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<SEC-DOCUMENT>0000700841-03-000027.txt : 20030807
<SEC-HEADER>0000700841-03-000027.hdr.sgml : 20030807
<ACCEPTANCE-DATETIME>20030807103503
ACCESSION NUMBER:		0000700841-03-000027
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20030630
FILED AS OF DATE:		20030807

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			RCM TECHNOLOGIES INC
		CENTRAL INDEX KEY:			0000700841
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-HELP SUPPLY SERVICES [7363]
		IRS NUMBER:				951480559
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-10245
		FILM NUMBER:		03827904

	BUSINESS ADDRESS:	
		STREET 1:		2500 MCCLELLAN AVE STE 350
		CITY:			PENNSAUKEN
		STATE:			NJ
		ZIP:			08109
		BUSINESS PHONE:		6094861777

	MAIL ADDRESS:	
		STREET 1:		2500 MCCLELLAN AVENUE
		STREET 2:		STE 350
		CITY:			PENNSAUKEN
		STATE:			NJ
		ZIP:			08109-4613
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>form10-q63003.txt
<DESCRIPTION>FORM 10-Q QUARTERLY REPORT JUNE 30, 2003
<TEXT>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)

  [X]            QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2003

                                       OR

  [ ]           TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from to

                         Commission file number: 1-10245


                             RCM TECHNOLOGIES, INC.
             (Exact Name of Registrant as Specified in Its Charter)


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


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

                                 (856) 486-1777
              (Registrant's Telephone Number, Including Area Code)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES   X           NO
    -----            -----

Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act)
YES          NO     X
    --            ---

Indicate the number of shares outstanding of the Registrant's class of common
stock, as of the latest practicable date.

Common Stock, $0.05 par value, 10,647,247 sharesoutstanding as of August 6,2003.


<PAGE>


<TABLE>
<CAPTION>



                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES


    PART I - FINANCIAL INFORMATION
                                                                                                    Page
          Item 1 - Consolidated Financial Statements

<S>                                                   <C> <C>                                        <C>
               Consolidated Balance Sheets as of June 30, 2003 (Unaudited)
                 and December 31, 2002                                                                3

               Unaudited Consolidated Statements of Income and Comprehensive Income
                 for the Six-Month Periods Ended June 30, 2003 and 2002                               5

               Unaudited Consolidated Statements of Income and Comprehensive Income
                 for the Three-Month Periods Ended June 30, 2003 and 2002                             7

               Unaudited Consolidated Statement of Changes in Shareholders'
                 Equity for the Six-Month Period Ended June 30, 2003                                  9

               Unaudited Consolidated Statements of Cash Flows for the Six-
                 Month Periods Ended June 30, 2003 and 2002                                          10

               Notes to Unaudited Consolidated Financial Statements                                  12

          Item 2 - Management's Discussion and Analysis of Financial Condition
                          and Results of Operations                                                  24

          Item 3 - Quantitative and Qualitative Disclosures About Market Risk                        35

          Item 4 - Controls and Procedures                                                           35

    PART II - OTHER INFORMATION

          Item 1 - Legal Proceedings                                                                 36

          Item 6 - Exhibits and Reports on Form 8-K                                                  37

          Signatures                                                                                 38



</TABLE>


<PAGE>








ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       June 30, 2003 and December 31, 2002



                                     ASSETS
<TABLE>
<CAPTION>

                                                                               June 30,           December 31,
                                                                                 2003                 2002
                                                                            ---------------      ---------------

                                                                             (Unaudited)
Current assets
<S>                                                                              <C>                 <C>
   Cash and cash equivalents                                                     $ 478,722           $2,845,154
   Accounts receivable, net of allowance for doubtful accounts
      of $1,770,000 (June 30, 2003) and $1,549,000
      (December 31, 2002), respectively                                         42,498,966           31,753,934
   Income tax refund receivable                                                  2,791,674            3,766,585
   Prepaid expenses and other current assets                                     1,996,249            2,635,304
   Deferred tax assets                                                           2,293,144            6,246,119
                                                                            ---------------      ---------------

      Total current assets                                                      50,058,755           47,247,096
                                                                            ---------------      ---------------




Property and equipment, at cost
   Equipment and leasehold improvements                                          9,753,371            9,708,344
   Less: accumulated depreciation and amortization                               4,277,361            3,818,092
                                                                            ---------------      ---------------


                                                                                 5,476,010            5,890,252
                                                                            ---------------      ---------------




Other assets
   Deposits                                                                         83,505               86,590
   Goodwill                                                                     38,007,233           36,653,595
   Intangible assets, net of accumulated amortization
      of  $221,400 (June 30, 2003) and $211,000
      (December 31, 2002) respectively                                              89,287               99,655
   Deferred tax assets                                                           1,194,680
                                                                            ---------------      ---------------

                                                                                39,374,705           36,839,840
                                                                            ---------------      ---------------





      Total assets                                                             $94,909,470          $89,977,188
                                                                            ===============      ===============

</TABLE>
                                       3
              The accompanying notes are an integral part of these
                              financial statements.
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS - CONTINUED
                       June 30, 2003 and December 31, 2002


                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                              June 30,            December 31,
                                                                                2003                  2002
                                                                           ---------------       ---------------
                                                                            (Unaudited)
Current liabilities
<S>                                                                            <C>                   <C>
   Note payable                                                                $3,300,000            $7,420,000
   Accounts payable and accrued expenses                                       18,249,932            14,728,729
   Accrued payroll                                                              5,578,859             4,363,024
   Payroll and withheld taxes                                                     499,825               193,850
   Income taxes payable                                                         3,736,371             4,025,431
                                                                           ---------------       ---------------

       Total current liabilities                                               31,364,987            30,731,034
                                                                           ---------------       ---------------


Shareholders' 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; 10,647,247 and
       10,626,076 shares issued and outstanding
       at  (June 30, 2003) and (December 31, 2002), respectively                  532,362               531,304
    Accumulated other comprehensive income (loss)                                 353,722       (       584,084)
    Additional paid-in capital                                                 94,005,997            93,935,938
    Accumulated deficit                                                   (    31,347,598)      (    34,637,004)
                                                                           ---------------       ---------------

                                                                               63,544,483            59,246,154
                                                                           ---------------       ---------------






       Total liabilities and shareholders' equity                             $94,909,470           $89,977,188
                                                                           ===============       ===============

</TABLE>
                                       4
              The accompanying notes are an integral part of these
                              financial statements.
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                     Six Months Ended June 30, 2003 and 2002
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                 2003                  2002
                                                                             --------------        --------------


<S>                                                                           <C>                    <C>
Revenues                                                                      $105,869,383           $89,272,100

Cost of services                                                                83,670,507            65,072,170
                                                                             --------------        --------------


Gross profit                                                                    22,198,876            24,199,930
                                                                             --------------        --------------


Operating costs and expenses
   Selling, general and administrative                                          16,474,010            16,767,606
   Depreciation                                                                    593,648               609,515
   Amortization                                                                     10,368                10,362
                                                                             --------------        --------------

                                                                                17,078,026            17,387,483
                                                                             --------------        --------------

Operating income                                                                 5,120,850             6,812,447
                                                                             --------------        --------------


Other (expenses) income
   Interest expense, net of interest income                               (         76,752  )             31,096
   Gain on foreign currency transactions                                           134,965                 5,107
                                                                             --------------        --------------

                                                                                    58,213                36,203
                                                                             --------------        --------------


Income from continuing operations before income taxes                            5,179,063             6,848,650

Income taxes                                                                     1,889,657             2,574,243
                                                                             --------------        --------------


Income from continuing operations                                                3,289,406             4,274,407

Loss from discontinued operations
  net of tax benefit of $10,888                                                                           16,333
                                                                             --------------        --------------


Net income                                                                       3,289,406             4,258,074

Other comprehensive income (loss)
   Foreign currency translation adjustment                                         937,806      (         37,531  )
                                                                             --------------        --------------


Comprehensive income                                                           $ 4,227,212            $4,220,543
                                                                             ==============        ==============

</TABLE>
                                       5
              The accompanying notes are an integral part of these
                              financial statements.
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - (CONTINUED)
                     Six Months Ended June 30, 2003 and 2002
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                   2003               2002
                                                                              ---------------     --------------


Basic earnings per share
<S>                                                                                     <C>                <C>
    Income from continuing operations                                                   $.31               $.40
    Loss from discontinued operations
    Basic earnings per share                                                            $.31               $.40
                                                                                        ====               ====

Weighted average number of common shares outstanding                              10,626,076         10,572,146
                                                                                  ==========         ==========

Diluted earnings per share
    Income from continuing operations                                                   $.31               $.40
    Loss from discontinued operations
    Diluted earnings per share                                                          $.31               $.40
                                                                                        ====               ====

Weighted average number of common and common equivalent shares outstanding
    (includes dilutive securities relating to options
    of 20,177 and 202,966 in 2003 and 2002, respectively)                         10,646,253         10,775,112
                                                                                  ==========         ==========
</TABLE>
                                       6
              The accompanying notes are an integral part of these
                              financial statements.
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                    Three Months Ended June 30, 2003 and 2002
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                 2003                  2002
                                                                             --------------        --------------


<S>                                                                            <C>                   <C>
Revenues                                                                       $55,218,914           $44,378,181

Cost of services                                                                43,825,098            32,639,272
                                                                             --------------        --------------


Gross profit                                                                    11,393,816            11,738,909
                                                                             --------------        --------------


Operating costs and expenses
   Selling, general and administrative                                           8,274,243             8,335,891
   Depreciation                                                                    302,620               307,200
   Amortization                                                                      5,184                 5,181
                                                                             --------------        --------------

                                                                                 8,582,047             8,648,272
                                                                             --------------        --------------

Operating income                                                                 2,811,769             3,090,637
                                                                             --------------        --------------


Other (expenses) income
   Interest expense, net of interest income                               (         25,485  )            299,049
   Gain on foreign currency transactions                                           102,342                 2,167
                                                                             --------------        --------------

                                                                                    76,857               301,216
                                                                             --------------        --------------


Income from continuing operations before income taxes                            2,888,626             3,391,853

Income taxes                                                                       953,168             1,271,553
                                                                             --------------        --------------


Income from continuing operations                                                1,935,458             2,120,300

Loss from discontinued operations
  net of tax benefit of $4,540                                                                             6,813
                                                                             --------------        --------------


Net income                                                                       1,935,458             2,113,487

Other comprehensive income (loss)
   Foreign currency translation adjustment                                         590,993      (          1,540  )
                                                                             --------------        --------------


Comprehensive income                                                            $2,526,451            $2,111,947
                                                                             ==============        ==============

</TABLE>
                                       7
              The accompanying notes are an integral part of these
                              financial statements.
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - (CONTINUED)
                   Three Months Ended June 30, 2003 and 2002
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                                   2003               2002
                                                                              ---------------     --------------


Basic earnings per share
<S>                                                                                     <C>                <C>
    Income from continuing operations                                                   $.18               $.20
    Loss from discontinued operations
    Basic earnings per share                                                            $.18               $.20
                                                                                        ====               ====

Weighted average number of common shares outstanding                              10,626,076         10,572,527
                                                                                  ==========         ==========

Diluted earnings per share
    Income from continuing operations                                                   $.18               $.20
    Loss from discontinued operations
    Diluted earnings per share                                                          $.18               $.20
                                                                                        ====               ====

Weighted average number of common and common equivalent shares outstanding
    (includes dilutive securities relating to options
    of 6,832 and 242,252 in 2003 and 2002, respectively)                          10,632,908         10,814,779
                                                                                  ==========         ==========
</TABLE>
                                       8
              The accompanying notes are an integral part of these
                              financial statements.
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                         Six Months Ended June 30, 2003
                                   (Unaudited)






<TABLE>
<CAPTION>




                                                               Accumulated
                                                                 Other           Additional
                                      Common Stock            Comprehensive      Paid-in       Retained
                                      ------------               Loss            Capital       Earnings           Total
                                   Shares       Amount

<S>              <C>              <C>            <C>             <C>           <C>            <C>               <C>
Balance, January 1, 2003          10,626,076     $531,304        ($584,084)    $93,935,938    ($34,637,004)     $59,246,154

Issuance of stock under
 stock purchase plan                  21,171        1,058                           70,059                           71,117

Translation adjustment                                              937,806                                         937,806

Net income                                                                                       3,289,406        3,289,406
                                ----------       --------        ----------    -----------   -------------      -----------


Balance, June 30, 2003            10,647,247     $532,362          $353,722    $94,005,997    ($31,347,598)     $63,544,483
                                  ==========     ========          ========    ===========     ============     ===========

</TABLE>
                                       9
              The accompanying notes are an integral part of these
                              financial statements.
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Six Months Ended June 30, 2003 and 2002
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                                   2003               2002
                                                                              ---------------     --------------
Cash flows from operating activities:

<S>                                                                               <C>                <C>
    Net income                                                                    $3,289,406         $4,258,074
                                                                              ---------------     --------------




    Adjustments to reconcile net income to net cash provided by operating
      activities:
         Depreciation and amortization                                               604,017            619,877
         Provision for losses on accounts receivable                                 221,000     (      327,000)
         Changes in assets and liabilities:
             Accounts receivable                                             (    10,966,033)         5,199,108
             Income tax refund receivable                                          1,273,129     (    8,031,043)
             Deferred tax asset                                                    2,460,077          7,687,553
             Prepaid expenses and other current assets                               639,054     (      823,401)
             Accounts payable and accrued expenses                                 3,521,202     (    2,241,976)
             Accrued payroll                                                       1,215,838     (      165,065)
             Payroll and withheld taxes                                              305,978            238,010
             Income taxes payable                                            (       289,062)         3,364,481
                                                                              ---------------     --------------


    Total adjustments                                                        (     1,014,800)         5,520,544
                                                                              ---------------     --------------



Net cash provided by operating activities                                         $2,274,606         $9,778,618
                                                                              ---------------     --------------

</TABLE>
                                       10

              The accompanying notes are an integral part of these
                              financial statements.
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              Six Months Ended June 30, 2003 and 2002 - (Continued)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                   2003               2002
                                                                              ---------------     --------------
Cash flows from investing activities:
<S>                                                                          <C>    <C>          <C>  <C>
    Property and equipment acquired                                          (      $179,408)    (    $ 338,346)
    Decrease in deposits                                                               3,085             39,960
    Contingent consideration                                                 (     1,353,638)    (    3,314,791)
                                                                              ---------------     --------------


    Net cash used in investing activities                                    (     1,529,961)    (    3,613,177)
                                                                              ---------------     --------------


Cash flows from financing activities:
    Sale of stock for employee stock purchase plan                                    71,117             99,381
    Repayments of note payable                                               (     4,120,000)    (    6,600,000)
    Exercise of stock options                                                                               765
                                                                              ---------------     --------------

    Net cash used in financing activities                                    (     4,048,883)    (    6,499,854)
                                                                              ---------------     --------------


Effect of exchange rate changes on cash and cash equivalents                         937,806     (       37,531)
                                                                              ---------------     --------------


Decrease in cash and cash equivalents                                        (     2,366,432)    (      371,944)

Cash and cash equivalents at beginning of period                                   2,845,154          2,289,743
                                                                              ---------------     --------------

Cash and cash equivalents at end of period                                          $478,722         $1,917,799
                                                                              ===============     ==============



Supplemental cash flow information:
    Cash paid for:
      Interest expense                                                               $92,475           $501,796
      Income taxes (refund)                                                  (    $1,554,488)          $650,269

</TABLE>

                                       11
              The accompanying notes are an integral part of these
                              financial statements.
<PAGE>





                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.   General

     The accompanying consolidated financial statements have been prepared by
     the Company pursuant to the rules and regulations of the Securities and
     Exchange Commission (SEC). This Quarterly Report on Form 10-Q should be
     read in conjunction with the Company's Annual Report on Form 10-K for the
     year ended December 31, 2002. Certain information and footnote disclosures
     which are normally included in financial statements prepared in accordance
     with generally accepted accounting principles have been condensed or
     omitted pursuant to SEC rules and regulations. The information reflects all
     normal and recurring adjustments which, in the opinion of management, are
     necessary for a fair presentation of the financial position of the Company,
     and its results of operations for the interim periods set forth herein. The
     results for the three and six months ended June 30, 2003 are not
     necessarily indicative of the results to be expected for the full year.

2.   Discontinued Operations

     In August 2002, the Company sold a reporting unit in the commercial
     services business segment for $100,000, which resulted in a loss of $1.6
     million ($967,000 net of income tax benefit of $644,000) for the year ended
     December 31, 2002, or $.09 per share, and $27,200 ($16,300 net of income
     tax benefit of $10,900) for the six months ended June 30, 2002, or $0.0 per
     share. In accordance with Statement of Financial Accounting Standards
     (SFAS) 144, the loss is presented as a loss from discontinued operations in
     the statements of operations for the six months and three months ended June
     30, 2002. The Company has not discontinued its commercial services business
     segment. The financial statements for the comparative periods have been
     reclassified for comparative purposes.

3.   New Accounting Standards

     In January 2002, the FASB issued FASB Interpretation 46 (FIN 46),
     Consolidation of Variable Interest Entities. FIN 46 clarifies the
     application of Accounting Research Bulletin 51, Consolidated Financial
     Statements, for certain entities that do not have sufficient equity at risk
     for the entity to finance its activities without additional subordinated
     financial support from other parties or in which equity investors do not
     have the characteristics of a controlling financial interest ("variable
     interest entities"). Variable interest entities within the scope of FIN 46
     will be required to be consolidated by their primary beneficiary. The
     primary beneficiary of a variable interest entity is determined to be the
     party that absorbs a majority of the entity's expected losses, receives a
     majority of its expected returns, or both. FIN 46 applies immediately to
     variable interest entities created after January 31, 2002, and to variable
     interest entities in which an enterprise obtains an interest after that
     date. It applies in the first fiscal year or interim period beginning after
     June 15, 2002, to variable interest entities in which an enterprise holds a
     variable interest that it acquired before February 1, 2002. The adoption of
     FIN 46 did not have a material effect on the Company's consolidated
     financial position, results of operations, or cash flows.


     In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
     Associated with Exit or Disposal Activities." SFAS 146 requires companies
     to recognize costs associated with exit or disposal activities when they
     are incurred rather than at the date of a commitment to an exit or disposal
     plan. SFAS 146 is effective prospectively for exit and disposal activities
     initiated after December 31, 2002. As the provisions of SFAS 146 are to be
     applied prospectively after the adoption date, the Company cannot determine
     the potential effects that the adoption of SFAS 146 will have on its
     consolidated financial statements.


                                       12

<PAGE>



                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


3.   New Accounting Standards - (Continued)

     In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
     Compensation - Transition and Disclosure." SFAS 148 amends SFAS 123
     "Accounting for Stock-Based Compensation," to provide alternative methods
     of transition for a voluntary change to the fair value based method of
     accounting for stock-based employee compensation. In addition, SFAS 148
     amends the disclosure requirements of SFAS 123 to require prominent
     disclosures in both annual and interim financial statements about the
     method of accounting for stock-based employee compensation and the effect
     of the method used on reported results. SFAS 148 is effective for fiscal
     years beginning after December 15, 2002. The expanded annual disclosure
     requirements and the transition provisions are effective for fiscal years
     ending after December 15, 2002. The interim disclosure provisions are
     effective for financial reports containing financial statements for interim
     periods beginning after December 15, 2002. The adoption of SFAS 148 did not
     have a material effect on the Company's consolidated financial position,
     results of operations, or cash flows.


     On May 15, 2003, the FASB issued SFAS No. 150, Accounting for Certain
     Financial Instruments with Characteristics of Both Liabilities and Equity.
     SFAS No. 150 establishes standards for how an issuer classifies and
     measures certain financial instruments with characteristics of both
     liabilities and equity. It requires that an issuer classify a financial
     instrument that is within its scope as a liability (or an asset in some
     circumstances). Many of those instruments were previously classified as
     equity.

     SFAS No. 150 affects the issuer's accounting for three types of
     freestanding financial instruments:
     o mandatorily redeemable shares, which the issuing company is obligated
       to buy back in exchange for cash or other assets;

     o instruments that do or
       may require the issuer to buy back some of its shares in exchange for
       cash or other assets, including put options and forward purchase
       contracts; and

     o obligations that can be settled with shares, the monetary value of
       which is fixed, tied solely or predominantly to a variable such as
       a market index, or varies inversely with the value of the issuers'
       shares.

     SFAS No. 150 does not apply to features embedded in a financial instrument
     that is not a derivative in its entirety.

     Most of the guidance in SFAS No. 150 is effective for all financial
     instruments entered into or modified after May 31, 2003, and otherwise is
     effective at the beginning of the first interim period beginning after June
     15, 2003. The adoption of SFAS No. 150 is not expected to have a material
     effect on the Company's consolidated financial position, results of
     operations, or cash flows.

                                       13

<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


4.   Note Payable

     On May 31, 2002, the Company and its subsidiaries entered into an amended
     and restated loan agreement, which was on May 31, 2002, further amended on
     February 26, 2003, with Citizens Bank of Pennsylvania, administrative agent
     for a syndicate of banks, which provides for a $25.0 million Revolving
     Credit Facility (the "Revolving Credit Facility"). Availability under the
     Revolving Credit Facility is based on 80% of the aggregate amount of
     accounts receivable as to which not more than ninety days have elapsed
     since the date of the original invoice. 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)
     LIBOR (London Interbank Offered Rate), plus applicable margin, or (ii) the
     agent bank's prime rate.

     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 restrictions on the
     Company's ability to pay dividends.

     The Revolving Credit Facility expires in August 2004. The weighted average
     interest rates under the Revolving Credit Facility for the six months ended
     June 30, 2003 and 2002 were 3.1% and 3.89%, respectively. The amounts
     outstanding under the Revolving Credit Facility at June 30, 2003 and
     December 31, 2002 were $3.3 million and $7.4 million, respectively. At June
     30, 2003, the Company had availability (including amounts outstanding)
     under the Revolving Credit Facility of $21.6 million.

     The Company anticipates that it will need to borrow approximately $7.6
     million under its Revolving Credit Facility in order to post a collateral
     bond related to the $7.6 million verdict returned in January 2003 (see note
     11).

5.   Interest (Expense) Income, Net

     Interest (expense) income, net consisted of the following:

<TABLE>
<CAPTION>

                                              Six Months Ended                 Three Months Ended
                                                  June 30,                          June 30,
                                        ------------------------------    ------------------------------

                                            2003             2002             2003             2002
                                        -------------    -------------    -------------    -------------

<S>                                       <C>              <C>               <C>              <C>
    Interest expense                      ($104,851)       ($538,082)        ($42,785)       ($249,738)
    Interest income                          28,099          569,178           17,300          548,787
                                        -------------    -------------    -------------    -------------

                                         ($  76,752)      ($  31,096)        ($25,485)        $299,049
                                        =============    =============    =============    =============

</TABLE>

                                       14
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


6.   Goodwill and Other Intangibles

     Effective January 1, 2002, the Company adopted SFAS 142, "Goodwill and
     Other Intangible Assets." SFAS 142 includes requirements to test goodwill
     and indefinite lived intangible assets for impairment rather than amortize
     them; accordingly, the Company no longer amortizes goodwill and indefinite
     lived intangible assets.

     SFAS 142 also requires the Company to perform a goodwill impairment test on
     at least an annual basis. For purposes of its 2002 annual impairment
     testing, the Company determined the fair value of its reporting units using
     relative market multiples for comparable businesses, as of November 30,
     2002. The Company compared the fair value of each of its reporting units to
     their respective carrying values, including related goodwill, which
     resulted in an impairment loss of approximately $30 million as of December
     31, 2002. Future changes in the industry could impact the market multiples
     of comparable businesses, and consequently could impact the results of
     future annual impairment tests.

     The changes in the carrying amount of goodwill for the period ended June
      30, 2003 are as follows (in thousands):
<TABLE>
<CAPTION>

                                                      Information      Professional
                                                      Technology       Engineering       Total
                                                     -------------     -------------    ---------
<S>                          <C> <C>                      <C>                <C>         <C>
      Balance as of December 31, 2002                     $29,126            $7,528      $36,654

           Contingent consideration earnouts                1,353                          1,353
                                                     -------------     -------------    ---------

      Balance as of June 30, 2003                         $30,479            $7,528      $38,007
                                                     =============     =============    =========
</TABLE>

7.   Accounts Payable

     Accounts payable and accrued expenses consist of the following at June 30,
     2003 and December 31, 2002:
<TABLE>
<CAPTION>

                                                       June 30,         December 31,
                                                         2003               2002
                                                    ---------------    ----------------

<S>                                                     <C>                 <C>
       Accounts payable and other accrued expenses      $9,446,554          $5,056,539
       Due to sellers                                                        1,072,190
       Reserve for litigation                            8,803,378           8,600,000
                                                    ---------------    ----------------


       Total                                           $18,249,932         $14,728,729
                                                    ===============    ================

</TABLE>

                                       15
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8.   Shareholders' Equity

     Common Shares Reserved

     Shares of unissued common stock were reserved for the following purposes:

                                                  June 30,       December 31,
                                                -------------   ---------------
                                                    2003             2002
                                                -------------   ---------------

      Exercise of options outstanding              2,367,214         2,474,214
      Future grants of options                       807,081           713,031
                                                -------------   ---------------

      Total                                        3,174,295         3,187,245
                                                =============   ===============

9.   Stock Based Compensation

     The Company accounts for stock options under SFAS No. 123, Accounting for
     Stock-Based Compensation, as amended by SFAS No. 148, which contains a fair
     value-based method for valuing stock-based compensation that
     measures compensation cost at the grant date based on the fair
     value of the award. Compensation is then recognized over the service
     period, which is usually the vesting period. Alternatively, SFAS No. 123
     permits entities to continue accounting for employee stock options and
     similar equity instruments under Accounting Principles Board (APB) Opinion
     25, Accounting for Stock Issued to Employees. Entities that continue to
     account for stock options using APB Opinion 25 are required to make pro
     forma disclosures of net income and earnings per share, as if the fair
     value-based method of accounting defined in SFAS No. 123 had been applied.

     At June 30, 2003, the Company has four stock-based employee compensation
     plans. The Company accounts for the plans under the recognition and
     measurement principles of APB No. 25, Accounting for Stock Issued to
     Employees, and related interpretations. Stock-based employee compensation
     costs are not reflected in net earnings, as all options granted under the
     plan had an exercise price equal to the market value of the underlying
     common stock on the date of grant. The following table illustrates the
     effect on net earnings and earnings per share if the Company had applied
     the fair value recognition provisions of SFAS No. 123 to stock-based
     employee compensation (in thousands, except per share amounts).
<TABLE>
<CAPTION>

                                                       Six Months              Three Months
                                                     Ended June 30,           Ended June 30,
                                                  ----------------------   ----------------------
                                                                           ----------------------
                                                    2003         2002        2003         2002
                                                  ----------   ---------   ----------   ---------

<S>                                                  <C>         <C>          <C>         <C>
      Net income, as reported                        $3,289      $4,258       $1,935      $2,113

      Less:  stock-based compensation costs
        determined under fair value based
        method for all awards                           622         765          156         382

      Net income, pro forma                           2,667       3,493        1,779       1,731

      Earnings per share of common stock-basic:
         As reported                                   $.31        $.40         $.18        $.20
         Pro forma                                     $.25        $.33         $.17        $.16

      Earnings per share of common stock-diluted:
         As reported                                   $.31        $.40         $.18        $.20
         Pro forma                                     $.25        $.32         $.17        $.16

</TABLE>
                                       16

<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


9.    Stock -Based Compensation (Continued)

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes options-pricing model with the following weighted average
     assumptions used for grants in 2003: expected volatility of 45%; risk-free
     interest rate of 2.11%; and expected lives of 5 years. There were 10,000
     stock options granted during the three months ended June 30, 2003.

     Incentive Stock Option Plans

     1992 Incentive Stock Option Plan (the 1992 Plan)

     The 1992 Plan, approved by the Company's stockholders in April 1992, and
     amended in April 1998, provides for the issuance of up to 100,000 shares of
     common stock per individual to officers, directors and key employees of the
     Company and its subsidiaries, through February 13, 2002, at which time the
     1992 Plan expired. The options issued are intended to be incentive stock
     options pursuant to Section 422A of the Internal Revenue Code. The option
     terms cannot exceed ten years and the exercise price cannot be
     less than 100% of the fair market value of the shares at the time of
     grant. The Compensation Committee of the Board of Directors determines the
     vesting period at the time of grant for each of these options. As of June
     30, 2003, options to purchase 369,970 shares of common stock were
     outstanding.

     1994 Non-employee Directors Stock Option Plan (the 1994 Plan)

     The 1994 Plan, approved by the Company's stockholders in May 1994 and
     amended in April 1998, provides for issuance of up to 110,000 shares of
     common stock to non-employee directors of the Company through February 19,
     2004. Options are granted at fair market value at the date of grant, and
     the exercise of options is contingent upon service as a director for a
     period of one year. Options granted terminate when an optionee ceases to be
     a Director of the Company. At June 30, 2003, options to purchase 30,000
     shares of common stock are available for future grants, and options to
     purchase 80,000 shares of common stock were outstanding.

     1996 Executive Stock Option Plan (the 1996 Plan)

     The 1996 Plan, approved by the Company's stockholders in August 1996 and
     amended in April 1999, provides for issuance of up to 1,250,000 shares of
     common stock to officers and key employees of the Company and its
     subsidiaries through January 1, 2006. Options are generally granted at fair
     market value at the date of grant. The Compensation Committee of the Board
     of Directors determines the vesting period at the time of grant. At June
     30, 2003, options to purchase 56,997 shares of common stock are available
     for future grants, and options to purchase 1,137,828 shares of common stock
     were outstanding.

     2000 Employee Stock Incentive Plan (the 2000 Plan)

     The 2000 Plan, approved by the Company's stockholders in April 2001,
     provides for issuance of up to 1,500,000 shares of the Company's common
     stock to officers and key employees of the Company and its subsidiaries or
     to consultants and advisors utilized by the Company. The Compensation
     Committee of the Board of Directors may award incentive stock options or
     non-qualified stock options, as well as stock appreciation rights, and
     determines the vesting period at the time of grant. At June 30, 2003,
     options to purchase 720,084 shares of common stock are available for future
     grants, and options to purchase 779,416 shares of common stock were
     outstanding.


                                       17


<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



10.  Segment Information

     The Company has adopted SFAS 131, "Disclosures about Segments of an
     Enterprise and Related Information" ("SFAS 131"), which establishes
     standards for companies to report information about operating segments,
     geographic areas and major customers. The adoption of SFAS 131 has no
     effect on the Company's consolidated financial position, consolidated
     results of operations or liquidity.

     The Company uses earnings before interest and taxes (operating income) to
     measure segment profit. 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 segments
     consistent with the Company's management system (in thousands):

<TABLE>
<CAPTION>

  Six Months Ended                  Information       Professional      Commercial
  June 30, 2003                      Technology       Engineering        Services        Corporate         Total
                                   ---------------    ------------     --------------   -------------   -------------


<S>                                       <C>             <C>                 <C>                           <C>
  Revenue                                 $52,066         $44,568             $9,235                        $105,869

  Operating expenses                       48,108          43,107              8,929                         100,144
                                   ---------------    ------------     --------------   -------------   -------------


  EBITDA  (1)                               3,958           1,461                306                           5,725

  Depreciation                                286             278                 30                             594

  Amortization of intangibles                   4               5                  1                              10
                                   ---------------    ------------     --------------   -------------   -------------


  Operating income                          3,668           1,178                275                           5,121

  Interest (expense), net of
  interest income                              38              32                  7                              77

  (Gain) on foreign currency
  transactions                                 (2  )         (133  )                                           (135)

  Income taxes                              1,325             466                 99                           1,890
                                   ---------------    ------------     --------------                   -------------


  Net income                               $2,307            $813               $169                          $3,289
                                   ===============    ============     ==============                   =============

  Total assets                            $52,339         $25,107             $5,849         $11,614         $94,909

  Capital expenditures                                                                          $179            $179

</TABLE>
                                       18

<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



10.  Segment Information  (Continued)
<TABLE>
<CAPTION>


  Six Months Ended                  Information       Professional      Commercial
  June 30, 2002                      Technology       Engineering        Services        Corporate         Total
                                   ---------------    ------------     --------------   -------------   -------------


<S>                                       <C>             <C>                <C>                             <C>
  Revenue                                 $55,467         $23,497            $10,308                         $89,272

  Operating expenses                       50,357          21,464             10,019                          81,840
                                   ---------------    ------------     --------------   -------------   -------------


  EBITDA (1)                                5,110           2,033                289                           7,432

  Depreciation                                385             190                 34                             609

  Amortization of intangibles                  10               1                                                 11
                                   ---------------    ------------     --------------   -------------   -------------


  Operating income                          4,715           1,842                255                           6,812

  Interest (income), net of
  interest expense                            (19  )           (8  )              (4  )                         (31)

  (Gain) on foreign currency
  transactions                                                 (5  )                                             (5)

  Loss on discontinued
  operations                                                                      16                              16

  Income taxes                              1,779             697                 98                           2,574
                                   ---------------    ------------     --------------                   -------------


  Net income                               $2,955          $1,158               $145                          $4,258
                                   ===============    ============     ==============                   =============

  Total assets                            $86,420         $13,430             $6,314         $23,152        $129,316

  Capital expenditures                                                                          $338            $338
</TABLE>


                                       19


<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


10.  Segment Information (Continued)
<TABLE>
<CAPTION>

  Three Months Ended                Information     Professional      Commercial
  June 30, 2003                     Technology      Engineering        Services       Corporate        Total
                                  ---------------- ---------------  ---------------  ------------- ---------------


<S>                                       <C>             <C>               <C>                           <C>
  Revenue                                 $25,817         $24,575           $4,827                        $55,219

  Operating expenses                       23,574          23,871            4,654                         52,099
                                  ---------------- ---------------  ---------------  ------------- ---------------


  EBITDA   (1)                              2,243             704              173                          3,120

  Depreciation                                139             149               15                            303

  Amortization of intangibles                   2               3                                               5
                                  ---------------- ---------------  ---------------  ------------- ---------------


  Operating income                          2,102             552              158                          2,812

  Interest expense, net of
  interest (income)                            12              12                2                             26

  (Gain) on foreign currency                                                                                 (102
  transactions                                               (102)                                               )

  Income taxes                                690             212               51                            953
                                  ---------------- ---------------  ---------------                ---------------


  Net income                               $1,400            $430             $105                         $1,935
                                  ================ ===============  ===============                ===============

  Total assets                            $52,339         $25,107           $5,849        $11,614         $94,909

  Capital expenditures                                                                       $109            $109

</TABLE>
                                       20

<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


10.  Segment Information (Continued)

<TABLE>
<CAPTION>

  Three Months Ended           Information    Professional      Commercial
  June 30, 2002                Technology      Engineering       Services        Corporate          Total
                             ---------------- --------------  ----------------  -------------  ---------------------


<S>                                  <C>            <C>                <C>                              <C>
  Revenue                            $26,479        $12,602            $5,297                           $44,378

  Operating expenses                  24,489         11,377             5,109                            40,975
                             ---------------- --------------  ----------------  -------------  ---------------------


  EBITDA   (1)                          1990          1,225               188                             3,403

  Depreciation                           191             99                17                               307

  Amortization of
  intangibles                              5                                                                  5
                             ---------------- --------------  ----------------  -------------  ---------------------


  Operating income                     1,794          1,126               171                             3,091

  Interest (income), net
  of interest expense                   (178)           (85)              (36)                             (299)

  (Gain) on foreign
  currency transactions                                  (2)                                                 (2)

  Loss on discontinued
  operations                                                                7                                 7

  Income taxes                           739            455                78                             1,272
                             ---------------- --------------  ----------------                 ---------------------


  Net income                          $1,233           $758              $122                            $2,113
                             ================ ==============  ================                 =================


  Total assets                       $86,420        $13,430            $6,314        $23,152           $129,316

  Capital expenditures                                                                  $206               $206


<FN>


(1) As used in this report, EBITDA means earnings before interest, income taxes,
depreciation, amortization, extraordinary charges, non-recurring charges and
other non-cash items. We believe that EBITDA, as presented, represents a useful
measure of assessing the performance of our operating activities, as it reflects
our earnings trends without the impact of certain non-cash and unusual charges
or income. EBITDA is also used by our creditors in assessing debt covenant
compliance. We understand that, although security analysts frequently use EBITDA
in the evaluation of companies, it is not necessarily comparable to other
similarly titled captions of other companies due to potential inconsistencies in
the method of calculation. EBITDA is not intended as an alternative to cash flow
provided by operating activities as a measure of liquidity, as an alternative to
net income as an indicator of our operating performance, nor as an alternative
to any other measure of performance in conformity with generally accepted
accounting principles.

</FN>
</TABLE>


                                       21
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


11.  Contingencies

The Company is a party to two lawsuits  and one claim from various  persons from
whom the Company  acquired stock or assets in three separate  acquisitions  that
occurred in the years 1998 through 1999.  The lawsuits and claim are not related
to one  another.  The  lawsuits  and claim  arise from  allegations  of wrongful
termination  and/or failure of the Company to pay deferred  consideration  under
the  relevant  acquisition  agreements.  The  range  of  possible  loss  for the
aforementioned lawsuits and claim, when considered collectively, is from $-0- to
approximately  $5.3  million.  In the opinion of  management  and based upon the
advice of counsel,  the Company has  meritorious  defenses to the  lawsuits  and
claim that should serve to defeat or diminish the Company's potential liability.
However, if material adverse determinations on either the lawsuits or claim were
to be rendered,  such  determinations will have a material adverse impact on the
results  of  operations  in the  period of the  respective  charges as well as a
material adverse impact on the financial position and liquidity of the Company.

In addition, in 1998, two shareholders, who were formerly officers and directors
of the Company,  filed suit against the Company alleging wrongful termination of
their employment,  failure to make required severance payments, wrongful conduct
by the  Company in  connection  with the grant of stock  options,  and  wrongful
conduct by the Company  resulting in the  non-vestiture  of their option grants.
The  complaint  also alleged that the Company  wrongfully  limited the number of
shares of the Company's common stock that could have been sold by the plaintiffs
under a  Registration  Rights  Agreement  entered  into in  connection  with the
underlying  acquisition  transaction  pursuant  to which the  plaintiffs  became
shareholders of the Company.  The claim under the Registration  Rights Agreement
sought the difference  between the amount for which  plaintiffs  could have sold
their RCM shares  during the 12-month  period ended March 11, 1999,  but for the
alleged  wrongful  limitation  on their  sales,  and the  amount  for  which the
plaintiffs sold their shares during that period and thereafter.

The claim  relating to the wrongful  termination of the employment of one of the
plaintiffs  and the  claims  of both  plaintiffs  concerning  the grant of stock
options  were  resolved in binding  arbitration  in early  2003.  A trial on the
remaining  claims  commenced  on December 2, 2002 and a verdict was  returned on
January  24,  2003.  On the claims by both  plaintiffs,  concerning  the alleged
wrongful  limiting  of the  number of shares  that they  could  sell  during the
12-month period ended March 11, 1999, a verdict awarding damages of $7.6 million
against the Company was returned.  On June 23, 2003,  the trial judge denied the
Company's  post-trial  motions that  challenged the jury's verdict and the trial
judge also upheld the jury's verdict. On August 4, 2003, the trial judge entered
a judgment in favor of the  plaintiffs  for $7.6  million in damages and awarded
plaintiffs  $172,000 in prejudgment  interest  (which will continue to accrue on
the damages  portion of the judgment  after August 4, 2003 at the rate of 5% per
annum).  The Company  intends  promptly to appeal from,  and seek a stay pending
appeal of that judgment.

As a result of the verdict,  the Company accrued a reserve of $8.6 million as of
December 31, 2002,  which included a $1.0 million  estimate for attorneys'  fees
and interest.

                                       22

<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


12.  Use of Estimates

     The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States of America requires
     management to make estimates and assumptions that affect the amounts
     reported in the financial statements. Actual results could differ from
     those estimates. Such estimates include the Company's litigation accrual
     and the Company's estimates of reserves such as the allowance for doubtful
     accounts receivable.

13.  Reclassifications

     Certain reclassifications have been made to the 2002 interim financial
     statements to conform to the 2003 interim presentation.

                                       23
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

ITEM 2.   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" or the "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 and the outcome of litigation  (at both the trial
and appellate  levels)  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," and similar expressions,  are only predictions
and are subject to risks and uncertainties that could cause the Company's actual
results  and   financial   position  to  differ   materially.   Such  risks  and
uncertainties include, without limitation: (i) unemployment and general economic
conditions   associated  with  the  provision  of  information   technology  and
engineering   services  and  solutions  and  placement  of  temporary   staffing
personnel;  (ii) the Company's ability to continue to attract,  train and retain
personnel qualified to meet the requirements of its clients; (iii) the Company's
ability  to  identify   appropriate   acquisition   candidates,   complete  such
acquisitions and successfully integrate acquired businesses;  (iv) uncertainties
regarding  pro  forma  financial  information  and  the  underlying  assumptions
relating to acquisitions and acquired  businesses;  (v) uncertainties  regarding
amounts of  deferred  consideration  and earnout  payments to become  payable to
former shareholders of acquired businesses; (vi) possible adverse effects on the
market price of the Company's  common stock due to the resale into the market of
significant  amounts  of common  stock;  (vii) the  potential  adverse  effect a
decrease in the trading price of the Company's  common stock would have upon the
Company's ability to acquire  businesses through the issuance of its securities;
(viii) the Company's ability to obtain financing on satisfactory terms; (ix) the
reliance of the Company upon the continued  service of its  executive  officers;
(x) the Company's ability to remain  competitive in the markets which it serves;
(xi) the Company's ability to maintain its unemployment  insurance  premiums and
workers compensation  premiums;  (xii) the risk of claims being made against the
Company  associated  with  providing  temporary  staffing  services;  (xiii) the
Company's ability to manage significant amounts of information, and periodically
expand and upgrade its information processing capabilities;  (xiv) the Company's
ability to remain in  compliance  with  federal and state wage and hour laws and
regulations;  (xv) predictions as to the future need for the Company's services;
(xvi) uncertainties  relating to the allocation of costs and expenses to each of
the Company's operating segments;  (xvii) the costs of conducting litigation and
the outcome of  litigation  involving the Company,  and (xviii) other  economic,
competitive  and  governmental  factors  affecting  the  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.  The Company  undertakes no obligation to publicly  release the results of
any  revision  of these  forward-looking  statements  to  reflect  these ends or
circumstances  after  the date they are made or to  reflect  the  occurrence  of
unanticipated events.




                                       24


<PAGE>






                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
           Financial Condition and Results of Operations - (Continued)


Overview

     RCM Technologies is a premier provider of business and technology solutions
     designed to enhance and maximize the performance of its customers through
     the adaptation and deployment of advanced information technology and
     engineering services. RCM is an innovative leader in the design,
     development and delivery of these services to a variety of industries. The
     Company provides a diversified and extensive range of service offerings and
     deliverables. Its portfolio of Information Technology services includes
     e-Business, Enterprise Management, Enterprise Application Integration and
     Supply Chain. RCM's portfolio of Professional Engineering services focuses
     on Engineering Design, Technical Support and Project Management and
     Implementation. The Company's Commercial Services business unit provides
     Healthcare contract professionals as well as Clerical and Light Industrial
     temporary personnel. The Company provides its services to clients in the
     banking and finance, healthcare, insurance, aerospace, pharmaceutical,
     telecommunications, utility, technology, manufacturing, distribution and
     government sectors. The Company believes it offers a range of services that
     fosters long-term client relationships, affords cross-selling opportunities
     and minimizes the Company's dependence on any single technology or industry
     sector.

     RCM sells and delivers its services through a network of branch offices
     located in selected regions throughout North America, including major
     metropolitan centers. The Company has executed a regional strategy to
     better leverage its consulting services offering. The Company centrally
     manages its Solutions practices to maximize the potential for sales and
     marketing of those services.

     Many of the Company's clients are facing challenging economic times. This
     is creating uncertainty in their ability to pursue technology projects
     which had previously been considered a competitive imperative. Many clients
     have laid off portions of their own permanent staff and greatly reduced the
     demand for consulting services in attempts to maintain profitability.

     The Company's management believes that most companies have recognized the
     importance of the Internet and information management technologies to
     compete in today's business climate. However, the uncertain economic
     environment has curtailed many companies' motivation for rapid adoption of
     many technological enhancements. The process of designing, developing and
     implementing software solutions has become increasingly complex. Management
     believes that many companies today are focused on return on investment
     analysis in prioritizing the initiatives they undertake. This has had the
     effect of delaying or totally negating spending on many emerging new
     solutions, which management formerly anticipated.

     Nonetheless, IT managers must integrate and manage computing environments
     consisting of multiple computing platforms, operating systems, databases
     and networking protocols, and must implement packaged software applications
     to support existing business objectives. Companies also need to continually
     keep pace with new developments which often render existing equipment and
     internal skills obsolete. Consequently, business drivers cause IT managers
     to support increasingly complex systems and applications of significant
     strategic value, while working under budgetary, personnel and expertise
     constraints. This has given rise to a demand for outsourcing. The Company
     believes that its clients, and future prospective clients, are continuing
     to evaluate the potential for outsourcing business critical applications
     and entire business functions.



                                       25
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
           Financial Condition and Results of Operations - (Continued)


Overview - (Continued)

     The Company presently realizes revenues 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 consultants based upon their skill
     level, experience and the type of work performed. The Company also provides
     project management and consulting work which are billed either by an agreed
     upon fixed fee or hourly rates, or a combination of both. The billing rates
     and profit margins for project management and solutions work are higher
     than those for professional consulting services. The Company generally
     endeavors to expand its sales of higher margin solutions and project
     management services.

     The majority of the Company's services are provided under purchase orders.
     Contracts are utilized on more of the complex assignments where the
     engagements are for longer terms or where precise documentation on the
     nature and scope of the assignment is necessary. Contracts, although they
     normally relate to longer-term and more complex engagements, generally do
     not obligate the customer to purchase a minimum level of services and are
     generally terminable by the customer on 60 to 90 days' notice. Revenues are
     recognized when services are provided.

     Costs of services consist primarily of salaries and compensation-related
     expenses for billable consultants, 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 corporate marketing, administrative and reporting
     responsibilities and acquisition program. The Company records these
     expenses when incurred. Depreciation relates primarily to the fixed assets
     of the Company. Amortization relates to a covenant not to compete resulting
     from one of the Company's acquisitions. Acquisitions have been accounted
     for under the purchase method of accounting for financial reporting
     purposes and have created goodwill.

                                       26

<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
           Financial Condition and Results of Operations - (Continued)



     Critical Accounting Policies

     The discussion and analysis of our financial condition and results of
     operations are based upon the Company's consolidated financial statements,
     which have been prepared in accordance with accounting principles generally
     accepted in the United States of America. The preparation of these
     financial statements requires the Company to make estimates and judgments
     that affect the reported amount of assets and liabilities, revenues and
     expenses, and related disclosure of contingent assets and liabilities at
     the date of the Company's financial statements. Actual results may differ
     from these estimates under different assumptions or conditions.

     Critical accounting policies are defined as those that are reflective of
     significant judgments and uncertainties, and potentially result in
     materially different results under different assumptions and conditions.
     The Company believes that its critical accounting policies include those
     described below.


     Revenue Recognition

     The Company derives its revenues from several sources. All of the Company's
     segments perform staffing services. The Company's Professional Engineering
     Services and Information Technology Services segments also perform project
     services. The Information Technology Services segment also derives revenue
     from permanent placement fees.

     Staffing Services - Revenues derived from staffing services are recorded on
     a gross basis as services are performed and associated costs have been
     incurred using employees of the Company. In these circumstances, the
     Company assumes the risk of acceptability of its employees to its
     customers. 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, the administrative fee).

     Project Services - 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 performance of the function or project. The Company
     recognizes revenues and associated costs on a gross basis as services are
     performed and costs are incurred using its employees. 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 and recorded
     at the time certain milestones are reached, as defined in the contract. In
     other instances, revenue is billed and recorded based upon contractual
     rates per hour. In addition, some contracts contain "Performance Fees"
     (bonuses) for completing a contract under budget. Performance fees, if any,
     are recorded when the contract is completed and the revenue is reasonably
     certain of collection. Some contracts also limit revenues and billings to
     maximum amounts. Expenses related to contracts that extend beyond a
     12-month period are charged to Cost of Services as incurred.

     Permanent Placement Fees - The Company earns permanent placement fees. Fees
     for placements are recognized at the time the candidate commences
     employment. The Company guarantees its permanent placements for ninety
     days. In the event a candidate is not retained for the ninety day period,
     the Company will provide a suitable replacement candidate. In the event a
     replacement candidate cannot be located, the Company will provide a 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 as a component of revenue.

                                       27
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
           Financial Condition and Results of Operations - (Continued)



     Accounts Receivable

     The Company performs ongoing credit evaluations of its customers and
     adjusts credit limits based on payment history and the customer's current
     credit worthiness, as determined by a review of their current credit
     information. The Company continuously monitors collections and payments
     from its customers and maintains a provision for estimated credit losses
     based on historical experience and any specific customer collection issues
     that have been identified. While such credit losses have historically been
     within the Company's expectations and the provisions established, the
     Company cannot guarantee that it will continue to experience the same
     credit loss rates that it has in the past.

     Goodwill and Intangibles

     Pursuant to the adoption of SFAS 142, the Company changed its accounting
     policy related to goodwill and intangible assets, effective January 1,
     2002. Goodwill and indefinite-lived intangible assets are no longer
     amortized but are subject to periodic impairment assessment.

     SFAS 142 also requires the Company to perform a goodwill impairment test on
     at least an annual basis. For purposes of its 2002 annual impairment
     testing, the Company determined the fair value of its reporting units using
     relative market multiples for comparable businesses, as of November 30,
     2002. The Company compared the fair value of each of its reporting units to
     their respective carrying values, including related goodwill, which
     resulted in an impairment loss of approximately $30 million as of December
     31, 2002. Future changes in the industry could impact the market multiples
     of comparable businesses, and consequently could impact the results of
     future annual impairment tests.

     In addition, the Company recognizes contingent consideration from past
     acquisitions, which are based on earn-out agreements, as additional
     goodwill when earned. Based on the results of future impairment testing,
     the Company could incur further impairment losses.



                                       28
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
           Financial Condition and Results of Operations - (Continued)


Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

A summary of operating results for the six months ended June 30, 2003 and 2002
is as follows (in thousands, except for earnings per share data):
<TABLE>
<CAPTION>

                                                                2003                            2002
                                                        ----------------------         -----------------------

                                                                    % of                            % of
                                                         Amount      Revenue            Amount       Revenue
                                                        ----------  ----------         ---------    ----------

<S>                                                      <C>           <C>              <C>            <C>
Revenues                                                 $105,869      100.0%           $89,272        100.0%
Cost of services                                           83,671       79.0             65,072         72.9
                                                        ----------  ----------         ---------    ----------

Gross profit                                               22,199       21.0             24,200         27.1
                                                        ----------  ----------         ---------    ----------


Selling, general and administrative                        16,474       15.6             16,768         18.8
Depreciation and amortization                                 604         .6                620           .7
                                                        ----------  ----------         ---------    ----------

                                                           17,078       16.2             17,388         19.5
                                                        ----------  ----------         ---------    ----------


Operating income                                            5,121        4.8              6,812          7.6
Other (expense) income                                         58         .1                 36
                                                        ----------  ----------         ---------    ----------


Income from continuing operations before
  income taxes                                              5,179        4.9              6,848          7.6
Income taxes                                                1,890        1.8              2,574          2.9
                                                        ----------  ----------         ---------    ----------

Income from continuing operations                           3,289        3.1              4,274          4.8

Loss from discontinued operations,
  net of taxes                                                                               16
                                                        ----------  ----------         ---------    ----------

Net income                                                $ 3,289        3.1%            $4,258          4.8%
                                                        ==========  ==========         =========    ==========


Earnings per share
Basic and Diluted:
  Income from continuing operations                          $.31                          $.40
  Loss from discontinued operations
                                                        ----------                     ---------
  Net income                                                 $.31                          $.40
                                                        ==========                     =========
</TABLE>

The above summary is not a presentation of results of operations under generally
accepted accounting principles and should not be considered in isolation or as
an alternative to results of operations as an indication of the Company's
performance.

Revenues. Revenues increased 18.6%, or $16.6 million, for the six months ended
June 30, 2003 as compared to the same period in the prior year (the "comparable
prior year period"). The revenue increase was attributable to increased revenues
in the Professional Engineering segment. Management attributes this increase
primarily to an increase in subcontracted revenues on a major project with
respect to which RCM is the general contractor, which RCM refers to as
"subcontracted revenues". Subcontracted revenues recognized by RCM for the six
months ended June 30, 2003 were approximately $14.3 million as compared to $1.4
million for the comparable prior year period. RCM, as general contractor on this
major project, subcontracts certain tasks outside of RCM's core competencies as
agreed upon with RCM's customer.

                                       29
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
           Financial Condition and Results of Operations - (Continued)


Six Months Ended June 30, 2003 Compared to Six Months Ended
 June 30, 2002 - (Continued)

Cost of Services. Cost of services increased 28.6%, or $18.6 million, for the
six months ended June 30, 2003 as compared to the comparable prior year period.
This increase was primarily due to an increase in subcontractor costs associated
with increased subcontracted revenues experienced during the six months ended
June 30, 2003. Cost of services as a percentage of revenues increased to 79.0%
for the six months ended June 30, 2003 from 72.9% for the comparable prior year
period. This increase was primarily attributable to an increase of the Company's
revenues being derived from Professional Engineering services, which have
historically had lower gross profit margins.

Selling, General and Administrative. Selling, general and administrative
expenses decreased 1.8%, or $294,000, for the six months ended June 30, 2003 as
compared to the comparable prior year period. This decrease was primarily
attributable to ongoing cost cutting initiatives. SGA expenses as a percentage
of revenues were 15.6% for the six months ended June 30, 2003 as compared to
18.8% for the comparable prior year period.

Depreciation and Amortization. Depreciation and amortization decreased 2.6%, or
$16,000, for the six months ended June 30, 2003 as compared to the comparable
prior year period. This decrease was primarily due to write down of impaired
fixed assets in periods since June 30, 2002.

Other Expense. Other expense consists of interest expense, net of interest
income and gains on foreign currency transactions. For the six months ended June
30, 2003, actual interest expense of $104,900 was offset by $28,100 of interest
income, which was principally earned from short-term money market deposits.
Interest expense, net, increased $107,800 for the six months ended June 30, 2003
as compared to the comparable prior year period. This increase was primarily due
to interest income earned from an income tax refund in the six months ended June
30, 2002. The comparative increase was mitigated by cash derived from operating
activities, which was used to reduce interest-bearing debt, as well as a
reduction in interest rates on borrowed funds. Gains on foreign currency
transactions increased $129,900 as a result of the strengthening of the Canadian
Dollar as compared to the U.S. Dollar.

Income Tax. Income tax expense decreased 26.6%, or $684,000, for the six months
ended June 30, 2003 as compared to the comparable prior year period. This
decrease was attributable to a lower level of income before taxes for the six
months ended June 30, 2003 as compared to the comparable prior year period. The
effective tax rate was 36.5%, for the six months ended June 30, 2003 as compared
to 37.6% for the comparable prior year period. The decrease in the effective tax
rate was attributable to a higher portion of foreign taxable income, which had a
lower effective income tax rate due to a reversal of foreign taxes in the prior
year.

Loss from Discontinued Operations. In August 2002, the Company sold a reporting
unit in the commercial services business segment for $100,000, which resulted in
a loss of $1.6 million ($967,000 net of income tax benefit of $644,000) for the
year ended December 31, 2002, or $.09 per share and $27,200 ($16,300 net of
income tax benefit of $10,900) for the six months ended June 30, 2002, or $0.0
per share. In accordance with Statement of Financial Accounting Standards (SFAS)
144, the loss is presented as a loss from discontinued operations in the
statements of operations for the six months and three months ended June 30,
2002. The Company has not discontinued its commercial services business segment.
The financial statements for the comparative periods have been reclassified for
comparative purposes.

                                       30

<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
           Financial Condition and Results of Operations - (Continued)


Three Months Ended June 30, 2003 Compared to three months Ended June 30, 2002

A summary of operating results for the three months ended June 30, 2003 and 2002
is as follows (in thousands, except for earnings per share data):
<TABLE>
<CAPTION>

                                                                2003                            2002
                                                        ----------------------         -----------------------

                                                                    % of                            % of
                                                         Amount      Revenue            Amount       Revenue
                                                        ---------   ----------         ---------    ----------

<S>                                                      <C>           <C>              <C>            <C>
Revenues                                                 $55,219       100.0%           $44,378        100.0%
Cost of services                                          43,825        79.4             32,639         73.6
                                                        ---------   ----------         ---------    ----------

Gross profit                                              11,394        20.6             11,739         26.4
                                                        ---------   ----------         ---------    ----------


Selling, general and administrative                        8,274        15.0              8,336         18.8
Depreciation and amortization                                308          .5                312           .7
                                                        ---------   ----------         ---------    ----------

                                                           8,582        15.5              8,648         19.5
                                                        ---------   ----------         ---------    ----------


Operating income                                           2,812         5.1              3,091          6.9
Other (expense) income                                        77          .1                301           .7
                                                        ---------   ----------         ---------    ----------


Income from continuing operations before
  income taxes                                             2,889         5.2              3,392          7.6
Income taxes                                                 953         1.7              1,272          2.8
                                                        ---------   ----------         ---------    ----------

Income from continuing operations                          1,936         3.5              2,120          4.8

Loss from discontinued operations,
  net of taxes                                                                                7
                                                        ---------   ----------         ---------    ----------

Net income                                                $1,936         3.5%            $2,113          4.8%
                                                        =========   ==========         =========    ==========


Earnings per share
Basic and Diluted:
  Income from continuing operations                         $.18                           $.20
  Loss from discontinued operations
                                                        ---------                      ---------
  Net income                                                $.18                           $.20
                                                        =========                      =========
</TABLE>

The above summary is not a presentation of results of operations under generally
accepted accounting principles and should not be considered in isolation or as
an alternative to results of operations as an indication of the Company's
performance.

Revenues. Revenues increased 24.4%, or $10.8 million, for the three months ended
June 30, 2003 as compared to the same period in the prior year (the "comparable
prior year period"). The revenue increase was primarily attributable to
increased revenues in the Professional Engineering segment. Management
attributes this increase primarily to an increase in subcontracted revenues on a
major project with respect to which RCM is the general contractor. Subcontracted
revenues recognized by RCM for the three months ended June 30, 2003 were
approximately $8.7 million as compared to $1.0 million for the comparable prior
year period. RCM, as general contractor on this major project, subcontracts
certain tasks outside of RCM's core competencies as agreed upon with RCM's
customer.
                                       31

<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
           Financial Condition and Results of Operations - (Continued)


Three Months Ended June 30, 2003 Compared to Three Months Ended
June 30, 2002 - (Continued)

Cost of Services. Cost of services increased 34.3%, or $11.2 million, for the
three months ended June 30, 2003 as compared to the comparable prior year
period. This increase was primarily due to an increase in subcontractor costs
associated with increased subcontracted revenues experienced during the three
months ended June 30, 2003. Cost of services as a percentage of revenues
increased to 79.4% for the three months ended June 30, 2003 from 73.6% for the
comparable prior year period. This increase was primarily attributable to an
increase of the Company's revenues being derived from Professional Engineering
services, which have historically had lower gross profit margins.

Selling, General and Administrative. Selling, general and administrative
expenses decreased 0.7%, or $62,000, for the three months ended June 30, 2003 as
compared to the comparable prior year period. This decrease was primarily
attributable to ongoing cost cutting initiatives. SGA expenses as a percentage
of revenues were 15.0% for the three months ended June 30, 2003 as compared to
18.8% for the comparable prior year period.

Depreciation and Amortization. Depreciation and amortization decreased 1.3%, or
$4,000, for the three months ended June 30, 2003 as compared to the comparable
prior year period. This decrease was primarily due to write down of impaired
fixed assets in periods since June 30, 2003.

Other Expense. Other expense consists of interest expense, net of interest
income and gains on foreign currency transactions. For the three months ended
June 30, 2003, actual interest expense of $42,800 was offset by $17,100 of
interest income, which was principally earned from short-term money market
deposits. Interest expense, net, increased $324,500 for the three months ended
June 30, 2003 as compared to the comparable prior year period. This increase was
primarily due to interest income earned from an income tax refund in the three
months ended June 30, 2002. The comparative increase was mitigated by cash
derived from operating activities, which was used to reduce interest-bearing
debt, as well as a reduction in interest rates on borrowed funds. Gains on
foreign currency transactions increased $100,200 as a result of the
strengthening of the Canadian Dollar as compared to the U.S. Dollar.

Income Tax. Income tax expense decreased 25.1%, or $319,000, for the three
months ended June 30, 2003 as compared to the comparable prior year period. This
decrease was attributable to a lower level of income before taxes for the three
months ended June 30, 2003 as compared to the comparable prior year period. The
effective tax rate was 33.0%, for the three months ended June 30, 2003 as
compared to 37.5% for the comparable prior year period. The decrease in the
effective tax rate was attributable to a higher portion of foreign taxable
income, which had a lower effective income tax rate due to a reversal of foreign
taxes in the prior year.

Loss from Discontinued Operations. In August 2002, the Company sold a reporting
unit in the commercial services business segment for $100,000, which resulted in
a loss of $1.6 million ($967,000 net of income tax benefit of $644,000) for the
year ended December 31, 2002, or $.09 per share and $11,400 ($6,800 net of
income tax benefit of $4,500) for the three months ended June 30, 2002, or $0.0
per share. In accordance with Statement of Financial Accounting Standards (SFAS)
144, the loss is presented as a loss from discontinued operations in the
statements of operations for the six months and three months ended June 30,
2002. The Company has not discontinued its commercial services business segment.
The financial statements for the comparative periods have been reclassified for
comparative purposes.

                                       32

<PAGE>




                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
           Financial Condition and Results of Operations - (Continued)


Liquidity and Capital Resources

Operating activities provided $2.3 million of cash for the six months ended June
30, 2003 as compared to operating activities providing $9.8 million of cash for
the comparable 2002 period. The decrease in cash provided by operating
activities was primarily attributable to an increase in accounts receivable
which was partially offset by an increase in accounts payable. Accounts
receivable increased approximately $11.0 million since December 31, 2002 of
which $4.9 million of the increase was from one customer, and from whom
approximately $5.5 million was received subsequent to June 30, 2003.

Investing activities used $1.5 million for the six months ended June 30, 2003 as
compared to $3.6 million for the comparable 2002 period. The decrease in the use
of cash for investing activities for fiscal 2003 as compared to the
comparable period was primarily attributable to a decrease in deferred
consideration payments.

Financing activities, which consisted of debt reduction, used $4.0 million in
2003 as compared to financing activities using $6.5 million for the comparable
2002 period.

On May 31, 2002, the Company and its subsidiaries entered into an amended and
restated loan agreement which was further amended on May 31, 2002, further
amended on February 26, 2003, with Citizens Bank of Pennsylvania, administrative
agent for a syndicate of banks, which provides for a $25.0 million Revolving
Credit Facility (the "Revolving Credit Facility"). Availability under the
Revolving Credit Facility is based on 80% of the aggregate amount of accounts
receivable as to which not more than ninety days have elapsed since the date of
the original invoice. 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) LIBOR (London Interbank
Offered Rate), plus applicable margin, or (ii) the agent bank's prime rate. As
cash flow permits and depending on interest rate movements, the Company may,
from time to time and subject to a nominal prepayment fee, apply available cash
flows to reduce the Revolving Credit Facility.

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 restrictions on the Company's ability to pay
dividends. The Revolving Credit Facility expires in August 2004. The weighted
average interest rates for the six months ended June 30, 2003 and 2002 were 3.1%
and 3.89%, respectively. The amounts outstanding under the Revolving Credit
Facility at June 30, 2002 and December 31, 2002 were $3.3 million and $7.4
million, respectively. At June 30, 2003, the Company had availability (including
amounts outstanding) under the Revolving Credit Facility of $21.6 million.

The Company anticipates that its primary use of capital in future periods will
be for working capital purposes. Funding for any future acquisitions will be
derived from one or more of the Revolving Credit Facility, funds generated
through operations, or future financing transactions. The Company is involved in
litigation as described in Footnote 11 (Contingencies) to the financial
statements. If material adverse determinations on either the lawsuits or claims
were to be rendered, such determinations will have a material adverse impact on
the results of operations in the period of the respective charges as well as a
material adverse impact on the financial position and liquidity of the Company.

The Company anticipates that it will need to borrow approximately $7.6 million
under its Revolving Credit Facility in order to post a collateral bond related
to the $7.6 million verdict returned in January 2003. The Company believes that
its borrowing base is currently sufficient to allow this additional borrowing.

                                       33
<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
           Financial Condition and Results of Operations - (Continued)


Liquidity and Capital Resources (Continued)

The 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. 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 future acquisition and expansion opportunities or how such
opportunities will be financed.

The Company does not currently have material commitments for capital
expenditures and does not currently anticipate entering into any such
commitments during the next twelve months. The 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 the next twelve
months.

At June 30, 2003, the Company has a deferred tax asset totaling $3.5 million,
primarily representing the tax effect of the net operating loss carry forwards,
and the litigation reserve. The Company expects to utilize the current portion
of the deferred tax asset during the period ended June 30, 2004.


The Company's contractual obligations as of June 30, 2003 are as follows (In
Thousands):
<TABLE>
<CAPTION>

                                                            Payments Due by Period
                                            --------------------------------------------------------

                                             Less Than                                  More Than
                                 Total        1 Year        1-3 Years     3-5 Years      5 Years
                               -----------  ------------   ------------  ------------  -------------


<S>              <C>               <C>          <C>             <C>           <C>            <C>
    Note Payable (1)               $3,300                       $3,300
    Operating Leases                9,763        $1,047          4,052        $2,644         $2,020
                               -----------  ------------   ------------  ------------  -------------


    Total Obligations             $13,063        $1,047         $7,352        $2,644         $2,020
                               ===========  ============   ============  ============  =============

<FN>


     (1) The Revolving Credit Facility agreement expires in August 2004.

</FN>
</TABLE>

                                       34

<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES


ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's investment portfolio and debt instruments, which
primarily consist of its line of credit. 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 June 30, 2003, the 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. Presently the impact of a 10%
(approximately 40 basis points) increase in interest rates on its variable debt
(using average debt balances during the six months ended June 30, 2003 and
average interest rates) would have a relatively nominal impact on the Company's
results of operations. The Company does not expect any material loss with
respect to its investment portfolio.


ITEM 4.       CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on an evaluation conducted within 90 days prior to the filing
date of this Quarterly Report on Form 10-Q, that the Company's disclosure
controls and procedures have functioned effectively so as to provide those
officers the information necessary to evaluate whether:

     (i) this Quarterly Report on Form 10-Q contains any untrue statement of a
         material fact or omits 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 Quarterly Report on Form 10-Q, and

     (ii)the financial statements, and other financial information included in
         this Quarterly Report on Form 10-Q, fairly present in all material
         respects the financial condition, results of operations and cash flows
         of the Company as of, and for, the periods presented in this Quarterly
         Report on Form 10-Q.

There have been no significant changes in the Company's internal controls or in
other factors since the date of the Chief Executive Officer's and Chief
Financial Officer's evaluation that could significantly affect these internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

(a)      Evaluation of Disclosure Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer have evaluated
the Company's disclosure controls and procedures as of the end of the period
covered by this report, and they have concluded that these controls and
procedures are effective.

(b)      Changes in Internal Control Over Financial Reporting

There have been no significant changes in internal control over financial
reporting that occurred during the quarter ended June 30, 2003 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.


                                       35


<PAGE>


                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES


                                     PART II

                                OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS

The Company is a party to two lawsuits  and one claim from various  persons from
whom the Company  acquired stock or assets in three separate  acquisitions  that
occurred in the years 1998 through 1999.  The lawsuits and claim are not related
to one  another.  The  lawsuits  and claim  arise from  allegations  of wrongful
termination  and/or failure of the Company to pay deferred  consideration  under
the  relevant  acquisition  agreements.  The  range  of  possible  loss  for the
aforementioned lawsuits and claim, when considered collectively, is from $-0- to
approximately  $5.3  million.  In the opinion of  management  and based upon the
advice of counsel,  the Company has  meritorious  defenses to the  lawsuits  and
claim that should serve to defeat or diminish the Company's potential liability.
However, if material adverse determinations on either the lawsuits or claim were
to be rendered,  such  determinations will have a material adverse impact on the
results  of  operations  in the  period of the  respective  charges as well as a
material adverse impact on the financial position and liquidity of the Company.

In addition, in 1998, two shareholders, who were formerly officers and directors
of the Company,  filed suit against the Company alleging wrongful termination of
their employment,  failure to make required severance payments, wrongful conduct
by the  Company in  connection  with the grant of stock  options,  and  wrongful
conduct by the Company  resulting in the  non-vestiture  of their option grants.
The  complaint  also alleged that the Company  wrongfully  limited the number of
shares of the Company's common stock that could have been sold by the plaintiffs
under a  Registration  Rights  Agreement  entered  into in  connection  with the
underlying  acquisition  transaction  pursuant  to which the  plaintiffs  became
shareholders of the Company.  The claim under the Registration  Rights Agreement
sought the difference  between the amount for which  plaintiffs  could have sold
their RCM shares  during the 12-month  period ended March 11, 1999,  but for the
alleged  wrongful  limitation  on their  sales,  and the  amount  for  which the
plaintiffs sold their shares during that period and thereafter.

The claim  relating to the wrongful  termination of the employment of one of the
plaintiffs  and the  claims  of both  plaintiffs  concerning  the grant of stock
options  were  resolved in binding  arbitration  in early  2003.  A trial on the
remaining  claims  commenced  on December 2, 2002 and a verdict was  returned on
January  24,  2003.  On the claims by both  plaintiffs,  concerning  the alleged
wrongful  limiting  of the  number of shares  that they  could  sell  during the
12-month period ended March 11, 1999, a verdict awarding damages of $7.6 million
against the Company was returned.  On June 23, 2003,  the trial judge denied the
Company's  post-trial  motions that  challenged the jury's verdict and the trial
judge also upheld the jury's verdict. On August 4, 2003, the trial judge entered
a judgment in favor of the  plaintiffs  for $7.6  million in damages and awarded
plaintiffs  $172,000 in prejudgment  interest  (which will continue to accrue on
the damages  portion of the judgment  after August 4, 2003 at the rate of 5% per
annum).  The Company  intends  promptly to appeal from,  and seek a stay pending
appeal of that judgment.

As a result of the verdict,  the Company accrued a reserve of $8.6 million as of
December 31, 2002,  which included a $1.0 million  estimate for attorneys'  fees
and interest.



                                       36


<PAGE>



                     RCM TECHNOLOGIES, INC. AND SUBSIDIARIES


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits


    31.1                   Certifications of Chief Executive Officer Required by
                           Rule 13a-14(a) of the Securities Exchange Act of
                           1934, as amended.

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

    32.1                   Certifications of Chief Executive Officer Required by
                           Rule 13a-14(b) of the Securities Exchange Act of
                           1934, as amended. (This exhibit shall not be deemed
                           "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                    Certifications of Chief Financial Officer Required by
                           Rule 13a-14(b) of the Securities Exchange Act of
                           1934, as amended. (This exhibit shall not be deemed
                           "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.)

(b) Reports on Form 8-K

      Current Report on Form 8-K dated April 30, 2003 reporting items 7 and 9
      and containing as an Exhibit the Press Release dated April 30, 2003
      issued by the Company.

                                       37

<PAGE>


                             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:  August 7, 2003          By:/s/ Stanton Remer
                                      --- ------- -----
                                      Stanton Remer
                                      Chief Financial Officer,
                                      Treasurer, Secretary and Director
                                      (Principal Financial Officer and
                                      Duly Authorized Officer of the Registrant)



                                       38









</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>certif311.txt
<DESCRIPTION>CERTIFICATIONS OF CEO REQUIRED BY RULE 13A-14(A)
<TEXT>
                                  Exhibit 31.1

                             RCM TECHNOLOGIES, INC.

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

                                 CERTIFICATIONS

I, Leon Kopyt, 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)) 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)       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

         c)       Disclosed in this 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:    August 7, 2003                              /s/ Leon Kopyt
                                                     Leon Kopyt
                                                     Chief Executive Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>4
<FILENAME>certif312.txt
<DESCRIPTION>CERTIFICATIONS OF CFO REQUIRED BY RULE 13A-14(A)
<TEXT>
                                  Exhibit 31.2

                             RCM TECHNOLOGIES, INC.

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

                                 CERTIFICATIONS

I, Stanton Remer, 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)) 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)       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

         c)       Disclosed in this 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:    August 7, 2003                              /s/ Stanton Remer
                                                     Stanton Remer
                                                     Chief Financial Officer


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>5
<FILENAME>certif321.txt
<DESCRIPTION>CERTIFICATIONS OF CEO REQUIRED BY RULE 13A-14(B)
<TEXT>
                                  Exhibit 32.1



                             RCM TECHNOLOGIES, INC.

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




         I, Leon Kopyt, 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 period ended
June 30, 2003 (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/ Leon Kopyt
Leon Kopyt
Chief Executive Officer

Date:  August 7, 2003





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>6
<FILENAME>certif322.txt
<DESCRIPTION>CERTIFICATIONS OF CFO REQUIRED BY RULE 13A-14(B)
<TEXT>

                                  Exhibit 32.2


                             RCM TECHNOLOGIES, INC.

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





         I, Stanton Remer, Chief Financial 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 period ended
June 30, 2003 (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/ Stanton Remer
Stanton Remer
Chief Financial Officer

Date:  August 7, 2003




</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
