This report and documents incorporated by reference into it may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are not historical facts but rather are based on current expectations, estimates and projections about our business and industry, and our beliefs and assumptions. Words such as “believes,” “anticipates,” “plans,” “expects,” “will,” “goal,” and similar expressions are intended to identify forward-looking statement. The inclusion of forward-looking statements should not be regarded as a representation by us that any of our plans will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Such forward-looking information is also subject to various risks and uncertainties. Such risks and uncertainties include, but are not limited to, risks arising from our providing service to the healthcare industry; the impact of and future effects of the COVlD-19 pandemic or other potential pandemics; having a significant portion of our condensed consolidated revenues contributed by a concentrated group of customer during the twenty-six weeks ended July 1, 2023; credit and collection risks; our claim experience related to workers’ compensation and general liability insurance; the effects of changes in, or interpretations of laws and regulations governing, the healthcare industry, our workforce and the services that we provide, including state and local regulations pertaining to the taxability of our services and other labor-related matters such a minimum wage increases; the Company’s expectations with respect to selling, general, and administrative expense; and the risk factors described in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Part II, Item 1A “Risk Factors” of subsequent Quarterly Reports on Form 10-Q, including this Form 10-Q.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

~~September 30, 2017~~

July 1, 2023 and December 31, ~~2016~~

2022

(In thousands, except share ~~and per share~~ amounts)

	July 1,		December 31,
	2023		2022
	(Unaudited)
Current assets:
Cash and cash equivalents	$	1,273	$	339
Accounts receivable, net		61,614		50,762
Transit accounts receivable		9,875		3,280
Prepaid expenses and other current assets		4,324		4,636
Total current assets		77,086		59,017

Property and equipment, net		2,158		2,098

Other assets:
Deposits		169		173
Goodwill		22,147		22,147
Operating right of use asset		3,203		3,665
Intangible assets, net		774		864
Total other assets		26,293		26,849

Total assets	$	105,537	$	87,964

Current liabilities:
Accounts payable and accrued expenses	$	12,947		$	14,147
Transit accounts payable		37,190			9,767
Accrued payroll and related costs		11,836			13,023
Finance lease payable		464			462
Income taxes payable		233			85
Operating right of use liability		1,091			1,349
Contingent consideration from acquisitions		300			472
Deferred revenue		504			1,119
Total current liabilities		64,565			40,424

Deferred income taxes, net, foreign		169			166
Deferred income taxes, net, domestic		1,599			1,495
Finance lease payable		-			232
Contingent consideration from acquisitions, net of current position		1,671			1,970
Operating right of use liability, net of current position		2,508			2,932
Borrowings under line of credit		14,851			8,783
Total liabilities		85,363			56,002

Contingencies (note 15)		-			-

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;
17,516,469 shares issued and 7,934,088 shares outstanding at July 1, 2023 and 17,287,967 shares issued and 9,285,318 shares outstanding at December 31, 2022		873			863
Additional paid-in capital		115,314			113,878
Accumulated other comprehensive loss		(2,857	)		(2,863	)
Accumulated deficit		(28,276	)		(36,096	)
Treasury stock, 9,582,381 shares at July 1, 2023 and
8,002,649 shares at December 31, 2022, at cost		(64,880	)		(43,820	)
Total stockholders’ equity		20,174			31,962

Total liabilities and stockholders’ equity	$	105,537		$	87,964

September 30, December 31,
2017 2016
(Unaudited)
Current assets:
Cash and cash equivalents $825 $279
Accounts receivable, net 41,942 45,170
Transit accounts receivable 1,664 4,295
Prepaid expenses and other current assets 3,212 3,327
Total current assets 47,643 53,071

Property and equipment, net 3,619 4,052

Other assets:
Deposits 207 212
Goodwill 12,458 12,325
Intangible assets, net 121 171
Total other assets 12,786 12,708

Total assets $64,048 $69,831

Current liabilities:
Accounts payable and accrued expenses $7,096 $8,154
Transit accounts payable 2,968 6,776
Accrued payroll and related costs 7,089 7,185
Income taxes payable 1,514 537
Contingent consideration 992 1,061
Total current liabilities 19,659 23,713

Deferred tax liability, domestic 441 148
Deferred tax liability, foreign 254 234
Contingent consideration 240 170
Borrowings under line of credit 9,451 14,311
Total liabilities 30,045 38,576

Stockholders' equity:
Preferred stock, $1.00 par value; 5,000,000 shares authorized;
no shares issued or outstanding - -
Common stock, $0.05 par value; 40,000,000 shares authorized;

14,832,871 shares issued and 12,009,699 shares outstanding at
September 30, 2017 and 14,716,940 shares issued and 11,953,080 shares outstanding at December 31, 2016
741 736
Additional paid-in capital 116,587 115,607
Accumulated other comprehensive loss (2,209 ) (2,578 )
Accumulated deficit (66,129 ) (67,888 )

Treasury stock (2,823,172 shares at September 30, 2017 and
2,763,860 shares at December 31, 2016, at cost)
(14,987 ) (14,622 )
Stockholders' equity 34,003 31,255

Total liabilities and stockholders' equity $64,048 $69,831

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

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~

OPERATIONS

Thirteen and ~~Thirty-Nine Week Periods~~Twenty-Six Weeks Ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~

July 2, 2022

(Unaudited)

(In thousands, except per share amounts)

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	July 1, 2023			July 2, 2022			July 1, 2023			July 2, 2022

Revenue	$	67,035		$	74,346		$	134,159		$	156,307
Cost of services		48,275			52,663			96,375			111,204
Gross profit		18,760			21,683			37,784			45,103

Operating costs and expenses
Selling, general and administrative		12,723			13,264			26,119			27,411
Depreciation and amortization of property and equipment		242			225			513			463
Amortization of acquired intangible assets		46			-			91			-
Gain on sale of assets		-			-			(395	)		-
Operating costs and expenses, net of gain on sale of assets		13,011			13,489			26,328			27,874

Operating income		5,749			8,194			11,456			17,229

Other expense (income)
Interest expense and other, net		425			69			785			166
(Gain) loss on foreign currency transactions		(7	)		(97	)		40			(142	)
Other expense (income), net		418			(28	)		825			24

Income before income taxes		5,331			8,222			10,631			17,205
Income tax expense		1,348			2,208			2,811			4,671

Net income	$	3,983		$	6,014		$	7,820		$	12,534

Basic net earnings per share	$	0.48		$	0.59		$	0.90		$	1.23
											��
Diluted net earnings per share	$	0.47		$	0.57		$	0.87		$	1.18

Thirteen Weeks Ended Thirty-Nine Weeks Ended

September 30,
2017

October 1,
2016

September 30,
2017

October 1,
2016

Revenues $43,827 $39,695 $135,680 $132,250
Cost of services 32,109 29,551 100,097 97,326
Gross profit 11,718 10,144 35,583 34,924

Operating costs and expenses
Selling, general and administrative 9,700 9,334 30,092 29,976
Depreciation and amortization 422 388 1,229 1,177
Change in contingent consideration - - 781 -
10,122 9,722 32,102 31,153
��
Operating income 1,596 422 3,481 3,771

Other (expense) income
Interest expense and other, net (137 ) (114 ) (409 ) (422 )
(Loss) gain on foreign currency transactions (17 ) (14 ) 38 9
(154 ) (128 ) (371 ) (413 )

Income before income taxes 1,442 294 3,110 3,358
Income tax expense 422 184 1,351 1,384

Net income $1,020 $110 $1,759 $1,974

Basic and diluted net earnings per share $0.08 $0.01 $0.15 $0.16

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

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

~~Thirty-Nine Week Periods~~

Twenty-Six Weeks Ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~

July 2, 2022

(Unaudited)

(In thousands)

	Twenty-Six Weeks Ended
	July 1, 2023		July 2, 2022

Net income	$	7,820	$	12,534
Other comprehensive income (loss)		6		(261	)
Comprehensive income	$	7,826	$	12,273

September 30,
2017

October 1,
2016

Net income $1,759 $1,974
Other comprehensive income 369 398
Comprehensive income $2,128 $2,372

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

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN ~~STOCKHOLDERS'~~STOCKHOLDERS’ EQUITY

~~Thirty-Nine~~ ~~Week Period~~

Twenty-Six Weeks Ended ~~September 30, 2017~~

July 1, 2023 and July 2, 2022

(Unaudited)

(In thousands, except share amounts)

	Common Stock				Additional			Accumulated Other						Treasury Stock
	Issued Shares		Amount			Paid-in Capital			Comprehensive Loss			Accumulated Deficit		Shares		Amount				Total

Balance, December 31, 2022		17,287,967	$	863	$	113,878		$	(2,863	)	$	(36,096	)		8,002,649	$	(43,820	)	$	31,962
Issuance of stock under employee stock purchase plan		33,071		2		345			-			-			-		-			347
Equity compensation expense from awards issued		-		-		496			-			-			-		-			496
Issuance of stock upon vesting of restricted share awards		179,762		8		(8	)		-			-			-		-			-
Purchase of treasury stock		-		-		-			-			-			640,578		(8,184	)		(8,184	)
Foreign currency translation adjustment		-		-		-			54			-			-		-			54
Net income		-		-		-			-			3,837					-			3,837

Balance, April 1, 2023		17,500,800	$	873	$	114,711		$	(2,809	)	$	(32,259	)		8,643,227	$	(52,004	)	$	28,512
Issuance of stock upon vesting of restricted share awards		7,669		-		-			-			-			-		-			-
Equity compensation expense from awards issued		-		-		471			-			-			-		-			471
Common stock issued as contingent consideration		8,000		-		132			-			-			-		-			132
Purchase of treasury stock		-		-		-			-			-			939,154		(12,876	)		(12,876	)
Foreign currency translation adjustment		-		-		-			(48	)		-			-		-			(48	)
Net income		-		-		-			-			3,983			-		-			3,983

Balance, July 1, 2023		17,516,469	$	873	$	115,314		$	(2,857	)	$	(28,276	)		9,582,381	$	(64,880	)	$	20,174

	Common Stock				Additional			Accumulated Other						Treasury Stock
	Issued Shares		Amount			Paid-in Capital			Comprehensive Loss			Accumulated Deficit		Shares		Amount				Total

Balance, January 1, 2022		16,903,157	$	845	$	111,068		$	(2,699	)	$	(56,985	)		6,612,222	$	(26,260	)	$	25,969
Issuance of stock under employee stock purchase plan		37,133		2		124			-			-			-		-			126
Equity compensation expense from awards issued		-		-		403			-			-			-		-			403
Issuance of stock upon vesting of restricted share awards		175,000		9		(9	)		-			-			-		-			-
Purchase of treasury stock		-		-		-			-			-			406,480		(2,781	)		(2,781	)
Foreign currency translation adjustment		-		-		-			(35	)		-			-		-			(35	)
Net income		-		-		-			-			6,520			-		-			6,520

Balance, April 2, 2022		17,115,290	$	856	$	111,586		$	(2,734	)	$	(50,465	)		7,018,702	$	(29,041	)	$	30,202
Issuance of stock upon vesting of restricted share awards		38,175		1		(1	)		-			-			-		-			-
Equity compensation expense from awards issued		-		-		302			-			-			-		-			302
Foreign currency translation adjustment		-		-		-			(226	)		-			-		-			(226	)
Net income		-		-		-			-			6,014			-		-			6,014

Balance, July 2, 2022		17,153,465		857	$	111,887		$	(2,960	)	$	(44,451	)		7,018,702	$	(29,041	)	$	36,292

Common Stock

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Loss

Accumulated
Deficit

Treasury Stock
Total

Issued
Shares
Amount

Shares

Amount

Balance, December 31, 2016 14,716,940 $736 $115,607 ($2,578 ) ($67,888 ) 2,763,860 ($14,622 ) $31,255

Issuance of stock under
employee stock purchase plan
90,931 4 390 - -

-

-
394
Translation adjustment - - - 369 - - - 369
Share-based compensation expense - - 591 - - - - 591
Issuance of stock upon vesting of
restricted stock awards
25,000 1 (1 ) - -

-

-
-
Common stock repurchase - - - - - 59,312 (365 ) (365 )
Net income - - - - 1,759 - - 1,759

Balance, September 30, 2017 14,832,871 $741 $116,587 ($2,209 ) ($66,129 ) 2,823,172 ($14,987 ) $34,003

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

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~Thirty-Nine~~ ~~Week Periods~~

Twenty-Six Weeks Ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~

July 2, 2022

(Unaudited)

(In thousands)

	Twenty-Six Weeks Ended
	July 1, 2023			July 2, 2022
Cash flows from operating activities:
Net income	$	7,820		$	12,534

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		604			463
Gain on sale of assets		(395	)		-
Equity compensation expense from awards issued		967			705
Provision for losses on accounts receivable		-			(600	)
Deferred income tax expense		108			38
Change in operating right of use assets		462			580
Changes in operating assets and liabilities:
Accounts receivable		(10,839	)		3,565
Prepaid expenses and other current assets		312			434
Net of transit accounts receivable and payable		20,828			(210	)
Accounts payable and accrued expenses		(1,013	)		(585	)
Accrued payroll and related costs		(1,194	)		3,048
Right of use liabilities		(683	)		(926	)
Income taxes payable		147			2,935
Deferred revenue		(615	)		(1,237	)
Deposits		2			11
Total adjustments and changes in operating assets and liabilities		8,691			8,221
Net cash provided by operating activities		16,511			20,755

Cash flows from investing activities:
Property and equipment acquired		(559	)		(409	)
Right of use asset additions		-			(44	)
Net cash used in investing activities		(559	)		(453	)

Cash flows from financing activities:
Borrowings under line of credit		69,797			69,990
Repayments under line of credit		(63,728	)		(84,141	)
Issuance of stock for employee stock purchase plan		347			126
Changes in finance lease obligations		(232	)		(270	)
Contingent consideration paid		(339	)		(99	)
Common stock repurchase		(21,060	)		(2,781	)
Net cash used in financing activities		(15,215	)		(17,175	)
Effect of exchange rate changes on cash and cash equivalents		197			(250	)
Increase in cash and cash equivalents		934			2,877
Cash and cash equivalents at beginning of period		339			235

Cash and cash equivalents at end of period	$	1,273		$	3,112

Supplemental cash flow information:
Cash paid for:
Interest	$	601		$	179
Income taxes	$	1,821		$	1,705

Non-cash investing activities:
Right of use assets obtained in exchange for lease obligations	$	-		$	732
Value of shares issued as contingent consideration	$	132		$	-

September 30,
2017

October 1,
2016

Cash flows from operating activities:
Net income $1,759 $1,974

Adjustments to reconcile net income to net cash provided by (used in)
  operating activities:

Depreciation and amortization 1,229 1,177
Change in contingent consideration 781 -
Share-based compensation expense 591 614
Provision for losses on accounts receivable 131 (128 )
Deferred income tax expense 294 312
Changes in assets and liabilities:
Accounts receivable 3,682 8,600
Prepaid expenses and other current assets 230 1,847
Net of transit accounts receivable and payable (1,189 ) 864
Accounts payable and accrued expenses (1,313 ) (1,746 )
Accrued payroll and related costs (185 ) (2,334 )
Income taxes payable 946 948
Total adjustments 5,197 10,154
Net cash provided by operating activities 6,956 12,128

Cash flows from investing activities:
Property and equipment acquired (747 ) (732 )
Decrease in deposits 4 3
Net cash used in investing activities (743 ) (729 )

Cash flows from financing activities:
Borrowings under line of credit 60,411 59,187
Repayments under line of credit (65,271 ) (69,036 )
Issuance of stock for employee stock purchase plan 394 368
Common stock repurchases (365 ) (1,828 )
Contingent consideration paid (790 ) (788 )
Net cash used in financing activities (5,621 ) (12,097 )
Effect of exchange rate changes on cash and cash equivalents (46 ) 16
Increase (decrease) in cash and cash equivalents 546 (682 )
Cash and cash equivalents at beginning of period 279 985

Cash and cash equivalents at end of period $825 $303

Supplemental cash flow information:
Cash paid for:
Interest $366 $363
Income taxes $340 $113

Non-cash investing activities:
Non-cash consideration for business acquisition $133 $   -

Non-cash financing activities:
Vesting of restricted stock units $117 $   -

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

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Basis of Presentation

The accompanying condensed consolidated interim financial statements of RCM Technologies, Inc. and subsidiaries ~~("RCM"~~(“RCM” or the ~~"Company"~~“Company”) are unaudited. The year-end consolidated balance sheet was derived from the Company’s 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~~10-Q and should be read in conjunction with the ~~Company's~~Company’s consolidated financial statements and the notes thereto for the year ended December 31, ~~2016~~ 2022 included in the ~~Company's~~Company’s Annual Report Form ~~10-K~~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 condensed consolidated financial statements for the unaudited interim periods presented include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of financial position, results of operations and cash flows for such interim periods.

Results for the thirteen and ~~thirty-nine week periods~~twenty-six weeks ended ~~September 30, 2017~~ July 1, 2023 and July 2, 2022 are not necessarily indicative of results that may be expected for the full ~~year.~~

2.	~~Fiscal Year~~

year or any future period.

Fiscal Year

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31. ~~The~~Both the current fiscal year ending December 30, 2023 (fiscal 2023) and the prior fiscal year ended December 31, ~~2016 was a 52-week~~2022 (fiscal 2022) are 52-week reporting ~~year.~~years. The ~~third~~ fiscal quarters ~~of 2017~~for fiscal 2023 and ~~2016 ended on the following dates, respectively:~~

fiscal 2022 align as follows:

~~Period Ended~~ Fiscal 2023 Quarters	Weeks ~~in Quarter~~	Fiscal 2022 Quarters	Weeks ~~in Year to Date~~
April 1, 2023	Thirteen	April 2, 2022	Thirteen
July 1, 2023	Thirteen	July 2, 2022	Thirteen
September 30, ~~2017~~2023	Thirteen	~~Thirty-Nine~~ October 1, 2022	Thirteen
~~October 1, 2016~~ December 30, 2023	Thirteen	~~Thirty-Nine~~ December 31, 2022	Thirteen

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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~~revenue and expenses and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

The Company uses estimates to ~~calculate~~determine an allowance for doubtful accounts on its accounts ~~receivables, adequacy of reserves,~~receivable, litigation, medical claims, vacation, goodwill impairment, if any, equity compensation, the tax rate applied and the valuation of certain assets and liability accounts. In addition, the Company reviews its estimated costs to complete a contract and adjusts those costs when necessary. These estimates can be significant to the operating results and financial position of the Company.

The estimates are based upon various factors including current and historical trends, as well as other pertinent industry and regulatory authority information. Management regularly evaluates this information to determine if it is necessary to update the basis for its estimates and to adjust for known changes.

The Company has risk participation arrangements with respect to workers compensation and health care insurance. The amounts included in the ~~Company's~~Company’s costs related to this risk participation are estimated and can vary based on changes in assumptions, the ~~Company's~~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~~Company’s services, adverse litigation and claims and the hiring, training and retention of key employees.

~~RCM TECHNOLOGIES, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

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

3.	~~Use of Estimates and Uncertainties (Continued)~~

Fair Value of Financial Instruments

The ~~Company's~~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.~~nature and the line of credit’s variable interest rate. 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.

The Company re-measures the fair value of the contingent consideration at each reporting period and any change in the fair value from either the passage of time or events occurring after the acquisition date, is recorded in earnings in the accompanying consolidated statement of operations.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~Accounts Receivable, Transit Accounts Receivable~~

Revenue Recognition

The Company records revenue under Accounting Standards Codification (“ASC”) Topic 606,Revenue from Contracts with Customers. Revenue is 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.

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 revenue from several sources. The Company’s Engineering Services, Life Sciences and Information Technology segments perform consulting and project solution services. The Healthcare segment specializes in long-term and short-term staffing and placement services to hospitals, schools and long-term care facilities amongst others. All of the Company’s segments perform staff augmentation services and derive revenue from permanent placement fees. The majority of the Company’s revenue is invoiced on a time and materials basis.

The following table presents our revenue disaggregated by revenue source for the thirteen and twenty-six weeks ended July 1, 2023 and July 2, 2022:

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Specialty Health Care:
Time and Material	$	35,276	$	43,045	$	74,110	$	95,068
Permanent Placement Services		252		412		548		573
Total Specialty Health Care	$	35,528	$	43,457	$	74,658	$	95,641

Engineering:
Time and Material	$	11,557	$	11,471	$	22,027	$	22,146
Fixed Fee		9,457		9,435		17,477		18,658
Total Engineering	$	21,014	$	20,906	$	39,504	$	40,804

Life Sciences and Information Technology:
Time and Material	$	8,624	$	9,101	$	16,858	$	18,257
Permanent Placement Services		133		695		247		1,241
Fixed Fee		1,736		187		2,892		364
Total Life Sciences and Information Technology	$	10,493	$	9,983	$	19,997	$	19,862
	$	67,035	$	74,346	$	134,159	$	156,307

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and ~~Transit Accounts Payable~~per share amounts, unless otherwise indicated)

3.Revenue Recognition (Continued)

Time and Material

The Company’s Health Care segment predominantly recognizes revenue through time and material work while its Engineering and Life Sciences and Information Technology segments recognize 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 revenue associated with these time and materials contracts are recognized based on hours worked at contracted rates.

Fixed Fee

From time to time and predominantly in 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. Revenue under these arrangements are recognized as the costs on these contracts are incurred. From time-to-time, amounts paid in excess of revenue earned and recognized are recorded as deferred revenue, included in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheets. 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 revenue 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 and 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 Company guarantees its permanent placements on a prorated basis for 90 days. In the event a candidate is not retained for the 90-day period, the Company will provide a suitable replacement candidate. In the event a replacement candidate cannot be located, the Company will provide a prorated refund to the client. An allowance for refunds, based upon the Company’s historical experience, is recorded in the financial statements.

Deferred Revenue

There was $0.5 million of deferred revenue as of July 1, 2023. Deferred revenue was $1.1 million as of December 31, 2022. Revenue is recognized when the service has been performed. Deferred revenue may be recognized over a period exceeding one year from the time it was recorded on the balance sheet, although this is an infrequent occurrence. For the thirteen weeks ended July 1, 2023 and July 2, 2022, the Company recognized revenue of $0.3 million and $1.9 million, respectively, that was included in deferred revenue at the beginning of the reporting period. For the twenty-six weeks ended July 1, 2023 and July 2, 2022, the Company recognized revenue of $1.0 million and $2.9 million, respectively, that was included in deferred revenue at the beginning of the reporting period.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

3.Revenue Recognition (Continued)

Concentration

During the twenty-six weeks ended July 1, 2023, the Company had one customer exceed 10% of consolidated revenue, representing 18.7% of consolidated revenue. During the twenty-six weeks ended July 2, 2022, the Company had two customers exceed 10% of consolidated revenue, representing 20.4% and 13.9% of consolidated revenue. In both periods presented, the customers are included in the Company’s Specialty Health Care segment.

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

The ~~Company's~~Company’s accounts receivable are comprised ~~as follows:~~

September 30,
2017

December 31,
2016

Billed $29,322 $34,463
Accrued and unbilled 8,911 6,894
Work-in-progress 4,770 5,215
Allowance for sales discounts and doubtful accounts (1,061 ) (1,402 )

Accounts receivable, net $41,942 $45,170

of the following:

	July 1, 2023			December 31, 2022
Billed	$	49,694		$	40,256
Unbilled		8,372			6,615
Work-in-progress		4,648			4,991
Allowance for sales discounts and doubtful accounts		(1,100	)		(1,100	)

Accounts receivable, net	$	61,614		$	50,762

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

From time to time, the ~~Company's~~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. In such situations, the Company acts as an agent under the provisions of FASB ASC 606 “Revenue from Contracts with Customers” and therefore recognizes revenue on a “net-basis.” The Company records revenue on a “net” basis on relevant engineering and construction management projects, which require subcontractor/procurement costs or transit costs. In those situations, the Company charges the client a negotiated fee, which is reported as net revenue when earned.

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~~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~~“transit account ~~receivable"~~receivable” and ~~"transit~~“transit account ~~payable"~~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~~Company is typically obligated to pay the subcontractor or staffing agency whether or not the client pays the Company. The Company’s transit accounts payable generally exceeds the ~~Company's~~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 ~~$1.7~~$9.9 million and related transit accounts payable was ~~$3.0~~$37.1 million, for a net ~~liability~~payable of ~~$1.3~~$27.2 million, as of ~~September 30, 2017.~~ July 1, 2023. The net of transit accounts payable and transit accounts receivable was ~~$4.3 million and related transit accounts payable was $6.8 million, for~~ a net ~~liability~~payable of ~~$2.5~~$6.5 million as of December 31, ~~2016.~~

2022 as compared to a net payable of $1.1 million as of January 1, 2022.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

5.	~~Property and Equipment~~

5.Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization, and are depreciated or amortized 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~~Computer hardware and software, ~~as well as~~and furniture and office ~~equipment.~~equipment are typically depreciated over five years. 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:

September 30,
2017

December 31,
2016
Equipment and furniture $912 $1,045
Computers and systems 5,981 5,521
Leasehold improvements 857 804
7,750 7,370

Less: accumulated depreciation and amortization 4,131 3,318

Property and equipment, net $3,619 $4,052

	July 1, 2023		December 31, 2022
Computers and systems	$	3,635	$	4,077
Equipment and furniture		259		220
Leasehold improvements		388		267
Laboratory equipment		140		67
		4,421		4,630

Less: accumulated depreciation and amortization		2,263		2,532

Property and equipment, net	$	2,158	$	2,098

The Company periodically writes off fully depreciated and amortized assets. The Company wrote off fully depreciated and amortized assets of ~~$367~~$601 and ~~$2,677~~$603 during the ~~thirty-nine week periods~~twenty-six weeks ended ~~September 30, 2017~~ July 1, 2023 and ~~October 1, 2016,~~ July 2, 2022, respectively. Depreciation and amortization expense of property and equipment for the ~~thirty-nine week periods~~thirteen weeks ended ~~September 30, 2017~~ July 1, 2023 and ~~October~~July 2, 2022 was $242 and $225, respectively. Depreciation and amortization expense of property and equipment for the twenty-six weeks ended July 1, ~~2016~~ 2023 and July 2, 2022 was ~~$1,179~~$513 and ~~$1,114,~~$463, respectively.

6.	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.

Divestitures

Future Contingent Payments

As of ~~September 30, 2017,~~ July 1, 2023, the Company had ~~five~~two active acquisition agreements whereby additional contingent consideration may be earned by the ~~former shareholders: 1)~~sellers: 1) effective ~~July 1, 2012~~ September 30, 2018, the Company acquired certain assets of ~~BGA,~~Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC ~~("BGA"~~(together, “TKE”)~~; 2)~~, and 2) effective ~~August 1, 2014 the Company acquired all of the stock of Point Comm, Inc. ("PCI"); 3) effective July 5, 2015,~~ October 2, 2022, 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") and 5) effective April 16, 2017 the Company acquired certain assets of R.A.F. Services, Inc. ("RAF").TalentHerder LLC. The Company estimates future contingent payments at ~~September 30, 2017~~ July 1, 2023 as follows:

	Total
The four quarters following July 1, 2023	$	300
Thereafter		1,671
Estimated future contingent consideration payments	$	1,971

~~Fiscal Year Ended~~	~~Total~~
~~December 30, 2017 (after September 30, 2017)~~	~~$992~~
~~December 30, 2018~~	~~240~~
~~Estimated future contingent consideration payments~~	~~$1,232~~

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

6.	~~Acquisitions (Continued)~~

6.Acquisitions and Divestitures (Continued)

Future Contingent Payments (Continued)

For acquisitions that involve contingent consideration, the Company records a liability equal to the fair value of the estimated contingent consideration obligation as of the acquisition date. The Company determines the acquisition date fair value of the contingent consideration based on the likelihood of paying the additional consideration. The fair value is estimated using projected future operating results and the corresponding future earn-out payments that can be earned upon the achievement of specified operating objectives and financial results by acquired companies using Level 3 inputs and the amounts are then discounted to present value. These liabilities are measured quarterly at fair value, and any change in the fair value of the contingent consideration liability is recognized in the consolidated statements of operations. During the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in the consolidated statements of operations.

Estimates of future contingent payments are subject to significant judgment and actual payments may materially differ from estimates. The Company estimates future contingent consideration payments based on forecasted performance and recorded the fair value of those expected payments as of July 1, 2023. Contingent consideration related to acquisitions is recorded at fair value (level 3) with changes in fair value recorded in other (expense) income, net.

Potential f~~uture~~future contingent payments to be made to all active acquisitions after July 1, 2023 are capped at a cumulative maximum of ~~$2.9~~$11.6 million. The Company ~~estimates future contingent consideration in payments based on forecasted performance~~paid $0.5 million and ~~recorded at the net present value~~$0.1 million of ~~those expected payments as of~~ ~~September 30, 2017. The measurement is based on significant inputs that are not observable in the market, which "Fair Value Measurements and Disclosures" (ASU Topic 820-10-35) refers to as Level 3 inputs.~~

~~The Company paid $0.8 million in~~ contingent consideration during ~~both~~the twenty-six weeks ended July 1, 2023 and July 2, 2022, respectively. The contingent consideration paid in the twenty-six weeks ended July 1, 2023 included $0.1 million of the ~~thirty-nine week periods ended September 30, 2017 and October 1, 2016.~~

~~AHP~~

Effective December 31, 2016, the Company acquired the business operations of Allied Health Professionals, LLC ("AHP"). AHP was a Chicago area healthcare staffing company providing physical therapists, occupational therapists and speech language pathologists to hospitals, rehabilitation centers, schools and outpatient programs. The Company expects the AHP acquisition to complement its Chicago area operations which formerly provided primarily nurses to the Chicago Public School system. AHP will add new clients and expand the Company's service offerings in the Chicago area. The purchase price for AHP was $695, all of which was allocated to goodwill, payable as follows: 1) cash of $275 paid in January 2017; 2) an unsecured note payable of $280 to be paid in quarterly installments through October 2018; and 3) maximum contingent consideration of $140 tied to certain gross profit targets and, if earned, payable in 2018.common stock.

~~RAF~~
Effective April 16, 2017, the Company acquired the business operations of R.A.F. Services, Inc. ("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, expected to be paid in fiscal 2018.

7.	~~Goodwill~~

7.Goodwill

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets acquired in business combinations. The Company ~~is required to assess the carrying value of its reporting units that contain~~tests goodwill ~~at least~~for impairment on an annual basis. The Company has the option to first assess qualitative factors to determine whether it is necessary to perform a two-step impairment test. If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than the carrying value, the quantitative impairment test is required. The Company formally assesses these qualitative factors, and if necessary, conducts its annual goodwill impairment testbasis as of the last day of the Company's fiscal ~~November each~~ year or more frequently if events occur or circumstances change indicating that the fair value of goodwill may be below the carrying amount. The Company reviewed industry and market conditions, reporting unit specific events as well as overall financial performance and determined that no indicators of impairment ~~exist. During all periods presented, the Company determined that the existing qualitative factors did not suggest that an impairment~~ of goodwill ~~exists. Since there have been~~existed during the twenty-six weeks ended July 1, 2023. As such, no ~~indicators~~impairment loss on the Company’s intangible assets during the twenty-six weeks ended July 1, 2023 was recorded as a result of ~~impairment, the Company has not performed a quantitative impairment test.~~

such review.

The carrying amount of goodwill as of July 1, 2023 and December 31, 2022 was as follows:

Engineering

Specialty

Health Care

Information

Technology

Total

11,918

2,398

7,831

22,147

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

7.	~~Goodwill (Continued)~~

~~The following changes in the carrying amount~~

8.Line of ~~goodwill occurred during the thirty-nine week period ended September 30, 2017:~~

Engineering Specialty Health Care
Information
Technology

Total

Balance as of December 31, 2016 $4,411 $2,398 $5,516 $12,325

Goodwill recorded, RAF 133 - - 133

Balance as of September 30, 2017 $4,544 $2,398 $5,516 $12,458

8. ~~Intangible Assets~~

On April 24, 2023, 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 relationshipsentered into a Fourth Amended and ~~non-compete agreements. During all periods presented, the Company determined that no impairment of intangible assets exists.~~

~~The following table reflects the activity for net intangible assets, excluding goodwill which is substantially attributable to the Company's Engineering segment, for the periods presented:~~

Thirty-Nine Weeks Ended

September 30,
2017

October 1,
2016

Beginning balance $171 $252

Amortization of intangibles during the
thirty-nine week period presented
(50

)
(63

)

Ending balance $121 $189

9.	~~Line of Credit~~

~~The Company~~Restated Loan Agreement (the “Fourth Amended and ~~its subsidiaries are party to a loan agreement~~Restated Loan Agreement”) with Citizens Bank, N.A., as lender (in such capacity, the “Lender”) and as administrative agent and arranger (in such capacity, the “Administrative Agent”), to amend and restate in its entirety that certain Third Amended and Restated Agreement dated as of ~~Pennsylvania which~~the August 9, 2018 (as the same has been amended and modified prior to the date hereof, the “Existing Loan Agreement”).

The Fourth Amended and Restated Loan Agreement provides for a ~~$35~~$45.0 million revolving credit facility ~~and includes a~~(the “Revolving Credit Facility”), has no 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 Seventh Amendment entered into~~ on ~~March 8, 2017 when the Company was granted a waiver that expressly excludes $1.3 million of certain legal settlement and office closure expenses in the calculation of the Company's loan covenants.~~ April 24, 2026.

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) SOFR (Secured Overnight Financing Rate) (which replaced LIBOR (London Interbank Offered Rate) upon the phasing out of LIBOR), plus applicable margin, typically borrowed in fixed ~~30-day~~30-day increments, plus applicable margin, typically borrowed in fixed 30-day increments or (ii) the agent ~~bank's~~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 weighted average interest rate, including unused line fees, for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017 was 2.6%.~~

~~RCM TECHNOLOGIES, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

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

9.	~~Line of Credit (Continued)~~

July 1, 2023 and July 2, 2022 were 6.3% and 1.9%, respectively.

All borrowings under the ~~Revolving Credit Facility are~~Fourth Amended and Restated Loan Agreement remain collateralized bywith substantially all of the Company’s assets, ofas well as the ~~Company and its subsidiaries and a pledge of the~~capital 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~~Company’s ability to borrow in order to pay dividends. As of ~~September 30, 2017,~~ July 1, 2023, the Company was in compliance with all covenants contained in ~~its~~the Revolving Credit Facility.

The Company believes that it will maintain compliance with its financial covenants for the foreseeable future.

Borrowings under the line of credit as of ~~September 30, 2017~~ July 1, 2023 and December 31, ~~2016~~ 2022 were ~~$9.5~~$14.9 million and ~~$14.3~~$8.8 million, respectively. ~~At September 30, 2017 and December 31, 2016 there~~There were letters of credit outstanding at July 1, 2023 and December 31, 2022 for ~~$0.8 million.~~$2.0 million and $1.9 million, respectively. At ~~September 30, 2017,~~ July 1, 2023 and December 31, 2022, the Company had availability for additional borrowings under the Revolving Credit Facility of ~~$24.7 million.~~$28.1 million and $34.3 million, respectively.

~~10.~~

~~Per Share Data~~

9.Per Share Data

The Company uses the treasury stock method to calculate the weighted-average shares outstanding used for diluted earnings per share. The number of ~~common~~weighted-average shares used to calculate basic and diluted earnings per share for the thirteen and ~~thirty-nine week periods~~twenty-six weeks ended ~~September 30, 2017~~ July 1, 2023 and ~~October 1, 2016~~ July 2, 2022 was determined as follows:

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended

September 30,
2017

October 1,
2016

September 30,
2017

October 1,
2016

Basic weighted average shares
  outstanding
12,009,181 12,295,493 11,972,600 12,380,617
Dilutive effect of outstanding stock
   options and restricted stock awards
141,914 136,150 116,610 102,817
Weighted average dilutive shares
   outstanding
12,151,095 12,431,643 12,089,210 12,483,434

~~There~~

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Basic weighted average shares outstanding		8,297,521		10,133,279		8,734,848		10,181,895
Dilutive effect of outstanding restricted share awards		260,875		417,617		241,866		401,624
Diluted weighted average shares outstanding		8,558,396		10,550,896		8,976,714		10,583,519

For all periods presented, there were ~~15,000 and 42,500 absolute~~no anti-dilutive shares ~~not~~ included in the calculation of common stock equivalents ~~for the thirty-nine week periods ended September 30, 2017 and October 1, 2016, respectively. These~~as there 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~~no stock ~~for the same periods.~~

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

September 30,
2017

December 31,
2016

Exercise of options outstanding 17,000 42,000
Time-based restricted stock units outstanding 212,734 197,734
Performance-based restricted stock units outstanding 400,000 200,000
Future grants of options or shares 379,266 619,266
Shares reserved for employee stock purchase plan 177,280 268,211

Total 1,186,280 1,327,211

options outstanding.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

9.Per Share Data (Continued)

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

	July 1, 2023		December 31, 2022
Time-based restricted stock awards outstanding		497,561		274,939
Performance-based restricted stock awards outstanding		100,000		-
Performance-based restricted stock awards outstanding under plans to be approved by the shareholders		-		225,000
Future grants of options or shares		605,629		890,682
Shares reserved for employee stock purchase plan		331,160		364,231

Total		1,534,350		1,754,852

~~11.~~

~~Share-Based Compensation~~

10.Share-Based Compensation

At ~~September 30, 2017,~~ July 1, 2023, the Company had ~~three~~two share-based employee compensation ~~plans.~~ plans, the Employee Stock Purchase Plan and the 2014 Omnibus Equity Compensation Plan.

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~~Company’s common stock on the date of grant. Awards typically vest over periods ranging from one to ~~three~~five years and expire within 10 years of issuance. The Company may also issue immediately vested equity awards. 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~~expenses 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.~~

vest or forfeited.

Share-based compensation expense ~~of $591 and $614 was recognized~~ for the ~~thirty-nine week periods~~ thirteen weeks ended ~~September 30, 2017~~ July 1, 2023 and ~~October 1, 2016,~~July 2, 2022 was $471 and $302, respectively. ~~Share based~~Share-based compensation expense for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017 did not include any~~July 1, 2023 and July 2, 2022 was $967 and $705, respectively. Stock-based compensation expense ~~associated with performance-based restricted stock units since they were, as~~is included in selling, general and administrative expense in the Company’s statement of ~~September 30, 2017, determined to be unlikely to vest.~~

operations.

As of ~~September 30, 2017,~~ July 1, 2023, the Company had ~~approximately $0.3~~$3.8 million of total unrecognized compensation cost, with approximately $3.5 million related to ~~all~~ time-based non-vested share-based awards ~~granted under the Company's various~~outstanding and $0.3 million related to performance-based non-vested share-based ~~plans, which the~~awards outstanding. The Company expects to recognize ~~over approximately a two-year period.~~the expense associated with time-based non-vested share-based awards through fiscal 2027. If earned, the Company will recognize the expense associated with performance-based non-vested share-based awards straight-line through fiscal 2023. 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)b) the impact of any potential changes in the ~~Company's~~Company’s forfeiture rate.

~~Incentive Share-Based Plans~~

~~2007 Omnibus Equity Compensation Plan (the 2007 Plan)~~

The 2007 Plan, approved by the Company's stockholders in June 2007, provides for the issuance of up to 700,000 shares of the Company's common stock to officers, non-employee directors, employees of the Company and its subsidiaries or consultants and advisors utilized by the Company. As of September 30, 2017, under the 2007 Plan, options to purchase 17,000 shares of common stock were outstanding. The 2007 Plan has expired therefore no shares are available for grant thereunder.

~~2014 Omnibus Equity Compensation Plan (the 2014 Plan)~~

The 2014 Plan, approved by the Company's stockholders in December 2014, provides for the issuance of up to 625,000 shares of the Company's common stock to officers, non-employee directors, employees of the Company and its subsidiaries or consultants and advisors utilized by the Company. 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 September 30, 2017, under the 2014 Plan, 612,734 restricted stock units were outstanding, including 400,000 performance-based restricted stock units the Company currently deems unlikely to vest, and 379,266 shares were available for awards thereunder.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~11.~~

~~Share-Based Compensation (Continued)~~

10.Share-Based Compensation (Continued)

Incentive Share-Based Plans ~~(Continued)~~

Employee Stock Purchase Plan

The Company implemented the 2001 Employee Stock Purchase Plan (the ~~"Purchase Plan"~~“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.~~

compensation, subject to maximum purchases in any one fiscal year of 3,000 shares.

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 Purchase 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 Purchase Plan to December 31, 2025.

In fiscal 2018, 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 Purchase 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 1,400,000 shares. In fiscal 2021, 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 Purchase Plan by an additional 400,000 shares so that the total number of shares of stock reserved for issuance or transfer under the Plan shall be 1,800,000 shares and the termination date of the Purchase Plan was extended to December 31, 2030.

The Company has two offering periods in the Purchase Plan coinciding with the ~~Company's~~ Company’s firsttwo 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 on January 3, 2023 (the ~~beginning of~~first business day following the ~~current period (on July 3, 2017)~~previous offering period) was ~~47,183.~~33,071. As of ~~September 30, 2017,~~ July 1, 2023, there were ~~177,280~~331,160 shares available for issuance under the Purchase Plan.

~~Stock Option Awards~~

~~There were no options granted during both~~ ~~thirty-nine week periods~~ ~~ended September 30, 2017 and October 1, 2016.~~ ~~Activity regarding outstanding options~~ Compensation expense, representing the discount to the quoted market price, for the ~~thirty-nine week period~~Purchase Plan for the twenty-six weeks ended ~~September 30, 2017 is as follows:~~

All Stock Options Outstanding

Shares

Weighted Average
Exercise Price

Options outstanding as of December 31, 2016 42,000 $8.27
Options granted -
Options exercised -
Options forfeited/cancelled (25,000 )

Options outstanding as of September 30, 2017 17,000 $6.00

Options outstanding price range at September 30, 2017 $5.27 - $6.10

Options exercisable as of September 30, 2017 17,000 $6.00

Intrinsic value of outstanding stock options as of
September 30, 2017
$1

~~As of September 30, 2017, the Company had approximately $0 of total unrecognized compensation cost related to all non-vested stock option awards.~~

July 1, 2023 and July 2, 2022 was $160 and $119, respectively.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~11.~~

~~Share-Based Compensation (Continued)~~

~~Time-Based Restricted Stock Units~~

~~From time-to-time~~

10.Share-Based Compensation (Continued)

2014 Omnibus Equity Compensation Plan (the 2014 Plan)

The 2014 Plan, approved by the Company’s shareholders in December 2014, initially provided for the issuance of up to 625,000 shares of the Company’s common stock to officers, non-employee directors, employees of the Company ~~issues time-based restricted~~and its subsidiaries, or consultants and advisors utilized by the Company. In fiscal 2016, fiscal 2020 and fiscal 2022, the Company amended, or amended and restated, the 2014 Plan with shareholder approval to increase the aggregate number of shares of stock ~~units. These time-based restricted~~reserved for issuance under the Plan by an additional 500,000, 850,000 and 1,000,000 shares, respectively, so that the total number of shares of stock ~~units~~reserved for issuance under the Plan is 2,975,000 shares. The expiration date of the Plan is December 17, 2030, unless the 2014 Plan is terminated earlier by the Board or is extended by the Board with the approval of the stockholders. The Compensation Committee of the Board of Directors determines the vesting period at the time of grant.

All stock awards 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~~grantee’s stock ~~unit~~award 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. As of July 1, 2023, there were no accrued dividends. Dividends for stock awards that ultimately do not vest are forfeited.

As of July 1, 2023, under the 2014 Plan, 497,561 time-based shares were outstanding, 100,000 performance-based restricted stock awards were outstanding and 605,629 shares were available for awards thereunder.

Time-Based Restricted Stock Awards

From time-to-time the Company issues 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 2007 and 2014 Plans.~~awards. The following summarizes the activity in the time-based restricted stock ~~units~~awards under the ~~2007 and~~ 2014 ~~Plans~~ Plan during the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017:~~

Number of
Time-Based
Restricted
Stock Units

Weighted
Average
Grant Date Fair
Value per Share
Outstanding non-vested at December 31, 2016 197,734 $7.33
Granted 40,000 $5.05
Vested (25,000 ) $5.41
Forfeited or expired - -
Outstanding non-vested at September 30, 2017 212,734 $7.12

July 1, 2023:

	Number of Time-Based Restricted Stock Awards			Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at December 31, 2022		274,939		$	3.59
Granted		288,893		$	13.00
Vested		(57,669	)	$	2.88
Forfeited or expired		(8,602	)	$	1.55
Outstanding non-vested at July 1, 2023		497,561		$	9.17

Based on the closing price of the ~~Company's~~Company’s common stock of ~~$5.72~~$18.40 per share on ~~September 29, 2017 (the~~June 30, 2023 (the last trading day prior to ~~September 30, 2017)~~July 1, 2023), the intrinsic value of the time-based non-vested restricted stock ~~units~~awards at ~~September 30, 2017~~ July 1, 2023 was approximately ~~$1.2~~$9.2 million. As of ~~September 30, 2017,~~ July 1, 2023, there was approximately ~~$0.3~~$3.5 million of total unrecognized compensation cost related to time-based restricted stock ~~units,~~awards, which is expected to be recognized over the average weighted remaining vesting period of the restricted stock ~~units.~~awards through fiscal 2027.

~~Performance Based~~

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

10.Share-Based Compensation (Continued)

Performance-Based Restricted Stock ~~Units~~

Awards

From time-to-time the Company issues performance-based restricted stock ~~units~~awards to its executives. Performance-based restricted stock ~~units~~awards 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.

~~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)~~

~~Performance Based Restricted Stock Units (Continued)~~

~~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~~awards during ~~2017:~~

Number of
Performance-Based
Restricted
Stock Units

Weighted
Average
Grant Date Fair
Value per Share
Outstanding non-vested at December 31, 2016 200,000 $5.36
Granted 200,000 $4.85
Vested - -
Forfeited or expired - -
Outstanding non-vested at September 30, 2017 400,000 $5.11

the twenty-six weeks ended July 1, 2023:

	Number of Performance-Based Restricted Stock Awards			Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at December 31, 2022		225,000		$	8.73
Granted		-			-
Vested		(125,000	)	$	6.15
Forfeited or expired		-			-
Outstanding non-vested at July 1, 2023		100,000		$	11.96

As of ~~September 30, 2017, the Company considers the metrics related to 400,000 of the~~July 1, 2023, there was one outstanding grant for performance-based restricted stock ~~units unlikely~~awards issued to ~~be achieved, thus no performance condition is probable of achievement and no compensation cost has been recognized on~~Bradley Vizi, the Company’s Chief Executive Officer. In December 2022, the Company issued a performance-based restricted stock ~~units.~~unit grant of 100,000 shares, subject to increase up to 125,000 shares, based on fiscal 2023 performance (the “2023 Grant”). The Company ~~will reassess~~has not made a determination as to how many shares it expects to issue under the 2023 Grant.

The Company assesses at each reporting date whether achievement of any performance condition is probable and ~~would begin recognizing compensation cost if and~~recognizes the expense 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,~~ If at a later measurement date, the ~~Board of Directors authorized a repurchase program~~Company determines that performance-based restricted stock awards deemed as likely to ~~purchase up~~vest are deemed as unlikely to ~~$5.0~~vest, the expense recognized will be reversed.

Share-based compensation for performance-based equity agreement was $0.2 million ~~of outstanding shares of common stock at~~and $0.4 million for the ~~prevailing market prices, from time to time over~~thirteen weeks ended July 1, 2023 and July 2, 2022, respectively. Share-based compensation for performance-based equity agreement was $0.3 million and $0.2 million for 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 twenty-six weeks ended July 1, 2023 and ~~extended this repurchase program through December 31, 2017.~~ July 2, 2022, respectively

During the ~~thirty-nine week periods~~twenty-six weeks ended ~~September 30, 2017 and October~~July 1, ~~2016,~~ 2023, the Company ~~purchased 59,312 shares~~awarded 4,762 immediately vested share awards at an average price of ~~$6.16 per share and 357,250 shares at an average price of $5.54, respectively. As of September 30, 2017,~~ $10.50. During the twenty-six weeks ended July 2, 2022, the Company ~~has $2.5 million available for future treasury stock purchases.~~

did not award any immediately vested share awards.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

11.Treasury Stock Transactions

On April 25, 2023, the Board authorized a program to repurchase shares of its common stock up to an amount not to exceed $25.0 million. This newly approved program succeeds the Company’s prior repurchase program authorized in November 2021, which was substantially completed in April 2023. The program is designed to provide the Company with enhanced flexibility over the long term to optimize its capital structure. Shares of the Common Stock may be repurchased in the open market or through negotiated transactions. The program may be terminated or suspended at any time at the discretion of the Company. The Company may enter into a Rule 10b5-1 trading plan to effect a portion of the authorized purchases if the criteria set forth in the plan are met. Such a plan would enable the Company to repurchase its shares during periods outside of its normal trading windows when the Company typically would not be active in the market.

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.

During the twenty-six weeks ending July 1, 2023, the Company purchased 1,579,732 shares at an average price of $13.53 per share, including the aforementioned private transaction. During the twenty-six weeks ending July 2, 2022, the Company purchased 406,480 shares at an average price of $6.84. As of July 1, 2023, the Company had $18.3 million available for future treasury stock purchases.

The Company accrued $0.2 million in excise tax associated with its Treasury Stock Repurchase Plan during the twenty-six weeks ended July 1, 2023.

~~13.~~

~~New Accounting Standards~~

12.New Accounting Standards and Updates from the Securities and Exchange Commission (“SEC”)

In ~~May 2014,~~ June 2016, the Financial Accounting Standards Board ~~("FASB")~~(FASB) issued Accounting Standards Update ~~("ASU") No. 2014-09, "Revenue from Contracts with Customers," to clarify the principles used to recognize revenue for all entities. In March~~ (ASU) 2016 the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations," which further clarifies the implementation guidance on principal versus agent considerations," and in April 2016, the FASB issued ASU 2016-10, "Revenue from contracts with customers (Topic 606): Identifying performance obligations and licensing," an update on identifying performance obligations and accounting for licenses of intellectual property. Additionally, in May 2016, the FASB issued ASU 2016-12, "Revenue from contracts with customers (Topic 606): Narrow-scope improvements and practical expedients," which includes amendments for enhanced clarification of the guidance. In December 2016, the FASB issued ASU 2016-20, ~~"Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,"~~ which continues the FASB's ongoing project to issue technical corrections and improvements to clarify the codification or correct unintended application of guidance. From the results of the preliminary review, the Company believes the impact of adopting the updated standard will not have a material impact on the Company. Over 90% of the Company's revenues are generated through time and material invoicing. The clients are invoiced after the hours have been worked and/or the material has been delivered and accepted. The remaining revenue relates to long term projects. The Company recognizes revenue on these projects using the percentage of completion method. The Company reviewed the five-step process for revenue recognition and believes its current method of recognizing revenue on these long term projects would not materially change upon adoption due to the value provided to the customer during the project.

The guidance is effective for fiscal years beginning on or after December 15, 2017 including interim periods within those fiscal years and early adoption is permitted. We are continuing to evaluate the effect the adoption will have on our consolidated financial statements. The Company expects to adopt this update in its fiscal 2018 first quarter using the modified retrospective approach.

~~In February 2016 the FASB issued ASU No. 2016-02, Leases (Topic 842),~~ which amended guidance for lease arrangements in order to increase transparency and comparability by providing additional information to users of financial statements regarding an entity's leasing activities. The revised guidance seeks to achieve this objective by requiring reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements. The guidance, which is required to be adopted in the first quarter of 2019, will be applied on a modified retrospective basis beginning with the earliest period presented. Early adoption is permitted. The Company is evaluating the impact of adopting this guidance on its consolidated financial statements.

~~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 of 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. Early adoption is permitted. The Company will adopt ASU 2017-10 in its consolidated financial statements in the first quarter of fiscal 2018. It is not expected to have a material impact.

~~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 (Continued)~~

~~In June 2016, the FASB issued ASU 2016-13,~~ -13,Financial Instruments - Credit Losses (Topic ~~326)~~326). The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. ~~This~~In February 2020, the FASB issued ASU is2020-02,Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No.2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for ~~financial statements issued~~the Company for interim and annual periods in fiscal years beginning after December 15, ~~2018, including interim periods within those fiscal years.~~ 2022. CECL estimates of expected credit losses on trade receivables over their life will be required to be recorded at inception, based on historical information, current conditions, and reasonable and supportable forecasts. The Company adopted the standard in its first quarter of 2023. There was no material impact on the results of operations.

In March 2020, the FASB issued ASU No.2020-04,Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard only applies to contracts and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference rate reform. This guidance provides temporary optional expedients and exceptions to accounting guidance on contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the LIBOR and other interbank offered rates to alternative reference rates. In December 2022, the FASB issued ASU No.2022-06,Deferral of the sunset date of Topic 848.This update defers the sunset date from December 31, 2022 to December 31, 2024. The Company may elect to apply the amendments prospectively through December 31, 2024. 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 new guidance is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company will adopt ASU 2016-15 in its consolidated financial statements in the first quarter of fiscal 2018. It is not expected to 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 guidance is effective for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted under certain circumstances. The Company will adopt ASU 2017-01 in its consolidated financial statements in the first quarter of fiscal 2018. It is not expected to have a material impact.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles – Goodwill and Other" (Topic 350). The objective of Phase 1 of the project, which resulted in this Update, is to simplify the testing of goodwill for impairment by eliminating Step 2 from the goodwill impairment test. The guidance is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019 including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact that adoption of this guidance will have on its consolidated financial ~~statements.~~

statements and related disclosures.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~14.~~

~~Segment Information~~

13.Segment Information

The Company follows ~~"Disclosures about Segments of an Enterprise and Related Information,"~~ASC 280, “Segment Reporting,” 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~~(see Note 1 to the ~~Company's~~Company’s Consolidated Financial Statements included in its Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016)~~2022).

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~~Company’s management system:

Thirteen Week Period Ended
September 30, 2017

Engineering
Specialty Health Care
Information
Technology

Corporate

Total

Revenue $21,708 $14,335 $7,784 $   - $43,827

Cost of services 15,533 10,805 5,771 - 32,109

Gross profit 6,175 3,530 2,013 - 11,718

Selling, general and administrative 3,968 3,750 1,982 - 9,700

Depreciation and amortization 297 86 39 - 422

Operating income (loss) $1,910 ($306 ) ($8 ) $   - $1,596

Total assets as of September 30, 2017 $33,721 $16,178 $10,212 $3,937 $64,048
Capital expenditures $138 $44 $   - $13 $195

Thirteen Week Period Ended
October 1, 2016

Engineering
Specialty Health Care
Information
Technology

Corporate

Total

Revenue $17,591 $12,035 $10,069 $   - $39,695

Cost of services 13,292 8,924 7,335 - 29,551

Gross profit 4,299 3,111 2,734 �� - 10,144

Selling, general and administrative 3,606 3,151 2,577 - 9,334

Depreciation and amortization 281 59 48 - 388

Operating income $412 ($99 ) $109 $   - $422

Total assets as of October 1, 2016 $34,019 $15,770 $12,336 $3,767 $65,892
Capital expenditures $61 $   - $10 $4 $75

Thirteen Weeks Ended July 1, 2023	Specialty Health Care		Engineering		Life Sciences and IT		Corporate		Total
Revenue	$	35,528	$	21,014	$	10,493	$	-	$	67,035
Cost of services		25,727		16,192		6,356		-		48,275
Gross profit		9,801		4,822		4,137		-		18,760
Selling, general and administrative		6,043		4,380		2,300		-		12,723
Depreciation and amortization of property and equipment		92		116		34		-		242
Amortization of acquired intangible assets		-		-		46		-		46
Operating income	$	3,666	$	326	$	1,757	$	-	$	5,749
Total assets as of July 1, 2023	$	39,961	$	42,668	$	17,947	$	4,961	$	105,537
Property and equipment acquired	$	29	$	190	$	2	$	7	$	228

Thirteen Weeks Ended July 2, 2022	Specialty Health Care		Engineering		Life Sciences and IT		Corporate		Total
Revenue	$	43,457	$	20,906	$	9,983	$	-	$	74,346
Cost of services		30,575		15,395		6,693		-		52,663
Gross profit		12,882		5,511		3,290		-		21,683
Selling, general and administrative		7,179		4,107		1,978		-		13,264
Depreciation and amortization of property and equipment		97		103		25		-		225
Operating income	$	5,606	$	1,300	$	1,288		-	$	8,194
Total assets as of July 2, 2022	$	29,889	$	29,523	$	7,962	$	5,051	$	72,425
Property and equipment acquired	$	21	$	124	$	43	$	4	$	192

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

13.Segment Information (Continued)

Twenty-Six Weeks Ended July 1, 2023	Specialty Health Care		Engineering			Life Sciences and IT		Corporate		Total
Revenue	$	74,658	$	39,504		$	19,997	$	-	$	134,159
Cost of services		53,185		30,365			12,555		-		96,375
Gross profit		21,473		8,869			7,442		-		37,784
Selling, general and administrative		13,241		8,298			4,580		-		26,119
Depreciation and amortization of property and equipment		199		244			70		-		513
Amortization of acquired intangible assets		-		-			91		-		91
Gain on sale of assets		-		(395	)		-		-		(395	)
Operating income	$	8,033	$	722		$	2,701	$	-	$	11,456
Total assets as of July 1, 2023	$	39,961	$	42,668		$	17,947	$	4,961	$	105,537
Property and equipment acquired	$	47	$	478		$	19	$	15	$	559

Twenty-Six Weeks Ended July 2, 2022	Specialty Health Care		Engineering		Life Sciences and IT		Corporate		Total
Revenue	$	95,641	$	40,804	$	19,862	$	-	$	156,307
Cost of services		67,758		30,059		13,387		-		111,204
Gross profit		27,883		10,745		6,475		-		45,103
Selling, general and administrative		15,149		8,219		4,043		-		27,411
Depreciation and amortization of property and equipment		217		199		47		-		463
Operating income	$	12,517	$	2,327	$	2,385	$	-	$	17,229
Total assets as of July 2, 2022	$	29,889	$	29,523	$	7,962	$	5,051	$	72,425
Property and equipment acquired	$	48	$	289	$	63	$	9	$	409

~~14.~~

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~Segment Information (Continued)~~

Thirty-Nine Week Period Ended
September 30, 2017

Engineering
Specialty Health Care
Information
Technology

Corporate

Total

Revenue $61,517 $49,212 $24,951 $   - $135,680

Cost of services 44,598 37,069 18,430 - 100,097

Gross profit 16,919 12,143 6,521 - 35,583

Selling, general and administrative 12,184 11,429 6,479 - 30,092

Change in contingent consideration - - - 781 781

Depreciation and amortization 863 246 120    - 1,229

Operating income (loss) $3,872 $468 ($78 ) ($781 ) $3,481

Total assets as of September 30, 2017 $33,721 $16,178 $10,212 $3,937 $64,048
Capital expenditures $247 $459 $   - $41 $747

Thirty-Nine Week Period Ended
October 1, 2016

Engineering
Specialty Health Care
Information
Technology

Corporate

Total

Revenue $55,019 $43,465 $33,766 $ - $132,250

Cost of services 40,859 32,012 24,455 - 97,326

Gross profit 14,160 11,453 9,311 - 34,924

Selling, general and administrative 11,355 10,202 8,419 - 29,976

Depreciation and amortization 840 188 149 - 1,177

Operating income $1,965 $1,063 $743 $ - $3,771

Total assets as of October 1, 2016 $34,019 $15,770 $12,336 $3,767 $65,892
Capital expenditures $516 $128 $58 $30 $732

13.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 ~~Puerto Rico. Revenues~~Europe. Revenue by geographic area for the thirteen and ~~thirty-nine week periods~~twenty-six weeks ended ~~September 30, 2017~~ July 1, 2023 and ~~October 1, 2016 are~~July 2, 2022 was as follows:

~~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)~~

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended
September 30, 2017
October 1,
2016
September 30, 2017
October 1,
2016

Revenues
U. S. $34,207 $32,851 $110,083 $110,158
Canada 8,703 5,545 22,420 18,149
Puerto Rico 917 1,299 3,177 3,943
$43,827 $39,695 $135,680 $132,250

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Revenue
United States	$	62,797	$	71,189	$	126,120	$	149,982
Canada		1,832		1,235		3,413		2,464
Puerto Rico		1,540		1,279		3,102		2,499
Europe		866		643		1,524		1,362
	$	67,035	$	74,346	$	134,159	$	156,307

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

	July 1, 2023		December 31, 2022
Total assets
United States	$	97,247	$	81,558
Canada		2,037		1,640
Puerto Rico		2,346		1,401
Europe		3,907		3,365
	$	105,537	$	87,964

September 30,
2017

December 31,
2016

Total assets
U. S. $45,895 $53,842
Canada 16,227 13,953
Puerto Rico 1,926 2,036
$64,048 $69,831

~~15.~~

~~Income Taxes~~

14.Income Taxes

The Company recognized $2.8 million of income tax expense for the twenty-six weeks ended July 1, 2023, as compared to $4.7 million for the comparable prior-year period. The consolidated effective income tax rate for the current period was 26.4% as compared to 27.1% for the comparable prior-year period. The projected fiscal ~~2017 effective~~2023 income tax rates as of ~~September 30, 2017~~July 1, 2023, were approximately 26.8%, 25.9% and ~~applied to income before any discrete permanent difference for the thirty-nine week period ended September 30, 2017 are approximately 42.5% and 26.5%~~11.7% in the United States, Canada and Canada, respectively, and yielded a consolidated effective income tax rate before any discrete permanent difference of approximately 34.7% for the thirty-nine week period ended September 30, 2017. For the comparable prior year period estimated income tax rates were 41.9% and 26.5% in the United States and Canada, respectively, and yielded a consolidated effective income tax rate of approximately 41.2% for the thirty-nine week period ended October 1, 2016.Europe, 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 European pretax income versus U.S. pretax income. The comparable prior-year period estimated income tax rates were 27.5%, 23.6% and 15.6% in the United States, Canada and Europe, respectively.

Differences between the effective tax rate and the applicable U.S. federal statutory rate may arise, primarily from the effect of state and local income taxes, share-based compensation, and potential tax credits available to the Company. The ~~Company experienced a discrete permanent difference of $0.8 million because of increases to contingent consideration. The Company's~~actual 2023 effective ~~income~~ tax rate ~~after including this discrete permanent difference was 43.4% for~~may vary from the ~~thirty-nine week period ended September 30, 2017.~~

estimate depending on the actual operating income earned in various jurisdictions, the potential availability of tax credits, and the exercise of stock options and vesting of share-based awards.

~~16.~~

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

15.

Contingencies

From time to time, the Company is a defendant ~~or plaintiff~~ in various legal actions that arise in the ~~normal course~~ordinary business course. These matters may relate to professional liability, tax, compensation, contract, competitor disputes, and employee-related matters and include individual and class action lawsuits, as well as inquiries and investigations by governmental agencies regarding the Company’s employment and compensation practices. Additionally, some of ~~business.~~ the Company’s clients may also become subject to claims, governmental inquiries and investigations, and legal actions relating to the Company’s professional services. Depending upon the particular facts and circumstances, the Company may also be subject to indemnification obligations under its contracts with such clients relating to these matters.

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. The Company records a liability when management believes an adverse outcome from a loss contingency is both probable and the amount, or a range, can be reasonably estimated. From time to time, the Company must estimate the potential loss even though the party adverse to the Company has not asserted any specific amounts. Significant judgment is required to determine both the probability of loss and the estimated amount. The Company reviews its loss contingencies at least quarterly and it adjusts its accruals and/or disclosures to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, or other new information, as deemed necessary. Once established, a provision may change in the future due to new developments or changes in ~~circumstances, and~~circumstances. The Company could increase or decrease ~~the Company's~~its earnings in the period that the changes are made. ~~Asserted~~

The Company is exposed to various asserted claims ~~in these matters sought approximately $0.6 million in damages~~ as of ~~September 30, 2017~~July 1, 2023, where the Company believes it has a probability of loss. Additionally, the Company is exposed to other asserted claims whereby an amount of loss has not been declared, and ~~$1.5 million as~~the Company cannot determine the potential loss. Any of ~~December 31, 2016~~.these various claims could result in an unfavorable outcome or settlement that exceeds the accrued amounts. However, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. As of ~~September 30, 2017,~~ July 1, 2023, the Company ~~had no accrual~~has accrued $2.8 million for ~~such liabilities. As~~asserted claims.

In April 2022, a client of ~~December 31, 2016,~~the Company’s Industrial Processing Group alleged that a system partially designed by the Company ~~accrued~~is not operating as intended and that the Company is responsible. The Company has not determined if it has any liability. In the event of liability, the Company believes its damages are contractually limited to an amount no higher than $3.3 million. Furthermore, the Company believes that if it were found liable, any damages would be covered by insurance, subject to a deductible of $0.5 million and maximum coverage of $5.0 million. While the Company attempts to find a mutually agreeable solution, the Company has reserved $0.5 million for ~~such liabilities.~~

this project. The Company can give no assurance that its liability is limited to $3.3 million or that liability over $0.5 million, if any, will be covered by insurance.

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.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

16.

Leases

Leases are recorded in accordance with FASB ASC 842, Leases which requires lessees to recognize a right of use (“ROU”) asset and an operating right of use liability for all leases with terms greater than 12 months and requires disclosures by lessees and lessors about the amount, timing and uncertainty of cash flows arising from leases.

The Company determines if an arrangement is a lease at inception. For leases where the Company is the lessee, right of use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The right of use asset also consists of any lease incentives received. The lease terms used to calculate the right of use asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition. The Company has lease agreements which require payments for lease and non-lease components. The Company has elected to account for these as a single lease component with the exception of its real estate leases.

The components of lease expense were as follows:

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022

Operating lease cost	$	357	$	432	$	729	$	881

Finance lease cost
Amortization of right of use assets	$	115	$	106	$	252	$	216
Interest on lease liabilities		1		2		2		4
Total finance lease cost	$	116	$	108	$	254	$	220

Supplemental Cash Flow information related to leases was as follows:

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 1, 2023		July 2, 2022				July 1, 2023	July 2, 2022

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	363	$	437		$	743	$	915
Operating cash flows from finance leases	$	1	$	4		$	3	$	6
Financing cash flows from finance leases	$	115	$	180		$	231	$	271

Right of use assets obtained in exchange for lease obligations
Operating leases		-	$	58			-	$	732
Finance leases		-		-			-		-

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

16.

Leases (Continued)

Supplemental Balance Sheet information as of July 1, 2023 and December 31, 2022 related to leases was as follows:

	July 1, 2023			December 31, 2022
Operating leases
Operating lease right of use assets	$	3,203		$	3,665

Operating right of use liability - current	$	(,1,091	)	$	(1,349	)
Operating right of use liability - non-current		(2,508	)		(2,932	)
Total operating lease liabilities	$	(3,599	)	$	(4,281	)

Finance leases
Property and equipment - (right of use assets)	$	926		$	1,177
Accumulated depreciation		(463	)		(461	)
Property and equipment, net	$	463		$	716

Finance lease liability - current	$	(464	)	$	(462	)
Finance lease liability - non-current		-			(232	)
Total finance lease liabilities	$	(464	)	$	(694	)

Weighted average remaining lease term in years
Operating leases		7.90			6.78
Finance leases		1.00			1.50

Weighted average discount rate
Operating leases		3.17	%		3.10	%
Finance leases		0.87	%		0.87	%

Maturities of lease liabilities are as follows:

Fiscal Year	Operating Leases			Finance Leases
2023 (After July 1, 2023)	$	716		$	233
2024		754			233
2025		493			-
2026		409			-
2027		302			-
Thereafter		1,456			-

Total lease payments	$	4,130		$	466
Less: imputed interest		(531	)		(2	)
Total	$	3,599		$	464

ITEM 2.

~~MANAGEMENT'S~~

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"~~(“RCM” or the ~~"Company"~~“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~~Company’s strategic and business initiatives and growth strategies; and the outcome of litigation (at both the trial and appellate levels) and arbitrations, or other business disputes, 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,"~~“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~~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 life sciences, information technology and engineering services and solutions and the placement of temporary staffing personnel; (ii) the ~~Company's~~effects of the COVID-19 pandemic and endemic; (iii) the Company’s ability to continue to attract, train and retain personnel qualified to meet the requirements of its clients; ~~(iii)~~(iv) the ~~Company's~~Company’s ability to identify appropriate acquisition candidates, complete such acquisitions and successfully integrate acquired businesses; ~~(iv)~~(v) the ~~Company's~~Company’s relationships with and reliance upon significant customers, and ability to collect accounts receivable from such customers; ~~(v)~~(vi) risks associated with foreign currency fluctuations and changes in exchange rates, particularly with respect to the Canadian dollar; ~~(vi)~~(vii) uncertainties regarding amounts of deferred consideration and earnout payments to become payable to former shareholders of acquired businesses; ~~(vii)~~(viii) the adverse effect a potential decrease in the trading price of the ~~Company's~~Company’s common stock would have upon the ~~Company's~~Company’s ability to acquire businesses through the issuance of its securities; ~~(viii)~~(ix) the ~~Company's~~Company’s ability to obtain financing on satisfactory terms; ~~(ix)~~(x) the reliance of the Company upon the continued service of its executive officers; ~~(x)~~(xi) the ~~Company's~~Company’s ability to remain competitive in the markets that it serves; ~~(xi)~~(xii) the ~~Company's~~Company’s ability to maintain its unemployment insurance premiums and workers compensation premiums; ~~(xii)~~(xiii) the risk of claims being made against the Company associated with providing temporary staffing services; ~~(xiii)~~(xiv) the ~~Company's~~Company’s ability to manage significant amounts of information and periodically expand and upgrade its information processing capabilities; ~~(xiv)~~(xv) the ~~Company's~~risk of cyber attacks on our information technology systems or those of our third party vendors; (xvi) the Company’s ability to remain in compliance with federal and state wage and hour laws and regulations; ~~(xv)~~(xvii) uncertainties in predictions as to the future need for the ~~Company's~~Company’s services; ~~(xvi)~~(xviii) uncertainties relating to the allocation of costs and expenses to each of the ~~Company's~~Company’s operating segments; ~~(xvii)~~(ixx) 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 litigation; ~~(xviii)~~(xx) 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~~Company’s governance and strategic direction, including without limitation a contested proxy solicitation initiated by such shareholders, or any similar such interactions; and ~~(ixx)~~(xxi) other economic, competitive, health and governmental factors affecting the ~~Company's~~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.

ITEM 2.

~~MANAGEMENT'S~~

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~~revenue and operations can be substantial, resulting in significant volatility in the ~~Company's~~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~~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 life sciences, 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~~revenue 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~~Company’s consultants based upon their skill level, experience and the type of work performed.

The majority of the ~~Company's~~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'~~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.

ITEM 2.

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

Overview (Continued)

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~~Company’s corporate marketing, administrative and financial reporting responsibilities and acquisition program. The Company records these expenses when incurred.

Corporate overhead expenses are allocated to the segments based on revenue for the purpose of segment financial reporting.

Critical Accounting Policies and Use of Estimates

This Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our 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 revenue and expenses during the reporting period. In our 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 awards, 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 31, 2022. 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 31, 2022.

Recently Issued Accounting Pronouncements

A discussion of the recently issued accounting pronouncements is set forth in Note 12, New Accounting Standards and Updates from the Securities and Exchange Commission, in the unaudited condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q and is incorporated herein by reference.

ITEM 2.

~~MANAGEMENT'S~~

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

~~Critical Accounting Policies~~

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

~~Revenue Recognition~~

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

~~Project Services~~

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

~~Consulting and Staffing Services~~

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

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

~~ITEM 2.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

~~Revenue Recognition (Continued)~~

~~Transit Accounts Receivable and Transit Accounts Payable~~

From time to time, the Company's Engineering segment enters into agreements to provide, among other things, construction management and engineering services. In certain circumstances, the Company may acquire equipment as a purchasing agent for the client for a fee. Pursuant to these agreements, the Company: a) may engage subcontractors to provide construction or other services or contracts with manufacturers on behalf of the Company's clients to procure equipment or fixtures; b) typically earns a fixed percentage of the total project value or a negotiated mark-up on subcontractor or procurement charges as a fee; and c) assumes no ownership or risks of inventory. In such situations, the Company acts as an agent under the provisions of "Overall Considerations of Reporting Revenue Gross as a Principal versus Net as an Agent" and therefore recognizing revenue on a "net-basis." The Company records revenue on a "net" basis on relevant engineering and construction management projects, which require subcontractor/procurement costs or transit costs. In those situations, the Company charges the client a negotiated fee, which is reported as net revenue when earned. During the thirty-nine week period ended September 30, 2017, total gross billings, including both transit cost billings and the Company's earned fees, was $28.7 million, for which the Company recognized $19.9 million of its net fee as revenue. During the thirty-nine week period ended October 1, 2016, total gross billings, including both transit cost billings and the Company's earned fees, was $36.8 million, for which the Company recognized $21.3 million of its net fee as revenue.

Under the terms of the agreements, the Company is typically not required to pay the subcontractor until after the corresponding payment from the Company's end-client is received. Upon invoicing the end-client on behalf of the subcontractor or staffing agency the Company records this amount simultaneously as both a "transit account receivable" and "transit account payable" as the amount when paid to the Company is due to and generally paid to the subcontractor within a few days. The Company typically does not pay a given transit account payable until the related transit account receivable is collected. The Company's transit accounts payable generally exceeds the Company's transit accounts receivable but absolute amounts and spreads fluctuate significantly from quarter to quarter in the normal course of business. The transit accounts receivable was $1.7 million and related transit accounts payable was $3.0 million, for a net liability of $1.3 million, as of September 30, 2017.

~~Permanent Placement Services~~

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

~~Accounts Receivable and Allowance for Doubtful Accounts~~

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

~~ITEM 2.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

~~Goodwill~~

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

~~Long-Lived and Intangible Assets~~

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

~~Accounting for Stock Options and Restricted Stock Units~~

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

~~ITEM 2.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

~~Insurance Liabilities~~

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

~~Accounting for Income Taxes~~

In establishing the provision for income taxes and deferred income tax assets and liabilities, and valuation allowances against deferred tax assets, the Company makes judgments and interpretations based on enacted tax laws, published tax guidance and estimates of future earnings. As of September 30, 2017, the Company had a net domestic long term deferred tax net liability of $0.4 million and a foreign long-term deferred tax net liability of $0.3 million. The domestic long term deferred tax net liability primarily represents the tax effect of accrued expenses which will be deductible for tax purposes within a twelve month period and the effect of temporary differences for the GAAP versus tax amortization of intangibles arising from acquisitions made in prior periods. Realization of deferred tax assets is dependent upon the likelihood that future taxable income will be sufficient to realize these benefits over time, and the effectiveness of tax planning strategies in the relevant tax jurisdictions. In the event that actual results differ from these estimates and assessments, valuation allowances may be required.

~~The Company conducts its operations in multiple tax jurisdictions in the United States, Canada~~ ~~and Puerto Rico.~~ The Company and its subsidiaries file a consolidated U.S. Federal income tax return and file in various states. The Company's federal income tax returns have been examined through 2010. The Internal Revenue Service is currently examining fiscal tax years 2011, 2012, 2013 and 2015. The State of New Jersey is currently examining fiscal tax years 2009 through 2012. Except for New Jersey and other limited exceptions, the Company is no longer subject to audits by state and local tax authorities for tax years prior to 2010. The Company is no longer subject to audit in Canada for the tax years prior to tax year 2012. The Company is no longer subject to audit in Puerto Rico for the tax years prior to tax year 2006.

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

~~There were no changes to unrecognized tax benefits during both thirty-nine week periods presented.~~

~~Accrued Bonuses~~

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

~~ITEM 2.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

Forward-looking Information

The ~~Company's~~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, life sciences and information technology services. When the U.S., Canadian or global economies decline, the ~~Company's~~Company’s operating performance could be adversely impacted. In addition, global events such as the ongoing COVID-19 pandemic and endemic also have a substantial impact on our operations and financial results. 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, general economic 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~~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~~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~~Company’s ability to maintain or increase its market share or profitability.

ITEM 2.

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

Thirteen ~~Week Period~~Weeks Ended ~~September 30, 2017~~July 1, 2023 Compared to Thirteen ~~Week Period~~Weeks Ended ~~October 1, 2016~~

July 2, 2022

A summary of operating results for the thirteen ~~week periods~~weeks ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022 is as follows (in thousands):

September 30, 2017 October 1, 2016

Amount
% of Revenue

Amount
% of Revenue
Revenues $43,827 100.0 $39,695 100.0
Cost of services 32,109 73.3 29,551 74.4
Gross profit 11,718 26.7 10,144 25.6

Selling, general and administrative 9,700 22.1 9,334 23.5
Depreciation and amortization 422 1.0 388 1.0
10,122 23.1 9,722 24.5

Operating income 1,596 3.6 422 1.1
Interest expense, net and foreign currency transactions (154 ) (0.3 ) (128 ) 0.3

Income before income taxes 1,442 3.3 294 0.8
Income tax expense 422 1.0 184 0.5

Net income $1,020 2.3 $110 0.3

	July 1, 2023				July 2, 2022
	Amount		% of Revenue		Amount			% of Revenue
Revenue	$	67,035		100.0	$	74,346			100.0
Cost of services		48,275		72.0		52,663			70.8
Gross profit		18,760		28.0		21,683			29.2

Selling, general and administrative		12,273		18.9		13,264			18.1
Depreciation and amortization of property and equipment		242		0.4		225			0.3
Amortization of acquired intangible assets		46		0.1		-			0.0
Operating costs and expenses		13,011		19.4		13,489			18.4

Operating income		5,749		8.6		8,194			11.2
Other expense, net		418		0.7		(28	)		0.0

Income before income taxes		5,331		7.9		8,222			11.2
Income tax expense		1,348		2.0		2,208			3.0

Net income	$	3,983		5.9	$	6,014			8.2

The Company follows a 52/53 week fiscal reporting calendar ending on the Saturday closest to December 31. The fiscal quarters ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022 consisted of thirteen weeks each.

~~ITEM 2.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

~~Thirteen Week Period Ended September 30, 2017 Compared to Thirteen Week Period Ended October 1, 2016 (Continued)~~

~~Revenues.~~ ~~Revenues increased 10.4%~~

Revenue. Revenue decreased 9.8%, or ~~$4.1~~$7.3 million, for the thirteen ~~week period~~weeks ended ~~September 30, 2017~~July 1, 2023 as compared to the thirteen ~~week period~~weeks ended ~~October 1, 2016~~July 2, 2022 (the ~~"comparable prior year period"~~“comparable prior-year period”). ~~Revenues increased $4.1 million in the Engineering segment,~~Revenue decreased ~~$2.3 million in the Information Technology segment and increased $2.3~~$7.9 million in the Specialty Health Care ~~segment. 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 September 30, 2017, the Company generated total revenues from its Canadian clients of $8.7 million in U.S. dollars at an Exchange Rate of 79.8% as compared to $5.6 million in U.S. dollars at an Exchange Rate of 76.6% for the prior year comparable period.

~~The Company has an office in San Juan, Puerto Rico. Due largely to the impact of Hurricane Maria, the Company estimates that it lost revenues of approximately~~segment, increased $0.1 million in ~~September 2017. The lost revenues~~the Engineering segment and increased $0.5 million in ~~September did not have a material impact to operating income~~the Life Sciences and Information Technology segment. See more detailed disclosure by segment in our Segment Discussion.

Cost of Services and Gross Profit. Cost of services decreased 8.3%, or $4.4 million, for the thirteen weeks ended ~~September 30, 2017. During both the thirteen week periods ended April 1, 2017 and~~ July 1, 2017 the Company's San Juan office generated $1.1 million in revenues. The Company believes that, for at least the next several quarters, San Juan revenues and contribution operating income will be materially impacted. In order to retain key consulting resources, the Company may need to pay full-time compensation to certain individuals who will not be billable to clients on a full-time basis (i.e. "bench time"). This bench time may materially impact the contribution operating income of the Information Technology segment.

~~Cost of Services and Gross Profit.~~ ~~Cost of services increased 8.7%, or $2.6 million, for the thirteen week period ended September 30, 2017~~2023 as compared to the comparable ~~prior year~~prior-year period. Cost of services decreased primarily due to the decrease in revenue. Cost of services as a percentage of ~~revenues~~revenue for the thirteen ~~week periods~~weeks ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022 was ~~73.3%~~72.0% and ~~74.4%~~70.8%, respectively. See Segment Discussion for further information regarding changes in cost of services and gross profit.

Selling, General and Administrative. Selling, general and administrative ~~("SGA"~~(“SGA”) expenses ~~increased 3.9%, or $0.4~~were $12.3 million for the thirteen ~~week period~~weeks ended ~~September 30, 2017~~July 1, 2023 as compared to $13.3 million for the comparable ~~prior year~~prior-year period. As a percentage of ~~revenues,~~revenue, SGA expenses were ~~22.1%~~18.9% for the thirteen ~~week period~~weeks ended ~~September 30, 2017~~July 1, 2023 and ~~23.5%~~18.1% for the comparable ~~prior year~~prior-year period. See Segment Discussion for further information on SGA expense changes.

ITEM 2.

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

Thirteen Weeks Ended July 1, 2023 Compared to Thirteen Weeks Ended July 2, 2022 (Continued)

Other Expense, Net. Other expense, net consists of interest expense, unused line fees and amortized loan costs on the ~~Company's loan agreement,~~Company’s line of credit, net of interest income and gains and losses on foreign currency transactions. ~~There were no material changes to other~~Other expense, net ~~for the thirteen week period ended September 30, 2017~~increased by $0.4 million as compared to the comparable prior ~~comparable period.~~

~~ITEM 2.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

~~Thirteen Week Period Ended September 30, 2017 Compared~~year period, primarily due to ~~Thirteen Week Period Ended October 1, 2016 (Continued)~~

an increase in interest expense, net. Interest expense increased due to increased borrowing. Borrowings increased primarily to fund treasury stock purchases.

Income Tax ~~Expense.~~Expense. The Company recognized ~~$0.4~~$1.3 million of income tax expense for the thirteen ~~week period~~weeks ended ~~September 30, 2017 and $0.2~~July 1, 2023, as compared to $2.2 million for the comparable ~~prior year~~prior-year period. The consolidated effective income tax rate for the current period was ~~29.3%~~25.3% as compared to ~~62.6%~~26.9% for the comparable ~~prior year~~prior-year period. The projected fiscal ~~2017~~2023 income tax rates as of ~~September 30, 2017~~July 1, 2023, were approximately ~~42.5%~~25.8%, 24.8% and ~~26.5%~~10.1% in the United States, Canada, and ~~Canada,~~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~~can also be impacted by discrete permanent differences affecting any period presented.

Differences between the ~~thirteen week period ended September 30, 2017 was lower than the Company has recently experienced due to a higher ratio of Canadian versus U.S. pretax income. The consolidated~~ effective ~~income~~ tax rate ~~for~~and the ~~thirteen week period ended October 1, 2016 was higher than~~applicable U.S. federal statutory rate may arise, primarily from the ~~Company typically experiences due~~effect of state and local income taxes, share-based compensation, and potential tax credits available to ~~an increase in anticipated U.S. fiscal 2016~~the Company. The actual 2023 effective tax rate asmay vary from the estimate depending on the actual operating income earned in various jurisdictions, the potential availability of ~~October 1, 2016 versus July 2, 2016~~tax credits, and the ~~necessary catchup accrual, exacerbated by the low pretax income for the comparable prior year period.~~

~~Segment Discussion~~

~~Engineering~~

~~Engineering revenues~~exercise of $21.7 million for the thirteen week period ended September 30, 2017 increased 23.4%, or $4.1 million, as compared to the comparable prior year period. The increase was primarily due to increases in revenuesstock options and vesting of $2.1 million from the Company's Canadian Power Systems Engineering Group, $1.2 million from the Company's Energy Services Group and $0.8 million from the Company's Aerospace Engineering Group. Gross profit increased 43.6%, or $1.9 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 28.4% for the current period as compared to 24.4% 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 $1.9 million for the thirteen week period ended September 30, 2017 as compared to $0.4 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 $0.4 million. The increase in SGA expense was primarily due to a higher allocation of corporate-generated SGA expense and also increased investment in selling costs.

~~Specialty Health Care~~

Specialty Health Care revenues of $14.3 million for the thirteen week period ended September 30, 2017 increased 19.1%, or $2.3 million, as compared to the comparable prior year period. The primary reasons for the increase in the revenues for the Specialty Health Care segment were increases of $1.2 million from the New York City Office, $0.7 million from the Honolulu office and $0.4 million from the Health Information Management ("HIM") practice. The Specialty Health Care segment's gross profit increased by 13.5%, or $0.4 million, to $3.5 million for the thirteen week period ended September 30, 2017 as compared to $3.1 million for the prior year period. The increase in gross profit was driven by the increase in revenue, offset by a decrease in gross profit margin. The Specialty Health Care segment's gross profit margin for the thirteen week period ended September 30, 2017 was 24.6% as compared to 25.8% for the comparable prior year period. The decrease in gross profit margin was primarily driven by decreases in gross profit margin from the travel nursing staffing group and HIM practice, generally due to market factors including increased competition and constrained labor. Additionally, the Specialty Health Care segment added a significant number of paraprofessionals in both New York City and Hawaii. Many of these paraprofessionals were new to the Company's payroll, resulting in high unemployment tax expense. Specialty Health Care experienced an operating income loss of $0.3 million for the thirteen week period ended September 30, 2017 as compared to an operating loss of $0.1 million for the comparable prior year period. Operating income decreased due to an increase in SGA expense. SGA expense increased by $0.6 million, primarily due to the need to increase SGA infrastructure expense in order to support the increased activity levels associated with higher revenues in the current period and anticipated, continued increased activity for the balance of the Company's fiscal 2017.

share-based awards.

ITEM 2.

~~MANAGEMENT'S~~

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

Thirteen ~~Week Period~~Weeks Ended ~~September 30, 2017~~July 1, 2023 Compared to Thirteen ~~Week Period~~Weeks Ended ~~October 1, 2016~~July 2, 2022 (Continued)

Segment Discussion ~~(Continued)~~

~~Information Technology~~

~~Information Technology revenues~~

Specialty Health Care

Specialty Health Care revenue of ~~$7.8~~$35.5 million for the thirteen ~~week period~~weeks ended ~~September 30, 2017~~July 1, 2023 decreased ~~22.7%~~18.2%, or ~~$2.3~~$7.9 million, as compared to ~~$10.1~~the comparable prior-year period. The decrease in revenue was driven by both the Company’s school and non-school clients. Revenue from school clients for the thirteen weeks ended July 1, 2023 was $26.5 million as compared to $32.3 million for the comparable ~~prior year~~prior-year period. Revenue from non-school clients for the thirteen weeks ended July 1, 2023 was $9.0 million as compared to $11.2 million for the comparable prior-year period. Revenue decreases were primarily due to decreased demand associated with COVID-19 transitioning from a high level of activity relating to the pandemic during the thirteen weeks ended July 2, 2022 to a lesser level activity associated with the change of COVID-19 to an endemic during the thirteen weeks ended July 1, 2023. The ~~decrease was primarily from reductions in project revenues from several large clients that were not replaced. Gross~~Specialty Health Care segment’s gross profit ~~of $2.0~~decreased by 23.9%, or $3.1 million, to $9.8 million for the thirteen ~~week period~~weeks ended ~~September 30, 2017 decreased 26.4%, or $0.7 million,~~July 1, 2023, as compared to ~~$2.7~~$12.9 million for the ~~comparable prior year~~prior-year period. The decrease in gross profit was ~~due to~~primarily driven by the decrease in ~~revenues~~revenue and a decrease in gross profit margin. ~~The Information Technology gross~~Gross profit margin for the thirteen ~~week period~~weeks ended ~~September 30, 2017 was 25.9%~~July 1, 2023 decreased to 27.6% as compared to ~~27.2%~~29.6% 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 a slight operating loss for the thirteen week period ended September 30, 2017 as compared to $0.1 million in operating income for the comparable prior yearprior-year period. The decrease in gross profit margin was primarily due to a mix shift to lower margin services. Specialty Health Care experienced operating income of $3.7 million for the thirteen weeks ended July 1, 2023, as compared to $5.6 million for the comparable prior-year period. The primary reason for the decrease in operating income was ~~due to~~ the decrease in gross profit, offset by a decrease in SGA expense. SGA expense ~~of $0.6 million.~~decreased by $1.2 million to $6.0 million, as compared to $7.2 million in the comparable prior-year period. The decrease in SGA expense was primarily due to ~~lower selling costs~~a decrease in expenses associated with lower ~~gross profit~~, ~~a focus on reducing SGA expense~~revenue and ~~also~~ a lower allocation of corporate SGA ~~expense.~~

The Company has an office in San Juan, Puerto Rico, which operates primarily in the Information Technology segment. Due largely to the impact of Hurricane Maria, the Company estimates that it lost revenues of approximately $0.1 million in September 2017. The lost revenues in September did not have a material impact to operating income for the thirteen weeks ended September 30, 2017. During both the thirteen week periods ended April 1, 2017 and July 1, 2017 the Company's San Juan office generated $1.1 million in revenues. expenses.

The Company believes that ~~for at least~~ the ~~next several quarters, San Juan revenues~~impact of the COVID-19 pandemic helped to increase Specialty Health Care revenue and ~~contribution operating income will be materially impacted. In order~~gross margin in the fourth quarter of fiscal 2021 and the first half of fiscal 2022. The Company also believes the COVID-19 pandemic began to ~~retain key consulting resources,~~shift to an endemic in the second half of fiscal 2022. As a result, COVID-19-related revenue has decreased. However, the Company ~~may need to pay full-time compensation to certain individuals who will not be billable to clients on a full-time basis (i.e. "bench time"). This bench time may materially~~also believes that the demand for its Healthcare services is greater than it typically had been before the COVID-19 pandemic. While the overall impact of these offsetting dynamics is uncertain, the ~~contribution operating income of the Information Technology segment.~~

Company believes that, except for seasonality, it is well positioned for growth in revenue going forward.

ITEM 2.

~~MANAGEMENT'S~~

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

~~Thirty-Nine Week Period~~

Thirteen Weeks Ended ~~September 30, 2017~~July 1, 2023 Compared to ~~Thirty-Nine Week Period~~Thirteen Weeks Ended ~~October~~July 2, 2022 (Continued)

Segment Discussion (Continued)

Engineering

Engineering revenue of $21.0 million for the thirteen weeks ended July 1, ~~2016~~

2023, increased 0.5%, or $0.1 million, compared to the comparable prior-year period. The increase in revenue comprised the following: an increase in Energy Services revenue of $2.1 million, offset by decreases in Aerospace revenue of $1.5 million and Industrial Processing revenue of $0.7 million. Aerospace revenue decreased primarily due to a contract reduction for the Company’s major outsourcing client. The Company believes the decrease in Industrial Processing revenue was primarily due to the irregular timing of large contracts with its Industrial Processing clients. Gross profit decreased by 12.5%, or $0.7 million, compared to the prior-year period. Gross profit decreased because of a decrease in gross profit margin. The gross profit margin of 22.9% for the current period decreased from 26.4% for the comparable prior-year period. The decrease in gross profit margin was primarily due to lower utilization resulting from an increase in staff in anticipation of higher revenue. The Engineering segment experienced operating income of $0.3 million for the thirteen weeks ended July 1, 2023, as compared to $1.3 million for the comparable prior-year period. The operating income decreased due to the decline in gross profit and increased SGA expense. The Engineering segment’s SGA expense of $4.4 million increased by $0.3 million, primarily due to an increased allocation of corporate SGA expenses.

Life Sciences and Information Technology

Life Sciences and Information Technology revenue of $10.5 million for the thirteen weeks ended July 1, 2023 increased by 5.1%. or $0.5 million, as compared to $10.0 million for the comparable prior-year period. Gross profit of $4.1 million for the thirteen weeks ended July 1, 2023 increased 25.8%, or $0.8 million, as compared to $3.3 million for the comparable prior-year period. The increase in gross profit was primarily due to an increase in gross profit margin. The Life Sciences and Information Technology gross profit margin for the thirteen weeks ended July 1, 2023 was 39.4% as compared to 33.0% for the comparable prior-year period. The Company attributes the gross profit margin increase to a concerted effort to increase gross profit margin through its managed service offerings and higher revenue from its RPO offering. The Life Sciences and Information Technology segment experienced operating income of $1.8 million as compared to $1.3 million for the comparable prior-year period. The increase in operating income was primarily due to an increase in gross profit, offset by an increase to SGA expense. SGA expense increased to $2.3 million as compared to $2.0 million in the comparable prior-year period. The increase in SGA expense was primarily due the acquisition of TalentHerder in the fourth quarter of fiscal 2022.

ITEM 2.

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

Twenty-Six Weeks Ended July 1, 2023 Compared to Twenty-Six Weeks Ended July 2, 2022

A summary of operating results for the ~~thirty-nine week periods~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022 is as follows (in thousands):

September 30, 2017 October 1, 2016

Amount
% of Revenue

Amount
% of Revenue
Revenues $135,680 100.0 $132,250 100.0
Cost of services 100,097 73.8 97,326 73.6
Gross profit 35,583 26.2 34,924 26.4

Selling, general and administrative 30,092 22.2 29,976 22.7
Depreciation and amortization 1,229 0.9 1,177 0.9
Change in contingent consideration 781 0.5 - -
32,102 23.6 31,153 23.6

Operating income 3,481 2.6 3,771 2.8
Interest expense, net and foreign currency transactions (371 ) (0.3 ) (413 ) 0.3

Income before income taxes 3,110 2.3 3,358 2.5
Income tax expense 1,351 1.0 1,384 1.0

Net income $1,759 1.3 $1,974 1.5

	July 1, 2023						July 2, 2022
	Amount			% of Revenue			Amount		% of Revenue
Revenue	$	134,159			100.0		$	156,307		100.0
Cost of services		96,375			71.8			111,204		71.1
Gross profit		37,784			28.2			45,103		28.9

Selling, general and administrative		26,119			19.4			27,411		17.7
Depreciation and amortization of property and equipment		513			0.4			463		0.3
Amortization of acquired intangible assets		91			0.1			-		0.0
Gain on sale of assets		(395	)		(0.3	)		-		0.0
Operating costs and expenses		26,326			19.6			27,874		18.0

Operating income		11,456			8.6			17,229		11.1
Other expense, net		825			0.6			24		0.0

Income before income taxes		10,631			8.0			17,205		11.1
Income tax expense		2,811			2.1			4,671		3.0

Net income	$	7,820			5.9		$	12,534		8.1

~~Revenues.~~ ~~Revenues increased 2.6%~~

Revenue. Revenue decreased 14.2%, or ~~$3.4~~$22.2 million, for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 as compared to the ~~thirty-nine week period~~twenty-six weeks ended ~~October 1, 2016~~July 2, 2022 (the ~~"comparable prior year period"~~“comparable prior-year period”). ~~Revenues increased $6.5 million in the Engineering segment,~~Revenue decreased ~~$8.8 million in the Information Technology segment and increased $5.7~~$21.0 million in the Specialty Health Care ~~segment. 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 changessegment, decreased $1.3 million in the Canadian dollar to U.S. dollar exchange rate (the "Exchange Rate"). For the thirty-nine week period ended September 30, 2017, the Company generated total revenues from its Canadian clients of $22.4 million in U.S. dollars at an Exchange Rate of 76.7% as compared to $18.2 million in U.S. dollars at an Exchange Rate of 75.7% for the prior year comparable period.

~~The Company has an office in San Juan, Puerto Rico. Due largely to the impact of Hurricane Maria, the Company estimates that it lost revenues of approximately~~Engineering segment and increased $0.1 million in ~~September 2017. The lost revenues in September did not have a material impact to operating income for~~ the ~~thirteen weeks ended September 30, 2017. During both the thirteen week periods ended April 1, 2017~~Life Sciences and July 1, 2017 the Company's San Juan office generated $1.1 million in revenues. The Company believes that, for at least the next several quarters, San Juan revenues and contribution operating income will be materially impacted. In order to retain key consulting resources, the Company may need to pay full-time compensation to certain individuals who will not be billable to clients on a full-time basis (i.e. "bench time"). This bench time may materially impact the contribution operating income of the Information Technology segment.

~~ITEM 2.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

~~Thirty-Nine Week Period Ended September 30, 2017 Compared to Thirty-Nine Week Period Ended October 1, 2016 (Continued)~~

See more detailed disclosure by segment in our Segment Discussion.

Cost of Services and Gross Profit. Cost of services ~~increased 2.8%~~decreased 13.3%, or ~~$2.8~~$14.8 million, for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 as compared to the comparable ~~prior year~~prior-year period. Cost of services decreased primarily due to the decrease in revenue. Cost of services as a percentage of ~~revenues~~revenue for the ~~thirty-nine week periods~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022 was ~~73.8%~~71.8% and ~~73.6%~~71.1%, respectively. See Segment Discussion for further information regarding changes in cost of services and gross profit.

Selling, General and Administrative. Selling, general and administrative ~~("SGA"~~(“SGA”) expenses ~~increased 0.3%, or $0.1~~were $26.1 million for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 as compared to $27.4 million for the comparable ~~prior year~~prior-year period. ~~SGA expense increased primarily due to the increase in revenues.~~ As a percentage of ~~revenues,~~revenue, SGA expenses were ~~22.2%~~19.4% for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 and ~~22.7%~~17.7% for the comparable ~~prior year~~prior-year period. See Segment Discussion for further information on SGA expense changes.

~~Change~~

ITEM 2.

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

Twenty-Six Weeks Ended July 1, 2023 Compared to Twenty-Six Weeks Ended July 2, 2022 (Continued)

Gain on Sale of Assets. On July 30, 2021, the Company sold the principal assets and certain liabilities of its Pickering and Kincardine offices, located in ~~Contingent Consideration.~~ Ontario, Canada. These two offices were often referred to as Canada Power Systems and principally provided engineering services to two major nuclear power providers in Canada. The two Canada Power Systems offices were part of a reporting unit within the Company’s Engineering segment. During the twenty-six weeks ended July 1, 2023, the Company ~~incurred charges~~recorded a discrete gain on the sale of ~~$0.8~~these assets and liabilities of $0.4 million ~~for increases to contingent consideration for the thirty-nine week period ended September 30, 2017. The increase can be principally attributed~~due to the ~~PCI acquisition. Since~~final collection of escrow funds from the PCI acquisition was for stock in Canada the increase in purchase price is not tax deductible and is treated as a permanent difference. There was no change to contingent consideration for the thirty-nine week period ended October 1, 2016.

transaction.

Other Expense, Net. Other expense, net consists of interest expense, unused line fees and amortized loan costs on the ~~Company's loan agreement,~~Company’s line of credit, net of interest income and gains and losses on foreign currency ~~transactions and any other non-operating items that may occur from time to time. There were no material changes to other~~transactions. Other expense, net ~~for the thirty-nine week period ended September 30, 2017~~increased by $0.8 million as compared to the comparable prior ~~comparable period.~~

year period, primarily due to an increase in interest expense, net. Interest expense increased due to increased borrowing. Borrowings increased primarily to fund treasury stock purchases.

Income Tax ~~Expense.~~Expense. The Company recognized ~~$1.4~~$2.8 million of income tax expense for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023, as compared to ~~$1.4~~$4.7 million for the comparable ~~prior year~~prior-year period. The consolidated effective income tax rate for the current period was ~~43.4%~~26.4% as compared to ~~41.2%~~27.1% for the comparable ~~prior year~~prior-year period. ~~The thirty-nine week period ended September 30, 2017 is impacted by a discrete permanent difference due to the increase in contingent consideration of $0.8 million.~~ The projected fiscal ~~2017~~2023 income tax rates as of ~~September 30, 2017~~July 1, 2023, were approximately ~~42.5%~~26.8%, 25.9% and ~~26.5%~~11.7% in the United States, Canada, and ~~Canada,~~Europe, 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 European pretax income versus U.S. pretax income. The ~~consolidated~~ effective income tax rate ~~after eliminating this~~can also be impacted by discrete permanent ~~difference decreased for~~differences affecting any period presented.

Differences between the ~~thirty-nine week period ended September 30, 2017 to 34.7% as compared to 41.2% for~~effective tax rate and the ~~comparable prior year period because~~applicable U.S. federal statutory rate may arise, primarily from the ~~Company's projected fiscal 2017 Canadian~~effect of state and local income ~~before~~ taxes, ~~was higher as a percentage of the total projected 2017 income before taxes as compared~~share-based compensation, and potential tax credits available to the ~~projected 2016 Canadian~~Company. The actual 2023 effective tax rate may vary from the estimate depending on the actual operating income ~~before taxes as a percentage~~earned in various jurisdictions, the potential availability of tax credits, and the ~~total projected 2016 income before taxes at the same time in the comparable prior year period.~~

exercise of stock options and vesting of share-based awards.

ITEM 2.

~~MANAGEMENT'S~~

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

~~Thirty-Nine Week Period~~

Twenty-Six Weeks Ended ~~September 30, 2017~~July 1, 2023 Compared to ~~Thirty-Nine Week Period~~Twenty-Six Weeks Ended ~~October 1, 2016~~July 2, 2022 (Continued)

Segment Discussion

~~Engineering~~

~~Engineering revenues~~

Specialty Health Care

Specialty Health Care revenue of ~~$61.5~~$74.7 million for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017 increased 11.8%~~July 1, 2023 decreased 21.9%, or ~~$6.5~~$21.0 million, as compared to the comparable ~~prior year~~prior-year period. The ~~increase~~decrease in revenue was ~~primarily due to increases in revenues of $3.3 million~~driven by both the Company’s school and non-school clients. Revenue from school clients for the Company's Energy Services Group, $2.8 million from the Company's Canadian Power Systems Engineering Group and $0.5 million from the Company's Aerospace Engineering Group. Gross profit increased 19.5%, or $2.7twenty-six weeks ended July 1, 2023 was $55.8 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 27.5% for the current period as compared to 25.7% 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 $3.9 million for the thirty-nine week period ended September 30, 2017 as compared to $2.0$73.8 million for the comparable ~~prior year~~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 $0.8 million. The increase in SGA expense was primarily due to a higher allocation of corporate-generated SGA expense and also increased investment in selling costs.

~~Specialty Health Care~~

~~Specialty Health Care revenues of $49.2 million~~Revenue from non-school clients for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017 increased 13.2%, or $5.7~~July 1, 2023 was $18.9 million as compared to $21.8 million for the comparable ~~prior year~~prior-year period. ~~The primary reasons for~~Revenue decreases were primarily due to decreased demand associated with COVID-19 transitioning from a high level of activity relating during the ~~increase in~~twenty-six weeks ended July 2, 2022 to a lesser level activity associated with the ~~revenues for~~change of COVID-19 to an endemic during the Specialty Health Care segment were increases of $2.0 million from the Honolulu office, $1.7 million from the Chicago office, $1.3 million from the travel nursing staffing group and $1.2 million from the New York City Office, partially offset by a decrease in revenue of $0.5 million from the permanent placement group.twenty-six weeks ended July 1, 2023. The Specialty Health Care ~~segment's~~segment’s gross profit ~~increased~~decreased by ~~6.0%~~23.0%, or ~~$0.7~~$6.4 million, to ~~$12.1~~$21.5 million for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023, as compared to ~~$11.5~~$27.9 million for the ~~prior year~~prior-year period. The ~~increase~~decrease in gross profit was primarily driven by the ~~increase~~decrease in ~~revenues, offset by lower gross profit margin. The Specialty Health Care segment's gross~~revenue. Gross profit margin for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 decreased to ~~24.7%~~28.8% as compared to ~~26.3%~~29.2% for the comparable ~~prior year~~prior-year period. The decrease in gross profit margin was primarily ~~driven by a decrease in high gross profit margin permanent placement revenues and decreases in gross profit margin from the travel nursing staffing group and HIM practice, generally~~ due to ~~market factors including increased competition and constrained labor. Additionally, the Specialty Health Care segment added~~ a ~~significant number of paraprofessionals in both New York City and Hawaii. Many of these paraprofessionals were new to the Company's payroll, resulting in high unemployment tax expense.~~mix shift for certain lower margin services. Specialty Health Care experienced operating income of ~~$0.5~~$8.0 million for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023, as compared to ~~$1.1~~$12.5 million for the comparable ~~prior year~~prior-year period. The primary reason for the decrease in operating income was ~~an increase~~the decrease in gross profit, offset by a decrease in SGA expense. SGA expense decreased by $1.9 million to $13.2 million, as compared to $15.1 million in the comparable prior-year period. The decrease in SGA expense ~~partially offset by the increase in gross profit. SGA expense increased by $1.2 million,~~was primarily due to a decrease in expenses associated with lower revenue and a lower allocation of corporate SGA expenses.

The Company believes that the ~~need~~impact of the COVID-19 pandemic helped to increase ~~SGA infrastructure expense in order to support the increased activity levels associated with higher revenues~~Specialty Health Care revenue and gross margin in the ~~current period~~fourth quarter of fiscal 2021 and ~~anticipated, continued increased activity~~the first half of fiscal 2022. The Company also believes the COVID-19 pandemic began to shift to an endemic in the second half of fiscal 2022. As a result, COVID-19-related revenue has decreased. However, the Company also believes that the demand for its Healthcare services is greater than it had been before the ~~balance~~COVID-19 pandemic. While the overall impact of these offsetting dynamics is uncertain, the ~~Company's fiscal 2017.~~

Company believes that, except for seasonality, it is well positioned for growth in revenue going forward.

ITEM 2.

~~MANAGEMENT'S~~

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

~~Thirty-Nine Week Period~~

Twenty-Six Weeks Ended ~~September 30, 2017~~July 1, 2023 Compared to ~~Thirty-Nine Week Period~~Twenty-Six Weeks Ended ~~October 1, 2016~~July 2, 2022 (Continued)

Segment Discussion (Continued)

~~Information Technology~~

~~Information Technology revenues~~

Engineering

Engineering revenue of ~~$25.0~~$39.5 million for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 decreased ~~26.1%~~3.2%, or ~~$8.8~~$1.3 million, as compared to ~~$33.8 million for~~ the comparable prior year period. The decrease was primarily from reductions in project revenues from several large clients that were not replaced. Gross profit of $6.5 million for the thirty-nine week period ended September 30, 2017 decreased 30.0%, or $2.8 million, as compared to $9.3 million for the comparable prior yearprior-year period. The decrease in ~~gross profit~~revenue was comprised of the following: decreases in Aerospace revenue of $1.6 million and Industrial Processing revenue of $2.3 million, offset by an increase to Energy Services revenue of $2.6 million. The decrease in Aerospace revenue was primarily due to a contract reduction for the Company’s major outsourcing client. The Company believes the decrease in Industrial Processing revenue was primarily due to the irregular timing of large contracts with its Industrial Processing clients. Gross profit decreased by 17.5%, or $1.9 million, as compared to the comparable prior-year period. Gross profit decreased because of the decrease in ~~revenues~~revenue and a decrease in gross profit margin. Gross profit margin of 22.5% for the current period decreased from 26.3% for the comparable prior-year period. The ~~Information Technology~~decrease in gross profit margin ~~for~~was primarily due to lower utilization resulting from an increase in staff associated with lower revenue as the thirty-nine week period ended September 30, 2017 was 26.1% as compared to 27.6% for the comparable prior year period. Gross profit margin decreased because large project high-value, high-margin revenues decreased and thereby increased the portion ofCompany absorbed fixed salaried costs over lower ~~gross profit margin staffing-oriented revenues.~~revenue. The ~~Information Technology~~Engineering segment experienced ~~an operating loss of $0.1 million for the thirty-nine week period ended September 30, 2017 as compared to~~ operating income of $0.7 million for the twenty-six weeks ended July 1, 2023, as compared to $2.3 million for the comparable ~~prior year~~prior-year period. The decrease in operating income was due to the decrease in gross profit ~~partially~~and an increase to SGA expense, offset by a ~~decrease~~discrete gain in the current period. The Engineering segment’s SGA expense of $8.3 million increased by $0.1 million, primarily due to an increased allocation of corporate SGA expenses. The discrete gain on sale of assets was due to the final collection of escrow funds associated with the sale of the Canadian Power Systems in fiscal 2021.

Life Sciences and Information Technology

Life Sciences and Information Technology revenue of $20.0 million for the twenty-six weeks ended July 1, 2023 increased by 0.7%, or $0.1 million, as compared to $19.9 million for the comparable prior-year period. Gross profit of $7.4 million for the twenty-six weeks ended July 1, 2023 increased 14.9%, or $1.0 million, as compared to $6.4 million for the comparable prior-year period. The increase in gross profit was primarily due to an increase in gross profit margin. The Life Sciences and Information Technology gross profit margin for the twenty-six weeks ended July 1, 2023 was 37.2% as compared to 32.6% for the comparable prior-year period. The Company attributes the gross profit margin increase to a concerted effort to increase gross profit margin through its managed service offerings and higher revenue from its RPO offering. The Life Sciences and Information Technology segment experienced operating income of $2.7 million as compared to $2.4 million for the comparable prior-year period. The increase in operating income was primarily due to an increase in gross profit, offset by an increase to SGA expense. SGA expense ~~of $6.5 million for the thirty-nine week period ended September 30, 2017 decreased $1.9~~increased to $4.6 million as compared to ~~$8.4~~$4.0 million in the comparable ~~prior year~~prior-year period. The ~~decrease~~increase in SGA expense was primarily due to ~~lower selling costs associated with lower gross profit~~,the acquisition of TalentHerder in the fourth quarter of fiscal 2022 and a ~~focus on reducing SGA expense and also a lower~~higher allocation of corporate SGA ~~expense.~~

The Company has an office in San Juan, Puerto Rico, which primarily operates in the Information Technology segment. Due largely to the impact of Hurricane Maria, the Company estimates that it lost revenues of approximately $0.1 million in September 2017. The lost revenues in September did not have a material impact to operating income for the thirteen weeks ended September 30, 2017. During both the thirteen week periods ended April 1, 2017 and July 1, 2017 the Company's San Juan office generated $1.1 million in revenues. The Company believes that, for at least the next several quarters, San Juan revenues and contribution operating income will be materially impacted. In order to retain key consulting resources, the Company may need to pay full-time compensation to certain individuals who will not be billable to clients on a full-time basis (i.e. "bench time"). This bench time may materially impact the contribution operating income of the Information Technology segment.

expenses.

ITEM 2.

~~MANAGEMENT'S~~

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

~~Thirty-Nine Week Period Ended September 30, 2017 Compared to Thirty-Nine Week Period Ended October 1, 2016 (Continued)~~

~~Segment Discussion (Continued)~~

~~Supplemental Operating Results on a Non-GAAP Basis~~

The following non-GAAP measures, which adjust for the categories of expenses described below, primarily changes in contingent consideration as a result of re-measurement in the amount of contingent consideration we expect to pay with respect to past acquisitions, are non-GAAP financial measures. Our management believes that these non-GAAP financial measures ("EBITDA", "Adjusted EBITDA", "Adjusted Net Income" and "Diluted EPS") are useful information for investors, shareholders and other stakeholders of our company in gauging our results of operations on an ongoing basis and to enhance investors' overall understanding of our current financial performance and period-to-period comparisons. We believe that EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation between net income and EBITDA and Adjusted EBITDA has been provided. EBITDA should not be considered as an alternative to net income as an indicator of performance. In addition, EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP. These non-GAAP measures should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

The following unaudited table presents the Company's GAAP Net Income measure and the corresponding adjustments used to calculate "EBITDA", "Adjusted EBITDA", "Adjusted Net Income" and "Diluted EPS" for the thirteen weeks and thirty-nine weeks ended September 30, 2017 and October 1, 2016.

Thirteen Week Periods Ended Thirty-Nine Week Periods Ended
September 30, 2017
October 1,
2016
September 30, 2017
October 1,
2016

GAAP net income $1,020 $110 $1,759 $1,974
Income tax expense 422 184 1,351 1,384
Interest expense 137 114 409 422
Depreciation and amortization 422 388 1,229 1,177
EBITDA (non-GAAP) $2,001 $796 $4,748 $4,957

Adjustments
   Change in contingent consideration - - 781 -
Gain (loss) on foreign currency
   transactions

17

14

(38

)

(9

)
Adjusted EBITDA (non-GAAP) $2,018 $810 $5,491 $4,948

GAAP net income $1,020 $110 $1,759 $1,974
Adjustments
   Change in contingent consideration - - 781 -
Adjusted net income (non-GAAP) $1,020 $110 $2,540 $1,974

GAAP Diluted EPS $0.08 $0.01 $0.15 $0.16
Adjustments
   Change in contingent consideration - - $0.06 -
Adjusted Diluted EPS (non-GAAP) $0.08 $0.01 $0.21 $0.16

~~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~~Company’s Condensed Consolidated Statements of Cash Flows (in thousands):

Thirty-Nine Week Periods Ended

September 30,
2017

October 1,
2016

Cash provided by (used in):
Operating activities $6,956 $12,128
Investing activities ($743 ) ($729 )
Financing activities ($5,621 ) ($12,097 )

	Twenty-Six Weeks Ended
	July 1, 2023			July 2, 2022
Cash (used in) provided by:
Operating activities	$	16,511		$	20,755
Investing activities	$	(559	)	$	(453	)
Financing activities	$	(15,215	)	$	(17,175	)

Operating Activities

Operating activities provided ~~$7.0~~$16.5 million of cash for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 as compared to ~~$12.1~~providing $20.8 million in the comparable ~~prior year~~prior-year period. The major components of cash provided by ~~or used in~~ operating activities in the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 and the comparable ~~prior year~~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~~costs, and deferred revenue.

For the twenty-six weeks ended July 1, 2023, the Company experienced net income ~~for the thirty-nine week period ended September 30, 2017 was $1.8~~of $7.8 million as compared to ~~$2.0~~$12.5 million for the comparable ~~prior year~~prior-year period. ~~A decrease~~An increase in accounts receivables in the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017 provided $3.7~~July 1, 2023 used $10.9 million of cash as compared to ~~$8.6~~providing $3.6 million in the comparable ~~prior year~~prior-year period. The Company primarily attributes ~~the decrease~~this increase in accounts receivables for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 to ~~improved collections, particularly from~~normal fluctuations in accounts receivable relative to revenue.

While highly variable, the ~~Company's Specialty Health Care and Canadian Engineering clients.~~

~~The Company's~~Company’s transit accounts payable ~~generally~~typically exceeds the ~~Company's~~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~~payable of ~~$1.3 million and $2.5~~$27.3 million as of ~~September 30, 2017~~July 1, 2023 and a net payable of $6.5 million as of December 31, ~~2016, respectively, so the~~2022, providing $20.8 million of cash ~~impact~~ during the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017 used $1.2 million in cash.~~July 1, 2023. The net of transit accounts payable and transit accounts receivable was a net ~~liability~~payable of ~~$2.4~~$0.9 million as of ~~October 1, 2016~~July 2, 2022 and a net payable of ~~$1.5~~$1.1 million as of January ~~2, 2016, so the~~1, 2022, using $0.2 million of cash ~~impact~~ during the ~~thirty-nine week period~~twenty-six weeks ended ~~October~~July 2, 2022. The increase to net transit payable as of July 1, ~~2016 provided $0.9 million~~2023 was due to several large, multiyear EPC (Engineering, Procurement and Construction) projects starting in ~~cash.~~

the Company’s second fiscal quarter. In a typical EPC contract, the Company receives significant cash upfront to fund equipment procurement and construction subcontractors throughout the project.

Prepaid expenses and other current assets provided ~~$0.2~~cash of $0.3 million infor the twenty-six weeks ended July 1, 2023 as compared to providing $0.4 million of cash for the ~~thirty-nine week period ended September 30, 2017 as compared to $1.8 million in the~~ comparable ~~prior year~~prior-year period. The Company attributes ~~these~~ changes to prepaid expenses and other current assets, if any, to general timing of payments in the normal course of business.

Since certain expenses are paid before a fiscal year concludes and are amortized over the next fiscal year, prepaid expenses and other current assets generally tend to increase at the end of a fiscal year and decrease during the first three quarters of the following fiscal year.

A decrease in accounts payable and accrued expenses used $1.3 million for the thirty-nine week period ended September 30, 2017 as compared to $1.7 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.

ITEM 2.

~~MANAGEMENT'S~~

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

Liquidity and Capital Resources (Continued)

Operating Activities (Continued)

A decrease in accounts payable and accrued expenses used cash of $1.0 million for the twenty-six weeks ended July 1, 2023 as compared to using $0.6 million for the comparable prior-year period. The Company attributes these changes to typical fluctuations in the normal course of business.

Changes in accrued payroll and related costs used cash of $1.2 million for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017 used $0.2 million in cash~~July 1, 2023 as compared to ~~using $2.3~~providing $3.0 million for the comparable ~~prior year~~prior-year period. There are ~~three~~four primary factors that generally impact accrued payroll and related costs: 1) there is a general correlation to operating expenses as payroll and related costs is the ~~Company's~~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~~payroll every two weeks and normally has ~~thirteen~~twenty-six weeks in a fiscal quarter, which means that the Company normally has a major payroll on the last business day of every other quarter; 3) the timing of various payroll related payments varies in the normal course of business; and 3)4) most of the ~~Company's~~Company’s senior management participate in annual incentive plans and while progress advances are ~~often~~sometimes made during the fiscal year, these accrued bonus balances, to the extent they are projected to be achieved, generally accumulate throughout the year. A significant portion of these incentive plan accruals are typically paid at the beginning of one fiscal year, pertaining to the prior fiscal year. The ~~Company's~~Company’s last major payroll for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 was paid on ~~September 29, 2017.~~

June 30, 2023. During fiscal 2020, the Company deferred $3.3 million of employer payroll taxes under the CARES Act. Half of these deferred payroll taxes were paid in fiscal December 2021 and the remaining portion was paid in fiscal December 2022.

Historically, the Company has experienced small deferred revenue balances. In fiscal 2022, the Company’s Industrial Processing group secured several contracts with front-loaded payments, thereby generating larger deferred revenue balances than typically generated. As a result, the Company’s deferred revenue balance as of July 1, 2023 was $0.5 million, compared to $1.1 million as of December 31, 2022, using cash from operations of $0.6 million for the twenty-six weeks ended July 1, 2023. While the Company expects to receive future upfront payments from its Industrial Processing clients, the Company cannot reasonably forecast deferred revenue balances as the timing of contract wins and front-loaded payments are typically haphazard.

Investing Activities

Investing activities used ~~cash of $0.7~~$0.6 million for the ~~thirty-nine week~~purchase of property and equipment in the current period ~~ended September 30, 2017~~ as compared to ~~$0.7~~using $0.5 million ~~for~~in the comparable ~~prior year~~prior-year period. ~~Investing activities for both periods presented were primarily related to expenditures for property and equipment.~~

Financing Activities

Financing activities used ~~$5.6~~$15.2 million of cash for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 as compared to ~~$12.1~~using $17.2 million in the comparable ~~prior year~~prior-year period. The Company made net ~~repayments~~borrowings under its line of credit of ~~$4.9~~$6.1 million during the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017~~July 1, 2023 as compared to making net ~~repayments~~payments of ~~$9.8~~$14.2 million in the comparable ~~prior year~~prior-year period. The Company ~~also~~ used ~~$0.4 million and $1.8~~$21.1 million to repurchase shares of its common stock ~~during~~in the ~~thirty-nine week~~current period ~~ended September 30, 2017 and~~as compared to $2.8 million in the comparable ~~prior year period, respectively. The Company also used $0.9 million to pay contingent consideration for both periods presented.~~prior-year period. The Company generated cash of ~~$0.4~~$0.3 million from sales of shares from its equity plans for ~~both periods presented.~~

~~The Company~~the current period and ~~its subsidiaries are party to a loan agreement with Citizens Bank of Pennsylvania which provides for a $35 million revolving credit facility and includes a sub-limit of $5~~$0.1 million for ~~letters of credit (the "Revolving Credit Facility")~~the comparable prior-year period.

ITEM 2.

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

Liquidity and expires December 11, 2019. The Revolving Credit Facility has been amended several times, most recently pursuant to the Seventh Amendment entered into on March 8, 2017 when the Company was granted a waiver that expressly excludes $1.3 million of certain legal settlement and office closure expenses in the calculation of the Company's loan covenants. Capital Resources (Continued)

Financing Activities (Continued)

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) SOFR (Secured Overnight Financing Rate) (which replaced LIBOR (London Interbank Offered Rate) upon the phasing out of LIBOR), plus applicable margin, typically borrowed in fixed 30-day increments, plus applicable margin, typically borrowed in fixed 30-day increments or (ii) the agent ~~bank's~~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 weighted average interest rate, including unused line fees, for the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017 was 2.6%.~~

July 1, 2023 and July 2, 2022 were 6.3% and 1.9%, respectively.

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~~Company’s ability to borrow in order to pay dividends. As of ~~September 30, 2017,~~July 1, 2023, the Company was in compliance with all covenants contained in ~~its~~the Revolving Credit Facility.

The Company believes that it will maintain compliance with its financial covenants for the foreseeable future.

Borrowings under the line of credit as of ~~September 30, 2017~~July 1, 2023 and December 31, ~~2016~~2022 were ~~$9.5~~$14.9 million and ~~$14.3~~$8.8 million, respectively. ~~At September 30, 2017 and December 31, 2016 there~~There were letters of credit outstanding at July 1, 2023 and December 31, 2022 for ~~$0.8 million.~~$2.0 million and $1.9 million, respectively. At ~~September 30, 2017,~~July 1, 2023 and December 31, 2022, the Company had availability for additional borrowings under the Revolving Credit Facility of ~~$24.7 million.~~

$28.1 million and $34.3 million, respectively.

In addition to borrowings and sales of shares from its equity plans, the Company may raise capital through sales of shares of common stock under its at the market issuance program (the “ATM Program”) established under its May 2021 At Market Issuance Sales Agreement with B. Riley Securities, Inc., as the agent (the “Agent”). The ATM Program allows the Company to offer and sell shares of the common stock having an aggregate sales price of up to $25.0 million from time to time through the Agent. To date, the Company has not sold any shares under the ATM Program.

Current Liquidity and Revolving Credit Facility

Liquidity is a measure of our ability to meet potential cash requirements, maintain our assets, fund our operations, and meet the other general cash needs of our business. Our liquidity is impacted by general economic, financial, competitive, and other factors beyond our control. Our liquidity requirements consist primarily of funds necessary to pay our expenses, principally labor-costs, and other related expenditures. We generally satisfy our liquidity needs through cash provided by operations and, when necessary, our revolving line of credit from Citizens Bank. The Company believes it has a great deal of flexibility to reduce its costs if it becomes necessary. The Company believes that it can satisfy its liquidity needs for at least the next 12 months.

ITEM 2.

~~MANAGEMENT'S~~

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

Liquidity and Capital Resources (Continued)

Current Liquidity and Revolving Credit Facility (Continued)

The Company’s liquidity and capital resources as of July 1, 2023, included accounts receivable and total current asset balances of $61.6 million and $77.1 million, respectively. Current liabilities were $64.6 million as of July 1, 2023 and were exceeded by total current assets by $12.5 million.

The Company experiences volatility in its daily cash flow and, at times, relies on the revolving line of credit to provide daily liquidity for the Company’s financial operations. As of July 1, 2023, the Company was in compliance with all financial covenants contained in the Revolving Credit Facility. The Company believes that it will maintain compliance with its financial covenants for the foreseeable future.

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~~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~~Company’s future acquisition and expansion opportunities or how such opportunities will be financed.

The Company is exposed to various asserted claims as of July 1, 2023, where the Company believes it has a probability of loss. Additionally, the Company is exposed to other asserted claims whereby an amount of loss has not been declared, and the Company cannot determine the potential loss. Any of these various claims could result in an unfavorable outcome or settlement that exceeds the accrued amounts. However, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows. As of July 1, 2023, the Company has accrued $2.8 million for asserted claims.

In April 2022, a client of the Company’s Industrial Processing Group alleged that a system partially designed by the Company is not operating as intended and that the Company is responsible. The Company has not determined if it has any liability. In the event of liability, the Company believes its damages are contractually limited to an amount no higher than $3.3 million. Furthermore, the Company believes that if it were found liable, any damages would be covered by insurance, subject to a deductible of $0.5 million and maximum coverage of $5.0 million. While the Company attempts to find a mutually agreeable solution, the Company has reserved $0.5 million for this project. The Company can give no assurance that its liability is limited to $3.3 million or that liability over $0.5 million, if any, will be covered by insurance.

ITEM 2.

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

Liquidity and Capital Resources (Continued)

Commitments and Contingencies (Continued)

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.

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~~is currently implementing an upgrade ~~or replace~~of its ~~SAP financial reporting~~current system and ~~accounting system. The Company has not determined when this contemplated replacement may be necessary, but~~ expects to ~~undertake a comprehensive review of the system during fiscal 2017.~~go live in 2024. The Company estimates this upgrade or replacement of ~~the third-party~~its financial reporting and accounting system will cost between ~~$1.0~~$0.5 million and ~~$2.0~~$1.0 million. These estimates are subject to material change.

The ~~Company's~~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.~~2027. Certain leases are subject to escalation clauses based upon changes in various factors. ~~The minimum future annual operating~~

Maturities of lease ~~commitments for leases with non-cancelable terms, exclusive of unknown operating escalation charges,~~liabilities are as ~~follows (in thousands):~~

Fiscal Years Amount
2017 (after September 30, 2017) $856
2018 2,969
2019 1,632
2020 999
2021 489
Thereafter 304
Total $7,249

~~ITEM 2.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)~~

~~Liquidity and Capital Resources (Continued)~~

follows:

Fiscal Year	Operating Leases			Finance Leases
2023 (After July 1, 2023)	$	716		$	233
2024		754			233
2025		493			-
2026		409			-
2027		302			-
Thereafter		1,456			-

Total lease payments	$	4,130		$	466
Less: imputed interest		(531	)		(2	)
Total	$	3,599		$	464

Future Contingent Payments

As of ~~September 30, 2017,~~July 1, 2023, the Company had ~~five~~two active acquisition agreements whereby additional contingent consideration may be earned by the ~~former shareholders:~~sellers: 1) effective ~~July 1, 2012~~September 30, 2018, the Company acquired certain assets of ~~BGA,~~Thermal Kinetics Engineering, PLLC and Thermal Kinetics Systems, LLC ~~("BGA"~~(together, “TKE”);, and 2) effective ~~August 1, 2014 the Company acquired all of the stock of Point Comm, Inc. ("PCI"); 3) effective July 5, 2015,~~October 2, 2022, 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") and 5) effective April 16, 2017 the Company acquired certain assets of R.A.F. Services, Inc. ("RAF").TalentHerder LLC. The Company estimates future contingent payments at ~~September 30, 2017~~July 1, 2023 as follows:

~~Fiscal Year~~	~~Total~~
~~December 30, 2017 (after September 30, 2017)~~	~~$992~~
~~December 30, 2018~~	~~240~~
~~Estimated future contingent consideration payments~~	~~$1,232~~

	Total
The four quarters following July 1, 2023	$	300
Thereafter		1,671
Estimated future contingent consideration payments	$	1,971

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 $2.9.~~ The Company estimates future contingent consideration in payments based on forecasted performance and recorded at the ~~net present~~fair value of those expected payments as of ~~September 30, 2017. The measurement~~July 1, 2023. Contingent consideration related to acquisitions is ~~based on significant inputs that are not observable~~recorded at fair value (level 3) with changes in ~~the market, which "Fair Value Measurements and Disclosures" (ASU Topic 820-10-35) refers to as Level 3 inputs.~~

fair value recorded in other (expense) income, net.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The ~~Company's~~Company’s exposure to market risk for changes in interest rates relates primarily to the ~~Company's~~Company’s investment portfolio and debt instruments, which primarily consist of ~~its~~the 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 ~~September 30, 2017,~~July 1, 2023, the ~~Company's~~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~~Company’s variable-rate line of credit balances during the ~~thirty-nine week period~~twenty-six weeks ended ~~September 30, 2017,~~July 1, 2023, if the interest rate on the ~~Company's~~Company’s variable-rate line of credit (using an incremental borrowing rate) during the period had been 1.0% higher, the ~~Company's~~Company’s interest expense on an annualized basis would have increased by ~~$0.1~~$0.2 million. The Company does not expect any material loss with respect to its investment portfolio.

ITEM 4.

CONTROLS AND PROCEDURES

The ~~Company's~~Company’s management, under the supervision and with the participation of the ~~Company's Chief~~Company’s Principal Executive Officer and ~~Chief~~Principal Financial Officer, evaluated the effectiveness of the ~~Company's~~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. As previously disclosed under “Item 9A. Controls and Procedures” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2022, we identified deficiencies described below that existed as of December 31, 2022, and continued to exist at July 1, 2023. Based ~~upon that~~on our evaluation, ~~the Chief~~our Principal Executive Officer and ~~Chief~~Principal Financial Officer have concluded that ~~those~~the Company’s 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~~(as such term is defined in ~~the reports that it files or submits~~Rule(s) 13a-15(e) and 15d-15(e) under the Exchange ~~Act~~Act) were not effective as of July 1, 2023, because of the material weaknesses in our internal control over financial reporting described below.

A material weakness is ~~recorded, processed, summarized~~a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified the following control deficiencies that resulted in material weaknesses in our internal control over financial reporting as of December 31, 2022. The Company did not design and ~~reported within~~maintain information technology controls relevant to preparing its financial statements, specifically concerning (i) separation of duties to the ~~time periods specified~~SAP ERP and General Ledger, (ii) adequate restriction of administrator-type access to SAP, (iii) program change management controls, and (iv) user access controls that ensure appropriate segregation of duties and adequately restrict user access to financial applications, programs, and data. As a result, the Company's related process-level IT-dependent manual and automated controls that rely upon the affected ITGCs, or information coming from IT systems with affected ITGCs, were also deemed ineffective.

This material weakness did not result in a misstatement of our annual or interim consolidated financial statements.

ITEM 4.

CONTROLS AND PROCEDURES (CONTINUED)

Planned Material Weakness Remediation Activities

To address these material weaknesses, we have commenced actions to formalize the Company's framework and policies to maintain evidence in the ~~SEC's rules~~operation of control procedures and ~~forms and is accumulated and communicated~~improve our IT general controls. Our planned remediation efforts related to the ~~Company's management, including its principal executive~~above-identified material weaknesses include, but are not limited to:

●

Investments to upgrade or replace existing systems that do not have the appropriate infrastructure to meet the requirements of our internal control framework.

●

Expand the available resources at the Company with experience designing and implementing control activities, including information technology general controls, with the advice from third-party consultants and specialists.

●

Assess segregation of duties and implement an annual user access review, including role design and process transformation to appropriately mitigate significant risks associated with conflicting responsibilities in financial systems.

●

Design and implement IT controls in change management that will ensure all changes are tested in staging, approved, and documented, and ensure that developers cannot deploy their own code to production.

●

Perform additional training to ensure a clear understanding of risk assessment, controls, and monitoring activities related to automated processes, systems, and ITGCs related to financial reporting.

We will continue to assess the effectiveness of our internal control over financial reporting and ~~principal financial officers, or persons performing similar functions, as appropriate,~~take steps to ~~allow timely decisions regarding required disclosure.~~

~~A controls system, no matter how well designed~~remediate the known material weaknesses expeditiously. The implementation of these remediation efforts is in progress, may require additional expenditures to implement, and ~~operated, cannot provide absolute assurance that the objectives~~will require validation and testing of the design and operating effectiveness of internal controls ~~system are met,~~over a sustained period of financial reporting cycles, and noas a result, the timing of when we will be able to remediate the material weaknesses fully is uncertain. We may also conclude that additional measures may be required to remediate the material weakness in our internal control over financial reporting, which may necessitate further implementation and evaluation ~~of controls can provide absolute assurance that all control issues~~time.

Changes in Internal Control Over Financial Reporting

Other than the material weaknesses and ~~instances of fraud, if any, within a company have been detected.~~

~~There~~remediation efforts described above, there have been no changes in ~~the Company's~~our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the ~~Company's most recent fiscal quarter and~~twenty-six weeks ended July 1, 2023, that have materially affected, or are reasonably likely to materially affect, ~~the Company's~~our internal control over financial reporting.

The company is making ongoing progress on its remediation plan to address the material weakness previously disclosed. A final assessment of remediation efforts will be conducted as part of our annual review of internal controls over financial reporting.

RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

See discussion of Contingencies in Note 1615 to the Condensed Consolidated Financial Statements included in Item 1 of this report.

ITEM 1A.

RISK FACTORS

~~There have been no material changes from~~

For information regarding factors that could affect the Company’s business, see the risk factors ~~disclosed in the "Risk Factors" section (Item 1A)~~discussed under Part I, Item 1A, Risk Factors, of the ~~Company's~~Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~

~~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.

2022.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents the Company’s purchases of common stock completed during the second quarter of 2023:

Period	Total Number of Shares Purchased			Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
April 2, 2023 - April 30, 2023		508,898	⁽¹⁾	$	11.85		175,212	$	25,000,000
May 1, 2023 - May 31, 2023		270,180		$	14.14		270,180	$	21,180,000
June 1, 2023 - July 1, 2023		160,076		$	17.85		160,076	$	18,320,000
Total		939,154	⁽¹⁾	$	13.53		605,468

(1)

Includes 333,686 shares purchased in a private transaction on April 24, 2023 for $11.91 per share.

~~None.~~

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

31.1*	Certification of ~~President and Chief~~Principal Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

31.2*	Certification of ~~Chief~~Principal Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

32.1**	Certification of ~~President and Chief~~Principal Executive Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed ~~"filed"~~“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~~Principal Financial Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed ~~"filed"~~“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 (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH*	Inline XBRL Taxonomy Extension Schema Document

101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Documents

101.DEF*	Inline XBRL Taxonomy Definition Linkbase Document

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

__________

*Filed herewith

**Furnished herewith

RCM TECHNOLOGIES, INC.

SIGNATURES

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

RCM Technologies, Inc.

Date: ~~November 2, 2017~~August 10, 2023

By: /s/ ~~Rocco Campanelli~~

Bradley S. Vizi

~~Rocco Campanelli~~

~~President~~

Bradley S. Vizi

Executive Chairman and ~~Chief Executive Officer~~

President

(Principal Executive Officer and

Duly Authorized Officer of the Registrant)

Date: ~~November 2, 2017~~August 10, 2023		By: /s/ Kevin D. Miller
			Kevin D. Miller Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer of the Registrant)

~~Exhibit 31.1~~

~~RCM TECHNOLOGIES, INC.~~

~~CERTIFICATIONS REQUIRED BY~~
~~RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~CERTIFICATION~~

~~I, Rocco Campanelli, certify that:~~

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

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

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

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

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

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

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

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

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

~~(a)~~

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

~~(b)~~

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

~~Date: November 2, 2017~~

~~/s/ Rocco Campanelli~~

~~Rocco Campanelli~~

~~President and Chief Executive Officer~~

~~Exhibit 31.2~~

~~RCM TECHNOLOGIES, INC.~~

~~CERTIFICATIONS REQUIRED BY~~
~~RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~CERTIFICATION~~

~~I, Kevin D. Miller, certify that:~~

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

~~(a)~~

~~(b)~~

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

~~Date: November 2, 2017~~

~~/s/ Kevin D. Miller~~

~~Kevin D. Miller~~

~~Chief Financial Officer~~

~~Exhibit 32.1~~

~~RCM TECHNOLOGIES, INC.~~

~~CERTIFICATIONS REQUIRED BY~~
~~RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934~~

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

(1) The Company's periodic report on Form 10-Q for the quarter ended September 30, 2017 (the "Form 10-Q") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

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

** *

~~/s/ Rocco Campanelli~~

~~Rocco Campanelli~~

~~President and Chief Executive Officer~~

~~Date: November 2, 2017~~

~~Exhibit 32.2~~

~~RCM TECHNOLOGIES, INC.~~

~~CERTIFICATIONS REQUIRED BY~~
~~RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934~~

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

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

** *

~~/s/ Kevin D. Miller~~

~~Kevin D. Miller~~

~~Chief Financial Officer~~

~~Date: November 2, 2017~~

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.05 per share		RCMT		The NASDAQ Stock Market LLC

PART I - FINANCIAL INFORMATION

		Page
Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~July 1, 2023 (Unaudited) and December 31, ~~2016~~ 2022	3 4

	Unaudited Condensed Consolidated Statements of ~~Income~~Operations for the Thirteen and ~~Thirty-Nine Week Periods~~ Twenty-Six Weeks Ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~ July 2, 2022	4 5

	Unaudited Condensed Consolidated Statements of Comprehensive Income for the ~~Thirty-Nine Week Periods~~ Twenty-Six Weeks Ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~ July 2, 2022	5 6

	Unaudited Condensed Consolidated ~~Statement~~Statements of Changes in ~~Stockholders'~~Stockholders’ Equity for the ~~Thirty-Nine Week Period~~Twenty-Six Weeks Ended ~~September 30, 2017~~ July 1, 2023 and July 2, 2022	6 7

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Thirty-Nine Week Periods~~ Twenty-Six Weeks Ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~ July 2, 2022	7 8

	Notes to Unaudited Condensed Consolidated Financial Statements	8 9

Item 2.	~~Management's~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations	23 28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42 45

Item 4.	Controls and Procedures	42 45


PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	43 47

Item 1A.	Risk Factors	43 47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43 47

Item 3.	Defaults Upon Senior Securities	43 47

Item 4.	Mine Safety Disclosures	43 47

Item 5.	Other Information	43 47

Item 6.	Exhibits	44 48

Signatures		45 49

			September 30,	December 31,
			2017	2016
			(Unaudited)
Current assets:
	Cash and cash equivalents		$825	$279
	Accounts receivable, net		41,942	45,170
	Transit accounts receivable		1,664	4,295
	Prepaid expenses and other current assets		3,212	3,327
		Total current assets	47,643	53,071

Property and equipment, net			3,619	4,052

Other assets:
	Deposits		207	212
	Goodwill		12,458	12,325
	Intangible assets, net		121	171
		Total other assets	12,786	12,708

		Total assets	$64,048	$69,831

Current liabilities:
	Accounts payable and accrued expenses		$7,096		$8,154
	Transit accounts payable		2,968		6,776
	Accrued payroll and related costs		7,089		7,185
	Income taxes payable		1,514		537
	Contingent consideration		992		1,061
		Total current liabilities	19,659		23,713

		Deferred tax liability, domestic	441		148
		Deferred tax liability, foreign	254		234
		Contingent consideration	240		170
		Borrowings under line of credit	9,451		14,311
		Total liabilities	30,045		38,576

Stockholders' equity:
	Preferred stock, $1.00 par value; 5,000,000 shares authorized;
		no shares issued or outstanding	-		-
	Common stock, $0.05 par value; 40,000,000 shares authorized;
		14,832,871 shares issued and 12,009,699 shares outstanding at September 30, 2017 and 14,716,940 shares issued and 11,953,080 shares outstanding at December 31, 2016	741		736
	Additional paid-in capital		116,587		115,607
	Accumulated other comprehensive loss		(2,209	)	(2,578	)
	Accumulated deficit		(66,129	)	(67,888	)
	Treasury stock (2,823,172 shares at September 30, 2017 and 2,763,860 shares at December 31, 2016, at cost)		(14,987	)	(14,622	)
		Stockholders' equity	34,003		31,255

		Total liabilities and stockholders' equity	$64,048		$69,831

		Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		September 30, 2017		October 1, 2016		September 30, 2017		October 1, 2016

Revenues		$43,827		$39,695		$135,680		$132,250
Cost of services		32,109		29,551		100,097		97,326
Gross profit		11,718		10,144		35,583		34,924

Operating costs and expenses
	Selling, general and administrative	9,700		9,334		30,092		29,976
	Depreciation and amortization	422		388		1,229		1,177
	Change in contingent consideration	-		-		781		-
		10,122		9,722		32,102		31,153
��
Operating income		1,596		422		3,481		3,771

Other (expense) income
	Interest expense and other, net	(137	)	(114	)	(409	)	(422	)
	(Loss) gain on foreign currency transactions	(17	)	(14	)	38		9
		(154	)	(128	)	(371	)	(413	)

Income before income taxes		1,442		294		3,110		3,358
Income tax expense		422		184		1,351		1,384

Net income		$1,020		$110		$1,759		$1,974

Basic and diluted net earnings per share		$0.08		$0.01		$0.15		$0.16

	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock			Total
	Issued Shares	Amount	Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Shares	Amount		Total

Balance, December 31, 2016	14,716,940	$736	$115,607		($2,578	)	($67,888	)	2,763,860	($14,622	)	$31,255

Issuance of stock under employee stock purchase plan	90,931	4	390		-		-		-	-		394
Translation adjustment	-	-	-		369		-		-	-		369
Share-based compensation expense	-	-	591		-		-		-	-		591
Issuance of stock upon vesting of restricted stock awards	25,000	1	(1	)	-		-		-	-		-
Common stock repurchase	-	-	-		-		-		59,312	(365	)	(365	)
Net income	-	-	-		-		1,759		-	-		1,759

Balance, September 30, 2017	14,832,871	$741	$116,587		($2,209	)	($66,129	)	2,823,172	($14,987	)	$34,003

	September 30, 2017		December 31, 2016
Billed	$29,322		$34,463
Accrued and unbilled	8,911		6,894
Work-in-progress	4,770		5,215
Allowance for sales discounts and doubtful accounts	(1,061	)	(1,402	)

Accounts receivable, net	$41,942		$45,170

	Engineering	Specialty Health Care	Information Technology	Total

Balance as of December 31, 2016	$4,411	$2,398	$5,516	$12,325

Goodwill recorded, RAF	133	-	-	133

Balance as of September 30, 2017	$4,544	$2,398	$5,516	$12,458

	Thirteen Week Periods Ended		Thirty-Nine Week Periods Ended
	September 30, 2017	October 1, 2016	September 30, 2017	October 1, 2016

Basic weighted average shares outstanding	12,009,181	12,295,493	11,972,600	12,380,617
Dilutive effect of outstanding stock options and restricted stock awards	141,914	136,150	116,610	102,817
Weighted average dilutive shares outstanding	12,151,095	12,431,643	12,089,210	12,483,434

	September 30, 2017	December 31, 2016

Exercise of options outstanding	17,000	42,000
Time-based restricted stock units outstanding	212,734	197,734
Performance-based restricted stock units outstanding	400,000	200,000
Future grants of options or shares	379,266	619,266
Shares reserved for employee stock purchase plan	177,280	268,211

Total	1,186,280	1,327,211

	All Stock Options Outstanding
	Shares		Weighted Average Exercise Price
Options outstanding as of December 31, 2016	42,000		$8.27
Options granted	-
Options exercised	-
Options forfeited/cancelled	(25,000	)

Options outstanding as of September 30, 2017	17,000		$6.00

Options outstanding price range at September 30, 2017	$5.27 - $6.10

Options exercisable as of September 30, 2017	17,000		$6.00

Intrinsic value of outstanding stock options as of September 30, 2017	$1

		Thirteen Week Periods Ended		Thirty-Nine Week Periods Ended
		September 30, 2017	October 1, 2016	September 30, 2017	October 1, 2016
Revenues
	U. S.	$34,207	$32,851	$110,083	$110,158
	Canada	8,703	5,545	22,420	18,149
	Puerto Rico	917	1,299	3,177	3,943
		$43,827	$39,695	$135,680	$132,250

	September 30, 2017				October 1, 2016
	Amount		% of Revenue		Amount		% of Revenue
Revenues	$43,827		100.0		$39,695		100.0
Cost of services	32,109		73.3		29,551		74.4
Gross profit	11,718		26.7		10,144		25.6

Selling, general and administrative	9,700		22.1		9,334		23.5
Depreciation and amortization	422		1.0		388		1.0
	10,122		23.1		9,722		24.5

Operating income	1,596		3.6		422		1.1
Interest expense, net and foreign currency transactions	(154	)	(0.3	)	(128	)	0.3

Income before income taxes	1,442		3.3		294		0.8
Income tax expense	422		1.0		184		0.5

Net income	$1,020		2.3		$110		0.3

Fiscal Years	Amount
2017 (after September 30, 2017)	$856
2018	2,969
2019	1,632
2020	999
2021	489
Thereafter	304
Total	$7,249