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Document and Entity Information (USD $)
12 Months Ended
Dec. 30, 2011
Apr. 05, 2012
Jul. 01, 2011
Document And Entity Information
Entity Registrant Name Command Center, Inc.
Entity Central Index Key 0001140102
Document Type 10-K
Document Period End Date Dec 30, 2011
Amendment Flag false
Current Fiscal Year End Date --12-30
Is Entity a Well-known Seasoned Issuer? No
Is Entity a Voluntary Filer? No
Is Entity's Reporting Status Current? Yes
Entity Filer Category Smaller Reporting Company
Entity Public Float $ 17,361,000
Entity Common Stock, Shares Outstanding 59,142,368
Document Fiscal Period Focus FY
Document Fiscal Year Focus 2011
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Balance Sheets (USD $)
Dec. 30, 2011
Dec. 31, 2010
Current assets
Cash $ 1,131,296 $ 1,667,281
Restricted cash 0 150,000
Accounts receivable, net of allowance for bad debts of $231,948 and $238,948 at December 30, 2011 and December 31, 2010, respectively 2,160,072 1,886,426
Prepaid expenses, deposits and other 396,908 351,657
Prepaid workers' compensation 27,632 231,840
Other receivables - current 11,028 6,667
Current portion of workers' compensation deposits 798,000 1,200,000
Deferred tax asset 912,195 0
Total current assets 5,437,131 5,493,871
Property and equipment - net 383,014 411,695
Workers' compensation risk pool deposits, less current portion 130,834 714,924
Goodwill 2,500,000 2,500,000
Intangible assets - net 46,834 176,336
Total Assets 8,497,813 9,296,826
Current liabilities
Accounts payable 900,174 2,075,326
Checks issued and payable 169,738 68,760
Other current liabilities 558,821 43,003
Accrued wages and benefits 785,665 870,736
Common stock issuable 0 22,200
Capital leases 0 5,422
Current portion of workers' compensation claims liability and insurance premiums 1,186,661 1,675,512
Total current liabilities 3,601,059 4,760,959
Long-term liabilities
Warrant liabilities 983,415 1,837,785
Workers compensation claims liability, less current portion 2,148,675 2,875,000
Total liabilities 6,733,149 9,473,744
Commitments and contingencies      
Stockholders equity:
Preferred stock - $$0.001 par value, 5,000,000 shares authorized; none issued 0 0
Common stock - $0.001 par value, 100,000,000 shares authorized; 57,606,368 and 54,624,368 shares issued and outstanding, respectively 57,606 54,624
Additional paid-in capital 54,952,802 53,868,105
Accumulated deficit (53,245,744) (54,099,647)
Total stockholders equity 1,764,664 (176,918)
Total liabilities and stockholders' equity $ 8,497,813 $ 9,296,826
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Balance Sheets (Parenthetical) (USD $)
Dec. 30, 2011
Dec. 31, 2010
Current assets:
Allowance for bad debts $ 231,948 $ 238,948
Stockholders' Equity (Deficit):
Preferred stock par value $ 0.001 $ 0.001
Preferred stock shares authorized 5,000,000 5,000,000
Preferred stock shares issued 0 0
Preferred stock shares outstanding 0 0
Common stock par value $ 0.001 $ 0.001
Common stock shares authorized 100,000,000 100,000,000
Common stock shares issued 57,606,368 54,624,368
Common stock shares outstanding 57,606,368 54,624,368
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Statements of Operations (USD $)
12 Months Ended
Dec. 30, 2011
Dec. 31, 2010
Income Statement [Abstract]
Revenue $ 81,920,997 $ 69,436,838
Cost of staffing services 63,279,204 52,290,151
Gross Profit 18,641,793 17,146,687
Selling, general and administrative expenses 17,314,170 15,021,450
Depreciation and amortization 441,087 569,905
Income from Operations 886,536 1,555,332
Interest expense and other financing expense (1,124,197) (1,011,448)
Loss on debt extinguishment 0 (840,307)
Change in fair value of warranty liability 179,369 (1,263,929)
Net Loss before income taxes (58,292) (1,560,352)
Benefit (provision) for income taxes 912,195 0
Basic and diluted net income (loss) $ 853,903 $ (1,560,352)
Net income (loss) per share
Basic $ 0.02 $ (0.03)
Diluted $ 0.01 $ (0.03)
Weighted average common shares outstanding
Basic 56,859,426 45,484,621
Diluted 61,367,518 45,484,621
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Statement of Changes in Stockholder's Equity (Deficit) (USD $)
Common Stock
Additional Paid-In Capital
Retained Earnings / Accumulated Deficit
Total
Beginning balance, par value at Dec. 25, 2009 $ 37,213 $ 51,446,437 $ (52,539,295) $ (1,055,645)
Beginning balance, shares at Dec. 25, 2009 37,212,923
Common stock issued in connection with note, par value 10,000 1,490,000    1,500,000
Common stock issued in connection with note, shares 10,000,000
Common stock issued in private placement, par value 5,250 295,060    300,310
Common stock issued in private placement, shares 5,250,000
Warrants issued in connection with private placement 119,690    119,690
Private placement expenses (15,000)    (15,000)
Common stock issued for services, par value 640 85,960    86,600
Common stock issued for services, shares 640,000
Common stock issued for compensation, par value 250 79,750    80,000
Common stock issued for compensation, shares 250,000
Common stock issued for rent, par value 1,271 168,254    169,525
Common stock issued for rent, shares 1,271,445
Stock based compensation expense 197,954    197,954
Net income (1,560,352) (1,560,352)
Ending balance, par value at Dec. 31, 2010 54,624 53,868,105 (54,099,647) (176,918)
Ending balance, shares at Dec. 31, 2010 54,624,368
Common stock issued for services, par value 192 71,768    71,960
Common stock issued for services, shares 192,000
Common stock issued for compensation, par value 40 15,560    15,600
Common stock issued for compensation, shares 40,000
Stock based compensation expense 105,119    105,119
Common stock issued relating to the exercise of warrants, par value 2,750 892,250    895,000
Common stock issued relating to the exercise of warrants, shares 2,750,000
Net income 853,903 853,903
Ending balance, par value at Dec. 30, 2011 $ 57,606 $ 54,952,802 $ (53,245,744) $ 1,764,664
Ending balance, shares at Dec. 30, 2011 57,606,368
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Statements of Cash Flows (USD $)
12 Months Ended
Dec. 30, 2011
Dec. 31, 2010
Cash flows from operating activities:
Net income (loss) $ 853,903 $ (1,560,352)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 431,425 569,905
Loss on debt extinguishment 0 840,307
Change in allowance for bad debt (7,000) (61,052)
Change in fair value of stock warrant liability (179,369) 1,263,929
Gain on sale of property and equipment (7,500) (25,550)
Common stock issued for interest and services 65,360 156,800
Common stock Issued for rent 0 149,526
Stock based compensation 105,119 197,954
Change in assets and liabilities:
Accounts receivable - trade (640,499) (2,549,072)
Other receivables (4,361) 30,392
Prepaid expenses, deposits and other (37,752) (107,431)
Prepaid workers' compensation premiums 204,208 0
Deferred tax asset (912,195) 0
Workers' compensation risk pool deposits 986,090 987,991
Accounts payable (646,818) (99,178)
Accounts receivable factoring agreement 373,854 2,833,165
Accrued wages and benefits (95,976) 176,657
Workers compensation claims liability (1,215,176) (50,911)
Disbursements outstanding 100,978 68,760
Other current liabilities (1,612) (181,488)
Net cash provided (used) by operating activities (627,321) 2,640,352
Cash flows from investing activities:
Purchases of property and equipment (278,664) (81,889)
Proceeds on sale of building 0 156,690
Cash released by lender 150,000 0
Cash restricted by lender 0 (150,000)
Net cash used by investing activities (128,664) (75,199)
Cash flows from financing activities:
Proceeds from excercise of common stock warrants 220,000 0
Proceeds from private placement 0 420,000
Net advances (payments) on line of credit facility 0 8,124
Principal payments on notes payable 0 (1,380,967)
Costs of common stock offering and registration 0 (15,000)
Net cash provided (used) by financing activities 220,000 (967,843)
Net increase (decrease) in cash (535,985) 1,597,310
Cash, beginning of period 1,667,281 69,971
Cash, end of period 1,131,296 1,667,281
Non-cash investing and financing activities
Fair value of warrants issued in connection with debt extinguishment 0 160,830
Common stock issued in connection with short-term debt refinancing 0 1,500,000
Line of credit settled with accounts receivable 0 2,915,645
Property and equipment financed with capital lease 0 5,422
Supplemental disclosure of cash flow information
Interest paid 532,899 432,060
Income taxes paid $ 0 $ 0
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BASIS OF PRESENTATION
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 1 - BASIS OF PRESENTATION

Organization: Command Center, Inc. (the "Company”, “CCNI”, “us”, "our", or “we”) is a Washington corporation initially organized in 2000. We reorganized in 2005 and 2006 and now provide on-demand employees for manual labor, light industrial, and skilled trade’s applications. Our customers are primarily small to mid-sized businesses in the restoration, wholesale trades, manufacturing, hospitality, construction, and retail industries. We currently operate 51 stores located in 23 states. Our largest 10 customers represent approximately 24% of our revenue. We operate as: Command Center, Inc. and Bakken Staffing, Inc. We have also created a separate, dormant, entities that are not active. All financial information is reported by Command Center, Inc  and we have no consolidating subsidiaries.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of our management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

 

Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Fiscal year end: The financial statements for the periods ended December 30, 2011 and December 31, 2010 are presented on a 52/53-week fiscal year end basis, with the last day of the year ending on the last Friday of each calendar year. In fiscal years consisting of fifty-three weeks, the final quarter will consist of 14 weeks. In fiscal years with fifty-two weeks, all quarters will consist of thirteen weeks. Fiscal year 2011 was a fifty-two week year and fiscal year 2010 was a fifty-three week year.

 

Reclassifications: Certain amounts in the financial statements for 2010 have been reclassified to conform to the 2011 presentation. These reclassifications have no effect on net loss, total assets, or stockholders’ equity as previously reported.

 

Revenue recognition: We generate revenues primarily from providing on-demand labor services. Revenue from services is recognized at the time the service is performed and is net of adjustments related to customer credits.

 

Cost of services: Cost of services includes the wages of temporary employees, related payroll taxes, workers’ compensation expenses, and other direct costs of services.

 

Cash and cash equivalents: Cash and cash equivalents consists of demand deposits, including interest-bearing accounts with original maturities of three months or less, held in banking institutions. These accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per institution. At December 30, 2011, we held deposits in excess of FDIC insured limits of approximately $881,000.

 

Accounts receivable and allowance for bad debts: Accounts receivable are recorded at the invoiced amount. We regularly review our accounts receivable for collectability. The allowance for doubtful accounts is determined based on historical write-off experience, age of receivable, other qualitative factors and extenuating circumstances, and current economic data and represents our best estimate of the amount of probable losses on our accounts receivable. The allowance for doubtful accounts is reviewed monthly. Generally, we refer overdue balances to a collection agency at 120 days and the collection agent typically pursues collection for another 60 or more days. All balances over 180 days past due are either written off as bad debt or fully reserved.

 

Property and equipment: We capitalize equipment purchases and depreciate the capitalized costs using the straight-line method over the useful lives, typically three to five years. Leasehold improvements are capitalized and amortized over the shorter of the non-cancelable lease term or their useful lives. Repairs and maintenance are expensed as incurred. When assets are sold or retired, cost and accumulated depreciation are eliminated from the balance sheet and gain or loss is reflected in the statement of operations.

 

Capitalized software development costs: We expense costs incurred in the preliminary project stage of developing or acquiring internal use software. Once the preliminary assessment is complete, management authorizes the project. When it is probable that the project will be completed, will result in new software or added functionality of existing software, and the software will be used for the function intended, we capitalize subsequent software development costs. The capitalized costs are amortized on a straight-line basis over the estimated useful life of the software which ranges from three to seven years.

 

Workers’ compensation reserves: In accordance with the terms of our workers’ compensation liability insurance policy, we maintain reserves for workers’ compensation claims to cover our cost of all claims. We use actuarial estimates of the future costs of the claims and related expenses discounted by a present value interest rate to determine the amount of our reserves. We evaluate the reserves regularly throughout the year and make adjustments as needed. If the actual cost of the claims incurred and related expenses exceed the amounts estimated, additional reserves may be required. In monopolistic states, we utilize the state funds for our workers’ compensation insurance and pay our premiums in accordance with the state plans.

 

Goodwill and other intangible assets: Goodwill and other intangible assets are measured for impairment at least annually and/or whenever events and circumstances arise that indicate an impairment may exist, such as a significant adverse change in the business climate. In assessing the value of goodwill, assets and liabilities are assigned to the reporting units and the appropriate valuation methodologies are used to determine fair value. Identified intangible assets are amortized using the straight-line method over their estimated useful lives which are estimated to be between three and seven years.

 

Fair value of financial instruments: We carry financial instruments on the balance sheet at the fair value of the instruments as of the balance sheet date. At the end of each period, management assesses the fair value of each instrument and adjusts the carrying value to reflect its assessment. At December 30, 2011 and December 31, 2010, the carrying values of accounts receivable and accounts payable approximated their fair values.

 

Derivatives: From time to time, we enter into transactions which contain conversion privileges, the settlement of which may entitle the holder or us to settle the obligation(s) by issuance of Company securities. When we enter into transactions which allow us to settle obligations by the issuance of Company securities, beneficial fair value is estimated using The Black-Scholes option pricing model.

 

Income taxes: We account for income taxes under the liability method, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized. Our policy is to prescribe a recognition threshold and measurement attribute for the recognition and measurement of a tax position taken or expected to be taken in a tax return. We have analyzed our filing positions in all jurisdictions where we are required to file returns, and found no positions that would require a liability for unrecognized income tax positions to be recognized. We are subject to tax examinations. In the event that we are assessed penalties and or interest, penalties will be charged to other financing expense and interest will be charged to interest expense.

 

Earnings per share: We follow financial accounting standards which require the calculation of basic and diluted earnings per share. Basic earnings per share is calculated by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding, and does not include the impact of any potentially dilutive common stock equivalents. Diluted earnings per share reflects the potential dilution of securities that could share in our earnings through the conversion of common shares issuable via outstanding stock warrants, and/or stock options. We had common stock equivalents outstanding to purchase 13,577,053 and 15,512,803 shares of common stock at December 30, 2011 and December 31, 2010, respectively. If we incur losses in the periods presented, or if conversion into common shares is anti-dilutive, basic and dilutive earnings per share are equal. At December 30, 2011, we had dilutive shares of  4,508,092 relating to vested stock options and warrants.

 

Share-Based Compensation: Periodically, we issue common shares or warrants to purchase shares of our common shares to our officers, directors, employees, or other parties. These issuances are valued at market, in the case of common shares issued, or at fair value, in the case of warrants. We use the Black Scholes valuation model for determining the fair value of warrants, and compensation expense is recognized ratably over the vesting periods. Compensation expense for grants that vest upon issue are recognized in the period of grant.

 

Fair Value Measures: Our policy on fair value measures requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The policy establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The policy prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

Our financial instruments consist principally of cash and a stock warrant liability.

 

The table below sets forth our assets and liabilities measured at fair value, whether recurring or non-recurring and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category.

 

    December 30, 2011   December 31, 2010   Input Hierarchy Level
Recurring:            
Stock Warrant liability    $           983,415    $        1,837,785   Level 2
Cash    $        1,131,296    $        1,667,281   Level 1

 

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GOODWILL
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 3 - GOODWILL

On an annual basis, we review goodwill for impairment. We are a single reporting unit consisting of purchased on-demand labor stores, thus the analysis was conducted for the Company as a whole. Our goodwill represents the remaining goodwill related to our acquisitions of the original franchises.

 

We performed an annual impairment analysis in March of 2012 and February of 2011 for the fiscal years ended December 30, 2011 and December 31, 2010 The fair value of the reporting unit was determined using a combination of valuation methodologies including quoted market prices, prices of comparable public companies and present value of discounted cash flows. We did not record an impairment of goodwill in 2011 or 2010, as the estimated fair value of the reporting unit exceeded its carrying value. There were no changes to the carrying value of goodwill in fiscal years ending December 30, 2011 or December 31, 2010.

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RELATED-PARTY TRANSACTIONS
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 4 - RELATED-PARTY TRANSACTIONS

During the year fiscal years ended December 30, 2011 and December 31, 2010, in addition to the related party transaction described in Notes 11 and 14, we had the following transactions with related parties:

 

Share Issue: We completed a private placement stock offering to our CEO on July 6, 2010 where we issued 2,750,000 units at a price of $.08 per unit for gross proceeds of $220,000. Each unit consisted of one share of common stock and one-half of one common share purchase warrant. Each warrant is exercisable at between $0.08 and $1.00 per share until April 15, 2015.

 

In the fourth quarter of 2009, we authorized the issuance of 150,000 shares of our common stock to Mr. Peterson, our  CFO at the time for services performed during the year ended December 25, 2009. We recorded $12,000 in compensation expense for the shares based on their fair value at the date of grant. The shares were recorded as common stock to be issued on our balance sheet dated December 25, 2009 and were issued in the second quarter of 2010.

 

Additionally, we authorized the issuance of 250,000 shares of our common stock to Mr. Mitchell, our CFO from October 2010 to December 2011, pursuant to an employment agreement dated October 20, 2010. We recorded $80,000 in compensation expense for the shares based on their fair value at the date of grant.

 

Van Leasing Arrangements: Our CEO owned a vehicle leasing company which provided vans and van drivers to us for use in transporting temporary workers to job sites at various locations. During 2010, we terminated the van leasing agreement with this company and settled the liability outstanding at December 25, 2009 in the amount of $224,491 with a cash payment of $220,000 and recognized a gain on extinguishment of debt of approximately $5,000.

 

Warrant Exercise: In the fourth quarter of 2009, our current CFO, purchased 250,000 shares of our common stock through the exercise of warrants. We issued the warrants to our CFO during 2009 as compensation for his services and, upon exercise, as a short term method to raise capital. We determined the warrants had a nominal fair value at the grant date. The warrants were exercisable at $0.08 with a four year term. The warrants were exercised on October 1, 2009 and the common shares, shown as common stock to be issued on the balance sheet dated December 25, 2009, were issued March 15, 2010.

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PROPERTY AND EQUIPMENT
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 5 - PROPERTY AND EQUIPMENT

The following table sets forth the book value of the assets and accumulated depreciation and amortization at December 30, 2011 and December 31, 2010:

    2011   2010
Leasehold improvements    $      1,110,634    $     993,190
Furniture and fixtures           283,831        293,370
Computer hardware and licensed software               218,970         1,060,126
Accumulated depreciation         (1,330,210)      (2,040,524)
             283,225        306,162
         
Software development costs             600,465           682,000
Accumulated amortization          (500,676)         (576,467)
                  99,789           105,533
Total property and Equipment, net    $         383,014    $     411,695

 

During the fiscal year ended December 30, 2011 and December 31, 2010, we recognized approximately $441,000 and $570,000, respectively, of depreciation and amortization expense related to property and equipment.

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INTANGIBLE ASSETS
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 6 - INTANGIBLE ASSETS

The following table presents our purchased intangible assets, other than goodwill, for the fiscal years ended December 30, 2011 and December 31, 2010:

 

  2011   2010
 Customer relationships $      925,000   $     925,000
 Accumulated amortization   (878,166)       (748,664)
 Intangible asset, net $       46,834   $      176,336

 

We obtained our amortizable intangible asset as a result of the acquisition of on-demand labor stores in 2006 and 2007. Amortization expense is included with depreciation and amortization expenses in the statement of operations.

 

Based on current events and circumstances, we tested the intangible asset for impairment by comparing the carrying value of the asset to its estimated fair value. The results of this test indicated that the intangible asset was not impaired as of December 30, 2011 and December 30, 2010.

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FACTORING AGREEMENT & LINE OF CREDIT FACILITY
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 7 - FACTORING AGREEMENT & LINE OF CREDIT FACILITY

On February 19, 2010, we entered into an agreement relating to our line of credit facility with our principal lender. The agreement, effective March 8, 2010, settled the previous line of credit facility with approximately $2.9 million of accounts receivable. The current agreement is an account purchase agreement which allows us to sell eligible accounts receivable for 90% of the invoiced amount on a full recourse basis up to the facility maximum, $10 million at December 30, 2011. When the account is paid by our customers, the remaining 10% is paid to us, less applicable fees and interest. Eligible accounts receivable are generally defined to include accounts that are not more than sixty days past due. Net accounts receivable sold pursuant to the new agreement at December 30, 2011 were approximately $6.1 million. The term of the new agreement is for the period ending April 7, 2012. The current agreement bears interest at the greater of the prime rate plus 2.5%, or the London Interbank Offered Rate (LIBOR) plus 5.5%, with a floor of 6.25% per annum. At December 30, 2011 the effective interest rate was 6.25%. Interest is payable on the actual amount advanced or $3 million, whichever is greater. Additional charges include an annual facility fee equal to one percent of the facility threshold in place (currently $10 million), a monthly monitoring fee of $5,000, and lockbox fees. As collateral for repayment of any and all obligations, we granted Wells Fargo Bank, N.A. a security interest in our all of our property including, but not limited to, accounts, intangible assets, contract rights, investment property, deposit accounts, and other such assets.

 

The agreement contains a covenant that requires the sum of the excess available advances, plus or minus our cash balance at month end, must at all times be greater than accrued payroll and accrued payroll taxes. At December 30, 2011, we were in compliance with this covenant.

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SHORT-TERM NOTE PAYBLE
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 8 - SHORT-TERM NOTE PAYBLE

On October 27, 2010 we made the final payment in full satisfaction of a short-term note payable amended on March 24, 2010. The amended agreement with Sonoran Pacific Resources, LLP ("Sonoran") had been previously amended on April 13, 2009.

 

The March 24, 2010 amendment with Sonoran called for us to issue the lender a combination of shares of common stock, a new convertible promissory note, and stock purchase warrants in exchange for cancellation of the existing note. We determined that the modified terms of the note were substantially different from the original note terms, therefore, a loss on extinguishment of debt of approximately $845,000 was recognized on our statement of operations for the difference between the net carrying value of the old debt, including accrued interest, and the fair value of the new debt, plus any additional consideration, which included shares of common stock, and stock purchase warrants.

 

The new convertible promissory note had an initial principal balance of $1.3 million and bore simple interest of 12% per annum. Principal and interest payments calculated based upon weekly revenue levels, or a minimum payment of $5,000, were due each week.

 

In connection with the March 24, 2010 amendment, we issued 10 million shares of common stock to the lender and its affiliates in exchange for the satisfaction of $870,000 of a liquidity redemption penalty. Sale or transfer of these shares is restricted until March 1, 2011. These shares were valued at $1.5 million, based on the closing price of our common stock on March 24, 2010. We also issued 1.5 million stock purchase warrants as consideration for reducing the interest rate from 20% to 12%.

 

We determined the warrants issued under the March 24, 2010 amendment agreement had an approximate fair value at inception of $161,000 using the Black-Scholes pricing model with the following inputs; exercise price of $0.08; current stock price of $0.15; expected term of one year; risk-free rate of 2.53%; and expected volatility of 165%. Because of their re-pricing terms, these warrants were recorded on March 24, 2010 as a stock warrant liability. These warrants were exercised in March of 2011. Accordingly, the derivate liability relating to these warrants on December 30, 2011 was zero. During the fiscal years ending December 30, 2011 and December 31, 2010, adjusting the value of these warrants to fair market value resulted in a gain of approximately $179,000 and a loss of approximately $1.3 million, respectively.

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WORKERS' COMPENSATION INSURANCE AND RESERVES
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 9 - WORKERS' COMPENSATION INSURANCE AND RESERVES

We provide our temporary and permanent workers with workers’ compensation insurance. On April 1, 2011, we changed workers’ compensation carriers to Zurich American Insurance Company (“Zurich”). The policy with Zurich is a guaranteed cost plan, which is in contrast to our previous coverage where we were substantially self-insured through a large deductible or retro based policy. Zurich now provides workers compensation coverage in all states in which we operate other than Washington and North Dakota. For workers' compensation claims originating in Washington and North Dakota, monopolistic jurisdictions, we pay workers' compensation insurance premiums and obtain full coverage under state government administered programs. Accordingly, our financial statements reflect only the mandated workers' compensation insurance premium liability for workers' compensation claims in these jurisdictions. At December 30, 2011 and December 31, 2010, this liability amounted to approximately $389,000 and $452,000, respectively, and is reflected on our Balance Sheet under current liabilities as, “Current portion of workers’ compensation claims liability and insurance premiums”.

 

Prior to Zurich, we maintained workers' compensation policies through AMS Staff Leasing II (“AMS”) for coverage in the non-monopolistic jurisdictions in which we operated. The AMS coverage was a large deductible policy where we have primary responsibility for claims under the policy. Under this policy, AMS provides re-insurance for covered losses and expenses in excess of $250,000 per claim, which results in us being substantially self-insured on claims originating under AMS.

 

Under the AMS policies, we make payments into a risk pool fund to cover claims within our self-insured layer. Per our contractual agreements with one of our previous workers’ compensation insurers, we were originally required to maintain a deposit in the amount of $715,000. When we transitioned to Zurich, we negotiated an arrangement where we now remit payments to the insurer in the amount of $25,000 each week to maintain a sufficient deposit with them. At December 30, 2011, our deposit with this previous insurer was approximately $145,000.

 

Recently, we discovered that our risk pool deposits related to multiple policy years with AIG Insurance (AIG), dated from May 13, 2006 to June 27, 2008 were overstated by approximately $716,000. See Note 15 regarding our accounting for this matter.

 

We have received notice from AIG requesting additional collateral based upon initial contractual agreements in the amount of approximately $3.1 million relating to prior policy years. Using third party actuarial analyses and considering the adjustments referenced above, we estimate that we may be under-collateralized with AIG by $500,000 to $1,000,000. At December 30, 2011, our risk pool deposit with AIG was approximately $713,000 and all liabilities associated with these claims are fully reserved on our balance sheet.

 

Expected losses will extend over the life of the longest lived claim which may be outstanding for many years. Our current actuarial analysis is based largely on industry averages which may not be applicable to us. If our average claims period is longer than industry average, our actual claims losses could exceed our current estimates. Conversely, if our average claims period is shorter than industry average, our actual claims could be less than current reserves.

 

Workers’ compensation expense for temporary workers is recorded as a component of our cost of services and consists of the following components: changes in our self-insurance reserves, net of the discount; actual claims paid; insurance premiums and administrative fees; and premiums paid in monopolistic jurisdictions. Workers’ compensation expense for our temporary workers totaled approximately $4.9 million and $4.1 in the fiscal years ended December 30, 2011 and December 31, 2010, respectively.

  2011   2010
Workers’ Compensation Deposits     (restated)
Workers’ compensation deposits available at the beginning of the period $     1,914,924    $      2,902,915
Additional workers’ compensation deposits made during the period            879,238           1,949,968
Deposits applied to payment of claims during the period      (1,805,328)        (2,937,959)
Refunds received           (60,000)                        -  
Deposits available for future claims at the end of the period  $        928,834    $    1,914,924
       
Workers’ Compensation Claims Liability      
Estimated future claims liabilities at the beginning of the period  $     4,099,000    $      4,100,000
Claims paid during the period      (1,311,158)        (2,937,959)
Additional future claims liabilities recorded during the period         158,833           2,936,959
Estimated future claims liabilities at the end of the period  $     2,946,675    $      4,099,000

 

The workers’ compensation risk pool deposits are classified as current and non-current assets on the balance sheet based upon management’s estimate of when the related claims liabilities will be paid. The deposits have not been discounted to present value in the accompanying financial statements.

 

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LONG-TERM DEBT (MORTGAGE)
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 10 - LONG-TERM DEBT (MORTGAGE)

In 2009, we owned a beneficial interest in one parcel of real estate that housed one of our on-demand labor locations and we assumed a mortgage on the property. During 2010, we sold the property to an unrelated party for $150,000 and recognized a gain of approximately $26,000. We now lease the building from the new owner for $1,800 a month with the ability to exit the lease agreement without penalty if 90 days' notice is given.

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STOCKHOLER' EQUITY (DEFICIT)
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 11 - STOCKHOLER' EQUITY (DEFICIT)

Issuance of Common Stock:  In the fiscal year ending December 30, 2011, we issued 2,750,000 shares of common stock for the exercise of warrant at a price of $0.08 per share.

 

We issued 192,000 shares of common stock valued at approximately $72,000 to our investor relations firm as partial payment for their investor relations fees. The average price of the shares issued was $0.37. The shares were recorded as an expense when earned and issuable.

 

We issued 40,000 shares of common stock to two employees for compensation valued at $15,600.

 

In the fiscal year ended December 31, 2010, we issued 5,250,000 shares of common stock in a private placement at a price of $0.08 per unit. Units consisted of one share of common stock and one-half of one common stock purchase warrant. Our CEO purchased 2,750,000 of those units. A detail of the warrant term and exercise price follows:

 

Exercise Price   Ending Period of Exercise Price
 $             0.08   March 15, 2011
 $             0.16   March 15, 2012
 $             0.32   March 15, 2013
 $             0.50   March 15, 2014
 $             1.00   March 15, 2015

 

We issued 250,000 shares of common stock to our former CFO pursuant to an employment agreement dated October 20, 2010, at a price of $0.32 per share.

 

We issued 10,000,000 shares of common stock to a lender and its affiliates in connection with an amendment agreement relating to a short-term note payable. These shares were valued at $1.5 million, based on the closing price of our common stock on March 24, 2010.

 

We issued 240,000 shares of common stock to our investor relations firm as partial payment for their investor relations fees. The average price of the shares issued was $0.23. The shares were recorded as an expense when earned and issuable.

 

We issued 400,000 shares of common stock to our CFO; 250,000 shares were issued for the exercise of warrants he held and 150,000 shares were issued as compensation. The warrants and common stock were awarded as employment compensation. We determined the warrants had a nominal fair value as issuance. The warrants were exercised at a price of $0.08 on October 1, 2009 but were not issued until March 15, 2010.

 

We issued 1,271,446 shares to a former Director and owner of our Post Falls, ID office building for rent during the year. The shares were issued at an average market price of $0.13 and were expensed in the period in which rent was due.

 

The following warrants for our common stock were issued and outstanding on December 31, 2010 and December 25, 2009, respectively:

  2011   2010
Warrants outstanding at beginning of year        14,887,803          10,762,803
Issued                       -              4,125,000
Exercised        (2,750,000)                         -  
Cancelled                       -                           -  
Warrants outstanding at end of year        12,137,803          14,887,803

 

A detail of warrants outstanding at December 30, 2011 is as follows: Number   Expiration Date
Exercisable at $1.50 per share 250,000   4/14/2012
Exercisable at $1.25 per share 6,312,803   6/20/2013
Exercisable at $0.08 per share 4,200,000   4/1/2014
Exercisable at between $0.16 and $1.00 per share 1,375,000   4/15/12 to 4/15/15
  12,137,803    

 

The fair value of outstanding warrants defined as a derivative instrument per the Accounting Standards Codification are estimated each period using the Black-Scholes pricing model. The change in fair value is presented as a line item in our Statement of Operations and amounted to approximately $179,000 for the fiscal year ending December 30, 2011.

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STOCK BASED COMPENSATION
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 12 - STOCK BASED COMPENSATION

 

We approved an option plan in 2008 permitting the grant of 6.4 million stock options to employees for the purpose of attracting and motivating employees, officers, directors, as well as advancing our own interests.

  

During the fifty-three weeks ended December 31, 2010, we granted 3,677,000 stock options to employees, officers and directors exercisable at a price between $0.17 and $0.40, which expire between October 5, 2013 and May 5, 2015. Options were granted with a term of three to five years from the date of grant. The vesting schedule varied on options granted during fiscal year 2010 with 625,000 options being fully vested upon grant and 3,052,000 options vesting over a period of four years, with 25% vesting on the first anniversary of the date of grant and 25% vesting each anniversary thereafter for the following three years.

 

The following table reflects the summary of stock options outstanding at December 25, 2009 and changes during the fiscal years ended December 31, 2010 and December 30, 2011:

 

    Weighted Weighted  
  Number of Average Average Aggregate
  Shares Under Exercise Price Fair Value Intrinsic
  Options Per Share Per Share Value
Outstanding, December 25, 2009 - $- $- $-
       Granted 3,677,000 0.20 0.17 1,232,280
  419,000) 0.17 0.15 (163,410)
Outstanding, December 31, 2010 3,258,000 0.20 0.17 1,068,870
Granted - - - -
Exercised - - - -
Forfeited (166,000) 0.17 0.15 (75,810)
Expired - - - -
Outstanding, December 30, 2011 3,092,000 $0.20 $0.17 $993,060

  

The fair value of each option award is estimated on the date of grant using the Black-Scholes pricing model. Expected volatility is based on historical annualized volatility of our stock. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate is based upon the U.S. Treasury yield curve in effect at the time of grant. Currently we do not foresee the payment of dividends in the near term. The assumptions used to calculate the fair value are as follows:

 

   

Fiscal Year Ended

December 31, 2010

 
Expected term (years)     3.0 - 5.0  
Expected volatility     120.4% - 142.7 %
Dividend yield     0 %
Risk-free rate     0.52% - 2.13 %

 

Under the fair value recognition provisions of the Accounting Standards Codification, share-based compensation cost is measured at the grant date based on the value of the award and is recognized as an expense over the vesting period using the straight-line method of amortization. The expected post vesting exercise rate was determined based on an estimated annual turnover percentage of 15% with an estimated 90% of vested options expected to be exercised. Options granted to certain key employees were not taken into consideration when determining the post vesting effects due to turnover. During the fiscal year ended December 30, 2011, we recognized share-based compensation expense of approximately $105,000 relating to the issuance of stock options.

  

The following table reflects a summary of our nonvested stock options outstanding at December 25, 2009 and changes during the fiscal years ended December 31, 2010 and December 30, 2011:

 

   

Number

of Options

    Weighted Average Exercise Price per Share     Weighted Average Grant Date Fair Value     Aggregate Intrinsic Value  
Nonvested, December 25, 2009      -      -      -      -  
Granted      3,677,000        0.20        0.17        1,232,280  
Vested      (625,000      0.32        0.17        (42,000
Fortified      (419,000      0.17        0.15        (163,410
Nonvested, December 31, 2010     2,633,000     $ 0.17     $ 0.15     $ 1,026,870  
Vested     (814,250 )     0.17       0.15       (212,278 )
Forfeited     (166,000 )     0.17       0.15       (75,810 )
Nonvested, December 30, 2011     1,652,750     $ 0.17     $ 0.15     $ 738,782  

 

As of December 31, 2010, there was unrecognized share-based compensation expense totaling approximately $172,000 relating to non-vested options that will be recognized over the next 2.35 years.

 

The following summarizes information about the stock options outstanding at December 30, 2011:

 

   

Number

 of Options

   

Weighted

 Average

 Exercise Price

 Per Share

   

Weighted

 Average

 Remaining

 Contractual

 Life (years)

   

Aggregate

Intrinsic

Value

 
Outstanding     3,092,000     $ 0.20       3.02     $ 49,838  
Exercisable     1,439,250       0.24       2.65       87,068  

 

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INCOME TAX
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 13 - INCOME TAX

We did not recognize an income tax provision for the fiscal year ended December 31, 2010. For the fiscal year ended December 30, 2011 we recognized a change in deferred tax assets, net of the valuation allowance, of $912,195. This change is due to our determination that we will be able to utilize a portion of our net operating losses within the following twelve months to offset our expected tax liabilities.

 

We have corrected the information previously reported for December 31, 2010 relating to certain components of our deferred tax assets that were previously considered temporary differences, but were actually permanent differences. In 2007 and 2008, we impaired goodwill in the amount of approximately $30 million, which had been treated as a temporary timing difference in prior disclosures. Additionally, in the review of timing differences, various warrant and other expenses were reclassified for reporting purposes form temporary to permanent differences. The total deferred tax assets previously reported for 2010 were approximately $21 million and were overstated by approximately $13 million. Since the deferred tax assets were fully offset by a matching valuation allowance, this correction had no effect on our net income, accumulated deficit, or earnings per share.

 

The provision for deferred income taxes is comprised of the follows:

 

    December 30, 2011   December 31, 2010
Deferred tax assets       (restated)
Workers’ compensation claims liability   $ 1,178,000     $ 1,640,000  
Other Assets   124,000     124,000  
Net operating loss   5,953,000     6,344,000  
Store closure reserve   49,000     49,000  
Property, plant, equipment and intangibles   233,000     213,000  
Bad debt reserve   93,000     96,000  
Total deferred tax assets   $ 7,630,000     $ 8,466,000  
Deferred tax liabilities        
Total Liabilities   -     -  
Net deferred tax asset   7,630,000     8,466,000  
Valuation allowance   (6,717,805 )   (8,466,000 )
Total deferred tax asset net of valuation allowance   $ 912,195     $ -  

 

At December 31, 2010, we fully offset the deferred tax asset by a valuation allowance because of uncertainties concerning our ability to generate sufficient taxable income in future periods to realize the tax benefit. At December 30, 2011, we revised our estimate relating to our ability to utilize our net operating losses to offset expected future income, and currently estimate that $912,195 will be utilized in the coming year. At this time, we do not have sufficient information or expectations that all of the deferred tax assets currently available can be realized. Management does not believe that information is available to support a greater reduction in the valuation allowance based upon the more likely than not test of future utilization of these deferred tax attributes. Based upon our future profitability, management will review the possible future utilization of the deferred tax attributes at every reporting period and adjust the allowance accordingly.

 

Our federal and state net operating loss carryover of approximately $15 million will expire in the years 2022 through 2031. Our charitable contribution carryover will expire in the years 2012 through 2017. The net change in the allowance account from December 31, 2010 to December 30, 2011 was a decrease of approximately $2 million.

 

Management estimates that our combined federal and state tax rates will be 40%. The items accounting for the difference between income taxes computed at the statutory federal income tax rate and the income taxes reported on the statements of operations are as follows:

    December 31, 2010   December 31, 2010
Income tax expense (benefit) based on statutory rate   $ (20,400 )   (35 )%   $ (546,000 )   (35) %
Permanent differences   101,700     174 %   87,000     6 %
State income taxes benefit net of federal taxes   (3,000 )   (5) %   (122,000 )   (8) %
Permanent adjustment PPE   -     - %   (394,000)      (25) %
Change in valuation allowance   (990,495)     (1,699) %   975,000     62 %
Total taxes(benefits) on income   $ (912,195 )   (1,564 )%   $ -     -  

 

Topic 740 in the Accounting Standards Codification (ASC 740) prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At December 30, 2011, we have not taken any tax positions that would require disclosure under ASC 740.

 

We have analyzed our filing positions in all jurisdictions where we are required to file income tax returns and found no positions that would require a liability for unrecognized income tax benefits to be recognized. We are subject to possible tax examinations for the years 2008 through 2011. We deduct interest and penalties as interest expense on the financial statements.

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COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 14 - COMMITMENTS AND CONTINGENCIES

Capital leases: We lease computer hardware as a normal part of our operations. Certain leased computer hardware with a bargain purchase option are capitalized and classified as a capital lease. At December 30, 2011 and December 31, 2010, equipment under capital leases amounted to approximately $-0-, and $24,000 (net of accumulated amortization of $489), respectively. The present value of net minimum lease payments are reflected on our Balance Sheet under current liabilities as "Capital leases.”

 

Operating leases: We lease store facilities, vehicles, and equipment. Most of our store leases have terms that extend over three to five years and some are on a month-to-month basis. Some of the leases have cancellation provisions that allow us to cancel on 90 day notice. Lease obligations for the next five years, as of December 30, 2011, are as follows:

 

Year   Operating Lease Obligation
2012     $   943,085
2013   516,931
2014   330,656
2015   225,223
2016   106,351

 

Legal Proceeding: In December, 2011, Mr. Jeff Mitchell, our former Chief Financial Officer (“Plaintiff”), filed a lawsuit in Kootenai County, Idaho against the Company and Mr. Glenn Welstad, our CEO, alleging breach of contract, failure to pay wages, and for Director’s liability. Plaintiff is seeking damages, interest, and attorney’s fees. The Company vehemently disagrees with Plaintiff’s allegations and intends to vigorously defend this lawsuit.

 

Contingent payroll and other tax liabilities: In May and June of 2006, we acquired the operating assets of a number of temporary staffing stores. The entities that owned and operated these stores received stock in consideration of the transaction. As operating businesses prior to our acquisition, each entity incurred obligations for payroll withholding taxes, workers’ compensation insurance fund taxes, and other liabilities. We structured the acquisition as an asset purchase and agreed to assume only the liability for each entity’s accounts receivable financing line of credit. We also obtained representations that liabilities for payroll taxes and other liabilities not assumed by us would be paid by the entities, and in each case, those entities are contractually committed to indemnify and hold harmless Command Center, Inc. from unassumed liabilities.

 

Since the acquisitions, it came to our attention that certain tax obligations incurred on operations prior to our acquisitions have not been paid. The entities that sold us the assets (the “selling entities”) are primarily liable for these obligations. The owners of the entities may also be liable. In most cases, the entities were owned or controlled by our CEO.

 

Based on the information currently available, we estimate that the total state payroll and other tax liabilities owed by the selling entities is between $400,000 and $600,000 and that total payroll taxes due to the Internal Revenue Service is between $1 and $2 million. We have been advised by outside legal counsel that successor liability for the federal claims remains remote.

 

We have not accrued any liability related to these claims for state payroll taxes and total payroll taxes due to the Internal Revenue Service because we have been advised by outside legal counsel that the likelihood of successor liability for these claims remains remote. We would be adversely affected if the state or federal government was able to show that we are liable for these claims.

 

Leases on closed stores: During fiscal years 2008 and 2009, we closed a number of stores in response to economic conditions and a general downturn in business opportunities in certain markets. Management evaluated opportunities in those markets and held out hope for a recovery that would allow us to re-open the closed stores. During the first quarter of 2009, Management assessed the likelihood of reopening the closed stores in the next twelve months as remote. As a result, we began negotiating with landlords for termination of the closed store leases and are considering other options to reduce the lease obligations on the closed stores. With the determination that store re-openings are unlikely, we recorded a reserve for closed store leases. This amount represents Management’s best estimate of the amounts we were likely to pay in settlement of the outstanding lease obligations on the closed stores. Management has concluded that total lease obligations on closed stores at the period ended December 30, 2011 is approximately $83,000. Management has concluded that the potential liability for closed stores could be between $40,000 and $200,000.

 

Everyday Staffing, LLC: On June 30, 2006, we acquired certain assets at three staffing office locations from Everyday Staffing LLC (“Everyday Staffing”) in exchange for 579,277 shares of our common stock. At the time of the acquisitions, Michael Moothart, controlling member of the LLC, represented that all tax liabilities of Everyday Staffing had been paid. As a result of the acquisitions, we booked a note payable to Everyday Staffing in the amount of approximately $113,000. In early 2008, we received notice from the State of Washington that Everyday Staffing owed certain tax obligations to the State that that arose prior to the acquisition date. The State requested that we pay the amounts due under a theory of successor liability. the Washington Department of labor and Industries (the “Department”) issued Notices and Orders of Assessment of Industrial Insurance Taxes (“Notice(s)”) to us. The Notices claim and assess taxes of approximately $958,000. We strongly dispute both the alleged successor liability and also the monetary amount asserted by the Department. We are pursuing administrative remedies in order to vigorously contest the assertions of these Notices. In strongly disputing the claims of the Department, Management believes that the potential liability, if any, is not probable and is not reasonably estimable at this time. Accordingly, no liability has been established on our books for the amounts claimed. Management believes our liability, if any, from the claims and assessments of the Department are not reasonably likely to have a material adverse effect on our financial position, results of operations or cash flows in future periods.

 

In response to our position that we are not the legal successor to Everyday Staffing, the Department asserted its claim of successor liability against a second limited liability company, also known as Everyday Staffing LLC (“Everyday Staffing II”). Everyday Staffing II was organized by the members of the first limited liability company after the first Everyday Staffing LLC was administratively dissolved by the state. The assertion by the state of successor liability against Everyday Staffing II is consistent with the position advanced by us that Everyday Staffing II, and not Command Center, Inc. is the only successor to the entity against which the industrial insurance taxes were assessed.

 

In response to the state claims for payment of Everyday Staffing liabilities, we filed a lawsuit against Everyday Staffing, LLC and Mr. Moothart, seeking indemnification and monetary damages. On July 15, 2009, we obtained a judgment against Mr. Moothart and Everyday Staffing, LLC, jointly and severally, in the amount of $1.295 million. The collectability of this judgment is questionable. Glenn Welstad, our CEO, has a minority interest in Everyday Staffing as a passive investor.

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RESTATEMENT OF FINANCIAL STATEMENTS
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 15 - RESTATEMENT OF FINANCIAL STATEMENTS

In October 2011, we discovered that our workers compensation deposits for the years 2006 to 2008 with AIG were overstated by approximately $716,000, principally due to the misdirection of premium-related payments by our former insurance broker.

 

After discovering that our balance sheet contained an overstated asset, we treated the adjustment as a change in estimate and recorded an entry in our third quarter 2011 financial statements. This adjustment reduced the amount of our workers’ compensation deposits by approximately $716,000 and increased workers’ compensation insurance expense by the same amount. After our 2011 year end, we investigated this matter further and determined that the accounting treatment in the third quarter of 2011 was itself erroneous because the charge should have been recorded as a charge to the earliest opening retained earnings (accumulated deficit) balance reported. The actual correction was for the 2006 – 2008 periods when the broker had wrongfully appropriated the funds for insurance deposits.

 

The effects of these restatement adjustments for fiscal year 2010 include the reduction of the workers compensation deposits asset by approximately $716,000 in each of these two years and an increase in our accumulated deficit by the same amount in the same time periods. There were no changes to our Statements of Operations for these two fiscal years. The restatement adjustments also had the effect of increasing net income for the third quarter and first three quarters ended September 30, 2011 by approximately $0.01 per share. We have restated our accumulated deficit in the Statement of  Stockholders’ Equity for the correction at the earliest year presented by approximately $716,000.

 

A summary of the effects of the restatement are as follows:

 

  2011   2010
  As Reported   As Corrected   As Reported   As Corrected
Net Income  $           853,903    $          853,903    $     (1,560,352)    $     (1,560,352)
Accumulated Deficit  $   (53,245,744)    $   (53,245,744)    $   (53,383,757)    $   (54,099,647)
Earnings Per Share  $                 0.02    $                 0.02    $              (0.03)    $              (0.03)

 

Also see Note-13 Income Tax concerning a restatement of  previous deferred tax assets, which were fully offset by the allowance amount, and thereby had no effect upon earnings information.

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SUBSEQUENT EVENTS
12 Months Ended
Dec. 30, 2011
Notes to Financial Statements
Note 16 - SUBSEQUENT EVENTS

On January 4, 2012, through our wholly-owned and newly formed subsidiary Disaster Recovery Services, Inc., we entered into an asset purchase agreement (the “agreement”), with DR Services of Louisiana, LLC, a Louisiana Limited Liability Company, and Environmental Resource Group, LLC, a Louisiana Limited Liability Company (collectively “DRS”). Under the terms of the agreement, we acquired substantially all of DRS’s assets in exchange for $300,000 ($150,000 paid at closing and $150,000 to be paid in six subsequent monthly installments of $25,000) and 1.5 million shares of our restricted common stock. There is also a contingent fee of up to an additional 1.5 million shares of our restricted common stock based on certain enumerated operating performance standards over the next 2 years.

 

Prior to the agreement, DRS had subcontracted with us to provide temporary employment services in various disaster relief projects, such as flood recovery work in several states.

 

On  March 15, 2012, we issued  36,000 shares to our investor relations firm for services valued at approximately $13,000.

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