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2. Acquisitions

9 Months Ended

Sep. 30, 2020

Business Combinations [Abstract]

Acquisitions

On July 15, 2019, Command Center completed its acquisition of Legacy HQ . Upon the closing of the Merger, all of the membership interests in Hire Quest Holdings, LLC were converted into the right to receive 68% of the Company’s common stock outstanding immediately after the closing, or 9,939,668 shares.

We accounted for the Merger as a reverse acquisition. As such, Legacy HQ is considered the accounting acquirer and Legacy HQ's historical financial statements replace Command Center’s historical financial statements following the completion of the Merger. The results of operations of the combined company are included in our financial statements for all periods beginning July 15, 2019.

The fair value of the purchase consideration is calculated based on the Company's stock price on the NASDAQ exchange as it is considered to be more reliable than the fair value of the membership interests a private company, Legacy HQ. Consideration is calculated based on the Company's closing share price of $5.76 on July 15, 2019.

The following table summarizes the estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date:

Closing share price on July 15, 2019		$	5.76
Common stock			4,677,487
Stock consideration		$	26,942,325

Accounts receivable		$	10,480,907
Cash and cash equivalents			5,376,543
Identifiable intangible assets			17,015,857
Other current assets			725,453
Property, plant and equipment, net			281,186
Right-of-use asset			1,642,695
Current liabilities			(3,124,081	)
Lease liabilities			(1,624,461	)
Deferred tax liability			(2,930,947	)
Other liabilities			(900,827	)
Purchase price allocation		$	26,942,325

The following table presents the unaudited pro forma information assuming the Merger occurred on January 1, 2018. The unaudited pro forma information is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place on that date:

		Three months ended								Nine months ended
		September 30, 2020				September 29, 2019				September 30, 2020				September 29, 2019
Royalty revenue		$	3,218,606			$	3,139,158			$	9,563,135			$	9,276,714
Net income			1,971,133				504,651				4,003,313				3,515,142
Basic earnings per share		$	0.15			$	0.04			$	0.30			$	0.27
Basic weighted average shares outstanding			13,573,086				13,238,818				13,551,507				13,281,839
Diluted earnings per share		$	0.15			$	0.04			$	0.30			$	0.27
Diluted weighted average shares outstanding			13,574,863				13,248,615				13,553,619				13,289,045

These calculations reflect the decreased amortization expense and the consequential tax effects that would have resulted had the Merger closed on January 1, 2018.