RCM Technologies (RCMT) risk factors, FY2025 10-K

What changed since the prior 10-K

New

• New

  No such costs were incurred for the fiscal year ended January 3, 2026

• New

  Potential stock issuance and financing transaction

• New

  Liquidity and Capital Resources

• New

  Financing Activities (Continued)

  The company amended its credit agreement with Citizens Bank to increase the maximum commitment limit from $65.0 million to $75.0 million to obtain flexibility for issuing letters of credit in Germany.

• New

  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

• New

  These deficiencies demonstrate gaps in management's ability to identify, analyze, and respond to financial reporting risks, reflecting deficiencies in the design and maintenance of effective internal controls over business processes, as well as in the monitoring component of internal control

• New

  To address these material weaknesses, management, with oversight from the Audit Committee. have commenced actions to enhance the Company's control framework and policies, maintain evidence of control procedure operation, and improve our control environment

• New

  Improve quarter-close controls by reevaluating the design, timing, and documentation requirements and implementing a structured close calendar with clear deadlines, ownership, and escalation protocols

• New

  Update its production application suite to phase out legacy timekeeping systems, implement a software development tool and update procedures to enhance change management documentation, and centralize provisioning and deprovisioning for remaining timekeeping systems via an IT ticketing system

• New

  Equity compensation plans not approved by security holders

• New

  RCM Technologies, Inc. 2025 Omnibus Equity Compensation Plan; incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 22, 2025

• New

  Revenue Recognition – Expected Costs to Complete Fixed-Price Contracts

  Fixed-price contract revenue reached $73.2 million, or 23% of total revenue, presenting complexity and subjectivity in estimating costs to complete as a critical audit matter.

• New

  Opinion on the Internal Control over Financial Reporting

• New

  Management did not design or maintain sufficient documentation during its management review controls across the Company's financial statement areas

• New

  These material weaknesses were considered in determining the nature, timing, and extent of the audit tests applied in our audit of the January 3, 2026 financial statements, and this report does not affect our report dated April 3, 2026, on those financial statements

• New

  To the Board of Directors and Stockholders of

• New

  Preferred stock, $1.00 par value; 5,000,000 shares authorized; no shares issued or outstanding

• New

  Potential stock issuance and financing transactions

• New

  Equity compensation expense from awards issued

• New

  Foreign currency translation adjustment

• New

  The consolidated financial statements are comprised of the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation

• New

  Unbilled Accounts Receivable and Contract Assets

• New

  ACCOUNTS RECEIVABLE AND CONTRACT ASSETS, NET

• New

  Unbilled receivables primarily represent revenue earned whereby those services are ready to be billed as of the balance sheet ending date. Contract assets primarily represents revenue earned under contracts which the Company contractually invoices at future dates

• New

  As of January 3, 2026, there are no active acquisitions whereby contingent consideration could be paid

• New

  Balance as of January 3, 2026

• New

  As of January 3, 2026, under the 2014 Plan, 179,037 time-based shares were outstanding, 282,157 performance-based restricted stock awards were outstanding and 248,902 shares were available for awards thereunder

• New

  2025 Omnibus Equity Compensation Plan (the 2025 Plan)

• New

  $ 296 $ 691 $ 28 $ 1,557 $ 2,572

• New

  Reserves, accruals, and other

• New

  New York and California made up the majority of the tax effect in this category

• New

  The Company has gross state net operating losses of $0.2 million to the net income of future tax returns. The state net operating losses are subject to various expiration periods

Dropped

• Dropped

  Revenue Recognition (Continued)

• Dropped

  The following table summarizes the major captions from the Company’s Consolidated Statements of Cash Flows

• Dropped

  An 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

• Dropped

  interest rate, including unused line fees, for the fiscal years ended December 28, 2024 and December 30, 2023 was 6.6% and 6.5%, respectively

• Dropped

  Current Liquidity and Revolving Credit Facility (Continued)

• Dropped

  Commitments and Contingencies (Continued)

• Dropped

  Future Contingent Payments

• Dropped

  ITEM 9A. CONTROLS AND PROCEDURES

• Dropped

  Management’s Annual Report on Internal Control over Financial Reporting (Continued)

• Dropped

  On 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")

• Dropped

  the 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

• Dropped

  (b) Rule 10b5-1 Trading Plans

• Dropped

  (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

• Dropped

  The following exhibits are filed as part of, or incorporated by reference into, this report (unless otherwise

• Dropped

  Chief Financial Officer, Treasurer and Secretary

• Dropped

  Description of the Matter

• Dropped

  We 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”)

• Dropped

  We 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

• Dropped

  Deferred income taxes, net, foreign

• Dropped

  Contingencies (note 16) and Commitments (note 18)

• Dropped

  with exercises of equity awards

• Dropped

  Purchase of treasury stock

• Dropped

  Adjustments to reconcile net income (loss) to net cash provided by

• Dropped

  Effect of excess tax deduction on equity awards

  An engineering client alleged a system was not operating as intended with potential liability limited to $3.3 million.

• Dropped

  Proceeds from sale of assets

• Dropped

  Contingent consideration paid

  Future contingent payments related to the Thermal Kinetics acquisition.

• Dropped

  Cash and Cash Equivalents

• Dropped

  Unbilled Accounts Receivable and Work-in-Process

• Dropped

  Level 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

• Dropped

  5. PROPERTY AND EQUIPMENT

• Dropped

  Potential future contingent payments to be made to all active acquisitions after December 28, 2024 are capped at a cumulative maximum of $0.2 million

• Dropped

  As 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

• Dropped

  Share-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

• Dropped

  On 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

• Dropped

  $ 141 $ 724 $ 123 $ 1,943 $ 2,931

• Dropped

  The 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

• Dropped

  Deferred tax liability, net, Canada

Reworded

• 100% rewritten

  Remeasurement of contingent consideration

• 100% rewritten

  15. INCOME TAXES (CONTINUED)

• 100% rewritten

  Material Weaknesses in Internal Control Over Financial Reporting

  The disclosure changed from reporting effective controls to disclosing identified material weaknesses in internal control over financial reporting as of January 3, 2026.

  Was: Management’s Annual Report on Internal Control over Financial Reporting

• 99% rewritten

  Changes in Internal Control Over Financial Reporting

• 98% rewritten

  Operating Activities (Continued)

• 96% rewritten

  Disclosure Controls and Procedures

  Was: Evaluation of Disclosure Controls and Procedures

• 93% rewritten

  Fiscal Year Ended January 3, 2026, Compared to Fiscal Year Ended December 28, 2024

  Operating results updated to report fiscal 2026 revenue of $319.4 million versus $278.3 million for the fiscal year ended December 28, 2024.

  Was: Fiscal Year Ended December 28, 2024 Compared to Fiscal Year Ended December 30, 2023

• 93% rewritten

  Contingent consideration from acquisitions

  Was: Contingent consideration from acquisitions, net of current position

• 92% rewritten

  The Company leases office facilities and various equipment under non-cancelable leases expiring at various dates through September 2030. Certain leases are subject to escalation clauses based upon changes in various factors

  Was: The 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

• 90% rewritten

  Fiscal Year Ended January 3, 2026, Compared to Fiscal Year Ended December 28, 2024 (Continued)

  Was: Fiscal Year Ended December 28, 2024 Compared to Fiscal Year Ended December 30, 2023 (Continued)

• 84% rewritten

  For the fiscal years ended January 3, 2026 and December 28, 2024, there were no anti-dilutive shares included in the calculation of common stock equivalents as there were no stock options outstanding

  Was: For 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

• 81% rewritten

  SEGMENT INFORMATION (CONTINUED)

  Was: 14. SEGMENT INFORMATION (CONTINUED)

• 79% rewritten

  Life Sciences, Data and Solutions

• 77% rewritten

  Consulting, 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

• 76% rewritten

  Critical Accounting Policies and Use of Estimates

• 76% rewritten

  New Accounting Standards and Updates

  Was: 13. NEW ACCOUNTING STANDARDS

• 69% rewritten

  Time-Based Restricted and Stock Unit Stock Awards

  Was: Time-Based Restricted Stock Awards

• 69% rewritten

  From time-to-time the Company issues performance-based restricted stock and stock unit awards to its employees. Performance-based restricted stock and stock unit awards are typically vested based on certain multi-year performance metrics as determined by the Board of Directors Compensation Committee

  Was: From 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

• 68% rewritten

  Definition and Limitations of Internal Control over Financial Reporting

• 66% rewritten

  Except as set forth below, the information required by Item 12 shall be included in the 2026 Proxy Statement and is incorporated herein by reference

  Was: Except as set forth below, the information required by Item 12 shall be included in the 2025 Proxy Statement and is incorporated herein by reference

• 63% rewritten

  Supplemental Operating Results on a Non-GAAP Basis

• 61% rewritten

  Accounting for Stock Awards and Stock Compensation

  Was: Accounting for Restricted Stock Awards

• 61% rewritten

  The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31. The fiscal years ended January 3, 2026 (fiscal 2025) and December 28, 2024 (fiscal 2024) consisted of fifty-three and fifty-two weeks, respectively

  Was: The 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

• 57% rewritten

  Permanent placement revenue was $1.7 million for both of the fiscal years ended January 3, 2026 and December 28, 2024

  Was: Permanent placement revenue was $1.5 million and $1.7 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively

• 57% rewritten

  LINE OF CREDIT (CONTINUED)

  Was: 9. LINE OF CREDIT (CONTINUED)

• 57% rewritten

  ACQUISITIONS AND DIVESTITURES (CONTINUED)

  Was: 6. ACQUISITIONS AND DIVESTITURES (CONTINUED)

• 56% rewritten

  Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs

  Was: Level 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

• 51% rewritten

  Opinion on the Financial Statements

• 50% rewritten

  Current Liquidity and Revolving Credit Facility

• 48% rewritten

  Transit Receivables and Transit Payables

• 44% rewritten

  RCM 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

• 44% rewritten

  TREASURY STOCK TRANSACTIONS

  Was: 12. TREASURY STOCK TRANSACTIONS

• 42% rewritten

  Accounting for Income Taxes

• 41% rewritten

  Transit Accounts Receivable and Transit Accounts Payable

• 40% rewritten

  Impairment in fiscal 2024

• 38% rewritten

  Employee Stock Purchase Plan (Continued)

• 38% rewritten

  Description of Business and Basis of Presentation

• 37% rewritten

  Permanent Placement Services

• 36% rewritten

  USE OF ESTIMATES AND UNCERTAINTIES

• 36% rewritten

  Performance-Based Restricted Stock and Stock Unit Awards

• 36% rewritten

  Share - Based Compensation

• 35% rewritten

  As of January 3, 2026, the Company had three share-based employee compensation plans, the Employee Stock Purchase Plan, the 2014 Omnibus Equity Compensation Plan, and the 2025 Omnibus Equity Compensation Plan

  Was: At December 28, 2024, the Company had two share-based employee compensation plans, the Employee Stock Purchase Plan and the 2014 Omnibus Equity Compensation Plan

• 32% rewritten

  Accounts Receivable and Provision for Credit Losses

• 29% rewritten

  Employee Stock Purchase Plan

• 29% rewritten

  Commitments and Contingencies

• 27% rewritten

  2014 Omnibus Equity Compensation Plan (the 2014 Plan)

• 22% rewritten

  Fair Value of Financial Instruments

• 21% rewritten

  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

All 86 risk factors

Headings as the filing states them, in filing order.

Other RCM Technologies 10-Ks

• FY2024 10-K risk factors

  91 risks

  RCM Technologies faces economic cyclicality impacting its engineering and healthcare staffing segments. Client disputes over engineering designs create potential liabilities up to $3.3 million. Internal control weaknesses in information technology remain a risk area.

  Filed Mar 13, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.