SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
(Amendent No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report June 12, 1998
(Date of earliest event reported) (January 4, 1998)
RCM TECHNOLOGIES, INC.
(exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation)
1-10245 95-1480559
(Commission File Number) (IRS Employer
Identification Number)
2500 McClellan Avenue, Pennsauken, NJ 08109-4613
(Address of principal executive offices) (Zip Code)
(609) 486 - 1777
(Registrant's telephone number, including area code)
ITEM 5. Other Events
On January 4, 1998, RCM Technologies, Inc. ("Registrant") acquired Northern
Technical Services, Inc. ("NTS"), a Milwaukee, Wisconsin-based provider of
information technology personnel and professional engineering staffing services.
The acquisition was completed through a stock purchase transaction (the "NTS
Purchase") pursuant to which NTS, through an exchange of all of its outstanding
shares of stock with the Registrant became a wholly-owned subsidiary of the
Registrant.
The NTS Purchase consideration paid to the former shareholders of NTS consisted
of $3.1 in million cash and $1.5 million of contingent consideration payable
over two years upon NTS achieving certain base levels of operating income for
each of the two twelve month periods following the NTS Purchase. An additional
earn-out payment shall be made to the former shareholders at the end of each of
the two twelve month periods following the NTS Purchase, to the extent that
operating income exceeds these base levels. The Purchase has been accounted for
under the purchase method of accounting. The source of cash utilized in the NTS
Purchase was from the Registrant's revolving credit facility. The cost in excess
of net assets acquired will be approximately $3.2 million. It is anticipated the
cost in excess of net assets acquired will be amortized over a 40 year period.
The Purchase consideration paid by the Registrant was determined by negotiations
between and among the representatives of the Registrant and NTS.
Following the NTS Purchase, the directors and executive officers of NTS consist
of Leon Kopyt Chief Executive officer, Stanton Remer Chief Financial Officer,
and Merle Cook (Chief Executive Officer of NTS prior to the Purchase).
NTS's assets consist of primarily of contracts and office equipment. These
assets were used in providing information technology and professional
engineering personnel to businesses and institutions. The Registrant plans for
NTS to continue such course of business under the Registrant's control.
Prior to the NTS Purchase, no material relationship existed between NTS and the
Registrant or any of its affiliates, any director or officer of the Registrant,
or any associate of any such director or officer.
On February 2, 1998, the Registrant acquired Global Technology Solutions, Inc.
("GTS"), a Sacramento, California-based provider of information technology
staffing services. The acquisition was completed through a stock purchase
transaction (the "GTS Purchase") pursuant to which GTS, through an exchange of
all of its outstanding shares of stock with the Registrant became a wholly-owned
subsidiary of the Registrant.
The GTS Purchase consideration paid to the former shareholders of GTS consisted
of $3.7 in million cash and $2.0 million of contingent consideration payable
over two years upon GTS achieving certain base levels of operating income for
each of the two twelve month periods following the GTS Purchase. An additional
earn-out payment shall be made to the former shareholders at the end of each of
the two twelve month periods following the GTS Purchase, to the extent that
operating income exceeds these base levels. The GTS Purchase has been accounted
for under the purchase method of accounting. The source of cash utilized in the
GTS Purchase was from the Registrant's revolving credit facility. The cost in
excess of net assets acquired will be approximately $4.5 million. It is
anticipated the cost in excess of net assets acquired will be amortized over a
40 year period.
The GTS Purchase consideration paid by the Registrant was determined by
negotiations between and among the representatives of the Registrant and GTS.
Following the GTS Purchase, the directors and executive officers of GTS consist
of Leon Kopyt Chief Executive Officer, Stanton Remer Chief Financial Officer,
and Murthy Venkat (General Manager of GTS prior to the GTS Purchase).
GTS's assets consist primarily of contracts and office equipment. These assets
were used in providing information technology and professional engineering
personnel to businesses and institutions. The Registrant plans for GTS to
continue such course of business under the Registrant's control.
Prior to the GTS Purchase, no material relationship existed between GTS and the
Registrant or any of its affiliates, any director or officer of the Registrant,
or any associate of any such director or officer.
ITEM 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired
Audited Balance Sheets
November 30, 1997
December 31, 1997
Audited Statements of Income Year ended November 30, 1997 Year ended
December 31, 1997
Audited Statement of Changes in Stockholders' Equity,
Year ended November 30, 1997
Year ended December 31, 1997
Audited Statement of Cash Flows
Year ended November 30, 1997
Year ended December 31, 1997
Notes to Financial Statements
November 30, 1997
December 31, 1997
(b) Pro forma financial information
Unaudited Pro Forma Condensed Combined Balance Sheet, October 31, 1997.
UnauditedPro Forma Condensed Combined Statement of Income for the year
ended October 31, 1997.
(c) Exhibits
10.1 Stock Purchase Agreement (Northern Technical Services, Inc.),
dated December 31, 1997
10.2 Stock Purchase Agreement (Global Technology Solutions, Inc.),
dated February 4, 1998
23 Consent of Frank b. Morris,
Certified Public Accountant
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.
By: /S/ Stanton Remer
Stanton Remer
Chief Financial Officer
(Principal Accounting Officer),
Treasurer and Director
June 18, 1998
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial
statements give effect to the acquisition of Northern Technical Services ("NTS")
by RCM Technologies, Inc. ("RCM") pursuant to a purchase transaction that was
completed on January 4, 1998 and the acquisition of Global Technology Solutions,
Inc. ("GTS") on February 2, 1998. This pro forma information has been prepared
utilizing the historical financial statements of RCM, NTS and GTS. This
information should be read in conjunction with the historical financial
statements and notes thereto of RCM which are incorporated by reference to RCM's
Form 10-K and the historical financial statements of NTS and GTS which are
incorporated within this Form 8-K. The pro forma financial data are provided for
comparative purposes only and do not purport to be indicative of the results
which actually would have been obtained if the acquisition had been effected on
the dates indicated, or of the results which may be obtained in the future.
The pro forma financial information is based on the purchase method of
accounting for the acquisitions. The pro forma adjustments are described in the
accompanying Notes to Unaudited Pro Forma Condensed Combined Balance Sheet and
Notes to Unaudited Pro Forma Condensed Combined Statement of Income. The
Unaudited Pro Forma condensed combined statement of income for the year ended
October 31, 1997 assumes that the acquisitions of NTS and GTS had occurred on
November 1, 1996 (combining the results for the year ended October 31, 1997 for
RCM, and the twelve months ended November 30, 1997 for NTS and the twelve months
ended December 31, 1997 for GTS). The unaudited pro forma condensed combined
balance sheet at October 31, 1997 assumes that the acquisitions of NTS and GTS
had occurred on October 31, 1997.
Acquisition
The consideration paid to the former shareholders of NTS consisted of $3.1
million in cash and $1.5 million of contingent consideration payable over two
years upon NTS achieving certain base levels of operating income for each of the
two twelve month periods following the NTS Purchase. An additional earn-out
payment shall be made to the former shareholders NTS at the end of each of the
two twelve month periods following the NTS Purchase, to the extent that
operating income exceeds these base levels.
The consideration paid to the former shareholders of GTS consisted of $3.7 in
million cash and $2.0 million of contingent consideration payable over two years
upon GTS achieving certain base levels of operating income for each of the two
twelve month periods following the GTS Purchase. An additional earn-out payment
shall be made to the former shareholders of GTS at the end of each of the two
twelve month periods following the GTS Purchase, to the extent that operating
income exceeds these base levels.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS- Continued
Assumptions
Purchase Price Allocation
Although neither RCM, NTS nor GTS has complete information at this time
as to the fair value of NTS's or GTS's individual assets and liabilities, an
estimate of the eventual allocation of the purchase price was made on the basis
of available information. The eventual allocation of the purchase price will be
made on the basis of appraisals and valuations which give effect to various
factors including the nature and intended future use of assets acquired in
determining their value. It is not anticipated that any change in the allocation
price will be material from the pro forma adjustments.
For the purpose of pro forma presentations, the excess purchase price
over the net assets acquired is being amortized over an estimated life of forty
(40) years.
RCM Technologies, Inc.
Unaudited Proforma Condensed Balance Sheet
October 31, 1997
Historical
RCM Northern Technical Global Technology
Technologies, Inc. Services, inc. Solutions, Inc. Adjustments & Proforma
October 31, 1997 November 30, 1997 December 31, 1997 Eliminations Combined
Assets:
Cash and cash equivalents $918,028 $1,375,237 $96,755 A & B ($6,825,000) $25,260
G (150,000)
E & F (2,189,760)
H 6,800,000
Accounts and notes receivable 24,850,304 1,281,615 1,256,201 27,388,120
Prepaid expenses & other current assets 673,265 12,357 19,184 704,806
Total current assets 26,441,597 2,669,209 1,372,140 28,118,186
Property and equipment-net 1,135,405 252,883 33,047 1,421,335
Intangible assets 26,411,445 0 0 A & B 6,825,000 33,386,445
G 150,000
Other Assets 94,149 724,089 61,980 880,218
Total $54,082,596 $3,646,181 $1,467,167 $4,610,240 $63,806,184
Liabilities and Shareholders' Equity:
Current Liabilities
Bank- line of credit $2,000,000 $100,000 H $6,800,000 $8,900,000
Other current liabilities 7,162,482 1,028,415 74,908 C & D 3,165,330 9,241,375
E & F (2,189,760)
Total current liabilities 9,162,482 1,028,415 174,908 18,141,375
Long Term Liabilities 308,129 340,215 648,344
Shareholders' equity 44,611,985 2,277,551 1,292,259 C & D (3,165,330) 45,016,465
Total $54,082,596 $3,646,181 $1,467,167 $4,610,240 $63,806,184
ADJUSTMENTS
(A) to record initial cash consideration for purchase Nothern Technical
Services, Inc. ("NTS") $3,125,000 in exchange for all the shares of NTS
(B) to record initial cash consideration for purchase Global Technology
Solutions, Inc.. ("GTS") $3,700,000 in exchange for all the shares of GTS
(C) to record tangible net worth, as defined due selling shareholders of NTS $1,955,449
(D) to record net working capital, as defined due selling shareholders of GTS $1,209,881
(E) to record initial payment of tangible net worth, as defined to selling shareholders of NTS $1,372,666
(F) to record initial payment of net working capital, as defined to selling shareholders of GTS $817,094
(G) to reflect estimated acquisition costs incurred $150,000
(H) to reflect funds borrowed for revolving line of credit to finance transactions $6,800,000
RCM TECHNOLOGIES, INC.,
UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED OCTOBER 31, 1997
Historical Historical Pro Forma
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RCM Northern Technical Global Technology
Technologies, Inc. Services, Inc. Solutions, Inc. Combined
October 31, 1997 November 30, 1997 December 31, 1997
Adjustments Combined
Revenues $113,959,093 $12,569,583 $5,750,116 $132,278,792 $132,278,792
Cost and expenses
Cost of services 86,832,348 9,479,033 4,037,818 100,349,199 100,349,199
Selling, general and administrative 18,068,899 2,520,649 684,072 21,273,620 (413,000)A 20,860,620
Interest expense (income) 184,645 (53,514) 251 131,382 544,000 C 675,382
Depreciation and amortization 572,279 104,580 6,127 682,986 174,375 B 857,361
Total 105,658,171 12,050,748 4,728,268 122,437,187 122,742,562
Income before taxes 8,300,922 518,835 1,021,848 9,841,605 9,536,230
Income taxes (benefit) 3,460,989 0 2,718 3,463,707 (128,258)D 3,981,395
645,945 E
Income from continuing operations 4,839,933 518,835 1,019,130 6,377,898 5,554,835
Loss from discontinued operations (362,500) (362,500) (362,500)
Net Income $4,477,433 $518,835 $1,019,130 $6,015,398 $5,192,335
Diluted earnings per share $0.70 $997.76 $10,191.30 $0.82
Shares used in computing earnings
per share 6,361,571 520 100 6,361,571
NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF INCOME
(A) to reflect reduction of expenses attributable to
consolidation of administrative overhead 413,000
(B) to provide for amortization on excess purchase price over net assets
acquired based an estimated life of 40 years 174,375
(C) to impute interest expense for acquistion debt 544,000
(D) to tax effect adjustments 128,258
(E) to tax effect S-Corporation earnings previously distributed to former shareholders 645,945