x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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WASHINGTON
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91-2079472
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(State
of other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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3773
West Fifth Avenue
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83854
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Page
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PART
I – FINANCIAL INFORMATION
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Item
1: Financial Statements
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Consolidated
Balance Sheets, March 26, 2010 (unaudited) and December 25,
2009
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4
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Consolidated
Statements of Operations for the thirteen week period ended March 26, 2010
and March 27, 2009 (unaudited)
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5
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Consolidated
Statements of Cash Flows for the thirteen weeks ended March 26, 2010 and
March 27, 2009
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6
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Notes
to Financial Statements
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7
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Item
2: Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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14
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Item
3: Quantitative and Qualitative Disclosures about Market
Risk
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19
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Item
4: Controls and Procedures
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19
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PART
II – OTHER INFORMATION
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Item
1: Legal Proceedings
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20
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Item
2: Unregistered Sales of Equity Securities and Use of
Proceeds
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20
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Item
3: Default on Senior Securities
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20
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Item
4: Removed and Reserved
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20
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Item
5: Other Information
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21
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Item
6: Exhibits
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21
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Signatures
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22
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March
26, 2010
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December
25, 2009
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||||||
Unaudited
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||||||||
Assets
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||||||||
CURRENT
ASSETS:
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|
|||||||
Cash
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$ | 53,565 | $ | 69,971 | ||||
Accounts
receivable trade, net of allowance for bad debts of
$300,000
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||||||||
at
March 26, 2010 and December 25, 2009
|
2,059,220 | 5,025,113 | ||||||
Other
receivables - current
|
37,477 | 37,059 | ||||||
Prepaid
expenses, deposits, and other
|
309,313 | 437,483 | ||||||
Current
portion of workers' compensation risk pool deposits
|
1,200,000 | 1,300,000 | ||||||
Total
current assets
|
3,659,575 | 6,869,626 | ||||||
PROPERTY
AND EQUIPMENT, NET
|
639,627 | 877,827 | ||||||
OTHER
ASSETS:
|
||||||||
Workers'
compensation risk pool deposits
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2,077,569 | 2,318,805 | ||||||
Goodwill
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2,500,000 | 2,500,000 | ||||||
Intangible
assets - net
|
287,834 | 323,937 | ||||||
Total
other assets
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4,865,403 | 5,142,742 | ||||||
$ | 9,164,605 | $ | 12,890,195 | |||||
Liabilities
and Stockholders' Equity (deficeit)
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
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$ | 1,904,130 | $ | 2,174,503 | ||||
Checks
issued and payable
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$ | 419,299 | $ | - | ||||
Line
of credit facility
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- | 2,907,521 | ||||||
Accrued
wages and benefits
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809,338 | 694,079 | ||||||
Other
current liabilities
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224,491 | 224,491 | ||||||
Current
portion of note payable
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- | 9,520 | ||||||
Short-term
note payable, net of discount
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913,149 | 1,025,000 | ||||||
Short-term
note liquidty redemption payable
|
186,939 | |||||||
Stock
warrant liability
|
731,325 | 413,026 | ||||||
Workers'
compensation and risk pool deposits payable
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347,595 | 501,423 | ||||||
Current
portion of workers' compensation claims liability
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1,200,000 | 1,300,000 | ||||||
Total
current liabilities
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6,549,326 | 9,436,502 | ||||||
LONG-TERM
LIABILITIES:
|
||||||||
Note
payable, less current portion
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- | 71,447 | ||||||
Common
stock to be issued
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1,500,000 | 922,000 | ||||||
Workers'
compensation claims liability, less current portion
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2,700,000 | 2,800,000 | ||||||
Total
long-term liabilities
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4,200,000 | 3,793,447 | ||||||
Total
liabilities
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10,749,327 | 13,229,949 | ||||||
COMMITMENTS
AND CONTINGENCIES (Notes 8 and 9)
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||||||||
STOCKHOLDERS'
EQUITY:
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||||||||
Preferred
stock - 5,000,000 shares, $0.001 par value, authorized;
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||||||||
no
shares issued and outstanding
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- | - | ||||||
Common
stock - 100,000,000 shares, $0.001 par value, authorized;
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||||||||
38,156,035
and 37,212,922 shares issued and outstanding, respectively
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38,156 | 37,213 | ||||||
Additional
paid-in capital
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51,913,605 | 51,446,438 | ||||||
Accumulated
deficit
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(53,536,483 | ) | (51,823,405 | ) | ||||
Total
stockholders' equity
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(1,584,722 | ) | (339,754 | ) | ||||
$ | 9,164,605 | $ | 12,890,195 |
Thirteen
Weeks Ended
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||||||||
March
26,
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March
27
|
|||||||
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2010
|
2009
|
||||||
REVENUE: | ||||||||
Revenue
from services
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$ | 11,878,885 | $ | 12,793,065 | ||||
Other
income
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20,871 | 30,238 | ||||||
11,899,756 | 12,823,303 | |||||||
COST
OF SERVICES:
|
||||||||
Temporary
worker costs
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8,548,674 | 8,875,966 | ||||||
Workers'
compensation costs
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427,229 | 688,487 | ||||||
Other
direct costs of services
|
50,369 | 150,782 | ||||||
9,026,272 | 9,715,235 | |||||||
GROSS
PROFIT
|
2,873,484 | 3,108,068 | ||||||
SELLING,
GENERAL, AND ADMINISTRATIVE EXPENSES:
|
||||||||
Personnel
costs
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1,736,325 | 2,261,119 | ||||||
Selling
and marketing expenses
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82,715 | 60,284 | ||||||
Transportation
and travel
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107,556 | 194,051 | ||||||
Office
expenses
|
115,566 | 307,332 | ||||||
Legal,
professional and consulting
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188,878 | 318,891 | ||||||
Depreciation
and amortization
|
143,164 | 210,780 | ||||||
Rents
and leases
|
409,923 | 528,825 | ||||||
Rents
and leases- closed store reserve
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- | 300,000 | ||||||
Other
expenses
|
640,434 | 695,806 | ||||||
3,424,561 | 4,877,088 | |||||||
LOSS
FROM OPERATIONS
|
(551,077 | ) | (1,769,020 | ) | ||||
OTHER
INCOME (EXPENSE):
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||||||||
Interest
expense and other financing expense
|
(159,734 | ) | (318,761 | ) | ||||
Loss
on debt extinguishment
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(844,798 | ) | ||||||
Change
in fair value of warrant liability
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(157,469 | ) | ||||||
(1,162,001 | ) | (318,761 | ) | |||||
BASIC
AND DILUTED NET LOSS
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$ | (1,713,078 | ) | $ | (2,087,781 | ) | ||
BASIC
AND DILUTED LOSS PER SHARE
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$ | (0.05 | ) | $ | (0.06 | ) | ||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING
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37,465,878 | 36,328,844 |
Thirteen
Weeks Ended
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||||||||
March
26,
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March
27,
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|||||||
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2010
|
2009
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||||||
Increase
(Decrease) in Cash
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||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
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||||||||
Net
loss
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$ | (1,713,078 | ) | $ | (2,087,781 | ) | ||
Adjustments
to reconcile net loss to net cash
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||||||||
used
by operating activities:
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||||||||
Depreciation
and amortization
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143,164 | 210,779 | ||||||
Gain
on sale of building
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(25,550 | ) | - | |||||
Write-off
of fixed assets
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- | 53,415 | ||||||
Amortization
of note discount
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- | 65,000 | ||||||
Closed
stores reserve
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- | 300,000 | ||||||
Loss
on debt extinquishment
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844,798 | - | ||||||
Change
in fair value of stock warrant liability
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157,469 | - | ||||||
Common
stock issued for interest and services
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11,400 | 10,759 | ||||||
Common
stock issued for rent
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36,951 | - | ||||||
Changes
in assets and liabilities:
|
||||||||
Accounts
receivable - trade
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50,248 | 461,451 | ||||||
Other
receivables
|
(418 | ) | - | |||||
Other
current liabilities
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- | 61,710 | ||||||
Prepaid
expenses, deposits and other
|
128,170 | 311,142 | ||||||
Workers'
compensation risk pool deposits
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341,236 | 140,562 | ||||||
Accounts
payable
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(270,373 | ) | 398,428 | |||||
Accrued
wages & benefits
|
115,259 | (243,344 | ) | |||||
Workers'
compensation insurance payable
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(153,828 | ) | (456,925 | ) | ||||
Workers'
compensation claims liability
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(200,000 | ) | 113,628 | |||||
Net
cash used by operating activities
|
(534,552 | ) | (661,176 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Proceeds
on sale of building
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156,690 | - | ||||||
Net
cash provided by investing activities
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156,690 | - | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
(payments) on line of credit facility, net
|
8,124 | (305,704 | ) | |||||
Change
in checks issued and payable
|
419,299 | - | ||||||
Costs
of common stock offering and registration
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15,000 | - | ||||||
Principal
payments on notes payable
|
(80,967 | ) | (502,326 | ) | ||||
Net
cash provided (used) by financing activities
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361,456 | (808,030 | ) | |||||
NET
INCREASE (DECREASE) IN CASH
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(16,406 | ) | (1,469,206 | ) | ||||
CASH,
BEGINNING OF PERIOD
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69,971 | 2,174,960 | ||||||
CASH,
END OF PERIOD
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$ | 53,565 | $ | 705,754 | ||||
NONCASH
INVESTING AND FINANCING ACTIVITIES:
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||||||||
Fairvalue of
Warrants issued in connection with
debt extinguishment
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$ | 161,000 | $ | - | ||||
Common stock issued
in connection with short
term debt refinance
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$ | 1,500,000 | $ | - | ||||
Line
of credit settled with accounts recievable
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$ | 2,915,645 | $ | - |
Exercise Price
|
Ending Period of Exercise Price
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||
$ | 0.08 |
March
15, 2011
|
|
$ | 0.16 |
March
15, 2012
|
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$ | 0.32 |
March
15, 2013
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$ | 0.50 |
March
15, 2014
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$ | 1.00 |
March
15, 2015.
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2010
|
2009
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|||||||
Warrants
outstanding at beginning of period
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10,762,803 | 7,762,803 | ||||||
Issued
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1,500,000 | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
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- | - | ||||||
Warrants
outstanding at end of period
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12,262,803 | 7,762,803 |
Number
|
Expiration
Date
|
|||||
Exercisable
at $1.25 per share
|
6,312,803 |
06/20/13
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Exercisable
at $1.50 per share
|
250,000 |
04/14/12
|
||||
Exercisable
at $0.15 per share
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4,200,000 |
04/01/14
|
||||
Exercisable
at between $0.08 and $1.00 per share
|
1,500,000 |
03/15/11
to 03/15/15
|
||||
12,262,803 |
Exercise
Price
|
Ending
Period of Exercise Price
|
||
$ | 0.08 |
April
15,
2011
|
|
$ | 0.16 |
April
15,
2012
|
|
$ | 0.32 |
April
15,
2013
|
|
$ | 0.50 |
April
15,
2014
|
|
$ | 1.00 |
April
15,
2015
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Part
I, Item 2.
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Management’s
Discussion and Analysis or Plan of
Operations.
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Thirteen
Weeks Ended
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||||||||||||||||
March
26,
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March
27,
|
|||||||||||||||
2010
|
2009
|
|||||||||||||||
REVENUE:
|
$ | 11,899,756 | $ | 12,823,303 | ||||||||||||
COST
OF SERVICES:
|
||||||||||||||||
Temporary
worker costs
|
8,548,674 | 71.8 | % | 8,875,966 | 69.2 | % | ||||||||||
Workers'
compensation costs
|
427,229 | 3.6 | % | 688,487 | 5.4 | % | ||||||||||
Other
direct costs of services
|
50,369 | 0.4 | % | 150,782 | 1.2 | % | ||||||||||
9,026,272 | 75.9 | % | 9,715,235 | 75.8 | % | |||||||||||
GROSS
PROFIT
|
2,873,484 | 24.1 | % | 3,108,068 | 24.2 | % | ||||||||||
SELLING,
GENERAL, AND ADMINISTRATIVE EXPENSES:
|
||||||||||||||||
Personnel
costs
|
1,736,325 | 14.6 | % | 2,261,119 | 17.6 | % | ||||||||||
Selling
and marketing expenses
|
82,715 | 0.7 | % | 60,284 | 0.5 | % | ||||||||||
Transportation
and travel
|
107,556 | 0.9 | % | 194,051 | 1.5 | % | ||||||||||
Office
expenses
|
115,566 | 1.0 | % | 307,332 | 2.4 | % | ||||||||||
Legal,
professional and consulting
|
188,878 | 1.6 | % | 318,891 | 2.5 | % | ||||||||||
Depreciation
and amortization
|
143,165 | 1.2 | % | 210,780 | 1.6 | % | ||||||||||
Rents
and leases
|
409,923 | 3.4 | % | 828,825 | 6.5 | % | ||||||||||
Other
expenses
|
640,434 | 5.4 | % | 695,806 | 5.4 | % | ||||||||||
3,424,561 | 28.8 | % | 4,877,088 | 38.0 | % | |||||||||||
LOSS
FROM OPERATIONS
|
(551,077 | ) | -4.6 | % | (1,769,020 | ) | -13.8 | % | ||||||||
OTHER
INCOME (EXPENSE):
|
(1,162,001 | ) | -9.8 | % | (318,761 | ) | -2.5 | % | ||||||||
NET
LOSS
|
$ | (1,713,078 | ) | -14.4 | % | $ | (2,087,781 | ) | -16.3 | % |
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
do not have an independent Board of Directors, an independent Audit
Committee or a board member designated as an independent financial expert
for the Company. The Board of Directors and Audit Committee are comprised
largely of members of management. As a result, there may be lack of
independent oversight of the management team, lack of independent review
of our operating and financial results, and lack of independent review of
disclosures made by the Company.
|
|
·
|
We
do not have an independent Board of Directors, an independent Audit
Committee or a board member designated as an independent financial expert
for the Company. The Board of Directors and Audit Committee are comprised
largely of members of management. As a result, there may be lack of
independent oversight of the management team, lack of independent review
of our operating and financial results, and lack of independent review of
disclosures made by the Company.
|
|
·
|
As
a relatively new Company, we continue to face challenges with hiring and
retaining qualified personnel in the finance department. In addition, we
continue to labor under a reduced staff as a result of a downsized
accounting department as part of a larger cost cutting program.
Limitations in both the number of personnel currently staffing the finance
department, and in the skill sets employed by such persons, create
obstacles to the segregation of duties essential for sound internal
controls.
|
|
·
|
During
the first quarter of the fiscal year ending December 24, 2010, we
experienced a higher than normal introduction of new finance and
accounting staff members and the reduced business process knowledge
available to these new staff members, some phases of the accounting work
including reconciliations and recurring entries and adjusting journal
entries were not completed on a timely basis. Completion of the financial
statements and associated notes for the quarter required the application
of additional third-party resources subsequent to quarter end and prior to
the completion of the independent
review.
|
|
·
|
Documentation
of proper accounting procedures is not yet complete and some of the
documentation that exists has not yet been reviewed or approved by
management, or has not been properly communicated and made available to
employees responsible for portions of the internal control
system.
|
|
·
|
Add
to our existing accounting staff when growth resumes and the economic
environment stabilizes. In the meantime, steps are being taken to
segregate duties by spreading specific control activities such as account
reconciliations, data entry verification, and transaction approval
procedures among existing staff and additional third-party resources who
are independent of the transactions or reconciliations over which they are
assigned review functions. While this step will help, we do not have
enough internal professional accounting staff to allow segregation of the
more technical accounting functions. We may retain experts when necessary
to address complex transactions as a further means of limiting risk from
this material weakness. We will continue to monitor this material weakness
and will take steps throughout 2010 to minimize risk when
possible.
|
|
·
|
Identify
and nominate additional independent members of the Board of Directors and
assign these individuals to the committees of the board, including the
Audit Committee. In addition, we will identify a qualified independent
person on the Board and designate him or her as the financial
expert.
|
|
·
|
Provide
focused on-the-job training and orientation to new staff members to align
their performance with the tasks required to produce complete and accurate
financial reports on a timely
basis.
|
Exhibit No.
|
Description
|
Page #
|
||
31.1
|
Certification
of Glenn Welstad, Chief Executive Officer of Command Center, Inc. pursuant
to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
||
31.2
|
Certification
of Ralph Peterson, Chief Financial Officer of Command Center, Inc.
pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
||
32.1
|
Certification
of Glenn Welstad, Chief Executive Officer of Command Center, Inc. pursuant
to 18 U.S.C. Section 1350, as adopted in Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
||
32.1
|
|
Certification
of Ralph Peterson, Chief Financial Officer of Command Center, Inc.
pursuant to 18 U.S.C. Section 1350, as adopted in Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
/s/Glenn
Welstad
|
President
and CEO
|
Glenn
Welstad
|
May
17, 2010
|
|||
Signature
|
Title
|
Printed
Name
|
Date
|
|||
/s/Ralph
Peterson
|
CFO,
Principal Financial Officer
|
Ralph
Peterson
|
May
17, 2010
|
|||
Signature
|
|
Title
|
|
Printed
Name
|
|
Date
|