and (2) is not effective until 18 months after the vote approving the amendment and does not apply to any combination with a person who first became an interested stockholder on or before the effective date of the amendment. We have not made such an election in our original articles of incorporation or in the Articles, and we have not amended the Articles to so elect.
Control Shares Statutes
In addition, the NRS contain provisions governing the acquisition of a controlling interest in certain personsNevada corporations. Nevada’s “acquisition of controlling interest” statutes (NRS 78.378 through 78.3793, inclusive) govern the acquisition of a controlling interest in certain Nevada corporations. These “control share” laws provide generally that any person that acquires a “controlling interest” in certain Nevada corporations may be denied voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights. These laws will apply to us as of a particular date if we were to have 200 or more stockholders of record (at least 100 of whom have addresses in Nevada appearing on our stock ledger at all times during the 90 days immediately preceding that date) and do business in the State of Nevada directly or through an affiliated corporation, unless our articles of incorporation or bylaws in effect on the tenth day after the acquisition of a controlling interest provide otherwise. These laws provide that a person acquires a “controlling interest” whenever a person acquires shares of a subject corporation that, but for the application of these provisions of the NRS, would enable that person to exercise (1) one-fifth or more, but less than one-third, (2) one-third or more, but less than a majority or (3) a majority or more, of all of the voting power of the corporation in the election of directors. Once an acquirer crosses one of these thresholds, shares which it acquired in the transaction taking it over the threshold and within the 90 days immediately preceding the date when the acquiring person acquired or offered to acquire a controlling interest become “control shares” to which the voting restrictions described above apply. These laws may have a chilling effect on certain transactions if our Articles or Bylaws are not amended to provide that these provisions do not apply to us or to an acquisition of a controlling interest, or if our disinterested stockholders do not confer voting rights in the control shares.
No Cumulative Voting
The Articles do not provide for cumulative voting in the election of directors.
5
Blank Check Preferred Stock
We believe that the availability of the preferred stock under the Articles provides the Company with flexibility in addressing corporate issues that may arise. Having these authorized shares available for issuance will allow the Company to issue shares of preferred stock without the expense and delay of a special stockholders’ meeting. The authorized shares of preferred stock, as well as shares of common stock, will be available for issuance without further action by the Company’s stockholders, with the exception of any actions required by applicable law or the rules of any stock exchange on which RCM’s securities may be listed. The board of directors will have the power, subject to applicable law, to issue classes or series of preferred stock that could, depending on the terms of the class or series, impede the completion of a merger, tender offer or other takeover attempt.
Action by Written Consent; Special Meetings of Stockholders; Advance Notice Procedure
The Articles provide that stockholders may take action by written consent if such consent is signed by the holders of record of the outstanding shares of the Company having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and otherwise may only take action at duly called annual or special meetings.
The Bylaws provide that special meetings of stockholders may be called only by a majority of the members of our board or upon the written request of stockholders, in accordance with, and subject to, the provisions of the Bylaws, from stockholders who hold, in the aggregate, not less than twenty percent (20%) of the voting power of our outstanding shares.
In addition, the Bylaws establish advance notice procedures for:
•
stockholders to nominate candidates for election as a director; and
•
stockholders to propose topics for consideration at stockholders’ meetings.
Stockholders must notify our corporate secretary in writing prior to the meeting at which the matters are to be acted upon or directors are to be elected. The notice must contain the information specified in the Bylaws. To be timely, the notice must be delivered to, or mailed and received at, the principal executive offices of the Company not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one-year anniversary of the immediately preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting is called for a date that is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received, not later than the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made. In the case of a special meeting of stockholders called to elect directors, the stockholder notice must be delivered to, or mailed and received by, the Secretary of the Company at its principal executive offices not earlier than the one hundred twentieth (120th) day prior to such special meeting and not later than the ninetieth (90th) day prior to such special meeting or, if later, the tenth (10th) day following the day on which public disclosure (as defined in Section 3.13(h)) of the date of such special meeting was first made. These provisions may preclude some stockholders from bringing matters before the stockholders at an annual or special meeting or from nominating candidates for director at an annual or special meeting.
Removal of Directors.
Our board of directors is elected each year by our stockholders for a term expiring at the next annual meeting of stockholders. Our stockholders may remove directors with or without cause by the affirmative vote or written consent of the holders of two-thirds (2/3) of the combined voting power of all then issued and outstanding shares of stock of all classes and series of the Company entitled to vote generally for the election of directors, voting together as a single class. Our board of directors may appoint a director to fill a vacancy created by the expansion of the board of directors.
6
Transfer Agent And Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC whose address is 59 Maiden Lane, New York, New York 10005.
Nasdaq Capital Market Listing
Our common stock is listed on The Nasdaq Capital Market under the symbol “RCMT.”
DESCRIPTION OF WARRANTS
The following description, together with the additional information we may include in any applicable prospectus supplements and free writing prospectuses, summarizes the material terms and provisions of the warrants that we may offer under this prospectus, which may consist of warrants to purchase common stock or preferred stock and may be issued in one or more series. Warrants may be issued independently or together with common stock or preferred stock offered by any prospectus supplement, and may be attached to or separate from those securities. While the terms we have summarized below will apply generally to any warrants that we may offer under this prospectus, we will describe the particular terms of any series of warrants that we may offer in more detail in the applicable prospectus supplement and any applicable free writing prospectus. The terms of any warrants offered under a prospectus supplement may differ from the terms described below. However, no prospectus supplement will fundamentally change the terms that are set forth in this prospectus or offer a security that is not registered and described in this prospectus at the time of its effectiveness.
We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from reports that we file with the SEC, the form of warrant agreement, if any, including a form of warrant certificate, that describes the terms of the particular series of warrants we are offering. The following summaries of material provisions of the warrants and the warrant agreements are subject to, and qualified in their entirety by reference to, all the provisions of the warrant agreement and warrant certificate applicable to the particular series of warrants that we may offer under this prospectus. We urge you to read the applicable prospectus supplements related to the particular series of warrants that we may offer under this prospectus, as well as any related free writing prospectuses, and the complete warrant agreements and warrant certificates that contain the terms of the warrants.
General
We will describe in the applicable prospectus supplement the terms relating to a series of warrants being offered, including:
•
the title of such securities;
•
the offering price or prices and aggregate number of warrants offered;
•
the currency or currencies for which the warrants may be purchased;
•
if applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued with each such security or each principal amount of such security;
•
if applicable, the date on and after which the warrants and the related securities will be separately transferable;
•
if applicable, the minimum or maximum amount of such warrants which may be exercised at any one time;
•
in the case of warrants to purchase common stock or preferred stock, the number of shares of common stock or preferred stock, as the case may be, purchasable upon the exercise of one warrant and the price at which, and the currency in which, these shares may be purchased upon such exercise;
•
the effect of any merger, consolidation, sale or other disposition of our business on the warrant agreements and the warrants;
•
the terms of any rights to redeem or call the warrants;
7
•
the terms of any rights to force the exercise of the warrants;
•
any provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
•
the dates on which the right to exercise the warrants will commence and expire;
•
the manner in which the warrant agreements and warrants may be modified;
•
a discussion of any material or special United States federal income tax consequences of holding or exercising the warrants;
•
the terms of the securities issuable upon exercise of the warrants; and
•
any other specific terms, preferences, rights or limitations of or restrictions on the warrants.
Before exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise, including, in the case of warrants to purchase common stock or preferred stock, the right to receive dividends, if any, or, payments upon our liquidation, dissolution or winding up or to exercise voting rights, if any.
Exercise Of Warrants
Each warrant will entitle the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price that we describe in the applicable prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders of the warrants may exercise the warrants at any time up to the specified time on the expiration date that we set forth in the table above includesapplicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.
Unless we otherwise specify in the applicable prospectus supplement, holders of the warrants may exercise the warrants by delivering the warrant certificate representing the warrants to be exercised together with specified information, and paying the required amount to the warrant agent in immediately available funds, as provided in the applicable prospectus supplement. We will set forth on the reverse side of the warrant certificate and in the applicable prospectus supplement the information that the holder of the warrant will be required to deliver to the warrant agent in connection with the exercise of the warrant.
Upon receipt of the required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities ownedpurchasable upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue a new warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants may surrender securities as all or part of the exercise price for warrants.
Enforceability Of Rights By Holders Of Warrants
Each warrant agent will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of agency or trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants. A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action its right to exercise, and receive the securities purchasable upon exercise of, its warrants.
DESCRIPTION OF RIGHTS
The following is a general description of the terms of the rights we may issue from time to time unless we provide otherwise in the applicable prospectus supplement. Particular terms of any rights we offer will be described in the prospectus supplement relating to such rights.
8
General
We may issue rights to purchase common stock, preferred stock or units. Rights may be issued independently or together with other securities and may or may not be transferable by the person purchasing or receiving the rights. In connection with any rights offering to our stockholders, we may enter into a standby underwriting, backstop or other arrangement with one or more underwriters or other persons securities aspursuant to which such underwriters or other persons share votingwould purchase any offered securities remaining unsubscribed for after such rights offering. In connection with a rights offering to our stockholders, we would distribute certificates evidencing the rights and a prospectus supplement to our stockholders on or investment powerabout the record date that we set for receiving rights in such rights offering.
The applicable prospectus supplement will describe the following terms of any rights we may issue, including some or all of the following:
•
the title and aggregate number of the rights;
•
the subscription price or a formula for the determination of the subscription price for the rights and the currency or currencies in which the subscription price may be payable;
•
if applicable, the designation and terms of the securities with which the rights are issued and the number of rights issued with each such persons havesecurity or each principal amount of such security;
•
the number or a formula for the determination of the number of the rights issued to each stockholder;
•
the extent to which the rights are transferable;
•
in the case of rights to purchase common stock or preferred stock, the type of stock and number of shares of stock purchasable upon exercise of one right;
•
the date on which the right to acquire within 60 days
afterexercise the rights will commence, and the date on which the rights will expire (subject to any extension);
•
if applicable, the minimum or maximum amount of this Prospectus. The table has been prepared based on
7,693,868the rights that may be exercised at any one time;
•
the extent to which such rights include an over-subscription privilege with respect to unsubscribed securities;
•
if applicable, the procedures for adjusting the subscription price and number of shares of Common Stock outstanding as of April 24, 1998.
(2) The shares of Common Stock being offered by the Selling Stockholders will
be issued by the Companycommon stock or preferred stock purchasable upon the exercise of each right upon the Selling Stockholder
Options.
(3) The addressoccurrence of all directors and officerscertain events, including stock splits, reverse stock splits, combinations, subdivisions or reclassifications of common stock or preferred stock;
•
the Company is c/o RCM
Technologies, Inc., 2500 McClellan Avenue, Suite 350, Pennsauken, New
Jersey 08109.
(4) Includes optionseffect on the rights of any merger, consolidation, sale or other disposition of our business;
•
the terms of any rights to purchase 694,020 shares underredeem or call the Company's stock
option plans and 38,312 sharesrights;
•
information with respect to which Mr. Kopyt has sole
voting power in book-entry procedures, if any;
•
the election of directors and disclaims beneficial
ownership. See "-- Certain Voting Arrangements."
(5) Includes 367,576 shares with respect to which each director is deemed to
have shared voting power as a memberterms of the Board of Directors pursuant to
an arrangement under which the Board of Directors has power to vote the
shares. Each director disclaims beneficial ownership of those shares. See
"-- Certain Voting Arrangements."
(6) Includes options to purchase 90,000 shares under the Company's stock option
plans.
36
(7) Mr. Kaminsky has agreed to vote 55,265 of his shares in accordance with the
recommendationsecurities issuable upon exercise of the majorityrights;
•
if applicable, the material terms of the Board of Directors until the earlier
of: (i) May 2, 1998;any standby underwriting, backstop or (ii) the termination of his employment agreement
with the Company. Includes options toother purchase 15,000 shares under the
Company's stock option plans.
(8) Includes options to purchase 70,000 shares under the Company's stock option
plans.
(9) Includes options to purchase 68,000 shares under the Company's stock option
plans. Does not include options to purchase 2,000 shares under the
Company's stock option plans, which options are not exercisable within 60
days after the date of this Prospectus.
(10) In fiscal 1997, Messrs. Meyers and Blaire were officers and directors of
the Company. Messrs. Meyers and Blaire acquired their shares in March 1996
in connection with their sale of The Consortium to the Company. At the time
of the sale, each of Messrs. Meyers and Blaire enteredarrangement that we may enter into a two-year
employment agreement with the Company expiring on March 11, 1998 unless
renewed by the Company. In January 1998, the Company informed each of
Messrs. Meyers and Blaire that his employment agreement would not be
renewed. On February 19, 1998, Mr. Meyers' employment with the Company
ended and, effective March 12, 1998, Mr. Meyers resigned from the Company's
Board of Directors. On March 27, 1998, Mr. Blaire's employment with the
Company ended and, effective April 6, 1998, Mr. Blaire resigned from the
Company's Board of Directors.
CERTAIN VOTING ARRANGEMENTS
On February 5, 1996, the Company issued and sold 276,625 shares of Common
Stock to Limeport Investments, LLC ("Limeport") in a private placement
transaction. In conjunction with this transaction, Limeport granted Mr. Kopyt an
irrevocable proxy entitling him to vote such shares solely in connection with the electionrights offering;
•
if applicable, a discussion of directorscertain U.S. federal income tax considerations; and
•
any other terms of the Company, at any regular or special meetingrights, including terms, procedures and limitations relating to the exchange and exercise of the stockholders. The numberrights.
Exercise of Rights
Each right will entitle the holder to purchase for cash or other consideration such shares of Common Stock ownedstock or principal amount of securities at the subscription price as shall in each case be set forth in, or be determinable as set forth in, the prospectus supplement relating to the rights offered thereby. Rights may be exercised as set forth in the applicable prospectus supplement beginning on the date specified therein and continuing until
9
the close of business on the expiration date set forth in the prospectus supplement relating to the rights offered thereby. After the close of business on the expiration date, unexercised rights will become void.
Upon receipt of payment and a subscription certificate properly completed and duly executed at the corporate trust office of the subscription agent or any other office indicated in the prospectus supplement, we will, as soon as practicable, forward the securities purchasable upon such exercise. If less than all of the rights represented by Limeport
Investments at April 22, 1998 was 38,312.
Effective August 31, 1995,such subscription certificate are exercised, a new subscription certificate will be issued for the Company completedremaining rights. If we so indicate in the acquisitionapplicable prospectus supplement, holders of Cataract, Inc. ("Cataract")the rights may surrender securities as all or part of the exercise price for rights.
We may determine to offer any unsubscribed offered securities directly to stockholders, persons other than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, including pursuant to standby underwriting, backstop or other arrangements, as set forth in the applicable prospectus supplement.
Prior to exercising their rights, holders of rights will not have any of the rights of holders of the securities purchasable upon subscription, including, in the case of rights to purchase common stock or preferred stock, the right to receive dividends, if any, or payments upon our liquidation, dissolution or winding up or to exercise any voting rights.
DESCRIPTION OF UNITS
We may issue units comprising one or more securities described in this prospectus in any combination. The following description sets forth certain general terms and provisions of the units that we may offer pursuant to this prospectus. The particular terms of the units and the extent, if any, to which the general terms and provisions may apply to the units so offered will be described in the applicable prospectus supplement.
Each unit will be issued so that the holder of the unit also is the holder of each security included in the unit. Thus, the unit will have the rights and obligations of a Merger Agreement dated July 31, 1995
(the "Cataract Merger Agreement"). Pursuantholder of each included security. Units will be issued pursuant to the terms of a unit agreement, which may provide that the Cataract Merger
Agreement,securities included in the former Cataract shareholders pledged until November 30, 1998,
approximately 312,311 sharesunit may not be held or transferred separately at any time or at any time before a specified date. A copy of the Company's common stock ("Cataract Shares")
they received as partforms of the merger consideration, in orderunit agreement and the unit certificate relating to guarantee certain
performance criteriaany particular issue of Cataract established inunits will be filed with the Cataract Merger Agreement.
Following the expirationSEC each time we issue units, and you should read those documents for provisions that may be important to you. For more information on how you can obtain copies of the pledge period,forms of the Cataract Shares areunit agreement and the related unit certificate, see “Where You Can Find More Information.”
The prospectus supplement relating to any particular issuance of units will describe the terms of those units, including, to the extent applicable, the following:
•
the designation and terms of the units and the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately;
•
any provision for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units; and
•
whether the units will be issued in fully registered or global form.
PLAN OF DISTRIBUTION
We may sell the securities covered hereby from time to time pursuant to underwritten public offerings, direct sales to the public, negotiated transactions, block trades or a combination of these methods. A distribution of the securities offered by this prospectus may also be effected through the issuance of derivative securities, including without limitation, warrants and subscriptions. We may sell the securities to or through underwriters or dealers, through agents, or directly to one or more purchasers. We may distribute securities from time to time in one or more transactions:
•
at a fixed price or prices, which may be changed;
•
at market prices prevailing at the time of sale;
•
at prices related to such prevailing market prices;
10
•
at varying prices determined at the time of sale; or
•
at negotiated prices.
We may also sell equity securities covered by this registration statement in an “at the market offering” as defined in Rule 415 under the Securities Act. Such offering may be made into an existing trading market for such securities in transactions at other than a fixed price, either:
•
on or through the facilities of The Nasdaq Capital Market or any other securities exchange or quotation or trading service on which such securities may be listed, quoted or traded at the time of sale; and/or
•
to or through a market maker otherwise than on The Nasdaq Capital Market or such other securities exchanges or quotation or trading services.
Such at-the-market offerings, if any, may be conducted by financial institutions acting as principal or agent.
A prospectus supplement or supplements (and any related free writing prospectus that we may authorize to be placed in a voting trust until the earlier of (i) the public or private sale of
such shares in open market transactionsprovided to unaffiliated third parties or (ii)
the resignation or removal from office of Leon Kopyt, currently Chief Executive
Officer and President of the Company. Notwithstanding the above, one-third of
the Cataract Shares shall be released from trust commencing August 31, 2000, and
thereafter an additional one-third of the Cataract Shares shall be released from
trust upon each of August 31, 2001 and August 31, 2002. During the period in
which the Cataract Shares are subject to pledge and the voting trust, the
Cataract Shares are to be voted by the Company's Board of Directors on behalf of
the former shareholders of Cataract.
Effective May 2, 1996, the Company completed the acquisition of Consortium
MD pursuant to a Merger Agreement dated April 23, 1996 (the "Consortium MD
Merger Agreement"). Pursuant toyou) will describe the terms of the Consortium MD Merger Agreement,
Peter Kaminsky, the former sole shareholder of Consortium MD and an executive
officeroffering of the Company, agreed, amongsecurities, including, to the extent applicable:
•
the name or names of any underwriters, dealers or agents participating in the offering, if any;
•
the purchase price of the securities sold by us to any underwriter or dealer and the net proceeds we expect to receive from the offering;
•
any option, under which underwriters may purchase additional securities from us;
•
any agency fees or underwriting discounts or commissions and other things,items constituting agents’ or underwriters’ compensation;
•
any public offering price;
•
any discounts or concessions allowed or reallowed or paid to votedealers; and
•
any securities exchange or market on which the 55,265 sharessecurities may be listed.
Only underwriters named in the prospectus supplement are underwriters of Common Stock received by him in connection with all matters to be voted onthe securities offered by the stockholdersprospectus supplement.
If underwriters are used in the sale, they will acquire the securities for their own account and may resell the securities from time to time in one or more transactions at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the Company, in accordance withunderwriters to purchase the recommendation of the
majority of the Board of Directors. These provisions shall remain in effect
until the earlier of (i) May 2, 1998 or (ii) the termination of Mr. Kaminsky's
employment agreement with the Company.
The former shareholders of The Consortium, including Messrs. Meyers and
Blaire, have limited preemptive rights with respect to certain issuances of
voting securities for cash by the Company. The rights are not applicable to the
offering of shares of Common Stock made by the Company pursuant to this
Prospectus or other underwritten public offerings or to issuances of shares of
Common Stock pursuant to stock option plans.
37
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of the Offering, there will be 10,393,868 shares of Common
Stock outstanding all of which will be freely tradeable without restriction or
further registration under the Securities Act, unless held by an "affiliate" of
the Company as that term is defined in Rule 144 under the Securities Act, which
shares will be subject to the resale limitations of Rule 144 and, except for (i)
1,096,936 shares which have been registered for resale and may be sold subject
to certain contractual restrictions limiting resales by each of Messrs. Meyers
and Blaire to 50,000 shares, each, per week, (ii) 55,265 shares have been
registered for resale, but are subject to a 90-day Lock-Up Period (as defined
below), and (iii) 312,311 shares may not be sold until November 30, 1998 due to
contractual restrictions. All other outstanding shares are subject to the resale
limitations of Rule 144.
In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned shares
constituting "restricted securities" (generally defined as securities acquired
from the Company or an affiliate of the Company in a non-public transaction) for
at least one year is entitled to sell within any three-month period a number of
shares that does not exceed the greater of (i) one percent of then outstanding
Common Stock 103,938 shares of Common Stock immediately after the Offering
without giving effect to additional shares issued pursuant to the Underwriters'
over-allotment option) or (ii) the average weekly reported trading volumeconditions set forth in the Common Stock duringapplicable underwriting agreement. We may offer the four calendar weeks preceding the date on which notice
of such sale is filed pursuant to Rule 144. Sales under Rule 144 are also
subject to certain provisions regarding the manner of sale, notice requirements
and the availability of current public information about the Company. A
stockholder (or stockholders whose shares are aggregated) who is not an
affiliate of the Company for at least 90 days prior to a sale and who has
beneficially owned "restricted securities" for at least two years is entitled to
sell such shares under Rule 144 without regard to the limitations described
above.
The Company and its executive officers and directors have agreed not to
offer, sell, contract to sell or otherwise dispose of any shares of Common Stock
or rights to acquire such shares or securities convertible into or exchangeable
for Common Stock other than sales contemplated hereby or issued or to be issued
pursuant to employee stock option plans or in connection with other employee
incentive compensation arrangements or agreements, in each case in effect on the
date of this Prospectus, for a period of 90 days after the date of this
Prospectus (the "Lock-Up Period"), without the prior written consent of BT Alex.
Brown Incorporated, as representative of the Underwriters.
Sales of additional shares in the public market could also occur upon the
exercise of 52,855 vested and exercisable employee stock options held by persons
not subject to the lock-up, and Class C Warrants to purchase 55,855 shares of
Common Stock. These sales could take place prior to the expiration of the
Lock-Up Period.
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of shares for future sale, to the public through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Subject to certain conditions, the underwriters will have on the market pricebe obligated to purchase all of the Common Stock prevailingsecurities offered by the prospectus supplement, other than securities covered by any option to purchase additional securities. Any public offering price and any discounts, commissions or concessions allowed or reallowed or paid to dealers may change from time to time. Sales of substantial amounts of Common StockWe may use underwriters with whom we have a material relationship. We will describe in the public market, whetherprospectus supplement, naming the underwriter, the nature of any such shares are presently outstandingrelationship.
We may sell securities directly or subsequently issued, orthrough agents we designate from time to time. We will name any agent involved in the perception
that such sales could occur, could adversely affect prevailing market pricesoffering and sale of securities, and we will describe any commissions and other compensation we will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agent will act on a best-efforts basis for the Common Stock and could impair the Company's abilityperiod of its appointment.
We may authorize agents or underwriters to raise capital in the
future through an offeringsolicit offers by certain types of equity securities. The Company cannot predict when
or how many of such additional shares of Common Stock may be offered for sale or
sold to the public in the future.
38
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives, BT
Alex. Brown Incorporated, BancAmerica Robertson Stephens and Legg Mason Wood
Walker, Incorporated, have severally agreedinstitutional investors to purchase securities from the Company and the
Selling Stockholders the following respective number of shares of Common Stock
at the public offering price less the underwriting discounts and commissions set
forth on the cover page of this Prospectus:
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase the total number of shares of Common Stock offered
hereby (other than those subject to the over-allotment described below) if any
of such shares are purchased.
The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the publicus at the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the cover pagefuture. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these contracts in the prospectus supplement.
11
We may provide agents and underwriters with indemnification against civil liabilities related to this Prospectusoffering, including liabilities under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect to these liabilities. Agents and underwriters may engage in transactions with, or perform services for, us in the ordinary course of business.
All securities we may offer, other than common stock, will be new issues of securities with no established trading market. Any agents or underwriters may make a market in these securities, but will not be obligated to certain dealersdo so and may discontinue any market making at such price less a concession notany time without notice. Accordingly, we cannot guarantee the liquidity of the trading markets for any securities.
Any underwriter may engage in overallotment, stabilizing transactions, short covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. Overallotment involves sales in excess of $ per share. The Underwriters may allow, and such dealers may
reallow,the offering size, which create a concessionshort position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not in excess of $ per share to certain other
dealers. After commencementexceed a specified maximum. Short covering transactions involve purchases of the Offering,securities in the Offeringopen market after the distribution is completed to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a stabilizing or covering transaction to cover short positions. Those activities may cause the price and other
selling termsof the securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time. These transactions may be changed by the Representatives.effected on any exchange or over-the-counter market or otherwise.
Any agents and underwriters who are qualified market makers on The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 405,000
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock purchased by each
of them as shown in the above table bears to 2,700,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 2,700,000 shares are being offered.
In connection with the Offering, certain UnderwritersNasdaq Capital Market may engage in passive market making transactions in the Common Stocksecurities on theThe Nasdaq NationalCapital Market
immediately prior to the commencement of sales in the Offering in accordance with Rule 103 of Regulation M.M, during the business day prior to the pricing of the offering, before the commencement of offers or sales of the securities. Passive market making consists of displaying bids
on the Nasdaq National Market limited by the bid prices of independentmakers must comply with applicable volume and price limitations and must be identified as passive market makers and making purchases limited by such prices and effected in response to
order flow. Net purchased bymakers. In general, a passive market maker on each daymust display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are limited to a
specified percentage oflowered below the passive market maker's average daily trading volume
inmaker’s bid, however, the Common Stock during a specified period andpassive market maker’s bid must then be discontinuedlowered when such
limit is reached.certain purchase limits are exceeded. Passive market making may stabilize the market price of the Common Stocksecurities at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time.
39
Subject to
12
LEGAL MATTERS
Unless otherwise indicated in the applicable limitations,prospectus supplement, the Underwriters,validity of the shares of common stock and preferred stock offered by this prospectus, and any supplement thereto, as well as certain other matters of Nevada law in connection with the
Offering, may place bids for or make purchases of the Common Stock in the open
market or otherwise, for long or short account, or cover short positions
incurred to stabilize, maintain or otherwise affect the price of the Common
Stock, which may be higher than the price that might otherwise prevail in the
open market. There can be no assurance that the price of the Common Stocksuch offering, will be stabilized, or that stabilizing, if commenced, will not be discontinued at
any time. Subject to applicable limitations, the Underwriters may also place
bids or make purchases on behalf of the underwriting syndicate to reduce a short
position created in connection with the Offering. The Underwriters are not
required to engage in these activities and may end these activities at any time.
The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriters and the Company and the Selling Stockholders with
respect to certain civil liabilities, including liabilities under the Securities
Act.
The Company's officers and directors, who following the Offering will
beneficially own an aggregate of 914,425 shares of Common Stock, and the Company
have agreed not to offer, sell or otherwise dispose of any such Common Stock or
any shares of Common Stock issuablepassed upon exercise of any options for Common
Stock for a period of 90 days after the date of this Prospectus without the
prior written consent of BT Alex. Brown Incorporated, except for the Common
Stock offered hereby.
LEGAL MATTERSus by Brownstein Hyatt Farber Schreck, LLP, Las Vegas, Nevada. Certain other legal matters in connection with the Offeringoffering, and the validity or enforceability of warrants or rights offered by this prospectus, and any supplement thereto, will be passed upon for the Companyus by Wolf, Block, Schorr and Solis-Cohen LLP, Philadelphia,
Pennsylvania. The validity of the shares of Common Stock offered hereby has been
passed upon for the Company by Schreck Morris, Las Vegas, Nevada. As to matters
of Nevada law, Wolf, Block, Schorr and Solis-Cohen LLP will rely upon the
opinion of Schreck Morris. CertainMorgan, Lewis & Bockius LLP. Additional legal matters in connection with the Offering
willmay be passed upon for us or any underwriters, dealers or agents, by counsel that we will name in the Underwriters by Hogan & Hartson L.L.P., Baltimore,
Maryland.
applicable prospectus supplement.
EXPERTS
The
WithumSmith+Brown, PC, an independent registered public accounting firm, has audited the consolidated financial statements and financial statement schedule of RCM Technologies, Inc. and Subsidiaries for the years ended December 30, 2023 and December 31, 2022 included in our Annual Report on Form 10-K for the year ended December 30, 2023, as of October 31, 1996set forth in their report, dated March 14, 2024, which is incorporated by reference in this prospectus and 1997 and for each of
the three yearselsewhere in the period ended October 31, 1997 included in this Prospectus
have been auditedregistration statement. Such financial statements are incorporated by Grant Thornton LLP, independent certified public
accountants, whose report thereon is included herein,reference in reliance of said firmon WithumSmith+Brown, PC’s report, given on their authority as experts in auditingaccounting and accounting.
AVAILABLEauditing.
WHERE YOU CAN FIND MORE INFORMATION
The Company is subject to the informational
We file annual, quarterly and reporting requirements of
the Exchange Act and, in accordance therewith, filescurrent reports, proxy statements and other information with the Commission. Such reports, proxy statements and
other information concerningSEC. Our SEC filings are available to the Company may be inspected without charge, and
copies of all or any part thereof may be obtained frompublic over the Commission's
principal office in Washington, D.C. at Room 1024, 450 Fifth Street N.W.,
Washington, D.C. 20549, andInternet at the Commission's regional offices at 7 World
Trade Center, Suite 1300, New York, New York 10048, and at Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Common Stock is listed for trading on the Nasdaq National
Market, and reports, proxy statements and other information concerning the
Company are on file for inspection at the offices of The Nasdaq Stock Market,
Inc., 1735 K Street, N.W., Washington, D.C. 20006. In addition, the Commission
maintains a Web siteSEC’s website at http://www.sec.gov containing reports, proxy andwww.sec.gov.
We maintain a website at www.rcmt.com. Information contained in or accessible through our website does not constitute a part of this prospectus.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to “incorporate by reference” into this prospectus the information statements and othercontained in documents that we file with them, which means that we can disclose important information regarding registrantsto you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. Information in this prospectus supersedes information incorporated by reference that file
electronically with the Commission, including the Company.
40
The Company haswe filed with the CommissionSEC before the date of this prospectus, while information that we file later with the SEC will automatically update and supersede prior information. Any information so updated and superseded shall not be deemed, except as so updated and superseded, to constitute a Registration Statement on Form
S-3part of this prospectus. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act with respectof 1934, as amended, prior to the sharestermination of Common Stock being
offered by this Prospectus. This Prospectus does not contain allthe offering. Notwithstanding the foregoing, unless specifically stated to the contrary, none of the information set forth inthat is not deemed “filed” with the Registration Statement and the exhibits and
schedules thereto, certain parts of which have been omitted as permitted by the
rules and regulations of the Commission. For furtherSEC, including information with respect to
the Company and the shares of Common Stock offered hereby, reference is made to
the Registration Statement, including the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contentsfurnished under Items 2.02 or 7.01 of any contract or
other document referred to herein are not necessarily complete and, where such
contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions of such exhibit,
to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company (File No. 1-10245)
with the Commission under the Exchange Act areCurrent Report on Form 8-K, will be incorporated by reference into, or otherwise included in, this Prospectus as of their respective dates: (i) the Company's Annual Reportprospectus:
1.
2.
our current reports on Form 8-K dated filed with the SEC on January 2, 199824, 2024, February 16, 2024 and March 17, 19988, 2024; and (iv)
3.
the description of the Common Stockour common stock, par value $0.05 per share, contained in the Company'sour Registration Statement on Form 10 filed under Section 12 ofwith the Exchange ActSEC on March 1, 1982.
All documents filed by1982, to register such securities under the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of theSecurities Exchange Act afterof 1934, as amended, including any amendments filed for the datepurpose of this Prospectus and prior to the
termination of the offering of the shares of Common Stock offered hereby shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the respective dates of filing ofupdating such documents, except as to any
portion of any future annualinformation.
We will provide, upon written or quarterly report to the Company's stockholders
or proxy statement which is not deemed to be filed under those provisions. Any
statement contained in this Prospectus, or in a document, all or a portion of
which is incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently dated document, as the case may be,
which also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
The Company undertakes to provide,oral request, without charge to each personyou, including any beneficial owner to whom a
copy of this Prospectus has beenprospectus is delivered, upon the request of such person, a copy of any or all of the documents referred to above which have been or may be
incorporated herein by reference in this Prospectus, other than the exhibits to suchthose documents, unless suchthe exhibits are also specifically incorporated by reference herein. Written or oral requestsinto
13
the information that this prospectus incorporates. You should direct a request for such copies should be directed to the
Companyus at Attention: Chief Financial Officer, 2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey 08109-4613,
Attention: Stanton Remer; telephone number (609) 486-1777.
41
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
REFERENCE
---------
Pro Forma Condensed Consolidated Statements of Operations
(Unaudited):
Three Months Ended January 31, 1998......................... F-2
Year Ended October 31, 1997................................. F-3
Notes to Unaudited Pro Forma Condensed Consolidated
Statements of Operations.................................. F-4
Consolidated Financial Statements:
Independent Auditors' Report................................ F-7
Consolidated Balance Sheets, October 31, 1996 and 1997 and
January 31, 1998 (Unaudited).............................. F-8
Consolidated Statements of Income, Years Ended October 31,
1995, 1996 and 1997 and the Three Months Ended January 31,
1997 and 1998
(Unaudited)............................................... F-9
Consolidated Statements of Changes in Shareholders' Equity,
Years Ended October 31, 1995, 1996 and 1997 and the Three
Months Ended January 31, 1998 (Unaudited)................. F-10
Consolidated Statements of Cash Flows, Years Ended October
31, 1995, 1996 and 1997 and the Three Months Ended January
31, 1997 and 1998 (Unaudited)............................. F-11
Notes to Consolidated Financial Statements.................. F-12
F-1
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTSNJ 08109 or you may call us at (856) 356-4500.
DISCLOSURE OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED JANUARY 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
See notes to pro forma condensed consolidated financial statement.
F-2
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
YEAR ENDED OCTOBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
See notes to pro forma condensed consolidated financial statement.
F-3
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated statements of
operations (the "Pro Forma Financial Statements") are based on adjustments to
the historical consolidated statements of operations of RCM Technologies, Inc.
("RCM" or the "Company") to give effect to the acquisitions described in Note 3
(the "Acquired Companies"). The pro forma condensed consolidated statements of
operations assume all acquisitions described in Note 3 were consummated as of
the beginning of the periods presented. The pro forma condensed consolidated
statements of operations are not necessarily indicative of results that would
have occurred had the acquisitions been consummated as of the beginning of the
periods presented or that might be attained in the future. Certain information
normally included in financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. The Pro Forma
Financial Statements should be read in conjunction with the historical
consolidated financial statements of RCM, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus.
2. FOOTNOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(a) THREE MONTHS ENDED JANUARY 31, 1998. The Acquired Companies statement of
operations represents historical operating data for fiscal 1998
acquisitions (described in Note 3) from November 1, 1997 to the earlier
of their respective dates of acquisition or January 31, 1998. Each of the
acquisitions has been accounted for under the purchase method of
accounting. Accordingly, the results of operations of each of the
Acquired Companies are included in the historical results of operations
of the Company from the date of its acquisition.
YEAR ENDED OCTOBER 31, 1997. The Acquired Companies statement of
operations represents historical operating data for fiscal 1997 and
fiscal 1998 acquisitions (described in Note 3) from November 1, 1996 to
the earlier of their respective dates of acquisition or October 31, 1997.
Each of the acquisitions has been accounted for under the purchase method
of accounting. Accordingly, the results of operations of each of the
Acquired Companies are included in the historical results of operations
of the Company from the date of its acquisition.
(b) The adjustments to reduce selling, general and administrative expenses
reflect redundant operating costs and non-recurring expenses that were
immediately identifiable at the time of the acquisitions. The adjustments
primarily reflect reductions in salaries for the difference between
compensation of certain sellers prior to consummation of the acquisition
and their compensation following the acquisitions as stipulated in their
respective employment agreements.
(c) Reflects additional amortization of goodwill over a 40 year period, as if
the Acquired Companies were acquired as of the beginning of the period
presented.
(d) Reflects additional interest expense that would have been incurred had
the Acquired Companies been acquired as of the beginning of the period
presented and the acquisition consideration was funded with debt. The
interest rate of 8% used to calculate pro forma interest on the assumed
additional debt reflects the Company's approximate borrowing rate.
(e) Reflects income taxes at the Company's effective tax rates.
(f) THREE MONTHS ENDED JANUARY 31, 1998. The Offering Adjustments assume the
issuance of 389,792 shares of Common Stock at $23.00, which, net of
estimated underwriting discounts and
F-4
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS -- (CONTINUED)
2. FOOTNOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS -- (CONTINUED)
offering expenses payable by the Company, would result in sufficient net
proceeds to repay acquisition related debt. These shares are assumed to
have been issued and the debt repaid, as of November 1, 1997, and thus
interest expense attributable to such debt has been eliminated.
YEAR ENDED OCTOBER 31, 1997. The Offering Adjustments assume that the
Company's secondary offering of 2,698,187 shares on June 10, 1997
were issued as of November 1, 1996. The Offering Adjustments also assume
the issuance of 539,785 shares of Common Stock at $23.00, which, net of
estimated underwriting discounts and offering expenses payable by the
Company, would result in sufficient net proceeds to repay acquisition
related debt. These shares are assumed to have been issued and the debt
repaid, as of November 1, 1996 and thus interest expense attributable to
such debt has been eliminated.
3. ACQUISITIONS
FISCAL 1997
PROGRAMMING RESOURCES UNLIMITED ("PRU"). On April 1, 1997, the Company
acquired certain operating assets of PRU, a Wayne, Pennsylvania-based provider
of information technology staffing services, for a purchase price consisting of:
(i) $600,000 in cash; (ii) $300,000 of contingent consideration, payable over
three years upon attaining certain earnings targets; and (iii) additional
consideration to the extent that during the three year period, PRU exceeds the
earnings targets. PRU generated revenue of approximately $2.4 million during the
fiscal year prior to the date of acquisition.
CAMELOT CONTRACTORS LIMITED ("CAMELOT"). On August 4, 1997, the Company
acquired all of the outstanding stock of Camelot, a Manchester, New
Hampshire-based provider of information technology staffing services, for a
purchase price consisting of: (i) $9.0 million in cash and 22,409 shares of
common stock valued at $318,433; (ii) $3.5 million of contingent consideration,
payable over three years upon attaining certain earnings targets; 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.
AUSTIN NICHOLS TECHNICAL TEMPORARIES, INC. ("AUSTIN"). On September 29,
1997, the Company acquired all of the outstanding stock of Austin, a Kansas
City, Missouri-based provider of information technology and professional
engineering staffing services, for a purchase price consisting of: (i) $2.5
million in cash; (ii) $900,000 of contingent consideration, payable over three
years upon attaining certain earnings targets; 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
during the fiscal year prior to the date of acquisition.
J.D. KARIN CONSULTING SERVICES, INC. ("J.D. KARIN"). On September 29, 1997,
the Company acquired all of the outstanding stock of J.D. Karin, a Flanders, New
Jersey-based provider of information technology staffing services, for a
purchase price consisting of: (i) $1.8 million in cash; (ii) $1.2 million of
contingent consideration, payable over three years upon attaining certain
earnings targets; 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 $4.9 million during the fiscal year prior to
the date of acquisition.
F-5
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS -- (CONTINUED)
3. ACQUISITIONS -- (CONTINUED)
FISCAL 1998
NORTHERN TECHNICAL SERVICES, INC. ("NTS"). On January 4, 1998, the Company
purchased of the outstanding stock of NTS, a Milwaukee, Wisconsin-based,
provider of information technology and professional engineering staffing
services, for a purchase price consisting of: (i) $3.1 million in cash; (ii)
$1.5 million of contingent consideration, payable over two years upon attaining
certain earnings targets; 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.
STAFFWORKS, INC. ("STAFFWORKS"). On February 2, 1998, the Company purchased
all of the outstanding stock of Staffworks, a Stanhope, New Jersey-based
provider of information technology staffing services, for a purchase price
consisting of: (i) $3.0 million in cash; (ii) $2.0 million of contingent
consideration, payable over three years upon attaining certain earnings targets;
and (iii) additional consideration to the extent that during the three year
period, Staffworks exceeds the earnings targets. Any additional consideration
paid will be recorded as additional purchase price. Staffworks generated revenue
of approximately $12.6 million during the fiscal year prior to the date of
acquisition.
GLOBAL TECHNOLOGY SOLUTIONS ("GLOBAL"). On February 2, 1998, the Company
acquired all of the outstanding stock of Global, a Sacramento, California-based
provider of information technology staffing services, for a purchase price
consisting of: (i) $3.7 million in cash; (ii) $2.0 million of contingent
consideration payable over two years upon attaining certain earnings targets;
and (iii) additional consideration to the extent that during the two year
period, Global exceeds the earnings targets. Global generated revenues of
approximately $5.5 million during the fiscal year prior to the date of
acquisition.
4. EARNINGS PER SHARE
Pro forma earnings per share were computed by dividing net income
applicable to common stock by the average number of shares of common stock and
common stock equivalents outstanding during the period and the dilutive effect
of common stock issued in connection with the acquisition of the Acquired
Companies.
F-6
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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
RCM Technologies, Inc. and Subsidiaries as of October 31, 1997 and 1996 and the
consolidated results of their operations and their consolidated 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 4 regarding the
acquisition
of Northern Technical Services, Inc.
as to
which the date is January 5, 1998)
F-7
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
F-8
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
The accompanying notes are an integral part of these financial statements.
F-9
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1995, 1996 AND 1997
AND THREE MONTHS ENDED JANUARY 31, 1998 (UNAUDITED)
The accompanying notes are an integral part of these financial statements.
F-10
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements.
F-11
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT ANDCOMMISSION’S POSITION ON INDEMNIFICATION FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
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, 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.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Certain information and footnote
disclosures which are normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to SEC rules and regulations, although management believes that
the disclosures are adequate to make the information presented not misleading.
The information reflects all normal and recurring adjustments which, in the
opinion of Management, are necessary for a fair presentation of the financial
position of the Company and its results of operations for the interim periods
set forth herein. The results for the three months ended January 31, 1998 are
not necessarily indicative of the results to be expected for the full year.
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.
F-12
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
REVENUE RECOGNITION
Revenue is recognized concurrently with the performance of services. When
the Company enters into long-term contracts for the supply of temporary
personnel, billings are rendered for employee hours worked according to
contractual billing rates.
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, 1995, 1996 and 1997 were $0, $0 and $6,246, respectively.
Contributions charged to operations by the Company for the three months ended
January 31, 1997 and 1998 were $3,267 and $8,516, 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
The Company adopted Financial Accounting Standard No. 128 "Earnings per
Share" (SFAS 128) in November 1997. SFAS revised standards for the computation
and presentation of earnings per share (EPS) requiring the presentation of both
basic and diluted earnings per share.
Basic EPS is computed by dividing net income by the weighted-average number
of common shares outstanding during each period. Diluted EPS is computed by
dividing net income by the weighted-average number of common shares outstanding
during the period after giving effect to potential dilution that could occur if
existing stock options were exercised.
A reconciliation of the basic and diluted earnings per share computations
for the year ended October 31, 1995, 1996 and 1997, and the three months ended
January 31, 1997 and 1998 is as follows (in millions except for per share
amounts):
Options to purchase 53,000 shares of common stock at prices ranging from
$3.44 to $19.85 per share, and warrants to purchase 157,342 shares of common
stock at $15 per share were outstanding
F-13
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
during the year ended October 31, 1995 but were not included in the computation
of diluted EPS because their exercise prices were greater than the average
market price of the common shares.
Warrants to purchase 157,342 shares of common stock at $15 per share were
outstanding during the year ended October 31, 1996, but were not included in the
computation of diluted EPS because the exercise price was greater than the
average market price of the common shares.
Options to purchase 10,000 shares of common stock at $10.63 per share and
warrants to purchase 157,342 shares of common stock at $15 per share were
outstanding during the year ended October 31, 1997, but were not included in the
computation of diluted EPS because their exercise prices were greater than the
average market price of the common shares.
The net income for the years ended October 31, 1995 and 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 $.18 and
$.38, respectively.
F-14
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Warrants to purchase 157,342 shares of common stock at $15.00 per share
were outstanding during the three months ended January 31, 1997, but were not
included in the computation of diluted EPS because the exercise prices were
greater than the average market price of the common shares.
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 1995, 1996 and 1997 was $48,928, $211,337
and $411,213, respectively. Amortization expense for the three months ended
January 31, 1997 and 1998 was $87,107 and $185,307, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments approximates fair value. The
Company's financial instruments are accounts receivable, accounts payable and
long-term debt. The Company does not have any off-balance sheet financial
instruments or derivatives.
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
F-15
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
2. DISCONTINUED OPERATIONS -- (CONTINUED)
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 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
THREE YEARS ENDED OCTOBER 31, 1997
During the three year period ended October 31, 1997, the Company acquired
ten businesses providing information technology and other professional staffing
services. 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."
The consideration payable to the former shareholders of Cataract, Inc.
consisted of $2,000,000 cash and 312,311 restricted shares of the Company's
common stock, 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
F-16
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
4. ACQUISITIONS -- (CONTINUED)
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 provider of information technology and health care staffing
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 stock 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 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 of 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.
On January 7, 1997, the Company acquired Programming Alternatives of
Minnesota, Inc. ("PAMI"), a Minneapolis, Minnesota- based 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 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 $1,625,000 contingent consideration payable
upon attaining certain earnings targets over a three year period. Additional
consideration 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 certain earnings targets. The purchase has been accounted
for under the purchase method of
F-17
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
4. ACQUISITIONS -- (CONTINUED)
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 contingent consideration
payable upon attaining certain earnings targets within a 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 provider of information
technology staffing services. The acquisition was completed effective as of
August 4, 1997, through a stock purchase transaction 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 Company
valued at $318,433 and $3,500,000 contingent consideration payable upon Camelot
achieving certain earnings targets within a three-year period. 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 earnings targets. 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 September 29, 1997, the Company acquired Austin Nichols Technical
Temporaries, Inc. ("Austin"), a Kansas City, Missouri-based provider of
information technology and professional engineering staffing services. 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.
The purchase consideration paid to the former shareholders of Austin
consisted of $2,500,000 cash, and $900,000 contingent consideration payable upon
Austin achieving certain earnings targets within a three-year period. 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 earnings targets. 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 September 29, 1997, the Company acquired J.D. Karin Consulting Services,
Inc. ("J.D. Karin"), a Flanders, New Jersey-based provider of information
technology staffing services. The acquisition was completed through a stock
purchase transaction pursuant to which J.D. Karin, through
F-18
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
4. ACQUISITIONS -- (CONTINUED)
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 $1,225,000 contingent consideration payable
upon J.D. Karin achieving certain earnings targets within a three-year period.
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 earnings targets. 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
all acquisitions made through October 31, 1997 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.
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.
THREE MONTHS ENDED JANUARY 31, 1998
On January 4, 1998, the Company purchased Northern Technical Services, Inc.
("NTS"), a provider of information technology and professional engineering
staffing services. The purchase price was $3,125,000 plus $1,500,000 contingent
consideration payable upon NTS achieving certain earnings targets within a
two-year period. 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.
The following unaudited results of operations have been prepared assuming
that all acquisitions made through January 31, 1998 had occurred since November
1, 1997 had occurred at the beginning of the periods presented. Those results
are not necessarily indicative of results of future operations nor of
F-19
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
4. ACQUISITIONS -- (CONTINUED)
results that would have occurred had the acquisitions been consummated as of the
beginning of the periods presented.
5. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
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 and January 31, 1998, 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 and January 31, 1998 was 9.10% and 9.76%, respectively. The interest
rate charged by the bank at October 31, 1996 was the prime rate of 8.25%. At
October 31, 1997 and January 31, 1998, there was $13,985,000 and $11,679,000,
respectively, available under the Revolving Credit Facility.
F-20
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
7. SHAREHOLDERS' EQUITY
COMMON SHARES RESERVED
Shares of unissued common stock were reserved for the following purposes:
WARRANTS
At October 31, 1996 and 1997 and January 31, 1998, the Company had 786,709,
786,709 and 612,479 warrants outstanding to purchase 157,342, 157,342 and
122,496 shares, respectively, 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 are scheduled to expire on April 30,
1998 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 options for 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.
F-21
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
7. SHAREHOLDERS' EQUITY -- (CONTINUED)
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:
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-Scholes option-pricing model with the
following weighted-average assumptions for grants in fiscal year 1996 and 1997,
respectively: expected volatility of 30% for both years; risk-free interest
rates of 6.32% and 6.43%; and expected lives of 5 years for both years. The
weighted-average fair value of options granted during fiscal years 1996 and 1997
was $2.16 and $3.46, 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:
F-22
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
7. SHAREHOLDERS' EQUITY -- (CONTINUED)
The following table summarizes information about stock options outstanding
at October 31, 1997:
The following table summarizes information about stock options outstanding
at January 31, 1998:
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 and January 31, 1998, Mr. Kopyt would have been entitled to
cash payments of approximately $1.6 million and $3.4 million, respectively
(representing salary and excise tax payments).
F-23
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
8. COMMITMENTS -- (CONTINUED)
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:
Rent expense for the years ended October 31, 1995, 1996 and 1997 was
$354,000, $498,000 and $814,000, respectively. Rent expense for the three months
ended January 31, 1997 and 1998 was $174,455 and $285,703, respectively.
9. MAJOR CUSTOMERS
Sales to major clients for the years ended October 31, 1995, 1996 and 1997
were as follows:
For the year ended October 31, 1995, three clients contributed $3,300,000,
$2,061,000 and $1,347,000, respectively (an aggregate of $6,708,000 or 24.9% of
total sales). Accounts receivable from these three clients represented 8.1% of
the total trade accounts receivable at October 31, 1995.
For the year ended October 31, 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, 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.
Sales to major clients for the three months ended January 31, 1997 and 1998
were as follows:
For the three months ended January 31, 1997, one client contributed
$2,482,000 or 11.7% of the total sales. Accounts receivable from the client
represented 4.0% of the total trade accounts receivable at January 31, 1997.
For the three months ended January 31, 1998, no one client contributed more
than 10% of the total sales.
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.
F-24
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
11. INCOME TAXES
The components of income tax expense are as follows:
The income tax provisions reconciled to the tax computed at the statutory
Federal rate was:
Significant components of the Company's deferred tax assets at October 31,
1996 and 1997 are as follows:
The valuation allowance was decreased during 1996 and 1997 by $967,887 and
$195,100, respectively, due to the utilization of net operating loss carry-overs
and the reversal of temporary differences.
F-25
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
12. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
YEAR ENDED OCTOBER 31, 1996
YEAR ENDED OCTOBER 31, 1997
- ------------------
(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.
13. INTEREST EXPENSE, NET OF INTEREST INCOME
Interest expense, net of interest income consisted of the following:
14. NEW STANDARDS
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
F-26
RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(AMOUNTS AND DISCLOSURES AT AND FOR THE
THREE MONTHS ENDED JANUARY 31, 1997 AND 1998 ARE UNAUDITED)
14. NEW STANDARDS -- (CONTINUED)
major customers. Management is currently evaluating the impact of the disclosure
requirements of this statement.
15. SUBSEQUENT EVENTS (UNAUDITED)
On February 2, 1998, the Company purchased Staffworks, Inc. ("Staffworks"),
a privately-held, provider of technical professional and information technology
personnel. The purchase price was $3,000,000 plus $2,000,000 of contingent
consideration payable over three years. 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 three
years. Any additional consideration paid will be recorded as additional purchase
price. Current annualized revenues provided by the management of Staffworks is
approximately $12.0 million.
On February 2, 1998, the Company acquired all of the outstanding stock of
Global Technology Solutions ("Global") for approximately $3.7 million cash plus
$2.0 million of consideration in the form of a two year promissory note payable
upon attaining certain earnings targets within a two-year period. The Company
also agreed to pay additional consideration to the former Global shareholder in
the event that during the two-year period the performance of Global exceeds the
established earnings targets. Global generated revenues of approximately $5.5
million during its fiscal year ended December 31, 1997. Through this
transaction, the Company acquired one branch office in Sacramento, California
which provides information technology staffing services, primarily to the San
Francisco Bay area.
F-27
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
2,700,000 SHARES
[RCM LOGO]
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
BT ALEX. BROWN
BANCAMERICA ROBERTSON
STEPHENS
LEGG MASON WOOD WALKER
INCORPORATED
, 1998
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be paid by the Company in connection with the
sale of the securities being registered in the Registration Statement are as
follows:
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Nevada Revised Statutes (the "NRS"), the Company's
Articles of Incorporation and Bylaws, provide that a director shall not be
personally liable in such capacity for monetary damages for any action or any
failure to take any action, unless the director breaches or fails to perform the
duties of his or her office under the NRS and the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness. These provisions,
however, do not apply to the responsibility or liability of a director pursuant
to any criminal statute or to the liability of a director for the payment of
taxes pursuant to local, Nevada or federal law. These provisions offer persons
who serve on the Board of Directors of the Company protection against awards of
monetary damages for negligence in the performance of their duties.
The Bylaws also provide that every person who is or was a director or
officer of the Company or of any corporation which he served as such at the
request of the Company, shall be indemnified by the Company against all expenses
and liabilities reasonably incurred by or imposed upon him, in connection with
any proceeding to which he may be made or threatened to be made, a party or in
which he may become involved by reason of his being or having been a director or
officer of the Company, or such other corporation, whether or not he is a
director or officer of the Company or such other corporation at the time the
expenses or liabilities are incurred. If the action is not by or in the right of
the Company, such person will be indemnified against expenses incurred to the
extent that he has been successful on the merits or otherwise in defense of such
action and against expenses incurred by him in connection therewith if he acted
in good faith and in a manner he reasonably believed to be in the best interests
of the Company, and with respect to any criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful. If the action is by or in
the right of the Company, such person shall be indemnified by the Company
against expenses incurred by him to the extent he has been successful on the
merits or otherwise in defense of such action and against expenses incurred by
him if he acted in good faith and in a manner he reasonably believed to be in
the best interests of the Company, except that no indemnification will apply in
respect of any matter as to which such person is adjudged to be liable to the
Company for negligence or misconduct in the performance of his duty to the
Company.
In addition, the Articles of Incorporation authorize the Company to
maintain insurance to cover such liabilities. The Company has purchased
Directors' and Officers' Liability Insurance to protect directors and officers
of the Company from any liability asserted against them for acts taken or
omissions occurring in their capacities as such. The Company policy has an
aggregate liability limit of $10,000,000. The Company is not required to
maintain such insurance and there can be no assurance that the Company will
continue to maintain such insurance or coverage in such amounts.
ACT LIABILITY
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers andor persons controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company haswe have been advisedinformed that in the opinion of the CommissionSEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim II-1
for indemnification against such liabilities (other than the payment by the Companyregistrant of expenses incurred or paid by a director, officer or controlling person of the Companyregistrant in athe successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Companywe will, unless in the opinion of itsour counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by itus is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issuer.
Referenceissue.
14
$100,000,000
RCM TECHNOLOGIES, INC.
Common Stock
Preferred Stock
Warrants
Rights to Purchase Common Stock, Preferred Stock or Units
Units
Preferred Stock
Warrants
Rights to Purchase Common Stock, Preferred Stock or Units
Units
PROSPECTUS
The information in this prospectus is madenot complete and may be changed without notice. We may not sell these securities until the registration statement relating to Item 17these securities has been declared effective by the Securities and Exchange Commission. This prospectus is neither an offer to sell nor a solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PROSPECTUS SUPPLEMENT
(To Prospectus dated , 2024)
(To Prospectus dated , 2024)
RCM TECHNOLOGIES, INC.
Up to $50,000,000
Common Stock
Common Stock
On [•], 2024, we entered into an At Market Issuance Sales Agreement, or the sales agreement, with B. Riley Securities, Inc., or the Agent, relating to the offering of shares of our common stock, par value $0.05 per share, in an aggregate amount of up to the amount described in this prospectus supplement and the accompanying prospectus. In accordance with the terms of the sales agreement, we may offer and sell up to $50.0 million of our common stock from time to time through or to the Agent, as sales agent or principal, by any method deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, or the Securities Act.
Our common stock is listed and trades on the Nasdaq Capital Market under the symbol “RCMT.” The last reported sale price of our common stock on the Nasdaq Capital Market on March 28, 2024 was $21.37 per share.
There is no arrangement for funds to be received in any escrow, trust or similar arrangement.
We will pay the Agent an amount equal to 3.0% of the aggregate sales price received by the Agent from each sale of shares sold through or to it acting as our sales agent or principal. Subject to the terms and conditions of the sales agreement, the Agent will use its commercially reasonable efforts to sell on our behalf any shares of common stock to be offered by us under the sales agreement. This offering of common stock pursuant to the sales agreement will terminate upon the earlier of (1) the sale of $50.0 million of our common stock or (2) the termination of the sales agreement, pursuant to its terms, by either the Agent or us.
Investing in our common stock involves risks. See “Risk Factors” beginning on page S-4 of this prospectus supplement and page 4 of the accompanying prospectus, and the risks set forth under the caption “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the undertakingsfiscal year ended December 31, 2022.
Neither the Securities and Exchange Commission, or the SEC, nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
B. Riley Securities
The date of this prospectus supplement is , 2024.
TABLE OF CONTENTS
Prospectus Supplement
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Prospectus
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This prospectus supplement describes the terms of this offering and adds to and updates information contained in the accompanying prospectus. The accompanying prospectus provides more general information, some of which may not apply to this offering. Generally, when we refer to this prospectus, we are referring to this prospectus supplement and the accompanying prospectus combined. To the extent there is a conflict between the information contained in this prospectus supplement, on the one hand, and the information contained in the accompanying prospectus, on the other hand, you should rely on the information contained in this prospectus supplement.
You should rely only on the information contained or incorporated by reference in this prospectus. We have not, and the Agent has not, authorized anyone to provide additional information or information different from that contained or incorporated by reference in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this prospectus in any jurisdiction where it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus nor the sale of shares of common stock means that information contained or incorporated by reference in this prospectus is correct after its respective dates. These documents do not constitute an offer to sell or solicitation of any offer to buy these shares of common stock in any circumstances under which the offer or solicitation is unlawful.
The terms “RCM,” the “Company,” “our,” “us,” and “we,” as used in this prospectus supplement, refer to RCM Technologies, Inc., unless we state otherwise or the context indicates otherwise.
S-i
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This prospectus supplement and in the accompanying prospectus, and the information incorporated by reference herein and therein, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the Securities Act, and Section 21E of the Exchange Act of 1934, as amended, which we refer to as the Exchange Act, that involve a number of risks and uncertainties. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on facts and factors currently known by us. Consequently, these forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.
Forward-looking statements can generally be identified by the use of forward-looking terms such as “believe,” “hope,” “expect,” “may,” “will,” “should,” “could,” “would,” “seek,” “intend,” “plan,” “estimate,” “anticipate” and “continue,” or other comparable terms (including their use in the negative), or by discussions of future matters. These statements include but are not limited to statements under the captions “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections included in this prospectus supplement and in the accompanying prospectus, and the information incorporated by reference herein and therein. You should be aware that the occurrence of any of the events discussed under the heading “Risk Factors” in this prospectus supplement and in the accompanying prospectus, and the information incorporated by reference herein and therein, could substantially harm our business, operating results and financial condition and that if any of these events occurs, it could adversely affect the value of an investment in our securities.
The cautionary statements made in this prospectus supplement are intended to be applicable to all related forward-looking statements wherever they may appear in this prospectus supplement and in the accompanying prospectus, and the information incorporated by reference herein and therein. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except as required by law, we assume no obligation to update our forward-looking statements, even if new information becomes available in the future.
S-ii
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights information contained elsewhere in this prospectus or incorporated by reference in this prospectus. This summary does not contain all of the information that you should consider before making an investment decision. Before making an investment decision, you should read carefully in its entirety this prospectus, including the matters discussed in “Risk Factors” in this prospectus and our Annual Report on Form 10-K for the fiscal year ended December 30, 2023, as such risk factors may be amended, updated or modified periodically in our quarterly reports filed on Form 10-Q with the SEC, and any amendment or update thereto reflected in subsequent filings with the SEC and incorporated by reference in this prospectus, and the financial data and related notes and the reports incorporated by reference in this prospectus.
Company Overview
RCM Technologies, Inc. is a premier provider of business and technology solutions designed to enhance and maximize the operational performance of its customers. The Company provides these services through the deployment of specialty health care, engineering, life sciences, information technology services, data management and solutions. For over 50 years, the Company has developed and assembled an extensive portfolio of capabilities, service offerings and delivery options with respectworld class technical talent in key end markets and high-growth industries. This combination, paired with RCM’s efficient pricing structure and global reach, offers clients a compelling value proposition.
RCM consists of three operating segments: Specialty Health Care, Engineering, and Life Sciences and Information Technology services.
•
The Specialty Health Care segment provides staffing solutions including medical health care professionals, health information management professionals, nurses, paraprofessionals, physicians and therapists for many of the largest healthcare institutions and school districts across the United States. The segment also provides Teletherapy services targeting the education sector with an emphasis on behavioral health.
•
The Engineering segment provides a comprehensive portfolio of engineering and design services across three verticals: (1) Energy Services, (2) Process & Industrial and (3) Aerospace. The segment also offers a complementary suite of consulting solutions and services to indemnificationaugment its engineering portfolio, including design and supply of liabilities arisinghigh-quality engineered process solutions and equipment, data management, technical writing and digital documentation across marine, locomotive, transportation and aerospace markets, integrated design and construction, and engineering, procurement and construction management (“EPC”), as well as demand side management/energy conservation services. The business segment staffs engineers to design and build critical infrastructure projects for clients with international coverage.
•
The Life Sciences and Information Technology, or LS&IT, segment provides enterprise business solutions, application services, IT infrastructure solutions, life sciences solutions and other vertical-specific offerings. The business segment includes data solutions, digitization, recruiting process outsourcing, human capital management solutions, workforce management and consulting services.
The Company services some of the largest national and international companies in North America as well as a lengthy roster of Fortune 1000 and mid-sized global businesses in such industries as Aerospace/Defense, Educational Institutions, the Energy Sector, Financial Services, Health Care, Life Sciences, Manufacturing & Distribution, the Public Sector and Technology. RCM sells and delivers its services through a network of approximately 29 offices in selected regions throughout North America and Europe. The Company has staffed key personnel to design and build internationally recognized critical infrastructure projects and retained strategic partners and client accounts for decades.
During the fiscal year ended December 30, 2023, approximately 51.7% of RCM’s total revenue were derived from Specialty Health Care services, 32.2% from Engineering services, and the remaining 16.1% from Life Sciences and Information Technology services.
The Company was incorporated in the state of Nevada in 1971. Our principal executive offices are located at 2500 McClellan Avenue, Suite 350, Pennsauken, NJ 08109 and our telephone number is
S-1
(856) 356-4500. Our website address is www.rcmt.com. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock.
S-2
The Offering
Issuer
RCM Technologies, Inc., a Nevada corporation.
Common stock offered
Up to $50.0 million of our common stock, par value $0.05 per share.
Manner of the Offering
Sales of shares of our common stock, if any, will be made in sales deemed to be “at the market offerings” as defined in Rule 415 promulgated under the Securities Act. ITEMThe Agent will act as agent or principal and will use reasonable best efforts to sell on our behalf all of the shares of common stock requested to be sold by us, consistent with its normal trading and sales practices. See “Plan of Distribution.”
Use of proceeds
We intend to use the net proceeds from the sale of the shares that we may offer under this prospectus for general working capital. See “Use of Proceeds.”
Risk factors
Before deciding to invest in shares of our common stock, you should read carefully the risks set forth under the caption “Risk Factors” beginning on page S-4 of this prospectus supplement and page 4 of the accompanying prospectus, and the risks set forth under the caption “Item 1A. Risk Factors” included in our Annual Report on Form 10- K for the fiscal year ended December 30, 2023, and our quarterly reports filed on Form 10-Q, and any amendment or update thereto reflected in subsequent filings with the SEC for certain considerations relevant to an investment in our common stock.
Nasdaq Capital Market Symbol
RCMT
Transfer Agent and Registrar
American Stock Transfer & Trust Company, LLC
S-3
RISK FACTORS
An investment in our common stock is subject to risk. Our business, financial condition, and results of operations could be materially adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. Before you decide to invest in our common stock, you should carefully consider the risks described in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023, as such risks may be amended, updated or modified periodically in our quarterly reports on Form 10-Q filed with the SEC, and any amendment or update thereto reflected in subsequent filings with the SEC, as well as the other information included in and incorporated by reference in this prospectus.
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our management has broad discretion in the application of the net proceeds from this offering, and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Our management could spend the net proceeds from this offering in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business or cause the price of our common stock to decline. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
The actual number of shares we will issue under the sales agreement, at any one time or in total, is uncertain.
Subject to certain limitations in the sales agreement and compliance with applicable law, we have the discretion to deliver a placement notice to the Agent at any time throughout the term of the sales agreement. The number of shares that are sold by the Agent, if any, after delivering a placement notice will fluctuate based on the market price of the common shares during the sales period and limits we set with the Agent. Because the price per share of each share sold will fluctuate based on the market price of our common stock during the sales period, it is not possible at this stage to predict the number of shares that will be ultimately issued.
The common stock offered hereby will be sold in “at the market offerings,” and investors who buy shares at different times will likely pay different prices.
Investors who purchase shares in this offering at different times will likely pay different prices, and so may experience different outcomes in their investment results. We will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold, and there is no minimum or maximum sales price. Investors may experience a decline in the value of their shares as a result of share sales made at prices lower than the prices they paid.
Our common stock has experienced and may continue to experience price and volume fluctuations, which could cause you to lose a significant portion of your investment, lead to costly litigation for us and interfere with our efforts to grow our business.
Stock markets are subject to significant price and volume fluctuations that may be unrelated to the operating performance of particular companies, and accordingly the market price of our common stock may frequently and meaningfully change. From January 1, 2023, through March 28, 2024, the low and high closing prices per share of our common stock were $10.32 and $31.91, respectively. We have not had any recent change in our financial condition or results of operations that is consistent with the recent change in our stock price. In addition, the market price of our common stock has fluctuated and may continue to fluctuate substantially due to a variety of other factors. Possible exogenous incidents and trends may also impact the capital markets generally and our common stock prices specifically, such as foreign and cross border altercations, political unrest, cyberterrorism on a global scale, and disruptive weather systems. The timing of your purchase of our common stock relative to fluctuations in its trading price may result in you losing all or a significant portion of your investment.
In the past, following periods of volatility in the market price of a company’s stock, class action securities litigation has often been instituted against such companies. Such litigation, if instituted against
S-4
us, could result in substantial costs and diversion of management’s attention and resources, which would interfere with our ability to execute our business plan, sell our software and services, and otherwise materially adversely affect our business, financial condition and operating results.
Our common stock may become the target of a “short squeeze.”
At times, the securities of certain companies have increasingly experienced significant and extreme volatility in stock price due to short sellers of shares of common stock and buy-and-hold decisions of longer investors, resulting in what is sometimes described as a “short squeeze.” Short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Sharp rises in a company’s stock price may force traders in a short position to buy the stock to avoid even greater losses. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest in those stocks have abated. We may be a target of a short squeeze, and investors may lose a significant portion or all of their investment if they purchase our shares at a rate that is significantly disconnected from our underlying value.
Future sales of substantial amounts of our common stock, or the possibility that such sales could occur, could adversely affect the market price of our common stock.
We may issue up to $50.0 million of common stock from time to time in this offering. The issuance from time to time of shares in this offering, as well as our ability to issue such shares in this offering, could have the effect of depressing the market price or increasing the market price volatility of our common stock. See “Plan of Distribution” for more information about the possible adverse effects of our sales under the Sales Agreement.
You may experience future dilution as a result of future equity offerings.
In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock. We may not be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing shareholders. The price per share at which we sell additional shares of our common stock or other securities convertible into or exchangeable for our common stock in future transactions may be higher or lower than the price per share in this offering.
If securities or industry analysts fail to continue publishing research about our business, if they change their recommendations adversely or if our results of operations do not meet their expectations, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. In addition, it is likely that in some future period our operating results will be below the expectations of securities analysts or investors. If one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.
S-5
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the shares that we may offer under this prospectus, if any, for general working capital. We may also use a portion of the net proceeds to invest in or acquire businesses or technologies that we believe are complementary to our own, although we have no current plans, commitments or agreements with respect to any acquisitions as of the date of this prospectus supplement. Pending these uses, we plan to invest these net proceeds in investment-grade, interest bearing securities.
These expected uses represent our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors. As a result, our management will have broad discretion in the application of the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds from this offering. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business.
S-6
PLAN OF DISTRIBUTION
We have entered into an At Market Issuance Sales Agreement with the Agent under which we may issue and sell over a period of time and from time to time shares of our common stock through or to the Agent, acting as sales agent or principal. Sales of the shares to which this prospectus relates, if any, will be made by any method deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act. As our sales agent, the Agent will not engage in any transactions that stabilize our common stock.
The Agent will offer the shares of our common stock subject to the terms and conditions of the sales agreement on a daily basis or as otherwise agreed upon by us and the Agent. We will designate the maximum number of shares or dollar value of common stock to be sold through the Agent on a daily basis or otherwise determine such maximum number together with the Agent. Subject to the terms and conditions of the sales agreement, the Agent will use its commercially reasonable efforts to sell on our behalf all of the shares of common stock so designated or determined. We may instruct the Agent not to sell shares of common stock if the sales cannot be effected at or above the price designated by us in any such instruction. We or the Agent may suspend the offering of shares of common stock being made through the Agent under the sales agreement upon proper notice to the other party.
For its service as sales agent in connection with the sale of shares of our common stock that may be offered hereby, we will pay the Agent an amount equal to 3.0% of the aggregate sales price received by the Agent from each sale of shares sold through or to it acting as our sales agent or principal. The remaining sales proceeds, after deducting any expenses payable by us and any transaction fees imposed by any governmental, regulatory, or self-regulatory organization in connection with the sales, will equal our net proceeds for the sale of such shares. We have also agreed to reimburse the Agent for certain specified expenses, including the fees and disbursements of its legal counsel in an amount not to exceed $75,000, as provided in the sales agreement. Additionally, pursuant to the terms of the sales agreement, we agreed to reimburse the Agent for the documented fees and costs of its legal counsel reasonably incurred in connection with the Agent’s ongoing diligence arising from the transactions contemplated by the sales agreement in an amount not to exceed $5,000 per calendar quarter. We estimate that the total expenses of the offering payable by us, excluding discounts and commissions payable to the Agent under the sales agreement, will be approximately $[•].
The Agent will provide written confirmation to us following the close of trading on the Nasdaq Capital Market each day in which shares of common stock are sold by it for us under the sales agreement. Each confirmation will include the number of shares sold on that day, the gross sales price per share, the compensation payable by us to the Agent and the proceeds to us net of such compensation.
Settlement for sales of common stock will occur, unless the parties agree otherwise, on the second business day following the date on which any sales were made in return for payment of the proceeds to us net of compensation paid by us to the Agent. There is no arrangement for funds to be received in an escrow, trust or similar arrangement.
We will deliver to the Nasdaq Capital Market copies of this prospectus pursuant to the rules of the Nasdaq Capital Market. Unless otherwise required, we will report at least quarterly the number of shares of common stock sold through the Agent under the sales agreement, the net proceeds to us and the compensation paid by us to the Agent in connection with the sales of common stock.
In connection with the sale of the common stock on our behalf, the Agent will be deemed to be an “underwriter” within the meaning of the Securities Act and the compensation paid to the Agent will be deemed to be underwriting commissions or discounts. We have agreed in the sales agreement to provide indemnification and contribution to the Agent against certain civil liabilities, including liabilities under the Securities Act.
In the ordinary course of their business, the Agent and/or its affiliates may perform, investment banking, broker dealer, lending, financial advisory or other services for us for which they have received, or may receive, separate fees.
This offering of common stock pursuant to the sales agreement will terminate upon the earlier of (1) the sale of $50.0 million of shares of our common stock or (2) the termination of the sales agreement, pursuant to its terms, by either the Agent or us.
S-7
This summary of the material provisions of the sales agreement does not purport to be a complete statement of its terms and conditions. We have filed a copy of the sales agreement as an exhibit to our Current Report on Form 8-K dated March 29, 2024.
S-8
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and other reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, including any amendments to those reports, and other information that we file with or furnish to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, can also be accessed free of charge through the Internet. These filings will be available as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We maintain a web site at www.rcmt.com. Information contained on our website is not part of this prospectus or any other document we file with or furnish to the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to “incorporate by reference” into this prospectus supplement the information contained in documents that we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. Information in this prospectus supersedes information incorporated by reference that we filed with the SEC before the date of this prospectus, while information that we file later with the SEC will automatically update and supersede prior information. Any information so updated and superseded shall not be deemed, except as so updated and superseded, to constitute a part of this prospectus. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, prior to the termination of the offering. Notwithstanding the foregoing, unless specifically stated to the contrary, none of the information that is not deemed “filed” with the SEC, including information furnished under Items 2.02 or 7.01 of any Current Report on Form 8-K, will be incorporated by reference into, or otherwise included in, this prospectus:
•
•
our current reports on Form 8-K filed with the SEC on January 24, 2024, February 16, 2024, March 8, 2024 and March 29, 2024; and
•
the description of our common stock, par value $0.05 per share, contained in our Registration Statement on Form 10 filed with the SEC on March 1, 1982, to register such securities under the Securities Exchange Act of 1934, as amended, including any amendments filed for the purpose of updating such information.
We also incorporate by reference into this prospectus supplement additional documents that we may file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the completion or termination of the offering, including all such documents we may file with the SEC after the date of the initial registration statement and prior to the effectiveness of the registration statement, but excluding any information deemed furnished and not filed with the SEC. Any statements contained in a previously filed document incorporated by reference into this prospectus supplement is deemed to be modified or superseded for purposes of this prospectus supplement to the extent that a statement contained in this prospectus supplement, or in a subsequently filed document also incorporated by reference herein, modifies or supersedes that statement.
As explained above in “Where You Can Find More Information,” these incorporated documents (as well as other documents filed by us under the Exchange Act) are available at the SEC and may be accessed in a number of ways, including online via the Internet.
S-9
You may request a copy of any of the documents described above, at no cost to you, by telephoning us at (856) 356-4500 or by writing us at the following address:
RCM Technologies, Inc.
2500 McClellan Avenue, Suite 350
Pennsauken, NJ 08109
United States of America
Attn: Chief Financial Officer
2500 McClellan Avenue, Suite 350
Pennsauken, NJ 08109
United States of America
Attn: Chief Financial Officer
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon for us by Brownstein Hyatt Farber Schreck, LLP, Las Vegas, Nevada and Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Certain legal matters in connection with this offering will be passed upon for the Agent by Duane Morris LLP, New York, New York.
EXPERTS
WithumSmith+Brown, PC, an independent registered public accounting firm, has audited the consolidated financial statements and financial statement schedule of RCM Technologies, Inc. and Subsidiaries for the years ended December 30, 2023 and December 31, 2022 included in our Annual Report on Form 10-K for the year ended December 30, 2023, as set forth in their report, dated March 14, 2024, which is incorporated by reference in this prospectus and elsewhere in the registration statement. Such financial statements are incorporated by reference in reliance on WithumSmith+Brown, PC’s report, given on their authority as experts in accounting and auditing.
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$50,000,000
RCM TECHNOLOGIES, INC.
Common Stock
PROSPECTUS SUPPLEMENT
B. Riley Securities
, 2024
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection with the issuance and distribution of an amount of up to $100,000,000 of our securities registered under this registration statement, other than any underwriting discounts and commissions. All amounts, except the SEC registration fee, are estimates.
| | SEC registration fee | | | | $ | 14,760(1) | | |
| | Legal fees and expenses | | | | | (2) | | |
| | Accounting fees and expenses | | | | | (2) | | |
| | Transfer agent and registrar fees and expenses | | | | | (2) | | |
| | Stock exchange listing fees | | | | | (2) | | |
| | Printing, FINRA filing fee (if applicable) and miscellaneous expenses | | | | | (2) | | |
| | Total | | | | | (2) | | |
(1)
See Exhibit 107 to this Form S-3. Of this amount, $2,728 was previously paid and is being applied to the registration fees due with respect to this Registration Statement pursuant to Rule 457(p) under the Securities Act of 1933, as amended.
(2)
These fees will be dependent on the number and amount of securities offerings under this registration statement and, therefore, cannot be estimated at this time. In accordance with Rule 430B, additional information regarding estimated fees and expenses will be provided at the time information as to an offering is included in a prospectus supplement.
Item 15. Indemnification of Directors and Officers
Section 78.7502 of the Nevada Revised Statutes (“NRS”) permits a corporation to indemnify, pursuant to that statutory provision, a present or former director, officer, employee or agent of the corporation, or of another entity or enterprise for which such person is or was serving in such capacity at the request of the corporation, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, except an action by or in the right of the corporation, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection therewith, arising by reason of such person’s service in such capacity if such person (i) is not liable pursuant to Section 78.138 of the NRS, or (ii) acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to a criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In the case of actions brought by or in the right of the corporation, however, no indemnification pursuant to Section 78.7502 of the NRS may be made for any claim, issue or matter as to which such person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
Any discretionary indemnification pursuant to Section 78.7502 of the NRS, unless ordered by a court or advanced to a director or officer by the corporation in accordance with the Nevada Revised Statutes, may be made by a corporation only as authorized in each specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. Such determination must be made (1) by the stockholders, (2) by the board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding, (3) if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion, or (4) if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.
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Section 78.751 of the NRS further provides that indemnification pursuant to Section 78.7502 of the NRS does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under our articles of incorporation, our bylaws. or any agreement, vote of stockholders or disinterested directors or otherwise, for either an action in the person’s official capacity or an action in another capacity while holding office, except that indemnification, unless ordered by a court pursuant to Section 78.7502 of the NRS or for the advancement of expenses, may not be made to or on behalf of any director or officer finally adjudged by a court of competent jurisdiction, after exhaustion of any appeals, to be liable for intentional misconduct, fraud or a knowing violation of law, and such misconduct, fraud or violation was material to the cause of action.
The Registrant’s Articles of Incorporation, as amended, provide that the Registrant shall, to the full extent permitted by the NRS, indemnify all persons whom it has the power to indemnify pursuant thereto, including officers and directors of the Registrant. The Registrant’s Amended and Restated Bylaws provide that provide that the Registrant shall, to the fullest extent permitted under the NRS, indemnify any and all persons whom it has the power to indemnify under said law from any and all expenses, liabilities or other matters referred to in such law.
The Registrant’s Amended and Restated Bylaws also provide that it shall pay the expenses of directors and officers incurred as a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, as they are incurred and in advance of the final disposition of the action, suit or proceeding, but, if applicable law so requires, only upon receipt by the Registrant of an undertaking from the director or officer to repay the advanced amounts in the event it is ultimately determined by a final decision of a court of competent jurisdiction that the director or officer is not entitled to be indemnified by the Registrant.
Section 78.752 of the NRS empowers a corporation to purchase and maintain insurance or make other financial arrangements on behalf of an Indemnified Party for any liability asserted against such person and liabilities and expenses incurred by such person in his or her capacity as an Indemnified Party or arising out of such person’s status as an Indemnified Party whether or not the corporation has the authority to indemnify such person against such liability and expenses.
The Registrant’s Articles of Incorporation, as amended, authorize the Registrant to maintain insurance to cover such liabilities. The Registrant has purchased Directors’ and Officer’s Liability Insurance to protect directors and officers of the Registrant from any liability asserted against them for acts taken or omissions occurring in their capacities as such. The Registrant is not required to maintain such insurance and there can be no assurance that the Registrant will continue to maintain such insurance or coverage in such amounts.
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Item 16. EXHIBITS.
1 FormExhibits
The following documents are filed as exhibits to this registration statement, including those exhibits incorporated herein by reference to one of Underwriting Agreement.
5 Opinion of Schreck Morris.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Schreck Morris (containedour prior filings under the Securities Act or the Exchange Act as indicated in Exhibit 5).
24 Power of Attorney (see page II-3).
27.1* Restated Financial Data Schedule for Fiscal Year Ended October 31,
1997
(EDGAR version only).
27.2* Restated Financial Data Schedule for Fiscal Year Ended October 31,
1996
(EDGAR version only).
27.3* Restated Financial Data Schedule for Fiscal Year Ended October 31,
1995
(EDGAR version only).
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parentheses:
*
To be filed by amendment.
ITEMamendment or as an exhibit to a document filed under the Securities Exchange Act of 1934, as amended, and incorporated by reference herein.
Item 17. UNDERTAKINGS.
(a) Undertakings
The undersigned Registrantregistrant hereby undertakesundertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be
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reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement;
provided, however, that paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That, for the purposespurpose of determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act that is incorporated by reference in this
Registration Statementsuch post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or date of the first sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which the prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Provided, however, that no statement made in a registration statement or prospectus that is part of this registration statement or made in a document incorporated or deemed incorporated by reference into this registration statement or prospectus that is a part of this registration statement will, as to a purchaser with a time of contract sale prior to such effective date, supersede or modify any statement that was made in this registration statement or prospectus that was a part of this registration statement or made in any such document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
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(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6) That, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(7) If and when applicable, to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrantregistrant pursuant to the foregoing provisions, or otherwise, the Registrantregistrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrantregistrant of expenses incurred or paid by a director, officer or controlling person of the Registrantregistrant in the successful defense of any action, suit or proceeding) is asserted against the registrant by such director, officer or controlling person in connection with the securities being registered, the Registrantregistrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant under Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrantregistrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration
Statementregistration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pennsauken, State of New Jersey on April 28, 1998.
RCM TECHNOLOGIES INC.
By: /s / LEON KOPYT
------------------------------------
Leon Kopyt
President and Chief Executive
Officer
March 29, 2024.
| | | | | RCM TECHNOLOGIES, INC. | |
| | | | | By: /s/ Bradley S. Vizi Bradley S. Vizi Executive Chairman and President | |
POWER OF ATTORNEY
KNOW ALL MENPERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Leon KopytBradley S. Vizi and Stanton Remer,Kevin D. Miller, and each of them, jointly and severally,as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement,registration statement and sign any registration statement for the same offering covered by the registration statement that is to be effective upon filing pursuant to Rule 462 promulgated under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, (including, without limitation, any
related registration statement or amendment thereto filed in accordance with
Rule 462 under the Securities Act of 1933, as amended), with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully as to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statementregistration statement has been signed below by the following persons in the capacities and on the dates indicated.
| | Signature | | | Title | | | Date | |
| | / Bradley S. Vizi | | | Executive Chairman, (Principal Executive Officer) | | | March 29, 2024 | |
| | / Kevin D. Miller | | | Chief Financial Officer, Treasurer (Principal Financial and Accounting Officer) | | | March 29, 2024 | |
| | / Chigozie O. Amadi | | | Director | | | March 29, 2024 | |
| | /s/ Swarna Srinivas Kakodkar Swarna Srinivas Kakodkar | | | Director | | | March 29, 2024 | |
| | /s/ Jayanth S. Jayanth S. Komarneni | | | Director | | | March 29, 2024 | |
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