Business Context and Reporting Period
This Form 8-K is filed by Command Center, Inc. (noted as Hirequest, Inc. in metadata) on November 15, 2006. The report addresses a material accounting error regarding a business combination that closed on November 9, 2005. The company determined that its previously issued financial statements for the year ended December 31, 2005, and interim periods ended March 31, 2006, and June 30, 2006, were materially misstated and should not be relied upon.
Key Financial Metrics and Adjustments
The filing details specific adjustments required to correct the accounting treatment of the acquisitions of Command Staffing LLC and Harborview Software, Inc. The primary changes involve identifying Command Staffing as the accounting acquirer and applying purchase accounting to the Harborview acquisition.
| Metric | As Originally Stated | As Restated |
|---|---|---|
| Total Assets (Dec 31, 2005) | $2,601,286 | $4,144,858 |
| Net Income (Year Ended Dec 31, 2005) | $(200,122) | $354,758 |
| Net Income (Year Ended Dec 31, 2004) | $123,867 (TFS) | $(137,663) (Command Staffing) |
The adjustment results in an increase to goodwill and paid-in-capital of $1,543,572. The filing does not provide specific figures for revenue, cash flow, margins, debt, or liquidity ratios.
Material Changes Versus Prior Period
The restatement fundamentally alters the historical financial presentation:
- Acquirer Identification: The company previously presented operations of Temporary Financial Services, Inc. (TFS) as the acquirer. The SEC's Office of the Chief Accountant determined Command Staffing LLC is the accounting acquirer, requiring the presentation of Command Staffing's historic 2004 financials instead of TFS's.
- Profitability Shift: The correction changes the company's reported status for 2005 from a net loss of approximately $200,000 to a net income of approximately $355,000.
- Asset Base: Total assets at year-end 2005 increased by approximately $1.54 million due to the restatement.
Guidance, Outlook, and Risks
Management Commentary and Plan: The company plans to restate the Form 10-KSB for 2005 and the Form 10-QSBs for the first two quarters of 2006. Independent auditors have agreed to perform additional procedures to re-issue their audit opinion. Pro forma financial information in prior 8-K filings will also be revised.
Risks and Contingencies: The primary risk identified is the material misstatement of previously issued financial statements and the invalidity of the prior audit report. The filing notes that while total assets will carry forward to future periods, there will be no change to the statements of operations or cash flows for the quarters ended March 31, 2006, and June 30, 2006.
Investor Verification Checklist
- Verify the upcoming restated Form 10-KSB for 2005 and Form 10-QSBs for Q1 and Q2 2006.
- Confirm the re-issued audit opinion from the independent registered auditors.
- Review the revised pro forma financial information for the November 9, 2005, and May 12, 2006, events.
- Assess the impact of the $1.54 million increase in goodwill on future impairment testing.