Disclosure - 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 28, 2012

Notes to Financial Statements

Note 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated condensed financial statements have been prepared by Command Center, Inc. (the Company, CCNI, us, we, or our) in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial reporting, as well as the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP may 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. The information included in this 10-Q should be read in conjunction with the audited financial statements and notes to the financial statements included in our Annual Report filed on Form 10-K for the year ended December 30, 2011.

Consolidation:  In January of 2012 we organized Disaster Recovery Services, Inc. (DRSI) as a wholly owned subsidiary (see Note 5) and during the thirteen weeks ended September 28, 2012, we incurred expenses in ComStaff Transport, Inc. (ComStaff), a previously dormant wholly owned entity. Accordingly, the consolidated condensed financial statements include the accounts of CCNI, DRSI, and ComStaff. All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassifications: Certain financial statement amounts for the prior period have been reclassified to conform to the current period presentation. These reclassifications include certain transportation costs which were reclassified from Cost of staffing services into Selling, general and administrative expenses, and bank fees and penalties which were reclassified from interest expense and other financing expenses into Selling, general and administrative expenses. These reclassifications had no effect on the net income or loss or accumulated deficit as previously reported.

Derivatives:  From time to time, we enter into transactions which utilize types of financing to fund our business needs, including warrants and other instruments, not indexed to our stock. We are required to record these derivative instruments at their fair value. Changes in the fair value of derivatives are recognized as a gain (loss) in our Statement of Operations.

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

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

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

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

Our financial instruments consist principally of stock warrant liabilities and a contingent liability. The table below sets forth our assets and liabilities measured at fair value, on a recurring basis.

	September 28, 2012		December 30, 2011		Input Hierarchy Level
Recurring:
Stock warrant liability	$	791,824	$	983,415	Level 2
Contingent liability	$	755,236	$	-	Level 2