UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES EXCHANGE ACT OF 1934





For the
quarterly period ended: March 29, 2019





or





☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES EXCHANGE ACT OF 1934


Commission
file number: 000-53088







COMMAND CENTER, INC.


(Exact
name of registrant as specified in its charter)





Washington

91-2079472(State
of incorporation)

(I.R.S.
Employer Identification No.)





3609 S. Wadsworth Blvd., Ste. 250, Lakewood, CO

80235(Address
of Principal Executive Offices)

(Zip
Code)





Registrant's telephone number, including area code: (866)
464-5844







Indicate
by check mark 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 ☐





Indicate
by check mark whether the registrant has submitted every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☑ No ☐





Indicate
by check mark whether the Registrant is a large accelerated filer
☐ , an accelerated filer ☐ , a non-accelerated filer ☐ , a smaller reporting company ☑ , or an emerging growth company ☐ (as defined in Rule 12b-2 of the Exchange
Act).





If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐





Indicate
by check mark whether the Registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑





Number
of shares of issuer's common stock outstanding at May 10, 2019:
4,629,331











Command Center, Inc.


Table of Contents





PART I. FINANCIAL INFORMATIONItem
1.
Financial
StatementsConsolidated
Balance Sheets
3Consolidated
Statements of Operations
4Consolidated
Statements of Changes in Stockholders’
Equity
5Consolidated
Statements of Cash Flows
6Notes to
Consolidated Financial Statements
7Item
2.
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
16Item
3.
Quantitative and
Qualitative Disclosures about Market Risk
18Item
4.
Controls and
Procedures
18PART II. OTHER INFORMATIONItem
1.
Legal
Proceedings
19Item
1A.
Risk
Factors
19Item
2.
Unregistered Sales
of Equity Securities and Use of Proceeds
19Item
3.
Defaults Upon
Senior Securities
19Item
4.
Mine Safety
Disclosures
19Item
5.
Other
Information
19Item
6.
Exhibits
20Signatures
21


2


PART I. FINANCIAL
INFORMATION





Item 1. Financial
Statements





Command Center, Inc.


Consolidated Balance Sheets





March 29,
2019
December 28,
2018ASSETS
(unaudited)Current
assetsCash
$7,338,186
$7,934,287Restricted
cash
139,859
69,423Accounts
receivable, net of allowance for doubtful accounts
9,063,215
9,041,361Prepaid expenses,
deposits, and other assets
460,953
380,930Prepaid workers'
compensation
313,814
212,197Total current
assets
17,316,027
17,638,198Property and
equipment, net
288,375
329,255Right-of-use
assets
1,795,451
-Deferred tax
asset
1,321,644
1,079,908Workers'
compensation risk pool deposit, net
191,521
193,984Workers'
compensation risk pool deposit in receivership, net
260,000
260,000Goodwill and other
intangible assets, net
3,903,963
3,930,900Total
assets
$25,076,981
$23,432,245LIABILITIES
AND STOCKHOLDERS' EQUITYCurrent
liabilitiesAccounts
payable
$904,981
$219,945Account purchase
agreement facility
-
398,894Other current
liabilities
788,831
821,142Accrued wages and
benefits
1,583,534
1,218,699Current portion of
lease liabilities
930,874
-Current portion of
workers' compensation claims liability
1,003,643
1,003,643Total current
liabilities
5,211,863
3,662,323Lease liabilities,
less current portion
915,203
-Workers'
compensation claims liability, less current portion
912,754
878,455Total
liabilities
7,039,821
4,540,778Commitments and
contingencies (Note 9)Stockholders'
equityPreferred stock -
$0.001 par value, 416,666 shares authorized; none
issued
-
-Common stock -
$0.001 par value, 8,333,333 shares authorized; 4,633,120 and
4,680,871 shares issued and outstanding, respectively
4,633
4,681Additional paid-in
capital
54,426,617
54,536,852Accumulated
deficit
(36,394,089)
(35,650,066)Total stockholders'
equity
18,037,161
18,891,467Total liabilities
and stockholders' equity
$25,076,981
$23,432,245








See
accompanying notes to consolidated financial
statements.
 
 
 3





Command Center, Inc.


Consolidated Statements of
Operations


(unaudited)





Thirteen weeks endedMarch 29, 2019
March 30, 2018Revenue
$21,754,898
$22,467,398Cost
of staffing services
16,122,635
16,873,331Gross
profit
5,632,263
5,594,067Selling,
general and administrative expenses
6,550,012
7,213,620Depreciation
and amortization
67,817
92,591Loss
from operations
(985,566)
(1,712,144)Interest
expense and other financing expense
80
2,163Net loss before
income taxes
(985,646)
(1,714,307)Provision for
income taxes
(241,623)
(496,618)Net
loss
$(744,023)
$(1,217,689)Loss per share:Basic
$(0.16)
$(0.24)Diluted
$(0.16)
$(0.24)Weighted average shares outstanding:Basic
4,662,275
4,983,157Diluted
4,662,275
4,983,157








See
accompanying notes to consolidated financial
statements.
 
 
 4








Command Center, Inc.


Consolidated Statements of Changes in
Stockholders’ Equity


(unaudited)





Common
StockShares
Par
Value
Additional
paid-in capital
Accumulated
deficit
Total
stockholders' equityBalance
at December 29, 2017
4,993,672
4,994
56,211,837
(36,621,042)
19,595,789Stock-based
compensation
-
-
26,593
-
26,593Common
stock purchased and retired
(22,461)
(23)
(129,010)
-
(129,033)Cumulative
effect of accounting change
-
-
-
(3,311)
(3,311)Effective
repurchase of stock options


(240,670)
-
(240,670)Net
income for the year
-
-
-
(1,217,689)
(1,217,689)Balance
at March 30, 2018
4,971,211
$4,971
$55,868,750
$(37,842,042)
$18,031,679Balance
at December 28, 2018
4,680,871
4,681
54,536,852
(35,650,066)
18,891,467Stock-based
compensation
-
-
87,726
-
87,726Common
stock purchased and retired
(47,751)
(48)
(197,961)
-
(198,009)Net
loss for the period
-
-
-
(744,023)
(744,023)Balance
at March 29, 2019
4,633,120
$4,633
$54,426,617
$(36,394,089)
$18,037,161








See
accompanying notes to consolidated financial
statements.
 
 
 5





Command Center, Inc.


Consolidated Statements of Cash
Flows





Thirteen weeks endedMarch 29, 2019
March 30, 2018Cash flows from operating activitiesNet
loss
$(744,023)
$(1,217,689)Adjustments
to reconcile net loss to net cash used in operations:Depreciation
and amortization
67,817
92,591Provision
for bad debt
45,524
(10,995)Stock
based compensation
87,726
26,593Deferred
taxes
(241,736)
(496,618)Reserve
on workers' compensation risk pool deposit in
receivership
-
1,540,000Cumulative
effect of accounting change
-
(3,311)Changes
in operating assets and liabilities:Accounts
receivable
(67,378)
150,046Prepaid
expenses, deposits, and other assets
133,053
90,372Prepaid
workers' compensation
(101,617)
(119,422)Accounts
payable
685,036
(324,831)Other
current liabilities
(32,311)
(283,310)Accrued
wages and benefits
364,835
388,523Operating
lease liability and righ-of-use assets
50,626
-Workers'
compensation risk pool deposits
2,463
-Workers'
compensation claims liability
34,299
-Net
cash provided by (used in) operating activities
284,314
(168,051)Cash flows from investing activitiesPurchase
of property and equipment
-
(67,197)Net
cash used in investing activities
-
(67,197)Cash flows from financing activitiesNet
change in account purchase agreement facility
(611,970)
(671,594)Purchase
of common stock
(198,009)
(129,032)Net
cash used in financing activities
(809,979)
(800,626)Net decrease in cash
(525,665)
(1,035,874)Cash and restricted cash, beginning of period
8,003,710
7,781,484Cash and restricted cash, end of period
$7,478,045
$6,745,610Supplemental disclosure of non-cash activitiesPurchase
of vested stock options
-
240,670Supplemental disclosure of cash flow informationInterest
paid
307
2,163Income
taxes paid
(604)
(3,252)Reconciliation of cash and cash equivalentsCash
$7,338,186
$6,708,742Restricted
cash
139,859
36,868Total
cash and restricted cash
$7,478,045
$6,745,610








See
accompanying notes to consolidated financial
statements.
 
 
 6





Command Center, Inc.


Notes to Consolidated Financial
Statements





NOTE 1 – BASIS OF
PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





The accompanying unaudited consolidated financial statements have
been prepared by Command Center, Inc. ("Command Center,” the
“Company,” “we,” "us," or
“our”) in accordance with accounting principles
generally accepted in the United States of America, or U.S. GAAP,
for interim financial reporting and rules and regulations of the
Securities and Exchange Commission, or the SEC. Accordingly,
certain information and footnote disclosures normally included in
financial statements prepared in accordance with U.S. GAAP have
been condensed or omitted. In the opinion of our management, all
adjustments, consisting of only normal recurring accruals,
necessary for a fair presentation of the financial position,
results of operations, and cash flows for the fiscal periods
presented have been included.





These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and
related notes included in our Annual Report filed on Form 10-K for
the year ended December 28, 2018. The results of operations for the
thirteen weeks ended March 29, 2019 are not necessarily indicative
of the results expected for the full fiscal year, or for any other
fiscal period.





Consolidation:The
consolidated financial statements include the accounts of Command
Center and all of our wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.





Use of estimates:The preparation of consolidated
financial statements in conformity with U.S. 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.
Significant estimates include the allowance for doubtful accounts,
workers’ compensation risk pool deposits and related
allowances, and workers’ compensation claims
liability.





Concentrations:At March
29, 2019, 17.3% of accounts receivable was due from a single
customer and 69.8% of total accounts payable were due to three
vendors. At December 28, 2018, 12.9% of total accounts receivable
was due from a single customer and 27.4% of total accounts payable
were due to two vendors.





Revenue recognition:We
account for revenue when both parties to the contract have approved
the contract, the rights and obligations of the parties are
identified, payment terms are identified, and collectability of
consideration is probable. Our primary source of revenue is from
providing temporary contract labor to our customers. Revenue is
recognized at the time we satisfy our performance obligation. Our
contracts have a single performance obligation, which is the
transfer of services. Because our customers receive and consume the
benefits of our services simultaneously, our performance
obligations are typically satisfied when our services are provided.
Revenue is reported net of customer credits, discounts, and taxes
collected from customers that are remitted to taxing authorities.
Our customers are invoiced every week and we do not require payment
prior to the delivery of service. Substantially all of our
contracts include payment terms of 30 days or less and are
short-term in nature. Because of our payment terms with our
customers, there are no significant contract assets or liabilities.
We do not extend payment terms beyond one year.





Below are summaries of our revenue disaggregated by industry (in
thousands, except percentages):





Thirteen weeks endedMarch 29, 2019
March 30, 2018Industrial,
manufacturing and warehousing
$6,596
30.3%
$8,628
38.4%Transportation
4,688
21.6%
3,749
16.7%Construction
4,002
18.4%
4,044
18.0%Hospitality
3,634
16.7%
3,748
16.7%Retail
and Other
2,835
13.0%
2,298
10.2%Total
$21,755
100.0%
$22,467
100.0%








7





Leases: We presently lease
facilities for our corporate headquarters and all of our branch
locations. We have the right to direct, and obtain substantially
all of the economic benefit, from the use of these facilities. We
determine if an arrangement meets the definition of a lease at
inception, at which time we also perform an analysis to determine
whether the lease qualifies as operating or financing. Most of our
branch leases have terms that extend over three to five years.
Generally, these leases do not have an option to extend the term.
In the instances where there is an option to extend, we assumed we
would not exercise that option, and accordingly, did not recognize
the option as part of our right-of-use asset or lease liability.
Some of the leases have cancellation provisions that allow us to
cancel with 90 days' notice. Some of our leases have been in
existence long enough that the term has expired and we are
currently occupying the premises on month-to-month
tenancies.





Operating leases are included in right-of-use assets and lease
current and long-term liabilities. Lease expense for operating
leases is recognized on a straight-line basis over the lease term,
and is included in selling, general and administrative expense.
Some of our leases require variable payments of property taxes,
insurance, and common area maintenance, in addition to base rent.
The variable portion of these lease payments is not included in our
right-of-use assets or lease liabilities. These variable payments
are expensed when the obligation for those payments is incurred and
are included in lease expense in selling, general and
administrative expense.





Lease right-of-use assets and lease liabilities are measured using
the present value of future minimum lease payments over the lease
term at the lease commencement cate. The right-of-use asset also
includes any lease payments made on or before the commencement date
of the lease, less any lease incentives received. We use our
incremental borrowing rates based on the information available at
the lease commencement date in determining the present value of
lease payments. The incremental borrowing rates used are estimated
based on what we would be required to pay for a collateralized loan
over a similar term.





Accounts Receivable and Allowance for Doubtful
Accounts:Accounts
receivable are carried at their estimated recoverable amount, net
of allowances. 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 each period and past due balances are
written-off when it is probable that the receivable will not be
collected. Our allowance for doubtful accounts was approximately
$137,000 and $113,000, at March 29, 2019 and December 28, 2018,
respectively.





Recently adopted accounting pronouncements:
In February 2016, the FASB issued
guidance on lease accounting. The new guidance continues to
classify leases as either finance or operating, but results in the
lessee recognizing most operating leases on the balance sheet as
right-of-use assets and lease liabilities. This guidance was
effective for annual and interim periods beginning after
December 15, 2018, with early adoption permitted. In July
2018, the FASB amended the standard to provide transition relief
for comparative reporting, allowing companies to adopt the
provisions of the new standard using a modified retrospective
transition method on the adoption date, with a cumulative-effect
adjustment to retained earnings recorded on the date of adoption.
We have elected to adopt the standard using the transition relief
provided in the July amendment. In preparation for adoption of the
standard, we have implemented internal controls to enable the
preparation of financial information.





We have elected the three practical expedients allowed for
implementation of the new standard, but have not utilized the
hindsight practical expedient. Accordingly, we did not reassess: 1)
whether any expired or existing contracts are or contain leases; 2)
the lease classification for any expired or existing leases; 3)
initial direct costs for any existing leases.





As a result of adopting this guidance, we recognized a right-of-use
asset, and corresponding lease liability, of approximately $2.1
million as of the first day of
our fiscal first quarter of 2019. The adoption of
this guidance did not have a material impact on expense
recognition. The difference
between the right-of-use assets and lease liabilities relates to
the deferred rent liability balance as of the end of fiscal 2018
associated with the leases capitalized. The deferred rent
liability, which was the difference between the straight-line lease
expense and cash paid, reduced the right-of-use asset upon
adoption.





8





In January 2017, the FASB issued guidance to simplify the
subsequent measurement of goodwill by eliminating the requirement
to perform a Step 2 impairment test to compute the implied fair
value of goodwill. As a result, entities will only compare the fair
value of a reporting unit to its carrying value (Step 1) and
recognize an impairment charge for the amount by which the carrying
amount exceeds the reporting unit’s fair value; however, the
loss recognized may not exceed the total amount of goodwill
allocated to that reporting unit. This amended guidance is
effective for fiscal years and interim periods beginning after
December 15, 2019, with early adoption permitted for interim or
annual goodwill impairment tests performed on testing dates after
January 1, 2017. We early adopted this guidance for our fiscal 2018
annual impairment test. The adoption of the new standard did not
have any impact to our consolidated financial
statements.





Recently issued accounting pronouncements:In June 2016, the FASB issued ASU
2016-13, “Financial Instruments – Credit Losses (Topic
326): Measurement of Credit Losses on Financial Instruments.”
The standard significantly changes how entities will measure credit
losses for most financial assets and certain other instruments that
are not measured at fair value through net income. The standard
will replace today's “incurred loss” approach with an
“expected loss” model for instruments measured at
amortized cost. For available-for-sale securities, entities will be
required to record allowances rather than reduce the carrying
amount, as they do today under the other-than-temporary impairment
model. It also simplifies the accounting model for purchased
credit-impaired debt securities and loans. This guidance is
effective for annual periods beginning after December 15, 2019, and
interim periods therein. Early adoption is permitted for annual
periods beginning after December 15, 2018, and interim periods
therein. We are currently evaluating the impact of the new guidance
on our consolidated financial statements and related
disclosures.





Other accounting standards that have been issued by the FASB or
other standards-setting bodies are not expected to have a material
impact on our financial position, results of operations, and cash
flows.





NOTE 2 – 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 options, except
where their inclusion would be anti-dilutive. Total outstanding
common stock equivalents at March 29, 2019 and March 30, 2018, were
approximately 161,000 and 255,000, respectively.





Diluted common shares outstanding were calculated using the
treasury stock method and are as follows:





Thirteen weeks
endedMarch 29, 2019
March 30, 2018Weighted
average number of common shares used in basic net income per common
share
4,662,275
4,983,157Dilutive
effects of stock options
-
-Weighted
average number of common shares used in diluted net income per
common share
4,662,275
4,983,157





NOTE 3 – ACCOUNT PURCHASE AGREEMENT & LINE OF CREDIT
FACILITY





In May 2016, we signed an account purchase agreement with our
lender, 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 of $14.0 million. When
the receivable 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.








9





Pursuant to this agreement, we owed approximately $399,000 at
December 28, 2018, and at March 29, 2019, there was approximately
$213,000 that was owed to us, which is included in Prepaid expense,
deposits, and other current assets on our Consolidated Balance
Sheet. The current agreement bears interest at the Daily One Month
London Interbank Offered Rate plus 2.50% per annum. At March 29,
2019, the effective interest rate was 5.00%. 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, deposit accounts,
and other similar assets. 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 March
29, 2019 and December 28, 2018, we were in compliance with this
covenant. There was approximately $69,000 and $2,000 available to
us under this agreement at March 29, 2019 and December 28, 2018,
respectively.





At March 29, 2019, we have a letter of credit with Wells Fargo for
approximately $6.2 million that secures our obligations to our
workers’ compensation insurance carrier and reduces the
amount available to us under the account purchase
agreement. For additional information related to this letter
of credit, seeNote 5 – Workers’
Compensation Insurance and Reserves.





NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS





Goodwill and other intangible assets are stated net of accumulated
amortization. The following table summarizes our purchased goodwill
and finite-lived intangible asset balances:





March 29, 2019
December 28, 2018Gross
Accumulated amortization
Net
Gross
Accumulated amortization
NetGoodwill
$3,777,568
$-
$3,777,568
$3,777,568
$-
$3,777,568Finite-lived
intangible assets:Customer
relationships
430,984
(304,589)
126,395
430,984
(277,652)
153,332Total finite-lived
intangible assets
430,984
(304,589)
126,395
430,984
(277,652)
153,332Total goodwill and
intangible assets
$4,208,552
$(304,589)
$3,903,963
$4,208,552
$(277,652)
$3,930,900





Amortization expense related to intangible assets for the thirteen
weeks ended March 29, 2019 and March 30, 2018 was approximately
$27,000 and $54,000, respectively.





The following table reflects future estimated amortization expense
of intangible assets with definite lives as of March 29,
2019.





Year
Obligation2019
$80,8102020
45,585Thereafter
-Total
$126,395





NOTE 5 – WORKERS' COMPENSATION INSURANCE AND
RESERVES





In April 2014, we changed our workers’ compensation carrier
to ACE American Insurance Company, or ACE, in all states in which
we operate other than Washington and North Dakota. The ACE policy
is a high deductible policy where we have primary responsibility
for all claims. 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 approximately $6.2 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 administered programs. Our liability associated
with claims in these jurisdictions is limited to the payment of
premiums, which are based upon the amount of payroll paid within
each particular state.





10





Accordingly, our consolidated financial statements reflect only the
mandated workers’ compensation insurance premium liability
for workers’ compensation claims in these
jurisdictions.





As part of our high 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 March 29,
2019, our cash and non-cash collateral totaled approximately $6.4
million and consisted of cash deposits of approximately $192,000
and a letter of credit of approximately $6.2 million.





Workers’ compensation expense for our field team members 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 paid to our
workers’ compensation carrier(s), and premiums paid to
mandatory state administered programs. Workers’ compensation
expense for the thirteen weeks ended March 29, 2019 and March 30,
2018 was approximately $701,000 and $993,000,
respectively.





NOTE 6 – STOCKHOLDERS’ EQUITY





Issuance of Common Stock: In
2018, we issued approximately 11,000 shares of common stock valued
at approximately $62,000 for services.





Stock Repurchase:In
September 2017, our Board of Directors authorized a $5.0 million
three-year repurchase plan of our common stock. This plan replaced
the previous plan, which was put in place in April 2015. During the
thirteen weeks ended March 29, 2019, we purchased approximately
48,000 shares of common stock at an aggregate cost of approximately
$198,000 resulting in an average price of $4.15 per share. These
shares were subsequently retired. In April, 2019 we suspended
purchases under this plan. As of March 29, 2019, we have
approximately $2.6 million remaining under the plan. The
following table summarizes in more detail our common stock
purchased during the thirteen weeks ended March 29,
2019.





Total shares
purchased
Average price
per share
Total number of
shares purchased as part of publicly announced plan
Approximate
dollar value of shares that may be purchased under the
planDecember 29, 2018
to January 25, 2019
6,929
$4.42
911,775
$2,766,222January 26, 2019 to
February 22, 2019
15,470
4.14
927,245
2,702,229February 23, 2019
to March 29, 2019
25,352
4.08
952,597
2,598,819Total
47,751
4.15





In April, 2019 we suspended purchases under this plan and we are
not currently repurchasing our common stock. Subsequent to March
29, 2019, through April 5, 2019, we have repurchased
approximately 4,000 additional
shares at an aggregate cost of approximately $15,000 resulting in
an average price of $3.97 per share.





Tender Offer:The
Merger Agreement with Hire Quest contemplates that we will commence
a self-tender offer to purchase up to 1,500,000 shares of our
common stock at a price of $6.00 per share.
SeeNote 10 – Subsequent
Events for a more complete
description.





NOTE 7 – STOCK BASED COMPENSATION





Employee Stock Incentive Plan:Our 2008 Stock Incentive Plan, which permitted the
grant of up to 533,333 equity awards, expired in January 2016.
Outstanding awards continue to remain in effect according to the
terms of the plan and the award documents. In November 2016, our
stockholders approved theCommand Center, Inc. 2016
Stock Incentive Planunder
which our Compensation Committee is authorized to issue awards for
up to 500,000 shares of our common stock over the 10 year life of
the plan. Pursuant to awards under these plans, there were
approximately 83,000 and 76,000 stock options vested at March 29,
2019 and December 28, 2018, respectively.








11








The following table summarizes our stock options outstanding at
December 28, 2018, and changes during the period ended March 29,
2019.





Number of shares underlying options
Weighted average exercise price per share
Weighted average grant date fair valueOutstanding,
December 28, 2018
160,831
$5.86
$3.18Granted
-
-
-Forfeited
-
-
-Expired
-
-
-Outstanding,
March 29, 2019
160,831
5.86
3.18





The following table summarizes our non-vested stock options
outstanding at December 28, 2018, and changes during the period
ended March 29, 2019:





Number of shares underlying options
Weighted average exercise price per share
Weighted average grant date fair valueNon-vested,
December 28, 2018
84,523
$5.56
$3.05Granted
-
-
-Forfeited
-
-
-Vested
(6,428)
5.70
3.16Non-vested,
March 29, 2019
78,095
5.55
3.04





The
following table summarizes information about our stock options
outstanding, and reflects the intrinsic value recalculated based on
the closing price of our common stock of $3.93 at March 29,
2019:





Number of shares underlying options
Weighted
average exercise price per share
Weighted
average remaining contractual life (years)
Aggregate
intrinsic valueOutstanding
160,831
$5.86
8.3
$306,912Exercisable
82,736
6.14
7.7
-





The following table summarizes information about our stock options
outstanding, and reflects weighted average contractual life at
March 29, 2019:





Outstanding options
Vested optionsRange of exercise prices
Number of shares underlying options
Weighted average remaining contractual life
(years)
Number of shares exercisable
Weighted average remaining contractual life
(years)$4.80 - 7.00
144,582
8.9
66,487
8.9$7.01 - 8.76
16,249
2.7
16,249
2.7





In July 2018, our Board of Directors authorized a restricted stock
grant of approximately 48,000 shares, valued at $300,000, to our
six non-employee directors. These shares will vest in equal
installments at each grant date anniversary over the next two
years.





At March 29, 2019, there was unrecognized stock-based compensation
expense totaling approximately $337,000 relating to non-vested
options and restricted stock grants that will be recognized over
the next 2.8 years. Certain non-vested stock options restricted
stock grants will vest upon completion of the Hire Quest Merger
Agreement which would result in the recognition all remaining,
unrecognized stock-based compensation expense for these common
stock equivalents.





12





NOTE 8 – INCOME TAX





Income tax expense during interim periods is based on applying an
estimated annual effective income tax rate to year-to-date income,
plus any significant unusual or infrequently occurring items which
are recorded in the interim period.  The provision for
income taxes for the interim periods differs from the amount that
would be provided by applying the statutory U.S. federal income tax
rate to pre-tax income primarily because of state income
taxes. The computation of the annual estimated effective tax
rate at each interim period requires certain estimates and
significant judgment including, but not limited to, the expected
operating income for the year and changes in tax law and tax
rates.  The accounting estimates used to compute the
provision for income taxes may change as new events occur, more
experience is obtained, additional information becomes known, or as
the tax environment changes.





NOTE 9 – COMMITMENTS AND CONTINGENCIES





Freestone Insurance Company Liquidation: From July 2008 through April 2011, our
workers’ compensation coverage was provided under an
agreement with AMS Staff Leasing II, or AMS, through a master
policy with Freestone Insurance Company, or Freestone. During this
time period, we deposited approximately $500,000 with an affiliate
of Freestone for collateral related to the coverage through
AMS.





From April 2012 through March 2014, our workers’ compensation
insurance coverage was provided by Dallas National Insurance, who
changed its corporate name to Freestone Insurance Company. Under
the terms of the policies, we were required to provide cash
collateral of $900,000 per year, for a total of $1.8 million, as a
non-depleting deposit to secure our obligation up to the deductible
amount.





In April 2014, the Insurance Commissioner of the State of Delaware
placed Freestone in receivership due to concerns about its
financial condition. In August 2014, the receivership was converted
to a liquidation proceeding. 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. 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.





During the second quarter of 2015 and the first quarter of 2016, it
became apparent that there was significant uncertainty related to
the collectability of the $500,000 deposit with AMS related to our
insurance coverage from July 2008 through April 2011. Because of
this, we recorded a reserve of $250,000 in each of those quarters,
fully reserving this deposit.





In conjunction with recent management, board, and audit committee
changes, we have reviewed the estimated costs and potential
benefits of pursuing priority claimant status in the liquidation
proceeding and have altered our planned long-term strategy.
 Given that Freestone has negative equity, the complexity of
this matter, our experience to date, and the amount of time this
matter has remained unresolved, we believe the
continuation of our efforts to achieve priority status will not
necessarily prove cost-effective.  While we will continue to
seek priority status, we have determined that our stockholders will
be best served by a more measured investment in the recovery
effort.  While we are hopeful for a more positive outcome, we
believe that without significant investment, it is more likely than
not that we will be treated in a similar manner as other creditors,
resulting in our priority claim having no value. Based on court
filings and other information made available to us, we estimate the
ratio between Freestone’s liquid assets and liabilities
to be approximately 20%.  We now believe this
ratio applied to our deposit represents the best estimate
of the high end of the range of our ultimate recovery. Accordingly,
we increased the reserve on this asset by approximately $1.5
million in the first quarter of 2018 resulting in a net carrying
amount of $260,000.





We believe that our recovery, if any, of the deposits placed with
Freestone and its affiliates will be the greater of: (i) the amount
determined and allowed resulting from a tracing analysis of our
collateral deposits; or (ii) the amount we would receive in
distribution as a general unsecured claimant based on the amount of
our collateral deposit. The Company and its counsel, in
conjunction and coordination with counsel for other potentially
aggrieved collateral depositors, are working diligently in order
to maximize our recovery of collateral deposits previously
made to Freestone and achieve the best possible outcome for
our stockholders. Ultimately, the amount of the collateral deposit
to be returned will be determined by the Chancery Court in
Delaware, after hearing evidence and arguments from all engaged
parties.








13





Management reviews these deposits at each balance sheet date and
estimates the future range in loss related to this matter could be
as high as $260,000, the net balance of the
deposit.





Leases: We presently lease
facilities for our corporate headquarters and all of our branch
locations. Each branch is between 1,000 and 5,000 square feet,
depending on location and market conditions. Most of our branch
leases have terms that extend over three to five years. Generally,
these leases do not have an option to extend the term. In the
instances where there is an option to extend, we assumed we would
not exercise that option, and accordingly, did not recognize the
option as part of our right-of-use asset or lease
liability.





We determined the discount rate used to calculate the present value
of future minimum lease payments based on our incremental borrowing
rate and consistent with financing terms currently in place with
financial institutions. The weighted average discount rate on our
operating leases is 5.0%. The weighted average remaining lease term
on our operating leases is 1.5 years.





Below is a table of our future minimum operating lease commitments
for the remainder of the current year and for the next five years,
and a reconciliation to the lease liability recognized on our
consolidated balance sheet. Amount necessary to reduce our minimum
lease payments to present value were calculated using our
incremental borrowing rate.





Remainder
of 2019
$788,0542020
754,1002021
279,1532022
104,7362023
23,187Total
undiscounted future minimum lease payments
1,949,230Less:
Imputed interest
(103,153)Present
value of lease liabilities
$1,846,077





Lease expense for the thirteen weeks ended March 29, 2019 and March
30, 2018 was approximately $366,000 and $380,000,
respectively





Legal Proceedings:From
time to time, we are involved in various legal proceedings. We
believe the outcome of these matters, 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 as of March 29,
2019.





NOTE 10 – SUBSEQUENT EVENTS





Hire Quest Merger Agreement:On
April 7, 2019, the Company, CCNI One, Inc., a wholly-owned
subsidiary of the Company (“Merger Sub 1”), Command
Florida, LLC, a wholly-owned subsidiary of the Company
(“Merger Sub 2”), and Hire Quest Holdings, LLC
(“Hire Quest”), entered into an Agreement and Plan of
Merger (the “Merger Agreement”), providing for the
acquisition of Hire Quest by the Company. The Merger Agreement
provides that, upon the terms and subject to the conditions set
forth in the Merger Agreement, (i) Merger Sub 1 will be merged with
and into Hire Quest (the “First Merger”), with Hire
Quest being the surviving entity (the “First Surviving
Company”), and (ii) immediately following the First Merger,
the First Surviving Company will be merged with and into Merger Sub
2 (the “Second Merger” and, together with the First
Merger, the “Merger”), with Merger Sub 2 being the
surviving entity (the “Surviving Company”). Upon
completion of the Merger and subject to shareholder approval, the
Company will change its name to HireQuest, Inc. In addition, the
Merger Agreement contemplates that the Company will commence a
self-tender offer to purchase up to 1,500,000 shares of its common
stock at a price of $6.00 per share (the
“Offer”).





14





Hire Quest provides the back-office support team for Trojan Labor
and Acrux Staffing franchised branch locations across the United
States. Trojan Labor provides temporary staffing services which
includes general labor, industrial, and construction personnel.
Acrux Staffing provides temporary staffing services which includes
skilled, semi-skilled and general labor industrial personnel, as
well as clerical and secretarial personnel.





Subject to the terms and conditions of the Merger Agreement, which
has been approved by the Board of Directors of the Company and the
members of Hire Quest, if the Merger is completed, all of the
ownership interests in Hire Quest will be converted into the right
to receive an aggregate number of shares of the Company’s
common stock representing 68% of the shares of the Company’s
common stock outstanding immediately after the effective time of
the Merger but prior to giving effect to the purchase of the
Company’s common stock pursuant to the Offer. The Merger
Agreement requires Hire Quest’s net tangible assets at
closing to be at least $14 million.





The Company and Hire Quest have made customary representations,
warranties and covenants in the Merger Agreement. Subject to
certain exceptions, each of the Company and Hire Quest is required,
among other things, to conduct its business in the ordinary course
in all material respects during the interim period between the
execution of the Merger Agreement and the closing of the Merger.
The Company is required to seek shareholder approval of (i) the
amendment of the Company’s articles of incorporation to
increase the authorized shares of Company’s common stock and
to change the name of the Company to “HireQuest, Inc.”,
(ii) the issuance of shares of common stock pursuant to the Merger
Agreement and the related change of control of the Company pursuant
to Nasdaq listing rules, and (iii) the conversion of the Company
from a Washington corporation to a Delaware corporation. The
Company will call and hold a shareholders meeting seeking to obtain
such approvals. The Company will distribute proxy statements to
shareholders of record containing additional details regarding the
Merger.


15





Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations





Forward Looking Statements:This Form 10-Q may contain forward-looking
statements. These statements relate to Command Center, Inc.’s
(“Command Center”, the “Company”,
“we”, “us” or “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. 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 of our Annual Report on Form 10-K for the year
ended December 28, 2018. 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. Our expectations, beliefs,
or projections may not be achieved or accomplished. 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, except as required by
law. You are advised to consult further disclosures we may make on
related subjects in our filings with the Securities and Exchange
Commission, or the SEC.





Overview





We are a staffing company operating primarily in the manual
on-demand labor segment of the staffing industry. Our customers
range in size from small businesses to large corporations. All of
our temporary staff, which we refer to as field team members, are
employed by us. Most of our work assignments are short-term, and
many are filled with little notice from our customers. In addition
to short and longer term temporary work assignments, we sometimes
recruit and place workers into temp-to-hire positions.





As of May 7, 2019, we owned and operated 67 on-demand labor
branches across 22 states.





Results of Operations





The following tables reflect operating results for the thirteen
week period ended March 29, 2019, compared to the thirteen week
period ended March 30, 2018 (in thousands except percentages).
Percentages reflect line item amounts as a percentage of revenue.
The tables serve as the basis for the narrative that
follows.





Thirteen weeks endedMarch 29, 2019
March 30, 2018Revenue
$21,755
100.0%
$22,467
100.0%Cost
of staffing services
16,123
74.1%
16,873
75.1%Gross
profit
5,632
25.9%
5,594
24.9%Selling,
general and administrative expenses
6,550
30.1%
7,214
32.1%Depreciation
and amortization
68
0.3%
93
0.4%Loss
from operations
(986)
(4.5)%
(1,713)
(7.6)%Interest
expense and other financing expense
-
0.0%
2
0.0%Net loss before
income taxes
(986)
(4.5)%
(1,715)
(7.6)%Provision for
income taxes
(242)
(1.1)%
(497)
(2.2)%Net
loss
$(744)
(3.4)%
$(1,218)
(5.4)%Non-GAAP
dataAdjusted
EBITDA
(118)
(0.5)%
417
1.9%





16





Use of non-GAAP Financial Measures





Earnings before interest, taxes, depreciation and amortization,
non-cash compensation, and certain non-recurring charges, or
adjusted EBITDA, is a non-GAAP measure that represents our net
income before interest expense, income tax expense, depreciation
and amortization, non-cash compensation, and certain non-recurring
charges. We utilize adjusted EBITDA as a financial measure as
management believes investors find it a useful tool to perform more
meaningful comparisons and evaluations of past, present, and future
operating results. We believe it is a complement to net income and
other financial performance measures. Adjusted EBITDA is not
intended to represent net income as defined by generally accepted
accounting principles in the United States, or U.S. GAAP, and such
information should not be considered as an alternative to net
income or any other measure of performance prescribed by U.S.
GAAP.





We use adjusted EBITDA to measure our financial performance because
we believe interest, taxes, depreciation and amortization, non-cash
compensation, and certain non-recurring charges bear little or no
relationship to our operating performance. By excluding interest
expense, adjusted EBITDA measures our financial performance
irrespective of our capital structure or how we finance our
operations. By excluding taxes on income, we
believe adjusted EBITDA provides a basis for measuring
the financial performance of our operations excluding factors that
are beyond our control. By excluding depreciation and amortization
expense, adjusted EBITDA measures the financial performance of
our operations without regard to their historical cost. By
excluding non-cash compensation, adjusted EBITDA provides
a basis for measuring the financial performance of our operations
excluding the value of our stock and stock option awards. In
addition, by excluding certain non-recurring
charges, adjusted EBITDA provides a basis for measuring
financial performance without non-recurring charges. For all
of these reasons, we believe that adjusted EBITDA
provides us, and investors, with information that is relevant and
useful in evaluating our business.





However, because adjusted EBITDA excludes depreciation
and amortization, it does not measure the capital we require to
maintain or preserve our fixed assets. In addition,
because adjusted 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. Adjusted EBITDA, as defined by us, may not be
comparable to adjusted EBITDA as reported by other
companies that do not define adjusted EBITDA exactly as
we define the term. Because we use adjusted 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 U.S. GAAP.





Thirteen weeks endedMarch 29, 2019
March 30, 2018Net
loss
$(744)
$(1,218)Interest
expense
-
2Provision
for income taxes
(242)
(496)Depreciation
and amortization
68
93Non-cash
compensation
88
26Other
non-recurring expense
712
2,010Adjusted
EBITDA
$(118)
$417





Thirteen Weeks Ended March 29, 2019





Summary of operations:Revenue for the thirteen weeks ended March
29, 2019 was approximately $21.8 million, a decrease of
approximately $713,000, or 3.2%, from $22.5 million for the
thirteen weeks ended March 30, 2018. This decrease is due to the
loss of a large customer, poor weather in parts of the country, the
loss of key salespeople, and a higher concentration of lower margin
business.





Cost of staffing services:Cost of staffing services was 74.1% of
revenue in the thirteen weeks ended March 29, 2019 compared to
75.1% for the thirteen weeks ended March 30, 2018. This decrease
was primarily due to a decrease in workers’ compensation
costs. We also benefited from lower unemployment costs, which was
offset by higher field team member wages and related payroll taxes
as unemployment rates remain low and continue to put upward
pressure on wages.





Selling, general and administrative expenses, or
SG&A:SG&A for the
thirteen weeks ended March 29, 2019 was approximately $6.6 million,
a decrease of approximately $664,000 from $7.2 million for the
thirteen weeks ended March 30, 2018. This decrease is primarily due
the impairment of our workers’ compensation deposit in
receivership of approximately $1.5 million that we incurred last
year. Excluding this expense from 2018, SG&A increased by
approximately $876,000. This increase was primarily due to higher
legal and professional fees related to the recently announced
agreement and plan of merger with Hire Quest. We also had less
significant cost increases related to recruiting, stock-based
compensation, bank fees, and bad debt, which were partially offset
by lower IT related costs.





17





Liquidity and Capital Resources





Our primary source of cash and liquidity to fund our ongoing
operations are derived from the revenue we generate from customers
utilizing our services. The primary use of our cash and liquidity
is the compensation paid to our field team members and internal
staff, the payroll taxes associated with that compensation, and
SG&A. At March 29, 2019, our current assets exceeded our
current liabilities by approximately $12.1 million. Included in
current assets is cash of approximately $7.5 million and net
accounts receivable of approximately $9.1 million. Included in
current liabilities are accrued wages and benefits of approximately
$1.6 million, and the current portion of our workers’
compensation claims liability of approximately $1.0
million.





Operating activities:Through the thirteen weeks ended March 29, 2019,
net cash provided by operating activities totaled approximately
$284,000 compared to net cash used in operating activities of
approximately $168,000 through the thirteen weeks ended March 30,
2018. Operating activity through the first quarter of 2019 included
a net loss of approximately $744,000, an increase in deferred taxes
of approximately $242,000, and an increase in prepaid
workers’ compensation of approximately $102,000. These uses
were offset by an increase in accounts payable of approximately
$685,000, an increase in accrued wages and benefits of
approximately $365,000, and a decrease in prepaid expenses and
other assets of approximately $133,000. Operating activity in the
first quarter of 2018 included a net loss of approximately $1.2
million, a decrease in accounts payable of approximately $325,000,
a decrease in other current liabilities of approximately $283,000,
and a decrease of prepaid workers’ compensation premiums of
approximately $119,000. These uses of cash were offset by a
decrease of approximately $1.5 million in our workers’
compensation risk pool deposit in receivership, an increase in
accrued wages and benefits of approximately $389,000, and a
decrease in accounts receivable of approximately
$150,000.





Investing activities:Through the thirteen weeks ended March 29, 2019,
there was no cash flow related to investing activities, compared to
net cash used in investing activities of approximately $67,000
through the thirteen weeks ended March 30, 2018. The use in 2018
was related to the purchse of equipment.





Financing activities:Through the thirteen weeks ended March 29, 2019,
net cash used in financing activities totaled approximately
$810,000, compared to approximately $801,000 through the thirteen
weeks ended March 30, 2018. Financing activity through the first
quarter of 2019 included a decrease in our account purchase
agreement of approximately $612,000, and the purchase of treasury
stock of approximately $198,000. Financing activity in 2018 related
to a decrease in our account purchase agreement of approximately
$672,000, and the purchase of treasury stock of approximately
$129,000.





Item 3. 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 required to provide
the information contained in this item pursuant to Regulation
S-K.





Item 4. Controls and
Procedures





(a)Evaluation of disclosure
controls and procedures.Our Chief Executive Officer and our Chief
Financial Officer 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-Q. Based on that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that,
as of March 29, 2019, our disclosure controls and procedures were
effective.








18





PART II. OTHER INFORMATION





Item 1. Legal Proceedings





From time to time we are involved in various legal proceedings.
Except for the Freestone Insurance Company liquidation proceedings
as described in Note 9 to the Consolidated Financial Statements, we
believe the outcomes of these proceedings, even if determined
adversely, will not have a material adverse effect on our business,
financial condition or results of operations.





Item 1A. Risk Factors





There have been no material changes from the risk factors we
previously disclosed in our Annual Report on Form 10-K for the year
ended December 28, 2018 filed with the Securities and Exchange
Commission on April 9, 2019.





Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds





Recent Sales of Unregistered Securities





We did not issue any unregistered securities during the thirteen
weeks ended March 29, 2019.





Purchase of Equity Securities by the Issuer and Affiliated
Purchasers:





In September 2017, our Board of Directors authorized a $5.0 million
three-year repurchase plan of our common stock. This plan replaced
the previous plan, which was put in place in April 2015. During the
thirteen weeks ended March 29, 2019, we purchased approximately
48,000 shares of common stock at an aggregate cost of approximately
$198,000 resulting in an average price of $4.15 per share. These
shares were subsequently retired. As of March 29, 2019, we have
approximately $2.6 million remaining under the plan. The
following table summarizes in more detail our common stock
purchased during the thirteen weeks ended March 29,
2019.





Total shares
purchased
Average price
per share
Total number of
shares purchased as part of publicly announced plan
Approximate
dollar value of shares that may be purchased under the
planDecember 29, 2018
to January 25, 2019
6,929
$4.42
911,775
$2,766,222January 26, 2019 to
February 22, 2019
15,470
4.14
927,245
2,702,229February 23, 2019
to March 29, 2019
25,352
4.08
952,597
2,598,819Total
47,751
4.15





Item 3. Defaults Upon Senior
Securities





None.





Item 4. Mine Safety
Disclosures





Not applicable.





Item 5. Other Information





On April 7, 2019, the Company, CCNI One, Inc., a wholly-owned
subsidiary of the Company (“Merger Sub 1”), Command
Florida, LLC, a wholly-owned subsidiary of the Company
(“Merger Sub 2”), and Hire Quest Holdings, LLC
(“Hire Quest”), entered into an Agreement and Plan of
Merger (the “Merger Agreement”), providing for the
acquisition of Hire Quest by the Company. The Merger Agreement
provides that, upon the terms and subject to the conditions set
forth in the Merger Agreement, (i) Merger Sub 1 will be merged with
and into Hire Quest (the “First Merger”), with Hire
Quest being the surviving entity (the “First Surviving
Company”), and (ii) immediately following the First Merger,
the First Surviving Company will be merged with and into Merger Sub
2 (the “Second Merger” and, together with the First
Merger, the “Merger”), with Merger Sub 2 being the
surviving entity (the “Surviving Company”). Upon
completion of the Merger and subject to shareholder approval, the
Company will change its name to HireQuest, Inc. In addition, the
Merger Agreement contemplates that the Company will commence a
self-tender offer to purchase up to 1,500,000 shares of its common
stock at share price of $6.00 per share (the
“Offer”).





19





Hire Quest is a trusted name in temporary staffing. Hire Quest
provides the back-office support team for Trojan Labor and Acrux
Staffing franchised branch locations across the United States.
Trojan Labor provides temporary staffing services which includes
general labor, industrial, and construction personnel. Acrux
Staffing provides temporary staffing services which includes
skilled, semi-skilled and general labor industrial personnel, as
well as clerical and secretarial personnel.





Subject to the terms and conditions of the Merger Agreement, which
has been approved by the Board of Directors of the Company and the
members of Hire Quest, if the Merger is completed, all of the
ownership interests in Hire Quest will be converted into the right
to receive an aggregate number of shares of the Company’s
common stock representing 68% of the shares of the Company’s
common stock outstanding immediately after the effective time of
the Merger but prior to giving effect to the purchase of the
Company’s common stock pursuant to the Offer. The Merger
Agreement requires Hire Quest’s net tangible assets at
closing to be at least $14 million.





The Company and Hire Quest have made customary representations,
warranties and covenants in the Merger Agreement. Subject to
certain exceptions, each of the Company and Hire Quest is required,
among other things, to conduct its business in the ordinary course
in all material respects during the interim period between the
execution of the Merger Agreement and the closing of the Merger.
The Company is required to seek shareholder approval of (i) the
amendment of the Company’s articles of incorporation to
increase the authorized shares of Company’s common stock and
to change the name of the Company to “HireQuest, Inc.”,
(ii) the issuance of shares of common stock pursuant to the Merger
Agreement and the related change of control of the Company pursuant
to Nasdaq listing rules, and (iii) the conversion of the Company
from a Washington corporation to a Delaware corporation. The
Company will call and hold a shareholders meeting seeking to obtain
such approvals. The Company will distribute proxy statements to
shareholders of record containing additional details regarding the
Merger.





Item 6. Exhibits





Exhibit No.

Description10.1

Executive Employment Agreement with Richard K. Coleman, Jr.
incorporated by reference to Exhibit 10.1 to Form 8-K as filed on
April 4, 2019.10.2

Agreement and Plan of Merger with Hire Quest Holdings, LLC
incorporated by reference to Exhibit 10.2 to Form 8-K as filed on
April 9, 2019.31.1

Certification of Richard K. Coleman, Jr., Chief Executive Officer
of Command Center, Inc. pursuant to Rule 13a-14(a) as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2

Certification of Cory Smith, Chief Financial Officer of Command
Center, Inc. pursuant to Rule 13a-14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1

Certification of Richard K. Coleman, Jr., Chief Executive Officer
of Command Center, Inc., and Cory Smith, Chief Financial Officer of
Command Center, Inc., pursuant to 18 U.S.C. Section 1350, as
adopted in Section 906 of the Sarbanes-Oxley Act of
2002.101.INS

XBRL Instance Document101.SCH

XBRL Taxonomy Extension Schema Document101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document101.DEF

XBRL Taxonomy Extension Definition Linkbase Document101.LAB

XBRL Taxonomy Extension Label Linkbase Document101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document





20


Signatures








Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized





Command Center, Inc.





/s/ Richard K.
Coleman, Jr.

May 13,
2019Richard K. Coleman, Jr

DatePresident
and Chief Executive Officer/s/ Cory
Smith

May 13,
2019Cory Smith

DateChief
Financial Officer








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