8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

________

FORM 8-K/A

AMENDMENT NO. 1

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): November 8, 2018

RCM Technologies, Inc.

(Exact Name of Registrant as Specified in Charter)

Nevada (State or Other Jurisdiction of Incorporation) 1-10245 (Commission File Number) 95-1480559 (I.R.S. Employer Identification No.)

2500 McClellan Avenue, Suite 350
Pennsauken, NJ	08109-4613
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (856) 356-4500

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[  ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).
[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).
[  ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b)).
[  ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c)).

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  [  ] 

EXPLANATORY NOTE

On November 8, 2018, RCM Technologies (USA), Inc. (the “Buyer”), a New Jersey corporation and a wholly-owned subsidiary of RCM Technologies, Inc. (the “Registrant” or the “Company”), entered into an Asset Purchase Agreement (the “Purchase Agreement”), with Thermal Kinetics Engineering, PLLC, a New York professional limited liability company, Thermal Kinetics Systems, LLC, a New York limited liability company (together “TKE”, each a “Seller” and collectively, “Sellers” or “Thermal Kinetics”), the members of Sellers identified in Section 1 of the Purchase Agreement (each, a “Seller’s Member” and collectively, “Sellers’ Members”).  The Registrant is also a party to the Purchase Agreement solely for purposes of being bound by the Parent Guarantee (as defined therein).

On November 15, 2018, the Company filed with the Securities and Exchange Commission a Current Report on Form 8-K (the “Original Form 8-K”) to report the execution of the Purchase Agreement and the consummation of the transactions contemplated thereby.  This Amendment No. 1 to the Original Form 8-K amends and supplements Item 9.01 of the Original Form 8-K to provide the financial statements and pro forma financial information required under Items 9.01(a) and (b) of Form 8-K, which were excluded from the Original Form 8-K in reliance on the instructions to such items.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The audited combined financial statements of Thermal Kinetics Engineering, PLLC and Affiliate for the year ended December 31, 2017 and for the nine months ended September 30, 2018 as well as the unaudited financial statements of Thermal Kinetics Engineering, PLLC for the nine months ended September 30, 2017 are attached as Exhibit 99.1 hereto. We have attached the consent of Freed Maxick, CPAs, P.C., Thermal Kinetics Engineering, PLLC and Affiliate’s independent auditors, as Exhibit 23.1 to this Form 8-K/A.

(b) Unaudited Pro Forma Financial Information.

The unaudited pro forma condensed combined financial information of the Company for the thirty-nine weeks ended September 29, 2018 and the fifty-two weeks ended December 31, 2017 and of Thermal Kinetics Engineering, PLLC and Affiliate for the nine months ended September 30, 2018 and the year ended December 31, 2017 are attached as Exhibit 99.2 hereto.

(d) Exhibits.

Exhibit No.	Description
23.1	Consent of Freed Maxick, CPAs, P.C.
99.1	Financial Statements of Thermal Kinetics Engineering, PLLC and Affiliate for the nine months ended September 30, 2018 (Audited), year ended December 31, 2017 (Audited) and the nine months ended September 30, 2017 (Unaudited).
99.2	Unaudited pro forma combined balance sheets of RCM as of September 29, 2018 and TKE as of September 30, 2018. Unaudited pro forma combined statement of income for the Company for the thirty-nine weeks ended September 29, 2018 and TKE for the nine months ended September 30, 2018 Unaudited pro forma combined statement of income for the Company for the fifty-two weeks ended December 30, 2017 and TKE for the year ended December 31, 2017

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 hereunto duly authorized.

RCM TECHNOLOGIES, INC.

By:	/s/ Kevin D. Miller
	Kevin D. Miller
	Chief Financial Officer, Treasurer and Secretary

Dated: January 24, 2019

EX-23.1

Exhibit 23.1

CONSENT OF FREED MAXICK, CPAs, P.C.

We consent to the inclusion in Amendment No. 1 to the Current Report on Form 8-K of RCM Technologies, Inc. of our reports dated January 24, 2019, relating to the combined financial statements of Thermal Kinetics Engineering, PLLC and Affiliate, appearing in this Current Report on Form 8-K/A, and to the incorporation by reference in the registration statements of RCM Technologies, Inc. on Form S-8 (Commission File Nos. 333-222151, 333-200826, 333-165482, 333-145904 and 333-52480) of our said report.

/s/ Freed Maxick, CPAs, P.C.

Buffalo, NY

January 24, 2019

EX-99.1

Exhibit 99.1

THERMAL KINETICS ENGINEERING, PLLC

AND AFFILIATE

COMBINED FINANCIAL STATEMENTS

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

TABLE OF CONTENTS

INDEPENDENT AUDITOR’S REPORT	2
INDEPENDENT ACCOUNTANT’S REPORT	3
FINANCIAL STATEMENTS
Combined Balance Sheets at September 30, 2018 (Audited), December 31, 2017 (Audited) and September 30, 2017 (Unaudited)	4
Combined Statements of Income and Comprehensive Income for the Nine Months Ended September 30, 2018 (Audited), the Year Ended December 31, 2017 (Audited) and Nine Months Ended September 30, 2017 (Unaudited)	5
Combined Statement of Changes in Members’ Equity from January 1, 2016 through September 30, 2018	6
Combined Statements of Cash Flows for the Nine Months Ended September 30, 2018 (Audited), the Year Ended December 31, 2017 (Audited) and Nine Months Ended September 30, 2017 (Unaudited)	7
Notes to Combined Financial Statements	8

1

INDEPENDENT AUDITOR’S REPORT

To the Members of

Thermal Kinetics Engineering, PLLC and Affiliate

Report on the Financial Statements

We have audited the accompanying combined financial statements of Thermal Kinetics Engineering, PLLC and Affiliate which comprise the combined balance sheets as of September 30, 2018 and December 31, 2017, and the related combined statements of income and comprehensive income, changes in members’ equity and cash flows for the nine months ended September 30, 2018 and year ended December 31, 2017 and the related notes to the combined financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Thermal Kinetics Engineering, PLLC and Affiliate as of September 30, 2018 and December 31, 2017, and the combined results of its operations and its cash flows for the nine months ended September 30, 2018 and the year ended December 31, 2017 in accordance with accounting principles generally accepted in the United States of America.

/s/ Freed Maxick, CPAs, P.C.

Buffalo, NY

January 24, 2019

2

INDEPENDENT ACCOUNTANT’S REVIEW REPORT

To the Members of

Thermal Kinetics Engineering, PLLC and Affiliate

We have reviewed the accompanying combined financial statements of Thermal Kinetics Engineering, PLLC and Affiliate (the Company), which comprise the combined balance sheet as of September 30, 2017, the related combined statement of income and comprehensive income, changes in members’ equity and cash flows for the nine months ended September 30, 2017, and the related notes to the combined financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Accountant’s Responsibility

Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.

Accountant’s Conclusion

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.

/s/ Freed Maxick, CPAs, P.C.

Buffalo, NY

January 24, 2019

3

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

COMBINED BALANCE SHEETS

(In thousands)

			Audited		Unaudited
			September 30,	December 31,	September 30,
			2018	2017	2017
Current assets:
	Cash and cash equivalents		$1,304	$1,288	$1,854
	Accounts receivable, net		1,000	221	117
	Marketable securities		487	457	431
	Prepaid expenses and other current assets		46	17	-
		Total current assets	2,837	1,983	2,402
Property and equipment, net			101	118	128
Other assets			19	19	19
	Total assets		$2,957	$2,120	$2,549

Current liabilities:
	Accounts payable and accrued expenses		$476	$46	$74
	Accrued payroll and payroll taxes		26	86	46
	Deferred revenues		900	213	64
		Total liabilities	1,402	345	184
Members’ equity			1,475	1,721	2,332
Accumulated other comprehensive income			80	54	33
	Total members’ equity		1,555	1,775	2,365
		Total liabilities and members’ equity	$2,957	$2,120	$2,549

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

4

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands)

		Audited		Unaudited
		Nine Months Ended September 30, 2018	Year  Ended December 31, 2017	Nine Months Ended September 30, 2017
Revenues		$5,459	$7,219	$6,899
Cost of services		3,417	4,269	4,109
Gross profit		2,042	2,950	2,790
Operating costs and expenses
	Selling, general and administrative	860	1,211	778
	Depreciation	30	39	29
Operating costs and expenses		890	1,250	807
Operating income		1,152	1,700	1,983
Other income
	Interest income, net	1	1	1
	Dividend income	5	9	4
Other income		6	10	5
Net income		1,158	1,710	1,988
Other comprehensive income:
	Unrealized gains on available for sale securities	26	54	33
Total comprehensive income		$1,184	$1,764	$2,021

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

5

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

COMBINED STATEMENT OF CHANGES IN MEMBERS’ EQUITY

(In thousands)

	Members’ Equity		Accumulated Other Comprehensive Income	Total
Balance, December 31, 2016	$1,181		$  -	$1,181
Net income	1,988		-	1,988
Members’ withdrawals	(837	)	-	(837	)
Unrealized gains on available for sale securities	-		33	33
Balance, September 30, 2017 (Unaudited)	2,332		33	2,365
Net loss	(278	)	-	(278	)
Members’ withdrawals	(333	)	-	(333	)
Unrealized gains on available for sale securities	-		21	21
Balance, December 31, 2017 (Audited)	1,721		54	1,775
Net income	1,158		-	1,158
Members’ withdrawals	(1,404	)	-	(1,404	)
Unrealized gains on available for sale securities	-		26	26
Balance, September 30, 2018 (Audited)	$1,475		$80	$1,555

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

6

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

COMBINED STATEMENTS OF CASH FLOWS

(In thousands)

				Audited				Unaudited
				Nine Months Ended September 30, 2018		Year Ended December 31, 2017		Nine Months Ended September 30, 2017
Cash flows from operating activities:
	Net income			$1,158		$1,710		$1,988
	Adjustments to reconcile net income to net cash provided by   operating activities:
		Depreciation		30		39		29
		Provision for losses on accounts receivable		18		-		-
		Changes in assets and liabilities:
			Accounts receivable	(797	)	464		569
			Prepaid expenses and other current assets	(29	)	11		28
			Accounts payable and accrued expenses	430		(250	)	(223	)
			Accrued payroll and payroll taxes	(60	)	10		(30	)
			Deferred revenues	687		(530	)	(679	)
	Total adjustments			279		(256	)	(306	)
	Net cash provided by operating activities			1,437		1,454		1,682
Cash flows from investing activities:
	Property and equipment acquired			(13	)	-		-
	Purchase of marketable securities			(4	)	(403	)	(398	)
	Net cash used in investing activities			(17	)	(403	)	(398	)
Cash flows from financing activities:
	Members’ withdrawals			(1,404	)	(1,170	)	(837	)
	Net cash used in financing activities			(1,404	)	(1,170	)	(837	)
Increase (decrease) in cash and cash equivalents				16		(119	)	447
Cash and cash equivalents at beginning of period				1,288		1,407		1,407
Cash and cash equivalents at end of period				$1,304		$1,288		$1,854
Supplemental cash flow information:
	Cash paid for:
		Interest		$8		$1		$  -
Noncash investing activity:
	Unrealized gain on marketable securities			$26		$54		$33

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

7

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS

(In thousands)

1. Description of Business and Summary of Significant Accounting Policies

Business Purpose

The Company is principally engaged in providing professional engineering services under fixed fee and time and expense arrangements and designs and develops chemical and food processing systems which employ heat and mass transfer for industrial companies principally in the United States.

Principles of Combination

The combined financial statements include the accounts of Thermal Kinetics Engineering, PLLC (TKE) (a single member PLLC) and Thermal Kinetics Systems, LLC (TKS) (a partnership), collectively referred to as the "Company", which are affiliated by virtue of common ownership and control. All material inter-company transactions have been eliminated in combination. The combined "Company" does not form a new legal entity.

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 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.

Cash and Cash Equivalents

Cash and cash equivalents consist of monies held in checking, savings and money market accounts.

Accounts Receivable

Trade accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Generally, the Company does not require collateral or other security to support customer receivables. At September 30, 2018, the Company considered accounts receivable to be fully collectible, subject to an allowance for doubtful accounts of $18.  The Company did not record an allowance at December 31, 2017 or September 30, 2017.

Marketable Securities

The Company determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the intent and ability to hold the security to maturity.

Held-to-maturity securities are stated at cost and investment income is included in income. The Company does not have any securities that are classified as held-to-maturity.

8

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS

(In thousands)

1. Description of Business and Summary of Significant Accounting Policies (Continued)

Marketable Securities (Continued)

Trading securities are stated at fair value and unrealized gains and losses are included in income.  The Company does not have any securities that are classified as trading securities.

Securities not classified as held-to-maturity or trading are classified as available-for-sale. The Company reports these marketable securities as a current asset. Available-for-sale securities are carried at fair value based on the quoted market value of such securities, with the unrealized holding gains and losses reported as a component of accumulated other comprehensive income, a separate component of members’ equity.  The Company did not have any realized gains on any marketable securities during the periods presented.

Available-for-sale: At September 30, 2018, December 31, 2017 and September 30, 2017, the Company’s holdings in marketable securities, classified as current assets, consisted of equity based mutual funds and exchange traded funds which are classified as available-for-sale. All available-for-sale marketable securities are Level 1 fair value measurements with observable inputs in an active market.

	Audited		Unaudited
	September 30, 2018	December 31, 2017	September 30, 2017
Cost	$407	$403	$398
Unrealized gains	80	54	33
Fair value	$487	$457	$431

Freight and Shipping

It is the Company's policy to classify freight and shipping costs as part of the cost of revenues.  Total freight and shipping costs for the nine months ended September 30, 2018, the year ended December 31, 2017 and the nine months ended September 30, 2017 were $24, $153 and $153, respectively.

Fair Value of Financial Instruments

Cash and cash equivalents and marketable securities are carried at fair market value.  The carrying value of financial instruments, consisting primarily of accounts receivable, accounts payable and accrued expenses approximates fair value due to their liquidity or their short-term nature.

Revenue and Cost Recognition

The Company recognizes revenue from contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total costs for each contract. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term.

Contract costs include all direct contract costs such as materials, labor, subcontract, freight and other sundry direct costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, depreciation costs, and various other expenses. The majority of general and administrative costs are charged to expense as incurred.

9

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS

(In thousands)

1. Description of Business and Summary of Significant Accounting Policies (Continued)

Revenue and Cost Recognition (Continued)

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and revenues in the next year.

The asset, “Work-in-progress”, which is include in account receivable (See Note 2), represents revenues recognized in excess of amounts billed. The liability, "Deferred revenues," represents billings in excess of revenues recognized. Any additional contract costs or back charges incurred after the contract is completed are expensed when the liability is determined.

Income Taxes

No provision for income taxes has been made since the members report their proportionate share of taxable income/loss on their personal income tax returns. The Company does not have any uncertain tax positions which must be considered for disclosure.  All tax years after 2014 are open for federal and state tax audit.

New Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-9 “Revenue from Contracts with Customers”. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The revenue standards will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has not yet selected a transition method and is currently evaluating the effect that the revenue standards will have on its consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”, which requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income. This pronouncement is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company is currently assessing the impact that adopting this new accounting standard will have on our Consolidated Financial Statements. 

10

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

NOTES TO  COMBINED FINANCIAL STATEMENTS

(In thousands)

2. Accounts Receivable

The Company’s accounts receivable are comprised as follows:

	Audited			Unaudited
	September 30, 2018		December 31, 2017	September 30, 2017
Billed	$968		$140	$61
Work-in-progress	50		81	56
Allowance for doubtful accounts	(18	)	-	-
Accounts receivable, net	$1,000		$221	$117

Work-in-progress primarily represents revenues earned under contracts which the Company contractually invoices at future dates.

3. 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 3-5 years for computer hardware and software, 5-7 years for furniture and office equipment.

Property and equipment are comprised of the following:

	Audited		Unaudited
	September 30, 2018	December 31, 2017	September 30, 2017
Computers and systems	$497	$484	$484
Equipment and furniture	73	73	73
	570	557	557
Less: accumulated depreciation	469	439	429
Property and equipment, net	$101	$118	$128

The cost of assets sold or otherwise disposed of, and the accumulated depreciation thereon, are eliminated from the accounts and the resulting gain or loss is reflected in income. Expenditures for maintenance and repairs are charged to operations as incurred; replacements and betterments that extend the useful lives are capitalized.

Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed.  There were no impairment losses identified during any of the periods presented.

11

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

NOTES TO  COMBINED FINANCIAL STATEMENTS

(In thousands)

4.    Retirement Plan

The Company adopted a Section 40l (k) retirement plan March 1, 2015 which covers substantially all employees. Participants may contribute a portion of their compensation to the plan, up to the maximum amount permitted under Section 40l (k) of the Internal Revenue Code. The Company contributes 3% of the employees' compensation. Under the plan, the Company may make an additional discretionary contribution.

Member retirement plan contributions are not recorded as an expense in these financial statements.  Pension expense was $25, $33 and $25 for the nine months ended September 30, 2018, year ended December 31, 2017 and the nine months ended September 30, 2017, respectively.

5.    Concentration of Revenue and Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable. The Company grants credit primarily withgeneral contractors and commercial customers located in various states.

Net revenues for nine months ended September 30, 2018 includes revenues from one major customer which accounted for 50% of the total net revenues of the Company and $867 of the accounts receivable at September 30, 2018.  Net revenues for the year ended December 31, 2017 includes revenues from one major customer which accounted for 78% of the total net revenues of the Company with no accounts receivable at December 31, 2017.  Net revenues for the nine months ended September 30, 2017 includes revenues from one major customer which accounted for 87% of the total net revenues of the Company, with no accounts receivable at September 30, 2017.

The Company may be subject to credit risk to its cash and cash equivalents, which are placed with high credit-quality financial institutions. The Federal Deposit Insurance Corporation ("FDIC") covers up to $250 for substantially all depository accounts. From time to time, the Company may have amounts on deposit in excess of FDIC limits. Management believes the Company is not exposed to any significant credit risk on cash and cash equivalents. At September 30, 2018, the Company has $1.1 million in cash in excess of the FDIC limits.

6.    Costs and Estimated Earnings on Uncompleted Contracts

Costs and estimated earnings on uncompleted contracts for the nine months ended September 30, 2018, year ended December 31, 2017 and the nine months ended September 30, 2017 are as follows:

	Audited				Unaudited
	September 30, 2018		December 31, 2017		September 30, 2017
Costs incurred on uncompleted contracts	$9,417		$7,256		$6,944
Estimated earnings	6,483		5,065		5,147
Total earned revenues	15,900		12,321		12,091
Less billings to date	16,750		12,453		12,099
Total	($850	)	($132	)	($8	)
Underbilling (work in process)	50		81		56
Overbilling (deferred revenue)	(900	)	(213	)	(64	)
Net	($850	)	($132	)	($8	)

12

THERMAL KINETICS ENGINEERING, PLLC AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS

(In thousands)

7.    Demand Note Payable

The Company maintained a line of credit with a bank with interest at prime plus .5%. The note was pursuant to the Company's $1.0 million open line of credit. The line was secured by all assets of the Company and was personally guaranteed by Christopher Brown, a member of the Company. The agreement was allowed to lapse on May 30, 2018.

8.    Commitments

Operating Leases

Effective March 1, 2014, the Company entered into a sixty-four month lease for office space.  Future minimum lease payments under this lease for the three months ending December 31, 2018 and year ended December 31, 2019 are as follows:

2018	$11
2019	22
Total	$33

9.    Subsequent Events

On November 8, 2018, the Company agreed to sell substantially all of the assets of the Company utilized in connection with the business to RCM Technologies (USA), Inc. a New Jersey corporation and a wholly-owned subsidiary of RCM Technologies, Inc.  Those assets of the Company purchased by RCM include work in progress, prepaid expenses, property plant and equipment and the deferred revenue liability.  The purchase was effective October 1, 2018.

These combined financial statements have not been updated for subsequent events occurring after January 24, 2019, which is the date these combined financial statements were available to be issued

13

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements have been prepared to reflect the acquisition of substantially all of the assets utilized in connection to the business of Thermal Kinetics Engineering, PLLC, a New York professional limited liability company, and Thermal Kinetics Systems, LLC, a New York limited liability company (together, “Thermal Kinetics”) by RCM Technologies, Inc. (“RCM” or the “Company”), and the related financing transactions.  The acquisition, inclusive of related fees and expenses, was financed through RCM’s revolving credit facility.

The unaudited pro forma condensed combined balance sheet has been derived from the historical consolidated balance sheets of RCM as of September 29, 2018 and combined financial statements of Thermal Kinetics as of September 30, 2018, to give effect to the Thermal Kinetics acquisition as if it had occurred on September 29, 2018. The unaudited pro forma condensed combined statements of income have been derived from the historical statements of income of RCM for the thirty-nine week period ended September 29, 2018 and the fifty-two week period ended December 30, 2017 and Thermal Kinetics for the nine months ended September 30, 2018 and year ended December 31, 2017, and give effect to the consummation of the acquisition as if it had occurred on January 1, 2017.

The pro forma condensed combined financial statements have been prepared using the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States, with RCM treated as the acquirer and Thermal Kinetics as the acquiree. The acquisition method of accounting is dependent upon certain valuations and other studies that have yet to progress to a stage where there is sufficient information for a definitive measure. Accordingly, the pro forma adjustments are preliminary, have been made solely for the purpose of providing pro forma financial statements, and are subject to revision based on a final determination of fair value as of the date of acquisition. Differences between these preliminary estimates and the final acquisition accounting may have a material impact on the accompanying pro forma condensed combined financial statements and RCM’s future results of operations and financial position.

Pro forma adjustments related to the balance sheet reflect the preliminary allocation of the purchase price to Thermal Kinetics’s assets and liabilities based on a preliminary estimate of their fair values and financing adjustments. Pro forma adjustments to the statements of income reflect acquisition accounting adjustments and financing adjustments. The pro forma condensed combined financial statements do not give effect to the costs of any integration activities or benefits that may result from the realization of future cost savings from operating efficiencies, or any other synergies that may result from the Thermal Kinetics acquisition.

The pro forma condensed combined financial statements are provided for informational purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of RCM would have been had the acquisition occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The pro forma condensed combined financial statements should be read in conjunction with the accompanying notes to the pro forma condensed combined financial statements and the audited and unaudited interim consolidated financial statements and accompanying notes of RCM and Thermal Kinetics incorporated by reference herein.

The unaudited pro forma condensed combined financial statements should be read in conjunction with the following information:

● Notes to the unaudited pro forma condensed combined financial statements;

● RCM’s Current Report on Form 8-K filed with the SEC on November 15, 2018, including the related exhibit;

See notes to the unaudited pro forma condensed combined financial statements.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONT’D)

● Audited consolidated financial statements of RCM for the fifty-two week period ended December 30, 2017, which are included in RCM’s Annual Report on Form 10-K for the year ended December 30, 2017, as filed with the SEC;

● Unaudited interim condensed consolidated financial statements of RCM as of September 29, 2018 and for the thirty-nine week period then ended, which are included in RCM’s Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2018, as filed with the SEC;

● Audited financial statements of Thermal Kinetics for the year ended December 31, 2017, which are included in RCM’s Current Report on Form 8-K/A filed on January 24, 2019;

● Audited interim condensed financial statements of Thermal Kinetics as of and for the nine months ended September 30, 2018, which are included in RCM’s Current Report on Form 8-K/A filed on January 24, 2019.

See notes to the unaudited pro forma condensed combined financial statements.

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 UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

			As of September 30, 2018	As of September 29, 2018	Adjustments
			Thermal	RCM				Note	Proforma
			Kinetics	Technologies	Acquisition		Financing	Reference	Combined
Current assets:
	Cash and cash equivalents, net		$1,304	$710	(1,304	)	$   -	5a	$710
	Accounts receivable, net		1,000	46,663	-		-		47,663
	Transit accounts receivable		-	4,365	-		-		4,365
	Prepaid expenses and other current assets		46	3,947	-		-		3,993
	Marketable securities		487	-	(487	)	-	5a	-
		Total current assets	2,837	55,685	(1,791	)	-		56,731
Property and equipment, net			101	3,694	(89	)	-	5b	3,706
Other assets:
	Deposits		19	224	-		-		243
	Goodwill		-	11,685	5,977		-	4	17,662
	Intangible assets, net		-	65	640		-	4	705
	Deferred tax assets, net		-	2,075	-		-		2,075
		Total other assets	19	14,049	6,617		-		20,685
		Total assets	$2,957	$73,428	$4,737		$   -		$81,122

Current liabilities:
	Accounts payable and accrued expenses			$476	$8,099		$413		$   -	5c	$8,988
	Transit accounts payable			-	4,461		-		-		4,461
	Accrued payroll and related expenses			26	8,658		-		-		8,684
	Deferred revenue			900	-		-		-		900
	Income taxes payable			-	916		-		-		916
	Liability for contingent consideration			-	553		-		-		553
			Total current liabilities	1,402	22,687		413		-		24,502
Deferred tax liability, foreign				-	424		-		-		424
Liability for contingent consideration				-	1,180		2,936		-	4	4,116
Borrowings under line of credit				-	24,460		-		1,066	3a	25,526
		Total liabilities		1,402	48,751		3,349		1,066		54,568
Stockholders’ equity:
	Common stock			-	755		-		22	3a	777
	Additional paid-in capital			-	105,243		-		1,855	3a	107,098
	Accumulated comprehensive income (loss)			80	(2,572	)	(80	)	-	5d	(2,572	)
	Accumulated deficit			-	(63,762	)	-		-		(63,762	)
	Treasury stock			-	(14,987	)	-		-		(14,987	)
	Members’ equity			1,475	-		(1,475	)	-	5d	-
			Total stockholders’ equity	1,555	24,677		(1,555	)	1,877		26,554
			Total liabilities and stockholders’ equity	$2,957	$73,428		$1,794		$2,943		81,122

See notes to the unaudited pro forma condensed combined financial statements.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

		For the Nine Months Ended September 30, 2018	For the Thirty-Nine Week Period Ended September 29, 2018
		Thermal	RCM		Adjustments				Note	Proforma
		Kinetics	Technologies		Acquisition		Financing		Reference	Combined
Revenues		$5,459	$145,081		($79	)	$  -		5e	$150,461
Cost of services		3,417	108,803		(79	)	-		5e	112,141
Gross profit		2,042	36,278		-		-			38,320
Operating costs and expenses
	Selling, general and administrative	860	29,909		-		-			30,769
	Depreciation and amortization	30	1,156		234		-		4	1,420
	Severance, professional fees and other charges	-	1,371		-		-			1,371
	Tax credit professional fees	-	-		-		-			-
	Change in contingent consideration	-	-		-		-			-
	Goodwill impairments	-	-		-		-			-
Operating costs and expenses		890	32,436		234		-			33,560
Income from operations		1,152	3,842		(234	)	-			4,760
Other income (expense)		6	(990	)	(6	)	(31	)	5f, 3b	(1,021	)
Income before income taxes		1,158	2,852		(240	)	(31	)		3,740
Income tax expense (benefit)		-	736		257		(9	)	5g	985
Net income		$1,158	$2,116		($497	)	($22	)		$2,755

See notes to the unaudited pro forma condensed combined financial statements.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

		For the Year  Ended December 31, 2017	For the Fifty-Two Week Period Ended December 30, 2017
		Thermal	RCM		Adjustments				Note	Proforma
		Kinetics	Technologies		Acquisition		Financing		Reference	Combined
Revenues		$7,219	$186,737		$   -		$   -			$193,956
Cost of services		4,269	138,350		-		-			142,619
Gross profit		2,950	48,387		-		-			51,337
Operating costs and expenses
	Selling, general and administrative	1,211	40,385		-		-			41,596
	Depreciation and amortization	39	1,757		312		-		4	2,108
	Severance, professional fees and other charges	-	1,447		-		-			1,447
	Tax credit professional fees	-	259		-		-			259
	Change in contingent consideration	-	781		-		-			781
	Goodwill impairments	-	3,478		-		-			3,478
Operating costs and expenses		1,250	48,107		312		-			49,669
Income from operations		1,700	280		(312	)	-			1,668
Other income (expense)		10	(525	)	(10	)	(29	)	5f, 3b	(554	)
Income (loss) before income taxes		1,710	(245	)	(322	)	(29	)		1,115
Income tax (benefit) expense		-	(2,255	)	555		(11	)	5g	(1,711	)
Net income		$1,710	$2,010		($877	)	($17	)		$2,826

See notes to the unaudited pro forma condensed combined financial statements.

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. Description of the Transaction

On November 8, 2018, RCM Technologies (USA), Inc. (the “Buyer”), a New Jersey corporation and a wholly-owned subsidiary of RCM Technologies, Inc. (the “Registrant” or the “Company”), entered into an Asset Purchase Agreement (the “Purchase Agreement”), with Thermal Kinetics Engineering, PLLC, a New York professional limited liability company, Thermal Kinetics Systems, LLC, a New York limited liability company (together “TKE”, each a “Seller” and collectively, “Sellers” or “Thermal Kinetics”), the members of Sellers identified in Section 1 of the Purchase Agreement (each, a “Sellers’ Member” and collectively, “Sellers’ Members”).  The Registrant is also a party to the Purchase Agreement solely for purposes of being bound by the Parent Guarantee (as defined therein).

Pursuant to the Purchase Agreement, the Buyer agreed to purchase from Sellers substantially all of the assets of Sellers utilized in connection with the business of supplying equipment and providing engineering, development, and design services (the “Business”).

The transactions contemplated by the Purchase Agreement closed as of the date of the Purchase Agreement.  The purchase price consisted of $1.8 million, inclusive of estimated assumed net liabilities of $0.7 million, resulting in $1.1 million being paid at closing in cash, 440,751 shares of the Registrant’s Common Stock, $0.10 par value, which shares are subject to a 36-month lock-up agreement, and a series of Earn-out Payments (as defined in the Purchase Agreement) based on the net operating income of the Business (the “NOI”) over the three fiscal years of the Registrant ending on the last fiscal day of September in each of 2019, 2020 and 2021 (the “First Earn-Out Period,” “Second Earn-Out Period” and “Third Earn-Out Period,” respectively).  With respect to the Earn-out Payments, Buyer shall pay Sellers, in accordance with the terms and provisions of the Purchase Agreement, an amount equal to $600,000 for each Earn-Out period where the NOI is greater than a hurdle amount of $1.9 million (for the First Earn-Out Period), $2.0 million (for the Second Earn-Out Period) and $2.1 million (for the Third Earn-Out Period), plus, for any such period, a Second-Tier Earn-out Payment amount equal to 50% of the NOI for such period in excess of the applicable hurdle amount; provided, that the Second-Tier Earn-out Payment for any given year cannot exceed $2.0 million.

2. Basis of Presentation

The unaudited pro forma condensed combined balance sheet gives effect to the acquisition of Thermal Kinetics by combining the Company’s audited balance sheet as of September 29, 2018 and Thermal Kinetics’ audited balance sheet as of September 30, 2018. The pro forma adjustments required to reflect the acquired assets and assumed liabilities of Thermal Kinetics are based on the estimated fair value of the assets and liabilities of Thermal Kinetics. The pro forma condensed combined statements of income combines the Company’s unaudited statement of operations for the thirty-nine weeks ended September 29, 2018 with Thermal Kinetics audited statement of operations for the nine months ended September 30, 2018 and the Company’s audited statement of operations for the fifty-two weeks ended December 30, 2017 with Thermal Kinetics audited statement of operations for the year ended December 31, 2017, and gives effect to the TKE acquisition as if it occurred on January 1, 2017.

The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting and is based on the historical financial information of the Company and Thermal Kinetics. The acquisition method of accounting, in accordance with ASC 805, “Business Combinations” (ASC 805) requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date, using the fair value concepts defined in ASC 820, “Fair Value Measurement” (ASC 820). As the accounting acquirer, the Company will estimate the fair value of Thermal Kinetics’s assets acquired and liabilities assumed. The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma combined financial statements to give effect to pro forma events that are (i) directly attributable to the acquisition, (ii) factually supportable, and (iii) with respect to the unaudited pro forma combined statements of income, are expected to have a continuing impact on the consolidated results.

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

2. Basis of Presentation (Continued)

Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” This is an exit price concept for the valuation of an asset or liability. Market participants are assumed to be buyers or sellers in the most advantageous market for the asset or liability. Fair value measurement for an asset assumes the highest and best use by these market participants. Fair value measurements can be highly subjective and it is possible the application of reasonable judgment could lead to different assumptions resulting in a range of alternative estimates using the same facts and circumstances.

3. Financing Transactions

a) The Company agreed to pay $1.1 million in cash, (assumed net liabilities of $0.7 million) and $1.9 million of common stock. Since certain liabilities were inseparable, principally deferred revenues, the Company assumed approximately $0.7 million in certain liabilities and reduced the cash paid at closing to $1.1 million. The Company paid the upfront cash portion of $1.1 million paid to Seller through borrowing from the Company’s line of credit. Absent other changes to net working capital in the normal course of business, the Company expects to satisfy the net liabilities of $0.7 million though additional borrowing from the Company’s line of credit. The Company also issued 440,751 shares of its common stock to Seller at closing.  The closing date share value was $4.26, thereby valuing the stock at $1.9 million. 

b) Based on average interest rates in affect over the periods presented, the Company would have incurred interest expense of $39 and $37 for the thirty-nine week period ended September 29, 2018 and fifty-two week period ended December 30, 2017, respectfully, on the pro forma borrowing.

4.    Preliminary Purchase Price Allocation

The estimated pro forma adjustments as a result of recording assets acquired and liabilities assumed at their respective fair values in accordance with ASC 805 discussed below are preliminary. The final allocation of the purchase price will be determined at a later date and is dependent on a number of factors, including the final valuation of Thermal Kinetics’ tangible and intangible assets acquired and liabilities assumed. The final valuation of assets acquired and liabilities assumed may be materially different than the value of assets acquired and liabilities assumed in the estimated pro forma adjustments.

The preliminary consideration and estimated fair value of assets acquired and liabilities assumed as if the acquisition date was September 30, 2018 is presented as follows:

Cash and net liabilities assumed	$1,816
Common stock of the Company	1,877
Contingent consideration, fair value	2,936
Total consideration	$6,629

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

4.    Preliminary Purchase Price Allocation (Continued)

The shareholders of Thermal Kinetics are eligible to receive post-closing contingent consideration upon the business exceeding certain base levels of operating income, potentially earned over three years as more fully described in footnote 1 to the unaudited condensed combined financial statements.  The amount recorded for the contingent consideration represents the acquisition date fair value of expected consideration to be paid based on Thermal Kinetic’s forecasted operating income during the three year period. Expected consideration was valued based on different possible scenarios for projected operating income.  Each case was assigned a probability which was used to calculate an estimate of the forecasted future payments.  Then a discount rate was applied to these forecasted future payments to determine the acquisition date fair value to be recorded.  At the time of the acquisition, the book and tax basis of assets and liabilities acquired are the same.

The acquisition has been accounted for under the purchase method of accounting. The total preliminary estimated purchase price has been allocated as follows:

Fixed assets	$12
Restricted covenants	50
Customer relationships	590
Goodwill	5,977
Total consideration	$6,629

The adjustments reflect the amount necessary to record the estimated fair value of Thermal Kinetics’ intangible assets acquired. The valuation of the identifiable intangible assets acquired was based on management’s preliminary estimates, currently available information and reasonable and supportable assumptions. Identifiable intangible assets expected to be acquired consist of the following:

	Estimated Useful Lives (Years)	Annual Amortization
Identifiable intangible assets:
Customer relationships	2	$295
Restricted covenants	3	$17

Some of the more significant assumptions inherent in the development of intangible asset fair values, from the perspective of a market participant, include: the amount and timing of projected future cash flows (including revenue, cost of sales, sales and marketing expenses, capital expenditures, and working capital requirements); the discount rate selected to measure inherent risk of future cash flows; the assumed royalty rate utilized; and the assessment of the asset’s life cycle and the competitive trends impacting the asset, among other factors.

Goodwill is calculated as the difference between the fair value of the consideration expected to be transferred and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. The primary item that generated goodwill was the acquisition of a highly skilled and trained assembled workforce of engineers that the Company anticipates will allow it to win contract awards from its current and future customer base that the Company would not otherwise win.

Currently, no adjustment to the unaudited pro forma condensed combined financial statements has been made as it relates to limitations the combined company might incur under Section 382 of the Code or ASC 740. Furthermore, adjustments to established deferred tax assets and liabilities as well as the recognition of additional deferred tax assets and liabilities may occur in conjunction with the finalization of the purchase accounting and these items could be material.

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

5. Unaudited Pro Forma Condensed Combined Financial Statements Adjustments

a) The Sellers of Thermal Kinetics retained all cash and marketable securities. For the pro forma combined balance sheets, these balances for Thermal Kinetics as of September 30, 2018 were removed in the adjustment column.

b) Fixed assets were reduced to fair market value as of September 30, 2018.

c) The Company assumed a lease in the Buffalo, New York area but will move the Thermal Kinetic operations into the Company’s existing Buffalo, New York area facility. The costs of this lease that will not be used by the Company was recorded as additional purchase consideration.  The Company acquired substantially all of the fixed and intangible assets of Thermal Kinetics necessary to manage the business after September 30, 2018. The Sellers of Thermal Kinetics retained the net economic benefit of the net working capital as of September 30, 2018.  At closing, the Company and Sellers estimated that the net assumed liabilities would be $0.7 million and it was agreed that amount would be fixed. To the extent the net liabilities actually assumed by the Company differed from the assumed fixed amount, there is a mechanism in the asset purchase agreement whereby one party will give the other party cash in order to maintain the fixed amount of net liabilities of $0.7 million assumed by the Company.  The pro forma accounts payable and accrued expenses adjustment as of September 29, 2018 is as follows:

Fixed assumed net liabilities		$700
Assumed lease		50
Thermal Kinetics net working capital as of September 30, 2018:
	Accounts receivable, net	1,000
	Prepaid expenses and other current assets	46
	Deposits	19
	Accounts payable and accrued expenses	(476	)
	Deferred revenue	(900	)
	Accrued payroll and related expenses	(26	)
Total adjustment		$413

d) Adjustments made to remove Thermal Kinetics additional comprehensive income and members’ equity as of September 30, 2018.

e) Prior to the acquisition of Thermal Kinetics by the Company, Thermal Kinetics was a customer of the Company, whereby certain engineering services were subcontracted to the Company. On a pro forma basis, these revenues and direct expenses were eliminated with no impact to income from operations.

f) Other income generated from cash, cash equivalents and marketable securities of Thermal Kinetics was removed.

g) The Company used its approximate historic marginal tax rates in the United States to impute income tax expense.

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