RCM Technologies (RCMT) risk factors, FY2024 10-K

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1. 01RCM participates in a market that is cyclical in nature and sensitive to economic changes. As a result, the impact of economic changes on revenue and operations can be substantial, resulting in significant volatility in the Company’s financial performance
2. 02Critical Accounting Policies and Use of Estimates
3. 03Revenue Recognition (Continued)
4. 04Permanent Placement Services
5. 05Accounts Receivable and Provision for Credit Losses
6. 06Long-Lived and Intangible Assets
7. 07Accounting for Restricted Stock Awards
8. 08Accounting for Income Taxes
9. 09Performance-Based Restricted Stock and Stock Unit Awards
10. 10Forward-looking Information
11. 11Fiscal Year Ended December 28, 2024 Compared to Fiscal Year Ended December 30, 2023
12. 12The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31. The fiscal years ended December 28, 2024 (fiscal 2024) and December 30, 2023 (fiscal 2023) consisted of fifty-two weeks each
13. 13Fiscal Year Ended December 28, 2024 Compared to Fiscal Year Ended December 30, 2023 (Continued)
14. 14Life Sciences, Data and Solutions
15. 15Supplemental Operating Results on a Non-GAAP Basis
16. 16The following table summarizes the major captions from the Company’s Consolidated Statements of Cash Flows
17. 17Operating Activities (Continued)
18. 18An increase in accounts payable and accrued expenses provided cash of $1.1 million for the fiscal year ended December 28, 2024 as compared to using $1.5 million for the comparable prior year period. The Company attributes these changes to typical fluctuations in the normal course of business
19. 19interest rate, including unused line fees, for the fiscal years ended December 28, 2024 and December 30, 2023 was 6.6% and 6.5%, respectively
20. 20Current Liquidity and Revolving Credit Facility
21. 21Current Liquidity and Revolving Credit Facility (Continued)
22. 22All restricted share awards contain a dividend equivalent provision entitling holders to dividends paid between the restricted stock award grant date and ultimate share distribution date. As of December 28, 2024, there were no accrued dividends
23. 23Commitments and Contingencies
24. 24Commitments and Contingencies (Continued)
25. 25The Company leases office facilities and various equipment under non-cancelable leases expiring at various dates through October 2029. Certain leases are subject to escalation clauses based upon changes in various factors
26. 26Future Contingent Payments
27. 27Consulting, staffing, and project services are generally priced based on mark-ups on prevailing rates of pay, and as a result are able to generally maintain their relationship to direct labor costs. Permanent placement services are priced as a function of salary levels of the job candidates
28. 28ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
29. 29ITEM 9A. CONTROLS AND PROCEDURES
30. 30Evaluation of Disclosure Controls and Procedures
31. 31Changes in Internal Control over Financial Reporting
32. 32Management’s Annual Report on Internal Control over Financial Reporting
33. 33Management’s Annual Report on Internal Control over Financial Reporting (Continued)
34. 34On March 12, 2025, the Company and Mr. Vizi entered into an amendment and restatement of his Executive Severance Agreement dated June 1, 2018, which was filed as an exhibit to the Company’s Current Report on Form 8-K dated June 7, 2018 (the "Severance Agreement")
35. 35the multiplier applicable to the amount that Mr. Vizi would receive, if a Change in Control occurs and he experiences a qualifying termination, from 2.0 times, as set forth in the original Severance Agreement, to 2.99 times, with the definition of Bonus for the purpose of such calculation modified as described above
36. 36(b) Rule 10b5-1 Trading Plans
37. 37(1) The aggregate number of shares that can be sold under the plan is allocated into a series of tranches that would be sold at laddered prices as outlined in the plan
38. 38The information required by Item 10 shall be included in the 2025 Proxy Statement and is incorporated herein by reference
39. 39Except as set forth below, the information required by Item 12 shall be included in the 2025 Proxy Statement and is incorporated herein by reference
40. 40The following exhibits are filed as part of, or incorporated by reference into, this report (unless otherwise
41. 41Chief Financial Officer, Treasurer and Secretary
42. 42Opinion on the Financial Statements
43. 43Description of the Matter
44. 44We have audited RCM Technologies, Inc. and Subsidiaries’ (the “Company”) internal control over financial reporting as of December 28, 2024, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
45. 45We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects
46. 46Definition and Limitations of Internal Control Over Financial Reporting
47. 47Deferred income taxes, net, foreign
48. 48Contingent consideration from acquisitions, net of current position
49. 49Contingencies (note 16) and Commitments (note 18)
50. 50with exercises of equity awards
51. 51Purchase of treasury stock
52. 52Adjustments to reconcile net income (loss) to net cash provided by
53. 53Effect of excess tax deduction on equity awards
54. 54Proceeds from sale of assets
55. 55Contingent consideration paid
56. 56Description of Business and Basis of Presentation
57. 57Cash and Cash Equivalents
58. 58Fair Value of Financial Instruments
59. 59Unbilled Accounts Receivable and Work-in-Process
60. 60Transit Accounts Receivable and Transit Accounts Payable
61. 61Permanent placement revenue was $1.5 million and $1.7 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively
62. 62Transit Receivables and Transit Payables
63. 63Foreign Currency Translation
64. 64Share - Based Compensation
65. 65Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs
66. 66Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs
67. 67USE OF ESTIMATES AND UNCERTAINTIES
68. 685. PROPERTY AND EQUIPMENT
69. 696. ACQUISITIONS AND DIVESTITURES
70. 70Potential future contingent payments to be made to all active acquisitions after December 28, 2024 are capped at a cumulative maximum of $0.2 million
71. 716. ACQUISITIONS AND DIVESTITURES (CONTINUED)
72. 72Impairment in fiscal 2024
73. 739. LINE OF CREDIT (CONTINUED)
74. 74For the fiscal years ended December 28, 2024 and December 30, 2023, there were no anti-dilutive shares included in the calculation of common stock equivalents as there were no stock options outstanding
75. 75At December 28, 2024, the Company had two share-based employee compensation plans, the Employee Stock Purchase Plan and the 2014 Omnibus Equity Compensation Plan
76. 76Employee Stock Purchase Plan
77. 77Employee Stock Purchase Plan (Continued)
78. 782014 Omnibus Equity Compensation Plan (the 2014 Plan)
79. 79As of December 28, 2024, under the 2014 Plan, 289,421 time-based shares were outstanding, 300,000 performance-based restricted stock awards were outstanding and 295,680 shares were available for awards thereunder
80. 80Time-Based Restricted Stock Awards
81. 81From time-to-time the Company issues performance-based restricted stock awards to its employees. Performance-based restricted stock awards are typically vested based on certain multi-year performance metrics as determined by the Board of Directors Compensation Committee
82. 82Share-based compensation for performance-based equity agreement was $1.6 million and $0.7 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively
83. 8312. TREASURY STOCK TRANSACTIONS
84. 84On April 24, 2023, the Company agreed to repurchase, in a private transaction approved by the Board, 333,686 shares of common stock at a per-share price of $11.91 per share
85. 8513. NEW ACCOUNTING STANDARDS
86. 86Remeasurement of contingent consideration
87. 87$ 141 $ 724 $ 123 $ 1,943 $ 2,931
88. 8814. SEGMENT INFORMATION (CONTINUED)
89. 8915. INCOME TAXES (CONTINUED)
90. 90The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes and records such amounts to tax expense. The Company recorded no expense for penalties or interest in the fiscal years ended December 28, 2024 and December 30, 2023
91. 91Deferred tax liability, net, Canada