Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the fiscal year ended December 30, 2016
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Commission file number: 000-53088
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Command Center, Inc.
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(Exact
Name of Registrant as Specified in its Charter)
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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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3609 S. Wadsworth Blvd., Suite 250 Lakewood, Co.
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80235
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(866)
464-5844
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(Registrant’s
Telephone Number, including Area Code)
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Securities
Registered Pursuant to Section 12(b) of the
Act: None
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Securities
Registered Pursuant to Section 12(g) of the Act: Common
Stock, par value $0.001
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(Title of
Class)
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes ☐·No☑
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Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐·No☑
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Indicate
by checkmark whether the registrant (1) 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 ☑·No ☐
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Indicate
by check mark whether the Registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§ 229.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes ☑·No ☐
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Indicate
by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to the Form 10-K.
☑
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Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of
“Accelerated filer and large accelerated filer” in Rule
12b-2 of the Exchange Act (Check one): Large Accelerated
Filer ☐ Accelerated
Filer ☐·Non-Accelerated
Filer ☐·Smaller Reporting
Company ☑
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Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act).
Yes ☐·No☑
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The
aggregate market value of the voting and non-voting common equity
held by non-affiliates, computed by reference to the price at which
the common equity was last sold, as of the last business day of the
second fiscal quarter, June 24, 2016, was approximately
$24,296,595.
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As of
March 30, 2017, there were 60,634,650 shares of the
registrant’s common stock outstanding.
The
following document is incorporated by reference into Parts I, II,
III, and IV of this report: None.
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Command Center, Inc.
2016 Annual Report on Form 10-K
Table of Contents
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Page
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PART I
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Item
1.
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Business
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3
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Item
1A.
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Risk
Factors
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Item
1B.
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Unresolved
Staff Comments
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11
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Item
2.
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Description
of Properties
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11
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Item
3.
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Legal
Proceedings
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11
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Item
4.
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Mine
Safety Disclosure
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11
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PART II
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Item
5.
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Markets
for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
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11
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Item
6.
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Selected
Financial Data
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12
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Item
7.
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Management’s
Discussion and Analysis of Financial Conditions and Results of
Operations
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13
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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16
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Item
8.
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Financial
Statements and Supplementary Data
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17
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Item
9.
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Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure
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36
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Item
9A.
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Controls
and Procedures
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36
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Item
9B.
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Other
Information
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36
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PART III
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Item
10.
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Directors,
Executive Officers, and Corporate Governance
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37
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Item
11.
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Executive
Compensation
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42
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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44
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Item
13
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Certain
Relationships and Related Transactions, and Director
Independence
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47
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Item
14.
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Principal
Accountant Fees and Services
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48
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PART IV
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Item
15.
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Exhibits,
Financial Statement Schedules
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49
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Signatures
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50
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2
Special Note Regarding Forward-Looking Statements
This
Form 10-K may contain forward-looking statements. These statements
relate to our expectations for future events and future financial
performance. Generally, the words “intend”,
“expect”, “anticipate”,
“estimate”, or “continue” and similar
expressions identify forward-looking statements. Forward-looking
statements involve risks and uncertainties, and future events and
circumstances could differ significantly from those anticipated in
the forward-looking statements. These statements are only
predictions. Factors which could affect our financial results are
described in Item 7 of Part II of this Form 10-K. Readers are
cautioned not to place undue reliance on these forward-looking
statements. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. We
do not, nor have we authorized any other person to, assume
responsibility for the accuracy and completeness of the
forward-looking statements. We undertake no duty to update any of
the forward-looking statements after the date of this report,
whether as a result of new information, future events, or
otherwise. You are advised to consult further disclosures we may
make on related subjects in our filings with the Securities and
Exchange Commission (“SEC”). Our expectations, beliefs,
or projections may not be achieved or accomplished. In addition to
other factors discussed in this report, some of the important
factors that could cause actual results to differ from those
discussed in the forward-looking statements include risk factors
described in Item 1A.
PART I
Item 1. Business
Introduction and General Background
We are
a staffing company, operating primarily in the manual on-demand
labor segment of the staffing industry. In 2016, we employed
approximately 34,000 workers providing services to approximately
3,200 customers, primarily in the areas of light industrial,
hospitality and event services. Our customers range in size from
small businesses to large corporate enterprises. All of our
workers, which we refer to as “field team members” are
employed by us. Most of our work assignments are short term and
many are filled on little notice from our customers. In addition to
short and longer term temporary work assignments, we sometimes
recruit and place workers in temp-to-hire situations.
As
of December 30, 2016, we owned and operated 64 on-demand labor
locations, or stores, across 21 states. We currently operate as
Command Center, Inc. Prior to 2014, we also operated through our
former wholly-owned subsidiary, Disaster Recovery Services, Inc.,
(“DR Services”). We ceased the corporate existence of
DR Services as of April 2016. We have also created a separate,
dormant entity, ComStaff, Inc. All financial information is
consolidated and reported in our consolidated financial statements.
In 2015 we moved our corporate headquarters from Coeur
d’Alene, Idaho to Lakewood, Colorado.
In
prior years we were organized as Command Staffing, LLC. We were
organized on December 26, 2002 and commenced operations in 2003 as
a franchisor of on-demand labor businesses. In November 2005, the
assets of Command Staffing, LLC and Harborview Software, Inc., an
affiliated company that owned the software used in the operation of
our on-demand labor stores, were acquired by Temporary Financial
Services, Inc., a public company. The transaction was accounted for
as if Command Staffing, LLC was the accounting acquirer. In
November 2005, we changed our name to Command Center,
Inc.
Industry Overview
The
on-demand labor industry developed based on the business need for
flexible staffing options. Many businesses operate in a cyclical
production environment and find it difficult to staff according to
their changing production cycles. Companies also desire a way to
temporarily replace full-time employees when absent due to illness,
vacation, or unplanned termination. On-demand labor offers
employers the opportunity to immediately respond to changes in
staffing needs, reduce the costs associated with recruiting and
interviewing, eliminate unemployment and workers’
compensation exposure, and draw from a larger employment
pool.
The
on-demand labor industry continues to develop specialized market
segments that reflect the diverse needs of the businesses it
serves. Technical skills, prior work history, duration of
assignment, and background check requirements vary among industries
and employers. We operate primarily within the short-term,
semi-skilled and unskilled segments of the on-demand labor
industry. We endeavor to customize our services according to the
unique opportunities and assets presented by each of our locations
while leveraging our overall size. This approach reduces our
overhead costs, improves economies of scale, establishes procedural
uniformity and internal controls, and creates a predictable
internal environment for our field team members.
3
Business
Strategic Growth Opportunities: We continue to
build our network of on-demand labor stores. We supply a quality
workforce and we always strive to consistently place the right
candidates in the right jobs. We have more than 60 locally-managed
stores throughout the United States that serve as trusted partners
to businesses and job seekers alike. Clients, representing a
variety of industries, trust us to learn their business and to plan
ahead to address their dynamic staffing needs. Job seekers trust us
to understand their complete employment picture and place them in
on-demand, temporary, temp-to-hire, or permanent placement
positions where they can grow, thrive, and provide immediate value.
The total number of stores open and operating increased from 57 at
the end of fiscal year 2015 to 64 at the end of fiscal year 2016 as
we expanded our operations while continuing to improve our business
fundamentals. In 2017, we plan to continue our strategy of
carefully balancing store expansion against return on investment.
In doing so, we expect to concentrate our revenue growth efforts
primarily in sales growth within our existing store structure,
while opening new stores in areas we believe present exceptional
opportunities. In all of our growth opportunities, we continue to
emphasize the fundamentals of our business: sell to quality
accounts, increase margins where possible and provide exceptional
customer service.
On-demand Labor Store Operations: In 2016, we continued
to focus on the basics of our business: consistency and excellence
in service, increases in margins, containment of costs, selling
techniques, and company culture. We concentrated on these measures
to improve profitability and solidify the groundwork for future
growth.
During
the year, we employed approximately 34,000 field team members and
serviced approximately 3,200 customers. Our stores are
located across 21 states. Our stores are often located in proximity
to concentrated commercial and industrial areas typically with
access to public transportation and other services that are
important to our field team members. We have developed a store
demographic model to identify and qualify future possible store
locations.
We
manage our field operations using in-store personnel, area managers
and corporate management personnel. Where appropriate, we also
include business development specialists to help drive business to
our stores. The intention and structure of our compensation plans
for store managers, area managers, and business development
specialists have been designed to aid in securing and retaining the
qualified personnel needed to meet our business, financial, and
growth objectives. Our personnel practices are designed to support
our need to attract, screen, hire, train, support and retain
qualified personnel at all levels of our organization. We take best
practices from our higher performing stores and propagate these
practices across all operating groups to produce consistent
execution and improvements in company-wide
performance.
Our Temporary Staff (Field Team
Members): Field team members are our
product and our key asset. Our success is highly dependent on our
ability to attract, train, motivate, and reward our field team
members. We have invested in many proprietary programs designed to
create a long term relationship with top-performing field team
members. These programs include health insurance, bonus programs,
safety rewards, longevity programs, training programs, and career
services.
The
pool of qualified, available field team members varies by location.
For most of our stores, the supply of workers is sufficient and
diverse enough to meet current client needs. However, in some
locations, worker availability is a limiting factor. We continue to
seek additional field team members through internet postings,
newspaper advertisements, printed flyers, store displays, career
fairs, and word-of-mouth.
Our Customers: In 2016, we serviced
approximately 3,200 customers in a variety of industries. Our 10
largest customers accounted for approximately 24% of our revenue in
2016. The top six industries we served retail, construction,
warehousing, industrial/manufacturing, transportation, and
hospitality. In 2015, we serviced approximately 3,300 customers in
a variety of industries. Our 10 largest customers accounted for
approximately 25% of our revenue in 2015. The top six industries we
served were retail, construction, warehousing,
industrial/manufacturing, transportation, and
hospitality.
Our Marketing Strategy: We recognize that
our customers are too busy to have time consumed by a traditional
sales person, but rather are looking for a consultant that provides
smart solutions to their current challenges. Our unique sales
process starts by learning about potential customers and
facilitating conversations with them where we offer support
and contribute to a growing relationship. Together, we create an
action plan that draws on our core competencies and solves our
potential client's needs. Once we have resolved one need, we
consistently strive to meet future needs, with the goal of
converting a business prospect to a repeat customer. We serve many
of our existing customers from multiple stores, across multiple
cities, and in many cases, across multiple states. We have tailored
programs to specifically address the needs of these national
accounts and plan to continue our efforts to expand our national
accounts in the years ahead.
4
Our Workers’ Compensation Coverage: In accordance
with the laws of every state, we provide our temporary workers and
our full time staff with workers’ compensation insurance.
Currently, we are covered under a large deductible policy with ACE
American Insurance Company ("ACE") where we have primary
responsibility for claims under the policy. Under our current
policy which has been in place since April 1, 2014, we are
responsible for covered losses and expenses up to $500,000 per
incident. Amounts in excess of $500,000 are the responsibility of
our workers’ compensation insurance provider. From April 1,
2012 through March 31, 2014 we were covered under a large
deductible policy issued by Dallas National Insurance. Under the
prior policy, we are responsible for covered losses and expenses up
to $350,000 per incident. Amounts in excess of $350,000 are the
responsibility of our workers’ compensation insurance
provider. Our policy from April 1, 2011 through March 31, 2012 was
a guaranteed cost policy where we were fully insured on all claims
occurring in covered states. Our policies before April 1, 2011
were large deductible policies similar to our current coverage.
Under these prior policies, we still have a primary responsibility
for all claims occurring before April 1, 2011 until all claims are
resolved completely, up to our deductible of $250,000 on a per
person basis. Amounts in excess of $250,000 are the responsibility
of our previous workers’ compensation insurance
providers.
For
workers’ compensation claims originating in Washington and
North Dakota, we pay workers’ compensation insurance premiums
and obtain full coverage under mandatory state administered
programs. Our liability associated with claims in these states is
limited to our premium payments.
Our Safety Program: To protect our workforce and
help control workers’ compensation insurance rates, we
maintain several company-wide safety programs designed to increase
awareness of safety issues. We provide safety training through
videos, employee safety manuals, and safety testing. Managers often
conduct job site safety inspections on new jobs to ensure that our
field team members are working in a safe environment. We encourage
safe work behavior through an incentive program that rewards our
field team members for working accident free. We also encourage our
field team members to report unsafe working conditions. We evaluate
the risk profile of the work we undertake on an ongoing basis and
sometimes restrict classes of work in order to minimize
risk.
Our Seasonality: Some of the industries in which
we operate are subject to seasonal fluctuation. Many of the jobs
filled by field team members are outdoor jobs that are generally
performed during the warmer months of the year. As a result,
activity increases in the spring and continues at higher levels
through summer, then begins to taper off during fall and through
winter. Seasonal fluctuations are typically less in the western and
southwestern parts of the United States where many of our stores
are located. These fluctuations in seasonal business affect
financial performance from period to period. Severe weather in any
of our locations for prolonged periods has the potential to impair
our business within these geographies given the outdoor nature of
much of our assignments.
Our Competition: The manual labor sector of the
on-demand labor industry in which we operate is largely fragmented
and highly competitive, with low barriers to entry. Our competitors
range in size from small, local or regional operators with five or
fewer locations to large, multi-national operations with hundreds
of locations.
The
primary competitive factors in our market segment include price,
the ability to timely provide the requested workers, and overall
quality of service. Secondary factors include worker quality and
performance, efficiency, the ability to meet the
business-to-business vendor requirements, name recognition,
established reputation, and customer relationships. While barriers
to entry are low, businesses operating in this sector of the
on-demand labor industry do require access to significant working
capital, particularly in the spring and summer when seasonal
staffing requirements are higher. Lack of working capital can be a
significant impediment to growth for small, local, and regional
on-demand labor providers. In addition, the growth in government
regulation is also creating a barrier to entry as many smaller
firms cannot profitably comply with the administrative burden of
the new regulations.
Our Trademarks and Trade Names: We have
registered “Command,” “Command Center,”
“Command Staffing,” “Command Labor,”
“Real Jobs for Real People,” “Bakken
Staffing.” “Disaster Recovery Services,”
“Apply Today, Daily Pay,” “A Different Kind of
Labor Place,” and “Labor Commander,” as service
marks with the U.S. Patent and Trademark Office.
Our Intellectual Property: We have proprietary
software systems in place to handle most aspects of our operations,
including temporary staff dispatch activities, invoicing, accounts
receivable, and payroll. Our software systems also provide internal
control over our operations, as well as produce internal management
reports necessary to track the financial performance of individual
stores. We utilize a dashboard-type system to provide management
with critical information and we refine our systems and processes
based on the feedback we receive. Our proprietary software systems
are not patented and are not licensed to or used by any other
organization. We have invested in off-site back-up and storage
systems that we believe provide reasonable protections for our
electronic information systems against breakdowns as well as other
disruptions and other unauthorized intrusions. Any failure in our
systems could have an adverse effect on our
operations.
Our Real Property: We lease the real property for of
all of our store locations and our corporate office. All of these
properties are leased at market rates that vary, depending on
location. Each store is between 1,000 and 5,000 square feet,
depending on locations and market conditions. We believe that our
corporate office and each of the store locations are adequate for
our current needs.
5
Our Employees: We currently employ a staff of
approximately 28 at our corporate headquarters in Lakewood,
Colorado. The number of employees at the corporate headquarters is
not expected to increase significantly over the next year. We also
employ approximately 191 field operations staff located at the
various on-demand labor stores. During fiscal year 2016, we
employed approximately 34,000 temporary workers. We are the
employer of record for our temporary workers and, as such, are
responsible for collecting withholding taxes and for paying
employer contributions for social security, unemployment tax,
workers’ compensation, other insurance programs and all other
governmental requirements imposed on employers. In addition to
completing the Form I-9 required by the Department of Homeland
Security, we also confirm the identity and work eligibility of each
applicant through the federal E-Verify system.
Environmental Concerns: Because we are a service business,
federal, state, or local laws that regulate the discharge of
materials into the environment do not impact our
business.
Available Information: We make available, free of
charge, through the investor section of our website, our annual
report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and all amendments to those reports. These
reports are available as soon as reasonably practicable after such
material is electronically filed with or furnished to the SEC.
Charters adopted by the Audit, Compensation, Nominating, and
Governance Committees of our Board of Directors are also available
on the website as well as the Corporate Governance Guidelines, the
Standards of Ethics and Business Conduct and the Policy on Roles
and Responsibilities of the Chairman of the Board. Our website
address is: www.commandonline.com. The information contained on our
website, or on other websites linked to our website, is not part of
this report.
You may
also read and copy any materials we file with the SEC at the
SEC’s Public Reference Room, located at 100 F Street, N.E.,
Washington, DC 20549, on official business days during the hours of
10:00 am to 3:00 pm. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at
http://www.sec.gov.
ITEM 1A. RISK FACTORS
Our common stock value and our business, results of
operations, cash flows and financial condition are subject to
various risks, including, but not limited to those set forth below.
If any of the following risks actually occurs, our common stock,
business, results of operations, cash flows and financial condition
could be materially adversely affected. These risk factors should
be carefully considered together with the other information in this
Annual Report on Form 10-K, including the risks and uncertainties
described under the heading “Special Note Regarding
Forward-Looking Statements.” If any of the events described
in the risk factors below actually occur, our business, financial
condition or results of operations could suffer significantly. In
such case, the value of your investment could decline and you may
lose all or part of the money you paid to buy our common
stock.
Our business is impacted by fluctuations in the general
economy. The staffing needs of our customers vary
greatly with the overall condition of the economy. While general
economic conditions appear to be improving, the changes are
gradual, and many customers are limiting and may continue to limit
their spending on the services we provide, which could limit our
growth or cause a reduction in our sales, thereby having a material
adverse effect on our financial and operating performance.
Deterioration of general economic conditions could have an adverse
material effect on our business, financial condition and results of
operations.
We are vulnerable to downturns in regional and local
economies. As of March 30, 2017, we own and operate 65
stores located across 21 states. As such, we are subject to
regional and local economic conditions in many markets.
Additionally, our new stores are sometimes placed in metropolitan
areas where we have one or more existing stores, increasing our
exposure to future economic weakness in those local areas.
Deterioration in regional and local economic conditions in the
areas in which we operate could have a material adverse impact on
our business, financial condition and results of
operations.
Seasonal fluctuations in demand for the services of our temporary
workers in certain markets may adversely affect our revenue and
financial performance in the fall and winter months.
Revenues generated from stores in markets subject to seasonal
fluctuations will be less stable and may be lower than in other
markets. Locating stores in highly seasonal markets involves higher
risks. Our individual store revenue can fluctuate significantly on
both a quarter over quarter and year over year basis depending on
the local economic conditions and need for temporary labor services
in the local economy. One of our goals is to increase the diversity
of clients and industries we service at both the store and the
company level. We believe this will reduce the potential negative
impact of an economic downturn in any one industry or region. To
the extent that we consider the opening of new stores, we intend to
select store locations with a view to maximizing total long-term
return on our investment in stores, personnel, marketing and other
fixed and sunk costs. However, there can be no assurance that our
profitability will not be adversely affected by low returns on
investment in certain highly seasonal markets. Weather can also
have a significant impact on our operations.
6
The market for our common stock is limited and our shareholders may
have difficulty reselling their shares when desired or at
attractive market prices. Our stock price and our listing
may make it more difficult for our shareholders to resell shares
when desired or at attractive prices. Our Company stock trades on
the “over-the-counter” market and is listed on OTCQB
tier of the OTC Markets. Our common stock has continued to trade in
low volumes and at low prices. Some investors view low-priced
stocks as unduly speculative and therefore not appropriate
candidates for investment. Many brokerage firms and institutional
investors have internal policies prohibiting the purchase or
maintenance of positions in low-priced stocks.
“Penny stock” rules may make buying or selling our
securities difficult which may make our stock less liquid and make
it harder for investors to buy and sell our shares. Trading
in our securities is subject to the SEC’s “penny
stock” rules and it is anticipated that trading in our
securities will continue to be subject to the penny stock rules for
the foreseeable future. The SEC has adopted regulations that
generally define a penny stock to be any equity security that has a
market price of less than $5.00 per share, subject to certain
exceptions. These rules require that any broker-dealer who
recommends our securities to persons other than prior customers and
accredited investors must, prior to the sale, make a special
written suitability determination for the purchaser and receive the
purchaser's written agreement to execute the transaction. Unless an
exception is available, the regulations require the delivery, prior
to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated
with trading in the penny stock market. In addition, broker-dealers
must disclose commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities
they offer. The additional burdens imposed upon broker-dealers by
these requirements may discourage broker-dealers from recommending
transactions in our securities, which could severely limit the
liquidity of our securities and consequently adversely affect the
market price for our securities.
Our inability to attract, develop and retain qualified store
managers and business development specialists may negatively affect
our business. We rely significantly on the performance and
productivity of our store managers and our staff of business
development specialists to help drive new business to our growing
number of stores. Each store manager has primary responsibility for
managing the operations of the individual on-demand labor store,
including recruiting workers, daily dispatch of personnel, and
collection of accounts receivable. In addition, each store manager
has responsibility for customer service. To combat a typically high
turnover rate for store managers in the on-demand labor industry,
we have developed and continue to develop and refine training and
compensation plans directed at employee retention. There can be no
assurance that our training and compensation plans will reduce
turnover in this position.
Loss of key personnel could negatively affect our business.
The loss of any key executive could have a material adverse effect
on our business, financial condition, and results of operations.
Our future performance also depends on our ability to identify,
recruit, motivate, and retain key management personnel. The failure
to attract and retain key management personnel could have a
material adverse effect on our business, financial condition, and
results of operations.
If we are unable to find a reliable pool of temporary personnel, we
may be unable to meet customer demand and our business may be
adversely affected. All on-demand labor companies must
continually attract reliable temporary workers to meet customer
needs. We compete for such workers with other temporary labor
businesses, as well as actual and potential customers, some of
which seek to fill positions directly with either regular or
temporary employees. In addition, our temporary workers sometimes
become regular employees of our customers. From time to time,
during peak periods and/or in certain geographic regions, we may
experience shortages of available temporary workers. Unavailability
of reliable temporary workers will have a negative effect on our
results of operations. Use of temporary employees also is affected
by other factors beyond our control that may increase the cost of
temporary personnel, such as increases in mandated levels of
benefits and wages payable to temporary employees. These economic
and other factors could reduce demand for our services and lead to
lower revenues.
We are dependent upon the availability of workers' compensation
insurance coverage. We maintain workers' compensation
insurance as required by state laws. Very few insurance carriers
provide workers' compensation coverage for staffing companies in
the manual labor market. We expect the insurance market to tighten
even further in the future. We cannot be certain that we will be
able to obtain adequate levels of insurance in the future with
acceptable terms, coverages, deductibles and collateral
requirements, or at all. In most of the states in which we operate,
we cannot engage in business without workers' compensation
insurance. In order to obtain coverage we are required to post
collateral with the carrier in the form of cash or a letter of
credit from our lender. The carrier can retain this collateral for
extended periods of time, and increase the amount of such
collateral.
If we do not manage our workers’ compensation claims well,
increased premiums could negatively affect operating
results. Workers’ compensation expenses and the
related liability accrual are based on our actual claims
experience. Currently, and throughout most of our corporate
history, we maintained large deductible workers’ compensation
insurance policies. Our current workers’ compensation policy
has a deductible limit of $500,000 per incident and our
workers’ compensation policies prior to April 2014 have a
deductible limit of $350,000 per claim. In the years prior to April
2011, our policies have a deductible limit of $250,000 per person.
As a result, we are substantially self-insured. Our management
training and safety programs attempt to minimize both the frequency
and severity of workers’ compensation insurance claims, but a
large number of claims or a small number of significant claims
could require payment of substantial benefits. In Washington and
North Dakota, where private insurance is not allowed or not
available, we purchase our insurance through state workers’
compensation funds and our liability in those monopolistic states
is limited to payment of the insurance premiums. We can provide no
assurance that we will be able to successfully limit the frequency
and severity of our workers’ compensation claims or that our
insurance premiums and costs will not increase substantially.
Higher costs for workers’ compensation coverage, if incurred,
will have a material adverse effect on our business, financial
condition, and results of operations.
7
We may not be able to recover collateral deposits we have placed
with our workers’ compensation insurance carrier.
Historically our workers’ compensation insurance carriers
have required collateral deposits to secure our payment of claims
up to the amount of our policy deductible. For the two-year period
prior to April 1, 2014, Dallas National Insurance (now known as
Freestone Insurance) provided our workers’ compensation
insurance coverage under a high deductible policy. Under the terms
of the policy we were required to provide cash collateral of $1.8
million as security for payment of claims up to the policy
deductible. We are responsible for paying claims up to the
deductible amount. In January 2014, Freestone Insurance confirmed
to us that it continued to hold $1.8 million of Command
Center’s funds as collateral. In April 2014, the State of
Delaware placed Freestone Insurance in receivership due to concerns
about Freestone’s financial condition. In August 2014, the
receivership was converted into a liquidation proceeding. In late
2015, we filed timely proofs of claim with the receiver for return
of our collateral deposits, one as a priority claim and one as a
general claim. On July 5, 2016, the receiver filed a first
accounting with the Delaware Court of Chancery. Pursuant to this
accounting, the receiver reported cash and cash equivalents of
$87.7 million as of December 31, 2015. We believe our claim for
return of collateral will be a priority claim and our collateral
will be returned to us. However, if the Receiver determines that
our claim for return of collateral is not entitled to priority or,
if there are not sufficient assets available to pay all of the
priority claims, we may not receive any or all of our collateral.
As a result of the developments, in the second quarters of each
2015 and 2016 we recorded a reserve of $250,000 on the deposit
balance, for a total reserve of $500,000, for potential loss of the
value of our collateral held by Freestone. The have of our
collateral could have a material adverse effect on our financial
condition and results of operations. There have been no recent
communications from the receiver.
We are exposed to substantial pressure on working capital due to
the delay between the time we pay our temporary workers and the
time we collect from our customers, which requires aggressive
management of our credit risk. The pressure on our working
capital requires that we manage the resulting credit risk. The
magnitude of the risk varies with general economic conditions. We
believe that write-offs for doubtful accounts can be maintained at
commercially acceptable levels without the need to resort to credit
management practices that are unduly intrusive for our customers
and interfere with customer acquisition and retention.
Nevertheless, there can be no assurance that our ability to achieve
and sustain profitable operations will not be adversely affected by
losses from doubtful accounts or customer relations problems
arising from our efforts to manage credit risk.
We require debt financing to provide working capital due to the
delay between when we pay our temporary workers and other creditors
from when we collect from our customers. Field team members
are typically paid on the same day the services are performed,
while customers are generally billed on a weekly basis with 30-day
payment terms. We currently have an account purchase agreement with
Wells Fargo Bank, N.A. that allows us to sell eligible accounts
receivable for 90% of the invoiced amount on a full recourse basis
up to the facility maximum or $14 million. When the receivable is
collected, the remaining 10% is paid to us, less applicable fees
and interest. The term of the agreement is through April 7, 2018.
The cancelation of the account purchase agreement would have a
material adverse effect on our liquidity, cash flows, and results
of operations.
The limitations in our receivables financing agreements negatively
impact our liquidity. Under our account purchase agreement
with our lender, our borrowing base is limited to the lesser of:
(1) 90% of acceptable accounts as defined in the agreement, or (2)
$14,000,000. Our collateral requirements with our workers'
compensation insurance carrier are secured by a $5.7 million letter
of credit from our lender. The amount of the letter of credit
result in a reduction to our borrowing base, currently reducing
funds otherwise available to us by $5.7 million. This limitation on
our liquidity may result in our inability to expand or to sustain
our operations, which could result in a material adverse impact on
our business.
Increased employee expenses could adversely affect our
operations. We are required to comply with all applicable
federal and state laws and regulations relating to employment,
including verification of eligibility for employment, occupational
safety and health provisions, wage and hour requirements,
employment insurance and laws relating to equal opportunity
employment. Costs and expenses related to these requirements are a
significant operating expense and may increase as a result of,
among other things, changes in federal or state laws or regulations
requiring employers to provide specified benefits to employees
(such as health insurance), increases in the minimum wage or the
level of existing benefits, or the lengthening of periods for which
unemployment benefits are available. We cannot assure that we will
be able to increase fees charged to our customers to offset any
increased costs and expenses, and higher costs will have a material
adverse effect on our business, financial condition, and results of
operations.
We will continue to be impacted by new laws and regulations
relating to employment. In addition to federal and state
laws and regulations, many counties and cities have become active
in regulating various aspects of employment, including minimum
wages, paid sick leave, application forms and background checks,
and required notices to employees, among others. Additionally, the
U.S. Department of Labor has enacted regulations which, if
implemented, will greatly restrict the availability of exemptions
from overtime compensation. As a staffing company and large
employer with a wide geographical footprint, we are often faced
with new legal requirements. Although we believe that we will be
able to maintain appropriate compliance procedures, there is no
assurance that our efforts will always be timely or effective, or
that we will be able to recover the increased cost of new legal
requirements through timely pricing increases to our
customers.
8
We may incur additional costs and regulatory risks relating to new
laws regulating the hiring of undocumented
workers. In addition
to federal laws, the statutes of several states regulate employer
practices relating to the identification and eligibility to work of
new hires. We have implemented procedures intended to meet all of
these requirements. We process information on each new applicant
for employment through the federal government’s E-Verify
system. Although we believe that we are in compliance and we will
be able to maintain appropriate procedures, we cannot assure that
our compliance will not be flawed or delayed because of the large
number of temporary personnel that we employ. In some cases, the
penalties for noncompliance are punitive. Regulatory requirements
imposed on employers and enforcement actions relating to
immigration status of employees are expected to increase. If we are
not able to maintain appropriate compliance procedures, our
operations would be materially and adversely affected.
We will incur additional costs and regulatory risks relating to the
impact of health care reform upon our business and failure to
comply with such rules and regulations could materially harm our
business. The Patient Protection and Affordable Care Act and
the Health Care and Education Reconciliation Act of
2010 (collectively, the “Health Care Reform
Laws”) include various health-related provisions that took
effect in 2015 and 2016, including the requirement that most
individuals have health insurance and establishing new regulations
on health plans. Although the Health Care Reform Laws do not
mandate that employers offer health insurance, beginning in 2016
tax penalties are assessable on large employers which do not offer
health insurance that meets certain affordability or benefit
requirements. Providing such additional health insurance benefits
to our qualifying temporary workers, or the payment of tax
penalties if such coverage is not provided, will increase our
costs. The economic impact of the Health Care Reform Laws to us is
not yet known. It is likely that the Health Care Reform Laws will
be revised or rewritten pursuant to proposed legislation. The
requirements and the cost impact of revisions to existing laws,
Health Care Reform Laws, or new health care legislation is unknown.
Under both the present laws and proposed legislation, if we are
unable to raise the rates we charge our customers to cover the
costs of these programs, such increases in costs could materially
harm our business.
We may be exposed to employment-related claims and costs from
temporary workers, customers, or third parties that could
materially adversely affect our business, financial condition and
results of operations. We are in the business of
employing people and placing them in the workplaces of other
businesses. As the employer of record, we are at risk for claims
brought by our temporary workers, such as wage and hour claims,
discrimination and harassment actions and workers' compensation
claims. We are also at risk for liabilities alleged to have been
caused by our temporary personnel (such as claims relating to
personal injuries, property damage, immigration status,
misappropriation of funds or property, violation of environmental
laws, or criminal activity). Significant instances of these types
of issues will impact our customers’ perception of us and may
have a negative effect on our results of operations. The risk is
heightened because we do not have control over our customers’
workplace or direct supervision of our temporary workers. If we are
found liable for the actions or omissions of our temporary workers
or our customers, and adequate insurance coverage is not available,
our business, financial condition, and results of operations could
be materially and adversely affected.
We may not be able to increase customer pricing to offset increased
costs and may lose volume as a result of price increases we are
able to implement. We expect to raise prices for our
services in amounts sufficient to offset increased costs of
services, operating costs, and cost increases due to inflation,
regulatory requirements and to improve our return on invested
capital. However, competitive factors may require us to absorb cost
increases, which would have a negative effect on our operating
margins. Even if we are able to increase costs as desired, we may
lose volume to competitors willing to service customers at a lower
price.
We face competition from companies that have greater resources than
we do and we may not be able to effectively compete against these
companies. The temporary staffing industry is largely
fragmented and highly competitive, with low barriers to entry. A
large percentage of on-demand labor companies are small local or
regional operations with fewer than five locations. Within local or
regional markets, these companies actively compete with us for
customers and temporary personnel. There are also several very
large full-service and specialized temporary labor companies
competing in national, regional and local markets. Many of these
competitors have substantially greater financial and marketing
resources than we have. Price competition in the staffing industry
is intense and we expect this level of competition to remain high
and even increase in the future. Competition could have a material
adverse effect on our business, financial condition, and results of
operations. There is also a risk that competitors, perceiving our
lack of capital resources, may undercut our prices or increase
promotional expenditures in our strongest markets in an effort to
force us out of business.
Improper disclosure of employee and customer data could result in
liabilities and harm our reputation. In the course of
our business, we collect, store, use, and transmit information
about our employees and customers. Protecting the privacy of this
information is critical to our business. We have established a
system of controls for safeguarding the security and privacy of our
data. Our security controls may not, in every case, be adequate to
prevent unauthorized internal or external intrusions into our
systems and improper disclosure of personal data and confidential
information relating to our employees, our customers or our
business. The regulations relating to the security and privacy of
information are increasingly prevalent and demanding. The failure
to adequately protect private information could expose us to claims
from employees and customers and to regulatory actions, could harm
our reputation, and could have a material adverse effect on our
business, financial condition and results of operations. Additional
security measures we may take to address customer or employee
concerns may cause higher operating expenses.
9
Cyberattacks or other breaches of our technology hardware and
software, as well as risks associated with compliance and data
privacy could have an adverse effect on our systems, our service to
our customers, our reputation, our competitive position, and
financial results. Our ability to manage our
operations successfully is critical to our success. Our business is
reliant on our ability to electronically gather, compile, process,
store and distribute data and other information. Unintended
interruptions or failures resulting from computer and
telecommunications failures, equipment or software
malfunction, power outages, catastrophic events, security breaches
(such as unauthorized access by hackers), social engineering
schemes, unauthorized access, errors in usage by our employees,
computer viruses, ransomware or malware and other events could harm
our business. While we have taken measures to minimize the
impact of these problems, the proper functioning of these systems
is critical to our business operations. Any security breach or
failure in our computer equipment, systems or data could result in
the interruption of our business operations, tarnish our reputation
and expose us to damages and litigation.
Our directors, officers and current principal shareholders own a
large percentage of our common stock and could limit your influence
over corporate decisions. As of March 30, 2017, our
directors, officers and current shareholders holding more than 5%
of our common stock collectively beneficially own, in the
aggregate, approximately 33% of our outstanding common stock. As a
result, these shareholders, if they act together, may be able to
control most matters requiring shareholder approval, including the
election of directors and approval of mergers or other significant
corporate transactions. This concentration of ownership may have
the effect of delaying or preventing a change in control. The
interests of these shareholders may not always coincide with our
corporate interests or the interests of our other shareholders, and
they may act in a manner with which you may not agree or that may
not be in the best interests of our other
shareholders.
We will likely be party, from time to time, to various legal
proceedings, lawsuits and other claims arising in the ordinary
course of our business. We anticipate that, based upon our
business plan, disputes will arise in the future relating to
contract, employment, labor relations, and other matters that could
result in litigation or require arbitration to resolve, which could
divert the attention of our management team and could result in
costly or unfavorable outcomes for us. Any such litigation could
result in substantial expense, could reduce our profits and harm
our reputation, and could have a materially adverse impact on our
business and financial condition. See Item 3 “Legal
Proceedings”.
We may have additional tax liabilities that exceed our
estimates. We are subject to federal taxes and a multitude
of state and local taxes in the United States. In the ordinary
course of our business, there are transactions and calculations
where the ultimate tax determination is uncertain. We are regularly
subject to audit by tax authorities. Although we believe our tax
estimates are reasonable, the final determination of tax audits and
any related litigation could be materially different from our
historical tax provisions and accruals. The results of an audit or
litigation could materially harm our business.
Our customer contracts contain termination provisions that could
decrease our future revenues and earnings. Most of our
customer contracts can be terminated by the customer on short
notice without penalty. Our customers are, therefore, not
contractually obligated to continue to do business with us in the
future. This creates uncertainty with respect to the revenues and
earnings we may recognize with respect to our customer
contracts.
We have a history of net losses. Although we have recorded a
net profit in each of the last six fiscal years, as of December 30,
2016, we had an accumulated deficit of approximately $37.6 million.
We have incurred net losses in many of our fiscal years since
inception. We may incur additional operating losses. We make no
assurance that our revenue will increase or that we will be
profitable in any future period.
If our goodwill is impaired, we will record an additional non-cash
charge to our results of operations and the amount of the charge
may be material. At least annually, or whenever events or
circumstances arise indicating impairment may exist, we review
goodwill for impairment as required by generally accepted
accounting principles in the United States (GAAP). In 2014, we
wrote-off approximately $807,000 in goodwill relating to our 2012
acquisition of DR Services. In addition, on June 3, 2016, we
purchased substantially all of the assets of Hanwood Arkansas, LLC,
an Arkansas limited liability company, and Hanwood Oklahoma, LLC,
an Oklahoma limited liability company. Together these companies
operated as Hancock Staffing (“Hancock”) from stores
located in Little Rock, Arkansas and Oklahoma City, Oklahoma. In
connection with the acquisition of Hancock, we identified and
recognized $1.3 million in goodwill that we added to the carrying
amount of $2.5 million from the acquisition of DR Services after
the write-off. The resulting carrying amount of $3.8
million could change if there are future changes in our capital
structure, cost of debt, interest rates, capital expenditure
levels, ability to perform at levels that were forecasted, or a
permanent change to our market capitalization. In the future, we
may need to further reduce the carrying amount of goodwill by
taking an additional non-cash charge to our results of operations.
Such a charge would have the effect of reducing goodwill with a
corresponding impairment expense and may have a material effect
upon our reported results. The additional expense may reduce our
reported profitability or increase our reported losses in future
periods and could negatively affect the market for our securities,
our ability to obtain other sources of capital, and may generally
have a negative effect on our future operations.
10
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not
applicable to smaller reporting companies.
ITEM 2. DESCRIPTION OF PROPERTIES
We
presently lease office space for our corporate headquarters in
Lakewood, Colorado. In April 2015, we executed the lease on this
facility for a sixty-four month term, beginning in September 1,
2015 and expiring December 31, 2020, with an option to renew for
two additional five year extensions. We pay approximately $10,800
per month for our office space with annual increases of
approximately 3% which includes typical triple net charges for
property taxes, insurance and maintenance. We own all of the office
furniture and equipment used in our corporate
headquarters.
We also
lease the property for all 65 of our current store locations. All
of these stores are leased at market rates that vary in amount,
depending on location. Each store is between 1,000 and 5,000 square
feet, depending on location and market conditions.
Operating leases: We lease office space, and
on occasion lease vehicles, and equipment. Most of our store leases
have terms that extend over three to five years. Some of the leases
have cancellation provisions that allow us to cancel with 90 days'
notice. Other leases have been in existence long enough that the
term has expired and we are currently occupying the premises on
month-to-month tenancies. For additional information related to our
operating leases see Note 11
– Commitments and Contingencies in our Notes to the
Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
On
occasion, we may be involved in legal matters arising in the
ordinary course of our business. While management believes that
such matters are currently insignificant, matters arising in the
ordinary course of business for which we are or could become
involved in litigation may have a material adverse effect on our
business, financial condition or results of operations. For
additional information related to our legal proceedings see
Note 11 – Commitments and
Contingencies in our Notes to the Consolidated Financial
Statements.
ITEM 4. MINE SAFETY DISCLOSURE
Not
applicable.
PART II
ITEM 5. MARKETS FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market Information
Our
common stock, par value $0.001 per share, is quoted on the OTCQB
tier of the OTC Markets under the symbol “CCNI.” The
OTCQB is a network of security dealers who buy and sell stock. The
dealers are connected by a computer network which provides
information on current “bids” and “asks” as
well as volume information. The OTCQB is not considered a
“national exchange.”
The
following table shows the high and low bid information for the
common stock for the quarterly period indicated for the last two
(2) fiscal years ended December 30, 2016 and December 25,
2015.
11
|
|
Price
(1)
|
|
|
Quarter
Ended
|
High
|
Low
|
|
March 27,
2015
|
$0.75
|
$0.58
|
|
June 26,
2015
|
$0.77
|
$0.64
|
|
September 25,
2015
|
$0.70
|
$0.48
|
|
December 25,
2015
|
$0.57
|
$0.42
|
|
March 25,
2016
|
$0.54
|
$0.36
|
|
June 24,
2016
|
$0.48
|
$0.34
|
|
September 23,
2016
|
$0.44
|
$0.36
|
|
December 30,
2016
|
$0.40
|
$0.29
|
|
(1) The above quotations
reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
The closing price for our common stock on the OTC QB
was $0.37 on March 30, 2017.
|
||
The
above data was compiled from information obtained from the OTC
Bulletin Board quotation service.
Holders of the Corporation’s Capital Stock
At
March 30, 2017, we had approximately 114 stockholders of record.
This figure does not reflect persons or entities that hold their
stock in nominee or “street” name through various
brokerage firms.
Dividends
No cash
dividends have been declared on our common stock to date and, at
present, we do not anticipate paying a cash dividend on our common
stock in the foreseeable future.
Equity Compensation Plan Information
|
|
Number of
securities
|
Weighted
average
|
Number of
securities
|
|
|
to be issued
upon
|
exercise price
of
|
remaining
|
|
|
exercise of
outstanding
|
outstanding
options,
|
available
for
|
|
Plan
category
|
options and
rights
|
warrants and
rights
|
future
issuance
|
|
Equity compensation
plans approved by security holders (1)
|
-
|
-
|
6,000,000
|
|
|
|
|
|
|
(1)
|
Consists
of 6,000,000 shares issuable under the Command Center, Inc. 2016 Employee Stock
Incentive Plan. This Plan was adopted by our Board of
Directors on September 29, 2016 and approved by our stockholders at
the 2016 Annual Meeting of Stockholders on November 17,
2016.
|
Transfer Agent and Registrar
Our
transfer agent is Continental Stock Transfer &Trust, located at
17 Battery Street, 8th Floor, New York,
New York, 10004.
Recent Issuances of Unregistered Securities
There
were no issuances of unregistered securities during the fiscal
fourth quarter of 2016.
Stock Repurchase
On
April 20, 2015 we announced that our Board of Directors authorized
a $5.0 million three-year repurchase plan of our common stock.
During 2015 we purchased 2,329,552 shares of common stock at an
aggregate price of approximately $1.4 million resulting in an
average price of $0.60 per share under the repurchase plan. These
shares were then retired. During 2016 we purchased 3,820,276 shares
of common stock at an aggregate price of approximately $1.5 million
resulting in an average price of $0.40 per share under the plan.
These shares were then retired. We have approximately $2.1 million
remaining under the repurchase plan. For additional information
related to our stock repurchase see Note 8 – Stockholders’
Equity in our Notes to the Consolidated Financial
Statements.
ITEM 6. SELECTED FINANCIAL DATA
As a
“smaller reporting company,” as defined by Rule 12b-2
of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are
electing scaled disclosure reporting obligations and therefore are
not required to provide the information requested by this
Item.
12
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
The
following management's discussion and analysis reviews significant
factors with respect to our financial condition at December 30,
2016 and December 25, 2015, and results of operations for the
fiscal years ended December 30, 2016 and December 25, 2015. This
discussion should be read in conjunction with the consolidated
financial statements, notes, tables, and selected financial data
presented elsewhere in this report.
Our
discussion and analysis contains forward-looking statements that
are provided to assist in the understanding of anticipated future
financial performance. However, such performance involves risks and
uncertainties that may cause actual results to differ materially
from those discussed in such forward-looking statements. A
cautionary statement regarding forward-looking statements is set
forth under the caption “Special Note Regarding
Forward-Looking Statements” immediately prior to Item 1 of
this Annual Report on Form 10-K. This discussion and analysis
should be considered in light of such cautionary statements and the
risk factors disclosed elsewhere in this report.
Overview
Our
mission is to be our customer’s provider of choice for all
manual on-demand employment solutions by placing the right people
in the right jobs every time and by providing unparalleled service.
We have focused intently on training, coaching and mentoring all of
our employees in providing consistently excellent service to both
our field team members and our customers. In furtherance of our
mission, we have consolidated operations, established and
implemented corporate operating policies and procedures, and
developed a unified branding strategy for all of our
stores.
The Temporary Labor Market: The temporary labor
industry is competitive and highly fragmented. We compete on the
basis of quality of service, availability of workers with the
appropriate skills and to a lesser extent price. In the United
States, approximately 100 companies operate nationally, and
approximately 10,000 smaller companies compete in varying degrees
at local levels. Demand for temporary services is highly dependent
on the overall strength of labor markets. In periods of economic
growth, demand for temporary services generally increases, and the
need to recruit, screen, train, retain and manage a labor pool
matching the skills required by particular customers becomes
critical. Conversely, during an economic downturn, competitive
pricing pressures can pose a threat to retaining a qualified
temporary workforce. We believe the on-demand temporary labor
market creates a unique competitive niche for us. As a company, we
have many experienced branch and Field Services employees
throughout the country and proven operations that take advantage of
on-demand (and long-term) opportunities on local and national
levels. Specifically, regarding the on-demand business, we believe
we recruit and retain better quality temporary workers than our
competitors and provide both our customers and our temporary
workers with excellent service on a consistent basis. These factors
allow us to place good workers to work on short notice, thereby
allowing us to achieve margins that are generally higher than our
competitors.
On-demand Labor Store Operations: We currently operate
65 on-demand labor stores serving approximately 3,200 customers and
employing approximately 34,000 temporary employees.
As the
economic environment continues to improve, we plan to grow through
revenue increases at existing stores, as well as opening and
acquiring new locations. Our target markets will include locations
that we believe are underserved by competitors, areas where there
is growing demand for on-demand services, and where we can increase
business from current national accounts. Additional sales growth
may result from selected acquisition opportunities, as well as the
development of new national accounts, and by providing services in
new business verticals.
With
growth, we expect to leverage our existing cost structure over an
increased revenue base. This may enable us to further reduce our
operating costs as a percentage of revenue. Increasing our selling
efforts and developing our business by targeting new customer
development remains one of our top priorities.
13
The
following table reflects operating results in 2016 compared to 2015
(in thousands, except per share amounts and percentages).
Percentages indicate line items as a percentage of total revenue.
The table serves as the basis for the narrative discussion that
follows.
|
|
Fifty-three
weeks ended
|
Fifty-two weeks
ended
|
||
|
|
December 30 ,
2016
|
December 25,
2015
|
||
|
|
|
|
|
|
|
Total operating
revenue
|
$93,259
|
|
$88,499
|
|
|
Cost of staffing
services
|
69,580
|
74.6%
|
64,893
|
73.3%
|
|
Gross
Profit
|
23,679
|
25.4%
|
23,606
|
26.7%
|
|
Selling, general,
and administrative expenses
|
21,775
|
23.4%
|
20,796
|
23.5%
|
|
Depreciation and
amortization
|
298
|
0.3%
|
172
|
0.2%
|
|
Income from
operations
|
1,606
|
1.7%
|
2,638
|
3.0%
|
|
Interest expense
and other financing expense
|
(25)
|
(0.0%)
|
(82)
|
(0.1%)
|
|
Net income before
taxes
|
1,581
|
1.7%
|
2,556
|
2.9%
|
|
Provision for
income taxes
|
(822)
|
(0.9%)
|
(999)
|
(1.1%)
|
|
Net
income
|
$759
|
0.8%
|
$1,557
|
1.8%
|
|
Non-GAAP
data
|
|
|
|
|
|
EBITDA
|
2,051
|
2.2%
|
3,482
|
3.9%
|
Earnings
before interest, taxes, depreciation and amortization, and the
non-cash compensation (“EBITDA”) is a non-GAAP measure
that represents our net income before interest expense, income tax
expense, depreciation and amortization, and non-cash compensation.
We utilize EBITDA as a financial measure, as management believes
investors find it a useful tool to perform more meaningful
comparisons of past, present and future operating results and as a
means to evaluate our operational results. We believe it is a
complement to net income and other financial performance measures.
EBITDA is not intended to represent net income as defined by GAAP,
and such information should not be considered as an alternative to
net income or any other measure of performance prescribed by
GAAP.
We use
EBITDA to measure our financial performance because we believe
interest, taxes, depreciation and amortization, and non-cash
compensation bear little or no relationship to our operating
performance. By excluding interest expense, EBITDA measures our
financial performance irrespective of our capital structure or how
we finance our operations. By excluding taxes on income, we believe
EBITDA provides a basis for measuring the financial performance of
our operations excluding factors that our stores cannot control. By
excluding depreciation and amortization expense, EBITDA measures
the financial performance of our operations without regard to their
historical cost. By excluding non-cash compensation, EBITDA
provides a basis for measuring the financial performance of our
operations excluding the value of our stock and stock options. For
all of these reasons, we believe that EBITDA provides us and
investors with information that is relevant and useful in
evaluating our business.
However,
because EBITDA excludes depreciation and amortization, it does not
measure the capital we require to maintain or preserve our fixed
assets. In addition, because EBITDA does not reflect interest
expense, it does not take into account the total amount of interest
we pay on outstanding debt nor does it show trends in interest
costs due to changes in our financing or changes in interest rates.
EBITDA, as defined by us, may not be comparable to EBITDA as
reported by other companies that do not define EBITDA exactly as we
define the term. Because we use EBITDA to evaluate our financial
performance, we reconcile it to net income, which is the most
comparable financial measure calculated and presented in accordance
with GAAP.
The
following is a reconciliation of EBITDA to net income for the
periods presented (in thousands):
|
|
Fifty-Three
|
Fifty-Two
|
|
|
Weeks
Ended
|
Weeks
Ended
|
|
|
December 30,
2016
|
December 25,
2015
|
|
EBITDA
|
$2,051
|
$3,482
|
|
Interest
expense
|
(25)
|
(82)
|
|
Depreciation and
amortization
|
(298)
|
(172)
|
|
Provision for
income taxes
|
(822)
|
(999)
|
|
Non-cash
compensation
|
(147)
|
(672)
|
|
Net
income
|
$759
|
$1,557
|
14
Results of Operations
53 Weeks Ended December 30, 2016
Summary of Operations: Revenue increased approximately $4.8
million or 5.4%, to $93.3 million from $88.5 in 2015. The fiscal
year ended December 30, 2016 had 53 weeks, compared to 52 weeks for
the year ended December 25, 2015. Revenue for the week ended
December 30, 2016 was $1.4 million. In June 2016, we acquired
substantially all of the assets of Hancock. From the date of
acquisition through the end of the fiscal year, revenue from the
Hancock stores was approximately $4.5 million or 4.8% of our
revenue for the 2016 fiscal year. Revenue from our stores in North
Dakota decreased approximately $5.2 million or 33.8%, to $10.2
million from $15.4 millionin 2015. This decrease in North Dakota
revenue is due to the decline in demand for temporary staffing
services in the Bakken oil and gas region of North Dakota. Revenue
from our remaining stores (excluding Hancock and North Dakota) was
$78.6 million, an increase of $5.5 million or 7.5% from fiscal year
2015.
Our
stores serve a wide variety of customers and industries across 21
states. Our individual store revenue can fluctuate significantly on
both a quarter over quarter and year over year basis depending on
the local economic conditions and need for temporary labor services
in the local economy. One of our goals is to increase the diversity
of customers and industries we service at both the store and the
company level. We believe this will reduce the potential negative
impact of an economic downturn in any one industry or
region.
Cost of Staffing Services: Cost of staffing services
increased approximately $4.7 million, or 7.2% to $69.6 million in
2016 from $64.9 million in 2015. Cost of staffing services was
74.6% and 73.3% of revenue for 2016 and 2015, respectively. Part of
the increase was due to the effect of an approximate $700,000
cumulative benefit from the actuarial adjustment to our
workers’ compensation liability for the year ended December
25, 2015. We did not receive this same benefit adjustment for
the year ended December 30, 2016. The cost of staffing services for
2015 was revised to include an additional liability of
approximately $159,000 to the State of Washington for workers'
compensation expense, which was not recorded at December 25, 2015,
but was related to the fourth quarter of 2015.
There
can be fluctuations in workers' compensation expense as a result of
changes to the mix of work performed during the year, changes in
our claims history and changes in actuarial assumptions. We
continue to put programs in place to train our employees on
workplace safety.
Selling, General and Administrative Expenses ("SG&A"):
SG&A expenses increased approximately $979,000 or 4.7% to $21.8
million in 2016 from $20.8 million in 2015. The increase is
attributable to the expenses associated with greater revenue in
2016. The total increase was driven by an increase in salaries of
$1.1 million, an increase in payroll taxes of approximately
$300,000, an increase in credit card processing fees of
approximately $147,000, and an increase in contract labor of
approximately $68,000. These increases were offset by decreases in
stock compensation expense of approximately $520,000.
The
total number of stores open and operating increased from 57 at the
end of fiscal year 2015 to 64 at the end of fiscal year 2016. The
costs of operating these stores including staff salaries, rent,
utilities and supplies are included in SG&A costs. While we
attempt to bring new stores to full profitability as quickly as
possible, it is normal for a new branch to operate below this level
for several months.
Included
in SG&A costs for 2015 is a non-recurring charge for $175,000
reserve for a note issued by Labor Smart, Inc. We purchased the
note from a creditor of Labor Smart and issued Labor Smart a notice
of default. We then filed suit to collect on the full value of the
note, and Labor Smart has similarly filed suit against us seeking
to halt collection efforts. The litigation is proceeding in the
United States District Court for the Southern District of New York.
Labor Smart has a history of operating losses and negative working
capital and shareholders' equity, which affected our valuation of
the note.
During
2015, we moved our corporate headquarters from Coeur d’Alene,
Idaho to Lakewood, Colorado. We incurred additional costs
associated with the hiring and training of new employees,
relocation of existing employees and moving furniture and office
equipment.
14 Weeks Ended December 30, 2016
Summary of Operations: Revenue for the quarter ended
December 30, 2016 increased approximately $4.2 million or 19.3%, to
$26.1 million from $21.9 for the quarter ended December 25, 2015.
The fiscal quarter ended December 30, 2016 had 14 weeks, compared
to 13 weeks for the fiscal quarter ended December 25, 2015. Revenue
for the week ended December 30, 2016 was $1.4 million. In June
2016, we acquired the assets of Hancock. For the quarter ended
December 30, 2016, revenue from the Hancock stores was
approximately $1.9 million or 7.3% of our revenue for the fiscal
quarter. Revenue for the quarter ended December 30, 2016 from our
stores in North Dakota decreased approximately $0.7 million or
19.7%, to $2.9 million from $3.6 million for the quarter ended
December 25, 2015. This decrease in North Dakota revenue is due to
the decline in demand for temporary staffing services in the Bakken
region of North Dakota. Revenue from our remaining stores
(excluding Hancock and North Dakota) was $21.3 million, an increase
of $3.0 million or 16.4% compared to the prior year.
Cost of Staffing Services: Cost of staffing services for the
quarter ended December 30, 2016 increased approximately $3.1
million, or 18.9%, to $19.4 million in 2016 from $16.3 million for
the quarter ended December 25, 2015. Cost of staffing services was
74.3% and 74.6% of revenue for 2016 and 2015, respectively,
representing a nominal quarter over quarter variation.
The
cost of staffing services for 2015 was revised to include an
additional liability of approximately $159,000 to the State of
Washington for workers' compensation expense, which was not
recorded at December 25, 2015, but was related to the fourth
quarter of 2015.
Selling, General and Administrative Expenses
(“SG&A”): SG&A expenses increased
approximately $710,000, or 13.4%, to $6.0 million for the quarter
ended December 30, 2016 from $5.3 million for the quarter ended
December 25, 2015. The total increase was driven by the expenses
associated with the revenue, including increase in salaries of $1.0
million and an increase in payroll taxes of approximately $200,000.
These increases were offset by a decrease in bad
debt expense of approximately $257,000, decreases in stock
compensation expense of approximately $298,000, a decrease in
insurance expense of $70,000, and a decrease in contract labor of
approximately $77,000.
15
Liquidity and Capital Resources
The
Company believes that cash flow from operations, working capital
balances at December 30, 2016, and access to its account purchase
agreement will be sufficient to fund anticipated operations through
March 2018.
As of
December 30, 2016, our current assets exceeded our current
liabilities by approximately $11.4 million. Included in current
assets are cash of approximately $3.0 million and trade accounts
receivable of $10.3 million.
Included
in current liabilities are accrued wages and benefits of
approximately $1.6 million, and the current portion of
workers’ compensation premiums and claims liability of
approximately $1.1 million.
The
account purchase facility agreement liability of approximately
$480,000 at December 25, 2015 was used to fund operations. There
was no liability at December 30, 2016. The current financing
agreement is an account purchase agreement with Wells Fargo Bank,
N.A. which allows us to sell eligible accounts receivable for 90%
of the invoiced amount on a full recourse basis up to the facility
maximum, or $14 million at December 30, 2016. When the receivable
is collected, the remaining 10% is paid to us, less applicable fees
and interest. The term of the agreement is through April 7, 2018.
The agreement bears interest at the Daily One Month London
Interbank Offered Rate plus 2.5% per annum. At December 30, 2016
the effective interest rate was 3.02%. Interest is payable on the
actual amount advanced. Additional charges include an annual
facility fee equal to 0.50% of the facility threshold in place and
lockbox fees. As collateral for repayment of any and all
obligations, we granted Wells Fargo Bank, N.A. a security interest
in all of our property including, but not limited to, accounts
receivable, intangible assets, contract rights, investment
property, deposit accounts, and other such assets. We also have an
outstanding letter of credit under this agreement in the amount of
$5.7 million which reduces the amount of funds otherwise made
available to us under this agreement.
Operating Activities: Net cash provided by
operating activities totaled approximately $13,000 in 2016,
compared to approximately $3.3 million in 2015. This change was
primarily driven by $1.1 million cash used related to
accounts receivable
– trade, approximately $336,000 cash used related to
prepaid expenses, deposits, and other, and $727,000 cash used
related to workers’ compensation premiums and claims
liability. These uses were offset by proceeds of $759,000 from net
income, $746,000 related to our deferred tax asset, and $244,000
related to workers’ compensation risk pool
deposits.
Investing Activities: Net cash used by investing
activities totaled approximately $2.1 in 2016, compared to
approximately a $297,000 in 2015, primarily for the acquisition of
Hancock.
Financing Activities: Net cash used by financing
activities totaled approximately $2.5 million in 2016 compared to
approximately $4.0 million in 2015. Financing activity in 2016
includes $417,000 to repay debt from Hancock as part of the
acquisition, a $593,000 reduction in the balance of our factoring
liability and $1.5 million in stock purchase under the
company’s stock repurchase plan, compared to approximately
$2.4 million reduction in the balance of our factoring liability
and $1.6 million in stock purchase under the company’s stock
repurchase plan and redemption of shares from cashless option
expense in 2015.
Critical Accounting Policies
Our
significant accounting policies and the anticipated impact of
recently issued accounting standards are described in Note 1 – Summary of Significant
Accounting Policies to the consolidated financial statements
included in Item 8 of this Annual Report. Management's discussion
and analysis of financial condition and results of operations are
based upon our financial statements, which have been prepared in
accordance with GAAP. The preparation of these financial statements
requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses and
the related disclosure of contingent assets and
liabilities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Command
Center is a “smaller reporting company” as defined by
Regulation S-K and as such, is not providing the information
contained in this item pursuant to Regulation S-K.
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
|
|
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
|
18
|
|
Consolidated
Balance Sheets, December 30, 2016 and December 25,
2015
|
|
19
|
|
Consolidated
Statements of Income for the fiscal years ended December 30, 2016
and December 25, 2015
|
|
20
|
|
Consolidated
Statements of Changes in Stockholders’ Equity for the fiscal
years ended December 30, 2016 and December 25,
2015
|
|
21
|
|
Consolidated Statements
of Cash Flows for the fiscal years ended December 30, 2016 and
December 25, 2015
|
|
22
|
|
Notes
to Consolidated Financial Statements
|
|
23
|
17
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders’
of Command Center, Inc.
We have
audited the accompanying consolidated balance sheets of Command
Center, Inc. as of the fiscal years December 30, 2016 and December
25, 2015, and the related consolidated statements of income,
changes in stockholders’ equity, and cash flows for each of
the fiscal years then ended. Command Center, Inc.’s
management is responsible for these consolidated financial
statements. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Command Center, Inc. as of December 30, 2016 and December 25, 2015,
and the results of its operations and its cash flows for the fiscal
years ended December 30, 2016 and December 25, 2015 in conformity
with accounting principles generally accepted in the United States
of America.
As
discussed in Note 1 to the Consolidated Financial Statements,
Command Center, Inc. revised its previously reported 2015
Consolidated Financial Statements.
PMB
Helin Donovan, LLP
/s/PMB
Helin Donovan, LLP
Austin,
Texas
April
11, 2017
18
Command Center, Inc.
Consolidated Balance Sheets
|
|
December
30,
|
December
25,
|
|
|
2016
|
2015
|
|
|
|
(Revised)
|
|
Assets
|
|
|
|
Current
Assets
|
|
|
|
Cash
|
$3,022,741
|
$7,629,424
|
|
Restricted
cash
|
24,676
|
-
|
|
Accounts
receivable, net of allowance for doubtful accounts
|
10,287,456
|
8,917,933
|
|
Prepaid expenses,
deposits, and other
|
631,873
|
292,352
|
|
Prepaid
workers’ compensation
|
745,697
|
756,005
|
|
Other
receivables
|
115,519
|
-
|
|
Current portion of
workers’ compensation deposits
|
404,327
|
398,319
|
|
Total
Current Assets
|
15,232,289
|
17,994,033
|
|
Property and
equipment, net
|
432,857
|
408,657
|
|
Deferred tax
asset
|
2,316,774
|
3,063,256
|
|
Workers’
compensation risk pool deposit, less current portion
|
2,006,813
|
2,256,814
|
|
Goodwill and other
intangible assets, net
|
4,307,611
|
2,500,000
|
|
Total
Assets
|
$24,296,344
|
$26,222,760
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
Current
Liabilities
|
|
|
|
Accounts
payable
|
762,277
|
560,961
|
|
Checks issued and
payable
|
98,837
|
487,087
|
|
Account purchase
agreement facility payable
|
-
|
479,616
|
|
Other current
liabilities
|
297,089
|
323,224
|
|
Accrued wages and
benefits
|
1,567,585
|
1,452,558
|
|
Current portion of
workers’ compensation premiums and claims
liability
|
1,101,966
|
1,201,703
|
|
Total
Current Liabilities
|
3,827,754
|
4,505,149
|
|
Long-Term
Liabilities
|
|
|
|
Workers’
compensation claims liability, less current portion
|
1,604,735
|
2,231,735
|
|
Total
Liabilities
|
5,432,489
|
6,736,884
|
|
Commitments and
Contingencies (See Note 11)
|
-
|
-
|
|
Stockholders’
Equity
|
|
|
|
Preferred stock -
$0.001 par value, 5,000,000 shares authorized, none
issued
|
-
|
-
|
|
Common stock -
100,000,000 shares, $0.001 par value, authorized; 60,634,650 and
64,305,288 shares issued and outstanding
|
60,634
|
64,305
|
|
Additional
paid-in-capital
|
56,374,625
|
57,752,301
|
|
Accumulated
deficit
|
(37,571,404)
|
(38,330,730)
|
|
Total
Stockholders’ Equity
|
18,863,855
|
19,485,876
|
|
Total
Liabilities and Stockholders’ Equity
|
$24,296,344
|
$26,222,760
|
|
|
||
|
The
accompanying notes are an integral part of these financial
statements
|
||
19
Command Center, Inc.
Consolidated Statements of Income
|
|
Fifty-Three
|
Fifty-Two
|
|
|
Weeks
Ended
|
Weeks
Ended
|
|
|
December 30,
2016
|
December 25,
2015
|
|
|
|
(Revised)
|
|
Revenue
|
$93,259,508
|
$88,498,943
|
|
Cost of staffing
services
|
69,580,410
|
64,892,648
|
|
Gross
profit
|
23,679,098
|
23,606,295
|
|
Selling, general,
and administrative expenses
|
21,774,419
|
20,795,777
|
|
Depreciation and
amortization
|
298,300
|
171,511
|
|
Income from
operations
|
1,606,379
|
2,639,007
|
|
Interest expense
and other financing expense
|
(25,018)
|
(82,167)
|
|
Net income before
income taxes
|
1,581,361
|
2,556,840
|
|
Provision for
income taxes
|
(822,035)
|
(999,313)
|
|
Net
income
|
$759,326
|
$1,557,527
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
Basic
|
$0.01
|
$0.02
|
|
Diluted
|
$0.01
|
$0.02
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
Basic
|
62,350,680
|
65,139,449
|
|
Diluted
|
63,095,454
|
66,095,168
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
|
||
20
Command Center, Inc.
Consolidated Statement of Changes in Stockholders’
Equity
|
|
Common
Stock
|
|
Retained
|
|
|
|
|
Shares
|
Par
Value
|
APIC
|
Earnings
(Deficit)
|
Total
|
|
Balance
at December 26, 2014
|
65,632,868
|
$65,633
|
$58,318,396
|
$(39,619,842)
|
$18,764,187
|
|
Common stock issues
for the conversion of options
|
122,000
|
122
|
28,118
|
-
|
28,240
|
|
Cashless option
exercise
|
190,972
|
191
|
32,275
|
(32,466)
|
-
|
|
Redemptions of
shares from cashless option exercise
|
-
|
-
|
-
|
(235,949)
|
(235,949)
|
|
Common stock issued
for service
|
689,000
|
689
|
388,668
|
-
|
389,357
|
|
Stock-based
compensation expense
|
-
|
-
|
352,299
|
-
|
352,299
|
|
Common stock
purchased and retired
|
(2,329,552)
|
(2,330)
|
(1,367,455)
|
-
|
(1,369,785)
|
|
Net income for the
year (Restated)
|
-
|
-
|
-
|
1,557,527
|
1,557,527
|
|
Balance
at December 25, 2015 (Revised)
|
64,305,288
|
$64,305
|
$57,752,301
|
$(38,330,730)
|
$19,485,876
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
149,637
|
$149
|
$9,601
|
$-
|
$9,750
|
|
Stock-based
compensation expense
|
-
|
-
|
137,567
|
-
|
137,567
|
|
Common stock
purchased and retired
|
(3,820,275)
|
(3,820)
|
(1,524,844)
|
-
|
(1,528,664)
|
|
Net income for the
year
|
-
|
-
|
-
|
759,326
|
759,326
|
|
Balance
at December 30, 2016
|
60,634,650
|
$60,634
|
$56,374,625
|
$(37,571,404)
|
$18,863,855
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
|
|||||
21
Command Center, Inc.
Consolidated Statements of Cash Flows
|
|
Fifty-Three
|
Fifty-Two
|
|
|
Weeks
Ended
|
Weeks
Ended
|
|
|
December 30,
2016
|
December 25,
2015
|
|
|
|
(Revised)
|
|
Cash
flows from operating activities
|
|
|
|
Net
income
|
$759,326
|
$1,557,527
|
|
Adjustments to
reconcile net income to net cash provided by
operations:
|
|
|
|
Depreciation and
amortization
|
298,300
|
171,511
|
|
Change in allowance
for doubtful accounts
|
266,445
|
82,495
|
|
Stock based
compensation
|
147,168
|
741,656
|
|
Reserve on note
receivable
|
-
|
175,000
|
|
Deferred tax
asset
|
746,482
|
822,744
|
|
Gain (Loss) on
disposition of property and equipment
|
-
|
(18,271)
|
|
Changes in assets
and liabilities:
|
|
|
|
Accounts receivable
– trade
|
(1,051,585)
|
28,919
|
|
Restricted
cash
|
(24,676)
|
-
|
|
Prepaid
workers’ compensation
|
10,308
|
(174,650)
|
|
Other
receivables
|
(1,742)
|
7,949
|
|
Prepaid expenses,
deposits, and other
|
(336,071)
|
(32,109)
|
|
Workers’
compensation risk pool deposits
|
243,993
|
249,500
|
|
Accounts
payable
|
201,316
|
14,714
|
|
Checks issued and
payable
|
(388,250)
|
231,555
|
|
Other current
liabilities
|
(246,130)
|
74,964
|
|
Accrued wages and
benefits
|
115,027
|
(213,138)
|
|
Workers’
compensation premiums and claims liability
|
(726,737)
|
(386,113)
|
|
Net cash provided
by operating activities
|
13,174
|
3,334,253
|
|
Cash
flows from investing activities
|
|
|
|
Cash paid for
acquisition
|
(1,980,000)
|
-
|
|
Purchase of
property and equipment
|
(100,609)
|
(124,621)
|
|
Purchase of note
receivable
|
-
|
(175,000)
|
|
Proceeds from the
sale of property and equipment
|
-
|
2,500
|
|
Net cash used in
investing activities
|
(2,080,609)
|
(297,121)
|
|
Cash
flows from financing activities
|
|
|
|
Payment on acquired
debt
|
(417,190)
|
-
|
|
Changes to account
purchase agreement facility
|
(593,393)
|
(2,420,487)
|
|
Purchase of
treasury stock
|
(1,528,665)
|
(1,615,710)
|
|
Proceeds from the
conversion of stock options
|
-
|
28,240
|
|
Net cash used in
financing activities
|
(2,539,248)
|
(4,007,957)
|
|
Net
decrease in cash
|
(4,606,683)
|
(970,825)
|
|
Cash
at beginning of period
|
7,629,424
|
8,600,249
|
|
Cash
at end of period
|
$3,022,741
|
$7,629,424
|
|
|
|
|
|
Non-cash
investing and financing activities
|
|
|
|
Cashless exercise
of stock options
|
$-
|
$32,466
|
|
Contingent
obligation (See Note 6)
|
$220,000
|
$-
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
Interest
paid
|
$25,018
|
$82,167
|
|
Income taxes
paid
|
$169,684
|
$103,878
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
|
||
22
Command Center, Inc.
Notes to Consolidated Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Description of Business: Command Center, Inc.
("Command Center,” the “Company,”
“CCI,” “we,” "us," or “our”) is
a Washington corporation initially organized in 2002. We
reorganized in 2005 and 2006 and now provide on-demand employees
for manual labor, light industrial, and skilled trade applications.
Our customers are primarily small to mid-sized businesses in the
retail, construction, warehousing, industrial/manufacturing,
transportation, and hospitality industries. We currently operate 65
stores located in 21 states. Our largest 10 customers represent
approximately 24% of our revenue.
Basis of Presentation: The consolidated financial
statements include the accounts of Command Center, Inc. and our
wholly-owned subsidiaries, Disaster Recovery Services, Inc.
(“DR Services”), for which we ceased the corporate
existence in April 2016 and ComStaff, Inc., which is dormant. All
significant intercompany balances and transactions have been
eliminated in consolidation. The consolidated financial statements
and accompanying notes are prepared in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”).
Use of Estimates: The preparation of consolidated
financial statements in conformity with GAAP requires us to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
Fiscal Year End: Our consolidated financial
statements are presented on a 52/53-week fiscal year end
basis, with the last day of the fiscal year being the last Friday
of each calendar year. In fiscal years consisting of 53 weeks, the
final quarter will consist of 14 weeks. Fiscal years 2016 consisted
of 53 weeks and 2015 consisted of 52 weeks.
Reclassifications: Certain amounts in the
consolidated financial statements for 2015 have been reclassified
to conform to the 2016 presentation. These reclassifications have
no effect on net income, earnings per share, or stockholders’
equity as previously reported.
Revisions: During
the fourth quarter of 2016, the Company identified that immaterial
amounts of certain costs of sales and general and administrative
expenses were misstated at December 25, 2015. As a result cost of
sales and general and administrative expenses were under accrued by
$256,952 ($155,632 net of income tax benefit) at December 25, 2015.
In addition, we reclassified $94,000 in bank fees from Interest
expense and other financing expense to selling, general, and
administrative expenses. These adjustments were 10% or less than
net income before income taxes and net income in 2015. However,
these misstatements would have been material to the 2016 financial
statements.
Pursuant
to the guidance of Staff Accounting Bulletin (“SAB”)
No. 99, Materiality, the Company concluded that the errors were not
material to any of its prior year consolidated financial
statements. The accompanying consolidated statement of operations
for the year ended December 25, 2015 includes a cumulative revision
relating to these misstatements.
These
revisions did not have any material effect on income from
operations, net income, cash flows, or non-GAAP reporting metrics
nor did they affect the Company’s past compliance with debt
covenants. These misstatements had no effect on our cash
balances.
The following
table compares previously reported balances to revised balances as
of December 25, 2015 and for the year ended December 25,
2015.
|
Balance Sheet
Changes
|
Previously Reported
2015
|
Adjustment
|
2015
revised
|
|
Deferred tax
asset
|
$2,961,936
|
$101,320
|
$3,063,256
|
|
Accounts
payable
|
$304,009
|
$256,952
|
$560,961
|
|
Accumulated
deficit
|
$(38,175,098)
|
$(155,632)
|
$(38,330,730)
|
|
|
|
|
|
|
Statement
of Operations changes
|
|
|
|
|
Cost of staffing
services
|
$64,733,358
|
$159,290
|
$64,892,648
|
|
Selling, general,
and administrative expenses
|
$20,603,745
|
$192,032
|
$20,795,777
|
|
Provision for
income taxes
|
$(1,100,633)
|
$101,320
|
$(999,313)
|
|
Net
income
|
$1,713,159
|
$(155,632)
|
$1,557,527
|
|
Earnings per share:
Basic
|
$0.03
|
|
$0.02
|
|
Earnings per share:
Diluted
|
$0.03
|
|
$0.02
|
23
Revenue Recognition: We generate revenues primarily
from providing on-demand labor services. Revenue from services is
recognized at the time the service is performed. Revenues are
reported net of customer credits and taxes collected from customers
that are remitted to taxing authorities.
Cost of Staffing Services: Cost of services
includes the wages of temporary employees, related payroll taxes,
workers’ compensation expenses, and other direct costs of
services. We do not include store level costs in this calculation
such as rent, store manager salary or other store level operating
expenses.
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 and a trust account.
Restricted Cash: We maintained a cash balance
that is held on deposit as a requirement of our workers’
compensation insurance provider.
Accounts Receivable and Allowance for Doubtful
Accounts: Accounts receivable are carried at
their estimated recoverable amount, net of allowances. 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 days. At December 30, 2016 and December
25, 2015, our allowance for doubtful accounts was approximately
$899,000 and $633,000, respectively. The Company's allowance is
calculated as a percentage of account balances based on aging.
Account balances over 120 days are typically full
reserved.
Property and Equipment: Property and equipment
are recorded at cost. We compute depreciation using the
straight-line method over the estimated 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 consolidated balance sheet and
gain or loss is reflected in the consolidated statement of
income.
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 third
party actuarial estimates of the future costs of the claims and
related expenses discounted by a 5% present value interest rate to
determine the amount of our reserves. The discount rate was
increased to 5% from 3% in prior years to more accurately reflect
the Company’s risk tolerance and the active management of
workers’ compensation claims. We evaluate the reserves
quarterly 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
represents the excess purchase price over the fair value of
identifiable assets received attributable to business acquisitions
and combinations. Goodwill and other intangible assets are measured
for impairment at least annually and/or whenever events and
circumstances arise that indicate 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 at the reporting unit level.
Identified intangible assets are amortized using the straight-line
method over their estimated useful lives which are estimated to be
between two and seven years.
Fair Value of Financial Instruments: We carry
financial instruments on the consolidated balance sheet at the fair
value of the instruments as of the consolidated 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, 2016 and December 25, 2015, the
carrying values of accounts receivable and accounts payable
approximated their fair values due to relatively short
maturities.
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
for 2012 through 2016. 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 reflect 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 2,598,000 and 3,633,500 shares of common
stock at December 30, 2016 and December 25, 2015,
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.
24
Diluted
common shares outstanding were calculated using the Treasury Stock
Method and are as follows:
|
|
Fifty-Three
|
Fifty-Two
|
|
|
Weeks
Ended
|
Weeks
Ended
|
|
|
December 30,
2016
|
December 25,
2015
|
|
Weighted average
number of common shares used in basic net income per common
share
|
62,350,680
|
65,139,449
|
|
Dilutive effects of
stock options
|
744,774
|
955,719
|
|
Weighted average
number of common shares used in diluted net income per common
share
|
63,095,454
|
66,095,168
|
Share-Based Compensation: Periodically, we issue
common shares or options to purchase our common shares to our
officers, directors, employees, or other parties. Compensation
expense for these equity awards are recognized over the vesting
period, based on the fair value on the grant date. We recognize
compensation expense for only the portion of options that are
expected to vest, rather than record forfeitures when they occur.
If the actual number of forfeitures differs from those estimated by
management, additional adjustments to compensation expense may be
required in the future periods. We determine the fair value of
equity awards using the Black-Scholes valuation model for stock
options and the quoted market price for stock
awards.
Advertising Costs: Advertising costs consist
primarily of print and other promotional activities. We expense
advertisements as incurred. During the fiscal years ended December
30, 2016 and December 25, 2015, advertising costs included in
selling, general and administrative expenses were approximately
$46,000 and $44,000, respectively.
Concentrations: No single customer represented
more than 10% of our revenue for the fiscal years ended December
30, 2016 and December 25, 2015. At December 30, 2016 and December
25, 2015, 20.6% and 11.5%, respectively, of total accounts payable
was due to a single vendor.
Long-lived asset impairment: Long-lived assets
include property and equipment and definite-lived intangible
assets. Definite-lived intangible assets consist of customer
relationships, trade names and non-compete agreements. Long-lived
assets are measured for impairment at least annually and/or
whenever events and circumstances arise that indicate that the
carrying value of the assets may not be recoverable.
Checks Issued and Outstanding: When checks
drafted at a financial institution are in excess of funds on
deposit at that financial institution, determined on an entity by
entity basis, they are presented as a current liability on the
consolidated balance sheet.
Fair Value Measures: Fair value is the price that would
be received to sell an asset, or paid to transfer a liability, in
the principal or most advantageous market for the asset or
liability in an ordinary transaction between market participants on
the measurement date. 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 a contingent
liability. For additional
information see Note 11 -
Commitments and Contingencies.
25
Recent Accounting Pronouncements: In August 2014, the FASB
issued ASU 2014-15 requiring management to evaluate whether there
are conditions or events, considered in the aggregate, that raise
substantial doubt about the entity’s ability to continue as a
going concern, which is currently performed by the external
auditors. Management will be required to perform this assessment
for both interim and annual reporting periods and must make certain
disclosures if it concludes that substantial doubt exists. This ASU
is effective for annual periods, and interim periods within those
annual periods, beginning on or after December 15, 2016. The
adoption of this guidance is not expected to have a material effect
on our financial statements.
In May
2014, the FASB issued new revenue recognition guidance under ASU
2014-09 that will supersede the existing revenue recognition
guidance under U.S. Generally Accepted Accounting Principles
(“GAAP”). The new standard focuses on creating a single
source of revenue guidance for revenue arising from contracts with
customers for all industries. The objective of the new standard is
for companies to recognize revenue when it transfers the promised
goods or services to its customers at an amount that represents
what the company expects to be entitled to in exchange for those
goods or services. In July 2015, the FASB deferred the effective
date by one year (ASU 2015-14). This ASU will now be effective for
annual periods, and interim periods within those annual periods,
beginning on or after December 15, 2017. Early adoption is
permitted, but not before the original effective date of December
15, 2016. Since the issuance of the original standard, the FASB has
issued several other subsequent updates including the following: 1)
clarification of the implementation guidance on principal versus
agent considerations (ASU 2016-08); 2) further guidance on
identifying performance obligations in a contract as well as
clarifications on the licensing implementation guidance (ASU
2016-10); 3) rescission of several SEC Staff Announcements that are
codified in Topic 605 (ASU 2016-11); and 4) additional guidance and
practical expedients in response to identified implementation
issues (ASU 2016-12). The new standard will be effective for us
beginning January 1, 2018 and we expect to implement the standard
with the modified retrospective approach, which recognizes the
cumulative effect of application recognized on that date. We are
evaluating the impact of adoption on our consolidated results of
operations, consolidated financial position and cash
flows.
In
February 2016, the FASB issued ASU 2016-02 amending the existing
accounting standards for lease accounting and requiring lessees to
recognize lease assets and lease liabilities for all leases with
lease terms of more than 12 months, including those classified as
operating leases. Both the asset and liability will initially be
measured at the present value of the future minimum lease payments,
with the asset being subject to adjustments such as initial direct
costs. Consistent with current U.S GAAP, the presentation of
expenses and cash flows will depend primarily on the classification
of the lease as either a finance or an operating lease. The new
standard also requires additional quantitative and qualitative
disclosures regarding the amount, timing and uncertainty of cash
flows arising from leases in order to provide additional
information about the nature of an organization’s leasing
activities. This ASU is effective for annual periods, and interim
periods within those annual periods, beginning after December 15,
2018 and requires modified retrospective application. Early
adoption is permitted. We are currently evaluating the impact of
the new guidance on our consolidated financial statements and
related disclosures.
In
March 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) 2016-09 amending several aspects of share-based
payment accounting. This guidance requires all excess tax benefits
and tax deficiencies to be recorded in the income statement when
the awards vest or are settled, with prospective application
required. The guidance also changes the classification of such tax
benefits or tax deficiencies on the statement of cash flows from a
financing activity to an operating activity, with retrospective or
prospective application allowed. Additionally, the guidance
requires the classification of employee taxes paid when an employer
withholds shares for tax-withholding purposes as a financing
activity on the statement of cash flows, with retrospective
application required. This ASU is effective for annual periods, and
interim periods within those annual periods, beginning after
December 15, 2016. Early adoption is permitted. We are currently
evaluating the impact of the new guidance on our consolidated
financial statements and related disclosures.
In
March 2016, the FASB issued ASU 2016-08, Revenue from Contracts
with Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net) (“ASU
2016-08”). ASU 2016-08 does not change the core principle of
Topic 606 but clarifies the implementation guidance on principal
versus agent considerations. ASU 2016-08 is effective for the
annual and interim periods beginning after December 15, 2017. We
are currently assessing the potential impact of ASU 2016-08 on our
consolidated financial statements and results of
operations.
In June
2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses
(“ASU 2016-13”). ASU 2016-13 changes the impairment
model for most financial assets and certain other instruments,
including trade and other receivables, held-to-maturity debt
securities and loans, and requires entities to use a new
forward-looking expected loss model that will result in the earlier
recognition of allowance for losses. This update is effective for
fiscal years beginning after December 15, 2019, including interim
periods within those fiscal years. Early adoption is permitted for
a fiscal year beginning after December 15, 2018, including interim
periods within that fiscal year. Entities will apply the standard's
provisions as a cumulative-effect adjustment to retained earnings
as of the beginning of the first reporting period in which the
guidance is adopted. We are currently assessing the potential
impact of ASU 2016-13 on our consolidated financial statements and
results of operations.
26
In
August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows
(Topic 230): Classification of
Certain Cash Receipts and Cash Payments ("ASU 2016-15"). ASU
2016-15 reduces diversity in practice in how certain transactions
are classified in the statement of cash flows. The amendments in
ASU 2016-15 provide guidance on specific cash flow issues including
debt prepayment or debt extinguishment costs, settlement of
zero-coupon debt instruments or other debt instruments with coupon
interest rates that are insignificant in relation to the effective
interest rate of the borrowing, contingent consideration payments
made after a business combination, proceeds from the settlement of
insurance claims, proceeds from the settlement of corporate-owned
life insurance policies, and distributions received from equity
method investees. ASU 2016-15 is effective for annual and interim
periods beginning after December 15, 2017. We are currently
assessing the potential impact of ASU 2016-15 on our consolidated
financial statements and results of operations.
Other
accounting standards that have been issued by the Financial
Accounting Standards Board or other standards-setting bodies are
not expected to have a material impact on our financial position,
results of operations and cash flows. For period ended December 30,
2016, the adoption of other accounting standards had no material
impact on our financial positions, results of operations, or cash
flows.
NOTE 2 – NOTE RECEIVABLE
On May
22, 2015, we purchased a 10% Original Issue Discount Convertible
Note originally issued by Labor Smart, Inc., a Nevada corporation,
to Gemini Master Fund, Ltd., a Cayman Islands corporation (the
“Note”) for $175,000. The Note was issued by Labor
Smart on March 27, 2014 in the principal amount of $220,000,
bearing a 10% annual interest rate and with a maturity date of
January 1, 2015.
At the
option of the holder, the Note, together with any unpaid accrued
interest, is convertible into shares of common stock of Labor Smart
at a variable conversion price calculated at 65% of the market
price based on the average of the lowest volume weighted average
price during the twenty trading day period ending prior to the
conversion date.
On May
26, 2015, we provided to Labor Smart a notice of default and demand
for payment of $305,429 under the terms of the Note. We have filed
suit in New York to collect all unpaid principal, interest,
penalties and collection costs. We plan to pursue all means
available to collect amounts due under the Note.
At the
present time, we do not own any shares of stock of Labor Smart,
Inc.
Based
on its most recent financial statements available, there is
substantial reason to doubt the ability of Labor Smart to repay the
note. In its most recent Form 10-Q filed on November 16, 2015,
Labor Smart has reported an accumulated deficit of approximately
$10.9 million, and 2015 year to date net loss of approximately $2.6
million. Based on Labor Smart’s financial condition we have
concluded that it is not probable the note will be repaid and we
reduced the carrying value of the note to zero in the second
quarter of 2015. On June 27, 2016, Labor Smart filed its intention
to terminate registration under the Securities and Exchange Act of
1934. The Company fully reserved the note receivable during 2015
with a provision for $175,000.
NOTE 3 – PROPERTY AND EQUIPMENT
The
following table summarizes the book value of the assets and
accumulated depreciation and amortization at December 30, 2016
and December 25, 2015:
|
|
2016
|
2015
|
|
Leasehold
improvements
|
$341,993
|
$376,859
|
|
Vehicles and
machinery
|
170,941
|
88,721
|
|
Furniture and
fixtures
|
140,938
|
123,570
|
|
Computer hardware
and licensed software
|
509,576
|
437,729
|
|
Accumulated
depreciation
|
(730,591)
|
(618,222)
|
|
Total property and
equipment, net
|
$432,857
|
$408,657
|
During
the fiscal year ended December 30, 2016 and December 25, 2015,
we recognized approximately $168,000 and $171,000, respectively, of
depreciation and amortization expense related to property and
equipment.
NOTE 4 – GOODWILL AND INTANGIBLE ASSETS
At
least annually, or whenever events or circumstances arise
indicating an impairment may exist, we review goodwill for
impairment. We are a single reporting unit consisting of purchased
on-demand labor stores, thus the analysis is conducted for the
Company as a whole. Our goodwill represents the consideration given
for acquisitions in excess of the fair value of identifiable assets
received. No provision has been made for an impairment loss as of
December 30, 2016 and December 25, 2015.
27
During
the fiscal year ended December 30, 2016, we recognized
approximately $130,000 of amortization expense related to
intangible assets.
On June
3, 2016, we purchased substantially all of the assets of Hancock.
In connection with the acquisition of Hancock, we identified and
recognized $1,277,568 in goodwill that we added to the remaining
carrying amount of $2.5 million from the previous acquisitions. In
addition, we added $659,564 in acquired intangible assets. For
additional information see Note 6
– Acquisitions.
NOTE 5
– ACCOUNT PURCHASE AGREEMENT & LINE OF CREDIT
FACILITY
Our
current financing 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, $14 million on December 30, 2016 and December 25, 2015.
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 ninety days past due.
Pursuant
to this agreement, at December 30, 2016, there was approximately
$114,000 that was owed to us and at December 25, 2015 we owed
approximately $480,000. In May 2016, we signed a new account
purchase agreement with our lender, Wells Fargo Bank, N.A. The
current agreement bears interest at the Daily One Month London
Interbank Offered Rate plus 2.5% per annum. At December 30, 2016
the effective interest rate was 3.02%. Interest is payable on the
actual amount advanced. Additional charges include an annual
facility fee equal to 0.50% of the facility threshold in place 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
receivable, intangible assets, contract rights, deposit accounts,
and other such assets.
We also
have a $5.7 million letter of credit with Wells Fargo that secures
our obligations to our workers' compensation insurance carrier. For
additional information related to this letter of credit see
Note 7 – Workers’
Compensation Insurance and Reserves.
The
agreement requires that the sum of our unrestricted cash plus net
accounts receivable must at all times be greater than the sum of
the amount outstanding under the agreement plus accrued payroll and
accrued payroll taxes. At December 30, 2016, and December 25, 2015
we were in compliance with this covenant.
NOTE 6 – ACQUISITION
On June
3, 2016 we purchased substantially all the assets of Hanwood
Arkansas, LLC, an Arkansas limited liability company, and Hanwood
Oklahoma, LLC, an Oklahoma limited liability company. Together
these companies operated as Hancock Staffing from stores located in
Little Rock, Arkansas and Oklahoma City, Oklahoma. We acquired all
of the assets used in connection with the operation of the two
staffing stores. In addition, we assumed liabilities for future
payments due under the leases for the two stores, amounts owed on
motor vehicles acquired, and the amount due on their receivables
factoring line. This transaction was accounted for under the
purchase method in accordance with FASB Accounting Standards
Codification Topic ASC 805, Business Combinations.
The
aggregate consideration paid for Hancock was $2,617,189, paid as
follows: (i) cash of $1,980,000; (ii) an unsecured one-year
holdback obligation of $220,000; and (iii) assumed liabilities of
$417,189.
In
connection with the acquisition of Hancock, we identified and
recognized an intangible asset of $659,564 representing customer
relationships and employment agreements/non-compete agreements. The
customer relationships are being amortized on a straight line basis
over their estimated life of four (4) years, the non-compete
agreement is amortized over its two-year term. During the year
ended December 30, 2016 we recognized amortization expense of
$129,521. We will recognize amortization expense of $222,036 in the
fiscal year ending 2017, $155,367 in the fiscal year ending 2018,
$107,746 in the fiscal year 2019 and $44,894 in the fiscal year
2020. At December 30, 2016 the intangible asset balance, net of
accumulated amortization, was $530,043.
28
The
following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition, which
have now been recorded in the financial statements as of December
30, 2016:
|
Assets:
|
|
|
Current
assets
|
$587,833
|
|
Fixed
assets
|
92,220
|
|
Intangible
assets
|
659,564
|
|
Goodwill
|
1,277,568
|
|
|
$2,617,185
|
|
Liabilities:
|
|
|
Current
liabilities
|
$637,185
|
|
Net purchase
price
|
$1,980,000
|
The
following table summarizes the pro forma operations had the
entities been acquired at the beginning of each year presented in
the Consolidated Statements of Income (in thousands):
|
|
2016
|
2015
|
|
Revenue
|
$97,060
|
$96,813
|
|
Net income before
income tax
|
1,847
|
3,101
|
|
Income
tax
|
(922)
|
(1,203)
|
|
Net
income
|
$925
|
$1,898
|
Revenue
from the date of the acquisition through December 30, 2016 was
approximately $4.5 million and has been included in the
Consolidated Statements of Income.
NOTE 7– WORKERS’ COMPENSATION INSURANCE AND
RESERVES
On
April 1, 2014, we changed our workers’ compensation carrier
to ACE American Insurance Company (“ACE”) in all states
in which we operate other than Washington and North Dakota. The ACE
insurance policy is a large deductible policy where we have primary
responsibility for all claims made. ACE provides insurance for
covered losses and expenses in excess of $500,000 per incident.
Under this high deductible program, we are largely self-insured.
Per our contractual agreements with ACE, we must provide a
collateral deposit of $5.7 million, which is accomplished through a
letter of credit under our Account Purchase Agreement with Wells
Fargo. For workers’ compensation claims originating in
Washington and North Dakota, we pay workers’ compensation
insurance premiums and obtain full coverage under mandatory state
government administered programs. Our liability associated with
claims in these jurisdictions is limited to the payment of
premiums. We also obtained full coverage in the state of New York
under a policy issued by the State Fund of New York. Accordingly,
our consolidated financial statements reflect only the mandated
workers’ compensation insurance premium liability for
workers’ compensation claims in these
jurisdictions.
On
April 1, 2012 to March 31, 2014 our workers’ compensation
carrier was Dallas National Insurance in all states in which we
operate other than Washington, North Dakota and New York. The
Dallas National coverage was a large deductible policy where we
have primary responsibility for claims under the policy. Dallas
National provided insurance for covered losses and expenses in
excess of $350,000 per incident. Per our contractual agreements
with Dallas National, we made payments into, and maintain a balance
of $1.8 million as a non-depleting deposit as collateral for our
self-insured claims.
From
April 1, 2011 to March 31, 2012, our workers’ compensation
coverage was obtained through Zurich American Insurance Company
(“Zurich”). The policy with Zurich was a guaranteed
cost plan under which all claims are paid by Zurich. Zurich
provided workers’ compensation coverage in all states in
which we operate other than Washington and North
Dakota.
Prior
to Zurich, we maintained workers’ compensation policies
through AMS Staff Leasing II (“AMS”) for coverage in
the non-monopolistic jurisdictions in which we operate. The AMS
coverage was a large deductible policy where we have primary
responsibility for claims under the policy. Under the AMS policies,
we made payments into a risk pool fund to cover claims within our
self-insured layer. Per our contractual agreements for this
coverage, we were originally required to maintain a deposit in the
amount of $715,000. At December 30, 2016, our deposit with AMS was
approximately $698,000.
For the
two-year period prior to May 13, 2008, our workers’
compensation coverage was obtained through policies issued by AIG.
At December 30, 2016, our risk pool deposit with AIG was
approximately $400,000.
As part
of our large deductible workers’ compensation programs, our
carriers require that we collateralize a portion of our future
workers’ compensation obligations in order to secure future
payments made on our behalf. This collateral is typically in the
form of cash and cash equivalents. At December 30, 2016 and
December 25, 2015, we had net cash collateral deposits of
approximately $2.4 million and $2.6 million, respectively. With the
addition of the $5.7 million letter of credit, our cash and
non-cash collateral totaled approximately $8.1 million at December
30, 2016. The workers’ compensation risk pool deposits total
$2.4 million as of December 30, 2016, consisting of a current
portion of $0.4 million and a long-term portion of $2.0 million.
The long-term portion of the risk pool deposits is net of an
allowance of $0.5 million, which is determined to be impaired. This
allowance is to reserve for the possibility that we would not
recover all of our risk pool deposits that we placed with our
former workers’ compensation insurance carrier, Freestone
Insurance (formerly Dallas National Insurance Company.) Freestone
Insurance was placed in receivership by the State of Delaware in
2014. We continue to believe that we have a priority claim for the
return of our collateral. However, the amount that will ultimately
be returned to us is still uncertain. See Note 11 – Commitments and
Contingencies, for additional information on cash collateral
provided to Freestone Insurance Company.
29
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 as determined by
our third party actuary, actual claims paid, insurance premiums and
administrative fees, and premiums paid in monopolistic
jurisdictions. Workers’ compensation expense for our
temporary workers totaled approximately $3.8 million and $3.1
million for the fiscal years ended December 30, 2016 and December
25, 2015, respectively.
The
following reflects the changes in our workers’ compensation
deposits and our workers’ compensation claims liability
during the fiscal years ended December 30, 2016 and December 25,
2015:
|
|
2016
|
2015
|
|
Workers’
Compensation Deposits
|
|
|
|
Workers’
compensation deposits available at the beginning of the
period
|
$2,655,133
|
$2,904,633
|
|
Additional
workers’ compensation deposits made during the
period
|
9,105
|
69,131
|
|
Deposits applied to
payment of claims during the period
|
(3,098)
|
(68,631)
|
|
Reserve
Allowance
|
(250,000)
|
(250,000)
|
|
Deposits available
for future claims at the end of the period
|
$2,411,140
|
$2,655,133
|
|
|
|
|
|
Workers’
Compensation Claims Liability
|
|
|
|
Estimated future
claims liabilities at the beginning of the period
|
$3,433,438
|
$3,628,302
|
|
Claims paid during
the period
|
(2,197,128)
|
(2,532,179)
|
|
Additional future
claims liabilities recorded during the period
|
1,470,391
|
2,337,315
|
|
Estimated future
claims liabilities at the end of the period
|
$2,706,701
|
$3,433,438
|
The
workers’ compensation risk pool deposits are classified as
current and non-current assets on the consolidated 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 consolidated financial
statements. All liabilities associated with our workers’
compensation claims are fully reserved on our consolidated balance
sheet.
The
following table summarizes financial assets measured at fair value
on a non-recurring basis using significant unobservable inputs
(Level 3) to measure fair value at December 31:
|
|
2016
|
2015
|
|
Freestone Workers'
compensation deposits
|
$1,997,798
|
2,247,798
|
During
the years ended December 30, 2016 and December 25, 2015, certain
workers' compensation deposits were re-measured and reported at
fair value through a specific valuation allowance based upon the
fair value of the underlying collateral based on collateral
valuations utilizing Level 3 valuation inputs as
follows:
|
|
2016
|
2015
|
|
Carrying value of
impaired deposits
|
$2,497,798
|
$2,497,798
|
|
Specific valuation
allowance allocations
|
(500,000)
|
(250,000)
|
|
Fair value of
impaired deposits
|
$1,997,798
|
$2,247,798
|
The
estimation process for the Level 3 investment involves the use
of a cash-flow methodology and other market valuation techniques
involving management judgment.
NOTE 8 – STOCKHOLDERS’ EQUITY
Issuance of Common Stock:
In
December 2015, we approved the issuance of 100,000 shares of common
stock valued at $49,000 to our Board of Directors for partial
payment of their services.
30
The
following warrants for our common stock were issued and outstanding
on December 30, 2016 and December 25, 2015:
|
|
2016
|
2015
|
|
Warrants
outstanding at beginning of year
|
-
|
1,375,000
|
|
Expired
|
-
|
(1,375,000)
|
|
Exercised
|
-
|
-
|
|
Warrants
outstanding at the end of the year
|
-
|
-
|
The
warrants outstanding at December 26, 2014 expired unexercised on
April 15, 2015.
Stock Repurchase: In April 2015 the Board of
Directors authorized a $5.0 million three-year repurchase plan of
our common stock. During 2016 we purchased 3,820,276 shares of
common stock at an aggregate price of approximately $1.5 million
resulting in an average price of $0.40 per share under the plan.
These shares were then retired. During 2015 we purchased 2,329,552
shares of common stock at an aggregate price of approximately $1.4
million resulting in an average price of $0.60 per share under the
plan. These share were then retired. We have approximately $2.1
million remaining under the plan. The table below summarizes our
common stock purchases during 2016.
|
|
|
|
Total number
of
|
Approximate
dollar
|
|
|
Total
|
|
Shares
purchased
|
value of shares
that
|
|
|
Shares
|
Average
Price
|
As part of
publicly
|
may yet be
purchased
|
|
|
Purchased
|
Per
Share
|
Announced
plan
|
under the
plan
|
|
Period 1 (December
26, 2015 to January 22, 2016)
|
162,037
|
$0.44
|
2,491,589
|
$3,522,252
|
|
Period 2 (January
23, 2016 to February19, 2016)
|
174,300
|
$0.45
|
2,665,889
|
$3,440,816
|
|
Period 3 (February
20, 2016 to March 25, 2016)
|
166,500
|
$0.43
|
2,832,389
|
$3,367,430
|
|
Period 4 (March 26,
2016 to April 22, 2016)
|
329,961
|
$0.41
|
3,162,350
|
$3,239,059
|
|
Period 5 (April 23,
2016 to May 20, 2016)
|
264,563
|
$0.44
|
3,426,913
|
$3,122,455
|
|
Period 6 (May 21,
2016 to June 24, 2016)
|
1,066,103
|
$0.38
|
4,493,016
|
$2,713,809
|
|
Period 7 (June 25,
2016 to July 22, 2016)
|
301,500
|
$0.41
|
4,794,516
|
$2,588,905
|
|
Period 8 (July 23,
2016 to August 19, 2016)
|
177,407
|
$0.41
|
4,971,923
|
$2,516,529
|
|
Period 9 (August
20, 2016 to September 23, 2016)
|
760,012
|
$0.40
|
5,731,935
|
$2,213,622
|
|
Period 10
(September 24, 2016 to October 21, 2016)
|
116,093
|
$0.37
|
5,848,028
|
$2,170,105
|
|
Period 11 (October
22, 2016 to November 25, 2016)
|
242,400
|
$0.35
|
6,090,428
|
$2,085,761
|
|
Period 12 (November
26, 2016 to December 30, 2016)
|
59,400
|
$0.36
|
6,149,828
|
$2,064,377
|
|
Total
|
3,820,276
|
$0.40
|
6,149,828
|
$2,064,377
|
Redemption of
Employee Stock Options: The Board of Directors
authorized the purchase of 429,000 shares of common stock issuable
to non-executive employees under stock options granted with an
exercise price of $0.17 per share, as awarded on May 7, 2010. On
March 27, 2015, we purchased the shares at the closing market price
of $0.72 per share for an aggregate net purchase price of $235,949.
These shares were retired. These shares are in addition to the
authorized plan.
NOTE 9 – STOCK BASED COMPENSATION
Employee Stock Incentive Plan: Our 2008 Stock
Incentive Plan expired in January 2016. Outstanding awards continue
to remain in effect according to the terms of the plan and the
award documents. The 2008 Stock Incentive Plan permitted the grant
of up to 6.4 million stock options in order to motivate, attract
and retain the services of employees, officers and directors, and
to provide an incentive for outstanding performance. Pursuant to
awards under this plan, there were 1,860,500 and 1,671,616 options
vested at December 30, 2016 and December 25, 2015, respectively.
As of
December 30, 2016, we had one equity compensation plan, namely the
Command Center, Inc. 2016 Stock
Incentive Plan, approved by the shareholders on November 17,
2016. Pursuant to the 2016 Plan, the Compensation Committee is
authorized to issue awards for up to 6.0 million shares over the 10
year life of the plan. Currently, there have been no awards granted
under this plan.
During
2015 we granted 300,000 stock options to employees. The options
were granted with an exercise price of the fair market on the date
of grant, seven year life and vesting over four years from the date
of grant.
31
During
2014 we granted 785,000 shares of restricted common stock to
employees. The shares vest one year from the date of grant if the
grantee is still employed by our company. In 2015, 581,500 of these
shares vested; the remaining 203,500 shares were forfeited. In
2016, 276,500 of the vested shares were issued to the respective
grantees. The remaining 305,000 shares will be issued to the
respective grantees in 2017.
|
|
Number
of
|
Weighted
Average
|
Weighted
Average
|
|
|
Shares
Under
|
Exercise
Price
|
Grant Date
Fair
|
|
|
Options
|
Per
Share
|
Value
|
|
Outstanding
December 26, 2014
|
4,266,500
|
$0.38
|
$0.25
|
|
Granted
|
300,000
|
0.70
|
0.31
|
|
Forfeited
|
(50,875)
|
0.41
|
0.28
|
|
Expired
|
(81,125)
|
0.35
|
0.28
|
|
Exercised
|
(801,000)
|
0.20
|
0.16
|
|
Outstanding
December 25, 2015
|
3,633,500
|
0.45
|
0.28
|
|
Granted
|
105,000
|
0.49
|
0.32
|
|
Forfeited
|
(940,500)
|
0.61
|
0.39
|
|
Expired
|
(300,000)
|
0.70
|
0.46
|
|
Exercised
|
-
|
-
|
-
|
|
Outstanding
December 30, 2016
|
2,498,000
|
$0.36
|
$0.24
|
|
|
|
|
|
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:
|
|
2016
|
2015
|
|
Expected term
(years)
|
5.5
|
5.5
|
|
Expected
volatility
|
41.3%
|
41.3%
|
|
Dividend
yield
|
0.0%
|
0.0%
|
|
Risk-free
rate
|
1.5%
|
1.5%
|
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%.
During the fiscal year ended December 30, 2016 and December 25,
2015, we recognized share-based compensation expense of
approximately $147,000 and $742,000, respectively, relating to the
issuance of stock options and stock grants.
The
following table reflects a summary of our non-vested stock options
outstanding at December 26, 2014 and changes during the fiscal
years ended December 25, 2015 and December 30, 2016:
|
|
|
Weighted
Average
|
Weighted
Average
|
|
|
Number
of
|
Exercise
Price
|
Grant Date
Fair
|
|
|
Options
|
Per
Share
|
Value
|
|
Non-vested December
26, 2014
|
2,666,125
|
$0.46
|
$0.28
|
|
Granted
|
300,000
|
0.70
|
0.31
|
|
Vested
|
(963,366)
|
0.46
|
0.28
|
|
Forfeited
|
(40,875)
|
0.41
|
0.33
|
|
Non-vested December
25, 2015
|
1,961,884
|
0.50
|
0.28
|
|
Granted
|
105,000
|
0.49
|
0.39
|
|
Vested
|
(741,884)
|
0.43
|
0.30
|
|
Forfeited
|
(687,500)
|
0.59
|
0.41
|
|
Non-vested December
30, 2016
|
637,500
|
$0.40
|
$0.27
|
|
|
|
|
|
As of
December 30, 2016, there was unrecognized share-based compensation
expense totaling approximately $38,854 relating to non-vested
options that will be recognized over the next 3 years.
32
The
following summarizes information about the stock options
outstanding at December 30, 2016:
|
|
|
|
Weighted
Average
|
|
|
|
|
Weighted
Average
|
Remaining
|
|
|
|
Number of
Shares
|
Exercise
Price
|
Contractual
Life
|
Aggregate
Intrinsic
|
|
|
Under
Options
|
Per
Share
|
(years)
|
Value
|
|
Outstanding
|
2,498,000
|
$0.36
|
4.02
|
$279,000
|
|
Exercisable
|
1,860,500
|
$0.35
|
4.61
|
$209,250
|
|
Options
Outstanding
|
Options Exercisable
|
|||
|
Range of exercise prices
|
Number of Shares Outstanding
|
Weighted Average Contractual Life
|
Number of Shares Exercisable
|
Weighted Average Contractual Life
|
|
0.20 – 0.41
|
1,818,000
|
5.1
|
1,443,000
|
5.1
|
|
0.67 – 0.73
|
680,000
|
4.8
|
417,500
|
4.8
|
|
|
2,498,000
|
|
1,860,500
|
|
|
|
|
|
|
|
The
intrinsic value of outstanding and expected stock options as of
December 30, 2016 is approximately $240,000.
Under
the employment agreement entered into with Colette Pieper, our CFO,
on September 2, 2016, we are obligated to award to her unvested
options to acquire 500,000 shares of Command Center common stock.
When granted, the options will vest in four equal installments of
125,000 shares each. As of December 30, 2016, and also as of the
date of this report, the options have not yet been
granted.
Employee Stock Purchase Plan: We approved an
employee stock purchase plan in 2008 permitting the grant of 1.0
million shares of common stock to employees. No shares have been
issued pursuant to this plan.
NOTE 10 – INCOME TAX
The
provision for deferred income taxes is comprised of the
following:
|
|
December 30 ,
2016
|
December 25,
2015
|
|
Current:
|
|
|
|
Federal
|
$22,757
|
$15,114
|
|
State
|
52,795
|
160,729
|
|
Deferred:
|
|
|
|
Federal
|
522,740
|
704,762
|
|
State
|
223,743
|
118,708
|
|
Provision for
income taxes
|
$822,035
|
$999,313
|
|
|
||
Deferred
income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of our deferred taxes are as
follows:
|
|
December 30 ,
2016
|
December 25,
2015
|
|
Deferred
tax assets and liabilities
|
|
|
|
Net operating loss
(NOL)
|
$322,300
|
$837,236
|
|
Accrued
vacation
|
50,925
|
40,850
|
|
Workers’
compensation claims liability
|
1,015,873
|
1,353,851
|
|
Depreciation
|
181,913
|
160,019
|
|
Bad debt
reserve
|
337,559
|
249,581
|
|
Deferred
rent
|
32,322
|
33,053
|
|
Stock compensation
(Restricted Stock)
|
60,689
|
-
|
|
Charitable
contribution
|
6,379
|
-
|
|
Other
accruals
|
-
|
101,320
|
|
AMT
credit
|
308,814
|
287,346
|
|
Total deferred tax
asset
|
2,316,774
|
3,063,256
|
|
Valuation
allowance
|
-
|
-
|
|
Net deferred tax
asset
|
$2,316,774
|
$3,063,256
|
Our
federal and state net operating loss carryover of approximately
$0.9 million will expire in the years 2028 through 2031. Our
charitable contribution carryover will expire in the years 2017
through 2018.
33
Management
estimates that our combined federal and state tax rates will be
approximately 37.5%, net of federal benefit on state income taxes.
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 income are as
follows:
|
|
December 30 ,
2016
|
December 25,
2015
|
||
|
|
|
|
|
|
|
Income tax expense
based on statutory rate
|
$544,603
|
34%
|
$576,742
|
34%
|
|
Permanent
differences
|
64,151
|
4%
|
246,264
|
15%
|
|
State income taxes
expense net of federal taxes
|
258,588
|
16%
|
224,789
|
13%
|
|
Change in valuation
allowance
|
-
|
0%
|
-
|
0%
|
|
Other
|
(45,307)
|
(3%)
|
(48,482)
|
(3%)
|
|
Total taxes
(benefits) on income
|
$822,035
|
51%
|
$999,313
|
59%
|
|
|
||||
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 2012 through 2016. We deduct interest and penalties as
interest expense on the consolidated financial statements. During
the year ended December 30, 2016, the Company reduced the net tax
rate applied for state income tax purposes from 5.3% to 3.5%
resulting in a decrease in deferred tax assist and an increase in
stock income tax expense of approximately
$120,000.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
We
presently lease office space for our corporate headquarters in
Lakewood, Colorado. In April 2015, we executed the lease on this
facility for a sixty-four month term, beginning September 1, 2015
and expiring December 31, 2020, with an option to renew for two
additional five-year extensions. We pay approximately $10,800 per
month for our office space with annual increases of approximately
3% which includes typical triple net charges for property taxes,
insurance and maintenance. We own all of the office furniture and
equipment used in our corporate headquarters.
We also
lease the facilities for all of our store locations. All of these
facilities are leased at market rates that vary in amount depending
on location. Each store is between 1,000 and 5,000 square feet,
depending on location and market conditions.
Operating leases: We lease store facilities,
vehicles, and equipment. Most of our store leases have terms that
extend over three to five years. Some of the leases have
cancellation provisions that allow us to cancel with 90 days'
notice. Other leases have been in existence long enough that the
term has expired and we are currently occupying the premises on
month-to-month tenancies. Minimum lease obligations for the next
five years as of December 30, 2016 are:
|
|
Operating
Lease
|
|
Year
|
Obligation
|
|
2017
|
$858,086
|
|
2018
|
569,374
|
|
2019
|
369,385
|
|
2020
|
213,850
|
|
2021
|
-
|
|
Thereafter
|
-
|
|
|
$2,010,695
|
|
|
|
Total
lease expense for the fiscal years ended December 30, 2016 and
December 25, 2015 was approximately $1.4 million and $1.5 million,
respectively.
Legal Proceedings: From time to time we are involved in
various legal proceedings. We believe that the outcome of these
proceedings, even if determined adversely, will not have a material
adverse effect on our business, financial condition or results of
operations. There have been no material changes in our legal
proceedings since December 30, 2016. Legal costs related to
contingencies are expensed as incurred.
Freestone Insurance Company Liquidation: For the
two-year period prior to April 1, 2014, our workers’
compensation insurance coverage was provided by Dallas National
Insurance under a high deductible policy in which we are
responsible for the first $350,000 per incident. During this time
period, Dallas National changed its corporate name to Freestone
Insurance Company. Under the terms of the policy we were required
to provide cash collateral of $900,000 per year for a total of $1.8
million, as a non-depleting fund to secure our payment of
anticipated claims up to the policy deductible. We are ultimately
responsible for paying costs of claims that occur during the term
of the policy, up to the deductible amount. In January 2014,
Freestone Insurance provided written confirmation to us that it
continued to hold $1.8 million of Command funds as collateral and
stated that an additional $200,000 was held at another insurance
provider for a total of $2.0 million. In April 2014, the State of
Delaware placed Freestone Insurance in receivership due to concerns
about its financial condition. On August 15, 2014, the receivership
was converted to a liquidation proceeding. The receiver distributed
pending individual claims for workers’ compensation benefits
to the respective state guaranty funds for administration. In many
cases, the state guaranty funds have made payments directly to the
claimants. In other situations we have continued to pay claims that
are below the deductible level and we are not aware of any pending
claims from this time period that exceed or are likely to exceed
our deductible.
34
From
about July 1, 2008 until April 1, 2011, in most states our
workers’ compensation coverage was provided under an
agreement with AMS Staff Leasing II, through a master policy with
Dallas National. During this time period, we deposited
approximately $500,000 with an affiliate of Dallas National for
collateral related to the coverage through AMS Staff Leasing II.
Claims that remain open from this time period have also been
distributed by the receiver to the state guaranty funds. In one
instance, the State of Minnesota has denied liability for payment
of a workers’ compensation claim that arose in 2010 and is in
excess of our deductible. In the first quarter of 2016, we settled
the individual workers’ compensation case and have legally
challenged the State’s denial of liability.
During
the second quarter of 2015, the receiver requested court
authorization to disburse funds to the state guaranty funds. We and
other depositors of collateral with Freestone objected and asked
the court to block the disbursements until a full accounting of the
assets and liabilities of Freestone is provided. Distribution of
funds by the receiver to the state guaranty funds remains on hold.
As a result of these developments, during the second quarters of
each 2015 and 2016 we recorded reserves of $250,000 on the deposit
balance, for a total reserve of $500,000. We review these deposits
at each balance sheet date and as of December 30, 2016, we did not
need to make an adjustment to our deposit balance.
On July
5, 2016, the receiver filed the First Accounting for the period
April 28, 2014 through December 31, 2015 with the Delaware Court of
Chancery. The First Accounting does not clarify the issues with
respect to the collateral claims, priorities and return of
collateral. In the accounting, the Receiver reports total assets
consisting of cash and cash equivalents of $87.7 million as of
December 31, 2015.
In late
2015, we filed timely proofs of claim with the receiver. One proof
of claim is filed as a priority claim seeking return of the full
amount of our collateral deposits. The other proof of claim is a
general claim covering non-collateral items. We believe that our
claim to the return of our collateral is a priority claim in the
liquidation proceeding and that our collateral should be returned
to us. However, if it is ultimately determined that our claim is
not a priority claim or if there are insufficient assets in the
liquidation to satisfy the priority claims, we may not receive any
or all of our collateral.
35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There
have been no disagreements between us and our accountants on
accounting and financial disclosure, and no changes in the
consolidated financial statement presentation were required by the
accountants.
In
response to revision corrections for the our 2015 prepaid expenses
and accrued liabilities, management has expanded our policies and
procedures to address the initial review of, and subsequent
accounting treatment for, those items to see if they are reported
in the proper period. In evaluating whether our previously issued
consolidated financial statements were materially misstated, we
considered the guidance in ASC Topic 250, Accounting Changes and
Error Corrections, ASC Topic 250-10-S99-1, Assessing Materiality,
and ASC Topic 250-10-S99-2, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year
Financial Statements. We concluded that these misstatements
were in the aggregate material to the 2016 reporting period, as
they were over 10% of pre-tax income and net income for 2016 but
were not considered material to the 2015 Consolidated Financial
Statements and therefore, revision of the previously filed
financial statements for the year ending December 25, 2015 was
necessary. There were no other annual or interim periods
affected by this correction.
ITEM 9A. CONTROLS AND PROCEDURES
(a)
Evaluation of disclosure controls
and procedures. Our Chief Executive Officer ("CEO") and the
Chief Financial Officer ("CFO") evaluated our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), prior to the filing of this Form 10-K. Based on that
evaluation, our CEO and CFO concluded that, as of December 30,
2016, our disclosure controls and procedures were
effective.
(b) Management's
Report on Internal Control Over Financial Reporting. Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting. The Company hired a new
Chief Financial Officer and a new Controller at the end of its 2016
third quarter and during their review of prior year account
reconciliations they identified certain immaterial misstatements.
Since those misstatements were material to the 2016 financial
statements, the 2015 financial statements were revised. The
misstatements were not considered the result of a material weakness
in internal controls. The Company has hired a third party
consultant to assess the internal controls environment under the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) 13 Framework. The Company intends to consider
recommendations from the third party consultant as well as
information obtained from the review of prior account
reconciliations to make enhancements to its internal control over
financial reporting during 2017.
(c)
Changes in internal controls over
financial reporting. There have not been any changes in our
internal control over financial reporting during the quarter ended
December 30, 2016 which have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
None.
36
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE
The
names and ages and positions of our directors and executive
officers are listed below along with their business experience
during the past five years. The business address of all executive
officers of the Company is 3609 S Wadsworth Blvd., Suite 250
Lakewood Colorado 80235. All of these individuals are citizens of
the United States. Our Board of Directors currently consists of
seven directors. Directors are elected at the annual meeting of
shareholders to serve until they resign or are removed, or are
otherwise disqualified to serve, or until their successors are
elected and qualified. Executive officers are appointed by the
Board. No family relationships exist among any of our directors or
executive officers.
|
Frederick
Sandford, age 56
|
Chief
Executive Officer, President, and Director
|
|
Colette
Pieper, age 62
|
Principal
Accounting Officer
|
|
Ronald
L. Junck, age 69
|
Executive
Vice President, Secretary, and General Counsel
|
|
Richard
Finlay, age 57
|
Director
|
|
John
Schneller, age 51
|
Director
|
|
JD
Smith, age 46
|
Director
|
|
John
Stewart, age 60
|
Director
|
|
R.
Rimmy Malhotra, age 41
|
Director
|
|
Steven
Bathgate, age 62
|
Director
|
Frederick J. Sandford, age 56, was appointed as our
President and Chief Executive Officer on February 22, 2013, and was
first elected as a director at the Company’s 2013
shareholders meeting. Mr. Sandford has over 30 years of leadership
experience as CEO, President, or General Manager, guiding
businesses in various stages, including startups, turnarounds and
wind downs. He has led companies in diverse industries, including
technology, industrial fabrication, security services, waste
management and retail. Prior to joining our company, he served as
an independent consultant to Silicon Valley venture capitalists.
From 2003-2005, he led the restructuring of The Environmental
Trust, a land mitigation organization with 80 holdings, resulting
in significant asset protection. Mr. Sandford was awarded a full
fellowship and earned his MBA from Cornell University while serving
as the CEO of Student Agencies, America’s oldest student-run
company. He earned a BA in Psychology from the University of
Massachusetts at Amherst. He is a former U.S. Navy
SEAL.
Colette C. Pieper, age 62, was appointed as our Chief
Financial Officer on September 2, 2016. Before joining Command
Center, Mrs. Pieper served as CFO from 2012 to 2016 for Life
Partners Holdings, Inc., a company engaged in the secondary market
for life insurance. From 2006 to 2012, she was an Executive
Director and Accounting/Financial Director for USAA, an insurance
and financial services provider to members of the military and
their families. Previously, from 2003 to 2005 she was Vice
President and CFO of Clarke American Checks, Inc. and from 2000 to
2003, she was Vice President and CFO of an affiliated company,
Checks In The Mail. Mrs. Pieper
holds a Bachelor of Science degree in Accounting from Trinity
University and a Master in Professional Accounting degree from the
University of Texas. She is licensed by the State of Texas as a
Certified Public Accountant and by the American Institute of CPAs
as a Chartered Global Management Accountant.
Ronald L. Junck, 69, has been our Executive Vice
President, Secretary and General Counsel since November 2006. From
1974 until 1998, Mr. Junck practiced law in Phoenix, Arizona,
specializing in business law and commercial transactions,
representing a wide variety of business organizations in their
corporate and business affairs, as well as in court. He has
lectured extensively at colleges and universities on various
aspects of business law. From 1998 through 2001, Mr. Junck served
as Executive Vice President and General Counsel of Labor Ready,
Inc., and for several years served as a director of that company.
In 2001, Mr. Junck returned to the private practice of law. Mr.
Junck served as a member of our Board of Directors from November
2005 until November 2007. Mr. Junck received a Bachelor of Science
in Mechanical Engineering from the University of Illinois in 1971
and a Juris Doctorate from Valparaiso University in 1974. He is
admitted to practice before all of the state and federal courts in
the State of Arizona, the United States Court of Appeals for the
Ninth Circuit and the U.S. Court of Federal Claims.
Richard Finlay, age 57, was appointed to our Board of
Directors on July 9, 2015. Mr. Finlay is currently Chief Financial
Officer at BNBuilders, Inc. (“BNB”), a construction
company focused on life science, biotech, lab research, health
care, education, and commercial markets with offices in Seattle and
San Diego. Prior to joining BNB, Mr. Finlay spent 4 years in
non-profit leadership as CFO at Eastside Catholic School, and in
Guatemala for Ecofiltro, a social enterprise manufacturing and
distributing water filters. Prior to his work in Central America,
Mr. Finlay served in senior leadership positions (either as CEO or
CFO) with a veterinary hospital group, a boat manufacturer, a
fitness / nutrition focused company and an innovative early stage
health care company. Additional experience includes more than 15
years’ experience in business development, finance and
accounting with a Fortune 500 company as well as small and mid-size
regional companies. He is a 1984 graduate of the University of
Washington earning a Bachelor of Arts in Business
Administration.
37
John Schneller, age 51, was appointed to our Board of
Directors on June 23, 2008. Mr. Schneller is a partner at the
investment banking firm of Scura Paley & Company LLC. Prior to
joining Scura Paley Mr. Schneller was the Chief Financial Officer
of iMedicor, Inc., an enterprise healthcare software company. Prior
to iMedicor Mr. Schneller served from 2002 to 2007 as an investment
analyst at Knott Partners, a multi-billion dollar, value-based, New
York hedge fund. Mr. Schneller's area of expertise was analysis and
investing in micro-to-mid-cap securities with emphasis in the
fields of intellectual property, technology, content distribution,
nanotechnology, healthcare, non-bank financials, business services,
insurance companies, packaging and retail. Mr. Schneller received
his Bachelor of Arts in History from the University of
Massachusetts at Amherst, MA, a Master's in Public Administration
from Suffolk University in Boston and a Master's in Business
Administration from the Johnson Graduate School of Management at
Cornell University in Ithaca, NY.
JD Smith, age 46, has
been a member of our Board of Directors since December 10, 2012.
Mr. Smith has worked in real estate investment, construction and
development since 1982. Currently, Mr. Smith is the owner of Real
Estate Investment Consultants, LLC, a turnkey investment service
firm serving all sectors of real estate and investment and
development businesses. He also serves on the Board of Directors of
iMedicor, Inc., a publicly-held New York based company and provider
of comprehensive healthcare communications solutions. From 2008
until 2012 he was Director of Development for CP Financial, a
venture capital firm based in Scottsdale, Arizona. From 1993 until
2008 he developed over two dozen projects in the Phoenix Metro
Area, acting through his companies JD Investments, Inc., The High
Sonoran Group, Inc., and JD Smith Development, LLC. In 1990 he
formed his first operating company to buy and maintain residential
rental properties and obtained his real estate license. In 1993 he
graduated from Arizona State University with a Bachelor’s of
Science degree in Real Estate.
John Stewart, age 60, has been a member of our Board of
Directors since November of 2013 and was elected as Chairman in
December 2014. He has been the President of Glacial Holdings, Inc.
and Glacial Holdings LLC, private multi-family residential and
commercial real estate holding companies, and of Glacial Holdings
Property Management, Inc., a private property management company
since 1992. Through a number of private entities, Mr. Stewart is an
investor in various business enterprises. During the past nine
years, he has served as the chair of the Advisory Board of the Bank
of North Dakota, a director of Corridor Investors, LLC, the Minot
Family YMCA and the Minot Vocational Adjustment Workshop, and as a
trustee of the Oppen Family Guidance Institute. Mr. Stewart was
employed as a Certified Public Accountant by the accounting firms
of Arthur Andersen & Co. (from 1978 to 1980) and Brady, Martz
& Associates P.C. (from 1980 to 1997). Mr. Stewart has been a
member of the Board of Trustees of Investors Real Estate Trust
(NYSE - IRET) since 2004.
R. Rimmy Malhotra, age 41, was
appointed to our Board of Directors on April 6, 2016. From 2013 to
the present, Mr. Malhotra has served as the Managing Member and
Portfolio Manager for the Nicoya Fund LP, a private investment
partnership. Previously, from 2008-2013 he served as portfolio
manager of the Gratio Values Fund, a mutual fund registered under
the Investment Act of 1940. Prior to this, he was an Investment
Analyst at a New York based hedge fund. He earned an MBA in Finance
from The Wharton School and a Master’s degree in
International Relations from the University of Pennsylvania where
he was a Lauder Fellow. Mr. Malhotra holds undergraduate degrees in
Computer Science and Economics from Johns Hopkins
University.
Steven Bathgate, age 62, has
over 35 years of security industry experience, particularly with
microcap companies. He was appointed to our Board of Directors in
2016. In 1995 he founded GVC Capital LLC and he is the Senior
Managing Partner of that firm. GVC Capital is an investment banking
firm located in Denver, Colorado, focusing primarily on providing
comprehensive investment banking services to undervalued microcap
companies. Prior to founding GVC Capital, Mr. Bathgate was CEO of
securities firm Cohig & Associates in Denver from 1985 to 1995
and was previously Managing Partner, Equity Trading, at Wall Street
West. He currently is also a director for Global Healthcare REIT
and Bluebook International, Inc. Mr. Bathgate received a Bachelor
of Science in Finance from the University of Colorado, Leeds School
of Business.
Corporate Governance Policies
In
October 2015, the directors adopted and approved as policies of the
Board, the Corporate Governance Guidelines, the Standards of Ethics
and Business Conduct and the Policy on Roles and Responsibilities
of the Chairman of the Board. Those policies are each available on
our website at www.commandonline.com
and in print to any shareholder upon request.
Committees of the Board of Directors
Our
Board of Directors established three standing committees to
facilitate and assist the Board in the execution of its
responsibilities. The committees are the Audit Committee, the
Compensation Committee and the Nominating and Governance Committee.
The composition and function of each of our committees complies
with the rules of the SEC that are currently applicable to us and
we intend to comply with additional exchange listing requirements
to the extent that they become applicable to us in the future. The
Board has also adopted charters for the Audit Committee,
Compensation Committee and Nominating and Governance Committee.
Charters for each committee are available on our website at
www.commandonline.com .
The charter of each committee is also available in print to any
shareholder upon request at no charge. The table below shows
current membership for each of the standing board
committees.
38
|
Audit
|
|
Compensation
|
|
Nominating and
Governance
|
|
John
Stewart (Chair)
|
|
John
Schneller (Chair)
|
|
JD
Smith (Chair)
|
|
Richard
Finlay
|
|
Rimmy
Malhotra
|
|
Steven
Bathgate
|
|
Rimmy
Malhotra
|
|
JD
Smith
|
|
John
Schneller
|
The
committees are described below. The committees were reconstituted
at the annual meeting of the board in November 2016. Previous to
this date, Rimmy Malhotra, Richard Finlay, and Steven Bathgate did
not formally sit on any committees.
Audit Committee: John Stewart (Chairman), Richard
Finlay, and Rimmy Malhotra currently serve on the Audit Committee.
The Audit Committee held four formal meetings in each 2016 and
2015, and reviewed our quarterly filings and our annual filing and
audit. Additional discussions among committee members and meetings
were held to discuss the audit process and the preparation and
review of the consolidated financial statements.
Our
Board of Directors has determined that Mr. Stewart qualifies as an
“audit committee financial expert” as defined under the
Securities Exchange Act of 1934 and the applicable rules of the
NASDAQ Capital Market. All the members of the Audit Committee are
financially literate pursuant to the NASDAQ Marketplace Rules. Each
of the members of the Audit Committee meets the independence
standards for independent directors under the NASDAQ Listing
Rules.
Compensation Committee: John Schneller
(Chairman), JD Smith, and Rimmy Malhotra currently serve on the
Compensation Committee. The Compensation Committee met on six
occasions in 2016 and six occasions in 2015. The Compensation
Committee is comprised of three non-employee directors. The
non-employee directors have been determined by the Board to be
independent pursuant to Rule 10A-3 of the Exchange Act and the
NASDAQ Marketplace Rules.
Nominating and Governance Committee: JD Smith
(Chairman), John Schneller, and Steven Bathgate currently
serve on the Nominating and Corporate Governance Committee. The
Nominating and Corporate Governance Committee met on three
occasions in 2016 and three occasions in 2015. Each of the members
of the Nominating and Governance Committee meets the independence
standards for independent directors under the NASDAQ Listing
Rules.
Special Committees:
In February 2017, our Board established the Strategic Alternatives
Committee as a special committee and appointed John Schneller, JD
Smith, Rimmy Malhotra and Steven Bathgate to serve on the
committee. Subsequently, the Strategic Alternatives Committee
appointed Rimmy Malhotra as chair. The Committee is empowered to
identify and evaluate strategic opportunities available to the
Company. We anticipate that the Committee will engage the services
of an investment banking firm to assist the Committee in fulfilling
this assignment. Each of the members of the Strategic Alternatives
Committee meets the independence standards for independent
directors under NASDAQ Listing Rules.
Director Nominations
The
Board of Directors nominates directors for election at each annual
meeting of stockholders and appoints new directors to fill
vacancies when they arise. The Nominating and Governance Committee
has the responsibility to identify, evaluate, recruit and recommend
qualified candidates to the Board of Directors for nomination or
election.
One of
the Board of Directors’ objectives in evaluating director
nominations is to ensure that its membership is composed of
experienced and dedicated individuals with a diversity of
backgrounds, perspectives and skills. The Nominating and Governance
Committee will select nominees for director based on their
character, judgment, diversity of experience, business acumen, and
ability to act on behalf of all stockholders. We do not have a
formal diversity policy. However, the Nominating and Governance
Committee endeavors to have a Board representing diverse viewpoints
as well as diverse expertise at policy-making levels in many areas,
including business, accounting and finance, marketing and sales,
legal, government affairs, regulatory affairs, business
development, technology and in other areas that are relevant to our
activities.
The
Nominating and Governance Committee believes that nominees for
director should have experience, such as those mentioned above,
that may be useful to Command Center and the Board of Directors,
high personal and professional ethics and the willingness and
ability to devote sufficient time to carry out effectively their
duties as directors. The Nominating and Governance Committee
believes it appropriate for at least one, and, preferably,
multiple, members of the Board of Directors to meet the criteria
for an “audit committee financial expert” as defined by
rules of the SEC, and for a majority of the members of the Board of
Directors to meet the definition of “independent
director” as defined by the NASDAQ Listing Rules. The
Nominating and Governance Committee also believes it is appropriate
for key members of our management to participate as members of the
Board of Directors. Prior to each annual meeting of stockholders,
the Nominating and Governance Committee identifies nominees first
by evaluating the current directors whose term will expire at the
annual meeting and who are willing to continue in service. These
candidates are evaluated based on the criteria described above,
including as demonstrated by the candidate’s prior service as
a director, and the needs of the Board of Directors with respect to
the particular talents and experience of its directors. In the
event that a director does not wish to continue in service, the
Nominating and Governance Committee determines not to re-nominate
the director, a vacancy is created on the Board of Directors as a
result of a resignation, an increase in the size of the Board or
other event, the Committee will consider various candidates for
Board membership, including those suggested by the Committee
members, by other Board members, by any executive search firm
engaged by the Committee or by stockholders.
39
A
stockholder who wishes to suggest a prospective nominee for the
Board of Directors should notify our Secretary, or any member of
the Committee, in writing and include any supporting material the
stockholder considers appropriate. Information to be in the notice
includes the name and contact information for the candidate, the
name and contact information of the person making the nomination,
and other information about the nominee that must be disclosed in
proxy solicitations under Section 14 of the Securities Exchange Act
of 1934 and the related rules and regulations under that Section.
There have been no material changes to the procedures by which
stockholders may recommend nominees to our Board of
Directors.
Stockholder
nominations must be made in accordance with the procedures outlined
in, and must include the information required by, our Bylaws and
must be addressed to: Secretary, Command Center, Inc., 3609 S.
Wadsworth, Suite 250, Lakewood, CO 80235. You can obtain a copy of
our Bylaws by writing to the Secretary at this
address.
Stockholder Communications with the Board of Directors
If you
wish to communicate with the Board of Directors, you may send your
communication in writing to: Secretary, Command Center, Inc., 3609
S. Wadsworth, Suite 250, Lakewood, CO 80235. Please include your
name and address in the written communication and indicate whether
you are a stockholder of Command Center. The Secretary will review
any communication received from a stockholder, and all material
communications from stockholders will be forwarded to the
appropriate director or directors or Committee of the Board of
Directors based on the subject matter.
Director Compensation
The
following table summarizes the cash, equity awards, and all other
compensation earned by each of our non-employee directors during
the year ended December 30, 2016. Directors who are also officers
are included in the Summary Executive Compensation Table
below.
|
|
Fees
|
|
|
|
|
|
|
Earned
or
|
|
|
|
|
|
|
Paid
in
|
Stock
|
Option
|
|
|
|
Name
|
Cash
|
Award
(1)
|
Award
(2)
|
All
Other
|
Total
|
|
John
Stewart
|
$46,500
|
$7,960
|
$-
|
$-
|
$54,460
|
|
Richard
Finlay
|
$25,000
|
$7,960
|
$-
|
$-
|
$32,960
|
|
John
Schneller
|
$36,000
|
$7,960
|
$-
|
$-
|
$43,960
|
|
JD
Smith
|
$36,000
|
$7,960
|
$-
|
$-
|
$43,960
|
|
Rimmy
Malhotra
|
$12,500
|
$-
|
$-
|
$-
|
$12,500
|
|
Steve
Bathgate
|
$6,250
|
$-
|
$-
|
$-
|
$6,250
|
|
(1)
|
This
column represents the grant date fair value of shares awarded to
each non-employee director in 2016 in accordance with GAAP. This
amount represents shares awarded for service in 2015. The amounts
were calculated using the closing price of our stock on the grant
date.
|
|
(2)
|
This
column represents the grant date fair value of options awarded to
each non-employee director in 2016 in accordance with
GAAP.
|
Narrative to Director Compensation Table
The
Compensation Committee recommends and the Board of Directors
determines the compensation for our directors, based on industry
standards and our financial situation. At all relevant times prior
to July 9, 2015, we paid each of our independent directors the base
amount of $25,000 as an annual retainer, paid on a quarterly basis,
together with an award of 20,000 shares of the Company’s
common stock. In addition, we paid a fee of $5,000 per annum, paid
quarterly, if the independent director was chairman of a committee.
Our employee directors receive no additional compensation for
attendance at Board meetings or meetings of Board committees.
Non-employee directors are also reimbursed for any expenses they
may incur in attending meetings.
40
Effective
as of July 9, 2015, director compensation was modified to increase
the annual retainer for the Chairman of the Board to $30,000 and to
increase the annual payment to the chair of the Audit Committee to
$6,500. The annual payment for the chairman of each the
Compensation Committee and the Nominating and Governance Committee
remains at $5,000. Non-chairman members of each board committee are
also awarded compensation, $3,500 annually for Audit Committee
members and $2,500 annually for members of other committees. The
award of 20,000 shares of our common stock and expense
reimbursement remain unchanged.
Attendance at Meetings
During
2016, our Board held six meetings and acted by unanimous written
consent on four occasions. During 2015, our Board also held six
meetings and acted by unanimous written consent on four additional
occasions. Each member attended at least 75% of the meetings of the
Board and committees on which he or she served during his or her
term of office. Directors are expected to attend the
Company’s meetings of stockholders, absent unusual
circumstances. Last year’s annual meeting of stockholders was
attended by all of our directors.
Code of Ethics
In
October 2015, the Board of Directors adopted the Standards of
Ethics and Business Conduct, or the Code of Ethics. The Code of
Ethics applicable to all directors, officers and employees of the
Company. To
date, there have been no waivers under our Code of Ethics. We
intend to disclose future amendments to certain provisions of our
Code of Ethics or any waivers, if and when granted, of our Code of
Ethics on our website at www.commandonline.com within four business
days following the date of such amendment or waiver.
The Code of Ethics is available on our website
at www.commandonline.com and
in print to any shareholder upon request at no charge. Requests
should be addressed to: Secretary, Command Center, Inc., 3609 S.
Wadsworth, Suite 250, Lakewood, CO 80235.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Securities and Exchange Act of 1934, as amended,
requires our officers, directors, and beneficial owners of more
than 10% any of our equity securities (“Reporting
Persons”) to timely file certain reports regarding ownership
of and transactions in our securities with the Securities and
Exchange Commission. Copies of the required filings must also be
furnished to us. We became subject to the requirements of Section
16(a) on February 8, 2008. Section 16(a) compliance was required
during the fiscal year ended December 30, 2016. Based solely on a
review of Forms 3, 4 and 5 and amendments thereto furnished to
us pursuant to Rule 16a-3(e) under the Exchange Act during
2016, we believe that, during 2016, the filing requirements under
Section 16(a) of the Exchange Act were satisfied except
one Form 4 was filed late
by 349 days for one transaction by Mr. Jeff
Wilson.
Indebtedness of Management
No
director or executive officer or nominee for director, or any
member of the immediate family of such has been indebted to the
Company during the past year.
Officer and Director Legal Proceedings
There
are no legal proceedings involving our officers or
directors.
41
ITEM 11. EXECUTIVE COMPENSATION
Role of Executive Officers in Executive Compensation
The
Compensation Committee is charged with reviewing executive
compensation and making recommendations to the Board of Directors
based upon their review and analysis. None of our executive
officers currently serve as a member of the compensation committee
of any entity that has one or more executive officers serving as an
independent director on our Board of Directors or Compensation
Committee.
Summary Compensation Table
The
following tables provide a summary of information about
compensation expensed or accrued by us during the fiscal years
ended December 30, 2016, and December 25, 2015 for (a) our Chief
Executive Officer, (b) our Chief Financial Officers,
and (c) the two other executive officers other than our CEO
and CFO serving at the end of such fiscal years; (collectively, the
“Named Executive Officers” or “NEOs”).
Columns required by SEC rules are omitted where there is no amount
to report.
|
|
|
|
|
|
All
Other
|
|
|
Name and
Principal Position
|
Year
|
Salary
|
Bonus
(4)
|
Stock
Awards
|
Compensation
(5)
|
Total
|
|
Frederick Sandford
(1)
|
2016
|
$275,000
|
$85,000
|
$-
|
$258
|
$360,258
|
|
President, Chief
Executive Officer, and Director
|
2015
|
$253,923
|
$-
|
$-
|
$138
|
$254,061
|
|
Colette Pieper
Chief Financial Officer (2)
|
2016
|
$60,481
|
$-
|
$-
|
$54,830(6)
|
$115,311
|
|
Ronald
Junck
|
2016
|
$185,000
|
$35,000
|
$-
|
$228
|
$220,228
|
|
Executive Vice
President and General Counsel
|
2015
|
$185,000
|
$-
|
$-
|
$762
|
$185,762
|
|
Jeff Wilson
(3)
|
2016
|
$149,029
|
$-
|
$13,256
|
$194
|
$162,479
|
|
Former Chief
Financial Officer and Former Director
|
2015
|
$200,000
|
$-
|
$-
|
$138
|
$200,138
|
|
|
|
|
|
|
|
|
|
(1)
|
Frederick
Sandford was appointed Chief Executive officer on February 22,
2013.
|
|
(2)
|
Colette
Pieper was appointed Chief Financial Officer on September 2,
2016.
|
|
(3)
|
Our
former Chief Financial Officer, Jeff Wilson was appointed on
September 2, 2014. Mr. Wilson’s tenure as an officer and
employee expired on September 1, 2016.
|
|
(4)
|
Bonus payments were awarded based on the successful relocation of the corporate office from Coeur d'Alene, Idaho to Lakewood, Colorado. |
|
(5)
|
Includes
payments for company sponsored life insurance.
|
|
(6)
|
Colette
Pieper Other Compensation includes $54,698 of reimbursable
relocation expenses.
|
Narrative to Summary Compensation Table
Summary of Executive Employment Agreements
On
October 13, 2015, we entered into an Executive Employment Agreement
with Frederick Sandford (the “CEO Agreement”). The key
terms of the Agreement are as follows: (i) A base salary of
$275,000, with an annual bonus opportunity under the terms and
conditions of the Executive Bonus Plan. There is no guarantee of
any annual bonus. (ii) If there is a change in control (as defined
in the Agreement), Mr. Sandford will continue to receive his Base
Salary and Annual Bonus for 24 months after termination, together
with vesting of all options granted. (iii) In the event of
termination without cause (as defined in the CEO Agreement), Mr.
Sandford would continue to receive his Base Salary for the longer
of: 18 months following termination or the remainder of the then
current term of the CEO Agreement. (iv) Non-competition and
confidentiality provisions are applicable under the CEO Agreement.
(v) The effective date of the CEO Agreement is October 13, 2015,
and continues for three years unless sooner terminated (the
“Employment Term”). Automatic extensions apply in
certain events.
Effective
September 2, 2016, we entered into an employment agreement with
Colette Pieper. The key terms of the agreement are as
follows: (i) A base salary of $185,000, increasing to $200,000 on
January 1, 2017. (ii) The agreement provides for a maximum bonus
opportunity of $20,000 for the remainder of fiscal 2016 and
thereafter with an annual bonus opportunity under the terms and
conditions of the Executive Bonus Plan as approved by the
Compensation Committee. There is no guarantee of any annual bonus.
(iii) We will pay certain relocation expenses, travel and expense
reimbursement, professional membership expenses, education
expenses, and vacation. (iv) We will make an initial grant of
unvested options to acquire 500,000 shares of common stock. The
options will vest in four equal annual installments of 125,000
options, effective beginning on a future date to be determined
following approval of the stock incentive plan by the shareholders.
(v) If there is a change in control (as defined in the agreement),
Mrs. Pieper will continue to receive her Base Salary and Annual
Bonus for 12 months after termination, together with vesting of all
options granted pursuant to the agreement. In the event of
termination without cause (as defined in the agreement), she would
continue to receive her Base Salary for the longer of: 12 months
following termination or the remainder of the then current
agreement. (vi) Non-competition and confidentiality provisions are
applicable under the agreement. (vii) The effective date of the
agreement is September 2, 2016 and continues for one year unless
sooner terminated. Automatic extensions apply in certain
events.
42
There
are no present or anticipated executive employment agreements with
Ronald Junck, Executive Vice President and General Counsel. Ronald
Junck receives a base salary of $185,000 per year,
effective September 2011, plus performance based compensation as
set by the Board.
Pursuant
to the Executive Employment Agreement with our former Chief
Financial Officer, Jeff Wilson, that expired on September 1, 2016,
Mr. Wilson was entitled to base salary of $200,000, with an annual
bonus opportunity under the terms and conditions of the Executive
Bonus Plan. There was no guarantee of any annual bonus.
Noncompetition and confidentiality provisions are applicable under
the agreement.
All our
executive officers receive expense reimbursement for business
travel and participation in employee benefits programs made
available during the term of employment.
Outstanding Equity Awards at Fiscal Year-End
The
following table shows grants of options outstanding on December 30,
2016, the last day of our last completed fiscal year, to each of
the Named Executive Officers named in the Summary Compensation
Table.
|
|
|
Number
of
|
Number
of
|
|
|
|
|
|
Securities
|
Securities
|
|
|
|
|
|
Underlying
|
Underlying
|
Option
|
Option
|
|
|
|
Unexercised
Options
|
Unexercised
Options
|
Exercise
|
Expiration
|
|
Name
|
Grant
Date
|
Exercisable
|
Unexercisable
|
Price
|
Date
|
|
Frederick
Sandford
|
2/22/2013
|
1,125,000
|
375,000
|
$0.20
|
2/21/2023
|
|
10/31/2014
|
150,000
|
150,000
|
$0.67
|
10/30/2021
|
|
|
|
|
|
|
|
|
Option Exercises
Ronald
Junck, our Executive Vice President, General Counsel and Secretary
and Ralph Peterson, former Director and former Chief Financial
Officer, each exercised options for 250,000 shares in 2015. Our
NEOs did not exercise any options in 2016.
Payments upon Termination and Change in Control
The
following is a summary setting forth potential severance payments
and benefits provided for Frederick J. Sandford and Colette Pieper,
the only named executive officers with a written employment
agreement.
|
Frederick J. Sandford,
President and Chief Executive Officer
|
Involuntary Termination without Cause (2)
|
Termination for Change in Control (3)
|
Death (4)
|
Disability (4)
|
|
Base
Salary
|
$412,500
|
$550,000
|
$137,500
|
$137,500
|
|
Bonus
(1)
|
-
|
550,000
|
-
|
-
|
|
Total
|
$412,500
|
$1,100,000
|
$137,500
|
$137,500
|
|
|
|
|
|
|
|
(1)
For purposes of this table, the annual bonus amount is assumed to
be equal to 100% of base salary.
|
||||
|
(2)
Includes base salary for 18 months.
|
||||
|
(3)
Includes base salary and bonus for 24 months.
|
||||
|
(4)
Includes base salary for six months.
|
||||
43
|
Colette Pieper,
Principal Accounting Officer
|
Involuntary Termination without Cause (2)
|
Termination for Change in Control (3)
|
Death (4)
|
|
Base
Salary
|
$200,000
|
$200,000
|
$100,000
|
|
Bonus
(1)
|
-
|
137,500
|
-
|
|
TOTAL
|
$200,000
|
$337,500
|
$100,000
|
(1)
For
purposes of this table, the bonus amount is assumed to be equal to
50% of the President and CEO’s annual bonus stated
above.
(2)
Includes
base salary for 12 months. This payment also applies to resignation
for good reason (as that term is defined in the employment
agreement).
(3)
Includes base salary and bonus for 12 months.
(4)
Includes base salary for six months.
Payments Made Upon Any Termination
Regardless
of the manner in which a named executive officer’s employment
terminates, the executive is entitled to receive amounts earned
during his term of employment. Such amounts include: earned but
unpaid salary through the date of termination; non-equity incentive
compensation earned and payable prior to the date of termination;
option grants received which have already vested and are
exercisable prior to the date of termination (subject to the terms
of the applicable option agreements) and unused vacation
pay.
Payments Made Upon Involuntary Termination Without
Cause
In the
case of Mr. Sandford, he will continue to receive his base salary
for the remainder of the then-current term or 18 months, whichever
is longer. In the case of Mrs. Pieper, she will continue to receive
her base salary for one year from termination or the remainder of
the then current term, whichever is longer.
Payments Made Upon a Change in Control
Mr.
Sandford’s and Mrs. Pieper’s employment agreement
contains change in control provisions. The benefits, in addition to
the items listed under the heading “Payments Made Upon Any
Termination” above include the vesting of all outstanding
stock options.
In the
case of Mr. Sandford, he will continue to receive his base salary
and bonus for 24 months. In the case of Mrs. Pieper, she will
continue to receive her base salary and bonus for 12
months.
Payments Made Upon Death or Permanent Disability
In the
event of the death or permanent disability of a named executive
officer, the executive or personal representative or estate, as
applicable, would receive, in addition to the items listed under
the heading “Payments Made Upon Any Termination” above
the vesting of all outstanding stock options.
In the
case of Mr. Sandford and Mrs. Pieper, they or their personal
representatives or estates, as applicable, will continue to receive
the executive's base salary during the six-month period following
the date of termination.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following tables set forth information regarding (a) the ownership
of any non-management person known to us to own more than five
percent of any class of our voting common stock, and (b) the number
and percentage of our shares of common stock held by each director,
each of the named executive officers and directors and officers as
a group. Percentages of ownership have been calculated based
upon 60,634,650 shares of common stock issued and outstanding
as of December 30, 2016.
44
Security Ownership of Non-Management Owners
|
Name and address
of Beneficial Owner (1) (2)
|
|
Title of
Class
|
|
|
Amount and
Nature of
Beneficial
Ownership (2)
|
|
|
Percent of
Class
|
|
Glenn
Welstad (3)
|
|
Common
Stock
|
|
|
2,500,000
|
|
|
4.1%
|
|
Jerry
Smith (4)
|
|
Common
Stock
|
|
|
5,756,706
|
|
|
9.5%
|
|
Merle
Rydesky (5)
|
|
Common
Stock
|
|
|
7,235,000
|
|
|
12.0%
|
|
(1)
|
The address of the non-management owners is: care of
Command Center, Inc., 3609 S Wadsworth Blvd, Suite 250 Lakewood, CO
80235.
|
|
(2)
|
Beneficial
ownership is calculated in accordance with Rule 13-d-3(d)(1) of the
Exchange Act, and includes shares held outright, shares held by
entity(s) controlled by NEOs and/or Directors, and shares issuable
upon exercise of options or warrants which are exercisable on or
within 60 days of March 3, 2015.
|
|
(3)
|
The
number of shares comprising Mr. Welstad’s beneficial
ownership is based upon the best information available to the
Company as of March 30, 2017.
|
|
(4)
|
The
number of shares comprising Mr. Smith’s beneficial ownership
is based upon the written representations of his legal
counsel.
|
|
(5)
|
The
number of shares comprising Dr. Rydesky’s beneficial
ownership is based upon the Schedules 13D filed by Merle Rydesky
and Barbara Rydesky on February 11, 2015 and the verbal
representations of Dr. Rydesky.
|
Security
Ownership of Management
|
Name and address
of Beneficial
Owner (1)
(2)
|
|
Title of
Class
|
|
|
Amount and
Nature of
Beneficial
Ownership (2)
|
|
|
Percent of
Class
|
|
Frederick
Sandford (3)
|
|
Common
Stock
|
|
|
1,845,000
|
|
|
3.3%
|
|
Colette
Pieper
|
|
Common
Stock
|
|
|
-
|
|
|
-
|
|
Ronald
Junck (4)
|
|
Common
Stock
|
|
|
1,460,225
|
|
|
2.4%
|
|
Richard
M. Finlay
|
|
Common
Stock
|
|
|
30,200
|
|
|
-
|
|
John
Schneller (5)
|
|
Common
Stock
|
|
|
365,000
|
|
|
0.6%
|
|
JD
Smith (6)
|
|
Common
Stock
|
|
|
324,750
|
|
|
0.6%
|
|
John
Stewart (7)
|
|
Common
Stock
|
|
|
658,015
|
|
|
1.1%
|
|
R.
Rimmy Malhotra (8)
|
|
Common
Stock
|
|
|
1,286,947
|
|
|
2.1%
|
|
Steven
Bathgate (9)
|
|
Common
Stock
|
|
|
1,149,710
|
|
|
1.9%
|
|
All
Officers and Directors as a Group
|
|
Common
Stock
|
|
|
7,119,847
|
|
|
12.1%
|
45
|
(1)
|
The address of the NEOs and Directors is: care of
Command Center, Inc., 3609 S Wadsworth Blvd, Suite 250 Lakewood, CO
80235.
|
|
(2)
|
Beneficial ownership is calculated in accordance with Rule
13-d-3(d)(1) of the Exchange Act, and includes shares held
outright, shares held by entity(s) controlled by NEOs and/or
Directors, and shares issuable upon exercise of options or warrants
which are exercisable on or within 60 days of March 30,
2016.
|
|
(3)
|
Includes 195,000 shares held outright and options to purchase
1,650,000 shares.
|
|
(4)
|
Includes 1,353,148 shares held outright, 107,077 shares held
indirectly.
|
|
(5)
|
Includes 295,000 shares held outright and options to purchase
70,000 shares.
|
|
(6)
|
Includes 216,000 shares held outright and options to purchase
108,750 shares.
|
|
(7)
|
Includes 60,000 shares held outright, 503,900 held indirectly and
options to purchase 94,115 shares.
|
|
(8)
|
All shares are owned indirectly through Nicoya Fund. The shares are
directly owned by the Nicoya Fund LLC, a Delaware limited liability
company. This reporting person is the managing member and a
co-owner of Nicoya Capital LLC, which is the managing member and
owner of the Nicoya Fund.
|
|
(9)
|
Includes 154,710 shares held outright, 995,000 shares held
indirectly, including 800,000 by Mr. Bathgate’s spouse,
95,000 by the Bathgate Family Partnership and 100,000 by Viva Co.,
LLC.
|
Equity Compensation Plans
At the
annual meeting of shareholders held on November 17, 2016, the
shareholders approved the adoption of the 2016 Employee Stock
Incentive Plan. The 2008 Stock Incentive Plan expired in January
2016, except as to awards that remain outstanding under the
plan.
Securities authorized for issuance under equity compensation
plans.
As of
December 30, 2016, we had one equity compensation plan, namely the
Command Center, Inc. 2016 Stock
Incentive Plan, approved by the shareholders on November 17,
2016. Pursuant to the 2016 Plan, the Compensation Committee is
authorized to issue awards for up to 6.0 million shares over the 10
year life of the plan. Currently, there have been no awards granted
under this plan.
As of
December 25, 2015 we had one prior equity compensation plan, namely
the Command Center, Inc. 2008
Stock Incentive Plan, previously approved by the
shareholders.. In January 2016 this plan expired and no new grants
can be made under the plan.
46
Changes in Control
We are
unaware of any contract or other arrangement the operation of which
may at a subsequent date result in a change in control of
us.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
There
were no material or significant Related Party Transactions during
2016 or 2015.
None of
our executive officers serve as a member of the board of directors
or compensation committee, or other committee serving an equivalent
function, of any other entity that has one or more of its executive
officers serving as a member of our Board of Directors or
Compensation Committee. None of the current members of our
Compensation Committee, nor any of their family members, has ever
been one of our employees.
Related Person Transactions Policy and Procedures
As set
forth in the written charter of the Audit Committee, any related
person transaction involving a Company director or executive
officer must be reviewed and approved by the Audit Committee. Any
member of the Audit Committee who is a related person with respect
to a transaction under review may not participate in the
deliberations or vote on the approval or ratification of the
transaction. Related persons include any director or executive
officer, certain shareholders and any of their “immediate
family members” (as defined by SEC regulations). In addition,
the Board of Directors determines on an annual basis which
directors meet the definition of independent director under the
NASDAQ Marketplace Rules and reviews any director relationship that
would potentially interfere with his or her exercise of independent
judgment in carrying out the responsibilities of a
director.
Director Independence
The
Board affirmatively determines the independence of each director
and nominee for election as a director in accordance with certain
criteria, which include all elements of independence set forth in
the related Securities and Exchange Commission Rules and
Regulations and the NASDAQ Marketplace Rules. As part of the Board
Committee meetings and as they feel necessary or appropriate at
full Board meetings, the independent directors routinely meet in
executive session without management or any non-independent
directors present.
Based
on these standards and information provided by the Directors and
Officers, the Board determined that Steven Bathgate, Richard
Finlay, Rimmy Malhotra, John Schneller, JD Smith and John Stewart,
all non-employee directors, are independent and have no material
relationship with the Company, except as directors and as
shareholders of the Company.
Based
on Securities and Exchange Commission Rules and Regulations and
NASDAQ Marketplace Rules, the Board affirmatively determined that:
Frederick Sandford is not independent because he is an employee of
the Company and our Chief Executive Officer and
President.
47
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The
Board of Directors selected PMB Helin Donovan as the independent
registered public accounting firm to examine our consolidated
financial statements for the fiscal years ending December 30, 2016
and December 25, 2015.
The
following table summarizes the fees that PMB Helin Donovan charged
us for the listed services during 2016 and 2015:
|
Type of
fee:
|
2016
|
2015
|
|
|
|
|
|
Audit fees
(1)
|
$122,500
|
$131,500
|
|
Audit related fees
(2)
|
-
|
-
|
|
Tax
fees
|
35,310
|
22,286
|
|
All other fees
(4)
|
-
|
-
|
|
Total
|
$157,810
|
$153,786
|
|
(1)
|
Audit
fees consist of fees billed for professional services provided in
connection with the audit of the Company’s consolidated
financial statements and reviews of our quarterly consolidated
financial statements.
|
|
(2)
|
Audit-related
fees consist of assurance and related services that include, but
are not limited to, internal control reviews, attest services not
required by statute or regulation and consultation concerning
financial accounting and reporting standards, and not reported
under “Audit fees.”
|
|
(3)
|
Tax
fees consist of the aggregate fees billed for professional services
for tax compliance, tax advice, and tax planning. These services
include preparation of federal income tax returns.
|
|
(4)
|
All
other fees consist of fees billed for products and services other
than the services reported above.
|
Our
Audit Committee reviewed the audit and tax services rendered by PMB
Helin Donovan and concluded that such services were compatible with
maintaining the auditors’ independence. All audit, non-audit,
tax services, and other services performed by our independent
accountants are pre-approved by our Audit Committee to assure that
such services do not impair the auditors’ independence from
us. We do not use PMB Helin Donovan for financial information
system design and implementation. These services, which include
designing or implementing a system that aggregates source data
underlying the financial statements, or generates information that
is significant to our financial statements, are provided
internally. We do not engage PMB Helin Donovan to provide
compliance outsourcing services.
48
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Documents
filed as part of this report on Form 10-K or incorporated by
reference:
|
(1)
|
Our
consolidated financial statements can be found in Item 8 of this
report.
|
|
(2)
|
Consolidated
Financial Statement Schedules (omitted because they are either not
required, are not applicable, or the required information is
disclosed in the notes to the consolidated financial statements or
related notes).
|
|
(3)
|
The
following exhibits are filed with this Annual Report on
Form 10-K or incorporated by reference:
|
|
Exhibit No.
|
|
Description
|
|
3.1
|
|
Articles
of Incorporation. Incorporated by reference to Exhibit 3.1 to Form
SB-2, as filed May 7, 2001.
|
|
3.2
|
|
Amendment
to the Articles of Incorporation. Incorporated by reference to
Exhibit 3.1 to Form 8-K, as filed November 16, 2005
|
|
3.3
|
|
Amendment
to the Articles of Incorporation. Incorporated by reference to
Exhibit 3.3 to Form S-1, as filed January 14, 2008
|
|
3.4
|
|
Bylaws.
Incorporated by reference to Exhibit 3(b) to Form SB-2, as filed
May 7, 2001
|
|
3.5
|
|
Amendment
to Bylaws. Incorporated by reference to Exhibit 3.2 to Form 8-K as
filed November 16, 2005.
|
|
3.6
|
|
Amended
and Restated Bylaws. Incorporated by reference to Exhibit 3.1 to
Form 8-K as filed on October 4, 2016.
|
|
4.5
|
|
Form of
Common Stock Share Certificate. Incorporated by reference to
Exhibit 4.5 to Form S-1 as filed January 14, 2008
|
|
10.3
|
|
Executive
Employment Agreement with Fredrick Sandford. Incorporated by
reference to Exhibit 10.1 to Form 8-K as filed on October 13,
2015
|
|
10.4
|
|
Executive
Employment Agreement with Colette C. Pieper. Incorporated by
reference to Exhibit 10.1 to Form 8-K as filed on September 2,
2016.
|
|
10.5
|
|
Command
Center, Inc. 2016 Stock Incentive Plan. Included as Appendix B to
Form DEF 14A as filed October 11,, 2016
|
|
|
Code of
Ethics.
|
|
|
|
List of
Subsidiaries
|
|
|
|
Consent
of PMB Helin Donovan
|
|
|
|
Certification
of Principal Executive Officer-Section 302
Certification
|
|
|
|
Certification
of Principal Accounting Officer-Section 302
Certification
|
|
|
|
Certification
of Chief Executive Officer-Section 906 Certification
|
|
|
|
Certification
of Principal Accounting Officer-Section 906
Certification
|
|
|
101.INS
|
|
XBRL
Instance Document
|
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
49
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMMAND CENTER, INC.
|
/s/Frederick
Sandford
|
Chief
Executive Officer
|
Frederick
Sandford
|
April
11, 2017
|
|
Signature
|
Title
|
Printed Name
|
Date
|
|
|
|
|
|
|
/s/Colette
Pieper
|
Principal
Accounting Officer
|
Colette
Pieper
|
April
11, 2017
|
|
Signature
|
Title
|
Printed Name
|
Date
|
In
accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
/s/John
Stewart
|
Director
|
John
Stewart
|
April
11, 2017
|
|
Signature
|
Title
|
Printed Name
|
Date
|
|
|
|
|
|
|
/s/Richard
Finlay
|
Director
|
Richard
Finlay
|
April
11, 2017
|
|
Signature
|
Title
|
Printed Name
|
Date
|
|
|
|
|
|
|
/s/Frederick
Sandford
|
Director
|
Frederick
Sandford
|
April
11, 2017
|
|
Signature
|
Title
|
Printed Name
|
Date
|
|
|
|
|
|
|
/s/John Schneller
|
Director
|
John Schneller
|
April
11, 2017
|
|
Signature
|
Title
|
Printed Name
|
Date
|
|
|
|
|
|
|
/s/JD
Smith
|
Director
|
JD
Smith
|
April
11, 2017
|
|
Signature
|
Title
|
Printed Name
|
Date
|
|
|
|
|
|
|
/s/R.
Rimmy Malhotra
|
Director
|
R.
Rimmy Malhotra
|
April
11, 2017
|
|
Signature
|
Title
|
Printed Name
|
Date
|
|
|
|
|
|
|
/s/Steven
Bathgate
|
Director
|
Steven
Bathgate
|
April
11, 2017
|
|
Signature
|
Title
|
Printed Name
|
Date
|
50