10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 3, 2015

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number: 1-10245

RCM TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	95-­1480559
(State or other Jurisdiction of Incorporation)	(I.R.S. Employer Identification No.)

2500 McClellan Avenue, Suite 350, Pennsauken, New Jersey  08109-4613

(Address of Principal Executive Offices)                                      (Zip Code)

(856) 356-4500

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES [X]     NO [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES [X]     NO [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  (See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act).  (Check one):

Large Accelerated Filer [  ] Accelerated Filer [  ] Non-Accelerated Filer [  ] (Do not check if a smaller reporting company) Smaller Reporting Company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES [  ]     NO [X]

Indicate the number of shares outstanding of the Registrant’s class of common stock, as of the latest practicable date.

Common Stock, $0.05 par value, 12,276,034 shares outstanding as of November 4, 2015.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

PART I - FINANCIAL INFORMATION
		Page
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of October 3, 2015 (Unaudited) and January 3, 2015	3
	Unaudited Consolidated Statements of Income for the Thirteen and Thirty-Nine Week Periods Ended October 3, 2015 and September 27, 2014	4
	Unaudited Consolidated Statements of Comprehensive Income for the Thirty-Nine Week Periods Ended October 3, 2015 and September 27, 2014	5
	Unaudited Consolidated Statements of Changes in Accumulated Other Comprehensive Income for the Thirty-Nine Week Periods Ended October 3, 2015 and September 27, 2014	6
	Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the Thirty-Nine Week Period Ended October 3, 2015	7
	Unaudited Consolidated Statements of Cash Flows for the Thirty-Nine Week Periods Ended October 3, 2015 and September 27, 2014	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

October 3, 2015 and January 3, 2015

(In thousands, except share and per share amounts)

			October 3,	January 3,
			2015	2015
			(Unaudited)
Current assets:
	Cash and cash equivalents		$4,542	$6,411
	Accounts receivable, net		52,766	59,187
	Transit accounts receivable		3,882	3,797
	Prepaid expenses and other current assets		2,342	2,368
	Deferred income tax assets, domestic		796	816
		Total current assets	64,328	72,579
Property and equipment, net			4,833	3,297
Other assets:
	Deposits		212	231
	Goodwill		11,630	10,223
	Intangible assets, net		276	194
	Deferred income tax assets, domestic		395	749
		Total other assets	12,513	11,397
		Total assets	$81,674	$87,273

Current liabilities:
	Accounts payable and accrued expenses		$7,623		$7,693
	Transit accounts payable		4,502		6,658
	Accrued payroll and related costs		7,456		7,783
	Income taxes payable		958		860
	Deferred income tax liability, foreign		140		160
	Contingent consideration		389		479
		Total current liabilities	21,068		23,633
		Contingent consideration	1,521		775
		Borrowings under line of credit	15,000		20,000
		Total liabilities	37,589		44,408
Commitments and contingencies			-		-
Stockholders’ equity:
	Preferred stock, $1.00 par value; 5,000,000 shares authorized;
		no shares issued or outstanding	-		-
	Common stock, $0.05 par value; 40,000,000 shares authorized;
		14,228,548 shares issued and 12,648,586 shares outstanding at October 3, 2015 and 14,148,667 shares issued and 12,671,887 shares outstanding at January 3, 2015	711		707
	Additional paid-in capital		113,824		112,529
	Accumulated other comprehensive (loss) income		(2,519	)	91
	Accumulated deficit		(59,894	)	(62,933	)
	Treasury stock (1,579,962 shares at October 3, 2015 and 1,476,780 at January 3, 2015, at cost)		(8,037	)	(7,529	)
		Stockholders’ equity	44,085		42,865
		Total liabilities and stockholders’ equity	$81,674		$87,273

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

3

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Thirteen and Thirty-Nine Week Periods Ended October 3, 2015 and September 27, 2014

(Unaudited)

(In thousands, except per share amounts)

		Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		October 3, 2015		September 27, 2014		October 3, 2015		September 27, 2014
Revenues		$45,077		$46,382		$138,329		$144,460
Cost of services		32,275		33,221		100,134		106,087
Gross profit		12,802		13,161		38,195		38,373
Operating costs and expenses
	Selling, general and administrative	10,462		9,991		31,640		29,592
	Depreciation and amortization	434		337		1,084		885
		10,896		10,328		32,724		30,477
Operating income		1,906		2,833		5,471		7,896
Other (expense) income
	Interest expense and other, net	(113	)	(19	)	(366	)	(45	)
	Gain (loss) on foreign currency transactions	(61	)	25		(61	)	26
		(174	)	6		(427	)	(19	)
Income before income taxes		1,732		2,839		5,044		7,877
Income tax expense		770		962		2,005		2,780
Net income		$962		$1,877		$3,039		$5,097
Basic net earnings per share		$0.08		$0.15		$0.24		$0.41
Diluted net earnings per share		$0.07		$0.15		$0.23		$0.40

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

4

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Thirty-Nine Week Periods Ended October 3, 2015 and September 27, 2014

(Unaudited)

(In thousands)

	October 3, 2015		September 27, 2014
Net income	$3,039		$5,097
Foreign currency translation adjustment	(2,610	)	(457	)
Comprehensive income	$429		$4,640

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

5

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME

Thirty-Nine Week Periods Ended October 3, 2015 and September 27, 2014

(Unaudited)

(In thousands)

	October 3, 2015		September 27, 2014
Beginning balance	$91		$815
Foreign currency translation adjustment    before reclassifications	(2,610	)	(457	)
Amounts reclassified from accumulated    other comprehensive income(a)	-		166
Net foreign currency translation adjustment	(2,610	)	(291	)
Ending balance	($2,519	)	$524

 (a) This amount represents residual foreign currency translation balances in our Cataract, Inc. and RCM Technologies Ireland Holding Limited subsidiaries after these subsidiaries had been effectively liquidated.

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

6

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Thirty-Nine Week Period Ended October 3, 2015

(Unaudited)

(In thousands, except share amounts)

	Common Stock		Additional Paid-in Capital	Accumulated Other Comprehensive Income		Accumulated Deficit		Treasury Stock			Total
	Issued Shares	Amount						Shares	Amount
Balance, January 3, 2015	14,148,667	$707	$112,529	$91		($62,933	)	1,476,780	($7,529	)	$42,865
Issuance of stock under    employee stock purchase plan	73,048	4	369	-		-		-	-		373
Translation adjustment	-	-	-	(2,610	)	-		-	-		(2,610	)
Issuance of stock upon exercise of    stock options	3,500	-	19	-		-		-	-		19
Share-based compensation expense	-	-	907	-		-		-	-		907
Issuance of stock upon vesting    of restricted stock awards	3,333	-	-	-		-		-	-		-
Purchase of treasury stock	-	-	-	-		-		103,182	(508	)	(508	)
Net income	-	-	-	-		3,039		-	-		3,039
Balance, October 3, 2015	14,228,548	$711	$113,824	($2,519	)	($59,894	)	1,579,962	($8,037	)	$44,085

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

7

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirty-Nine Week Periods Ended October 3, 2015 and September 27, 2014

 (Unaudited)

(In thousands)

				October 3, 2015		September 27, 2014
Cash flows from operating activities:
	Net income			$3,039		$5,097
	Adjustments to reconcile net income to net cash provided by (used in)   operating activities:
		Depreciation and amortization		1,084		885
		Stock-based compensation expense		907		551
		Provision for allowance for doubtful accounts		840		850
		Deferred income tax expense		373		1,292
		Changes in assets and liabilities:
			Accounts receivable	3,272		(5,645	)
			Prepaid expenses and other current assets	(45	)	(426	)
			Net of transit accounts receivable and payable	(2,263	)	131
			Accounts payable and accrued expenses	251		(968	)
			Accrued payroll and related costs	(175	)	(882	)
			Income taxes payable	205		299
	Total adjustments			4,449		(3,913	)
	Net cash provided by operating activities			7,488		1,184
Cash flows from investing activities:
	Property and equipment acquired			(2,551	)	(1,952	)
	Decrease (increase) in deposits			18		(71	)
	Payments for business acquired			(800	)	-
	Net cash used in investing activities			(3,333	)	(2,023	)
Cash flows from financing activities:
	Net repayments under line of credit			(5,000	)	-
	Issuance of stock for employee stock purchase plan			373		339
	Exercise of stock options			19		266
	Common stock repurchases			(508	)	-
	Contingent consideration paid			(90	)	(313	)
	Net cash (used in) provided by financing activities			(5,206	)	292
Effect of exchange rate changes on cash and cash equivalents				(818	)	(465	)
Decrease in cash and cash equivalents				(1,869	)	(1,012	)
Cash and cash equivalents at beginning of period				6,411		9,317
Cash and cash equivalents at end of period				$4,542		$8,305
Supplemental cash flow information:
	Cash paid for:
		Interest		$367		$51
		Income taxes		$800		$1,346
Non-cash investing activities:
	Contingent consideration accrued as part of business acquisition			$746		$765
	Fixed assets acquired in acquisition			$   -		$26

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

8

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

1.   Basis of Presentation

The accompanying consolidated interim financial statements of RCM Technologies, Inc. and subsidiaries (“RCM” or the “Company”) are unaudited. The year-end consolidated balance sheet was derived from audited statements but does not include all disclosures required by accounting principles generally accepted in the United States. These statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission pertaining to reports on Form 10-Q and should be read in conjunction with the Company’s consolidated financial statements and the notes thereto for the year ended January 3, 2015 included in the Company’s Annual Report Form 10-K for such period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.

The consolidated financial statements for the unaudited interim periods presented include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows for such interim periods.

Results for the thirteen and thirty-nine week period ended October 3, 2015 are not necessarily indicative of results that may be expected for the full year.

2.   Fiscal Year

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31.  The fiscal year ended January 3, 2015 was a 53-week reporting year.  The third fiscal quarters of 2015 and 2014 ended on the following dates, respectively:

Period Ended	Weeks in Quarter	Weeks in Year to Date
October 3, 2015	Thirteen	Thirty-Nine
September 27, 2014	Thirteen	Thirty-Nine

3.   Use of Estimates and Uncertainties

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

The Company uses estimates to calculate an allowance for doubtful accounts on its accounts receivables, adequacy of reserves, the tax rate applied and the valuation of certain assets and liability accounts.  These estimates can be significant to the operating results and financial position of the Company.

The Company has risk participation arrangements with respect to workers compensation and health care insurance.  The amounts included in the Company’s costs related to this risk participation are estimated and can vary based on changes in assumptions, the Company’s claims experience or the providers included in the associated insurance programs.

Fair Value of Financial Instruments

The Company’s carrying value of financial instruments, consisting primarily of accounts receivable, accounts payable and accrued expenses and borrowings under line of credit, approximates fair value due to their liquidity or their short-term nature.  The Company does not have derivative products in place to manage risks related to foreign currency fluctuations for its foreign operations or for interest rate changes.

9

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

4. Accounts Receivable, Transit Accounts Receivable and Transit Accounts Payable

The Company’s accounts receivable are comprised as follows:

	October 3, 2015		January 3, 2015
Billed	$40,406		$47,318
Accrued and unbilled	4,780		4,853
Work-in-progress	8,879		8,027
Allowance for doubtful accounts	(1,299	)	(1,011	)
Accounts receivable, net	$52,766		$59,187

Unbilled receivables primarily represent revenues earned whereby those services are ready to be billed as of the balance sheet ending date.  Work-in-process primarily represents revenues earned under contracts which the Company contractually invoices at future dates.

From time to time, the Company’s Engineering segment enters into agreements to provide, among other things, construction management and engineering services.  Pursuant to these agreements, the Company a) may engage subcontractors to provide construction or other services; b) typically earns a fixed percentage of the total project value; and c) assumes no ownership or risks of inventory.  Under the terms of the agreements, the Company is typically not required to pay the subcontractor until after the corresponding payment from the Company’s end-client is received. Upon invoicing the end-client on behalf of the subcontractor or staffing agency the Company records this amount simultaneously as both a “transit account receivable” and “transit account payable” as the amount when paid to the Company is due to and generally paid to the subcontractor within a few days. The Company typically does not pay a given transit account payable until the related transit account receivable is collected. The Company’s transit accounts payable generally exceeds the Company’s transit accounts receivable but absolute amounts and spreads fluctuate significantly from quarter to quarter in the normal course of business. The transit accounts receivable was $3.9 million and related transit accounts payable was $4.5 million, for a net liability of $0.6 million, as of October 3, 2015.  The transit accounts receivable was $3.8 million and related transit accounts payable was $6.7 million, for a net liability of $2.9 million, as of January 3, 2015.

The Company has a subcontract agreement with Black & McDonald Limited (“B&M”) to provide engineering and procurement services under B&M’s master services agreement with Ontario Power Generation (“OPG”). The Company understands that in October 2014, OPG provided to B&M notice of default and termination of a large purchase order from OPG to B&M with respect to which B&M had engaged several subcontractors, including the Company. B&M notified the Company that it is disputing OPG’s default claim on this purchase order. Subsequently, OPG has disputed the services provided on several other smaller purchase orders. As of October 3, 2015 the Company had outstanding accounts receivable from B&M under disputed purchase orders by OPG of $1.7 million and, including such disputed amounts, a total of $5.8 million of outstanding accounts receivable from B&M.  OPG has indicated to the Company that it will not make any further payments to B&M on the projects in dispute.  The Company has received notice from B&M that while B&M disputes OPG’s assertion it is in default on any contested purchase order, B&M believes that in the event that it is in default under its agreement with OPG, then the Company may also be in default under its agreement with B&M.  The Company does not agree with this assertion.

The Company does not believe that any of its account receivables from B&M have been materially impaired and believes that its accounts receivable from B&M remain collectible, subject to existing reserves.  However, it is possible that a protracted dispute between OPG and B&M may impact the Company’s ability to collect its outstanding accounts receivable in a timely manner.

10

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

5. Property and Equipment

Property and equipment are stated at cost and are depreciated on the straight-line method at rates calculated to provide for retirement of assets at the end of their estimated useful lives.  The annual rates are 20% for computer hardware and software as well as furniture and office equipment.  Leasehold improvements are amortized over the shorter of the estimated life of the asset or the lease term.

Property and equipment are comprised of the following:

	October 3, 2015	January 3, 2015
Equipment and furniture	$2,379	$2,585
Computers and systems	5,918	6,553
Leasehold improvements	711	781
	9,008	9,919
Less: accumulated depreciation and amortization	4,175	6,622
Property and equipment, net	$4,833	$3,297

The Company periodically writes off fully depreciated and amortized assets.  The Company wrote off fully depreciated and amortized assets of $3,470 and $916 during the thirty-nine week periods ended October 3, 2015 and September 27, 2014, respectively.

6. Acquisitions

The Company has acquired numerous companies throughout its history and those acquisitions have generally included significant future contingent consideration.

Future Contingent Payments

As of October 3, 2015, the Company had three active acquisition agreements whereby additional contingent consideration may be earned by the former owners: 1) effective July 1, 2012 the Company acquired the business operations of BGA, LLC (“BGA”); 2) effective August 1, 2014 the Company acquired all of the stock of Point Comm, Inc. (“PCI”); and 3) effective July 5, 2015, the Company acquired the business operations of Substation Design Services, LLC (“SDS”). The Company estimates future contingent payments at October 3, 2015 as follows:

Fiscal Year	BGA	PCI	SDS	Total
2015	$127	$262	$   -	$389
2016	271	197	180	648
2017	-	307	253	560
2018	-	-	313	313
Estimated future contingent consideration payments	$398	$766	$746	$1,910

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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

6. Acquisitions (Continued)

Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates.  Future contingent payments to be made to BGA, PCI and SDS are capped at cumulative maximums of $2.6 million, $2.0 million and $1.5 million, respectively.  The Company estimates future contingent consideration payments based on forecasted performance and records the net present value of those expected payments as of October 3, 2015.  The measurement is based on significant inputs that are not observable in the market, which “Fair Value Measurements and Disclosures” (ASU Topic 820-10-35) refers to as Level 3 inputs.

The Company paid $0.1 million and $0.3 million in contingent consideration during the thirty-nine week periods ended October 3, 2015 and September 27, 2014, respectively.

7. Goodwill

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired in business combinations.  The Company is required to assess the carrying value of its reporting units that contain goodwill at least on an annual basis.  The Company has the option to first assess qualitative factors to determine whether it is necessary to perform a two-step impairment test.  If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than the carrying value, the quantitative impairment test is required.  The Company formally assesses these qualitative factors, and if necessary, conducts its annual goodwill impairment test as of the last day of the Company’s fiscal November each year or if indicators of impairment exist.  During all periods presented, the Company determined that the existing qualitative factors did not suggest that an impairment of goodwill exists.  Since there have been no indicators of impairment, the Company has not performed a quantitative impairment test.

Changes in the carrying amount of goodwill for the thirty-nine week period ended October 3, 2015 are as follows:

	Engineering	Information Technology	Specialty Health Care	Total
Balance as of January 3, 2015	$3,004	$5,516	$1,703	$10,223
Goodwill recorded, SDS acquisition	1,407	-	-	1,407
Balance as of October 3, 2015	$4,411	$5,516	$1,703	$11,630

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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

8. Intangible Assets

The Company evaluates long-lived assets and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  When the Company determines that it is probable that undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value.  Assets to be disposed of by sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell.  The Company’s intangible assets consist of customer relationships and non-compete agreements.

The following table reflects the components of net intangible assets, excluding goodwill:

	Engineering		Information Technology		Total
Balance as of January 3, 2015	$189		$5		$194
Amortization of intangibles during the    thirty-nine week period ended    October 3, 2015	(53	)	(5	)	(58	)
Intangibles acquired, SDS acquisition	140		-		140
Balance as of October 3, 2015	$276		$ -		$276

9. Line of Credit

The Company and its subsidiaries are party to a loan agreement with Citizens Bank of Pennsylvania, amended and restated effective February 20, 2009, which provides for a $35 million revolving credit facility and includes a sub-limit of $5 million for letters of credit (the “Revolving Credit Facility”).  The Revolving Credit Facility has been amended several times, most recently on December 12, 2014 when the maturity date was extended to December 11, 2019.  Borrowings under the Revolving Credit Facility bear interest at one of two alternative rates, as selected by the Company at each incremental borrowing.  These alternatives are: (i) LIBOR (London Interbank Offered Rate), plus applicable margin, typically borrowed in fixed 30-day increments or (ii) the agent bank’s prime rate generally borrowed over shorter durations.  The Company also pays unused line fees based on the amount of the Revolving Credit Facility that is not drawn.  Unused line fees are recorded as interest expense.  The effective interest rate, including unused line fees, for the thirty-nine week period ended October 3, 2015 was 2.5%.

All borrowings under the Revolving Credit Facility are collateralized by all of the assets of the Company and its subsidiaries and a pledge of the stock of its subsidiaries.  The Revolving Credit Facility also contains various financial and non-financial covenants, such as a covenant that restricts on the Company’s ability to borrow in order to pay dividends.  The Company paid a special cash dividend on December 30, 2014 which was expressly permitted under its amended Revolving Credit Facility.  As of October 3, 2015, the Company was in compliance with all covenants contained in its Revolving Credit Facility.

Borrowings under the line of credit as of October 3, 2015 and January 3, 2015 were $15.0 million and $20.0 million, respectively, and there were letters of credit outstanding for $0.8 million as of both dates.  At October 3, 2015, the Company had availability for additional borrowings under the Revolving Credit Facility of $19.2 million.

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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

10. Per Share Data

Both basic and diluted earnings per share for all periods are calculated based on the reported earnings in the Company’s consolidated statements of income.

The number of shares of common stock used to calculate basic and diluted earnings per share for the thirty-nine week periods ended October 3, 2015 and September 27, 2014 was determined as follows:

	Thirteen Week Periods Ended		Thirty-Nine Week Periods Ended
	October 3, 2015	September 27, 2014	October 3, 2015	September 27, 2014
Basic weighted average shares   outstanding	12,724,899	12,540,955	12,715,236	12,494,793
Dilutive effect of outstanding stock    options and restricted stock awards	272,877	217,850	236,648	198,036
Weighted average dilutive shares    outstanding	12,997,776	12,758,805	12,951,884	12,692,829

There were 40,000 and 45,000 absolute anti-dilutive shares not included in the calculation of common stock equivalents for the thirty-nine week periods ended October 3, 2015 and September 27, 2014, respectively.  These were determined to be anti-dilutive because the exercise prices of these shares for the periods were higher than the average market price of the Company’s common stock for the same periods.

Unissued shares of common stock were reserved for the following purposes:

	October 3, 2015	January 3, 2015
Exercise of options outstanding	44,500	53,000
Restricted stock awards outstanding	496,667	500,000
Future grants of options or shares	425,000	425,000
Shares reserved for employee stock purchase plan	49,436	122,484
Total	1,015,603	1,100,484

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RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

11. Share-Based Compensation

At October 3, 2015, the Company had three share-based employee compensation plans.  The Company measures the fair value of share-based awards, if and when granted, based on the Black-Scholes method and using the closing market price of the Company’s common stock on the date of grant.  Awards vest over periods ranging from one to three years and expire within 10 years of issuance.  Share-based compensation expense related to awards is amortized in accordance with applicable vesting periods using the straight-line method.  Share-based compensation expense of $907 and $551 was recognized for the thirty-nine week periods ended October 3, 2015 and September 27, 2014, respectively.

As of October 3, 2015, the Company had approximately $1.2 million of total unrecognized compensation cost related to all non-vested share-based awards granted under the Company’s various share-based plans, which the Company expects to recognize over approximately a three-year period.  These amounts do not include the cost of any additional share-based awards that may be granted in future periods or reflect any potential changes in the Company’s forfeiture rate.

Incentive Share-Based Plans

2000 Employee Stock Incentive Plan (the 2000 Plan)

The 2000 Plan, approved by the Company’s stockholders in April 2001, provided for the issuance of up to 1,500,000 shares of the Company’s common stock to officers and key employees of the Company and its subsidiaries or consultants and advisors utilized by the Company.  As of October 3, 2015, options to purchase 25,000 shares of common stock granted under the 2000 Plan were outstanding.

2007 Omnibus Equity Compensation Plan (the 2007 Plan)

The 2007 Plan, approved by the Company’s stockholders in June 2007, provides for the issuance of up to 700,000 shares of the Company’s common stock to officers, non-employee directors, employees of the Company and its subsidiaries or consultants and advisors utilized by the Company.  As of October 3, 2015, under the 2007 Plan, no shares of common stock were available for future grants and options to purchase 19,500 shares of common stock, as well as 296,667 restricted stock units, were outstanding.

The 2000 and 2007 Plans are expired and therefore no shares are available for grant thereunder.

2014 Omnibus Equity Compensation Plan (the 2014 Plan)

The 2014 Plan, approved by the Company’s stockholders in December 2014, provides for the issuance of up to 625,000 shares of the Company’s common stock to officers, non-employee directors, employees of the Company and its subsidiaries or consultants and advisors utilized by the Company.  The Compensation Committee of the Board of Directors determines the vesting period at the time of grant.  As of October 3, 2015, under the 2014 Plan, 200,000 restricted stock units were outstanding and 425,000 shares were available for awards thereunder.

15

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

11. Share-Based Compensation (Continued)

Stock Options

There were no options granted during the thirty-nine week period ended October 3, 2015 and 15,000 options granted during the thirty-nine week period ended September 27, 2014.  Activity regarding outstanding options for the thirty-nine week period ended October 3, 2015 is as follows:

	All Stock Options Outstanding
	Shares		Weighted Average Exercise Price
Options outstanding as of January 3, 2015	53,000		$7.65
Options granted	0
Options exercised	(3,500	)	$4.30
Options forfeited/cancelled	(5,000	)	$5.78
Options outstanding as of October 3, 2015	44,500		$8.12
Options outstanding price range at October 3, 2015	$5.27 - $9.81
Options exercisable as of October 3, 2015	27,000		$9.47
Intrinsic value per share of outstanding stock options as of    October 3, 2015	$0
Intrinsic value per share of stock options exercised for the    thirty-nine week period ended October 3, 2015	$2

As of October 3, 2015, the Company had approximately $18 of total unrecognized compensation cost related to all non-vested stock option awards.

16

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

11. Share-Based Compensation (Continued)

Restricted Stock Units

From time-to-time the Company issues restricted stock units.  These restricted stock units typically include dividend accrual equivalents, which means that any dividends paid by the Company during the three year vesting period become due and payable after the three year vesting period assuming the grantee’s restricted stock unit fully vests.  Dividends for these grants are accrued on the dividend payment dates and included in accounts payable and accrued expenses on the accompanying consolidated balance sheet.  Dividends for restricted stock units that ultimately do not vest are forfeited.

To date, the Company has only issued restricted stock units under the 2007 and 2014 Plans.  The following summarizes activity in the restricted stock units under the 2007 and 2014 Plans during 2015:

	Number of Restricted Stock Units (in thousands)	Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at January 3, 2015	500	$6.61
Granted	-	-
Vested	3	$6.61
Forfeited or expired	-	-
Outstanding non-vested at October 3, 2015	497	$6.61

Based on the closing price of the Company’s common stock of $4.84 per share on October 2, 2015 (the last trading day prior to October 3, 2015), the intrinsic value of the non-vested restricted stock units at October 3, 2015 was approximately $2.4 million.  As of October 3, 2015, there was approximately $1.2 million of total unrecognized compensation cost related to restricted stock units, which is expected to be recognized over three years.

Employee Stock Purchase Plan

The Company implemented the 2001 Employee Stock Purchase Plan with stockholder approval, effective January 1, 2001.  Such Plan was subsequently amended, pursuant to stockholder approval where required, effective July 1, 2004, June 18, 2009 and September 16, 2009 (the 2001 Employee Stock Purchase Plan, as so amended, the “Purchase Plan”).  Under the Purchase Plan, employees meeting certain specific employment qualifications are eligible to participate and can purchase shares of common stock semi-annually through payroll deductions at the lower of 85% of the fair market value of the stock at the commencement or end of the offering period.  The purchase plan permits eligible employees to purchase shares of common stock through payroll deductions for up to 10% of qualified compensation.  The Company has two offering periods in the Purchase Plan coinciding with the Company’s first two fiscal quarters and the last two fiscal quarters.  Actual shares are issued on the first day of the subsequent offering period for the prior offering period payroll deductions.  The number of shares issued at the beginning of the current period (as of July 6, 2015) was 40,108.  As of October 3, 2015, there were 49,436 shares available for issuance under the Purchase Plan.

17

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

12. Treasury Stock Transactions

On October 28, 2013, the Board of Directors authorized a repurchase program to purchase up to $5.0 million of outstanding shares of common stock at the prevailing market prices, from time to time over the subsequent 12-month period.  On September 30, 2014, the Board extended this repurchase program through October 31, 2015.  On September 11, 2015, the Board extended this repurchase program through December 31, 2016.  During the thirty-nine week period ended October 3, 2015, the Company purchased 103,182 shares at an average price of $4.92 per share.  The Company did not repurchase any shares in the comparable prior year period.

13. New Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration it expects to be entitled in exchange for those goods or services.  On July 9, 2015, the FASB voted to delay the effective date of this standard by one year. This deferral resulted in ASU 2014-09 being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.  However, early adoption is permitted so that ASU 2014-09 would become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.  The Company intends to adopt the standard early so that it will be effective for the Company beginning in the first quarter of fiscal 2017.  The new standard permits the use of either the retrospective or cumulative effect transition method on adoption.    The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures, including which transition method it will adopt.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern, which states management should evaluate whether there are conditions or events, considered in the aggregate, that raise a substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.  Management’s evaluation should be based on relevant conditions and events that are known and likely to occur at the date that the financial statements are issued.  The standard update will be effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter, however, early application is permitted.  The Company is evaluating the effect that ASU 2014-15 will have on its consolidated financial statements and related disclosures.

In April, 2015, The FASB issued ASU 2015-03 Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements.  Under the standard, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability.  Amortization of the costs is reported as interest expense.  However, for debt issuance costs related to line-of-credit arrangements, such costs can be deferred and presented as an asset and subsequently amortized ratably over the term of the arrangement.  The standard will be effective for the annual period beginning after December 15, 2015.  The Company is evaluating the effect that ASU 2015-03 will have on its consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-05(ASU 2015-05), Intangibles—GoodwillandOther—Internal-UseSoftware(Subtopic350-40):Customer’sAccountingfor FeesPaidinaCloudComputingArrangement. This standard clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software under ASC 350-40. ASU 2015-05 is effective for public entities for annual and interim periods therein beginning after December 15, 2015. Early adoption is permitted. Entities may adopt the guidance either retrospectively or prospectively to arrangements entered into, or materially modified after the effective date. The Company is currently evaluating the impact the adoption of ASU 2015-05 will have on its consolidated financial statements.

18

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

14. Segment Information

The Company follows “Disclosures about Segments of an Enterprise and Related Information,” which establishes standards for companies to report information about operating segments, geographic areas and major customers.  The accounting policies of each reportable segment are the same as those described in the summary of significant accounting policies (see Note 1 to the Company’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended January 3, 2015).

Segment operating income includes selling, general and administrative expenses directly attributable to that segment as well as charges for allocating corporate costs to each of the operating segments.  The following tables reflect the results of the reportable segments consistent with the Company’s management system:

Thirteen Week Period Ended October 3, 2015	Engineering	Information Technology	Specialty Health Care	Corporate	Total
Revenue	$19,224	$15,171	$10,682	$   -	$45,077
Cost of services	14,325	10,477	7,473	-	32,275
Gross profit	4,899	4,694	3,209	-	12,802
Selling, general and administrative	3,784	3,653	3,025	-	10,462
Depreciation and amortization	301	78	55	-	434
Operating income	$814	$963	$129	$   -	$1,906
Total assets as of October 3, 2015	$39,985	$15,278	$17,021	$9,390	$81,674
Capital expenditures	$263	$   -	$54	$1,240	$1,557

Thirteen Week Period Ended September 27, 2014	Engineering	Information Technology	Specialty Health Care		Corporate	Total
Revenue	$24,835	$14,405	$7,142		$   -	$46,382
Cost of services	18,239	9,941	5,041		-	33,221
Gross profit	6,596	4,464	2,101		-	13,161
Selling, general and administrative	4,096	3,560	2,335		-	9,991
Depreciation and amortization	248	61	28		-	337
Operating income	$2,252	$843	($262	)	$   -	$2,833
Total assets as of September 27, 2014	$49,169	$15,253	$16,529		$13,389	$94,340
Capital expenditures	$587	$   -	$9		$7	$603

19

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

14. Segment Information (Continued)

Thirty-Nine Week Period Ended October 3, 2015	Engineering	Information Technology	Specialty Health Care	Corporate	Total
Revenue	$61,843	$44,684	$31,802	$   -	$138,329
Cost of services	46,989	30,904	22,241	-	100,134
Gross profit	14,854	13,780	9,561	-	38,195
Selling, general and administrative	11,893	11,291	8,456	-	31,640
Depreciation and amortization	794	172	118	-	1,084
Operating income	$2,167	$2,317	$987	$   -	$5,471
Total assets as of October 3, 2015	$39,985	$15,278	$17,021	$9,390	$81,674
Capital expenditures	$1,036	$   -	$54	$1,461	$2,551

Thirty-Nine Week Period Ended September 27, 2014	Engineering	Information Technology	Specialty Health Care	Corporate	Total
Revenue	$75,615	$44,076	$24,769	$   -	$144,460
Cost of services	57,695	30,734	17,658	-	106,087
Gross profit	17,920	13,342	7,111	-	38,373
Selling, general and administrative	11,939	10,768	6,885	-	29,592
Depreciation and amortization	642	166	77	-	885
Operating income	$5,340	$2,410	$146	$   -	$7,896
Total assets as of September 27, 2014	$49,169	$15,253	$16,529	$13,389	$94,340
Capital expenditures	$1,120	$   -	$92	$740	$1,952

20

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

14. Segment Information (Continued)

The Company derives a majority of its revenue from offices in the United States.  Revenues reported for each operating segment are all from external customers.  The Company is domiciled in the United States and its segments operate in the United States, Canada and Puerto Rico. Revenues by geographic area for the thirty-nine week periods ended October 3, 2015 and September 27, 2014 are as follows:  

		Thirteen Week Periods Ended		Thirty-Nine Week Periods Ended
		October 3, 2015	September 27, 2014	October 3, 2015	September 27, 2014
Revenues
	U. S.	$36,625	$32,651	$109,992	$103,403
	Canada	6,862	12,087	23,231	36,669
	Puerto Rico	1,590	1,644	5,106	4,388
		$45,077	$46,382	$138,329	$144,460

Total assets by geographic area as of the reported periods are as follows:

		October 3, 2015	January 3, 2015
Total assets
	U. S.	$62,068	$56,764
	Canada	17,752	28,776
	Puerto Rico	1,854	1,733
		$81,674	$87,273

15. Income Taxes

The projected fiscal 2015 effective income tax rates as of October 3, 2015 and applied for the thirty-nine week period ended October 3, 2015 are approximately 41.4% and 26.5% in the United States and Canada, respectively, and yielded a consolidated effective income tax rate of approximately 39.8% for the thirty-nine week period ended October 3, 2015.  For the comparable prior year period estimated income tax rates were 41.7% and 27.7% in the United States and Canada, respectively, and yielded a consolidated effective income tax rate of approximately 35.3% for the thirty-nine week period ended September 27, 2014.  The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company. 

21

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts, unless otherwise indicated)

16.   Contingencies

From time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business.  As such, the Company is required to assess the likelihood of any adverse outcomes to these matters as well as potential ranges of losses and possible recoveries.  The Company may not be covered by insurance as it pertains to some or all of these matters.  A determination of the amount of the provision required for these commitments and contingencies, if any, which would be charged to earnings, is made after careful analysis of each matter.  Once established, a provision may change in the future due to new developments or changes in circumstances, and could increase or decrease the Company’s earnings in the period that the changes are made.  Asserted claims in these matters sought approximately $1.9 million and $7.6 million in damages as of October 3, 2015 and January 3, 2015, respectively.  The primary reason for the reduction is that one matter in which claims of $6.5 million were asserted as of January 3, 2015 was settled without any contribution from the Company.  As of October 3, 2015, the Company did not accrue for any such liabilities.

Please refer to footnote 4 that discloses the nature of the disputed purchase orders with B&M.

The Company is also subject to other pending legal proceedings and claims that arise from time to time in the ordinary course of its business, which may not be covered by insurance.

22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Private Securities Litigation Reform Act Safe Harbor Statement

Certain statements included herein and in other reports and public filings made by RCM Technologies, Inc. (“RCM” or the “Company”) are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements include, without limitation, statements regarding the adoption by businesses of new technology solutions; the use by businesses of outsourced solutions, such as those offered by the Company, in connection with such adoption; the Company’s strategic and business initiatives and growth strategies; and the outcome of litigation (at both the trial and appellate levels) involving the Company.  Readers are cautioned that such forward-looking statements, as well as others made by the Company, which may be identified by words such as “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” “believe,” and similar expressions, are only predictions and are subject to risks and uncertainties that could cause the Company’s actual results and financial position to differ materially from such statements.  Such risks and uncertainties include, without limitation:  (i) unemployment and general economic conditions affecting the provision of information technology and engineering services and solutions and the placement of temporary staffing personnel; (ii) the Company’s ability to continue to attract, train and retain personnel qualified to meet the requirements of its clients; (iii) the Company’s ability to identify appropriate acquisition candidates, complete such acquisitions and successfully integrate acquired businesses; (iv) the Company’s relationships with and reliance upon significant customers; (v) risks associated with foreign currency fluctuations and changes in exchange rates, particularly with respect to the Canadian dollar; (vi) uncertainties regarding amounts of deferred consideration and earnout payments to become payable to former shareholders of acquired businesses; (vii) the adverse effect a potential decrease in the trading price of the Company’s common stock would have upon the Company’s ability to acquire businesses through the issuance of its securities; (viii) the Company’s ability to obtain financing on satisfactory terms; (ix) the reliance of the Company upon the continued service of its executive officers; (x) the Company’s ability to remain competitive in the markets that it serves; (xi) the Company’s ability to maintain its unemployment insurance premiums and workers compensation premiums; (xii) the risk of claims being made against the Company associated with providing temporary staffing services; (xiii) the Company’s ability to manage significant amounts of information and periodically expand and upgrade its information processing capabilities; (xiv) the Company’s ability to remain in compliance with federal and state wage and hour laws and regulations; (xv) uncertainties in predictions as to the future need for the Company’s services; (xvi) uncertainties relating to the allocation of costs and expenses to each of the Company’s operating segments; (xvii) the costs of conducting and the outcome of litigation involving the Company, and the applicability of insurance coverage with respect to any such litigation; (xviii) the results of, and costs relating to, any interactions with shareholders of the Company who may pursue specific initiatives with respect to the Company’s governance and strategic direction, including without limitation a contested proxy solicitation initiated by such shareholders, or any similar such interactions; and (ixx) other economic, competitive and governmental factors affecting the Company’s operations, markets, products and services.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made.  Except as required by law, the Company undertakes no obligation to publicly release the results of any revision of these forward-looking statements to reflect these trends or circumstances after the date they are made or to reflect the occurrence of unanticipated events.

23

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Overview

RCM participates in a market that is cyclical in nature and sensitive to economic changes.  As a result, the impact of economic changes on revenues and operations can be substantial, resulting in significant volatility in the Company’s financial performance.

The Company believes it has developed and assembled an attractive portfolio of capabilities, established a proven record of performance and credibility and built an efficient pricing structure.  The Company is committed to optimizing its business model as a single-source premier provider of business and technology solutions with a strong vertical focus offering an integrated suite of services through a global delivery platform.

The Company believes that most companies recognize the importance of advanced technologies and business processes to compete in today’s business climate.  However, the process of designing, developing and implementing business and technology solutions is becoming increasingly complex.  The Company believes that many businesses today are focused on return on investment analysis in prioritizing their initiatives.  This has had an adverse impact on spending by current and prospective clients for many emerging new solutions.

Nonetheless, the Company continues to believe that businesses must implement more advanced information technology and engineering solutions to upgrade their systems, applications and processes so that they can maximize their productivity and optimize their performance in order to maintain a competitive advantage.  Although working under budgetary, personnel and expertise constraints, companies are driven to support increasingly complex systems, applications and processes of significant strategic value.  This has given rise to a demand for outsourcing.  The Company believes that its current and prospective clients are continuing to evaluate the potential for outsourcing business critical systems, applications and processes.

The Company provides project management and consulting services, which are billed based on either agreed-upon fixed fees or hourly rates, or a combination of both.  The billing rates and profit margins for project management and solutions services are generally higher than those for professional consulting services.  The Company generally endeavors to expand its sales of higher margin solutions and project management services.  The Company also realizes revenues from client engagements that range from the placement of contract and temporary technical consultants to project assignments that entail the delivery of end-to-end solutions.  These services are primarily provided to the client at hourly rates that are established for each of the Company’s consultants based upon their skill level, experience and the type of work performed.

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.  Although contracts normally relate to longer-term and more complex engagements, they do not obligate the customer to purchase a minimum level of services and are generally terminable by the customer on 60 to 90 days’ notice.  The Company, from time to time, enters into contracts requiring the completion of specific deliverables.  Typically these contracts are for less than one year.  The Company recognizes revenue on these deliverables at the time the client accepts and approves the deliverables.

Costs of services consist primarily of salaries and compensation-related expenses for billable consultants and employees, including payroll taxes, employee benefits and insurance.  Selling, general and administrative expenses consist primarily of salaries and benefits of personnel responsible for business development, recruiting, operating activities, and training, and include corporate overhead expenses.  Corporate overhead expenses relate to salaries and benefits of personnel responsible for corporate activities, including the Company’s corporate marketing, administrative and financial reporting responsibilities and acquisition program.  The Company records these expenses when incurred.

24

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Critical Accounting Policies

The Company’s consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles, which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the judgment increases, such judgments become even more subjective. While management believes its assumptions are reasonable and appropriate, actual results may be materially different from estimated. Management has identified certain critical accounting policies, described below, that require significant judgment to be exercised by management.

Revenue Recognition

The Company derives its revenues from several sources.  The Company’s Engineering Services and Information Technology Services segments perform consulting and project solutions services.  All of the Company’s segments perform staff augmentation services and derive revenue from permanent placement fees.  The majority of the Company’s revenues are invoiced on a time and materials basis.

Project Services

The Company recognizes revenues in accordance with current revenue recognition standards under ASC 605, Revenue Recognition, which clarifies application of U.S. generally accepted accounting principles to revenue transactions.  Project services are generally provided on a cost-plus, fixed-fee or time-and-material basis.  Typically, a customer will outsource a discrete project or activity and the Company assumes responsibility for the performance of such project or activity.  The Company recognizes revenues and associated costs on a gross basis as services are provided to the customer and costs are incurred using its employees.  The Company, from time to time, enters into contracts requiring the completion of specific deliverables.  The Company may recognize revenues on these deliverables at the time the client accepts and approves the deliverables.  In instances where project services are provided on a fixed-price basis and the contract will extend beyond a 12-month period, revenue is recorded in accordance with the terms of each contract.  In some instances, revenue is billed at the time certain milestones are reached, as defined in the contract.  Revenues under these arrangements are recognized as the costs on these contracts are incurred.  Amounts invoiced in excess of revenues recognized are recorded as deferred revenue, included in accounts payable and accrued expenses on the accompanying balance sheets.  In other instances, revenue is billed and recorded based upon contractual rates per hour (i.e., percentage of completion). In addition, some contracts contain “Performance Fees” (bonuses) for completing a contract under budget.  Performance Fees, if any, are recorded when earned.  Some contracts also limit revenues and billings to specified maximum amounts.  Provision for contract losses, if any, are made in the period such losses are determined.  For contracts where there is a deliverable, the work is not complete on a specific deliverable and the revenue is not recognized, the costs are deferred.  The associated costs are expensed when the related revenue is recognized.

Consulting and Staffing Services

Revenues derived from consulting and staffing services are recorded on a gross basis as services are performed and associated costs have been incurred using employees of the Company.  These services are typically billed on a time and material basis.

In certain cases, the Company may utilize other companies and their employees to fulfill customer requirements. In these cases, the Company receives an administrative fee for arranging for, billing for, and collecting the billings related to these companies.  The customer is typically responsible for assessing the work of these companies who have responsibility for acceptability of their personnel to the customer.  Under these circumstances, the Company’s reported revenues are net of associated costs (effectively recognizing the net administrative fee only).

25

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Revenue Recognition (Continued)

Transit Accounts Receivable and Transit Accounts Payable

From time to time, the Company’s Engineering segment enters into agreements to provide, among other things, construction management and engineering services.  In certain circumstances, the Company may acquire equipment as a purchasing agent for the client for a fee.  Pursuant to these agreements, the Company: a) may engage subcontractors to provide construction or other services or contracts with manufacturers on behalf of the Company’s clients to procure equipment or fixtures; b) typically earns a fixed percentage of the total project value or a negotiated mark-up on subcontractor or procurement charges as a fee; and c) assumes no ownership or risks of inventory.  In such situations, the Company acts as an agent under the provisions of “Overall Considerations of Reporting Revenue Gross as a Principal versus Net as an Agent” and therefore recognizing revenue on a “net-basis.”  The Company records revenue on a “net” basis on relevant engineering and construction management projects, which require subcontractor/procurement costs or transit costs. In those situations, the Company charges the client a negotiated fee, which is reported as net revenue when earned.  During the thirty-nine week period ended October 3, 2015, total gross billings, including both transit cost billings and the Company’s earned fees, was $46.9 million, for which the Company recognized $26.9 million of its net fee as revenue.  During the thirty-nine week period ended September 27, 2014, total gross billings, including both transit cost billings and the Company’s earned fees, was $55.2 million, for which the Company recognized $32.3 million of its net fee as revenue.

Under the terms of the agreements, the Company is typically not required to pay the subcontractor until after the corresponding payment from the Company’s end-client is received.  Upon invoicing the end-client on behalf of the subcontractor or staffing agency the Company records this amount simultaneously as both a “transit account receivable” and “transit account payable” as the amount when paid to the Company is due to and generally paid to the subcontractor within a few days.  The Company typically does not pay a given transit account payable until the related transit account receivable is collected.  The Company’s transit accounts payable generally exceeds the Company’s transit accounts receivable but absolute amounts and spreads fluctuate significantly from quarter to quarter in the normal course of business.  The transit accounts receivable was $3.9 million and related transit accounts payable was $4.5 million, for a net liability of $0.6 million, as of October 3, 2015.

Permanent Placement Services

The Company earns permanent placement fees from providing permanent placement services.  Fees for placements are recognized at the time the candidate commences employment.  The Company guarantees its permanent placements on a prorated basis for 90 days.  In the event a candidate is not retained for the 90-day period, the Company will provide a suitable replacement candidate.  In the event a replacement candidate cannot be located, the Company will provide a prorated refund to the client.  An allowance for refunds, based upon the Company’s historical experience, is recorded in the financial statements.  Revenues are recorded on a gross basis.

Accounts Receivable

The Company’s accounts receivable are primarily due from trade customers.  Credit is extended based on evaluation of customers’ financial condition and, generally, collateral is not required.  Accounts receivable payment terms vary and are stated in the financial statements at amounts due from customers net of an allowance for doubtful accounts.  Accounts outstanding longer than the payment terms are considered past due.  The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company and the condition of the general economy and the industry as a whole.  The Company writes off accounts receivable when they become uncollectible.

26

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Goodwill

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired in business combinations.  The Company is required to assess the carrying value of its reporting units that contain goodwill at least on an annual basis in order to determine if any impairment in value has occurred.  The Company has the option to first assess qualitative factors to determine whether it is necessary to perform a two-step impairment test. An assessment of those qualitative factors or the application of the goodwill impairment test requires significant judgment including but not limited to the assessment of the business, its management and general market conditions, estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur and determination of weighted average cost of capital.  Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit.  The Company formally assesses these qualitative factors and, if necessary, conducts its annual goodwill impairment test as of the last day of the Company’s fiscal November each year, or more frequently if indicators of impairment exist.  The Company periodically analyzes whether any such indicators of impairment exist.  A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include a sustained, significant decline in share price and market capitalization, a decline in expected future cash flows, a significant adverse change in legal factors or in the business climate, unanticipated competition, a material change in management or other key personnel and/or slower expected growth rates, among others.  Due to the thin trading of the Company stock in the public marketplace and the impact of the control premium held by a relatively few shareholders, the Company does not consider the market capitalization of the Company the most appropriate measure of fair value of goodwill for our reporting units.  The Company looks to earnings/revenue multiples of similar companies recently completing acquisitions and the ability of our reporting units to generate cash flows as better measures of the fair value of our reporting units.  The Company compares the fair value of each of its reporting units to their respective carrying values, including related goodwill.  There can be no assurance that future tests of goodwill impairment will not result in impairment charges.  During all periods presented, the Company determined that the existing qualitative factors did not suggest that an impairment of goodwill exists.  Since there have been no indicators of impairment, the Company has not performed a quantitative impairment test.

Long-Lived and Intangible Assets

The Company evaluates long-lived assets and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  When it is probable that undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value.  Assets to be disposed of by sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell.

Accounting for Stock Options and Restricted Stock Units

The Company uses stock options and restricted stock units to attract, retain and reward employees for long-term service.  The Company follows “Share-Based Payment,” which requires that the compensation cost relating to stock-based payment transactions be recognized in the financial statements.  This compensation cost is measured based on the fair value of the equity or liability instruments issued.  The Company measures stock-based compensation cost using the Black-Scholes option pricing model for stock options and the fair value of the underlying common stock at the date of grant for restricted stock units.

27

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Insurance Liabilities

The Company has risk participation arrangements with respect to workers compensation and health care insurance.  The Company establishes loss provisions based on historical experience and in the case of expected losses from workers compensation, considers input from third parties.  The amounts included in the Company’s costs related to this risk participation are estimated and can vary based on changes in assumptions, the Company’s claims experience or the providers included in the associated insurance programs.

Accounting for Income Taxes

In establishing the provision for income taxes and deferred income tax assets and liabilities, and valuation allowances against deferred tax assets, the Company makes judgments and interpretations based on enacted tax laws, published tax guidance and estimates of future earnings.  As of October 3, 2015, the Company had domestic short term deferred tax assets of $0.8 million, total domestic long term net deferred income tax assets of $0.4 million and a foreign short-term deferred tax liability of $0.1 million.   The domestic short term deferred tax assets primarily represent the tax effect of accrued expenses which will be deductible for tax purposes within a twelve month period.  The domestic long term deferred tax assets primarily represent the tax effect of temporary differences for the GAAP versus tax amortization of intangibles arising from acquisitions made in prior periods.   Realization of deferred tax assets is dependent upon the likelihood that future taxable income will be sufficient to realize these benefits over time, and the effectiveness of tax planning strategies in the relevant tax jurisdictions.  In the event that actual results differ from these estimates and assessments, valuation allowances may be required.

The Company conducts its operations in multiple tax jurisdictions in the United States, Canada and Puerto Rico. The Company and its subsidiaries file a consolidated U.S. Federal income tax return and file in various states. The Company’s federal income tax returns have been examined through 2010.  The Internal Revenue Service is currently examining fiscal tax years 2011 and 2012.  The State of New Jersey is currently examining fiscal tax years 2009 through 2012.  With limited exceptions, the Company is no longer subject to audits by federal, state and local tax authorities in the United States for tax years prior to 2010.  The Company is no longer subject to audit in Canada prior to tax year 2009.  The Company is no longer subject to audit in Puerto Rico prior to tax year 2004.

The Company’s future effective tax rates could be adversely affected by changes in the valuation of its deferred tax assets or liabilities or changes in tax laws or interpretations thereof. In addition, the Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.

There were no changes to unrecognized tax benefits during the comparable prior year period.

Accrued Bonuses

The Company pays bonuses to certain executive management, field management and corporate employees based on, or after giving consideration to, a variety of financial performance measures. Executive management, field management and certain corporate employees’ bonuses are accrued throughout the year for payment during the first quarter of the following year, based in part upon anticipated annual results compared to annual budgets.  In addition, the Company pays discretionary bonuses to certain employees, which are not related to budget performance. Variances in actual results versus budgeted amounts can have a significant impact on the calculations and therefore on the estimates of the required accruals.  Accordingly, the actual earned bonuses may be materially different from the estimates used to determine the quarterly accruals.

28

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Forward-looking Information

The Company’s growth prospects are influenced by broad economic trends.  The pace of customer capital spending programs, new product launches and similar activities have a direct impact on the need for engineering and information technology services.  When the U.S., Canadian or global economies decline, the Company’s operating performance could be adversely impacted.  The Company believes that its fiscal discipline, strategic focus on targeted vertical markets and diversification of service offerings provides some insulation from adverse trends.  However, declines in the economy could result in the need for future cost reductions or changes in strategy.

Additionally, changes in government regulations could result in prohibition or restriction of certain types of employment services or the imposition of new or additional employee benefits, licensing or tax requirements with respect to the provision of employment services that may reduce the Company’s future earnings.  There can be no assurance that the Company will be able to increase the fees charged to its clients in a timely manner and in a sufficient amount to cover increased costs as a result of any of the foregoing.

The consulting and employment services market is highly competitive with limited barriers to entry.  The Company competes in global, national, regional and local markets with numerous competitors in all of the Company’s service lines.  Price competition in the industries the Company serves is significant, and pricing pressures from competitors and customers are increasing.  The Company expects that the level of competition will remain high in the future, which could limit the Company’s ability to maintain or increase its market share or profitability.

Thirteen Week Period Ended October 3, 2015 Compared to Thirteen Week Period Ended September 27, 2014

A summary of operating results for the thirteen week periods ended October 3, 2015 and September 27, 2014 is as follows (in thousands):

	October 3, 2015			September 27, 2014
	Amount		% of Revenue	Amount	% of Revenue
Revenues	$45,077		100.0	$46,382	100.0
Cost of services	32,275		71.6	33,221	71.6
Gross profit	12,802		28.4	13,161	28.4
Selling, general and administrative	10,462		23.2	9,991	21.6
Depreciation and amortization	434		1.0	337	0.7
	10,896		24.2	10,328	22.3
Operating income	1,906		4.2	2,833	6.1
Other expense, net	(174	)	0.4	6	-
Income before income taxes	1,732		3.8	2,839	6.1
Income tax expense	770		1.7	962	2.1
Net income	$962		2.1	$1,877	4.0

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31.  The fiscal quarters ended October 3, 2015 and September 27, 2014 consisted of thirteen weeks each.

Revenues.  Revenues decreased 2.8%, or $1.3 million, for the thirteen week period ended October 3, 2015 as compared to the thirteen week period ended September 27, 2014 (the “comparable prior year period”).  Revenues decreased $5.6 million in the Engineering segment and increased $0.8 million in the Information Technology segment and $3.5 million in the Specialty Health Care segment.  See Segment Discussion for further information on revenue changes.

29

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Thirteen Week Period Ended October 3, 2015 Compared to Thirteen Week Period Ended September 27, 2014 (Continued)

The Company has material operations in Canada; this business is conducted primarily in Canadian dollars. Since the Company reports its consolidated results in U.S. dollars the consolidated results are subject to potentially material fluctuations as a result of changes in the Canadian dollar to U.S. dollar exchange rate. For the thirteen week period ended October 3, 2015, the Company generated total revenues from its Canadian clients of $9.1 million in Canadian dollars ($9.0 million generated by work performed in Canada and $0.1 million generated by work performed in the U.S.), which translated to $6.9 million in revenues in U.S. dollars based on an effective Canadian to U.S. dollar exchange rate of 76.2%.  For the thirteen week period ended September 27, 2014, the Company generated total revenues from its Canadian clients of $14.5 million in Canadian dollars ($13.1 million generated by work performed in Canada and $1.4 million generated by work performed in the U.S.), which translated to $13.3 million in revenues in U.S. dollars based on an effective Canadian to U.S. dollar exchange rate of 92.1%. Had the effective Canadian exchange rate for the thirteen week period ended October 3, 2015 of 76.2% been the same as the comparable prior period effective rate of 92.1%, reported revenues in U.S. dollars for the thirteen weeks ended October 3, 2015 would have been $1.4 million higher.

Cost of Services and Gross Profit.  Cost of services decreased 2.8%, or $0.9 million, for the thirteen week period ended October 3, 2015 as compared to the comparable prior year period.  The decrease in cost of services was primarily due to the decrease in revenues.  Cost of services as a percentage of revenues for both the thirteen week period ended October 3, 2015 and the comparable prior year period was 71.6%.  See Segment Discussion for further information regarding changes in cost of services as a percentage of revenues and consequently, gross profit.

Selling, General and Administrative.  Selling, general and administrative (“SGA”) expenses increased 4.7%, or $0.5 million, for the thirteen week period ended October 3, 2015 as compared to the comparable prior year period.   As a percentage of revenues, SGA expenses were 23.2% for the thirteen week period ended October 3, 2015 as compared to 21.6% for the comparable prior year period.  SGA expense as a percentage of revenues increased primarily due to the increase in SGA expense and decrease in revenues. The major components of the increase in SGA expense are as follows: $0.4 million for increases to selling and recruiting compensation and related costs, $0.1 million for increases to medical insurance and claims, $0.1 million for internal information technology infrastructure, and $0.1 million for equity compensation, partially offset by reductions in other components of SGA expense totaling $0.2 million. 

Other Expense, Net.  Other expense, net consists of interest expense, unused line fees and amortized loan costs on the Company’s loan agreement, net of interest income, gains and losses on foreign currency transactions and any other non-operating items that may occur from time to time.  The Company’s interest expense, net of interest income for the thirteen week period ended October 3, 2015 increased by approximately $0.1 million as compared to the comparable prior year period, primarily due to the Company borrowings under its line of credit facility. The Company borrowed the $20.0 million in order to finance a special cash dividend of $25.3 million paid in the fourth quarter of fiscal 2014.  The Company’s outstanding borrowings under its line of credit was $15.0 million as of October 3, 2015.

Income Tax Expense.  The Company recognized $0.8 million of income tax expense for the thirteen week period ended October 3, 2015 as compared to $1.0 million for the comparable prior year period.  The consolidated effective income tax rate for the current period was 44.5% as compared to 33.9% for the comparable prior year period. The projected fiscal 2015 effective income tax rate as of October 3, 2015 was approximately 41.4% and 26.5% in the United States and Canada, respectively. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company.  The consolidated effective income tax rate increased for the thirteen week period ended October 3, 2015 as compared to the comparable prior year period because the Company’s Canadian income before taxes decreased as a percentage of total income before taxes.

30

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Thirteen Week Period Ended October 3, 2015 Compared to Thirteen Week Period Ended September 27, 2014 (Continued)

Segment Discussion

Engineering

Engineering revenues of $19.2 million in the thirteen week period ended October 3, 2015 decreased $5.6 million, or 22.6%, as compared to the comparable prior year period. The decrease was primarily due to a decrease in revenues of $6.5 million from the Company’s Canadian clients, resulting from a reduced level of project activity with the Company’s Canadian engineering clients and a significant decrease in the Canadian dollar exchange rate.  The effective Canadian dollar exchange rate for the thirteen weeks ended October 3, 2015 for Engineering segment revenues was 76.2% as compared to 92.1% for the comparable prior year period.  The change in the effective exchange rate resulted in a reduction of revenues converted from Canadian dollars to U.S. dollars of $1.4 million for the thirteen week period ended October 3, 2015.  The Engineering segment operating income was $0.8 million for the thirteen week period ended October 3, 2015 as compared to $2.3 million for the comparable prior year period. The decrease of $1.5 million in operating income was due to a decrease in gross profit of $1.7 million offset by a decrease in SGA expense of $0.2 million. The Engineering segment’s gross profit decreased due to the decrease in revenues.  The primary reason for the decrease in SGA expense was a lower allocation of corporate-generated SGA expense.

Information Technology

Information Technology revenues of $15.2 million in the thirteen week period ended October 3, 2015 increased $0.8 million, or 5.3%, as compared to the comparable prior year period.  The increase was achieved despite a decrease in revenues of $2.0 million from the Life Sciences Practice’s two largest fiscal 2014 clients that had multiple projects either conclude or decelerate in 2015. The Information Technology segment’s gross profit for the thirteen week period ended October 3, 2015 increased $0.2 million as compared to the comparable prior year period due primarily to the increase in revenues. The Information Technology segment operating income was $1.0 million for the thirteen week period ended October 3, 2015 as compared to $0.8 million for the comparable prior year period.

Specialty Health Care

Specialty Health Care revenues of $10.7 million in the thirteen week period ended October 3, 2015 increased $3.5 million, or 49.6%, as compared to the comparable prior year period.  The primary drivers for the increase in the revenues for the Specialty Health Care segment were increases of $1.0 million from the travel nursing staffing group, $0.8 million from the health information management staffing group, $0.6 million from the recently opened Chicago office, $0.6 million from the Honolulu office, $0.3 million in permanent placement revenues and $0.2 million from the New York City office. The Specialty Health Care segment’s gross profit for the thirteen week period ended October 3, 2015 increased by $1.1 million, or 52.7%, as compared to the prior year period. The increase in gross profit was primarily driven by the increase in revenues and an increase in gross profit margin to 30.0% for the thirteen week period ended October 3, 2015 as compared to 29.4% for the comparable prior year period. The increase in gross profit margin was primarily driven by an increased focus on delivering higher margin staffing services and increases to its permanent placement revenues. Specialty Healthcare experienced operating income of $0.1 million for the thirteen week period ended October 3, 2015 as compared to an operating loss of $0.3 million for comparable prior year period. The primary reason for the increase in operating income was the increase in gross profit, offset by an increase in SGA expense.  SGA expense increased by $0.7 million, to $3.0 million in the thirteen week period ended October 3, 2015 as compared to $2.3 million in the comparable prior year period. SGA expense increased primarily due to increased investment in the Specialty Healthcare’s newer service lines (Chicago, travel nursing staffing and health information management), and also a higher allocation of corporate-generated SGA expense.

31

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Thirty-Nine Week Period Ended October 3, 2015 Compared to Thirty-Nine Week Period Ended September 27, 2014

A summary of operating results for the thirty-nine week periods ended October 3, 2015 and September 27, 2014 is as follows (in thousands):

	October 3, 2015			September 27, 2014
	Amount		% of Revenue	Amount		% of Revenue
Revenues	$138,329		100.0	$144,460		100.0
Cost of services	100,134		72.4	106,087		73.4
Gross profit	38,195		27.6	38,373		26.6
Selling, general and administrative	31,640		22.9	29,592		20.4
Depreciation and amortization	1,084		0.7	885		0.6
	32,724		23.6	30,477		21.1
Operating income	5,471		4.0	7,896		5.5
Other expense, net	(427	)	0.3	(19	)	-
Income before income taxes	5,044		3.7	7,877		5.5
Income tax expense	2,005		1.5	2,780		1.9
Net income	$3,039		2.2	$5,097		3.6

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31.  The fiscal quarters ended October 3, 2015 and September 27, 2014 consisted of thirty-nine weeks each.

Revenues.  Revenues decreased 4.2%, or $6.1 million, for the thirty-nine week period ended October 3, 2015 as compared to the thirty-nine week period ended September 27, 2014 (the “comparable prior year period”).  Revenues decreased $13.8 million in the Engineering segment and increased $0.6 million in the Information Technology segment and $7.1 million in the Specialty Health Care segment.  See Segment Discussion for further information on revenue changes.

The Company has material operations in Canada; this business is conducted primarily in Canadian dollars. Since the Company reports its consolidated results in U.S. dollars the consolidated results are subject to potentially material fluctuations as a result of changes in the Canadian dollar to U.S. dollar exchange rate. For the thirty-nine week period ended October 3, 2015, the Company generated total revenues from its Canadian clients of $30.2 million in Canadian dollars ($29.2 million generated by work performed in Canada and $1.0 million generated by work performed in the U.S.), which translated to $24.0 million in revenues in U.S. dollars based on an effective Canadian to U.S. dollar exchange rate of 79.5%.  For the thirty-nine week period ended September 27, 2014, the Company generated total revenues from its Canadian clients of $45.4 million in Canadian dollars ($40.2 million generated by work performed in Canada and $5.2 million generated by work performed in the U.S.), which translated to $41.4 million in revenues in U.S. dollars based on an effective Canadian to U.S. dollar exchange rate of 91.2%. Had the effective Canadian exchange rate for the thirty-nine week period ended October 3, 2015 of 79.5% been the same as the comparable prior period effective rate of 91.2%, reported revenues in U.S. dollars for the thirty-nine weeks ended October 3, 2015 would have been $3.5 million higher.

32

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Thirty-Nine Week Period Ended October 3, 2015 Compared to Thirty-Nine Week Period Ended September 27, 2014 (Continued)

Cost of Services and Gross Profit.  Cost of services decreased 5.6%, or $6.0 million, for the thirty-nine week period ended October 3, 2015 as compared to the comparable prior year period.  The decrease in cost of services was primarily due to the decrease in revenues and a deliberate effort to reduce cost of services as a percentage of revenues.  Cost of services as a percentage of revenues decreased to 72.4% for the thirty-nine week period ended October 3, 2015 from 73.4% for the comparable prior year period.  See Segment Discussion for further information regarding changes in cost of services as a percentage of revenues and consequently, gross profit.

Selling, General and Administrative.  Selling, general and administrative (“SGA”) expenses increased 6.9%, or $2.0 million, for the thirty-nine week period ended October 3, 2015 as compared to the comparable prior year period.   The increase in SGA expense was primarily due to investment in personnel and infrastructure necessary to support current and prospective revenues and new service offerings.  As a percentage of revenues, SGA expenses were 22.9% for the thirty-nine week period ended October 3, 2015 as compared to 20.4% for the comparable prior year period.  SGA expense as a percentage of revenues increased primarily due to the decrease in revenues. The major components of the increase in SGA expense are as follows: $0.9 million for increases to selling and recruiting compensation and related costs, $0.4 million for equity compensation, $0.3 million for increases to medical insurance and claims, $0.3 million for compensation and related costs for existing, new and reclassified (from cost of services) personnel and $0.3 million for internal information technology infrastructure, partially offset by reductions in other components of SGA expense totaling $0.2 million.

Other Expense, Net.  Other expense, net consists of interest expense, unused line fees and amortized loan costs on the Company’s loan agreement, net of interest income, gains and losses on foreign currency transactions and any other non-operating items that may occur from time to time.  The Company’s interest expense, net of interest income for the thirty-nine week period ended October 3, 2015 increased by approximately $0.3 million as compared to the comparable prior year period, primarily due to the Company borrowings under its line of credit facility. The Company borrowed the $20.0 million in order to finance a special cash dividend of $25.3 million paid in the fourth quarter of fiscal 2014.  The Company’s outstanding borrowings under its line of credit was $15.0 million as of October 3, 2015.

Income Tax Expense.  The Company recognized $2.0 million of income tax expense for the thirty-nine week period ended October 3, 2015 as compared to $2.8 million for the comparable prior year period.  The consolidated effective income tax rate for the current period was 39.8% as compared to 35.3% for the comparable prior year period. The projected fiscal 2015 effective income tax rate as of October 3, 2015 was approximately 41.4% and 26.5% in the United States and Canada, respectively. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company.  The consolidated effective income tax rate increased for the thirty-nine week period ended October 3, 2015 as compared to the comparable prior year period because the Company’s Canadian income before taxes decreased as a percentage of total income before taxes.

33

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Thirty-Nine Week Period Ended October 3, 2015 Compared to Thirty-Nine Week Period Ended September 27, 2014 (Continued)

Segment Discussion

Engineering

Engineering revenues of $61.8 million in the thirty-nine week period ended October 3, 2015 decreased $13.8 million, or 18.2%, as compared to the comparable prior year period. The decrease was primarily due to a decrease in revenues of $17.5 million in the Company’s Canadian clients, resulting from a reduced level of project activity with the Company’s Canadian engineering clients and a significant decrease in the Canadian dollar exchange rate.  The effective Canadian dollar exchange rate for the thirty-nine weeks ended October 3, 2015 for Engineering segment revenues was 79.5% as compared to 91.2% for the comparable prior year period.  The change in the effective exchange rate resulted in a reduction of revenues converted from Canadian dollars to U.S. dollars of $3.4 million for the thirty-nine week period ended October 3, 2015. The Engineering segment operating income was $2.2 million for the thirty-nine week period ended October 3, 2015 as compared to $5.3 million for the comparable prior year period. The decrease of $3.1 million was primarily due to a decrease in the Engineering segment’s gross profit of $3.1 million. The Engineering segment’s gross profit decreased due to the decrease in revenues.

Information Technology

Information Technology revenues of $44.7 million in the thirty-nine week period ended October 3, 2015 increased $0.6 million, or 1.3%, as compared to the comparable prior year period.  The increase was achieved despite a decrease in revenues of $6.9 million from the Life Sciences Practice’s two largest fiscal 2014 clients that had multiple projects either conclude or decelerate in 2015. The Information Technology segment’s gross profit for the thirty-nine week period ended October 3, 2015 increased $0.4 million as compared to the comparable prior year period primarily due to an increase in gross profit margin to 30.8% for the thirty-nine week period ended October 3, 2015 as compared to 30.2% for the comparable prior year period. The increase in gross profit margin was due to an overall focus by the Information Technology segment on providing higher value, higher margin services to its clients, improved utilization as well as natural quarter-to-quarter fluctuations. The Information Technology segment operating income was $2.3 million for the thirty-nine week period ended October 3, 2015 as compared to $2.4 million for the comparable prior year period. The decrease of $0.1 million was due to an increase in SGA expense of $0.5 million. The increase in SGA expense was primarily due to increases in compensation and related costs and a higher allocation of corporate-generated SGA expense.

Specialty Health Care

Specialty Health Care revenues of $31.8 million in the thirty-nine week period ended October 3, 2015 increased $7.1 million, or 28.4%, as compared to the comparable prior year period.  The primary drivers for the increase in the revenues for the Specialty Health Care segment were increases of $2.4 million from the travel nursing staffing group, $1.7 million from the Honolulu office, $1.0 million from the New York City office, $0.8 million from the health information management staffing group, $0.6 million from the recently opened Chicago office and $0.5 million in permanent placement revenues.  The Specialty Health Care segment’s gross profit for the thirty-nine week period ended October 3, 2015 increased by $2.5 million, or 34.5%, as compared to the prior year period. The increase in gross profit was primarily driven by the increase in revenues and an increase in gross profit margin to 30.1% for the thirty-nine week period ended October 3, 2015 as compared to 28.7% for the comparable prior year period. The increase in gross profit margin was primarily driven by an increased focus on delivering higher margin staffing services and increases to its permanent placement revenues. Specialty Healthcare experienced operating income of $1.0 million for the thirty-nine week period ended October 3, 2015 as compared to $0.1 million for comparable prior year period. The primary reason for the increase in operating income was the increase in gross profit, offset by an increase in SGA expense.  SGA expense increased by $1.6 million, to $8.5 million in the thirty-nine week period ended October 3, 2015 as compared to $6.9 million in the comparable prior year period. SGA expense increased primarily due to increased investment in the Specialty Healthcare’s newer service lines Chicago, (travel nursing staffing and health information management), and also a higher allocation of corporate-generated SGA expense.

34

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources

The following table summarizes the major captions from the Company’s Consolidated Statements of Cash Flows (in thousands):

		Thirty-Nine Week Periods Ended
		October 3, 2015		September 27, 2014
Cash (used in) provided by:
	Operating activities	$7,488		$1,184
	Investing activities	($3,333	)	($2,023	)
	Financing activities	($5,206	)	$292

Operating Activities

Operating activities provided $7.5 million of cash for the thirty-nine week period ended October 3, 2015 as compared to providing $1.2 million in the comparable prior year period.  The major components of cash provided by or used in operating activities in the thirty-nine week period ended October 3, 2015 and the comparable prior year period are as follows: net income and changes in accounts receivable, the net of transit accounts payable and transit accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses and accrued payroll and related costs.

Net income for the thirty-nine week period ended October 3, 2015 was $3.0 million as compared to $5.1 million for the comparable prior year period.  A decrease in accounts receivables in the thirty-nine week period ended October 3, 2015 provided $3.3 million of cash as compared to using $5.6 million in the comparable prior year period. The Company primarily attributes the decrease in accounts receivables for the thirty-nine week period ended October 3, 2015 to progress in collecting certain aged accounts receivable in Canada. 

The Company’s transit accounts payable generally exceeds the Company’s transit accounts receivable, but absolute amounts and differences fluctuate significantly from quarter to quarter in the normal course of business.  The net of transit accounts payable and transit accounts receivable was a net liability of $0.6 million as of October 3, 2015 and of $2.9 million as of January 3, 2015, so the cash impact during the thirty-nine week period ended October 3, 2015 used $2.3 million in cash.  The net of transit accounts payable and transit accounts receivable was a net liability of $0.1 million as of September 27, 2014 and was a negligible net asset as of December 28, 2013, so the cash impact during the thirty-nine week period ended September 27, 2014 provided $0.1 million in cash.   Prepaid expenses and other current assets used a negligible amount of cash for the thirty-nine week period ended October 3, 2015 as compared to using $0.4 million in the comparable prior year period.

An increase in accounts payable and accrued expenses provided $0.3 million for the thirty-nine week period ended October 3, 2015 as compared to using $1.0 million of cash for the comparable prior year period.  The Company attributes these changes to general timing of payments to vendors in the normal course of business. The increase in accrued payroll and related costs for the thirty-nine week period ended October 3, 2015 used $0.2 million in cash as compared to $0.9 million for the comparable prior year period. 

35

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources (Continued)

Investing Activities

Investing activities used cash of $3.3 million for the thirty-nine week period ended October 3, 2015 as compared to $2.0 million in the comparable prior year period.  The primary reason for the increase of $1.3 million was the SDS acquisition which used $0.8 million in cash.  The Company continued to invest in its internal information technology infrastructure during the thirty-nine week period ended October 3, 2015, including $0.4 in a new project management software platform, initially for its Canadian Engineering division.  The initial implementation is anticipated to be substantially complete and operational by the end of the Company’s fiscal year and the total cost for the first phase is expected to be as much as $1.0 million, inclusive of amounts already spent.  The Company anticipates that it will extend this new project management software platform to its United States Engineering divisions and possibly its Information Technology segment, starting as early as the Company’s fourth quarter and costing up to an additional $0.5 million. 

The Company utilizes SAP software for its financial reporting and accounting system which was implemented in 1999 and has not undergone significant upgrades since its initial implementation.  The Company believes that it will become necessary to upgrade or replace its SAP financial reporting and accounting system, perhaps as early as some time in fiscal 2016.  The Company estimates this upgrade or replacement of the SAP system will cost between $1.0 million and $2.0 million.  These estimates are subject to material change.

Financing Activities

Financing activities used $5.2 million of cash for the thirty-nine week period ended October 3, 2015 as compared to providing $0.3 million in the comparable prior year period.  The Company made net repayments under its line of credit of $5.0 million during the thirty-nine week period ended October 3, 2015.  The Company generated cash of $0.4 million in the thirty-nine week period ended October 3, 2015 as compared to $0.6 million for comparable prior year period from sales of shares from its equity plans. The Company paid contingent payments of $0.1 million and $0.3 million to the former principles of BGA during the current year and comparable prior year periods, respectively.  The Company used $0.5 million to repurchase common stock.

The Company and its subsidiaries are party to a loan agreement with Citizens Bank of Pennsylvania, amended and restated effective February 20, 2009, which provides for a $35 million revolving credit facility and includes a sub-limit of $5 million for letters of credit (the “Revolving Credit Facility”).  The Revolving Credit Facility has been amended several times, most recently on December 12, 2014 when the maturity date was extended to December 11, 2019.  Borrowings under the Revolving Credit Facility bear interest at one of two alternative rates, as selected by the Company at each incremental borrowing.  These alternatives are: (i) LIBOR (London Interbank Offered Rate), plus applicable margin, typically borrowed in fixed 30-day increments or (ii) the agent bank’s prime rate generally borrowed over shorter durations.  The Company also pays unused line fees based on the amount of the Revolving Credit Facility that is not drawn.  Unused line fees are recorded as interest expense.  The effective interest rate, including unused line fees, for the thirty-nine week period ended October 3, 2015 was 2.5%.

All borrowings under the Revolving Credit Facility are collateralized by all of the assets of the Company and its subsidiaries and a pledge of the stock of its subsidiaries.  The Revolving Credit Facility also contains various financial and non-financial covenants, such as a covenant that restricts on the Company’s ability to borrow in order to pay dividends.  The Company paid a special cash dividend on December 30, 2014 which was expressly permitted under its amended Revolving Credit Facility.  As of October 3, 2015, the Company was in compliance with all covenants contained in its Revolving Credit Facility.

Borrowings under the line of credit as of October 3, 2015 and January 3, 2015 were $15.0 million and $20.0 million, respectively, and there were letters of credit outstanding for $0.8 million as of both dates.  At October 3, 2015, the Company had availability for additional borrowings under the Revolving Credit Facility of $19.2 million.

As of October 3, 2015, $1.3 million of the $4.5 million (on the Consolidated Balance Sheet) of cash and cash equivalents was held by foreign subsidiaries, with $0.1 million of this portion held in U.S. dollars and the balance held in Canadian dollars.

36

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources (Continued)

Commitments and Contingencies

The Company anticipates that its primary uses of capital in future periods will be for working capital purposes.  Funding for any long-term and short-term capital requirements as well as future acquisitions will be derived from one or more of the Revolving Credit Facility (or a replacement thereof), funds generated through operations or future financing transactions.  The Company is subject to legal proceedings and claims that arise from time to time in the ordinary course of its business, which may or may not be covered by insurance.  Were an unfavorable final outcome to occur, there exists the possibility of a material adverse impact on our financial position, liquidity, and the results of operations.

The Company has a subcontract agreement with Black & McDonald Limited (“B&M”) to provide engineering and procurement services under B&M’s master services agreement with Ontario Power Generation (“OPG”).  The Company understands that in October 2014, OPG provided to B&M notice of default and termination of a large purchase order from OPG to B&M with respect to which B&M had engaged several subcontractors, including the Company. B&M notified the Company that it is disputing OPG’s default claim on this purchase order. Subsequently, OPG has disputed the services provided on several other smaller purchase orders. As of October 3, 2015 the Company had outstanding accounts receivable from B&M under disputed purchase orders by OPG of $1.7 million and, including such disputed amounts, a total of $5.8 million of outstanding accounts receivable from B&M. OPG has indicated to the Company that it will not make any further payments to B&M on the projects in dispute. The Company has received notice from B&M that while B&M disputes OPG’s assertion it is in default on any contested purchase order, B&M believes that in the event that it is in default under its agreement with OPG, then the Company may also be in default under its agreement with B&M.  The Company does not agree with this assertion.

The Company does not believe that any of its account receivables from B&M have been materially impaired and believes that its accounts receivable from B&M remain collectible, subject to existing reserves.  However, it is possible that a protracted dispute between OPG and B&M may impact the Company’s ability to collect its outstanding accounts receivable in a timely manner.

The Company’s business strategy is to achieve growth both internally through operations and externally through strategic acquisitions.  The Company from time to time engages in discussions with potential acquisition candidates. The Company has acquired numerous companies throughout its history and those acquisitions have generally included significant future contingent consideration.  As the size of the Company and its financial resources increase however, acquisition opportunities requiring significant commitments of capital may arise.  In order to pursue such opportunities, the Company may be required to incur debt or issue potentially dilutive securities in the future.  No assurance can be given as to the Company’s future acquisition and expansion opportunities or how such opportunities will be financed.

The Company purchased and began implementing a new project management software platform in early 2015, initially for its Canadian Engineering division.  The initial implementation is anticipated to be substantially complete and operational by the end of the Company’s fiscal year and the total cost for the first phase is expected to be as much as $1.0 million.  The Company anticipates that it will extend this new project management software platform to its United States Engineering divisions and possibly its Information Technology segment starting as early as the Company’s fourth quarter and costing up to an additional $0.5 million.  The Company utilizes SAP software for its financial reporting and accounting system which was implemented in 1999 and has not undergone significant upgrades since its initial implementation.  The Company believes that it will become necessary to upgrade or replace its SAP financial reporting and accounting system, perhaps as early as some time in fiscal 2016.  The Company estimates this upgrade or replacement of the SAP system will cost between $1.0 million and $2.0 million.  These estimates are subject to material change.

37

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Capital Resources (Continued)

The Company’s current commitments consist primarily of lease obligations for office space.  The Company believes that its capital resources are sufficient to meet its present obligations and those to be incurred in the normal course of business for at least the next 12 months.

The Company leases office facilities and various equipment under non-cancelable leases expiring at various dates through September 2020.  Certain leases are subject to escalation clauses based upon changes in various factors.  The minimum future annual operating lease commitments for leases with non-cancelable terms, exclusive of unknown operating escalation charges, are as follows (in thousands):

Fiscal Years	Amount
2015 (After October 3, 2015)	$896
2016	2,809
2017	2,287
2018	1,777
2019	756
Thereafter	308
Total	$8,833

Future Contingent Payments

As of October 3, 2015, the Company had three active acquisition agreements whereby additional contingent consideration may be earned by the former shareholders: 1) effective July 1, 2012 the Company acquired certain assets of BGA, LLC (“BGA”); 2) effective August 1, 2014 the Company acquired all of the stock of Point Comm, Inc. (“PCI”); and 3) effective July 5, 2015, the Company acquired certain assets of Substation Design Services, LLC (“SDS”). The Company estimates future contingent payments at October 3, 2015 as follows:

Fiscal Year	BGA	PCI	SDS	Total
2015	$127	$262	$   -	$389
2016	271	197	180	648
2017	-	307	253	560
2018	-	-	313	313
Estimated future contingent consideration payments	$398	$766	$746	$1,910

Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates.  Future contingent payments to be made to BGA, PCI and SDS are capped at cumulative maximums of $2.6 million, $2.0 million and $1.5 million, respectively.  The Company estimates future contingent consideration in payments based on forecasted performance and recorded at the net present value of those expected payments as of October 3, 2015.  The measurement is based on significant inputs that are not observable in the market, which “Fair Value Measurements and Disclosures” (ASU Topic 820-10-35) refers to as Level 3 inputs.

38

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s investment portfolio and debt instruments, which primarily consist of its Revolving Credit Facility. The Company does not have any derivative financial instruments in its portfolio.  The Company places its investments in instruments that meet high credit quality standards.  The Company is adverse to principal loss and ensures the safety and preservation of its invested funds by limiting default risk, market risk and reinvestment risk.  As of October 3, 2015, the Company’s investments consisted of cash and money market funds.  The Company does not use interest rate derivative instruments to manage its exposure to interest rate changes.  Based on the Company’s variable-rate line of credit balances during the thirty-nine week period ended October 3, 2015, if the interest rate on the Company’s variable-rate line of credit (using an incremental borrowing rate) during the period had been 1.0% higher, the Company’s interest expense for the period would have increased by $0.2 million.  The Company does not expect any material loss with respect to its investment portfolio.

ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that those disclosure controls and procedures as of the end of the period covered by this report were effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter and that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

39

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See discussion of Contingencies in Note 16 to the Consolidated Financial Statements included in Item 1 of this report.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in the “Risk Factors” section (Item 1A) of the Company’s Annual Report on Form 10-K for the year ended January 3, 2015.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

40

ITEM 6. EXHIBITS

31.1*	Certification of President and Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2*	Certification of Chief Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1**	Certification of President and Chief Executive Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.  (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
32.2**	Certification of Chief Financial Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.  (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Documents
101.DEF*	XBRL Taxonomy Definition Linkbase Document

__________

*      Filed herewith

**    Furnished herewith

41

RCM TECHNOLOGIES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RCM Technologies, Inc.
Date:  November 5, 2015	By: /s/ Rocco Campanelli
		Rocco Campanelli President and Chief Executive Officer (Principal Executive Officer and Duly Authorized Officer of the Registrant)

Date:  November 5, 2015	By: /s/ Kevin D. Miller
		Kevin D. Miller Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer of the Registrant)

42

Exhibit 31.1

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATION

I, Rocco Campanelli, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of RCM Technologies, Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this  report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.      The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 5, 2015 /s/ Rocco Campanelli Rocco Campanelli President and Chief Executive Officer

43

Exhibit 31.2

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATION

I, Kevin D. Miller, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of RCM Technologies, Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.      The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 5, 2015 /s/ Kevin D. Miller Kevin D. Miller Chief Financial Officer

44

Exhibit 32.1

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Rocco Campanelli, President and Chief Executive Officer of RCM Technologies, Inc., a Nevada corporation (the “Company”), hereby certify that, to my knowledge:

(1)  The Company’s periodic report on Form 10-Q for the quarter ended October 3, 2015 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2)   The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

*           *           *

/s/ Rocco Campanelli                                           

Rocco Campanelli

President and Chief Executive Officer

Date:  November 5, 2015

45

Exhibit 32.2

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Kevin D. Miller, Chief Financial Officer of RCM Technologies, Inc., a Nevada corporation (the “Company”), hereby certify that, to my knowledge:

(1)  The Company’s periodic report on Form 10-Q for the quarter ended October 3, 2015 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2)  The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

*           *           *

/s/ Kevin D. Miller                                           

Kevin D. Miller

Chief Financial Officer

Date:  November 5, 2015

46

EX-31.1

Exhibit 31.1

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATION

I, Rocco Campanelli, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of RCM Technologies, Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this  report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.      The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 5, 2015 /s/ Rocco Campanelli Rocco Campanelli President and Chief Executive Officer

EX-31.2

Exhibit 31.2

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATION

I, Kevin D. Miller, certify that:

1.      I have reviewed this quarterly report on Form 10-Q of RCM Technologies, Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.      The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 5, 2015 /s/ Kevin D. Miller Kevin D. Miller Chief Financial Officer

EX-32.1

Exhibit 32.1

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Rocco Campanelli, President and Chief Executive Officer of RCM Technologies, Inc., a Nevada corporation (the “Company”), hereby certify that, to my knowledge:

(1)  The Company’s periodic report on Form 10-Q for the quarter ended October 3, 2015 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2)   The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

*           *           *

/s/ Rocco Campanelli                                           

Rocco Campanelli

President and Chief Executive Officer

Date:  November 5, 2015

EX-32.2

Exhibit 32.2

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Kevin D. Miller, Chief Financial Officer of RCM Technologies, Inc., a Nevada corporation (the “Company”), hereby certify that, to my knowledge:

(1)  The Company’s periodic report on Form 10-Q for the quarter ended October 3, 2015 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2)  The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

*           *           *

/s/ Kevin D. Miller                                           

Kevin D. Miller

Chief Financial Officer

Date:  November 5, 2015

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Note 8 - Components of Intangible Assets (Details) $ in Thousands	9 Months Ended
	Oct. 03, 2015 USD ($)
Engineering [Member] | SDS [Member]
Intangibles acquired, SDS acquisition	$ 140
Engineering [Member]
Balance as of January 3, 2015	189
Amortization of intangibles during the thirty-nine week period ended October 3, 2015	(53)
Balance as of October 3, 2015	276
Information Technology [Member]
Balance as of January 3, 2015	5
Amortization of intangibles during the thirty-nine week period ended October 3, 2015	$ (5)
Balance as of October 3, 2015
SDS [Member]
Intangibles acquired, SDS acquisition	$ 140
Balance as of January 3, 2015	194
Amortization of intangibles during the thirty-nine week period ended October 3, 2015	(58)
Balance as of October 3, 2015	$ 276

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Note 14 - Results of the Segments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
Engineering [Member]
Revenue	$ 19,224	$ 24,835	$ 61,843	$ 75,615
Cost of services	14,325	18,239	46,989	57,695
Gross profit	4,899	6,596	14,854	17,920
Selling, general and administrative	3,784	4,096	11,893	11,939
Depreciation and amortization	301	248	794	642
Operating income	814	2,252	2,167	5,340
Assets	39,985	49,169	39,985	49,169
Capital expenditures	263	587	1,036	1,120
Information Technology [Member]
Revenue	15,171	14,405	44,684	44,076
Cost of services	10,477	9,941	30,904	30,734
Gross profit	4,694	4,464	13,780	13,342
Selling, general and administrative	3,653	3,560	11,291	10,768
Depreciation and amortization	78	61	172	166
Operating income	963	843	2,317	2,410
Assets	$ 15,278	$ 15,253	$ 15,278	$ 15,253
Capital expenditures
Specialty Health Care [Member]
Revenue	$ 10,682	$ 7,142	$ 31,802	$ 24,769
Cost of services	7,473	5,041	22,241	17,658
Gross profit	3,209	2,101	9,561	7,111
Selling, general and administrative	3,025	2,335	8,456	6,885
Depreciation and amortization	55	28	118	77
Operating income	129	(262)	987	146
Assets	17,021	16,529	17,021	16,529
Capital expenditures	$ 54	$ 9	$ 54	$ 92
Corporate Segment [Member]
Revenue
Cost of services
Gross profit
Selling, general and administrative
Depreciation and amortization
Operating income
Assets	$ 9,390	$ 13,389	$ 9,390	$ 13,389
Capital expenditures	1,240	7	1,461	740
Revenue	45,077	46,382	138,329	144,460
Cost of services	32,275	33,221	100,134	106,087
Gross profit	12,802	13,161	38,195	38,373
Selling, general and administrative	10,462	9,991	31,640	29,592
Depreciation and amortization	434	337	1,084	885
Operating income	1,906	2,833	5,471	7,896
Assets	81,674	94,340	81,674	94,340
Capital expenditures	$ 1,557	$ 603	$ 2,551	$ 1,952

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Note 11 - Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) [Member] shares in Thousands	9 Months Ended
	Oct. 03, 2015 $ / shares shares
Outstanding non-vested at January 3, 2015 (in shares) | shares	500
Outstanding non-vested at January 3, 2015 (in dollars per share)	$ 6.61
Vested (in shares) | shares	3
Vested (in dollars per share)	$ 6.61
Outstanding non-vested at October 3, 2015 (in shares) | shares	497
Outstanding non-vested at October 3, 2015 (in dollars per share)	$ 6.61

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Note 4 - Accounts Receivable (Details) - USD ($) $ in Thousands	Oct. 03, 2015	Jan. 03, 2015
Billed Revenues [Member]
Accounts Receivable, Gross, Current	$ 40,406	$ 47,318
Unbilled Revenues [Member]
Accounts Receivable, Gross, Current	4,780	4,853
Work In Progress [Member]
Accounts Receivable, Gross, Current	8,879	8,027
Allowance for doubtful accounts	(1,299)	(1,011)
Accounts receivable, net	$ 52,766	$ 59,187

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Note 5 - Property and Equipment (Tables)

9 Months Ended

Oct. 03, 2015

Notes Tables

Property, Plant and Equipment [Table Text Block]

	October 3, 2015		January 3, 2015
Equipment and furniture	$	2,379	$	2,585
Computers and systems		5,918		6,553
Leasehold improvements		711		781
		9,008		9,919
Less: accumulated depreciation and amortization		4,175		6,622
Property and equipment, net	$	4,833	$	3,297

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Note 14 - Total Assets by Geographic Area (Details) - USD ($) $ in Thousands	Oct. 03, 2015	Jan. 03, 2015
UNITED STATES
Total assets
Assets	$ 62,068	$ 56,764
CANADA
Total assets
Assets	17,752	28,776
PUERTO RICO
Total assets
Assets	1,854	1,733
Assets	$ 81,674	$ 87,273

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Note 10 - Weighted Average Number of Common Shares (Details) - shares	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
Basic weighted average shares outstanding (in shares)	12,724,899	12,540,955	12,715,236	12,494,793
Dilutive effect of outstanding stock options and restricted stock awards (in shares)	272,877	217,850	236,648	198,036
Weighted average dilutive shares outstanding (in shares)	12,997,776	12,758,805	12,951,884	12,692,829

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Note 6 - Maximum Deferred Consideration Payments (Details) $ in Thousands	Oct. 03, 2015 USD ($)
BGA [Member]
2015	$ 127
2016	$ 271
2017
2018
Estimated future contingent consideration payments	$ 398
PCI [Member]
2015	262
2016	197
2017	$ 307
2018
Estimated future contingent consideration payments	$ 766
SDS [Member]
2015
2016	$ 180
2017	253
2018	313
Estimated future contingent consideration payments	746
2015	389
2016	648
2017	560
2018	313
Estimated future contingent consideration payments	$ 1,910

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Note 16 - Contingencies (Details Textual) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Oct. 03, 2015	Jan. 03, 2015
Settled Litigation [Member]
Loss Contingency, Damages Sought, Value	$ 6.5
Loss Contingency, Damages Sought, Value	$ 1.9	$ 7.6

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Note 12 - Treasury Stock Transactions (Details Textual) - Stock Repurchase Program 2013 [Member] - USD ($) $ / shares in Units, $ in Millions	9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 28, 2013
Treasury Stock, Shares, Acquired	103,182	0
Stock Repurchase Program, Authorized Amount			$ 5
Treasury Stock Acquired, Average Cost Per Share	$ 4.92

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Note 2 - Fiscal Year

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

2. Fiscal Year

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31. The fiscal year ended January 3, 2015 was a 53-week reporting year. The third fiscal quarters of 2015 and 2014 ended on the following dates, respectively:

Period Ended	Weeks in Quarter	Weeks in Year to Date
October 3, 2015	Thirteen	Thirty-Nine
September 27, 2014	Thirteen	Thirty-Nine

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Note 10 - Unissued Shares of Common Stock Were Reserved For The Following Purposes (Details) - shares	Oct. 03, 2015	Jan. 03, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	44,500	53,000
Restricted stock awards outstanding (in shares)	496,667	500,000
Future grants of options or shares (in shares)	425,000	425,000
Shares reserved for employee stock purchase plan (in shares)	49,436	122,484
Total (in shares)	1,015,603	1,100,484

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Note 10 - Per Share Data (Tables)

9 Months Ended

Oct. 03, 2015

Notes Tables

Schedule of Weighted Average Number of Shares [Table Text Block]

	Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
	October 3, 2015		September 27, 2014		October 3, 2015		September 27, 2014
Basic weighted average shares outstanding		12,724,899		12,540,955		12,715,236		12,494,793
Dilutive effect of outstanding stock options and restricted stock awards		272,877		217,850		236,648		198,036
Weighted average dilutive shares outstanding		12,997,776		12,758,805		12,951,884		12,692,829

Unissued Shares of Common Stock [Table Text Block]

	October 3, 2015		January 3, 2015
Exercise of options outstanding		44,500		53,000
Restricted stock awards outstanding		496,667		500,000
Future grants of options or shares		425,000		425,000
Shares reserved for employee stock purchase plan		49,436		122,484
Total		1,015,603		1,100,484

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Note 8 - Intangible Assets (Tables)

9 Months Ended

Oct. 03, 2015

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	Engineering			Information Technology			Total
Balance as of January 3, 2015	$	189		$	5		$	194
Amortization of intangibles during the thirty-nine week period ended October 3, 2015		(53	)		(5	)		(58	)
Intangibles acquired, SDS acquisition		140			-			140
Balance as of October 3, 2015	$	276		$	-		$	276

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Note 11 - Share-Based Compensation (Details Textual) - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended
	Jul. 06, 2015	Oct. 03, 2015	Sep. 27, 2014	Oct. 02, 2015	Jan. 03, 2015
The 2007 Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number		296,667
The 2007 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		0
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		700,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number		19,500
The 2000 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		0
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		1,500,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number		25,000
The 2014 Plan [Member] | Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		425,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number		200,000
The 2014 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		625,000
ESPP [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		49,436
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Offering Date		85.00%
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate		10.00%
Stock Issued During Period, Shares, Employee Stock Purchase Plans	40,108
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number		497,000			500,000
Restricted Stock [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized		$ 1,200
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Nonvested		$ 2,400
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		1 year
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Common Stock [Member]
Share Price				$ 4.84
Stock Issued During Period, Shares, Employee Stock Purchase Plans		73,048
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		0	15,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options		$ 18
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		10 years
Allocated Share-based Compensation Expense		$ 907	$ 551
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized		$ 1,200
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number		44,500			53,000

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Note 11 - Share-Based Compensation (Tables)

9 Months Ended

Oct. 03, 2015

Notes Tables

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	All Stock Options Outstanding
	Shares					Weighted Average Exercise Price
Options outstanding as of January 3, 2015				53,000		$	7.65
Options granted				0
Options exercised				(3,500	)	$	4.30
Options forfeited/cancelled				(5,000	)	$	5.78
Options outstanding as of October 3, 2015				44,500		$	8.12
Options outstanding price range at October 3, 2015	$	5.27	-	9.81
Options exercisable as of October 3, 2015				27,000		$	9.47
Intrinsic value per share of outstanding stock options as of October 3, 2015	$			0
Intrinsic value per share of stock options exercised for the thirty-nine week period ended October 3, 2015	$			2

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

	Number of Restricted Stock Units (in thousands)		Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at January 3, 2015		500	$	6.61
Granted		-		-
Vested		3	$	6.61
Forfeited or expired		-		-
Outstanding non-vested at October 3, 2015		497	$	6.61

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Note 14 - Segment Information (Tables)

9 Months Ended

Oct. 03, 2015

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

Thirteen Week Period Ended October 3, 2015	Engineering		Information Technology		Specialty Health Care		Corporate		Total
Revenue	$	19,224	$	15,171	$	10,682	$	-	$	45,077
Cost of services		14,325		10,477		7,473		-		32,275
Gross profit		4,899		4,694		3,209		-		12,802
Selling, general and administrative		3,784		3,653		3,025		-		10,462
Depreciation and amortization		301		78		55		-		434
Operating income	$	814	$	963	$	129	$	-	$	1,906
Total assets as of October 3, 2015	$	39,985	$	15,278	$	17,021	$	9,390	$	81,674
Capital expenditures	$	263	$	-	$	54	$	1,240	$	1,557

Thirteen Week Period Ended September 27, 2014	Engineering		Information Technology		Specialty Health Care			Corporate		Total
Revenue	$	24,835	$	14,405	$	7,142		$	-	$	46,382
Cost of services		18,239		9,941		5,041			-		33,221
Gross profit		6,596		4,464		2,101			-		13,161
Selling, general and administrative		4,096		3,560		2,335			-		9,991
Depreciation and amortization		248		61		28			-		337
Operating income	$	2,252	$	843	$	(262	)	$	-	$	2,833
Total assets as of September 27, 2014	$	49,169	$	15,253	$	16,529		$	13,389	$	94,340
Capital expenditures	$	587	$	-	$	9		$	7	$	603

Thirty-Nine Week Period Ended October 3, 2015	Engineering		Information Technology		Specialty Health Care		Corporate		Total
Revenue	$	61,843	$	44,684	$	31,802	$	-	$	138,329
Cost of services		46,989		30,904		22,241		-		100,134
Gross profit		14,854		13,780		9,561		-		38,195
Selling, general and administrative		11,893		11,291		8,456		-		31,640
Depreciation and amortization		794		172		118		-		1,084
Operating income	$	2,167	$	2,317	$	987	$	-	$	5,471
Total assets as of October 3, 2015	$	39,985	$	15,278	$	17,021	$	9,390	$	81,674
Capital expenditures	$	1,036	$	-	$	54	$	1,461	$	2,551

Thirty-Nine Week Period Ended September 27, 2014	Engineering		Information Technology		Specialty Health Care		Corporate		Total
Revenue	$	75,615	$	44,076	$	24,769	$	-	$	144,460
Cost of services		57,695		30,734		17,658		-		106,087
Gross profit		17,920		13,342		7,111		-		38,373
Selling, general and administrative		11,939		10,768		6,885		-		29,592
Depreciation and amortization		642		166		77		-		885
Operating income	$	5,340	$	2,410	$	146		-	$	7,896
Total assets as of September 27, 2014	$	49,169	$	15,253	$	16,529	$	13,389	$	94,340
Capital expenditures	$	1,120	$	-	$	92	$	740	$	1,952

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
	October 3, 2015		September 27, 2014		October 3, 2015		September 27, 2014
Revenues
U. S.	$	36,625	$	32,651	$	109,992	$	103,403
Canada		6,862		12,087		23,231		36,669
Puerto Rico		1,590		1,644		5,106		4,388
	$	45,077	$	46,382	$	138,329	$	144,460

Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country [Table Text Block]

	October 3, 2015		January 3, 2015
Total assets
U. S.	$	62,068	$	56,764
Canada		17,752		28,776
Puerto Rico		1,854		1,733
	$	81,674	$	87,273

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Note 1 - Basis of Presentation

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Basis of Presentation

The accompanying consolidated interim financial statements of RCM Technologies, Inc. and subsidiaries (“RCM” or the “Company”) are unaudited. The year-end consolidated balance sheet was derived from audited statements but does not include all disclosures required by accounting principles generally accepted in the United States. These statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission pertaining to reports on Form 10-Q and should be read in conjunction with the Company’s consolidated financial statements and the notes thereto for the year ended January 3, 2015 included in the Company’s Annual Report Form 10-K for such period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.

The consolidated financial statements for the unaudited interim periods presented include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows for such interim periods.

Results for the thirteen and thirty-nine week period ended October 3, 2015 are not necessarily indicative of results that may be expected for the full year.

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Note 4 - Accounts Receivable, Transit Accounts Receivable and Transit Accounts Payable (Details Textual) - USD ($) $ in Millions	Oct. 03, 2015	Jan. 03, 2015
Transit Accounts Receivable [Member]
Accounts Receivable, Gross, Current	$ 3.9	$ 3.8
Disputed Purchase Order [Member] | B&M [Member]
Contract Receivable	1.7
Transit Accounts Payable [Member]
Accounts Payable, Current	4.5	6.7
B&M [Member]
Contract Receivable	5.8
Liabitilities, Net	$ 0.6	$ 2.9

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Note 9 - Line of Credit (Details Textual) - USD ($) $ in Millions	6 Months Ended
	Oct. 03, 2015	Jan. 03, 2015	Feb. 20, 2009
Revolving Credit Facility [Member]
Line of Credit Facility, Expiration Date	Dec. 11, 2019
Long-term Line of Credit	$ 15.0	$ 20.0
Line of Credit Facility, Maximum Borrowing Capacity			$ 35.0
Debt Instrument, Interest Rate, Effective Percentage	2.50%
Line of Credit Facility, Remaining Borrowing Capacity	$ 19.2
Letter of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity			$ 5.0
Letters of Credit Outstanding, Amount	$ 0.8	$ 0.8

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Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Oct. 03, 2015	Jan. 03, 2015
Current assets:
Cash and cash equivalents	$ 4,542	$ 6,411
Accounts receivable, net	52,766	59,187
Transit accounts receivable	3,882	3,797
Prepaid expenses and other current assets	2,342	2,368
Deferred income tax assets, domestic	796	816
Total current assets	64,328	72,579
Property and equipment, net	4,833	3,297
Other assets:
Deposits	212	231
Goodwill	11,630	10,223
Intangible assets, net	276	194
Deferred income tax assets, domestic	395	749
Total other assets	12,513	11,397
Total assets	81,674	87,273
Current liabilities:
Accounts payable and accrued expenses	7,623	7,693
Transit accounts payable	4,502	6,658
Accrued payroll and related costs	7,456	7,783
Income taxes payable	958	860
Deferred income tax liability, foreign	140	160
Contingent consideration	389	479
Total current liabilities	21,068	23,633
Contingent consideration	1,521	775
Borrowings under line of credit	15,000	20,000
Total liabilities	$ 37,589	$ 44,408
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $1.00 par value; 5,000,000 shares authorized; no shares issued or outstanding
Common stock, $0.05 par value; 40,000,000 shares authorized; 14,228,548 shares issued and 12,648,586 shares outstanding at October 3, 2015 and 14,148,667 shares issued and 12,671,887 shares outstanding at January 3, 2015	$ 711	$ 707
Additional paid-in capital	113,824	112,529
Accumulated other comprehensive (loss) income	(2,519)	91
Accumulated deficit	(59,894)	(62,933)
Treasury stock (1,579,962 shares at October 3, 2015 and 1,476,780 at January 3, 2015, at cost)	(8,037)	(7,529)
Stockholders’ equity	44,085	42,865
Total liabilities and stockholders’ equity	$ 81,674	$ 87,273

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Note 11 - Stock Option Activity (Details)	9 Months Ended
	Oct. 03, 2015 $ / shares shares
Options outstanding as of January 3, 2015, shares (in shares) | shares	53,000
Options outstanding as of January 3, 2015, weighted average exercise price (in dollars per share)	$ 7.65
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares	0
Options exercised, shares (in shares) | shares	(3,500)
Options exercised, weighted average exercise price (in dollars per share)	$ 4.30
Options forfeited/cancelled, shares (in shares) | shares	(5,000)
Options forfeited/cancelled, weighted average exercise price (in dollars per share)	$ 5.78
Options outstanding as of October 3, 2015, shares (in shares) | shares	44,500
Options outstanding as of October 3, 2015, weighted average exercise price (in dollars per share)	$ 8.12
Options outstanding price range at October 3, 2015 (in dollars per share)	5.27
Options outstanding price range at October 3, 2015 (in dollars per share)	$ 9.81
Options exercisable, shares (in shares) | shares	27,000
Options exercisable, weighted average exercise price (in dollars per share)	$ 9.47
Intrinsic value per share of outstanding stock options as of October 3, 2015 (in dollars per share)	0
Intrinsic value per share of stock options exercised for the thirty-nine week period ended October 3, 2015 (in dollars per share)	$ 2

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Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - 9 months ended Oct. 03, 2015 - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Total
Balance (in shares) at Jan. 03, 2015	14,148,667				1,476,780
Balance at Jan. 03, 2015	$ 707	$ 112,529	$ 91	$ (62,933)	$ (7,529)	$ 42,865
Issuance of stock under employee stock purchase plan (in shares)	73,048
Issuance of stock under employee stock purchase plan	$ 4	369				373
Translation adjustment			(2,610)			$ (2,610)
Issuance of stock upon exercise of stock options (in shares)	3,500					3,500
Issuance of stock upon exercise of stock options		19				$ 19
Share-based compensation expense		907				907
Issuance of stock upon vesting of restricted stock awards (in shares)	3,333
Purchase of treasury stock (in shares)					103,182
Purchase of treasury stock					$ (508)	(508)
Net income				3,039		3,039
Balance (in shares) at Oct. 03, 2015	14,228,548				1,579,962
Balance at Oct. 03, 2015	$ 711	$ 113,824	$ (2,519)	$ (59,894)	$ (8,037)	$ 44,085

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Note 5 - Property and Equipment (Details) - USD ($) $ in Thousands	Oct. 03, 2015	Jan. 03, 2015
Equipment and Furniture [Member]
Property and equipment	$ 2,379	$ 2,585
Computers and Systems [Member]
Property and equipment	5,918	6,553
Leasehold Improvements [Member]
Property and equipment	711	781
Property and equipment	9,008	9,919
Less: accumulated depreciation and amortization	4,175	6,622
Property and equipment	$ 4,833	$ 3,297

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Note 15 - Income Taxes

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Income Tax Disclosure [Text Block]

15. Income Taxes

The projected fiscal 2015 effective income tax rates as of October 3, 2015 and applied for the thirty-nine week period ended October 3, 2015 are approximately 41.4% and 26.5% in the United States and Canada, respectively, and yielded a consolidated effective income tax rate of approximately 39.8% for the thirty-nine week period ended October 3, 2015. For the comparable prior year period estimated income tax rates were 41.7% and 27.7% in the United States and Canada, respectively, and yielded a consolidated effective income tax rate of approximately 35.3% for the thirty-nine week period ended September 27, 2014.  The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company. 

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Note 6 - Acquisitions (Details Textual) - USD ($) $ in Thousands	9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014
BGA [Member]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	$ 2,600
PCI [Member]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	2,000
SDS [Member]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	1,500
Contingent Consideration [Member]
Payments to Acquire Businesses, Gross	100	$ 300
Payments to Acquire Businesses, Gross	$ 800

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Note 4 - Accounts Receivable, Transit Accounts Receivable and Transit Accounts Payable (Tables)

9 Months Ended

Oct. 03, 2015

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	October 3, 2015			January 3, 2015
Billed	$	40,406		$	47,318
Accrued and unbilled		4,780			4,853
Work-in-progress		8,879			8,027
Allowance for doubtful accounts		(1,299	)		(1,011	)
Accounts receivable, net	$	52,766		$	59,187

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014
Cash flows from operating activities:
Net income	$ 3,039	$ 5,097
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	1,084	885
Stock-based compensation expense	907	551
Provision for allowance for doubtful accounts	840	850
Deferred income tax expense	373	1,292
Changes in assets and liabilities:
Accounts receivable	3,272	(5,645)
Prepaid expenses and other current assets	(45)	(426)
Net of transit accounts receivable and payable	(2,263)	131
Accounts payable and accrued expenses	251	(968)
Accrued payroll and related costs	(175)	(882)
Income taxes payable	205	299
Total adjustments	4,449	(3,913)
Net cash provided by operating activities	7,488	1,184
Cash flows from investing activities:
Property and equipment acquired	(2,551)	(1,952)
Decrease (increase) in deposits	18	$ (71)
Payments for business acquired	(800)
Net cash used in investing activities	(3,333)	$ (2,023)
Cash flows from financing activities:
Net repayments under line of credit	(5,000)
Issuance of stock for employee stock purchase plan	373	$ 339
Exercise of stock options	19	$ 266
Common stock repurchases	(508)
Contingent consideration paid	(90)	$ (313)
Net cash (used in) provided by financing activities	(5,206)	292
Effect of exchange rate changes on cash and cash equivalents	(818)	(465)
Decrease in cash and cash equivalents	(1,869)	(1,012)
Cash and cash equivalents at beginning of period	6,411	9,317
Cash and cash equivalents at end of period	4,542	8,305
Supplemental cash flow information:
Interest	367	51
Income taxes	800	1,346
Non-cash investing activities:
Contingent consideration accrued as part of business acquisition	$ 746	765
Fixed assets acquired in acquisition		$ 26

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Oct. 03, 2015	Jan. 03, 2015
Preferred stock par value (in dollars per share)	$ 1	$ 1
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.05	$ 0.05
Common stock, authorized (in shares)	40,000,000	40,000,000
Common stock, issued (in shares)	14,228,548	14,148,667
Common stock, outstanding (in shares)	12,648,586	12,671,887
Treasury stock shares (in shares)	1,579,962	1,476,780

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Note 10 - Per Share Data

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Earnings Per Share [Text Block]

1 0 . Per Share Data

Both basic and diluted earnings per share for all periods are calculated based on the reported earnings in the Company’s consolidated statements of income.

The number of shares of common stock used to calculate basic and diluted earnings per share for the thirty-nine week periods ended October 3, 2015 and September 27, 2014 was determined as follows:

	Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
	October 3, 2015		September 27, 2014		October 3, 2015		September 27, 2014
Basic weighted average shares outstanding		12,724,899		12,540,955		12,715,236		12,494,793
Dilutive effect of outstanding stock options and restricted stock awards		272,877		217,850		236,648		198,036
Weighted average dilutive shares outstanding		12,997,776		12,758,805		12,951,884		12,692,829

There were 40,000 and 45,000 absolute anti-dilutive shares not included in the calculation of common stock equivalents for the thirty-nine week periods ended October 3, 2015 and September 27, 2014, respectively.  These were determined to be anti-dilutive because the exercise prices of these shares for the periods were higher than the average market price of the Company’s common stock for the same periods.

Unissued shares of common stock were reserved for the following purposes:

	October 3, 2015		January 3, 2015
Exercise of options outstanding		44,500		53,000
Restricted stock awards outstanding		496,667		500,000
Future grants of options or shares		425,000		425,000
Shares reserved for employee stock purchase plan		49,436		122,484
Total		1,015,603		1,100,484

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Document And Entity Information - shares	9 Months Ended
	Oct. 03, 2015	Nov. 04, 2015
Entity Registrant Name	RCM TECHNOLOGIES INC
Entity Central Index Key	0000700841
Trading Symbol	rcmt
Current Fiscal Year End Date	--01-02
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		12,276,034
Document Type	10-Q
Document Period End Date	Oct. 03, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Amendment Flag	false

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Note 11 - Share-Based Compensation

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

11. Share-Based Compensation

At October 3, 2015, the Company had three share-based employee compensation plans. The Company measures the fair value of share-based awards, if and when granted, based on the Black-Scholes method and using the closing market price of the Company’s common stock on the date of grant. Awards vest over periods ranging from one to three years and expire within 10 years of issuance. Share-based compensation expense related to awards is amortized in accordance with applicable vesting periods using the straight-line method. Share-based compensation expense of $907 and $551 was recognized for the thirty-nine week periods

ended October 3, 2015 and September 27, 2014, respectively.

As of October 3, 2015, the Company had approximately $1.2 million of total unrecognized compensation cost related to all non-vested share-based awards granted under the Company’s various share-based plans, which the Company expects to recognize over approximately a three-year period. These amounts do not include the cost of any additional share-based awards that may be granted in future periods or reflect any potential changes in the Company’s forfeiture rate.

Incentive S

hare-Based

Plans

2000 Employee Stock Incentive Plan (the 2000 Plan)

The 2000 Plan, approved by the Company’s stockholders in April 2001, provided for the issuance of up to 1,500,000 shares of the Company’s common stock to officers and key employees of the Company and its subsidiaries or consultants and advisors utilized by the Company. As of October 3, 2015, options to purchase 25,000 shares of common stock granted under the 2000 Plan were outstanding.

2007 Omnibus Equity Compensation Plan (the 2007 Plan)

The 2007 Plan, approved by the Company’s stockholders in June 2007, provides for the issuance of up to 700,000 shares of the Company’s common stock to officers, non-employee directors, employees of the Company and its subsidiaries or consultants and advisors utilized by the Company. As of October 3, 2015, under the 2007 Plan, no shares of common stock were available for future grants and options to purchase 19,500 shares of common stock, as well as 296,667 restricted stock units, were outstanding.

The 2000 and 2007 Plans are expired and therefore no shares are available for grant thereunder.

2014 Omnibus Equity Compensation Plan (the 2014 Plan)

The 2014 Plan, approved by the Company’s stockholders in December 2014, provides for the issuance of up to 625,000 shares of the Company’s common stock to officers, non-employee directors, employees of the Company and its subsidiaries or consultants and advisors utilized by the Company. The Compensation Committee of the Board of Directors determines the vesting period at the time of grant. As of October 3, 2015, under the 2014 Plan, 200,000 restricted stock units were outstanding and 425,000 shares were available for awards thereunder.

Stock Options

There were no options granted during the thirty-nine week

period ended October 3, 2015 and 15,000 options granted during the thirty-nine week

period ended September 27, 2014. Activity regarding outstanding options for the thirty-nine week period ended October 3, 2015 is as follows:

	All Stock Options Outstanding
	Shares					Weighted Average Exercise Price
Options outstanding as of January 3, 2015				53,000		$	7.65
Options granted				0
Options exercised				(3,500	)	$	4.30
Options forfeited/cancelled				(5,000	)	$	5.78
Options outstanding as of October 3, 2015				44,500		$	8.12
Options outstanding price range at October 3, 2015	$	5.27	-	9.81
Options exercisable as of October 3, 2015				27,000		$	9.47
Intrinsic value per share of outstanding stock options as of October 3, 2015	$			0
Intrinsic value per share of stock options exercised for the thirty-nine week period ended October 3, 2015	$			2

As of October 3, 2015, the Company had approximately $18 of total unrecognized compensation cost related to all non-vested stock option awards. 

Restricted Stock

Units

From time-to-time the Company issues restricted stock units. These restricted stock units typically include dividend accrual equivalents, which means that any dividends paid by the Company during the three year vesting period become due and payable after the three year vesting period assuming the grantee’s restricted stock unit fully vests. Dividends for these grants are accrued on the dividend payment dates and included in accounts payable and accrued expenses on the accompanying consolidated balance sheet. Dividends for restricted stock units that ultimately do not vest are forfeited.

To date, the Company has only issued restricted stock units under the 2007 and 2014 Plans. The following summarizes activity in the restricted stock units under the 2007 and 2014 Plans during 2015:

	Number of Restricted Stock Units (in thousands)		Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at January 3, 2015		500	$	6.61
Granted		-		-
Vested		3	$	6.61
Forfeited or expired		-		-
Outstanding non-vested at October 3, 2015		497	$	6.61

Based on the closing price of the Company’s common stock of $4.84 per share on October 2, 2015 (the last trading day prior to October 3, 2015), the intrinsic value of the non-vested restricted stock units at October 3, 2015 was approximately $2.4 million. As of October 3, 2015, there was approximately $1.2 million of total unrecognized compensation cost related to restricted stock units, which is expected to be recognized over three years.

Employee Stock Purchase Plan

The Company implemented the 2001 Employee Stock Purchase Plan with stockholder approval, effective January 1, 2001. Such Plan was subsequently amended, pursuant to stockholder approval where required, effective July 1, 2004, June 18, 2009 and September 16, 2009 (the 2001 Employee Stock Purchase Plan, as so amended, the “Purchase Plan”). Under the Purchase Plan, employees meeting certain specific employment qualifications are eligible to participate and can purchase shares of common stock semi-annually through payroll deductions at the lower of 85% of the fair market value of the stock at the commencement or end of the offering period. The purchase plan permits eligible employees to purchase shares of common stock through payroll deductions for up to 10% of qualified compensation. The Company has two offering periods in the Purchase Plan coinciding with the Company’s first two fiscal quarters and the last two fiscal quarters. Actual shares are issued on the first day of the subsequent offering period for the prior offering period payroll deductions. The number of shares issued at the beginning of the current period (as of July 6, 2015) was 40,108. As of October 3, 2015, there were 49,436 shares available for issuance under the Purchase Plan.

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Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
Revenues	$ 45,077	$ 46,382	$ 138,329	$ 144,460
Cost of services	32,275	33,221	100,134	106,087
Gross profit	12,802	13,161	38,195	38,373
Operating costs and expenses
Selling, general and administrative	10,462	9,991	31,640	29,592
Depreciation and amortization	434	337	1,084	885
Operating costs and expenses	10,896	10,328	32,724	30,477
Operating income	1,906	2,833	5,471	7,896
Other (expense) income
Interest expense and other, net	(113)	(19)	(366)	(45)
Gain (loss) on foreign currency transactions	(61)	25	(61)	26
Other (expense) income	(174)	6	(427)	(19)
Income before income taxes	1,732	2,839	5,044	7,877
Income tax expense	770	962	2,005	2,780
Net income	$ 962	$ 1,877	$ 3,039	$ 5,097
Basic net earnings per share (in dollars per share)	$ 0.08	$ 0.15	$ 0.24	$ 0.41
Diluted net earnings per share (in dollars per share)	$ 0.07	$ 0.15	$ 0.23	$ 0.40

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Note 5 - Property and Equipment

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

5. Property and Equipment

Property and equipment are stated at cost and are depreciated on the straight-line method at rates calculated to provide for retirement of assets at the end of their estimated useful lives. The annual rates are 20% for computer hardware and software as well as furniture and office equipment. Leasehold improvements are amortized over the shorter of the estimated life of the asset or the lease term.

Property and equipment are comprised of the following:

	October 3, 2015		January 3, 2015
Equipment and furniture	$	2,379	$	2,585
Computers and systems		5,918		6,553
Leasehold improvements		711		781
		9,008		9,919
Less: accumulated depreciation and amortization		4,175		6,622
Property and equipment, net	$	4,833	$	3,297

The Company periodically writes off fully depreciated and amortized assets.  The Company wrote off fully depreciated and amortized assets of $3,470 and $916 during the thirty-nine week periods ended October 3, 2015 and September 27, 2014, respectively.

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Note 4 - Accounts Receivable, Transit Accounts Receivable and Transit Accounts Payable

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

4. Accounts Receivable, Transit Accounts Receivable and Transit Accounts Payable

The Company’s accounts receivable are comprised as follows:

	October 3, 2015			January 3, 2015
Billed	$	40,406		$	47,318
Accrued and unbilled		4,780			4,853
Work-in-progress		8,879			8,027
Allowance for doubtful accounts		(1,299	)		(1,011	)
Accounts receivable, net	$	52,766		$	59,187

Unbilled receivables primarily represent revenues earned whereby those services are ready to be billed as of the balance sheet ending date. Work-in-process primarily represents revenues earned under contracts which the Company contractually invoices at future dates.

From time to time, the Company’s Engineering segment enters into agreements to provide, among other things, construction management and engineering services.  Pursuant to these agreements, the Company a) may engage subcontractors to provide construction or other services; b) typically earns a fixed percentage of the total project value; and c) assumes no ownership or risks of inventory.  Under the terms of the agreements, the Company is typically not required to pay the subcontractor until after the corresponding payment from the Company’s end-client is received. Upon invoicing the end-client on behalf of the subcontractor or staffing agency the Company records this amount simultaneously as both a “transit account receivable” and “transit account payable” as the amount when paid to the Company is due to and generally paid to the subcontractor within a few days. The Company typically does not pay a given transit account payable until the related transit account receivable is collected. The Company’s transit accounts payable generally exceeds the Company’s transit accounts receivable but absolute amounts and spreads fluctuate significantly from quarter to quarter in the normal course of business. The transit accounts receivable was $3.9 million and related transit accounts payable was $4.5 million, for a net liability of $0.6 million, as of October 3, 2015. The transit accounts receivable was $3.8 million and related transit accounts payable was $6.7 million, for a net liability of $2.9 million, as of January 3, 2015.

The Company has a subcontract agreement with Black & McDonald Limited (“B&M”) to provide engineering and procurement services under B&M’s master services agreement with Ontario Power Generation (“OPG”). The Company understands that in October 2014, OPG provided to B&M notice of default and termination of a large purchase order from OPG to B&M with respect to which B&M had engaged several subcontractors, including the Company. B&M notified the Company that it is disputing OPG’s default claim on this purchase order. Subsequently, OPG has disputed the services provided on several other smaller purchase orders. As of October 3, 2015 the Company had outstanding accounts receivable from B&M under disputed purchase orders by OPG of $1.7 million and, including such disputed amounts, a total of $5.8 million of outstanding accounts receivable from B&M.  OPG has indicated to the Company that it will not make any further payments to B&M on the projects in dispute.  The Company has received notice from B&M that while B&M disputes OPG’s assertion it is in default on any contested purchase order, B&M believes that in the event that it is in default under its agreement with OPG, then the Company may also be in default under its agreement with B&M.  The Company does not agree with this assertion.

The Company does not believe that any of its account receivables from B&M have been materially impaired and believes that its accounts receivable from B&M remain collectible, subject to existing reserves.  However, it is possible that a protracted dispute between OPG and B&M may impact the Company’s ability to collect its outstanding accounts receivable in a timely manner.

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Note 16 - Contingencies

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Contingencies Disclosure [Text Block]

16. Contingencies

From time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business.  As such, the Company is required to assess the likelihood of any adverse outcomes to these matters as well as potential ranges of losses and possible recoveries.  The Company may not be covered by insurance as it pertains to some or all of these matters. A determination of the amount of the provision required for these commitments and contingencies, if any, which would be charged to earnings, is made after careful analysis of each matter.  Once established, a provision may change in the future due to new developments or changes in circumstances, and could increase or decrease the Company’s earnings in the period that the changes are made.  Asserted claims in these matters sought approximately $1.9 million and $7.6 million in damages as of October 3, 2015 and January 3, 2015, respectively

. The primary reason for the reduction is that one matter in which claims of $6.5 million were asserted as of January 3, 2015 was settled without any contribution from the Company. As of October 3, 2015, the Company did not accrue for any such liabilities.

Please refer to footnote 4 that discloses the nature of the disputed purchase orders with B&M.

The Company is also subject to other pending legal proceedings and claims that arise from time to time in the ordinary course of its business, which may not be covered by insurance.

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Note 12 - Treasury Stock Transactions

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Treasury Stock [Text Block]

12. Treasury Stock Transactions

On October 28, 2013, the Board of Directors authorized a repurchase program to purchase up to $5.0 million of outstanding shares of common stock at the prevailing market prices, from time to time over the subsequent 12-month period. On September 30, 2014, the Board extended this repurchase program through October 31, 2015. On September 11, 2015, the Board extended this repurchase program through December 31, 2016. During the thirty-nine week period ended October 3, 2015, the Company purchased 103,182 shares at an average price of $4.92 per share. The Company did not repurchase any shares in the comparable prior year period.

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Note 8 - Intangible Assets

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

8. Intangible Assets

The Company evaluates long-lived assets and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the Company determines that it is probable that undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. Assets to be disposed of by sale, if any, are reported at the lower of the carrying amount or fair value less cost to sell. The Company’s intangible assets consist of customer relationships and non-compete agreements.

The following table reflects the components of net intangible assets, excluding goodwill:

	Engineering			Information Technology			Total
Balance as of January 3, 2015	$	189		$	5		$	194
Amortization of intangibles during the thirty-nine week period ended October 3, 2015		(53	)		(5	)		(58	)
Intangibles acquired, SDS acquisition		140			-			140
Balance as of October 3, 2015	$	276		$	-		$	276

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Note 6 - Acquisitions

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Business Combination Disclosure [Text Block]

6 . Acquisitions

The Company has acquired numerous companies throughout its history and those acquisitions have generally included significant future contingent consideration.

Future Contingent Payments

As of October 3, 2015, the Company had three active acquisition agreements whereby additional contingent consideration may be earned by the former owners: 1) effective July 1, 2012 the Company acquired the business operations of BGA, LLC (“BGA”); 2) effective August 1, 2014 the Company acquired all of the stock of Point Comm, Inc. (“PCI”); and 3) effective July 5, 2015, the Company acquired the business operations of Substation Design Services, LLC (“SDS”). The Company estimates future contingent payments at October 3, 2015 as follows:

Fiscal Year	BGA		PCI		SDS		Total
2015	$	127	$	262	$	-	$	389
2016		271		197		180		648
2017		-		307		253		560
2018		-		-		313		313
Estimated future contingent consideration payments	$	398	$	766	$	746	$	1,910

Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates. Future contingent payments to be made to BGA, PCI and SDS are capped at cumulative maximums of $2.6 million, $2.0 million and $1.5 million, respectively. The Company estimates future contingent consideration payments based on forecasted performance and records the net present value of those expected payments as of

October 3, 2015. The measurement is based on significant inputs that are not observable in the market, which “Fair Value Measurements and Disclosures” (ASU Topic 820-10-35) refers to as Level 3 inputs.

The Company paid $0.1 million and $0.3 million in contingent consideration during the thirty-nine week periods ended October 3, 2015 and September 27, 2014, respectively.

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Note 7 - Goodwill

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Goodwill Disclosure [Text Block]

7. Goodwill

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired in business combinations.  The Company is required to assess the carrying value of its reporting units that contain goodwill at least on an annual basis.  The Company has the option to first assess qualitative factors to determine whether it is necessary to perform a two-step impairment test. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than the carrying value, the quantitative impairment test is required.  The Company formally assesses these qualitative factors, and if necessary, conducts its annual goodwill impairment test as of the last day of the Company’s fiscal November each year or if indicators of impairment exist. During all periods presented, the Company determined that the existing qualitative factors did not suggest that an impairment of goodwill exists. Since there have been no indicators of impairment, the Company has not performed a quantitative impairment test.

Changes in the carrying amount of goodwill for the thirty-nine week period ended October 3, 2015 are as follows:

	Engineering		Information Technology		Specialty Health Care		Total
Balance as of January 3, 2015	$	3,004	$	5,516	$	1,703	$	10,223
Goodwill recorded, SDS acquisition		1,407		-		-		1,407
Balance as of October 3, 2015	$	4,411	$	5,516	$	1,703	$	11,630

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Note 9 - Line of Credit

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Debt Disclosure [Text Block]

9. Line of Credit

The Company and its subsidiaries are party to a loan agreement with Citizens Bank of Pennsylvania, amended and restated effective February 20, 2009, which provides for a $35 million revolving credit facility and includes a sub-limit of $5 million for letters of credit (the “Revolving Credit Facility”). The Revolving Credit Facility has been amended several times, most recently on December 12, 2014 when the maturity date was extended to December 11, 2019. Borrowings under the Revolving Credit Facility bear interest at one of two alternative rates, as selected by the Company at each incremental borrowing. These alternatives are: (i) LIBOR (London Interbank Offered Rate), plus applicable margin, typically borrowed in fixed 30-day increments or (ii) the agent bank’s prime rate generally borrowed over shorter durations. The Company also pays unused line fees based on the amount of the Revolving Credit Facility that is not drawn. Unused line fees are recorded as interest expense. The effective interest rate, including unused line fees, for the thirty-nine week period ended October 3, 2015 was 2.5%.

All borrowings under the Revolving Credit Facility are collateralized by all of the assets of the Company and its subsidiaries and a pledge of the stock of its subsidiaries.  The Revolving Credit Facility also contains various financial and non-financial covenants, such as a covenant that restricts on the Company’s ability to borrow in order to pay dividends.  The Company paid a special cash dividend on December 30, 2014 which was expressly permitted under its amended Revolving Credit Facility. As of October 3, 2015, the Company was in compliance with all covenants contained in its Revolving Credit Facility.

Borrowings under the line of credit as of October 3, 2015 and January 3, 2015 were $15.0 million and $20.0 million, respectively, and there were letters of credit outstanding for $0.8 million as of both dates. At October 3, 2015, the Company had availability for additional borrowings under the Revolving Credit Facility of $19.2 million. 

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Note 5 - Property and Equipment (Details Textual) - USD ($) $ in Thousands	9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014
Annual Depreciation Rate	20.00%
Write Off of Fully Depreciated Property and Equipment	$ 3,470	$ 916

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Note 15 - Income Taxes (Details Textual)	9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014
Internal Revenue Service (IRS) [Member] | Domestic Tax Authority [Member]
Effective Income Tax Rate Reconciliation, Percent	41.40%	41.70%
Canada Revenue Agency [Member] | Foreign Tax Authority [Member]
Effective Income Tax Rate Reconciliation, Percent	26.50%	27.70%
Effective Income Tax Rate Reconciliation, Percent	39.80%	35.30%

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Note 14 - Segment Information

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

1 4 . Segment Information

The Company follows “Disclosures about Segments of an Enterprise and Related Information,” which establishes standards for companies to report information about operating segments, geographic areas and major customers. The accounting policies of each reportable segment are the same as those described in the summary of significant accounting policies (

see Note 1 to the Company’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended January 3, 2015).

Segment operating income includes selling, general and administrative expenses directly attributable to that segment as well as charges for allocating corporate costs to each of the operating segments. The following tables reflect the results of the reportable segments consistent with the Company’s management system:

Thirteen Week Period Ended October 3, 2015	Engineering		Information Technology		Specialty Health Care		Corporate		Total
Revenue	$	19,224	$	15,171	$	10,682	$	-	$	45,077
Cost of services		14,325		10,477		7,473		-		32,275
Gross profit		4,899		4,694		3,209		-		12,802
Selling, general and administrative		3,784		3,653		3,025		-		10,462
Depreciation and amortization		301		78		55		-		434
Operating income	$	814	$	963	$	129	$	-	$	1,906
Total assets as of October 3, 2015	$	39,985	$	15,278	$	17,021	$	9,390	$	81,674
Capital expenditures	$	263	$	-	$	54	$	1,240	$	1,557

Thirteen Week Period Ended September 27, 2014	Engineering		Information Technology		Specialty Health Care			Corporate		Total
Revenue	$	24,835	$	14,405	$	7,142		$	-	$	46,382
Cost of services		18,239		9,941		5,041			-		33,221
Gross profit		6,596		4,464		2,101			-		13,161
Selling, general and administrative		4,096		3,560		2,335			-		9,991
Depreciation and amortization		248		61		28			-		337
Operating income	$	2,252	$	843	$	(262	)	$	-	$	2,833
Total assets as of September 27, 2014	$	49,169	$	15,253	$	16,529		$	13,389	$	94,340
Capital expenditures	$	587	$	-	$	9		$	7	$	603

Thirty-Nine Week Period Ended October 3, 2015	Engineering		Information Technology		Specialty Health Care		Corporate		Total
Revenue	$	61,843	$	44,684	$	31,802	$	-	$	138,329
Cost of services		46,989		30,904		22,241		-		100,134
Gross profit		14,854		13,780		9,561		-		38,195
Selling, general and administrative		11,893		11,291		8,456		-		31,640
Depreciation and amortization		794		172		118		-		1,084
Operating income	$	2,167	$	2,317	$	987	$	-	$	5,471
Total assets as of October 3, 2015	$	39,985	$	15,278	$	17,021	$	9,390	$	81,674
Capital expenditures	$	1,036	$	-	$	54	$	1,461	$	2,551

Thirty-Nine Week Period Ended September 27, 2014	Engineering		Information Technology		Specialty Health Care		Corporate		Total
Revenue	$	75,615	$	44,076	$	24,769	$	-	$	144,460
Cost of services		57,695		30,734		17,658		-		106,087
Gross profit		17,920		13,342		7,111		-		38,373
Selling, general and administrative		11,939		10,768		6,885		-		29,592
Depreciation and amortization		642		166		77		-		885
Operating income	$	5,340	$	2,410	$	146		-	$	7,896
Total assets as of September 27, 2014	$	49,169	$	15,253	$	16,529	$	13,389	$	94,340
Capital expenditures	$	1,120	$	-	$	92	$	740	$	1,952

The Company derives a majority of its revenue from offices in the United States. Revenues reported for each operating segment are all from external customers. The Company is domiciled in the United States and its segments operate in the United States, Canada and Puerto Rico. Revenues by geographic area for the thirty-nine week periods ended October 3, 2015 and September 27, 2014 are as follows:

	Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
	October 3, 2015		September 27, 2014		October 3, 2015		September 27, 2014
Revenues
U. S.	$	36,625	$	32,651	$	109,992	$	103,403
Canada		6,862		12,087		23,231		36,669
Puerto Rico		1,590		1,644		5,106		4,388
	$	45,077	$	46,382	$	138,329	$	144,460

Total assets by geographic area as of the reported periods are as follows:

	October 3, 2015		January 3, 2015
Total assets
U. S.	$	62,068	$	56,764
Canada		17,752		28,776
Puerto Rico		1,854		1,733
	$	81,674	$	87,273

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Note 6 - Acquisitions (Tables)

9 Months Ended

Oct. 03, 2015

Notes Tables

Schedule of Business Acquisitions by Acquisition, Contingent Consideration [Table Text Block]

Fiscal Year	BGA		PCI		SDS		Total
2015	$	127	$	262	$	-	$	389
2016		271		197		180		648
2017		-		307		253		560
2018		-		-		313		313
Estimated future contingent consideration payments	$	398	$	766	$	746	$	1,910

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Note 14 - Revenues by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014	Oct. 03, 2015	Sep. 27, 2014
UNITED STATES
Revenue	$ 36,625	$ 32,651	$ 109,992	$ 103,403
CANADA
Revenue	6,862	12,087	23,231	36,669
PUERTO RICO
Revenue	1,590	1,644	5,106	4,388
Revenue	$ 45,077	$ 46,382	$ 138,329	$ 144,460

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Note 10 - Per Share Data (Details Textual) - shares	9 Months Ended
	Oct. 03, 2015	Sep. 27, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	40,000	45,000

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Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands		9 Months Ended
		Oct. 03, 2015	Sep. 27, 2014
Net income		$ 3,039	$ 5,097
Foreign currency translation adjustment		(2,610)	(457)
Comprehensive income		429	4,640
Beginning balance		$ 91	815
Amounts reclassified from accumulated other comprehensive income(a)	[1]		166
Net foreign currency translation adjustment		$ (2,610)	(291)
Ending balance		$ (2,519)	$ 524

[1] This amount represents residual foreign currency translation balances in our Cataract, Inc. and RCM Technologies Ireland Holding Limited subsidiaries after these subsidiaries had been effectively liquidated.

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Note 3 - Use of Estimates and Uncertainties

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

Basis of Presentation and Significant Accounting Policies [Text Block]

3. Use of Estimates and Uncertainties

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

The Company uses estimates to calculate an allowance for doubtful accounts on its accounts receivables, adequacy of reserves, the tax rate applied and the valuation of certain assets and liability accounts. These estimates can be significant to the operating results and financial position of the Company.

The Company has risk participation arrangements with respect to workers compensation and health care insurance. The amounts included in the Company’s costs related to this risk participation are estimated and can vary based on changes in assumptions, the Company’s claims experience or the providers included in the associated insurance programs.

Fair Value of Financial Instruments

The Company’s carrying value of financial instruments, consisting primarily of accounts receivable, accounts payable and accrued expenses and borrowings under line of credit, approximates fair value due to their liquidity or their short-term nature. The Company does not have derivative products in place to manage risks related to foreign currency fluctuations for its foreign operations or for interest rate changes.

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Note 7 - Goodwill (Tables)

9 Months Ended

Oct. 03, 2015

Notes Tables

Schedule of Goodwill [Table Text Block]

	Engineering		Information Technology		Specialty Health Care		Total
Balance as of January 3, 2015	$	3,004	$	5,516	$	1,703	$	10,223
Goodwill recorded, SDS acquisition		1,407		-		-		1,407
Balance as of October 3, 2015	$	4,411	$	5,516	$	1,703	$	11,630

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Note 7 - Changes in Carrying Amount of Goodwill (Details) $ in Thousands	9 Months Ended
	Oct. 03, 2015 USD ($)
Engineering [Member] | SDS [Member]
Goodwill recorded, SDS acquisition	$ 1,407
Engineering [Member]
Balance as of January 3, 2015	3,004
Balance as of October 3, 2015	4,411
Information Technology [Member]
Balance as of January 3, 2015	5,516
Balance as of October 3, 2015	5,516
Specialty Health Care [Member]
Balance as of January 3, 2015	1,703
Balance as of October 3, 2015	1,703
SDS [Member]
Goodwill recorded, SDS acquisition	1,407
Balance as of January 3, 2015	10,223
Balance as of October 3, 2015	$ 11,630

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Note 13 - New Accounting Standards

9 Months Ended

Oct. 03, 2015

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

13. New Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,

Revenue

from Contracts with Customers,

which requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration it expects to be entitled in exchange for those goods or services. On July 9, 2015, the FASB voted to delay the effective date of this standard by one year. This deferral resulted in ASU 2014-09 being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. However, early adoption is permitted so that ASU 2014-09 would become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company intends to adopt the standard early so that it will be effective for the Company beginning in the first quarter of fiscal 2017. The new standard permits the use of either the retrospective or cumulative effect transition method on adoption. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures, including which transition method it will adopt.

In August

2014, the FASB issued ASU No. 2014-15,

Presentation of Financial Statements – Going Concern,

which states management should evaluate whether there are conditions or events, considered in the aggregate, that raise a substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.  Management’s evaluation should be based on relevant conditions and events that are known and likely to occur at the date that the financial statements are issued.  The standard update will be effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter, however, early application is permitted.  The Company is evaluating the effect that ASU 2014-15 will have on its consolidated financial statements and related disclosures.

In April, 2015, The FASB issued ASU 2015-03 S

implifying the Presentation of Debt Issuance Costs

, which changes the presentation of debt issuance costs in financial statements. Under the standard, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability. Amortization of the costs is reported as interest expense. However, for debt issuance costs related to line-of-credit arrangements, such costs can be deferred and presented as an asset and subsequently amortized ratably over the term of the arrangement. The standard will be effective for the annual period beginning after December 15, 2015. The Company is evaluating the effect that ASU 2015-03 will have on its consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-05(ASU 2015-05),

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