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 March 31, 2018

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, smaller reporting company or emerging growth company.  (See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act).  (Check one):

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [  ]

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, 12,239,758 shares outstanding as of May 11, 2018.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

PART I - FINANCIAL INFORMATION
		Page
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of March 31, 2018 (Unaudited) and December 30, 2017	3
	Unaudited Consolidated Statements of Income for the Thirteen Week Periods Ended March 31, 2018 and April 1, 2017	4
	Unaudited Consolidated Statements of Comprehensive Income for the Thirteen Week Periods Ended March 31, 2018 and April 1, 2017	5
	Unaudited Consolidated Statement of Changes in Stockholders' Equity for the Thirteen Week Period Ended March 31, 2018	6
	Unaudited Consolidated Statements of Cash Flows for the Thirteen Week Periods Ended March 31, 2018 and April 1, 2017	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures		37

2

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

March 31, 2018 and December 30, 2017

(In thousands, except share and per share amounts)

			March 31,	December 30,
			2018	2017
			(Unaudited)
Current assets:
	Cash and cash equivalents		$452	$2,851
	Accounts receivable, net		51,913	46,080
	Transit accounts receivable		1,089	3,002
	Prepaid expenses and other current assets		3,662	3,706
		Total current assets	57,116	55,639
Property and equipment, net			3,337	3,446
Other assets:
	Deposits		226	215
	Goodwill		11,685	11,685
	Intangible assets, net		87	105
	Deferred tax assets, net, domestic		2,101	2,189
		Total other assets	14,099	14,194
		Total assets	$74,552	$73,279

Current liabilities:
	Accounts payable and accrued expenses			$7,404		$8,634
	Transit accounts payable			1,503		4,661
	Accrued payroll and related costs			7,696		7,780
	Income taxes payable			98		372
	Liability for contingent consideration from acquisitions			741		741
			Total current liabilities	17,442		22,188
Deferred tax liability, foreign				428		431
Liability for contingent consideration from acquisitions				1,350		1,350
Borrowings under line of credit				32,014		27,279
		Total liabilities		51,234		51,248
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;
			15,062,930 shares issued and 12,239,758 shares outstanding at March 31, 2018 and 15,017,522 shares issued and 12,194,350 shares outstanding at December 30, 2017	753		751
	Additional paid-in capital			104,844		104,540
	Accumulated other comprehensive loss			(2,465	)	(2,395	)
	Accumulated deficit			(64,827	)	(65,878	)
	Treasury stock (2,823,172 shares at March 31, 2018 and
			December 30, 2017) at cost	(14,987	)	(14,987	)
			Stockholders' equity	23,318		22,031
			Total liabilities and stockholders' equity	$74,552		$73,279

3

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

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Thirteen Week Periods Ended March 31, 2018 and April 1, 2017

(Unaudited)

(In thousands, except per share amounts)

		Thirteen Weeks Ended
		March 31, 2018		April 1, 2017
Revenues		$50,812		$46,341
Cost of services		38,257		34,589
Gross profit		12,555		11,752
Operating costs and expenses
	Selling, general and administrative	10,421		10,317
	Depreciation and amortization	414		397
Operating costs and expenses		10,835		10,714
Operating income		1,720		1,038
Other income (expense)
	Interest expense and other, net	(266	)	(138	)
	(Loss) gain on foreign currency transactions	(41	)	2
Other income (expense)		(307	)	(136	)
Income before income taxes		1,413		902
Income tax expense		362		352
Net income		$1,051		$550
Basic and diluted net earnings per share		$0.09		$0.05

4

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

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Thirteen Week Periods Ended March 31, 2018 and April 1, 2017

(Unaudited)

(In thousands)

	March 31, 2018		April 1, 2017
Net income	$1,051		$550
Other comprehensive (loss) income	(70	)	4
Comprehensive income	$981		$554

5

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

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

Thirteen Week Period Ended March 31, 2018

(Unaudited)

(In thousands, except share amounts)

	Common Stock		Additional Paid-in Capital	Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock			Total
	Issued Shares	Amount						Shares	Amount
Balance, December 30, 2017	15,017,522	$751	$104,540	($2,395	)	($65,878	)	2,823,172	($14,987	)	$22,031
Issuance of stock under    employee stock purchase plan	45,408	2	192	-		-		-	-		194
Translation adjustment	-	-	-	(70	)	-		-	-		(70	)
Share-based compensation expense	-	-	112	-		-		-	-		112
Net income	-	-	-	-		1,051		-	-		1,051
Balance, March 31, 2018	15,062,930	$753	$104,844	($2,465	)	($64,827	)	2,823,172	($14,987	)	$23,318

6

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

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirteen Week Periods Ended March 31, 2018 and April 1, 2017

 (Unaudited)

(In thousands)

				March 31, 2018		April 1, 2017
Cash flows from operating activities:
	Net income			$1,051		$550
	Adjustments to reconcile net income to net cash (used in) provided by   operating activities:
		Depreciation and amortization		414		397
		Share-based compensation expense		112		203
		Provision for losses on accounts receivable		162		161
		Deferred income tax expense		91		98
		Changes in assets and liabilities:
			Accounts receivable	(6,078	)	663
			Prepaid expenses and other current assets	(2	)	(21	)
			Net of transit accounts receivable and payable	(1,243	)	217
			Accounts payable and accrued expenses	(1,212	)	(607	)
			Accrued payroll and related costs	(70	)	51
			Income taxes payable	(269	)	157
	Total adjustments			(8,095	)	1,319
	Net cash (used in)  provided by operating activities			(7,044	)	1,869
Cash flows from investing activities:
	Property and equipment acquired			(289	)	(92	)
	Decrease in deposits			(11	)	-
	Net cash used in investing activities			(300	)	(92	)
Cash flows from financing activities:
	Borrowings under line of credit			23,716		22,058
	Repayments under line of credit			(18,982	)	(23,644	)
	Issuance of stock for employee stock purchase plan			194		192
	Common stock repurchases			-		(365	)
	Contingent consideration paid			-		(8	)
	Net cash provided by (used in) financing activities			4,928		(1,767	)
Effect of exchange rate changes on cash and cash equivalents				17		4
(Decrease) increase in cash and cash equivalents				(2,399	)	14
Cash and cash equivalents at beginning of period				2,851		279
Cash and cash equivalents at end of period				$452		$293
Supplemental cash flow information:
	Cash paid for:
		Interest		$167		$113
		Income taxes		$304		$98

7

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

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 December 30, 2017 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 week periods ended March 31, 2018 are not necessarily indicative of results that may be expected for the full year.

Fiscal Year

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31.  The fiscal year ended December 30, 2017 was a 52-week reporting year.  The first fiscal quarters of 2018 and 2017 ended on the following dates, respectively:

Period Ended	Weeks in Quarter	Weeks in Year to Date
March 31, 2018	Thirteen	Thirteen
April 1, 2017	Thirteen	Thirteen

2. 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, goodwill impairment, if any, equity compensation, 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.

The Company can be affected by a variety of factors including uncertainty relating to the performance of the general economy, competition, demand for the Company's services, adverse litigation and claims and the hiring, training and retention of key employees.

8

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

2. Use of Estimates and Uncertainties (Continued)

Fair Value of Financial Instruments

The Company's carrying value of financial instruments, consisting primarily of accounts receivable, transit accounts receivable, accounts payable and accrued expenses, and transit accounts payable 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.

3. Revenue Recognition

As of December 31, 2017, the Company adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASC 606"), using the modified retrospective approach.  Revenues are recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services.  Performance obligations in our contracts represent distinct or separate service streams that we provide to our customers. The adoption of ASC 606 did not result in an adjustment to retained earnings in the Company's consolidated balance sheet as of December 31, 2017.

We evaluate our revenue contracts with customers based on the five-step model under ASC 606: (1) Identify the contract with the customer; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to separate performance obligations; and (5) Recognize revenue when (or as) each performance obligation is satisfied.

The Company derives its revenues from several sources.  The Company's Engineering Services and Information Technology Services segments perform consulting and project solution 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.

The following table presents our revenues disaggregated by revenue source for the thirteen weeks periods ending March 31, 2018 and April 1, 2017:

	March 31, 2018	April 1, 2017
Engineering:
Time and Material	$18,655	$16,698
Fixed Fee	2,763	2,526
Total Engineering	$21,418	$19,224
Specialty Health Care:
Time and Material	$22,113	$17,881
Permanent Placement Services	521	626
Total Specialty Health Care	$22,634	$18,507
Information Technology:
Time and Material	$6,668	$8,516
Permanent Placement Services	92	94
Total Information Technology	$6,760	$8,610
	$50,812	$46,341

9

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

1. Revenue Recognition (Continued)

Time and Material

The Company's IT and Healthcare segments predominantly recognize revenue through time and material work while our Engineering segment recognizes revenue through both time and material and fixed fee work. The Company's time and material contracts are typically based on the number of hours worked at contractually agreed upon rates, therefore revenues associated with these time and materials contracts are recognized based on hours worked at contracted rates. 

Fixed fee

From time to time and predominantly our Engineering segment, the Company will enter into contracts requiring the completion of specific deliverables.  The Company has master services agreements with many of its customers that broadly define terms and conditions. Actual services performed under fixed fee arrangements are typically delivered under purchase orders that more specifically define terms and conditions related to that fixed fee project. While these master services agreements can often span several years, the Company's fixed fee purchase orders are typically performed over six to nine month periods.  In instances where project services are provided on a fixed-price basis, revenue is recorded in accordance with the terms of each contract.  In certain instances, revenue is invoiced 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.  On an infrequent basis, amounts paid in excess of revenues earned and 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.  Additionally, 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.  Provisions for contract losses, if any, are made in the period such losses are determined.  For contracts where there is a specific deliverable, the work is not complete and the revenue is not recognized, the costs incurred are deferred as a prepaid asset.  The associated costs are expensed when the related revenue is recognized.

Permanent Placement Services

The Company earns permanent placement fees from providing permanent placement services.  These fees are typically based on a percentage of the compensation paid to the person placed with the Company's client.

The deferred revenue balance at March 31, 2018 and December 30, 2017 was $302 and $596, respectively and is included in accounts payable and accrued expense in the accompanying consolidated balance sheet.  Revenue is recognized when the service has been performed.  This revenue can be recognized over a period exceeding one year from the time it was recorded on the balance sheet as deferred revenue.  For the thirteen week period ended March 31, 2018, the Company recognized revenue of $295 that was included in deferred revenue at the beginning of the reporting period.  The March 31, 2018 balance in deferred revenue will be recognized in fiscal year 2018.

10

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:

	March 31, 2018		December 30, 2017
Billed	$33,405		$31,448
Accrued and unbilled	14,446		10,573
Work-in-progress	5,178		5,026
Allowance for sales discounts and doubtful accounts	(1,116	)	(967	)
Accounts receivable, net	$51,913		$46,080

Unbilled receivables primarily represent revenues earned whereby those services are ready to be billed as of the balance sheet ending date.  Work-in-progress 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 $1.1 million and related transit accounts payable was $1.5 million, for a net liability of $0.4 million, as of March 31, 2018.  The transit accounts receivable was $3.0 million and related transit accounts payable was $4.7 million, a net payable of $1.7 million, as of December 30, 2017.

The Company has a dispute with a customer that is a major utility in the United States. Essentially, the customer has not paid the balance of accounts receivable the Company believes are owed to the Company. The Company recently compelled arbitration with this customer.  As of March 31, 2018 the total amount due from this customer is $5.9 million, subject to an upward adjustment following disclosures by the customer in the arbitration.  Additionally, as part of the arbitration process, the customer has asserted counter claims of $9.3 million.  The Company also believes these counter claims were retaliatory in nature.  Prior to the arbitration, the customer had not asserted any claims.  The Company believes these asserted claims have no merit and were merely asserted as a strategy to reduce the Company's claims in any arbitration award or potential settlement agreement. The Company believes that its accounts receivable balance, subject to reserves, is collectible. Furthermore, the Company believes that this arbitration will conclude sometime late in fiscal year 2018 or early fiscal 2019.  While the Company believes the customer's counter claims to be frivolous and without merit, it can give no assurances that it will ultimately not have to pay all or a portion of such claims.  The Company is continuing work on one of the engagements that have given rise to this dispute and also on several engagements from the same client that are not currently part of the arbitration.

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.

11

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 (Continued)

Property and equipment are comprised of the following:

	March 31, 2018	December 30, 2017
Equipment and furniture	$713	$938
Computers and systems	6,203	6,172
Leasehold improvements	702	899
	7,618	8,009
Less: accumulated depreciation and amortization	4,281	4,563
Property and equipment, net	$3,337	$3,446

The Company periodically writes off fully depreciated and amortized assets.  The Company wrote off fully depreciated and amortized assets of $681 and $355 during the thirteen week periods ended March 31, 2018 and April 1, 2017, respectively.  Depreciation expense for the thirteen week periods ended March 31, 2018 and April 1, 2017 was $396 and $380, respectively.

6. Acquisitions

The Company has acquired numerous companies throughout its history and those acquisitions have generally included significant future contingent consideration.  The Company gives no assurance that it will make acquisitions in the future and if they do make acquisitions gives no assurance that such acquisitions will be successful.

Future Contingent Payments

As of March 31, 2018, the Company had six 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"); 3) effective July 5, 2015, the Company acquired certain assets of Substation Design Services, LLC ("SDS"); 4) effective December 31, 2016, the Company acquired certain assets of Allied Health Professionals, LLC ("AHP"); 5) effective April 16, 2017 the Company acquired certain assets of R.A.F. Services, Inc. ("RAF") and 6) effective October 1, 2017, the Company acquired all of the stock of PSR Engineering Solutions d.o.o. Beograd (Voždovac) ("PSR"). The Company estimates future contingent payments at March 31, 2018 as follows:

Fiscal Years Ending	Total
December 29, 2018 (after March 31, 2018)	$741
December 28, 2019	625
January 2, 2021	725
Estimated future contingent consideration payments	$2,091

Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates.  Potential future contingent payments to be made to all active acquisitions are capped at cumulative maximum of $4.1 million.  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 March 31, 2018.  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.  There has been no change in the fair value of contingent consideration for the thirteen week period ended March 31, 2018.

12

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)

The Company did not pay contingent consideration during the thirteen week period ended March 31, 2018 and paid $8 for the thirteen week period ended April 1, 2017.

RAFEffective April 16, 2017, the Company acquired the business operations of RAF. RAF has been in business since 1991 as a multi-disciplined engineering and consulting and design company, headquartered on Long Island. The firm has been providing Engineering, Design, Permitting, Inspection and Construction Management services to the utility, industrial, commercial, and property management industries. RAF specializes in turnkey above ground tank inspection, repair and cleaning services, as well as concrete, steel, masonry, and roofing routine maintenance inspection and design. The purchase price for RAF was $133, all of which was allocated to goodwill as follows: 1) assumed liabilities of $123; and 2) estimated contingent consideration of $10 was paid in fiscal 2017.

PSR

Effective October 1, 2017 the Company acquired all of the stock of PSR. PSR was established in Serbia in 2006 and specializes in the design and engineering associated with high voltage substations, design engineering for electrical equipment in power plants, 3D modeling, commissioning, site supervision and other engineering services for clients in Europe, North America, South America and the Middle East. At the time of acquisition, PSR had a highly trained staff of approximately 30 engineers. PSR has acted as a subcontractor to the Company for over three years. The total purchase price of $3,248 included cash at closing of $1,000, estimated contingent consideration of $1,763 and $485 due to seller upon realization of net working capital recorded at closing.  As part of the working capital recorded at closing, the Company received cash of $237. The Company allocated $58 to fixed assets and the balance to goodwill.

7. Goodwill

There were no changes in the carrying amount of goodwill for the thirteen week period ended March 31, 2018.

	Engineering	Specialty Health Care	Information Technology	Total
Balance as of March 31, 2018 and    December 30, 2017	$7,249	$2,398	$2,038	$11,685

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.  During all periods presented, the Company determined that no impairment of intangible assets exists.

13

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 (Continued)

Intangible assets are substantially attributable to the Company's Engineering segment and include the following:

	Thirteen Weeks Ended
	March 31, 2018	April 1, 2017
Customer contracts and relations	$74	$87
Non-compete agreements	13	18
Intangible assets	$87	$105

Amortization expense of intangible assets for the thirteen week periods ended March 31, 2018 and April 1, 2017 was $18 and $17, respectively.

9. Line of Credit

The Company and its subsidiaries are party to a loan agreement with Citizens Bank of Pennsylvania which, as of March 31, 2018, provides for a $40 million revolving credit facility and includes a sub-limit of $5 million for letters of credit (the "Revolving Credit Facility") and expires December 11, 2019.  The Revolving Credit Facility has been amended several times, most recently pursuant to the Tenth Amendment entered into on February 14, 2018 when the Company increased the Revolving Credit Facility to $40 million from its previous amount of $35 million.  The Company also entered into to the Ninth Amendment on December 8, 2017 when the Company was granted waivers that expressly allowed a cash dividend of up to $12.4 million and waived certain expenses from the Company's loan covenant calculations, including $1.3 million of certain expenses related legal costs, office closures and other expenses in fiscal 2017, up to $1.0 million consulting expenses for analyzing tax credits for research and development costs and 179D energy savings tax credits on a rolling four quarter basis and up to $4.6 million for goodwill impairment.  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 thirteen week period ended March 31, 2018 was 3.0%.

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.  As of March 31, 2018, the Company was in compliance with all covenants contained in its Revolving Credit Facility.

Borrowings under the line of credit as of March 31, 2018 and December 30, 2017 were $32.0 million and $27.3 million, respectively.  At March 31, 2018 and December 30, 2017 there were letters of credit outstanding for $0.8 million.  At March 31, 2018, the Company had availability for additional borrowings under the Revolving Credit Facility of $7.2 million.

14

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

The Company uses the treasury stock method to calculate the weighted-average shares used for diluted earnings per share.  The number of common shares used to calculate basic and diluted earnings per share for the thirteen week periods ended March 31, 2018 and April 1, 2017 was determined as follows:

	Thirteen Week Periods Ended
	March 31, 2018	April 1, 2017
Basic weighted average shares outstanding	12,238,760	11,946,653
Dilutive effect of outstanding restricted stock awards	18,747	101,114
Weighted average dilutive shares outstanding	12,257,507	12,047,767

For the thirteen week period ended March 31, 2018, there were no anti-dilutive shares not included in the calculation of common stock equivalents.  For the thirteen week period ended April 1, 2017 there were 40,000 absolute anti-dilutive shares not included in the calculation of common stock equivalents.  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:

	March 31, 2018	December 30, 2017
Time-based restricted stock units outstanding	87,034	87,034
Performance-based restricted stock units outstanding	400,000	400,000
Future grants of options or shares	332,232	332,232
Shares reserved for employee stock purchase plan	131,872	177,280
Total	951,138	996,546

11. Share-Based Compensation

At March 31, 2018, the Company had two 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 time-based awards is amortized in accordance with applicable vesting periods using the straight-line method.  The Company vests performance-based awards only when the performance metrics are likely to be achieved and the associated awards are therefore likely to vest.  Performance-based share awards that are likely to vest are also expensed on a straight-line basis over the vesting period but may vest on a retroactive basis or be reversed, depending on when it is determined that they are likely to vest, or in the case of a reversal when they are later determined to be unlikely to vest.

Share-based compensation expense of $112 and $203 was recognized for the thirteen week periods ended March 31, 2018 and April 1, 2017, respectively.  Share based compensation for the thirteen week period ended March 31, 2018 did not include any expense associated with performance-based restricted stock units since they were, as of March 31, 2018, determined to be unlikely to vest.

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)

As of March 31, 2018, the Company had approximately $376 of total unrecognized compensation cost related to all time-based non-vested share-based awards granted under the Company's various share-based plans, which the Company expects to recognize over approximately a two-year period.  These amounts do not include a) performance-based restricted stock units, b) the cost of any additional share-based awards that may be granted in future periods or c) the impact of any potential changes in the Company's forfeiture rate.

Incentive Share-Based Plans

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.  In fiscal 2016, the Company amended the 2014 Plan with shareholder approval to increase the aggregate number of shares of stock reserved for issuance under the Plan by an additional 500,000 shares so that the total number of shares of stock reserved for issuance under the Plan is 1,125,000 shares.  The expiration date of the Plan is December 1, 2026.  The Compensation Committee of the Board of Directors determines the vesting period at the time of grant.

As of March 31, 2018, under the 2014 Plan, 87,034 time-based and 400,000 performance-based restricted share units were outstanding and 332,232 shares were available for awards thereunder.

Employee Stock Purchase Plan

The Company implemented the 2001 Employee Stock Purchase Plan (the "Purchase Plan") with shareholder approval, effective January 1, 2001.  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.

In fiscal 2015, the Company amended the Purchase Plan with shareholder approval to increase the aggregate number of shares of stock reserved for issuance or transfer under the Plan by an additional 300,000 shares so that the total number of shares of stock reserved for issuance or transfer under the Plan shall be 1,100,000 shares and to extend the expiration date of the Plan to December 31, 2025.

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 business 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 (on January 2, 2018) was 45,408.  As of March 31, 2018, there were 131,872 shares available for issuance under the Purchase Plan.

Time-Based Restricted Stock Units

From time-to-time the Company issues time-based restricted stock units.  These time-based restricted stock units typically include dividend accrual equivalents, which means that any dividends paid by the Company during the vesting period become due and payable after the 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 time-based restricted stock units that ultimately do not vest are forfeited.

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)

To date, the Company has only issued time-based restricted stock units under the 2014 Plan.  The following summarizes the activity in the time-based restricted stock units under the 2014 Plan during the thirteen week period ended March 31, 2018:

	Number of Time-Based Restricted Stock Units	Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at December 30, 2017	87,034	$5.88
Granted	-	-
Vested	-	-
Forfeited or expired	-	-
Outstanding non-vested at March 31, 2018	87,034	$5.88

Based on the closing price of the Company's common stock of $5.77 per share on March 29, 2018 (the last trading day prior to March 31, 2018), the intrinsic value of the time-based non-vested restricted stock units at March 31, 2018 was approximately $502.  As of March 31, 2018, there was approximately $376 of total unrecognized compensation cost related to time-based restricted stock units, which is expected to be recognized over the vesting period of the restricted stock units.

Performance Based Restricted Stock Units

From time-to-time the Company issues performance-based restricted stock units to its executives.  Performance-based restricted stock units are typically vested based on certain multi-year performance metrics as determined by the Board of Directors Compensation Committee. These performance-based restricted stock units typically include dividend accrual equivalents, which means that any dividends paid by the Company during the vesting period become due and payable after the vesting period on any stock units that actually vest, if any.  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 performance-based restricted stock units that ultimately do not vest are forfeited.   

To date, the Company has only issued performance-based restricted stock units under the 2014 Plan.  The following summarizes the activity in the performance-based restricted stock units during 2017:

	Number of Performance-Based Restricted Stock Units	Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at December 30, 2017	400,000	$5.11
Granted	-	-
Vested	-	-
Forfeited or expired	-	-
Outstanding non-vested at March 31, 2018	400,000	$5.11

17

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)

As of March 31, 2018, the Company considers the metrics related to 400,000 of the performance-based restricted stock units unlikely to be achieved, thus no performance condition is probable of achievement and no compensation cost has been recognized on the performance-based restricted stock units. The Company will reassess at each reporting date whether achievement of any performance condition is probable and would begin recognizing compensation cost if and when achievement of the performance condition becomes probable.  The Company will then recognize the appropriate expense cumulatively in the year performance becomes probable and recognize the remaining compensation cost over the remaining requisite service period.

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.  On August 9, 2016, the Board authorized an additional $5.0 million to the repurchase program and extended this repurchase program through December 31, 2017.  For the thirteen week period ended March 31, 2018, the Company did not purchase any treasury shares.  For the thirteen week period ended April 1, 2017, the Company purchased 59,312 shares at an average price of $6.16.  As of March 31, 2018, the Company has $2.5 million available for future treasury stock purchases.

18

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

13. New Accounting Standards

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, (Topic 606) "Revenue from Contracts with Customers." Topic 606 supersedes the revenue recognition requirement in Topic "Revenue Recognition" (Topic 605), and requires entities to recognize revenue when control of the promised good or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for goods or services.  The Company adopted this standard in its fiscal 2018 first quarter using the modified retrospective approach.  See Note 3 for further details.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company will adopt ASU 2016-02 in the first quarter of 2019.Although the Company is in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements, the Company currently believes the most significant change will be related to the recognition of right-of-use assets and lease liabilities on the Company's balance sheet for real estate operating leases.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting.  ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows.  Additionally, in May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718).  ASU 2017-09 clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under ASC 718. The Company adopted ASU 2016-09 in its fiscal 2017 first quarter.  It did not have a material impact.  ASU 2017-09 is effective for annual and interim reporting periods beginning after December 15, 2017.  The Company adopted ASU 2017-09 in its fiscal 2018 first quarter.  It did not have a material impact.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies how certain cash receipts and payments should be presented in the statement of cash flows. The guidance requires application using a retrospective transition method.  The Company adopted ASU 2016-15 in its fiscal 2018 first quarter.  It did not have a material impact.

In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations" (Topic 805) to clarify the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  The Company adopted ASU 2017-01 in its fiscal 2018 first quarter.  It did not have a material impact. 

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

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 December 30, 2017).

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 March 31, 2018	Engineering	Specialty Health Care	Information Technology		Corporate	Total
Revenue	$21,418	$22,634	$6,760		$   -	$50,812
Cost of services	15,724	17,384	5,149		-	38,257
Gross profit	5,694	5,250	1,611		-	12,555
Selling, general and administrative	4,122	4,470	1,829		-	10,421
Depreciation and amortization	283	105	26		-	414
Operating income (loss)	$1,289	$675	($244	)	$   -	$1,720
Total assets as of March 31, 2018	$36,578	$24,884	$6,573		$6,517	$74,552
Capital expenditures	$109	$40	$9		$131	$289

Thirteen Week Period Ended April 1, 2017	Engineering	Specialty Health Care	Information Technology		Corporate	Total
Revenue	$19,224	$18,507	$8,610		$   -	$46,341
Cost of services	14,185	13,947	6,457		-	34,589
Gross profit	5,039	4,560	2,153		-	11,752
Selling, general and administrative	4,037	3,927	2,353		-	10,317
Depreciation and amortization	285	72	40		-	397
Operating income (loss)	$717	$561	($240	)	$   -	$1,038
Total assets as of April 1, 2017	$32,014	$17,867	$11,903		$4,016	$65,800
Capital expenditures	$69	$  -	$  -		$23	$92

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, Puerto Rico and Serbia. Revenues by geographic area for the thirteen week periods ended March 31, 2018 and April 1, 2017 are as follows: 

		Thirteen Week Periods Ended
		March 31, 2018	April 1, 2017
Revenues
	U. S.	$41,591	$38,718
	Canada	7,629	6,495
	Puerto Rico	983	1,128
	Serbia	609	-
		$50,812	$46,341

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

		March 31, 2018	December 30, 2017
Total assets
	U. S.	$55,067	$52,595
	Canada	13,943	15,419
	Puerto Rico	1,838	1,891
	Serbia	3,704	3,374
		$74,552	$73,279

15. Income Taxes

On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118") directing taxpayers to consider the impact of the Tax Act as "provisional" when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. The changes in the Tax Act are broad and complex. The final impacts of the Tax Act may differ from the Company's estimates due to, among other things, changes in interpretations of the Tax Act, further legislation related to the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates to estimates the Company has utilized to calculate the impacts of the Tax Act. The SEC has issued rules that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the related tax impacts. The Company currently anticipates finalizing any resulting adjustments by the end of its fiscal year ending December 29, 2018.  The Company, based on current knowledge, estimated the impact of SAB 118 on its income tax provision for the fifty-two week period ended December 30, 2017.  The total impact was an increase to its fiscal 2017 tax expense of $1.2 million, including $1.0 million for a reduction in deferred tax benefit and $0.2 million related to transition repatriation taxes. Any subsequent changes to the Company's fiscal 2017 tax expense estimates, if any, could materially impact the Company's fiscal 2018 tax provision. As of March 31, 2018, the Company is unaware of any factors or potential revisions that would materially change the Company's estimated fiscal 2017 tax provision.

21

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

15. Income Taxes (Continued)

The projected fiscal 2018 effective income tax rates as of March 31, 2018 for the thirteen week period ended March 31, 2018 are approximately 27.9%, 26.5% and 14.8% in the United States, Canada and Serbia, respectively, and yielded a consolidated effective income tax rate of approximately 25.6% for the thirteen week period ended March 31, 2018.  The comparable prior year period estimated income tax rates were 41.6% and 26.5% in the United States and Canada, respectively, and yielded a consolidated effective income tax rate of approximately 39.0% for the thirteen week period ended April 1, 2017.  The Company did not have Serbian operations for the comparable prior year period. The significant decrease in the tax rate in the United States for the thirteen week period ended March 31, 2018 as compared to the comparable prior year period was due to the reduction in the Company's federal income tax rate to 21.0% from 34.0% as provided for in the Tax Cuts and Jobs Act. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company.

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 $10.0 million in damages (including $9.3 million in counter claims described below) as of March 31, 2018.  As of March 31, 2018, the Company had an accrual of $0.1 million for any such liabilities.

The Company has a dispute with a customer that is a major utility in the United States. Essentially, the customer has not paid the balance of accounts receivable the Company believes are owed to the Company. The Company recently compelled arbitration with this customer.  As of March 31, 2018 the total amount due from this customer is $5.9 million, subject to an upward adjustment following disclosures by the customer in the arbitration.  Additionally, as part of the arbitration process, the customer has asserted counter claims of $9.3 million.  The Company also believes these counter claims were retaliatory in nature.  Prior to the arbitration, the customer had not asserted any claims.  The Company believes these asserted claims have no merit and were merely asserted as a strategy to reduce the Company's claims in any arbitration award or potential settlement agreement. The Company believes that its accounts receivable balance, subject to reserves, is collectible. Furthermore, the Company believes that this arbitration will conclude sometime late in fiscal year 2018 or early fiscal 2019.  While the Company believes the customer's counter claims to be frivolous and without merit, it can give no assurances that it will ultimately not have to pay all or a portion of such claims.  The Company is continuing work on one of the engagements that have given rise to this dispute and also on several engagements from the same client that are not currently part of the arbitration.

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, arbitrations, and other business disputes involving the Company, and the applicability of insurance coverage with respect to any such disputes; (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 and Use of Estimates

This Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our unaudited interim condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In our unaudited interim condensed consolidated financial statements, estimates are used for, but not limited to, accounts receivable and allowance for doubtful accounts, goodwill, long-lived intangible assets, accounting for stock options and restricted stock units, insurance liabilities, accounting for income taxes and accrued bonuses.

A summary of our significant accounting policies is included in our Consolidated Financial Statements, Note 1, Summary of Significant Accounting Policies, in our Annual Report on Form 10-K for the year ended December 30, 2017. Certain of our accounting policies are considered critical, as these policies require significant, difficult or complex judgments by management, often requiring the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 30, 2017.

Recently Issued Accounting Pronouncements

A discussion of the recently issued accounting pronouncements is set forth in Note 13, New Accounting Standards, in the unaudited interim condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q and is incorporated herein by reference.

25

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.

26

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

Thirteen Week Period Ended March 31, 2018 Compared to Thirteen Week Period Ended April 1, 2017

A summary of operating results for the thirteen week periods ended March 31, 2018 and April 1, 2017 is as follows (in thousands):

	March 31, 2018			April 1, 2017
	Amount		% of Revenue	Amount		% of Revenue
Revenues	$50,812		100.0	$46,341		100.0
Cost of services	38,257		75.3	34,589		74.6
Gross profit	12,555		24.7	11,752		25.4
Selling, general and administrative	10,421		20.5	10,317		22.2
Depreciation and amortization	414		0.8	397		0.9
	10,835		21.3	10,714		23.1
Operating income	1,720		3.4	1,038		2.3
Interest expense, net and foreign currency transactions	(307	)	0.6	(136	)	0.3
Income before income taxes	1,413		2.8	902		2.0
Income tax expense	362		0.7	352		0.8
Net income	$1,051		2.1	$550		1.2

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31.  The fiscal quarters ended March 31, 2018 and April 1, 2017 consisted of thirteen weeks each.

Revenues.  Revenues increased 9.6%, or $4.5 million, for the thirteen week period ended March 31, 2018 as compared to the thirteen week period ended April 1, 2017 (the "comparable prior year period").  Revenues increased $2.2 million in the Engineering segment, increased $4.1 million in the Specialty Health Care segment and decreased $1.8 million in the Information Technology segment.  On the last day of fiscal 2017, the Company disposed of its Microsoft Solutions Business Unit ("Microsoft Business"), which generated $0.5 million in revenues for the thirteen week period ended April 1, 2017.  See Segment Discussion for further information on revenue changes.

The Company has material operations in Canada, primarily from the Company's Engineering segment; 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 (the "Exchange Rate"). For the thirteen week period ended March 31, 2018, the Company generated total revenues from its Canadian clients of $7.6 million in U.S. dollars at an Exchange Rate of 79.0% as compared to $6.5 million in U.S. dollars at an Exchange Rate of 75.5% for the prior year comparable period.

Cost of Services and Gross Profit.  Cost of services increased 10.6%, or $3.7 million, for the thirteen week period ended March 31, 2018 as compared to the comparable prior year period. Cost of services increased due to the increase in revenues.  Cost of services as a percentage of revenues for the thirteen week periods ended March 31, 2018 and April 1, 2017 was 75.3% and 74.6%, respectively.  See Segment Discussion for further information regarding changes in cost of services and gross profit.

27

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

Thirteen Week Period Ended March 31, 2018 Compared to Thirteen Week Period Ended April 1, 2017 (Continued)

Selling, General and Administrative.  Selling, general and administrative ("SGA") expenses increased 1.0%, or $0.1 million, as compared to the comparable prior year period.  SGA expenses increased due to the increase in revenues.  As a percentage of revenues, SGA expenses were 20.5% for the thirteen week period ended March 31, 2018 and 22.2% for the comparable prior year period.   See Segment Discussion for further information on SGA expense changes.

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 and gains and losses on foreign currency transactions.  Other expense, net increased to $0.3 million as compared to $0.1 million for the comparable prior year period.  The primary component of the increase was interest expense which increased due to increased borrowings under the Company's line of credit.  The primary reason for the increased borrowing was to fund the Company's $12.2 million cash dividend paid in December 2017. 

Income Tax Expense.  The Company recognized $0.4 million of income tax expense for both the thirteen week period ended March 31, 2018 and the comparable prior year period.  The consolidated effective income tax rate for the current period was 25.6% as compared to 39.0% for the comparable prior year period. The projected fiscal 2018 income tax rates as of March 31, 2018 were approximately 27.9%, 26.5% and 14.8% in the United States, Canada and Serbia, respectively. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company, particularly the ratio of Canadian and Serbian pretax income versus U.S. pretax income.  The consolidated effective income tax rate for the thirteen week period ended March 31, 2018 was lower than the comparable prior year period primarily due to the reduction of the Company's federal income tax rate to 21.0% from 34.0% as provided for in the Tax Cuts and Jobs Act and the impact of its Serbian operations acquired in October 2017.

Segment Discussion

Engineering

Engineering revenues of $21.4 million for the thirteen week period ended March 31, 2018 increased 11.4%, or $2.2 million, as compared to the comparable prior year period.  The increase was due to increases in revenues of $2.0 million from the Company's Energy Services Group and $0.2 million from the Company's Canadian Power Systems Engineering Group.  Gross profit increased 13.0%, or $0.7 million, as compared to the comparable prior year period. Gross profit increased due to the increase in revenues and an increase in gross margin to 26.6% for the current period as compared to 26.2% for the comparable prior year period. The gross margin increase was primarily due to more favorable utilization of billable consultants on fixed price contracts as the Company naturally experiences variability in utilization from quarter to quarter. The Engineering segment operating income was $1.3 million for the thirteen week period ended March 31, 2018 as compared to $0.7 million for the comparable prior year period. The improvement in operating income was primarily driven by the increase in gross profit and was offset by an increase in SGA expense of $0.1 million. The increase in SGA expense was primarily due to a higher incentive compensation accruals associated with improved performance.

28

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

Thirteen Week Period Ended March 31, 2018 Compared to Thirteen Week Period Ended April 1, 2017 (Continued)

Segment Discussion (Continued)

Specialty Health Care

Specialty Health Care revenues of $22.6 million for the thirteen week period ended March 31, 2018 increased 22.3%, or $4.1 million, as compared to the comparable prior year period.  The primary drivers of the increase in the revenues for the Specialty Health Care segment were increases of $4.0 million from the New York City Office, $1.2 million from the Honolulu office, offset by a decrease in revenue of $0.8 million from travel nursing staffing group.  The primary reason for revenue increases in New York City and Hawaii were incremental additions of paraprofessionals billed on school contracts.  The Company primarily attributes the decline in revenue from its travel nursing staffing group to increased competition from large national competitors. The Specialty Health Care segment's gross profit increased by 15.1%, or $0.7 million, to $5.3 million for the thirteen week period ended March 31, 2018 as compared to $4.6 million for the prior year period. The increase in gross profit was primarily driven by the increase in revenues, offset by lower gross profit margin. The Specialty Health Care segment's gross profit margin for the thirteen week period ended March 31, 2018 decreased to 23.2% as compared to 24.6% for the comparable prior year period. The decrease in gross profit margin was primarily driven by the decrease in high gross profit margin permanent placement revenues and decreases in gross profit margin from the travel nursing staffing group, generally due to market factors including increased competition and constrained labor.  Specialty Health Care experienced operating income of $0.7 million for the thirteen week period ended March 31, 2018 as compared to $0.6 million for the comparable prior year period. The primary reason for the increase in operating income was the increase to gross profit, offset by an increase of $0.5 million in SGA expense.  SGA expense increased primarily due to the need to increase SGA infrastructure expense in order to support the increased activity levels associated with higher revenues and a higher allocation of corporate-generated SGA expense.

Information Technology

Information Technology revenues of $6.8 million for the thirteen week period ended March 31, 2018 decreased 21.5%, or $1.8 million, as compared to $8.6 million for the comparable prior year period.  The decrease was primarily from reductions in project revenues from several large clients that were not replaced.  Additionally, on the last day of fiscal 2017, the Company sold its Microsoft Business which generated $0.5 million in revenues for the thirteen week period ended April 1, 2017. Gross profit of $1.6 million for the thirteen week period ended March 31, 2018 decreased 25.2%, or $0.5 million, as compared to $2.2 million for the comparable prior year period. The decrease in gross profit was primarily due to the decrease in revenues and a decrease in gross profit margin. Additionally, the Microsoft Business contributed $0.1 million in the comparable prior year period. The Information Technology gross profit margin for the thirteen week period ended March 31, 2018 was 23.8% as compared to 25.0% for the comparable prior year period.  Gross profit margin decreased because large project high-value, high-margin revenues decreased and thereby increased the portion of lower gross profit margin staffing-oriented revenues. The Information Technology segment experienced an operating loss of $0.2 million for both the thirteen week period ended March 31, 2018 and the comparable prior year period.  The current year reflects a decrease in SGA expense of $0.5 million. The decrease in SGA expense was primarily due to lower selling costs associated with lower revenue and gross profit, a focus on reducing SGA expense and also a lower allocation of corporate SGA expense. Additionally, the Microsoft Business generated $0.1 million in SGA expense for the comparable prior year period.

29

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):

		Thirteen Week Periods Ended
		March 31, 2018		April 1, 2017
Cash provided by (used in):
	Operating activities	($7,044	)	$1,869
	Investing activities	($300	)	($92	)
	Financing activities	$4,928		($1,767	)

Operating Activities

Operating activities used $7.0 million of cash for the thirteen week period ended March 31, 2018 as compared to providing $1.9 million in the comparable prior year period.  The major components of cash provided by or used in operating activities in the thirteen week period ended March 31, 2018 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 thirteen week period ended March 31, 2018 was $1.1 million as compared to $0.6 million for the comparable prior year period.  An increase in accounts receivables in the thirteen week period ended March 31, 2018 used $6.1 million of cash as compared to providing $0.7 million in the comparable prior year period. The Company attributes the increase in accounts receivables for the thirteen week period ended March 31, 2018 to several different clients in both its Engineering and Specialty Health Care segments that experienced temporary delays in its approval and payment processes.  The Company anticipates that its accounts receivable balance will decrease to levels experienced at the end of fiscal 2017 in the near term.

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 $0.4 million and $1.7 million as of March 31, 2018 and December 30, 2017, respectively, so the cash impact during the thirteen week period ended March 31, 2018 used $1.3 million in cash.  The net of transit accounts payable and transit accounts receivable was a net liability of $2.7 million and $2.5 million as of April 1, 2017 and December 31, 2016, respectively, so the cash impact during the thirteen week period ended April 1, 2017 provided $0.2 million in cash. 

Prepaid expenses and other current assets used negligible cash for both the thirteen week period ended March 31, 2018 and the comparable prior year period.  The Company attributes these changes to general timing of payments in the normal course of business.

A decrease in accounts payable and accrued expenses used $1.2 million for the thirteen week period ended March 31, 2018 as compared to $0.6 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.

30

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

Liquidity and Capital Resources (Continued)

Operating Activities (Continued)

Changes in accrued payroll and related costs for the thirteen week periods ended March 31, 2018 and April 1, 2017 used and provided negligible cash, respectively.  There are three primary factors that impact accrued payroll and related costs: 1) there is a general correlation to operating expenses as payroll and related costs is the Company's largest expense group, so as operating costs increase or decrease, absent all other factors, so will the accrued payroll and related costs; 2) the Company pays the majority of its employees every two weeks and normally has thirteen weeks in a fiscal quarter, which means that the Company normally has a major payroll on the last business day of every other quarter; and 3) most of the Company's senior management participate in annual incentive plans and while progress advances are often made during the fiscal year these accrued bonus balances to the extent they are projected to be achieved generally accumulate throughout the year.  The Company's last major payroll for the thirteen week period ended March 31, 2018 was paid on March 30, 2018.

Investing Activities

Investing activities used cash of $0.3 million for the thirteen week period ended March 31, 2018 as compared to $0.1 million for the comparable prior year period.  Investing activities for both periods presented were primarily related to expenditures for property and equipment.

Financing Activities

Financing activities provided $4.9 million of cash for the thirteen week period ended March 31, 2018 as compared to using $1.8 million in the comparable prior year period.  The Company made net borrowings under its line of credit of $4.7 million during the thirteen week period ended March 31, 2018 as compared to net repayments of $1.6 million in the comparable prior year period.  The Company generated cash of $0.2 million from sales of shares from its equity plans for both periods presented.

The Company and its subsidiaries are party to a loan agreement with Citizens Bank of Pennsylvania which, as of March 31, 2018, provides for a $40 million revolving credit facility and includes a sub-limit of $5 million for letters of credit (the "Revolving Credit Facility") and expires December 11, 2019.  The Revolving Credit Facility has been amended several times, most recently pursuant to the Tenth Amendment entered into on February 14, 2018 when the Company increased the Revolving Credit Facility to $40 million from its previous amount of $35 million.  The Company also entered into to the Ninth Amendment on December 8, 2017 when the Company was granted waivers that expressly allowed a cash dividend of up to $12.4 million and waived certain expenses from the Company's loan covenant calculations, including $1.3 million of certain expenses related legal costs, office closures and other expenses in fiscal 2017, up to $1.0 million consulting expenses for analyzing tax credits for research and development costs and 179D energy savings tax credits on a rolling four quarter basis and up to $4.6 million for goodwill impairment.  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 thirteen week period ended March 31, 2018 was 3.0%.

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.  As of March 31, 2018, the Company was in compliance with all covenants contained in its Revolving Credit Facility.

31

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

Liquidity and Capital Resources (Continued)

Financing Activities (Continued)

Borrowings under the line of credit as of March 31, 2018 and December 30, 2017 were $32.0 million and $27.3 million, respectively.  At March 31, 2018 and December 30, 2017 there were letters of credit outstanding for $0.8 million.  At March 31, 2018, the Company had availability for additional borrowings under the Revolving Credit Facility of $7.2 million.

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'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 has a dispute with a customer that is a major utility in the United States. Essentially, the customer has not paid the balance of accounts receivable the Company believes are owed to the Company. The Company recently compelled arbitration with this customer.  As of March 31, 2018 the total amount due from this customer is $5.9 million, subject to an upward adjustment following disclosures by the customer in the arbitration.  Additionally, as part of the arbitration process, the customer has asserted counter claims of $9.3 million.  The Company also believes these counter claims were retaliatory in nature.  Prior to the arbitration, the customer had not asserted any claims.  The Company believes these asserted claims have no merit and were merely asserted as a strategy to reduce the Company's claims in any arbitration award or potential settlement agreement. The Company believes that its accounts receivable balance, subject to reserves, is collectible. Furthermore, the Company believes that this arbitration will conclude sometime late in fiscal year 2018 or early fiscal 2019.  While the Company believes the customer's counter claims to be frivolous and without merit, it can give no assurances that it will ultimately not have to pay all or a portion of such claims.  The Company is continuing work on one of the engagements that have given rise to this dispute and also on several engagements from the same client that are not currently part of the arbitration.The Company is continuing work on one of the engagements that have given rise to this dispute and also on several engagements from the same client that are not currently part of the arbitration.

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.  The Company has not determined when this contemplated replacement may be necessary, but may undertake a comprehensive review of the system during fiscal 2018.  The Company estimates this upgrade or replacement of their financial reporting and accounting system will cost between $1.0 million and $2.0 million.  These estimates are subject to material change.

32

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 November 2022.  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 Ending	Amount
2018 (after March 31, 2018)	$2,572
2019	1,749
2020	1,091
2021	523
2022	308
Total	$6,243

Future Contingent Payments

As of March 31, 2018, the Company had six 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"); 3) effective July 5, 2015, the Company acquired certain assets of Substation Design Services, LLC ("SDS"); 4) effective December 31, 2016, the Company acquired certain assets of Allied Health Professionals, LLC ("AHP"); 5) effective April 16, 2017 the Company acquired certain assets of R.A.F. Services, Inc. ("RAF") and 6) effective October 1, 2017, the Company acquired all of the stock of PSR Engineering Solutions d.o.o. Beograd (Voždovac) ("PSR"). The Company estimates future contingent payments at March 31, 2018 as follows:

Fiscal Years Ending	Total
December 29, 2018 (after March 31, 2018)	$741
December 28, 2019	625
January 2, 2021	725
Estimated future contingent consideration payments	$2,091

Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates.  Potential future contingent payments to be made to all active acquisitions are capped at cumulative maximum of $4.1 million. 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 March 31, 2018.  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.

33

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 March 31, 2018, 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 thirteen week period ended March 31, 2018, 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 on an annualized basis would have increased by $0.3 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.

We implemented the new revenue recognition standard as of December 31, 2017.  As a result, we made the following modifications to internal control over financial reporting, including changes to accounting policies and procedures, operational processes, and documentation practices:

• Updated our policies and procedures related to recognizing revenue and added documentation processes related to meeting the new criteria for recognizing revenue.

• Added controls to address related required disclosures regarding revenue, including the disclosure of performance obligations and our significant judgments and estimates for determining the transaction price and when to recognize revenue.

Other than the items described above, there were no changes in the Company's internal control over financial reporting  during the quarter ended March 31, 2018, that materially affected or are reasonably likely to materially affect the Company's  internal control over financial reporting.

34

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 December 30, 2017.

Operations in Puerto Rico

Our office in San Juan, Puerto Rico has been significantly impacted by Hurricane Maria.  Since that event in September 2017, that office has not generated meaningful revenues, and may not generate significant revenues in the near future, or ever.  In addition, while Puerto Rico in general and our office in particular work to recover, we expect to incur expenses, such as full-time compensation to certain individuals whom we seek to retain long-term, without receiving any associated revenue.

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.

35

ITEM 6. EXHIBITS

10(a)	Tenth Amendment to Second Amended and Restated Amendment, dated as of February 14, 2018, to Amended and Restated Loan and Security Agreement dated as of February 19, 2009, by and among the Company and all of its subsidiaries, Citizens Bank of Pennsylvania, a Pennsylvania state chartered bank, in its capacity as administrative agent and arranger, and Citizens Bank of Pennsylvania, as lender; incorporated by reference to Exhibit 99.1 to the Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 20, 2018.
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

36

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:  May 11, 2018	By: /s/ Rocco Campanelli
		Rocco Campanelli President and Chief Executive Officer (Principal Executive Officer and Duly Authorized Officer of the Registrant)

Date:  May 11, 2018	By: /s/ Kevin D. Miller
		Kevin D. Miller Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer of the Registrant)

37

Exhibit 31.1

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BYRULE 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:  May 11, 2018 /s/ Rocco Campanelli Rocco Campanelli President and Chief Executive Officer

38

Exhibit 31.2

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BYRULE 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:  May 11, 2018 /s/ Kevin D. Miller Kevin D. Miller Chief Financial Officer

39

Exhibit 32.1

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BYRULE 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 March 31, 2018 (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:  May 11, 2018

40

Exhibit 32.2

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BYRULE 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 March 31, 2018 (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:  May 11, 2018

41

EX-31.1

Exhibit 31.1

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BYRULE 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:  May 11, 2018 /s/ Rocco Campanelli Rocco Campanelli President and Chief Executive Officer

EX-31.2

Exhibit 31.2

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BYRULE 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:  May 11, 2018 /s/ Kevin D. Miller Kevin D. Miller Chief Financial Officer

EX-32.1

Exhibit 32.1

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BYRULE 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 March 31, 2018 (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:  May 11, 2018

EX-32.2

Exhibit 32.2

RCM TECHNOLOGIES, INC.

CERTIFICATIONS REQUIRED BYRULE 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 March 31, 2018 (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:  May 11, 2018

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 11, 2018
Document Information [Line Items]
Entity Registrant Name	RCM TECHNOLOGIES INC
Entity Central Index Key	0000700841
Trading Symbol	rcmt
Current Fiscal Year End Date	--12-30
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)		12,239,758
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 30, 2017
Current assets:
Cash and cash equivalents	$ 452	$ 2,851
Accounts receivable, net	51,913	46,080
Transit accounts receivable	1,089	3,002
Prepaid expenses and other current assets	3,662	3,706
Total current assets	57,116	55,639
Property and equipment, net	3,337	3,446
Other assets:
Deposits	226	215
Goodwill	11,685	11,685
Intangible assets, net	87	105
Deferred tax assets, net, domestic	2,101	2,189
Total other assets	14,099	14,194
Total assets	74,552	73,279
Current liabilities:
Accounts payable and accrued expenses	7,404	8,634
Transit accounts payable	1,503	4,661
Accrued payroll and related costs	7,696	7,780
Income taxes payable	98	372
Liability for contingent consideration from acquisitions	741	741
Total current liabilities	17,442	22,188
Liability for contingent consideration from acquisitions	1,350	1,350
Borrowings under line of credit	32,014	27,279
Total liabilities	51,234	51,248
Stockholders’ equity:
Preferred stock, $1.00 par value; 5,000,000 shares authorized; no shares issued or outstanding	0	0
Common stock, $0.05 par value; 40,000,000 shares authorized; 15,062,930 shares issued and 12,239,758 shares outstanding at March 31, 2018 and 15,017,522 shares issued and 12,194,350 shares outstanding at December 30, 2017	753	751
Additional paid-in capital	104,844	104,540
Accumulated other comprehensive loss	(2,465)	(2,395)
Accumulated deficit	(64,827)	(65,878)
Treasury stock (2,823,172 shares at March 31, 2018 and December 30, 2017) at cost	(14,987)	(14,987)
Stockholders’ equity	23,318	22,031
Total liabilities and stockholders’ equity	74,552	73,279
Foreign Tax Authority [Member]
Current liabilities:
Deferred tax liability	$ 428	$ 431

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2018	Dec. 30, 2017
Preferred stock par value (in dollars per share)	$ 1	$ 1
Preferred stock, authorized (in shares)	5,000,000	5,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, 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)	15,062,930	15,017,522
Common stock, outstanding (in shares)	12,239,758	12,194,350
Treasury stock, shares (in shares)	2,823,172	2,823,172

XML

Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Revenues	$ 50,812	$ 46,341
Cost of services	38,257	34,589
Gross profit	12,555	11,752
Operating costs and expenses
Selling, general and administrative	10,421	10,317
Depreciation and amortization	414	397
Operating costs and expenses	10,835	10,714
Operating income	1,720	1,038
Other income (expense)
Interest expense and other, net	(266)	(138)
(Loss) gain on foreign currency transactions	(41)	2
Other income (expense)	(307)	(136)
Income before income taxes	1,413	902
Income tax expense	362	352
Net income	$ 1,051	$ 550
Basic and diluted net earnings per share (in dollars per share)	$ 0.09	$ 0.05

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Net income	$ 1,051	$ 550
Other comprehensive (loss) income	(70)	4
Comprehensive income	$ 981	$ 554

XML

Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - 3 months ended Mar. 31, 2018 - 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 Dec. 30, 2017	15,017,522				2,823,172
Balance at Dec. 30, 2017	$ 751	$ 104,540	$ (2,395)	$ (65,878)	$ (14,987)	$ 22,031
Issuance of stock under employee stock purchase plan (in shares)	45,408
Issuance of stock under employee stock purchase plan	$ 2	192				194
Translation adjustment			(70)			(70)
Share-based compensation expense		112				112
Net income				1,051		1,051
Balance (in shares) at Mar. 31, 2018	15,062,930				2,823,172
Balance at Mar. 31, 2018	$ 753	$ 104,844	$ (2,465)	$ (64,827)	$ (14,987)	$ 23,318

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Cash flows from operating activities:
Net income	$ 1,051	$ 550
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	414	397
Share-based compensation expense	112	203
Provision for losses on accounts receivable	162	161
Deferred income tax expense	91	98
Changes in assets and liabilities:
Accounts receivable	(6,078)	663
Prepaid expenses and other current assets	(2)	(21)
Net of transit accounts receivable and payable	(1,243)	217
Accounts payable and accrued expenses	(1,212)	(607)
Accrued payroll and related costs	(70)	51
Income taxes payable	(269)	157
Total adjustments	(8,095)	1,319
Net cash (used in) provided by operating activities	(7,044)	1,869
Cash flows from investing activities:
Property and equipment acquired	(289)	(92)
Decrease in deposits	(11)
Net cash used in investing activities	(300)	(92)
Cash flows from financing activities:
Borrowings under line of credit	23,716	22,058
Repayments under line of credit	(18,982)	(23,644)
Issuance of stock for employee stock purchase plan	194	192
Common stock repurchases		(365)
Contingent consideration paid		(8)
Net cash provided by (used in) financing activities	4,928	(1,767)
Effect of exchange rate changes on cash and cash equivalents	17	4
(Decrease) increase in cash and cash equivalents	(2,399)	14
Cash and cash equivalents at beginning of period	2,851	279
Cash and cash equivalents at end of period	452	293
Supplemental cash flow information:
Interest	167	113
Income taxes	$ 304	$ 98

XML

Note 1 - Basis of Presentation

3 Months Ended

Mar. 31, 2018

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

December 30, 2017

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

week periods ended

March 31, 2018

are

not

necessarily indicative of results that

may

be expected for the full year.

Fiscal Year

The Company follows a

52/53

week fiscal reporting calendar ending on the Saturday closest to

December 31.

The fiscal year ended

December 30, 2017

was a

52

-week reporting year. The

first

fiscal quarters of

2018

and

2017

ended on the following dates, respectively:

Period Ended	Weeks in Quarter	Weeks in Year to Date
March 31, 2018	Thirteen	Thirteen
April 1, 2017	Thirteen	Thirteen

XML

Note 2 - Use of Estimates and Uncertainties

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Basis of Presentation and Significant Accounting Policies [Text Block]

2. 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, goodwill impairment, if any, equity compensation, 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.

The Company can be affected by a variety of factors including uncertainty relating to the performance of the general economy, competition, demand for the Company’s services, adverse litigation and claims and the hiring, training and retention of key employees.

F

air Value of Financial Instruments

The Company’s carrying value of financial instruments, consisting primarily of accounts receivable, transit accounts receivable, accounts payable and accrued expenses, and transit accounts payable 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.

XML

Note 3 - Revenue Recoginition

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3. Revenue Recognition

As of

December 31, 2017,

the Company adopted Accounting Standards Update ("ASU")

2014

-

09,

 

Revenue from Contracts with Customers ("ASC

606"

),

using the modified retrospective approach.  Revenues are recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services.  Performance obligations in our contracts represent distinct or separate service streams that we provide to our customers. The adoption of ASC

606

did

not

result in an adjustment to retained earnings in the Company’s consolidated balance sheet as of

December 31, 2017.  

We evaluate our revenue contracts with customers based on the

five

-step model under ASC

606:

(

1

) Identify the contract with the customer; (

2

) Identify the performance obligations in the contract; (

3

) Determine the transaction price; (

4

) Allocate the transaction price to separate performance obligations; and (

5

) Recognize revenue when (or as) each performance obligation is satisfied.

The Company derives its revenues from several sources. The Company’s Engineering Services and Information Technology Services segments perform consulting and project solution 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.

The following table presents our revenues disaggregated by revenue source for the

thirteen

weeks periods ending

March 31, 2018

and

April 1, 2017:

	March 31, 2018		April 1, 2017
Engineering:
Time and Material	$	18,655	$	16,698
Fixed Fee		2,763		2,526
Total Engineering	$	21,418	$	19,224
Specialty Health Care:
Time and Material	$	22,113	$	17,881
Permanent Placement Services		521		626
Total Specialty Health Care	$	22,634	$	18,507
Information Technology:
Time and Material	$	6,668	$	8,516
Permanent Placement Services		92		94
Total Information Technology	$	6,760	$	8,610
	$	50,812	$	46,341

Time and Material

The Company’s IT and Healthcare segments predominantly recognize revenue through time and material work while our Engineering segment recognizes revenue through both time and material and fixed fee work. The Company’s time and material contracts are typically based on the number of hours worked at contractually agreed upon rates, therefore revenues associated with these time and materials contracts are recognized based on hours worked at contracted rates. 

Fixed fee

From time to time and predominantly our Engineering segment, the Company will enter into contracts requiring the completion of specific deliverables.  The Company has master services agreements with many of its customers that broadly define terms and conditions. Actual services performed under fixed fee arrangements are typically delivered under purchase orders that more specifically define terms and conditions related to that fixed fee project. While these master services agreements can often span several years, the Company’s fixed fee purchase orders are typically performed over

six

to

nine

month periods.  In instances where project services are provided on a fixed-price basis, revenue is recorded in accordance with the terms of each contract.  In certain instances, revenue is invoiced 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.  On an infrequent basis, amounts paid in excess of revenues earned and 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.  Additionally, 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.  Provisions for contract losses, if any, are made in the period such losses are determined.  For contracts where there is a specific deliverable, the work is

not

complete and the revenue is

not

recognized, the costs incurred are deferred as a prepaid asset.  The associated costs are expensed when the related revenue is recognized.

Permanent Placement Services

The Company earns permanent placement fees from providing permanent placement services.  These fees are typically based on a percentage of the compensation paid to the person placed with the Company’s client.

The deferred revenue balance at

March 31, 2018

and

December 30, 2017

was

$302

and

$596,

respectively and is included in accounts payable and accrued expense in the accompanying consolidated balance sheet.  Revenue is recognized when the service has been performed.  This revenue can be recognized over a period exceeding

one

year from the time it was recorded on the balance sheet as deferred revenue.  For the

thirteen

week period ended

March 31, 2018,

the Company recognized revenue of

$295

that was included in deferred revenue at the beginning of the reporting period.  The

March 31, 2018

balance in deferred revenue will be recognized in fiscal year

2018.

XML

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

3 Months Ended

Mar. 31, 2018

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:

	March 31, 2018			December 30, 2017
Billed	$	33,405		$	31,448
Accrued and unbilled		14,446			10,573
Work-in-progress		5,178			5,026
Allowance for sales discounts and doubtful accounts		(1,116	)		(967	)
Accounts receivable, net	$	51,913		$	46,080

Unbilled receivables primarily represent revenues earned whereby those services are ready to be billed as of the balance sheet ending date. Work-in-progress 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

$1.1

million and related transit accounts payable was

$1.5

million, for a net liability of

$0.4

million, as of

March 31, 2018.

The transit accounts receivable was

$3.0

million and related transit accounts payable was

$4.7

million, a net payable of

$1.7

million, as of

December 30, 2017.

The Company has a dispute with a customer that is a major utility in the United States. Essentially, the customer has

not

paid the balance of accounts receivable the Company believes are owed to the Company. The Company recently compelled arbitration with this customer.  As of

March 31, 2018

the total amount due from this customer is

$5.9

million, subject to an upward adjustment following disclosures by the customer in the arbitration.  Additionally, as part of the arbitration process, the customer has asserted counter claims of

$9.3

million.  The Company also believes these counter claims were retaliatory in nature.  Prior to the arbitration, the customer had

not

asserted any claims.  The Company believes these asserted claims have

no

merit and were merely asserted as a strategy to reduce the Company’s claims in any arbitration award or potential settlement agreement. The Company believes that its accounts receivable balance, subject to reserves, is collectible. Furthermore, the Company believes that this arbitration will conclude sometime late in fiscal year

2018

or early fiscal

2019.

  While the Company believes the customer’s counter claims to be frivolous and without merit, it can give

no

assurances that it will ultimately

not

have to pay all or a portion of such claims.  The Company is continuing work on

one

of the engagements that have given rise to this dispute and also on several engagements from the same client that are

not

currently part of the arbitration.

XML

Note 5 - Property and Equipment

3 Months Ended

Mar. 31, 2018

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:

	March 31, 2018		December 30, 2017
Equipment and furniture	$	713	$	938
Computers and systems		6,203		6,172
Leasehold improvements		702		899
		7,618		8,009
Less: accumulated depreciation and amortization		4,281		4,563
Property and equipment, net	$	3,337	$	3,446

The Company periodically writes off fully depreciated and amortized assets.  The Company wrote off fully depreciated and amortized assets of

$681

and

$355

during the

thirteen

week periods ended

March 31, 2018

and

April 1, 2017,

respectively. Depreciation expense for the

thirteen

week periods ended

March 31, 2018

and

April 1, 2017

was

$396

and

$380,

respectively.

XML

Note 6 - Acquisitions

3 Months Ended

Mar. 31, 2018

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. The Company gives

no

assurance that it will make acquisitions in the future and if they do make acquisitions gives

no

assurance that such acquisitions will be successful.

Future Contingent Payments

As of

March 31, 2018,

the Company had

six

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”);

3

) effective

July 5, 2015,

the Company acquired certain assets of Substation Design Services, LLC (“SDS”);

4

) effective

December 31, 2016,

the Company acquired certain assets of Allied Health Professionals, LLC (“AHP”);

5

) effective

April 16, 2017

the Company acquired certain assets of R.A.F. Services, Inc. (“RAF”) and

6

) effective

October 1, 2017,

the Company acquired all of the stock of PSR Engineering Solutions d.o.o. Beograd (Voždovac) (“PSR”). The Company estimates future contingent payments at

March 31, 2018

as follows:

Fiscal Years Ending	Total
December 29, 2018 (after March 31, 2018)	$	741
December 28, 2019		625
January 2, 2021		725
Estimated future contingent consideration payments	$	2,091

Estimates of future contingent payments are subject to significant judgment and actual payments

may

materially differ from estimates.  Potential future contingent payments to be made to all active acquisitions are capped at cumulative maximum of

$4.1

million.  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

March 31, 2018. 

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.  There has been

no

change in the fair value of contingent consideration for the

thirteen

week period ended

March 31, 2018.

The Company did

not

pay contingent consideration during the

thirteen

week period ended

March 31, 2018

and paid

$8

for the

thirteen

week period ended

April 1, 2017.

RAF

Effective

April 16, 2017,

the Company acquired the business operations of RAF. RAF has been in business since

1991

as a multi-disciplined engineering and consulting and design company, headquartered on Long Island. The firm has been providing Engineering, Design, Permitting, Inspection and Construction Management services to the utility, industrial, commercial, and property management industries. RAF specializes in turnkey above ground tank inspection, repair and cleaning services, as well as concrete, steel, masonry, and roofing routine maintenance inspection and design. The purchase price for RAF was

$133,

all of which was allocated to goodwill as follows:

1

) assumed liabilities of

$123;

and

2

) estimated contingent consideration of

$10

was paid in fiscal

2017.

PSR

Effective

October 1, 2017

the Company acquired all of the stock of PSR. PSR was established in Serbia in

2006

and specializes in the design and engineering associated with high voltage substations, design engineering for electrical equipment in power plants,

3D

modeling, commissioning, site supervision and other engineering services for clients in Europe, North America, South America and the Middle East. At the time of acquisition, PSR had a highly trained staff of approximately

30

engineers. PSR has acted as a subcontractor to the Company for over

three

years. The total purchase price of

$3,248

included cash at closing of

$1,000,

estimated contingent consideration of

$1,763

and

$485

due to seller upon realization of net working capital recorded at closing. As part of the working capital recorded at closing, the Company received cash of

$237.

The Company allocated

$58

to fixed assets and the balance to goodwill.

XML

Note 7 - Goodwill

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Goodwill Disclosure [Text Block]

7. Goodwill

There were

no

changes in the carrying amount of goodwill for the

thirteen

week period ended

March 31, 2018.

	Engineering		Specialty Health Care		Information Technology		Total
Balance as of March 31, 2018 and December 30, 2017	$	7,249	$	2,398	$	2,038	$	11,685

XML

Note 8 - Intangible Assets

3 Months Ended

Mar. 31, 2018

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. During all periods presented, the Company determined that

no

impairment of intangible assets exists.

Intangible assets are substantially attributable to the Company’s Engineering segment and include the following:

	Thirteen Weeks Ended
	March 31, 2018		April 1, 2017
Customer contracts and relations	$	74	$	87
Non-compete agreements		13		18
Intangible assets	$	87	$	105

Amortization expense of intangible assets for the

thirteen

week periods ended

March 31, 2018

and

April 1, 2017

was

$18

and

$17,

respectively.

XML

Note 9 - Line of Credit

3 Months Ended

Mar. 31, 2018

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 which, as of

March 31, 2018,

provides for a

$40

million revolving credit facility and includes a sub-limit of

$5

million for letters of credit (the “Revolving Credit Facility”) and expires

December 11, 2019. 

The Revolving Credit Facility has been amended several times, most recently pursuant to the Tenth Amendment entered into on

February 14, 2018

when the Company increased the Revolving Credit Facility to

$40

million from its previous amount of

$35

million. The Company also entered into to the Ninth Amendment on

December 8, 2017

when the Company was granted waivers that expressly allowed a cash dividend of up to

$12.4

million and waived certain expenses from the Company’s loan covenant calculations, including

$1.3

million of certain expenses related legal costs, office closures and other expenses in fiscal

2017,

up to

$1.0

million consulting expenses for analyzing tax credits for research and development costs and

179D

energy savings tax credits on a rolling

four

quarter basis and up to

$4.6

million for goodwill impairment.  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

thirteen

week period ended

March 31, 2018

was

3.0%.

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.  As of

March 31, 2018,

the Company was in compliance with all covenants contained in its Revolving Credit Facility.

Borrowings under the line of credit as of

March 31, 2018

and

December 30, 2017

were

$32.0

million and

$27.3

million, respectively. At

March 31, 2018

and

December 30, 2017

there were letters of credit outstanding for

$0.8

million. At

March 31, 2018,

the Company had availability for additional borrowings under the Revolving Credit Facility of

$7.2

million.

XML

Note 10 - Per Share Data

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

1 0 . Per Share Data

The Company uses the treasury stock method to calculate the weighted-average shares used for diluted earnings per share. The number of common shares used to calculate basic and diluted earnings per share for the

thirteen

week periods ended

March 31, 2018

and

April 1, 2017

was determined as follows:

	Thirteen Week Periods Ended
	March 31, 2018		April 1, 2017
Basic weighted average shares outstanding		12,238,760		11,946,653
Dilutive effect of outstanding restricted stock awards		18,747		101,114
Weighted average dilutive shares outstanding		12,257,507		12,047,767

For the

thirteen

week period ended

March 31, 2018,

there were

no

anti-dilutive shares

not

included in the calculation of common stock equivalents.  For the

thirteen

week period ended

April 1, 2017

there were

40,000

absolute anti-dilutive shares

not

included in the calculation of common stock equivalents.  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:

	March 31, 2018		December 30, 2017
Time-based restricted stock units outstanding		87,034		87,034
Performance-based restricted stock units outstanding		400,000		400,000
Future grants of options or shares		332,232		332,232
Shares reserved for employee stock purchase plan		131,872		177,280
Total		951,138		996,546

XML

Note 11 - Share-based Compensation

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

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

11. Share-Based Compensation

At

March 31, 2018,

the Company had

two

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 time-based awards is amortized in accordance with applicable vesting periods using the straight-line method. The Company vests performance-based awards only when the performance metrics are likely to be achieved and the associated awards are therefore likely to vest. Performance-based share awards that are likely to vest are also expensed on a straight-line basis over the vesting period but

may

vest on a retroactive basis or be reversed, depending on when it is determined that they are likely to vest, or in the case of a reversal when they are later determined to be unlikely to vest.

Share-based compensation expense of

$112

and

$203

was recognized for the

thirteen

week periods ended

March 31, 2018

and

April 1, 2017,

respectively. Share based compensation for the

thirteen

week period ended

March 31, 2018

did

not

include any expense associated with performance-based restricted stock units since they were, as of

March 31, 2018,

determined to be unlikely to vest.

As of

March 31, 2018,

the Company had approximately

$376

of total unrecognized compensation cost related to all time-based non-vested share-based awards granted under the Company’s various share-based plans, which the Company expects to recognize over approximately a

two

-year period. These amounts do

not

include a) performance-based restricted stock units, b) the cost of any additional share-based awards that

may

be granted in future periods or c) the impact of any potential changes in the Company’s forfeiture rate.

Incentive S

hare-Based

Plans

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. In fiscal

2016,

the Company amended the

2014

Plan with shareholder approval to increase the aggregate number of shares of stock reserved for issuance under the Plan by an additional

500,000

shares so that the total number of shares of stock reserved for issuance under the Plan is

1,125,000

shares. The expiration date of the Plan is

December 1, 2026.

The Compensation Committee of the Board of Directors determines the vesting period at the time of grant.

As of

March 31, 2018,

under the

2014

Plan,

87,034

time-based and

400,000

performance-based restricted share units were outstanding and

332,232

shares were available for awards thereunder.

Employee Stock Purchase Plan

The Company implemented the

2001

Employee Stock Purchase Plan (the “Purchase Plan”) with shareholder approval, effective

January 1, 2001.

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.

In fiscal

2015,

the Company amended the Purchase Plan with shareholder approval to increase the aggregate number of shares of stock reserved for issuance or transfer under the Plan by an additional

300,000

shares so that the total number of shares of stock reserved for issuance or transfer under the Plan shall be

1,100,000

shares and to extend the expiration date of the Plan to

December 31, 2025.

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

business 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 (on

January 2, 2018)

was

45,408.

As of

March 31, 2018,

there were

131,872

shares available for issuance under the Purchase Plan.

Time-Based

Restricted Stock

Units

From time-to-time the Company issues time-based restricted stock units. These time-based restricted stock units typically include dividend accrual equivalents, which means that any dividends paid by the Company during the vesting period become due and payable after the 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 time-based restricted stock units that ultimately do

not

vest are forfeited.

To date, the Company has only issued time-based restricted stock units under the

2014

Plan. The following summarizes the activity in the time-based restricted stock units under the

2014

Plan during the

thirteen

week period ended

March 31, 2018:

	Number of Time-Based Restricted Stock Units		Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at December 30, 2017		87,034	$	5.88
Granted		-		-
Vested		-		-
Forfeited or expired		-		-
Outstanding non-vested at March 31, 2018		87,034	$	5.88

Based on the closing price of the Company’s common stock of

$5.77

per share on

March 29, 2018 (

the last trading day prior to

March 31, 2018),

the intrinsic value of the time-based non-vested restricted stock units at

March 31, 2018

was approximately

$502.

As of

March 31, 2018,

there was approximately

$376

of total unrecognized compensation cost related to time-based restricted stock units, which is expected to be recognized over the vesting period of the restricted stock units.

Performance Based Restricted Stock Units

From time-to-time the Company issues performance-based restricted stock units to its executives.  Performance-based restricted stock units are typically vested based on certain multi-year performance metrics as determined by the Board of Directors Compensation Committee. These performance-based restricted stock units typically include dividend accrual equivalents, which means that any dividends paid by the Company during the vesting period become due and payable after the vesting period on any stock units that actually vest, if any.  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 performance-based restricted stock units that ultimately do

not

vest are forfeited.   

To date, the Company has only issued performance-based restricted stock units under the

2014

Plan.  The following summarizes the activity in the performance-based restricted stock units during

2017:

	Number of Performance-Based Restricted Stock Units		Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at December 30, 2017		400,000	$	5.11
Granted		-		-
Vested		-		-
Forfeited or expired		-		-
Outstanding non-vested at March 31, 2018		400,000	$	5.11

As of

March 31, 2018,

the Company considers the metrics related to

400,000

of the performance-based restricted stock units unlikely to be achieved, thus

no

performance condition is probable of achievement and

no

compensation cost has been recognized on the performance-based restricted stock units. The Company will reassess at each reporting date whether achievement of any performance condition is probable and would begin recognizing compensation cost if and when achievement of the performance condition becomes probable. The Company will then recognize the appropriate expense cumulatively in the year performance becomes probable and recognize the remaining compensation cost over the remaining requisite service period.

XML

Note 12 - Treasury Stock Transactions

3 Months Ended

Mar. 31, 2018

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.

On

August 9, 2016,

the Board authorized an additional

$5.0

million to the repurchase program and extended this repurchase program through

December 31, 2017.

For the

thirteen

week period ended

March 31, 2018,

the Company did

not

purchase any treasury shares. For the

thirteen

week period ended

April 1, 2017,

the Company purchased

59,312

shares at an average price of

$6.16.

As of

March 31, 2018,

the Company has

$2.5

million available for future treasury stock purchases.

XML

Note 13 - New Accounting Standards

3 Months Ended

Mar. 31, 2018

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,

(Topic

606

) “Revenue from Contracts with Customers.” Topic

606

supersedes the revenue recognition requirement in Topic “Revenue Recognition” (Topic

605

), and requires entities to recognize revenue when control of the promised good or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for goods or services.  The Company adopted this standard in its fiscal

2018

first

quarter using the modified retrospective approach.  See Note

3

for further details.

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases (Topic

842

),

in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU

2016

-

02

requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU

2016

-

02

is effective for fiscal years beginning after

December 15, 2018 (

including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company will adopt ASU

2016

-

02

in the

first

quarter of

2019.Although

the Company is in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements, the Company currently believes the most significant change will be related to the recognition of right-of-use assets and lease liabilities on the Company's balance sheet for real estate operating leases.

In

March 2016,

the FASB issued ASU

2016

-

09,

Compensation – Stock Compensation (Topic

718

): Improvement to Employee Share-based Payment Accounting

.  ASU

2016

-

09

simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows.  Additionally, in

May 2017,

the FASB issued ASU

2017

-

09,

Compensation – Stock Compensation (Topic

718

). 

ASU

2017

-

09

clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under ASC

718.

The Company adopted ASU

2016

-

09

in its fiscal

2017

first

quarter.  It did

not

have a material impact.  ASU

2017

-

09

is effective for annual and interim reporting periods beginning after

December 15, 2017. 

The Company adopted ASU

2017

-

09

in its fiscal

2018

first

quarter.  It did

not

have a material impact.

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments - Credit Losses (Topic

326

).

The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. This ASU is effective for financial statements issued for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact it

may

have on its consolidated financial statements.

In

August 2016,

the FASB issued ASU

No.

2016

-

15,

Statement of Cash Flows (

Topic

230

):

Classification of Certain Cash Receipts and Cash Payments

. ASU

2016

-

15

clarifies how certain cash receipts and payments should be presented in the statement of cash flows. The guidance requires application using a retrospective transition method. The Company adopted ASU

2016

-

15

in its fiscal

2018

first

quarter. It did

not

have a material impact.

In

January 2017,

the FASB issued ASU

No.

2017

-

01,

“

Business Combinations”

(Topic

805

) to clarify the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.  The Company adopted ASU

2017

-

01

in its fiscal

2018

first

quarter. It did

not

have a material impact. 

XML

Note 14 - Segment Information

3 Months Ended

Mar. 31, 2018

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

December 30, 2017).

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 March 31, 2018	Engineering		Specialty Health Care		Information Technology			Corporate		Total
Revenue	$	21,418	$	22,634	$	6,760		$	-	$	50,812
Cost of services		15,724		17,384		5,149			-		38,257
Gross profit		5,694		5,250		1,611			-		12,555
Selling, general and administrative		4,122		4,470		1,829			-		10,421
Depreciation and amortization		283		105		26			-		414
Operating income (loss)	$	1,289	$	675	$	(244	)	$	-	$	1,720
Total assets as of March 31, 2018	$	36,578	$	24,884	$	6,573		$	6,517	$	74,552
Capital expenditures	$	109	$	40	$	9		$	131	$	289

Thirteen Week Period Ended April 1, 2017	Engineering		Specialty Health Care		Information Technology			Corporate		Total
Revenue	$	19,224	$	18,507	$	8,610		$	-	$	46,341
Cost of services		14,185		13,947		6,457			-		34,589
Gross profit		5,039		4,560		2,153			-		11,752
Selling, general and administrative		4,037		3,927		2,353			-		10,317
Depreciation and amortization		285		72		40			-		397
Operating income (loss)	$	717	$	561	$	(240	)	$	-	$	1,038
Total assets as of April 1, 2017	$	32,014	$	17,867	$	11,903		$	4,016	$	65,800
Capital expenditures	$	69	$	-	$	-		$	23	$	92

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, Puerto Rico and Serbia. Revenues by geographic area for the

thirteen

week periods ended

March 31, 2018

and

April 1, 2017

are as follows:

	Thirteen Week Periods Ended
	March 31, 2018		April 1, 2017
Revenues
U. S.	$	41,591	$	38,718
Canada		7,629		6,495
Puerto Rico		983		1,128
Serbia		609		-
	$	50,812	$	46,341

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

	March 31, 2018		December 30, 2017
Total assets
U. S.	$	55,067	$	52,595
Canada		13,943		15,419
Puerto Rico		1,838		1,891
Serbia		3,704		3,374
	$	74,552	$	73,279

XML

Note 15 - Income Taxes

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

15. Income Taxes

On

December 22, 2017,

the SEC issued guidance under Staff Accounting Bulletin

No.

118,

Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB

118”

) directing taxpayers to consider the impact of the Tax Act as “provisional” when it does

not

have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. The changes in the Tax Act are broad and complex. The final impacts of the Tax Act

may

differ from the Company’s estimates due to, among other things, changes in interpretations of the Tax Act, further legislation related to the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates to estimates the Company has utilized to calculate the impacts of the Tax Act. The SEC has issued rules that would allow for a measurement period of up to

one

year after the enactment date of the Tax Act to finalize the related tax impacts. The Company currently anticipates finalizing any resulting adjustments by the end of its fiscal year ending

December 29, 2018. 

The Company, based on current knowledge, estimated the impact of SAB

118

on its income tax provision for the

fifty-two

week period ended

December 30, 2017. 

The total impact was an increase to its fiscal

2017

tax expense of

$1.2

million, including

$1.0

million for a reduction in deferred tax benefit and

$0.2

million related to transition repatriation taxes. Any subsequent changes to the Company’s fiscal

2017

tax expense estimates, if any, could materially impact the Company’s fiscal

2018

tax provision. As of

March 31, 2018,

the Company is unaware of any factors or potential revisions that would materially change the Company’s estimated fiscal

2017

tax provision.

The projected fiscal

2018

effective income tax rates as of

March 31, 2018

for the

thirteen

week period ended

March 31, 2018

are approximately

27.9%,

26.5%

and

14.8%

in the United States, Canada and Serbia, respectively, and yielded a consolidated effective income tax rate of approximately

25.6%

for the

thirteen

week period ended

March 31, 2018. 

The comparable prior year period estimated income tax rates were

41.6%

and

26.5%

in the United States and Canada, respectively, and yielded a consolidated effective income tax rate of approximately

39.0%

for the

thirteen

week period ended

April 1, 2017. 

The Company did

not

have Serbian operations for the comparable prior year period. The significant decrease in the tax rate in the United States for the

thirteen

week period ended

March 31, 2018

as compared to the comparable prior year period was due to the reduction in the Company’s federal income tax rate to

21.0%

from

34.0%

as provided for in the Tax Cuts and Jobs Act. The relative income or loss generated in each jurisdiction can materially impact the overall effective income tax rate of the Company.

XML

Note 16 - Contingencies

3 Months Ended

Mar. 31, 2018

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

$10.0

million in damages (including

$9.3

million in counter claims described below) as of

March 31, 2018.

As of

March 31, 2018,

the Company had an accrual of

$0.1

million for any such liabilities.

The Company has a dispute with a customer that is a major utility in the United States. Essentially, the customer has

not

paid the balance of accounts receivable the Company believes are owed to the Company. The Company recently compelled arbitration with this customer.  As of

March 31, 2018

the total amount due from this customer is

$5.9

million, subject to an upward adjustment following disclosures by the customer in the arbitration.  Additionally, as part of the arbitration process, the customer has asserted counter claims of

$9.3

million.  The Company also believes these counter claims were retaliatory in nature.  Prior to the arbitration, the customer had

not

asserted any claims.  The Company believes these asserted claims have

no

merit and were merely asserted as a strategy to reduce the Company’s claims in any arbitration award or potential settlement agreement. The Company believes that its accounts receivable balance, subject to reserves, is collectible. Furthermore, the Company believes that this arbitration will conclude sometime late in fiscal year

2018

or early fiscal

2019.

  While the Company believes the customer’s counter claims to be frivolous and without merit, it can give

no

assurances that it will ultimately

not

have to pay all or a portion of such claims.  The Company is continuing work on

one

of the engagements that have given rise to this dispute and also on several engagements from the same client that are

not

currently part of the arbitration.

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.

XML

Note 3 - Revenue Recoginition (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Disaggregation of Revenue [Table Text Block]

	March 31, 2018		April 1, 2017
Engineering:
Time and Material	$	18,655	$	16,698
Fixed Fee		2,763		2,526
Total Engineering	$	21,418	$	19,224
Specialty Health Care:
Time and Material	$	22,113	$	17,881
Permanent Placement Services		521		626
Total Specialty Health Care	$	22,634	$	18,507
Information Technology:
Time and Material	$	6,668	$	8,516
Permanent Placement Services		92		94
Total Information Technology	$	6,760	$	8,610
	$	50,812	$	46,341

XML

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

3 Months Ended

Mar. 31, 2018

Notes Tables

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

	March 31, 2018			December 30, 2017
Billed	$	33,405		$	31,448
Accrued and unbilled		14,446			10,573
Work-in-progress		5,178			5,026
Allowance for sales discounts and doubtful accounts		(1,116	)		(967	)
Accounts receivable, net	$	51,913		$	46,080

XML

Note 5 - Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Property, Plant and Equipment [Table Text Block]

	March 31, 2018		December 30, 2017
Equipment and furniture	$	713	$	938
Computers and systems		6,203		6,172
Leasehold improvements		702		899
		7,618		8,009
Less: accumulated depreciation and amortization		4,281		4,563
Property and equipment, net	$	3,337	$	3,446

XML

Note 6 - Acquisitions (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

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

Fiscal Years Ending	Total
December 29, 2018 (after March 31, 2018)	$	741
December 28, 2019		625
January 2, 2021		725
Estimated future contingent consideration payments	$	2,091

XML

Note 7 - Goodwill (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Goodwill [Table Text Block]

	Engineering		Specialty Health Care		Information Technology		Total
Balance as of March 31, 2018 and December 30, 2017	$	7,249	$	2,398	$	2,038	$	11,685

XML

Note 8 - Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Acquired Finite-Lived Intangible Assets by Major Class [Table Text Block]

	Thirteen Weeks Ended
	March 31, 2018		April 1, 2017
Customer contracts and relations	$	74	$	87
Non-compete agreements		13		18
Intangible assets	$	87	$	105

XML

Note 10 - Per Share Data (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

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

	Thirteen Week Periods Ended
	March 31, 2018		April 1, 2017
Basic weighted average shares outstanding		12,238,760		11,946,653
Dilutive effect of outstanding restricted stock awards		18,747		101,114
Weighted average dilutive shares outstanding		12,257,507		12,047,767

Unissued Shares of Common Stock [Table Text Block]

	March 31, 2018		December 30, 2017
Time-based restricted stock units outstanding		87,034		87,034
Performance-based restricted stock units outstanding		400,000		400,000
Future grants of options or shares		332,232		332,232
Shares reserved for employee stock purchase plan		131,872		177,280
Total		951,138		996,546

XML

Note 11 - Share-based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

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

	Number of Time-Based Restricted Stock Units		Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at December 30, 2017		87,034	$	5.88
Granted		-		-
Vested		-		-
Forfeited or expired		-		-
Outstanding non-vested at March 31, 2018		87,034	$	5.88

	Number of Performance-Based Restricted Stock Units		Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at December 30, 2017		400,000	$	5.11
Granted		-		-
Vested		-		-
Forfeited or expired		-		-
Outstanding non-vested at March 31, 2018		400,000	$	5.11

XML

Note 14 - Segment Information (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

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

Thirteen Week Period Ended March 31, 2018	Engineering		Specialty Health Care		Information Technology			Corporate		Total
Revenue	$	21,418	$	22,634	$	6,760		$	-	$	50,812
Cost of services		15,724		17,384		5,149			-		38,257
Gross profit		5,694		5,250		1,611			-		12,555
Selling, general and administrative		4,122		4,470		1,829			-		10,421
Depreciation and amortization		283		105		26			-		414
Operating income (loss)	$	1,289	$	675	$	(244	)	$	-	$	1,720
Total assets as of March 31, 2018	$	36,578	$	24,884	$	6,573		$	6,517	$	74,552
Capital expenditures	$	109	$	40	$	9		$	131	$	289

Thirteen Week Period Ended April 1, 2017	Engineering		Specialty Health Care		Information Technology			Corporate		Total
Revenue	$	19,224	$	18,507	$	8,610		$	-	$	46,341
Cost of services		14,185		13,947		6,457			-		34,589
Gross profit		5,039		4,560		2,153			-		11,752
Selling, general and administrative		4,037		3,927		2,353			-		10,317
Depreciation and amortization		285		72		40			-		397
Operating income (loss)	$	717	$	561	$	(240	)	$	-	$	1,038
Total assets as of April 1, 2017	$	32,014	$	17,867	$	11,903		$	4,016	$	65,800
Capital expenditures	$	69	$	-	$	-		$	23	$	92

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

	Thirteen Week Periods Ended
	March 31, 2018		April 1, 2017
Revenues
U. S.	$	41,591	$	38,718
Canada		7,629		6,495
Puerto Rico		983		1,128
Serbia		609		-
	$	50,812	$	46,341

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

	March 31, 2018		December 30, 2017
Total assets
U. S.	$	55,067	$	52,595
Canada		13,943		15,419
Puerto Rico		1,838		1,891
Serbia		3,704		3,374
	$	74,552	$	73,279

XML

Note 3 - Revenue Recoginition (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 30, 2017
Contract with Customer, Liability, Revenue Recognized	$ 295
Accounts Payable and Accrued Liabilities [Member]
Contract with Customer, Liability, Total	$ 302	$ 596

XML

Note 3 - Revenue Recognition - Revenues Disaggregated by Revenue Source (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Revenues	$ 50,812	$ 46,341
Engineering Services [Member]
Revenues	21,418	19,224
Health Care [Member]
Revenues	22,634	18,507
Technology Service [Member]
Revenues	6,760	8,610
Time-and-materials Contract [Member] | Engineering Services [Member]
Revenues	18,655	16,698
Time-and-materials Contract [Member] | Health Care [Member]
Revenues	22,113	17,881
Time-and-materials Contract [Member] | Technology Service [Member]
Revenues	6,668	8,516
Fixed-price Contract [Member] | Engineering Services [Member]
Revenues	2,763	2,526
Permanent Placement Services [Member] | Health Care [Member]
Revenues	521	626
Permanent Placement Services [Member] | Technology Service [Member]
Revenues	$ 92	$ 94

XML

Note 4 - Accounts Receivable, Transit Accounts Receivable and Transit Accounts Payable (Details Textual) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 30, 2017
Liabilities, Net	$ 0.4	$ 1.7
Loss Contingency, Receivable, Ending Balance	5.9
Loss Contingency, Estimate of Possible Loss	9.3
Collectibility of Receivables [Member]
Loss Contingency, Estimate of Possible Loss	9.3
Transit Accounts Payable [Member]
Accounts Payable, Current, Total	1.5	4.7
Transit Accounts Receivable [Member]
Accounts Receivable, Gross, Current	$ 1.1	$ 3.0

XML

Note 4 - Accounts Receivable, Transit Accounts Receivable and Transit Accounts Payable - Accounts Receivable (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 30, 2017
Allowance for sales discounts and doubtful accounts	$ (1,116)	$ (967)
Accounts receivable, net	51,913	46,080
Billed Revenues [Member]
Accounts receivable, current	33,405	31,448
Unbilled Revenues [Member]
Accounts receivable, current	14,446	10,573
Work In Progress [Member]
Accounts receivable, current	$ 5,178	$ 5,026

XML

Note 5 - Property and Equipment (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Annual Depreciation Rate	20.00%
Write Off of Fully Depreciated Property and Equipment	$ 681	$ 355
Depreciation, Total	$ 396	$ 380

XML

Note 5 - Property and Equipment - Summary of Property and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 30, 2017
Property and equipment	$ 7,618	$ 8,009
Less: accumulated depreciation and amortization	4,281	4,563
Property and equipment, net	3,337	3,446
Equipment and Furniture [Member]
Property and equipment	713	938
Computers and Systems [Member]
Property and equipment	6,203	6,172
Leasehold Improvements [Member]
Property and equipment	$ 702	$ 899

XML

Note 6 - Acquisitions (Details Textual) $ in Thousands			3 Months Ended
	Oct. 01, 2017 USD ($)	Apr. 16, 2017 USD ($)	Mar. 31, 2018 USD ($)	Apr. 01, 2017 USD ($)	Dec. 30, 2017 USD ($)
Business Combinations, Acquisitions with Contingent Consideration Outstanding			6
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High			$ 4,100
Payments to Acquire Businesses, Gross			$ 0	$ 8
RAF Services, Inc [Member]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High					$ 10
Business Combination, Consideration Transferred, Total		$ 133
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities, Total		$ 123
PSR Engineering Solutions d.o.o. Beograd (Voždovac) [Member]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	$ 1,763
Payments to Acquire Businesses, Gross	1,000
Business Combination, Consideration Transferred, Total	3,248
Business Combination, Consideration Transferred, Liabilities Incurred	485
Cash Acquired from Acquisition	237
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Property, Plant, and Equipment, Total	$ 58

XML

Note 6 - Acquisitions - Maximum Deferred Consideration Payments (Details) $ in Thousands	Mar. 31, 2018 USD ($)
December 29, 2018 (after March 31, 2018)	$ 741
December 28, 2019	625
January 2, 2021	725
Estimated future contingent consideration payments	$ 2,091

XML

Note 7 - Goodwill (Details Textual) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)
Goodwill, Period Increase (Decrease), Total	$ 0

XML

Note 7 - Goodwill - Changes in Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 30, 2017
Balance	$ 11,685	$ 11,685
Engineering [Member]
Balance	7,249
Specialty Health Care [Member]
Balance	2,398
Information Technology [Member]
Balance	$ 2,038

XML

Note 8 - Intangible Assets (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Impairment of Intangible Assets (Excluding Goodwill), Total	$ 0	$ 0
Amortization of Intangible Assets, Total	$ 18	$ 17

XML

Note 8 - Intangible Assets - Intangible Assets by Class (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 30, 2017	Apr. 01, 2017
Intangible assets, net	$ 87	$ 105	$ 105
Customer-Related Intangible Assets [Member]
Intangible assets, net	74		87
Noncompete Agreements [Member]
Intangible assets, net	$ 13		$ 18

XML

Note 9 - Line of Credit (Details Textual) - USD ($) $ in Thousands	Dec. 08, 2017	Mar. 31, 2018	Feb. 13, 2018	Dec. 30, 2017
Long-term Line of Credit, Noncurrent		$ 32,014		$ 27,279
Citizens Bank of Pennsylvania [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 40,000	$ 35,000
Line of Credit, Loan Covenants, Cash Dividend	$ 12,400
Line of Credit, Loan Covenants, Waiver Granted, Amount of Legal Settlement and Office Closure Expenses Excluded	1,300
Line of Credit, Loan Covenants, Waiver Granted, Consulting Expenses Excluded	1,000
Line of Credit, Loan Covenants, Waiver Granted, Goodwill Impairment Expenses Excluded	$ 4,600
Debt Instrument, Interest Rate, Effective Percentage		3.00%
Long-term Line of Credit, Noncurrent		$ 32,000		27,300
Letters of Credit Outstanding, Amount		800		$ 800
Line of Credit Facility, Remaining Borrowing Capacity		7,200
Citizens Bank of Pennsylvania [Member] | Letter of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 5,000

XML

Note 10 - Per Share Data (Details Textual) - shares	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	40,000

XML

Note 10 - Per Share Data - Weighted Average Number of Common Shares (Details) - shares	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Basic weighted average shares outstanding (in shares)	12,238,760	11,946,653
Dilutive effect of outstanding restricted stock awards (in shares)	18,747	101,114
Weighted average dilutive shares outstanding (in shares)	12,257,507	12,047,767

XML

Note 10 - Per Share Data - Unissued Shares of Common Stock Were Reserved for the Following Purposes (Details) - shares	Mar. 31, 2018	Dec. 30, 2017
Future grants of options or shares (in shares)	332,232	332,232
Shares reserved for employee stock purchase plan (in shares)	131,872	177,280
Total (in shares)	951,138	996,546
Time-based Restricted Stock Units [Member]
Restricted stock units outstanding (in shares)	87,034	87,034
Performance-based Restricted Stock Units [Member]
Restricted stock units outstanding (in shares)	400,000	400,000

XML

Note 11 - Share-based Compensation (Details Textual) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Apr. 01, 2017	Dec. 31, 2016	Jan. 02, 2016	Mar. 29, 2018	Dec. 30, 2017	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Allocated Share-based Compensation Expense, Total	$ 112	$ 203
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	$ 376
Common Stock, Capital Shares Reserved for Future Issuance	951,138					996,546
Share Price					$ 5.77
The 2014 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,125,000						625,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized			500,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	332,232
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	131,872
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%
Additional Shares of Common Stock Reserved for Future Issuance				300,000
Common Stock, Capital Shares Reserved for Future Issuance				1,100,000
Stock Issued During Period, Shares, Employee Stock Purchase Plans	45,408
Performance-based Restricted Stock Units [Member]
Allocated Share-based Compensation Expense, Total	$ 0
Performance-based Restricted Stock Units [Member] | The 2014 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Ending Balance	400,000					400,000
Time-based Restricted Stock Units [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	$ 376
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Nonvested	$ 502
Time-based Restricted Stock Units [Member] | The 2014 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Ending Balance	87,034					87,034
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

XML

Note 11 - Share-based Compensation - Restricted Stock Units Activity (Details) - The 2014 Plan [Member]	3 Months Ended
	Mar. 31, 2018 $ / shares shares
Time-based Restricted Stock Units [Member]
Outstanding non-vested (in shares) | shares	87,034
Outstanding non-vested, weighted average grant date fair value (in dollars per share) | $ / shares	$ 5.88
Granted (in shares) | shares
Granted, weighted average grant date fair value (in dollars per share) | $ / shares
Vested (in shares) | shares
Vested, weighted average grant date fair value (in dollars per share) | $ / shares
Forfeited or expired (in shares) | shares	0
Forfeited or expired, weighted average grant date fair value (in dollars per share) | $ / shares	$ 0
Outstanding non-vested (in shares) | shares	87,034
Outstanding non-vested, weighted average grant date fair value (in dollars per share) | $ / shares	$ 5.88
Performance-based Restricted Stock Units [Member]
Outstanding non-vested (in shares) | shares	400,000
Outstanding non-vested, weighted average grant date fair value (in dollars per share) | $ / shares	$ 5.11
Granted (in shares) | shares
Granted, weighted average grant date fair value (in dollars per share) | $ / shares
Vested (in shares) | shares	0
Vested, weighted average grant date fair value (in dollars per share) | $ / shares	$ 0
Forfeited or expired (in shares) | shares	0
Forfeited or expired, weighted average grant date fair value (in dollars per share) | $ / shares	$ 0
Outstanding non-vested (in shares) | shares	400,000
Outstanding non-vested, weighted average grant date fair value (in dollars per share) | $ / shares	$ 5.11

XML

Note 12 - Treasury Stock Transactions (Details Textual) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017	Aug. 09, 2016	Oct. 28, 2013
Stock Repurchase Program 2013 [Member]
Stock Repurchase Program, Authorized Amount				$ 5.0
Stock Repurchase Program, 2016 [Member]
Stock Repurchase Program, Authorized Amount			$ 5.0
Treasury Stock, Shares, Acquired	0	59,312
Treasury Stock Acquired, Average Cost Per Share		$ 6.16
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 2.5

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Note 14 - Segment Information - Results of the Segments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017	Dec. 30, 2017
Revenues	$ 50,812	$ 46,341
Cost of services	38,257	34,589
Gross profit	12,555	11,752
Selling, general and administrative	10,421	10,317
Depreciation and amortization	414	397
Operating income (loss)	1,720	1,038
Total assets	74,552	65,800	$ 73,279
Capital expenditures	289	92
Engineering [Member]
Revenues	21,418	19,224
Cost of services	15,724	14,185
Gross profit	5,694	5,039
Selling, general and administrative	4,122	4,037
Depreciation and amortization	283	285
Operating income (loss)	1,289	717
Total assets	36,578	32,014
Capital expenditures	109	69
Specialty Health Care [Member]
Revenues	22,634	18,507
Cost of services	17,384	13,947
Gross profit	5,250	4,560
Selling, general and administrative	4,470	3,927
Depreciation and amortization	105	72
Operating income (loss)	675	561
Total assets	24,884	17,867
Capital expenditures	40
Information Technology [Member]
Revenues	6,760	8,610
Cost of services	5,149	6,457
Gross profit	1,611	2,153
Selling, general and administrative	1,829	2,353
Depreciation and amortization	26	40
Operating income (loss)	(244)	(240)
Total assets	6,573	11,903
Capital expenditures	9
Corporate Segment [Member]
Revenues
Cost of services
Gross profit
Selling, general and administrative
Depreciation and amortization
Operating income (loss)
Total assets	6,517	4,016
Capital expenditures	$ 131	$ 23

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Note 14 - Segment Information - Revenues by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Apr. 01, 2017
Revenues	$ 50,812	$ 46,341
UNITED STATES
Revenues	41,591	38,718
CANADA
Revenues	7,629	6,495
PUERTO RICO
Revenues	983	1,128
SERBIA
Revenues	$ 609

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Note 14 - Segment Information - Total Assets by Geographic Area (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 30, 2017	Apr. 01, 2017
U. S.	$ 74,552	$ 73,279	$ 65,800
UNITED STATES
U. S.	55,067	52,595
CANADA
U. S.	13,943	15,419
PUERTO RICO
U. S.	1,838	1,891
SERBIA
U. S.	$ 3,704	$ 3,374

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Note 15 - Income Taxes (Details Textual) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Apr. 01, 2017	Dec. 30, 2017
Tax Adjustments, Settlements, and Unusual Provisions			$ 1.2
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability			1.0
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Amount			$ 0.2
Effective Income Tax Rate Reconciliation, Percent, Total	25.60%	39.00%
Domestic Tax Authority [Member] | Internal Revenue Service (IRS) [Member]
Effective Income Tax Rate Reconciliation, Percent, Total	27.90%	41.60%
Foreign Tax Authority [Member] | Canada Revenue Agency [Member]
Effective Income Tax Rate Reconciliation, Percent, Total	26.50%	26.50%
Foreign Tax Authority [Member] | Ministry of Finance, Republic of Serbia [Member]
Effective Income Tax Rate Reconciliation, Percent, Total	14.80%

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Note 16 - Contingencies (Details Textual) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($)
Loss Contingency, Damages Sought, Value	$ 10.0
Estimated Litigation Liability	0.1
Loss Contingency, Receivable, Ending Balance	5.9
Loss Contingency, Estimate of Possible Loss	$ 9.3