**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-K**





x
            ANNUAL
              REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
              ACT
              OF 1934For
              the fiscal year ended March 31, 2007oro
            ****TRANSITION
              REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
              OF
              1934For the transition period
              from
              ___________________________________ to
              ______________________________________Commission
                File Number 001-33525





**COMMAND
      SECURITY CORPORATION**


(Exact
      name of registrant as specified in its charter)




New
                York
            14-1626307(State
                or other jurisdiction of
            (IRS
                Employer Identification
                No.)incorporation
                or organization)Lexington
                Park, Lagrangeville, New York
            12540(Address
                of Principal executive offices)
            (Zip
                Code)






Registrant's
      telephone number, including area code: (845) 454-3703





Securities
      registered pursuant to Section 12(b) of the Act: Common Stock, $.0001 par value





Securities
      registered pursuant to Section 12(g) of the Act: None





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes o
      No x





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 o
      No x





Indicate
      by check mark whether the registrant (1) has 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. Yesx|
      No o





Indicate
      by check mark 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
      this
      Form 10-K x





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.


Large
      accelerated filer o  Accelerated
      filer o  Non-accelerated
      filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act). Yes o No
x





The
      aggregate market value of common stock held by non-affiliates of the registrant
      as of June 20, 2007 was approximately


$13,732,878.





As
      of
      June 20, 2007, the registrant had issued and outstanding 10,752,216 shares
      of
      common stock.





DOCUMENTS
      INCORPORATED BY REFERENCE





Certain
      information required by Items 10, 11, 12, 13 and 14 of Form 10-K is incorporated
      by reference into Part III hereof from the registrant’s proxy statement relating
      to the registrant’s 2007 Annual Meeting of Shareholders, which is expected to be
      filed with the Securities and Exchange Commission (the “SEC”) within 120 days of
      the close of the registrant’s fiscal year ended March 31, 2007.




1





**Command
      Security Corporation**


**Annual
      Report on Form 10-K**


**For
      the Fiscal Year Ended March 31, 2007**




TABLE
                    OF CONTENTSPART
                    I1.
                Business1A.
                Risk
                    Factors1B.
                Unresolved
                    Staff Comments2.
                Properties3.
                Legal
                    Proceedings4.
                Submission
                    of Matters to a Vote of Security HoldersPART
                    II5.
                Market
                    for the Registrant's Common Equity and Related Stockholder Matters
                    And
                    Issuer Purchases of Equity Securities6.
                Selected
                    Financial Data7.
                Management's
                    Discussion and Analysis of Financial Condition and Results of
                    Operation7A.
                Quantitative
                    and Qualitative Disclosures About Market Risk8.
                Financial
                    Statements and Supplementary Data9.
                Changes
                    in and Disagreements with Accountants on Accounting and Financial
                    Disclosure9A.
                Controls
                    and Procedures9B.
                Other
                    InformationPART
                    III10.
                Directors,
                    Executive Officers and Corporate Governance11.
                Executive
                    Compensation12.
                Security
                    Ownership of Certain Beneficial Owners and Management and Related
                    Stockholder Matters13.
                Certain
                    Relationships and Related Transactions, and Director
                    Independence14.
                Principal
                    Accounting Fees and ServicesPART
                    IV15.
                Exhibits,
                    Financial Statement Schedules




1




**PART
      I**





**ITEM
      1. BUSINESS.**





**General**





Command
      Security Corporation (the "Company") principally provides uniformed security
      officers, aviation and support security services to commercial, financial,
      industrial, aviation and governmental clients in the United States from its
      over
      thirty company-owned offices in California, Connecticut, Delaware, Florida,
      Illinois, Maine, Maryland, Massachusetts, Nevada, New Jersey, New York, Oregon,
      Pennsylvania and Washington.





The
      Company operates as a provider of security services to a wide range of clients
      that the Company has categorized into three groups; security services, aviation
      services and support services. The latter includes services provided to security
      services firms under administrative service agreements and back office support
      services provided to police departments.





The
      security services division provides its services to governmental,
      quasi-governmental, health, educational and financial institutions, residential
      and commercial property management companies, and industrial, distribution,
      logistics and retail clients. Security services generated approximately $31.4
      million, or 33.5%, of the Company's revenues for the fiscal year ended March
      31,
      2007. Security services include providing armed and unarmed uniformed security
      personnel for access control, mobile patrols, traffic control, security
      console/system operators, fire safety directors, communication, reception,
      concierge and front desk/doorman operations.





The
      aviation services division provides its services to airlines, airports, airport
      authorities and the general aviation community. Aviation services generated
      approximately $62.1 million, or 66.2%, of the Company's revenues for the fiscal
      year ended March 31, 2007. Aviation services include providing uniformed
      security services to airport and airport-related clients, including document
      verifiers, skycaps, wheelchair escorts, general security and baggage handling
      services.





The
      support services division provides its services to security services firms
      and
      police departments. Support services generated approximately $.3 million, or
      .3%, of the Company’s revenues for the fiscal year ended March 31, 2007 and
      encompassed back office support to three police departments and two
      administrative service clients. Contracts with both administrative service
      clients were discontinued during the fiscal year ended March 31, 2007. While
      not
      a key focus of the Company, the Company would consider additional administrative
      service clients if such opportunities arise.




**Operations**





As
      a
      licensed watch guard and patrol agency, the Company's security services division
      furnishes security officers to its security service customers to protect people
      or property and to prevent the theft of property. The Company principally
      conducts its security services business by providing security officers and
      other
      personnel who are, depending on the particular requirements of the customer,
      uniformed or plain-clothed, armed or unarmed, and who patrol in marked radio
      cars or stand duty on the premises at stationary posts such as fire stations,
      reception areas or video monitors. The Company's security officers maintain
      contact with headquarters or supervisors via car radio, hand-held radios or
      cell
      phones. In addition to the more traditional tasks associated with access control
      and theft prevention, the Company’s security officers respond to emergency
      situations and report to appropriate authorities for fires, natural disasters,
      work accidents and medical crises.





The
      Company provides security services to many of its industrial, commercial and
      residential property management customers on a 24-hour basis, 365 days per
      year.
      For these customers, security officers are on hand to provide plant security,
      access control, personnel security checks and traffic and parking control and
      to
      protect against fire, theft, sabotage and safety hazards. The Company’s
      remaining customers include retail establishments, hospitals and governmental
      units. The services provided to these customers may require armed as well as
      unarmed security officers. The Company also provides specialized vehicle patrol
      and inspection services and personal protection services to key executives
      and
      high profile personalities from time to time. Recently, the Company’s security
      services division has been successful in obtaining a new security services
      contract for a major medical center that commenced in November 2006.





The
      Company's aviation services division provides a variety of uniformed services
      for domestic and international air carriers, including aircraft security, access
      control, wheelchair escorts, skycaps, baggage handlers and uniformed security
      officers for cargo security areas. Recently, the Company’s aviation division has
      been successful in obtaining three new service contracts that commenced in
      August 2006, October 2006 and March 2007, respectively.





The
      nature of the Company’s business subjects it to claims and litigation alleging
      that it is liable for damages as a result of the conduct of its employees or
      other parties that the Company indemnifies against such claims. The Company
      insures against such claims and suits through general liability policies with
      third-party insurance companies. Such policies have limits of $5,000,000 per
      occurrence. Effective October 1, 2006, the policy limit was increased to
      $7,000,000 per occurrence with an additional excess umbrella policy of
      $5,000,000. On the aviation related business, as of October 1, 2004, the Company
      acquired an insurance policy with a $30,000,000 limit per occurrence. Effective
      as of October 1, 2006, the Company retains the risk for the first $25,000 per
      occurrence on the non-aviation related policy that includes airport wheelchair
      and electric cart operations and $5,000 on the aviation related policy except
      for $25,000 for damage to aircraft and $100,000 for skycap
      operations.




2




To
      ensure
      that adequate protection requirements have been established prior to commencing
      service to a customer, the Company evaluates the customer's site and prepares
      a
      recommendation for any required changes to existing security programs or
      services. Surveys typically include an examination and evaluation of perimeter
      controls, lighting, personnel and vehicle identification and control, visitor
      controls, electronic alarm reporting systems, safety and emergency procedures,
      key controls and security force manning levels. While surveys and
      recommendations are prepared by the Company, the security plan and coverage
      requirements are determined by the customer. Operational procedures and
      individual post orders are reviewed and/or rewritten by the Company to meet
      the
      requirements of the security plan, and coverage as determined by the customer.





In
      order
      to provide a high level of service, the Company frequently establishes offices
      close to its customers and delegates responsibility and decision making
      authority to its local managers. The Company’s managers each play an important
      role as highlighted by their responsibility for both service quality and
      assisting with sales and marketing efforts. The Company believes that, in most
      situations, providing a single individual with responsibility for service
      quality results in better supervision, quality control and greater
      responsiveness to customer needs.





The
      Company generally renders its security services pursuant to a standard form
      security services agreement that specifies the personnel and/or equipment to
      be
      provided by the Company at designated locations and the applicable rates, which
      typically are hourly rates per person. Rates vary depending on base, overtime
      and holiday time worked, and the term of engagement. The Company assumes
      responsibility for a variety of functions, including scheduling for each
      customer site, paying all security officers and providing uniforms, training,
      equipment, supervision, fringe benefits and workers' compensation insurance.
      These security services agreements also provide customers with flexibility
      by
      permitting reduction or expansion of the security force on relatively short
      notice. The Company is responsible for preventing the interruption of security
      services as a consequence of illness, vacations or resignations. In most cases
      the customer also agrees not to hire any security personnel used by the Company
      for at least 180 days after the termination of the engagement. Each security
      services agreement may be terminated by the customer or the Company, typically
      with not less than thirty days written notice. In addition, the Company may
      also
      terminate an agreement immediately upon default by the customer in payment
      of
      funds due thereunder, or if the customer is involved in a bankruptcy or similar
      insolvency event.





The
      Company has its own proprietary computerized scheduling and information system.
      The scheduling of security officers, while time-consuming, is an important
      function of the Company. Management believes that the Company’s system
      substantially reduces the time a manager must spend on scheduling daily security
      officer hours and allows the Company to fulfill customer needs by automatically
      selecting those security officers that fit the customer's requirements.





**Employee
      Recruitment and Training**





The
      Company believes that the quality of its security officers is essential to
      its
      ability to offer effective and reliable service, and it believes diligence
      in
      their selection and training produces the level of performance required to
      maintain customer satisfaction.





The
      Company's corporate policy requires that all selected applicants for security
      officer positions undergo a detailed pre-employment interview and a background
      investigation covering such areas as employment, education, military service,
      medical history and, subject to applicable state laws, criminal record. In
      certain cases the Company employs psychological testing. Personnel are selected
      based upon the Company’s evaluation of their physical fitness, maturity,
      experience, personality, stability and reliability. Medical examinations and
      substance abuse testing may also be performed. Preference is given to applicants
      with previous experience, either as a military or a civilian security-police
      officer.





The
      Company trains accepted applicants in three phases; pre-assignment, on-the-job
      and refresher training. Pre-assignment training covers topics such as the duties
      and powers of a security officer, report preparation, emergency procedures,
      general orders, regulations, grounds for discharge, uniforms, personal
      appearance and basic post responsibilities. On-the-job assignment training
      covers specific duties as required by the post and job orders. Ongoing refresher
      training is given on a periodic basis as determined by the local area supervisor
      and manager.





The
      Company treats all employees and applicants for employment without unlawful
      discrimination as to race, creed, color, national origin, sex, age, disability,
      marital status or sexual orientation in all employment-related decisions.





**Significant
      Customers**





For
      the
      fiscal year ended March 31, 2007, Delta Airlines (“Delta”) accounted for
      approximately $14,700,000, or 16%, of the Company’s total revenues. See
“Management's Discussion and Analysis of Financial Condition and Results of
      Operation - Liquidity and Capital Resources - Financing.”





Several
      of the Company's aviation clients filed for bankruptcy protection during fiscal
      2007, 2006 and 2005. The aviation industry continues to struggle with various
      challenges including the cost of security and higher fuel prices. Additional
      bankruptcy filings by aviation and non-aviation clients could have a material
      adverse impact on the Company's liquidity, results of operations and financial
      condition.




3


**Competition**





Competition
      in the security service business is intense. A customer’s selection of a company
      to provide security services is based primarily on price, quality of services
      provided, scope of services performed, name recognition, recruiting, training
      and the extent and quality of security officer supervision. As the Company
      has
      expanded its operations it has had to compete more frequently against larger
      national companies, such as Securitas North America, the Wackenhut Corporation,
      AlliedBarton Security and Guardsmark, LLC, all which have substantially greater
      financial and other resources, personnel and facilities than the Company. These
      competitors also offer a range of security and investigative services that
      are
      at least as extensive as, and directly competitive with, those offered by the
      Company. In addition, the Company competes with numerous regional and local
      organizations that offer substantially all of the services provided by the
      Company. Although management believes that, especially with respect to certain
      of its markets, the Company enjoys a favorable competitive position because
      of
      its emphasis on customer service, supervision and training and is able to
      compete on the basis of the quality of its service, personal relationships
      with
      customers and reputation, there can be no assurance that it will be able to
      maintain its competitive position in the security industry.





**Government
      Regulation**





The
      Company is subject to city, county and state firearm and occupational licensing
      laws that apply to security officers and private investigators. In addition,
      many states have laws requiring training and registration of security officers,
      regulating the use of badges and uniforms, prescribing the use of identification
      cards or badges, and imposing minimum bond, surety or insurance standards.
      The
      Company may be subjected to penalties or fines as the result of licensing
      irregularities or the misconduct of one of its security officers from time
      to
      time in the ordinary course of its business. Management believes the Company
      is
      in material compliance with all applicable laws and regulations.





**Employees**





The
      Company has approximately 3,650 employees of which 150 employees include
      managers, administrative employees and executive staff; and an additional 3,500
      employees consisting primarily of hourly personnel.





The
      Company's business is labor intensive and, as a result, is affected by the
      availability of qualified personnel and the cost of labor. Although the security
      services industry is characterized by high turnover, the Company has not
      experienced any material difficulty in hiring suitable numbers of qualified
      security officers, although, when labor has been in short supply, it has been
      required to pay higher wages and/or incur overtime charges.





Approximately
      55% of the Company's employees do not belong to a labor union. Some of the
      Company's employees in the following locations are members of unions: New York
      City security services office; and John F. Kennedy, La Guardia, Los Angeles
      and
      Philadelphia airport offices. Together, the unionized employees account for
      approximately 45% of the Company's employees and work under collective
      bargaining agreements with the following unions: Allied International Union,
      Allied Services Division of the Transportation Communications International
      Union and Special & Superior Officers Benevolent Association. Many of the
      Company's Los Angeles and New York City competitors are also unionized. The
      Company has experienced no work stoppages attributable to labor disputes. The
      Company believes that its relations with its employees are satisfactory.
      Security officers and other personnel supplied by the Company to its customers
      are employees of the Company, even though they may be stationed regularly at
      the
      customer's business premises.





**Service
      Marks**





The
      Company believes that it owns the service marks "Command Security Corporation",
      "CSC" and "CSC Plus" design for security officer, detective, private
      investigation services and security consulting services.





The
      Company also believes that it owns the trademark "Smartwheel" for the computer
      program for use in dispatching and tracking small vehicles such as carts and
      wheelchairs at transportation terminals. The trademark was acquired as part
      of
      United Security Group, Inc. acquisition. In addition, the Company believes
      that
      it owns the service marks "STAIRS" and "Smart Guard."





**ITEM
      1A. RISK FACTORS.**





In
      addition to the other information set forth in this report, you should carefully
      consider the following factors that could materially affect our business,
      financial condition or future results. The risks described below are not the
      only risks facing our Company. Additional risks and uncertainties not currently
      known to us or that we currently deem to be immaterial also may materially
      adversely affect our business, financial condition and/or operating
      results.




4


**Airline
      Industry Concerns**





Several
      of the Company's aviation clients filed for bankruptcy protection during fiscal
      2007, 2006 and 2005. The aviation industry continues to struggle with various
      challenges including the cost of security and higher fuel prices. Additional
      bankruptcy filings by aviation and non-aviation clients could have a material
      adverse impact on the Company's liquidity, results of operations and financial
      condition.





**Acquisitions**





Part
      of
      the Company’s growth strategy involves acquiring other quality security services
      companies. Our acquisition strategy entails numerous risks. The pursuit of
      acquisition candidates is expensive and may not be successful. Our ability
      to
      complete future acquisitions will depend on our ability to identify suitable
      acquisition candidates, negotiate acceptable terms for their acquisition and,
      if
      necessary, finance those acquisitions, in each case, before any attractive
      candidates are purchased by other parties, some of whom may have greater
      financial and other resources than us. Whether or not any particular acquisition
      is successfully completed, each of these activities is expensive and time
      consuming and would likely require our management to spend considerable time
      and
      effort to accomplish them, which would detract from their ability to run our
      current business. Although we may spend considerable expense and effort to
      pursue acquisitions, we may not be successful in completing them. Further,
      the
      Company’s ability to grow through acquisitions will depend in part on whether it
      can identify suitable acquisition candidates and reach attractive prices and
      terms.





Acquisitions
      could result in the occurrence of one or more of the following
      events:


·
            dilutive
                issuances of equity securities,


·
            additional
                debt and contingent liabilities,


·
            increased
                amortization expenses related to intangible
                assets,


·
            difficulties
                in the assimilation of the operations, technologies, services and
                products
                of the acquired companies and


·
            the
                diversion of management’s attention from other business
                activities.





The
      Company currently has no commitments or agreements with respect to any
      acquisition. Nor is it certain that it will complete other acquisitions
      necessary to complement its growth strategy on acceptable terms, or at all.
      Further, if the Company does not successfully integrate the operations of any
      companies that it has acquired or subsequently acquires, it may not achieve
      the
      potential benefits of such acquisitions.





**Additional
      Financing**





We
      believe that existing funds, cash generated from operations, and existing
      sources of and access to financing are adequate to satisfy our working capital,
      capital expenditures and debt service requirements for the foreseeable future.
      However, we cannot assure you that this will be the case, and we may be required
      to obtain additional financing to maintain and expand our existing operations
      through the sale of our securities, an increase in our credit facilities or
      otherwise. The failure by us to obtain such financing, if needed, would have
      a
      material adverse effect upon our business, financial condition and results
      of
      operations.





**Competition**





The
      Company's assumptions regarding projected results depend largely upon the
      Company’s ability to retain substantially all of its current clients. Retention
      is affected by several factors including, but not limited to, regulatory
      limitations, the quality of the services provided by the Company, the quality
      and pricing of comparable services offered by competitors, continuity of
      management and non-management personnel. There are several major national
      competitors with resources greater than those of the Company that, therefore,
      have the ability to provide more attractive service, cost and compensation
      incentives to clients and employees than those provided by the Company. Our
      ability to gain or maintain sales, gross margins and/or employees may be limited
      as a result of actions by competitors.





**Service
      Contracts**





Our
      largest expenses are for payroll and related taxes and employee benefits. Most
      of our service contracts provide for fixed hourly billing rates. Competitive
      pressures in the security and aviation services industries may prevent us from
      increasing our hourly billing rates on contract anniversary or renewal dates.
      If, due to inflation or other reasons, we must increase the wages, salaries
      and
      related taxes and benefits of our employees at rates in excess of what we can
      increase the billing rates charged under our service contracts, then our
      profitability would be adversely affected.





In
      many
      cases, our security and aviation services contracts require us to indemnify
      our
      clients or may otherwise subject us to additional liability for events occurring
      on client premises. While we maintain insurance programs that we believe provide
      appropriate coverage for certain liability risks, including personal injury,
      death and property damage, the laws of many states limit or prohibit insurance
      coverage for punitive damages arising from willful or grossly negligent conduct.
      Therefore, insurance may not be adequate to cover all potential claims or
      damages. If a plaintiff brings a successful claim against us for punitive
      damages in excess of our insurance coverage, then we could incur substantial
      liabilities that would have a material adverse affect on our business, financial
      condition and results of operations.




5


**Staffing**





Our
      business involves the labor-intensive delivery of contract security and aviation
      services. We derive our revenues primarily from contract security and aviation
      services performed by our hourly employees. Our future performance depends in
      large part upon our ability to attract, train, motivate and retain our skilled
      operational and administrative staffs. The loss of the services of, or the
      failure to recruit, the required complement of operational and administrative
      staff would have a material adverse effect on our business, financial condition
      and results of operations, including our ability to secure and complete service
      contracts. Additionally, if we do not successfully manage our existing
      operational and administrative staffs, we may not be able to achieve the
      anticipated gross margins, service quality, overtime levels and other
      performance measures that are important to our business, financial condition
      and
      results of operations.





**Changes
      in Accounting Standards and Taxation Requirements**





New
      accounting standards or pronouncements that may become applicable to our Company
      from time to time, and changes in the interpretation of existing standards
      and
      pronouncements, could have a significant effect on our reported results for
      the
      affected periods. We are also subject to income and various other taxes in
      the
      numerous jurisdictions where we generate revenues. Increases in income or other
      tax rates could reduce our after-tax results from affected jurisdictions in
      which we operate.





**Collective
      Bargaining Agreements and Organized Labor Action**





Many
      of
      our employees at our operating locations are covered by collective bargaining
      agreements. If we are unable to renew such agreements on satisfactory terms,
      our
      labor costs could increase, which would affect our gross margins.





Our
      industry has been the subject of campaigns to increase the number of unionized
      employees. In addition, strikes or work stoppages at our locations could impair
      our ability to provide contracted services to our customers, which would reduce
      our revenues and could expose us to customer claims. Although we believe that
      our relationships with our employees are good, we cannot provide you with any
      assurances that organized labor action at one or more of our operating locations
      will not occur, or that any such activities, or any other labor difficulties
      at
      our operating locations, would not materially affect our business, financial
      condition and results of operations.





**Consulting
      Agreement with Giuliani Security & Safety**





In
      January 2006, the Company entered into a consulting agreement (the “Consulting
      Agreement”) with Giuliani Security & Safety LLC (“Giuliani Security”) to
      provide a broad range of guidance and assistance to the Company to help grow
      its
      business in the areas of security, crisis management, fire and life safety
      and
      counterterrorism. As compensation for Giuliani Security’s performance of its
      obligations under the Consulting Agreement, the Company agreed to pay Giuliani
      Security a monthly cash fee during the term of the engagement of one hundred
      seventy five thousand dollars ($175,000). The Consulting Agreement had a term
      of
      one year. Management expected that fees paid under the Consulting Agreement
      would have a negative impact on the Company’s current year results of
      operations.





**Cost
      Management**





The
      Company's ability to realize expectations will be largely dependent upon
      management and its ability to maintain gross margins, which in turn will be
      determined in large part by management's control over costs and increased
      pressure on its vendors to cut their costs. To a significant extent, certain
      costs are not within the control of management and margins may be adversely
      affected by such items as litigation expenses, fees incurred in connection
      with
      extraordinary business transactions, inflation, labor unrest, increased payroll
      and related costs, which would adversely affect the Company’s business,
      financial condition and results of operations.





**Collection
      of Accounts Receivable**





The
      aviation industry in general poses a high degree of customer credit risk. Any
      such default by one or more significant clients due to bankruptcy or otherwise
      could have a material adverse impact on the Company's liquidity, results of
      operations and financial condition.





**Loss
      of a Large Customer**





Our
      success depends in part upon the retention of our large security and aviation
      services customers. In general, security services companies such as ours face
      the risk of losing customers as a result of the expiration, or termination
      of a
      contract, or as a result of a merger or acquisition, business failure or the
      selection of another provider of security services. We generate a significant
      portion of our revenues from large airline and security services customers
      some
      of which are experiencing substantial financial difficulties. We cannot assure
      you that we will be able to retain all or a substantial portion of our long-term
      customers or develop relationships with new customers in the
      future.





**Loss
      of Key Management Personnel**





Our
      success depends upon the talents and efforts of key management personnel,
      several of whom have been with our company or our industry for decades,
      including Barry I. Regenstein, Martin C. Blake, Jr., Debra M. Miller, John
      C.
      Reed and William A. Vigna. The loss of any such management personnel, due to
      retirement or otherwise, and our inability to attract and retain highly
      qualified technical and management personnel in the future, could have a
      material adverse effect on our business, financial condition and results of
      operations.




6


**Concentration
      of Stock Ownership**





Although
      none of the Company’s directors and officers has any agreements relating to the
      manner in which they will vote their shares of the Company’s common stock, such
      parties together own shares representing approximately 57% of the combined
      voting power of our outstanding capital stock. The concentration of ownership
      among these shareholders could give them the power to influence the outcome
      of
      substantially all matters subject to a vote of the Company’s shareholders,
      including mergers, consolidations and the sale of all or substantially all
      of
      our assets. Such decisions may conflict with the interests of our other
      shareholders.





**Stock
      Price Volatility**





The
      stock
      markets have experienced price and volume fluctuations that have affected and
      continue to affect the market prices of equity securities of many companies.
      These fluctuations often have been unrelated or disproportionate to the
      operating performance of those companies. The market price of the Company’s
      common stock may also fluctuate as a result of variations in our operating
      results. Due to the nature of our business, the market price of the common
      stock
      may fall in response to a number of factors, some of which are beyond our
      control, including: announcements of competitive developments by others; changes
      in estimates of our financial performance or changes in recommendations by
      securities analysts; a loss of a major customer; additions or departures of
      key
      management or other personnel; future sale of our common or preferred stock;
      acquisitions or strategic alliances by us or our competitors; our historical
      and
      anticipated operating results; quarterly fluctuations in our financial and
      operating results; changes in market valuations of other companies that operate
      in our business markets or industry sector; and general market and economic
      conditions.





**Information
      Systems**





We
      are
      increasingly dependent on information technology networks and systems, including
      the Internet, to process, transmit and store electronic information. In
      particular, we depend on our information technology infrastructure for
      electronic communications among our locations around the country and between
      Company personnel and our customers and suppliers. Security breaches of this
      infrastructure can create disruptions, shutdowns or unauthorized disclosure
      of
      confidential information. If we are unable to prevent such breaches, our
      operations could be disrupted or we may suffer financial damage or loss because
      of lost or misappropriated information.





**Regulation**





If
      the
      current regulation and federalization of pre-board screening services provided
      by the Company is expanded into other areas such as general security and baggage
      handling at aviation facilities, the Company's business, financial condition
      and
      results of operations could be materially, adversely affected.





**Catastrophic
      Events**





The
      Company is exposed to potential claims for catastrophic events, such as acts
      of
      terrorism, or based upon allegations that the Company failed to perform its
      services in accordance with contractual or industry standards. The Company's
      insurance coverage limits are currently $5,000,000 and $30,000,000 per
      occurrence for guard and aviation services, respectively. Effective October
      1,
      2006, the policy limit for guard services was increased to $7,000,000 per
      occurrence with an additional excess umbrella policy of $5,000,000. The Company
      retains the risk for the first $25,000 per occurrence on the non-aviation
      related policy that includes airport wheelchair and electric cart operations
      and
      $5,000 on the aviation related policy (except $25,000 for damage to aircraft
      and
      $100,000 for skycap operations). The Terrorism Risk Insurance Act of 2002
      established a program within the United States Department of the Treasury,
      under
      which the federal government shares, with the insurance industry, the risk
      of
      loss from future “acts of terrorism,” as defined in the Act. The Company does
      not currently maintain additional insurance coverage for losses arising from
      “acts of terrorism.”





**ITEM
      1B. UNRESOLVED STAFF COMMENTS.**




None.




**ITEM
      2. PROPERTIES.**





As
      of
      March 31, 2007, the Company did not own any real property. The Company occupies
      executive offices at Route 55, Lexington Park, Lagrangeville, New York,
      consisting of approximately 6,600 square feet with a base annual rental of
      $105,600 under a five-year lease expiring September 30, 2010. The Company also
      leases the following offices:




7





Location2450
                S. Atlantic BoulevardSuites
                #206 & #207Commerce,
                CA8939
                S. Sepulveda BoulevardSuite
                #201Los
                Angeles, CANorman
                Y. Mineta San Jose Int’l Airport1661
                Airport BoulevardSan
                Jose, CASan
                Jose Int'l. Airport1400
                Coleman AvenueSuites
                D24 & D25Santa
                Clara, CA2194
                Edison AvenueSuite
                1San
                Leandro, CA100
                Wells Street#2AHartford,
                CT2777
                Summer StreetSuite
                208AStamford,
                CTSuite
                208 Wilson Building3511
                Silverside RoadConcord
                PlazaWilmington,
                DE4901
                N.W. 17th WaySuite
                505Ft.
                Lauderdale, FL800
                Virginia AvenueSuite
                53Ft.
                Pierce, FL5775
                Blue Lagoon DriveSuite
                310Miami,
                FL






8






8452
                South Stony Island2nd
                FloorChicago,
                ILPortland
                International Airport
              1001
                Westbrook StreetPortland,
                ME780
                Elkridge Landing RoadSuite
                220Linthicum
                Heights, MD21
                Cummings ParkSuite
                224Woburn,
                MA186
                Stafford StreetSpringfield,
                MA1280
                Route 463rdFloorParsippany,
                NJ2204
                Morris AvenueSuite
                302, 3rdFloorUnion,
                NJ52
                Oswego RoadBaldwinsville,
                NY2144
                Doubleday AvenueBallston
                Spa, NYLaguardia
                Int'l. AirportUnited
                Hangar #2, Rooms 328 & 329Flushing,
                NYJFK
                International Airport175-01
                Rockaway BoulevardJamaica,
                NY17
                Battery PlaceSuite
                223New
                York, NY720
                Fifth Avenue10thFloorNew
                York, NY






9






22
                IBM RoadSuite
                105Poughkeepsie,
                NYTwo
                Gannett DriveSuite
                208White
                Plains, NY700
                NE Airport WaySuite
                B2420Portland,
                OR29
                Bala AvenueSuite
                118Bala
                Cynwyd, PA2
                International PlazaSuite
                242Philadelphia,
                PAPittsburgh
                International AirportTicketing
                Level of the Landside Terminal BuildingPittsburgh,
                PASeattle-Tacoma
                Int’l. AirportMain
                Terminal Building Ticketing LevelSeattle,
                WA


We
      believe that our existing properties are in good condition and are suitable
      for
      the conduct of our business.





**ITEM
      3. LEGAL PROCEEDINGS.**





Except
      as
      described below, the Company is not a party to any material pending proceedings,
      other than ordinary routine litigation incidental to its business.





The
      nature of the Company's business subjects it to claims or litigation alleging
      that it is liable for damages as a result of the conduct of its employees or
      others. Except for such litigation incidental to its business, other claims
      or
      actions that are not material and the lawsuits described below, there are no
      pending legal proceedings to which the Company is a party or to which any of
      its
      property is subject.





The
      nature of the Company’s business is such that there is a significant volume of
      routine claims and lawsuits that are issued against it, the vast majority of
      which never lead to substantial damages being awarded. The Company maintains
      general liability and workers’ compensation insurance coverage that it believes
      is appropriate to the relevant level of risk and potential liability. Some
      of
      the claims brought against the Company could result in significant payments;
      however, the exposure to the Company under general liability is limited to
      the
      first $25,000 per occurrence on the non-aviation and airport wheelchair and
      electric cart operations related claims and $5,000 per occurrence on the
      aviation related claims except $25,000 for damage to aircraft and $100,000
      for
      skycap operations. Any punitive damage award would not be covered by the general
      liability insurance policy. The only other potential impact would be on future
      premiums, which may be adversely affected by an unfavorable claims
      history.





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**





No
      matters were submitted to a vote of our security holders during the last quarter
      of our fiscal year ended March 31, 2007.


10





**PART
      II**





**ITEM
      5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
      ISSUER**


**PURCHASES
      OF EQUITY SECURITIES.**





The
      Company's common stock was quoted on the OTC Bulletin Board Service, until
      June
      7, 2007, under the symbol "CMMD.OB." On June 6, 2007, the Company announced
      that
      its shares of common stock had been approved for listing on the American Stock
      Exchange (the “AMEX”). The Company’s common stock has been trading on the AMEX
      under the ticker symbol “MOC” since June 8, 2007.





The
      following table sets forth, for the calendar periods indicated, the high and
      low
      sales price for the Company’s common stock as reported by the OTC Bulletin Board
      Service, for each full quarterly period within the two most recent fiscal
      years.




Last
      Sales Price Period (1)




Common
                  stock market priceHigh
              
              Low2007First
                  Quarter
              
              $
              2.68
              
              $
              2.20Second
                  Quarter
              
              
              2.80
              
              
              2.20Third
                  Quarter
              
              
              2.90
              
              
              2.40Fourth
                  Quarter
              
              
              3.40
              
              
              2.652006First
                  Quarter
              
              $
              2.05
              
              $
              1.20Second
                  Quarter
              
              
              3.42
              
              
              1.76Third
                  Quarter
              
              
              2.30
              
              
              1.65Fourth
                  Quarter
              
              
              2.90
              
              
              1.75




(1)
      Reflects fiscal years of the Company ended March 31, 2006 and 2007 as indicated.





The
      above
      quotations do not include retail mark-ups, markdowns or commissions and
      represent prices between dealers and may not represent actual transactions.
      The
      past performance of the Company's common stock is not necessarily indicative
      of
      the price at which it may trade in the future.





As
      of
      June 20, 2007 there were approximately 1,000 holders of the Company's common
      stock.





The
      Company has never paid cash dividends on its common stock. Payment of dividends
      on the Company’s common stock, if any, will be within the discretion of the
      Company's Board of Directors and will depend, among other factors, on approval
      of its principal lender, earnings, capital requirements and the operating and
      financial condition of the Company. At present, the Company's anticipated
      capital requirements are such that it intends to follow a policy of retaining
      earnings, if any, in order to finance its business operations and any growth
      in
      its business.


11





The
      graph
      below compares the cumulative total shareholder return on common shares with
      the
      cumulative total return of (1) the Nasdaq Stock Market Index (U.S.) (the “Nasdaq
      Index”) and (2) an index of publicly traded companies with a Standard Industrial
      Classification Code (“SIC Code”) of between 7380 and 7389 (the “SIC Code
      Index”). The graph assumes that $100 was invested in each of (A) shares of the
      Company’s common stock, (B) the Nasdaq Index and (C) the SIC Code Index on March
      31, 2002 and reflects the return through March 31, 2007 and assumes the
      reinvestment of dividends, if any. The comparisons in the graph below are based
      on historical data and are not indicative of, or intended to forecast, possible
      future performance of our Common Stock.










**THE
      INFORMATION CONTAINED IN THE STOCK PERFORMANCE GRAPH SHALL NOT BE DEEMED TO
      BE
“SOLICITING MATERIAL” OR TO BE FILED WITH THE SEC, NOR SHALL SUCH INFORMATION BE
      INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE SECURITIES ACT OR
      THE
      EXCHANGE ACT, EXCEPT TO THE EXTENT WE SPECIFICALLY INCORPORATE IT BY REFERENCE
      INTO SUCH FILING.**








12





**ITEM
      6. SELECTED FINANCIAL DATA.**




The
      financial data included in this table has been derived from the financial
      statements as of and for the fiscal years ended March 31, 2007, 2006, 2005,
      2004
      and 2003, which have been audited by independent certified public accountants.
      The information should be read in conjunction with “Item 7. Management’s
      Discussion and Analysis of Financial Condition and Results of Operations” and
      with the financial statements and related notes included in the Annual
      Repor t
      on Form
      10-K. The dollar amounts presented below in this Item 6 are in thousands of
      dollars, except for weighted average number of common shares and per share
      data.




Statements
                  of Operations DataYears
                  Ended March 31,2007
              
              2006
              
              2005
              
              2004
              
              2003Revenue
              
              
              93,823
              
              
              85,209
              
              
              79,655
              
              
              75,905
              
              
              94,315Gross
                  profit
              
              
              13,665
              
              
              11,420
              
              
              10,523
              
              
              10,960
              
              
              19,558Operating
                  income (loss)
              
              
              1,135
              
              
              8
              
              
              (289
              )
              
              195
              
              
              3,266Net
                  income (loss)
              
              
              1,240
              
              
              (100
              )
              
              (390
              )
              
              (310
              )
              
              1,327Income
                  (loss) per common share
              
              
              .12
              
              
              (.01
              )
              
              (.06
              )
              
              (.08
              )
              
              0.14Weighted
                  average numberof
                  common shares
              
              
              10,137,970
              
              
              8,834,952
              
              
              7,302,738
              
              
              6,287,343
              
              
              6,287,343


Balance
                  Sheet Data At March 31,2007
              
              2006
              
              2005
              
              2004
              
              2003Working
                  capital
              
              
              6,514
              
              
              6,838
              
              
              3,679
              
              
              2,549
              
              
              3,591Total
                  assets
              
              
              25,330
              
              
              18,113
              
              
              16,511
              
              
              21,927
              
              
              20,707Short-term
                  debt (1)
              
              
              8,751
              
              
              3,475
              
              
              4,866
              
              
              9,519
              
              
              9,248Long-term
                  debt (2)
              
              
              16
              
              
              57
              
              
              81
              
              
              221
              
              
              88Stockholders'
                  equity
              
              
              9,104
              
              
              7,625
              
              
              4,409
              
              
              4,494
              
              
              4,967
 (1)
                The
                    Company's short-term debt includes the current maturities of
                    long-term
                    debt, obligations under capital leases and short term borrowings.
                    See
                    Notes 7, 8 and 16, “Short-Term Borrowings”, “Long-Term Debt” and “Lease
                    Commitments”, respectively, to the financial statements for further
                    discussion.
 
 (2)
                The
                    Company's long-term debt includes the long-term portion of obligations
                    under capital leases.


**ITEM
      7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS.**





Management's
      Discussion and Analysis of Financial Condition and Results of Operations should
      be read in conjunction with the Company’s financial statements and related notes
      thereto contained in this report. In this discussion, the words "Company",
      "we",
      "our" and "us" refer to Command Security Corporation.





The
      following can be interpreted as including forward-looking statements under
      the
      Private Securities Litigation Reform Act of 1995. The words “outlook”, “intend”,
“plans”, “efforts”, “anticipates”, “believes”, “expects” or words of similar
      import typically identify such statements. Various important factors that could
      cause actual results to differ materially from those expressed in the
      forward-looking statements are identified at the end of this Item 7. The
      Company’s actual results may vary significantly from the results contemplated by
      these forward looking statements based on a number of factors including, but
      not
      limited to, availability of labor, marketing success, competitive conditions
      and
      the change in economic conditions of the various markets the Company serves.


13





**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES.**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires us to make estimates and
      judgments that affect the reported amounts of assets, liabilities, revenues,
      expenses and related disclosure of contingent assets and liabilities. We believe
      the following critical accounting policies affect our more significant judgments
      and estimates used in the preparation of our financial statements. Actual
      results may differ from these estimates under different assumptions and
      conditions.





**Revenue
      Recognition**





The
      Company records revenues as services are provided to its customers. Revenues
      consist primarily of aviation and security services, which are typically billed
      at hourly rates. These rates may vary depending on base, overtime and holiday
      time worked. Revenue for administrative services provided to other security
      companies are calculated as a percentage of the administrative service client's
      revenue and are recognized when billings for the related security services
      are
      generated.





**Trade
      Receivables**





The
      Company periodically evaluates the requirement for providing for billing
      adjustments and/or credit losses on its accounts receivable. The Company
      provides for billing adjustments where management determines that there is
      a
      likelihood of a significant adjustment for disputed billings. Criteria used
      by
      management to evaluate the adequacy of the allowance for doubtful accounts
      include, among others, the creditworthiness of the customer, current trends,
      prior payment performance, the age of the receivables and the Company's overall
      historical loss experience. Individual accounts are charged off against the
      allowance as management deems them as uncollectible.





**Insurance
      Reserves**





General
      liability estimated accrued liabilities are calculated on an undiscounted basis
      based on actual claim data and estimates of incurred but not reported claims
      developed utilizing historical claim trends. Projected settlements and incurred
      but not reported claims are estimated based on pending claims, historical trends
      and data.





Workers’
      compensation annual premiums are based on the incurred losses as determined
      at
      the end of the coverage period, subject to minimum and maximum premium.
      Estimated accrued liabilities are based on the Company’s historical loss
      experience and the ratio of claims paid to the Company’s historical payout
      profiles.





**Income
      Taxes**





Income
      taxes are based on income (loss) for financial reporting purposes and reflect
      a
      current tax liability (asset) for the estimated taxes payable (recoverable)
      in
      the current year tax return and changes in deferred taxes. Deferred tax assets
      or liabilities are determined based on differences between financial reporting
      and tax bases of assets and liabilities and are measured using enacted tax
      laws
      and rates. A valuation allowance is provided on deferred tax assets if it is
      determined that it is more likely than not that the asset will not be
      realized.





**Accounting
      for Stock Options**





In
      December 2002 the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      148, (“SFAS 148”), "Accounting for Stock-Based Compensation-Transition and
      Disclosure", an amendment of SFAS No. 123, (“SFAS 123”), “Accounting for
      Stock-Based Compensation” to provide alternative methods of transition for a
      voluntary change to the fair value based method of accounting for stock-based
      compensation. Since SFAS 148 was adopted during fiscal year ended March 31,
      2003, the Company could elect to adopt any of the three transitional recognition
      provisions. The Company adopted the prospective method of accounting for
      stock-based compensation. The adoption of SFAS 148 resulted in a non-cash charge
      of $19,600 for stock compensation cost for the three months ended June 30,
      2005.





In
      December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based
      Payment” (“SFAS 123R”), which replaced SFAS 123. SFAS 123R requires all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the financial statements based on their fair values at
      grant
      date and the recognition of the related expense over the period in which the
      share-based compensation vests. The Company was required to adopt the provisions
      of SFAS 123R effective July 1, 2005 and use the modified-prospective transition
      method. Under the modified-prospective method, the Company recognizes
      compensation expense in its financial statements issued subsequent to the date
      of adoption for all share-based payments granted, modified or settled after
      July
      1, 2005. The adoption of SFAS 123R resulted in a non-cash charge of $377,750
      for
      stock based compensation for the nine months ended March 31, 2006. Such non-cash
      charge would have been the same under the provisions of SFAS 148.





14




**OVERVIEW**





We
      provide uniformed security officers, aviation and support security services
      to
      commercial, residential, financial, industrial, aviation and governmental
      clients through over thirty company-offices in fourteen states throughout the
      United States. In conjunction with providing these services, we assume
      responsibility for a variety of functions, including recruiting, hiring,
      training and supervising all operating personnel as well as paying such
      personnel and providing them with uniforms, fringe benefits and workers’
compensation insurance.





Command’s
      client focused mission is to provide the best personalized supervision and
      management attention necessary to deliver timely and efficient security
      solutions so that our clients can operate in safe environments without
      disruption or loss. Technology underpins our efficiency, accuracy and
      dependability. Operations are handled by a refined software system that
      integrates scheduling, payroll and billing functions, giving clients the benefit
      of customized programs using the personnel best suited to the job.




In
      light
      of current world conditions, we expect that security will continue to be a
      key
      area of focus both domestically in the United States and internationally.





**RESULTS
      OF OPERATIONS**





**Earnings**





The
      Company reported net income for the fiscal year ended March 31, 2007 of
      $1,240,039. The net income primarily results from: (i) the Company’s continuing
      growth and expansion of its aviation and security services divisions; (ii)
      lower
      workers’ compensation insurance costs associated with a company-wide focus on
      safety and accident prevention in the workplace and (iii) internal cost
      reduction programs. Partially offsetting the net income were expenses associated
      with: (i) higher professional fees of approximately $1,640,000 related primarily
      to a one-year consulting agreement with Giuliani Security & Safety LLC that
      expired in December 2006 and (ii) a non-cash charge of $226,550 for stock
      compensation costs.





The
      Company reported a net loss for the fiscal year ended March 31, 2006 of $99,595.
      The loss reflects, among other items,: (i) an additional provision for bad
      debts
      of $850,000 related to the filing by Delta Air Lines and Northwest Airlines
      of
      voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy
      Code and (ii) approximately $560,000 of professional fees and a non-cash charge
      of $280,000 for stock compensation costs both of which relate primarily to
      the
      Company entering into a consulting agreement with Giuliani Security & Safety
      LLC, a leading security consulting firm.





**Revenues**





Revenues
      for the fiscal year ended March 31, 2007 increased by $8,613,931, or 10.1%,
      to
      $93,822,546 from $85,208,615 in fiscal year 2006. The increase is primarily
      due
      to higher revenues of approximately $6,500,000 in the aviation division from:
      (i) new and existing airline customers at the Company’s terminal operations at
      John F. Kennedy International Airport in New York, Los Angeles and San Jose
      International Airports in California and LaGuardia Airport in New York totaling
      approximately $3,000,000 and (ii) new contracts that commenced in November
      2005,
      May 2006 and September 2006 with groups of airlines at new airport locations
      in
      Pittsburgh, Pennsylvania, Oakland, California and Seattle, Washington totaling
      approximately $3,300,000. In addition, the security services division
      experienced higher revenues of approximately $2,150,000 due mainly to: (i)
      the
      purchase of a security services business in Florida of approximately $1,760,000
      (net); (ii) a new contract with a major medical center in Manhattan, New York
      for approximately $600,000 and (iii) a short-term contract with a national
      insurance company at multiple domestic locations of approximately $840,000,
      that
      terminated during September 2006. These increases in security service revenues
      were partially offset by lower revenues from: (i) the Company discontinuing
      services at its Buffalo, New York location during fiscal 2007 of approximately
      $520,000; (ii) the Company’s Ft. Pierce, Florida, Hartford, Connecticut and
      Commerce, California branch locations of approximately $500,000.





Revenues
      for the fiscal year ended March 31, 2006 increased by $5,553,871, or 7.0%,
      to
      $85,208,615 from $79,654,744 in fiscal year 2005. The increase is primarily
      due
      to higher revenues of approximately $5,100,000 in the aviation division from:
      (i) new and existing airline customers at the Company’s terminal operations at
      John F. Kennedy International Airport in New York, Baltimore/Washington
      International Airport in Maryland and Los Angeles International Airport in
      California and (ii) new contracts that commenced in January and November 2005
      with groups of airlines at new airport locations in Portland, Maine and
      Pittsburgh, Pennsylvania. In addition, the security services division
      experienced higher revenues of approximately $400,000 due mainly to rate
      increases with existing customers as well as a net growth in new customers.





**Gross
      Profit**





Gross
      profit for the fiscal year ended March 31, 2007 increased by $2,244,873 to
      $13,665,232 (14.6% of revenues) from $11,420,359 (13.4% of revenues) for fiscal
      year 2006. The increase was due mainly to: (i) expanded services with new and
      existing customers at John F. Kennedy International and LaGuardia Airports
      in
      New York and San Jose International Airport in California; (ii) new contracts
      at
      Pittsburgh, Oakland and Seattle Tacoma International Airports; (iii) a new
      contract with a major medical center as noted above; (iv) improved labor ratio
      margins in the security services division; (v) the purchase of a security
      services business in Florida; (vi) a short-term contract to provide security
      services to a national insurance company at multiple domestic locations; (vii)
      the Company discontinuing services at its Buffalo, New York location; (viii)
      lower State of New York payroll taxes related to the elimination of prior year
      reductions in Federal Unemployment tax credits and (ix) lower workers’
compensation and automotive insurance costs.




15




Gross
      profit for the fiscal year ended March 31, 2006 increased by $897,833 to
      $11,420,359 (13.4% of revenues) from $10,522,526 (13.2% of revenues) for fiscal
      year 2005. The increase was due mainly to: (i) expanded services with new and
      existing customers as noted above and (ii) lower workers’ compensation and
      automotive insurance costs. Partially offsetting these increases were increased
      labor and related costs associated with the Company’s security services
      division.





The
      Company has an insurance policy covering workers’ compensation claims in States
      in which the Company performs services. Estimated accrued liabilities are based
      on the Company’s historical loss experience and the ratio of claims paid to the
      Company’s historical payout profiles. Charges for estimated workers’
compensation related losses incurred and included in cost of sales were
      $2,042,618, $2,881,041 and $3,257,608, for the fiscal years ended March 31,
      2007, 2006 and 2005, respectively.





The
      nature of the Company’s business also subjects it to claims or litigation
      alleging that it is liable for damages as a result of the conduct of its
      employees or others. The Company insures against such claims and suits through
      general liability policies with third-party insurance companies. Such policies
      have limits of $5,000,000 per occurrence. Effective October 1, 2006, the policy
      limit was increased to $7,000,000 per occurrence with an additional excess
      umbrella policy of $5,000,000. On the aviation related business, as of October
      1, 2004, the Company acquired a policy with a $30,000,000 limit per occurrence.
      Effective as of October 1, 2006, the Company retains the risk for the first
      $25,000 per occurrence on the non-aviation related policy that includes airport
      wheelchair and electric cart operations and $5,000 on the aviation related
      policy, except for $25,000 for damage to aircraft and $100,000 for skycap
      operations. Estimated accrued liabilities are based on specific reserves in
      connection with existing claims as determined by third party risk management
      consultants and actuarial factors and the timing of reported claims. These
      are
      all factored into estimated losses incurred but not yet reported to the
      Company.





**General
      and Administrative Expenses**





General
      and administrative expenses increased by $2,061,713 to $12,315,745 (13.1% of
      revenues) for the fiscal year ended March 31, 2007 from $10,254,032 (12.0%
      of
      revenues) in fiscal year 2006. The increase was primarily due to higher: (i)
      professional fees of approximately $1,640,000 related primarily to a one-year
      consulting agreement that the Company entered into with Giuliani Security &
Safety LLC that expired in December 2006; (ii) administrative payroll and
      related costs and (iii) facility costs. Partially offsetting the increase were:
      (i) lower bank service charges and (ii) a decrease of approximately $171,000
      in
      non-cash charges for stock based compensation costs.





General
      and administrative expenses decreased by $336,746 to $10,254,032 (12.0% of
      revenues) for the fiscal year ended March 31, 2006 from $10,590,778 (13.3%
      of
      revenues) in fiscal year 2005. The decrease was primarily due to lower: (i)
      payroll and related costs; (ii) legal fees due mainly to absence of the prior
      year payment by the Company of certain legal fees and expenses primarily in
      connection with litigation relating to the conversion of the Company’s preferred
      stock into common stock by certain shareholders; (iii) administrative automobile
      insurance costs; (iv) facility and communication costs; (v) bank fees and
      service charges; and (vi) depreciation charges on administrative furniture
      and
      fixtures. Partially offsetting the decrease were: (i) approximately $560,000
      of
      professional fees related primarily to the Company entering into a consulting
      agreement with Giuliani Security & Safety LLC and (ii) an increase of
      $290,950 in non-cash charges for stock based compensation costs.





**Provision
      for Doubtful Accounts**





The
      provision for doubtful accounts decreased by $894,055 to $268,118 for the fiscal
      year ended March 31, 2007 compared with $1,162,173 in fiscal year 2006. The
      decrease was due mainly to the absence of an additional provision for bad debts
      of $850,000 in fiscal 2006 as noted below.





The
      provision for doubtful accounts increased by $884,968 to $1,162,173 for the
      fiscal year ended March 31, 2006 compared with $277,205 in fiscal year 2005.
      The
      increase was due mainly to an additional provision for bad debts of $850,000
      in
      September 2005 related to the filing by Delta Air Lines and Northwest Airlines
      of voluntary petitions for reorganization under Chapter 11 of the U.S.
      Bankruptcy Code.





The
      Company periodically evaluates the requirement for providing for billing
      adjustments and/or credit losses on its accounts receivable. The Company
      provides for billing adjustments where management determines that there is
      a
      likelihood of a significant adjustment for disputed billings. Criteria used
      by
      management to evaluate the adequacy of the allowance for doubtful accounts
      include, among others, the creditworthiness of the customer, current trends,
      prior payment performance, the age of the receivables and the Company's overall
      historical loss experience. Individual accounts are charged off against the
      allowance as management deems them as uncollectible. It is not known if bad
      debts will increase in future periods nor is it believed by management that
      the
      decrease during the fiscal year ended March 31, 2007 compared with the same
      period of the prior year is necessarily indicative of a trend.




16




**Bad
      Debt Recoveries**





Bad
      debt
      recoveries increased for the fiscal year ended March 31, 2007 by $49,238 to
      $53,229 from $3,991 in fiscal year 2006 as a result of a recovery of
      approximately $45,000 related to the Company’s claim against a former service
      agreement customer that ceased operations in a previous year.





Bad
      debt
      recoveries decreased for the fiscal year ended March 31, 2006 by $51,983 to
      $3,991 from $55,974 in fiscal year 2005 as a result of higher recoveries in
      the
      previous fiscal year.





**Interest
      Income**





Interest
      income for the fiscal year ended March 31, 2007 principally represents interest
      earned on: (i) cash balances; (ii) trust funds for potential future workers’
compensation claims and (iii) financing income from the Company’s service
      agreement customers. Interest income in fiscal year 2007 was comparable with
      the
      same period of the prior year.





Interest
      income for the fiscal year ended March 31, 2006 principally represents interest
      earned on: (i) cash balances; (ii) trust funds for potential future workers’
compensation claims and (iii) financing income from the Company’s service
      agreement customers. Interest income in fiscal year 2006 increased by $142,156
      to $238,887 from $96,731 in fiscal year 2005.





**Interest
      Expense**





Interest
      expense for the fiscal year ended March 31, 2007 increased by $135,606 to
      $567,765 from $432,159 in fiscal year 2006. The increase is due mainly to:
      (i)
      higher average outstanding borrowings and an increase in the weighted average
      interest rate under the Company’s commercial revolving loan agreement and (ii)
      interest expense on the note payable related to the Company’s purchase of a
      security guard business during June 2006.





Interest
      expense for the fiscal year ended March 31, 2006 decreased by $27,946 to
      $432,159 from $460,105 in fiscal year 2005. The decrease principally represents
      lower average outstanding borrowings under the Company’s commercial revolving
      loan agreement, partially offset by an increase in the weighted average interest
      rate.





**Equipment
      Dispositions**





Equipment
      dispositions are a result of the sale of vehicles, office equipment and security
      equipment at prices above or below book value.





The
      $2,851 loss on equipment dispositions for the fiscal year ended March 31, 2007
      was primarily due to the disposition of Company vehicles at amounts below their
      respective book values.





The
      $19,137 gain on equipment dispositions for the fiscal year ended March 31,
      2006
      was primarily due to the disposition of Company vehicles at amounts in excess
      of
      their respective book values.





**Income
      Tax Benefit (Expense)**





Income
      tax benefit for the fiscal year ended March 31, 2006 increased $383,605 to
      $450,000 from $66,395 in fiscal year 2006 due primarily to the Company’s
      recognition of a portion of its deferred tax assets. The Company has determined
      based on its expectations for the future that it is more likely than not that
      future taxable income will be sufficient to utilize fully the net deferred
      tax
      assets at March 31, 2007 and 2006.





Income
      tax benefit for the fiscal year ended March 31, 2006 decreased $201,055 to
      $66,395 from $267,450 in fiscal year 2005 due mainly to a reduction in the
      Company’s pre-tax loss. The Company has determined based on its expectations for
      the future that it is more likely than not that future taxable income will
      be
      sufficient to utilize fully the net deferred tax assets at March 31, 2006 and
      2005.


17


**LIQUIDITY
      AND CAPITAL RESOURCES**





The
      Company pays employees and administrative service clients on a weekly basis,
      while customers pay for services generally within 60 days after billing by
      the
      Company. In order to fund our payroll and operations, the Company maintains
      a
      commercial revolving loan arrangement, currently with CIT Group/Business Credit,
      Inc. ("CIT").





The
      Company’s principal use of short-term borrowings is for carrying accounts
      receivable. The Company’s short-term borrowings have supported the increase in
      accounts receivable associated with: (i) its ongoing expansion and growth;
      and
      (ii) the October 1, 2006 change in a majority of Delta Airline’s billing and
      payment terms from monthly invoices prepaid in advance to weekly invoices due
      in
      thirty (30) days. The Company will continue to use its short-term borrowings
      to
      support its working capital requirements.





We
      believe that existing funds, cash generated from operations, and existing
      sources of and access to financing are adequate to satisfy our working capital,
      capital expenditure and debt service requirements for the foreseeable future.
      However, we cannot assure you that this will be the case, and we may be required
      to obtain additional financing to maintain and expand our existing operations
      through the sale of our securities, an increase in our credit facilities or
      otherwise. We cannot assure you that such financing will be available upon
      commercially acceptable terms or otherwise. The failure by us to obtain such
      financing, if needed, would have a material adverse effect upon our business,
      financial condition and results of operations.





**CIT
      Revolving Loan**





Until
      March 21, 2006, we were parties to a financing agreement (the “Agreement”) with
      CIT that had a term of 3 years ending December 12, 2006 and provided for
      borrowings in an amount up to 85% of the Company’s eligible accounts receivable,
      but in no event more than $15,000,000. The Agreement also provided for advances
      against unbilled revenue (primarily monthly invoiced accounts) although this
      benefit was offset by a reserve against all outstanding payroll checks. The
      revolving loan bore interest at the prime rate, as defined, plus 1.25% per
      annum
      on the greater of: (i) $5,000,000 or (ii) the average of the net balances owed
      by the Company to CIT in the loan account at the close of each day during such
      month. Costs to close the loan totaled $279,963 and are being amortized over
      the
      three year life of the Agreement.




On
      March
      22, 2006, the Company entered into an Amended and Restated Financing Agreement
      with CIT (the “Amended Agreement”), which provides for borrowings as noted
      above, but in no event more that $12,000,000. The Amended Agreement provides
      for
      a letter of credit sub-line in an aggregate amount of up to $1,500,000. Letters
      of credit are subject to a two percent (2%) per annum fee on the face amount
      of
      each letter of credit. The Amended Agreement provides that interest will be
      calculated on the outstanding principal balance of the revolving loans at the
      prime rate, as defined, plus .25% if EBITDA, as defined, is equal to or less
      than $500,000 for the most recently completed fiscal quarter; otherwise, at
      the
      prime rate, as defined. For LIBOR loans interest will be calculated on the
      outstanding principal balance of the LIBOR loans at the LIBOR rate, as defined,
      plus 2.75% if EBITDA, as defined, is equal to or less than $500,000 for the
      most
      recently completed fiscal quarter; otherwise, at the LIBOR rate, as defined,
      plus 2.50%. As of March 31, 2007, the interest rate was 8.25% per annum.




At
      March
      31, 2007, the Company had borrowed $8,487,065 representing approximately 87%
      of
      its maximum borrowing capacity based on the definition of “eligible accounts
      receivable” under the terms of the Amended Agreement. However, up to $3,512,935
      could additionally be available to borrow under the Amended Agreement to finance
      growth and increased receivables, if any.





On
      April
      12, 2007, the Company entered into an Amendment to its Financing Agreement
      (the
“Financing Agreement”) with CIT (the “Amendment”) in connection with the closing
      of the transactions (the “Transactions”) under the Stock Purchase Agreement and
      the Merger Agreement described in Note 21 to the Company’s financial statements
      listed in Item 15 (a)(1) and (a)(2) of Part IV of this Form 10-K Annual Report.
      Pursuant to the Amendment, the aggregate line of credit under the Financing
      Agreement was increased from $12,000,000 to $16,000,000, and the Company was
      provided with a $2,400,000 acquisition advance to fund the cash requirements
      of
      the Transactions. The Amendment also provides for an extension of the maturity
      date of the Financing Agreement to December 12, 2008, and for reductions in
      interest rates, fees and availability reserves and an increase in the letter
      of
      credit sub-line to an aggregate amount of up to $3,000,000. Costs to close
      the
      Amendment totaled $125,000 payable $45,000 at closing, $40,000 six months after
      closing and $40,000 twelve months after closing. Such costs are being amortized
      over the remaining life of the Financing Agreement.





The
      Company relies on its revolving loan from CIT that contains a fixed charge
      covenant and various other financial and non-financial covenants. If the Company
      breaches a covenant, CIT has the right to call the line unless CIT waives the
      breach. Under such circumstances, the Company’s business would be materially
      adversely affected if we were not able to obtain suitable alternative financing.
      For the fiscal year ended March 31, 2007, the Company was in compliance with
      all
      covenants under the Amended Agreement.




18


**Cash
      Flows**





The
      following table summarizes our cash flow activity for the fiscal years ended
      March 31, 2007, 2006 and 2005:





**2007**
            
            **2006**
            
            **2005**Net
                cash (used in) provided by operating activities
            
            $
            (4,001,190
            )
            $
            (4,941,428
            )
            $
            8,149,004Net
                cash (used in) provided by investing activities
            
            
            (639,633
            )
            
            (179,988
            )
            
            36,637Net
                cash provided by (used in) financing activities
            
            
            4,828,620
            
            
            2,642,609
            
            
            (5,684,892
            )





**Investing**





The
      Company finances vehicle purchases typically over three years and insurance
      through short-term borrowings. The Company has no present material commitments
      for capital expenditures.





**Financing**





During
      the fiscal year ended March 31, 2007, the Company increased its short-term
      borrowings principally to support higher accounts receivable associated with:
      (i) its ongoing expansion and growth; and (ii) the October 1, 2006 change in
      a
      majority of Delta Airline’s billing and payment terms from monthly invoices
      prepaid in advance to weekly invoices due in thirty (30) days.





**Working
      Capital**





Working
      capital decreased by $324,082 to $6,513,663 as of March 31, 2007, from
      $6,837,745 as of March 31, 2006.





The
      Company experienced checks issued in advance of deposits (defined as checks
      drawn in advance of future deposits) of $1,760,155 as of March 31, 2007,
      compared with $1,828,802 at March 31, 2006. Cash balances and book overdrafts
      can fluctuate materially from day to day depending on such factors as
      collections, timing of billing and payroll dates, and are covered via advances
      from the revolving loan as checks are presented for payment.





**Off-Balance
      Sheet Arrangements**





The
      Company does not have any off-balance sheet arrangements that are currently
      material or reasonably likely to be material to our financial position or
      results of operations.





**Contractual
      Obligations**





The
      impact that our contractual obligations as of March 31, 2007 are expected to
      have on our liquidity and cash flow in future periods is as
      follows:





**Payments
                Due by
                Period****Total**
            
            **Less
                than 1 Year**
            
            **1-3
                Years**
            
            **3-5
                Years**
            
            **More
                than 5 Years**Long-term
                debt obligations
            
            $
            252,956
            
            $
            247,054
            
            $
            5,902
            
            $
            --
            
            $
            --Capital
                lease obligations
            
            
            26,417
            
            
            16,774
            
            
            9,643
            
            
            --
            
            
            --Operating
                lease obligations
            
            
            2,487,388
            
            
            989,542
            
            
            1,033,998
            
            
            463,648
            
            
            200Purchase
                obligations (1)
            
            
            330,164
            
            
            91,322
            
            
            182,644
            
            
            56,198
            
            
            --Total
            
            $
            3,096,925
            
            $
            1,344,692
            
            $
            1,232,187
            
            $
            519,846
            
            $
            200





(1)
            Purchase
                obligations include an agreement to purchase uniform cleaning services
                that is legally binding on the Company and that specifies all significant
                terms, including fixed or minimum quantities to be purchased; fixed,
                minimum or variable price provisions; and the approximate timing
                of the
                transaction.





**OUTLOOK**





This
      section, Management's Discussion and Analysis of Financial Condition and Results
      of Operations, contains a number of forward-looking statements, all of which
      are
      based upon current expectations. Actual results may differ materially from
      the
      results contemplated by these forward-looking statements and are qualified
      by
      the section below entitled “Forward Looking Statements” and Part I, Item 1A of
      this report entitled “Risk Factors.”




19




**Financial
      Results**





Future
      revenue will be largely dependent upon the Company’s ability to gain additional
      revenues in the security and aviation services divisions at acceptable margins
      while minimizing terminations of existing clients. The revenues of the security
      services division has stabilized and begun to experience both organic and
      transactional growth over recent months after a reduction over the past few
      years as contracts with unacceptable margins were cancelled. On April 18, 2007,
      the Company announced completing a merger with Brown Security Industries, Inc.,
      including its subsidiaries Strategic Security Services, Inc. and Rodgers Police
      Patrol. Our current focus is on increasing revenues while our sales and
      marketing team and branch managers work to sell new business and retain
      profitable contracts. The airline industry continues to increase its demand
      for
      services provided by the Company.





The
      Company’s gross profit margin increased during the fiscal year ended March 31,
      2007 to 14.6% of revenues compared with 13.4% for the fiscal year ended March
      31, 2006. The increase is due mainly to: (i) expanded services with new and
      existing customers at Los Angeles and San Jose International Airports and
      LaGuardia Airport; (ii) new contracts at Pittsburgh, Oakland and Seattle Tacoma
      International Airports; (iii) improved labor ratio margins principally in the
      security services division; (iv) lower workers’ compensation insurance costs;
      (v) the purchase of a security services business in Florida; (vi) lower State
      of
      New York payroll taxes related to the elimination of prior year reductions
      in
      Federal Unemployment Tax credits. Also, contributing to the increase in gross
      profit for the fiscal year was: (a) a short-term contract to provide security
      services to a national insurance company at multiple domestic locations; (b)
      temporary strike coverage for doormen and elevator operators in New York City
      and (c) lower automotive insurance costs. The Company expects gross profit
      margins to average between 14.0% and 15.0% of revenue for fiscal year 2008
      based
      on current business conditions. Management expects gross profit to remain under
      pressure due primarily to continued price competition. However, management
      expects these effects to be moderated by continued operational efficiencies
      resulting from better management of the Company’s cost structures and workers’
compensation experience ratings.





A
      cost
      reduction program was instituted in October 2004 that is expected to continue
      to
      reduce the Company’s general and administrative expenses in future periods.
      Additional cost reduction opportunities are being pursued as they are
      determined.





The
      aviation services division represents approximately 66% of the Company's total
      revenues and Delta, at annual billings of approximately $14,700,000, is the
      largest customer of the aviation division at approximately 24% of the aviation
      services division and 16% of the Company’s total revenues. Due to the existing
      limitations under the Amendment with CIT, the Company is limited to borrowing
      against Delta’s accounts receivable of up to (but not exceeding) approximately
      $2,060,000, so long as such accounts do not remain unpaid for more than sixty
      (60) days from the invoice date. In the event of a bankruptcy by another airline
      customer(s), the Company’s earnings and liquidity could be adversely affected to
      the extent of the accounts receivable with such airline(s), as well as from
      lost
      future revenues if such airline(s) cease operations or reduce their requirements
      from the Company.





As
      of the
      close of business on June 20, 2007, the Company’s cash availability was
      approximately $4,900,000, which is believed to be sufficient to meet its needs
      for the foreseeable future barring any increase in reserves imposed by CIT.





We
      believe that existing funds, cash generated from operations, and existing
      sources of and access to financing are adequate to satisfy our working capital,
      capital expenditure and debt service requirements for the foreseeable future.
      However, we cannot assure you that this will be the case, and we may be required
      to obtain additional financing to maintain and expand our existing operations
      through the sale of our securities, an increase in our credit facilities or
      otherwise. We cannot assure you that such financing will be available upon
      commercially acceptable terms or otherwise. The failure by us to obtain such
      financing, if needed, would have a material adverse effect upon our business,
      financial condition and results of operations.





**SAFE
      HARBOR STATEMENT**





This
      management’s discussion and analysis of financial condition and results of
      operations, other sections of this annual report on Form 10-K and other reports
      and oral statements made by our representatives from time to time may contain
      forward-looking statements that are based on our assumptions, expectations
      and
      projections about the Company and the security industry. These include
      statements regarding our expectations about revenues, our liquidity, or expenses
      and our continued growth, among others. Such forward-looking statements by
      their
      nature involve a degree of risk and uncertainty. We caution that a variety
      of
      factors, including but not limited to the factors described under Item 1A,
“Risk
      Factors” and the following, could cause business conditions and our results to
      differ materially from what is contained in forward-looking
      statements:


·
            changes
                in the rate of economic growth in the United
                States;


·
            changes
                in the financial condition of our
                customers;


·
            changes
                in regulatory environment;


·
            contract
                cancellations;


·
            changes
                in our estimates of costs;


·
            war
                and/or terrorist attacks on facilities where services are or may
                be
                provided;


·
            outcomes
                of pending and future litigation;


·
            increasing
                competition by other companies;


·
            compliance
                with our loan covenants;


·
            recoverability
                of claims against our customers and others by us and claims by third
                parties against us; and




20


·
            changes
                in estimates used in our critical accounting
                policies.




Other
      factors and assumptions not identified above were also involved in the formation
      of these forward-looking statements and the failure of such other assumptions
      to
      be realized, as well as other factors, may also cause actual results to differ
      materially from those projected. Most of these factors are difficult to predict
      accurately and are generally beyond our control. You should consider the areas
      of risk described above in connection with any forward-looking statements that
      may be made by us.





We
      undertake no obligation to publicly update any forward-looking statements,
      whether as a result of new information, future events or otherwise. You are
      advised, however, to consult any additional disclosures we make in proxy
      statements, quarterly reports on Form 10-Q, annual reports on Form 10-K and
      current reports on Form 8-K filed with the Securities and Exchange
      Commission.





**ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**





During
      the fiscal year ended March 31, 2007, the Company did not hold a portfolio
      of
      securities instruments for either trading or for other purposes.





The
      Company is exposed to market risk in connection with changes in interest rates,
      primarily in connection with outstanding balances under its revolving line
      of
      credit with CIT. Based on the Company's average outstanding balances during
      the
      fiscal year ended March 31, 2007, a 1% change in the prime lending rate would
      impact the Company's financial position and results of operations by
      approximately $65,000 over the next fiscal year.





**ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.**





The
      information required by this item is incorporated herein by reference to the
      financial statements and schedule listed in Item 15 (a)(1) and (a)(2) of Part
      IV
      of this Form 10-K Annual Report.





**ITEM
      9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.**





None.





**ITEM
      9a. CONTROLS AND PROCEDURES.**





The
      Company maintains “disclosure controls and procedures”, as such term is defined
      under Exchange Act Rule 13a-15(e), that are designed to ensure that information
      required to be disclosed in the Company's Exchange Act reports is recorded,
      processed, summarized, and reported within the time periods specified in the
      SEC's rules and forms, and that such information is accumulated and communicated
      to the Company's management, including its President and Chief Financial
      Officer, as appropriate, to allow timely decisions regarding required
      disclosures.





We
      believe that a control system, no matter how well designed and operated, cannot
      provide absolute assurance that the objectives of the control system are met,
      and no evaluation of controls can provide absolute assurance that all control
      issues and instances of fraud, if any, within a company have been detected.
      Our
      disclosure controls and procedures are designed to provide reasonable assurance
      of achieving their objectives and our President and Chief Financial Officer
      have
      concluded that such controls and procedures are effective at the reasonable
      assurance level.





An
      evaluation was performed under the supervision and with the participation of
      management, including the Company’s President and Chief Financial Officer, of
      the effectiveness of the design and operation of the Company's disclosure
      controls and procedures. Based on that evaluation and subject to the foregoing,
      the President and Chief Financial Officer concluded that our disclosure controls
      and procedures were effective as of March 31, 2007. There have been no changes
      in the Company’s internal control over financial reporting that occurred during
      the fourth quarter of fiscal 2007 that has materially affected, or are
      reasonably likely to materially affect, the Company’s internal control over
      financial reporting.





**ITEM
      9b. OTHER INFORMATION.**





None.


21


**PART
      III**





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
      GOVERNANCE.**





The
      information required by this Item 10 will be set forth in our Proxy Statement
      for our 2007 Annual Meeting of Stockholders (the “2007 Proxy Statement”) under
      the caption “Directors, Executive Officers and Corporate Governance,” and is
      incorporated herein by reference.





**ITEM
      11. EXECUTIVE COMPENSATION.**





The
      information required by this Item 11 will be set forth in the 2007 Proxy
      Statement under the caption “Executive Compensation,” and is incorporated herein
      by reference.





The
      information required by this Item 11 will be set forth in the 2007 Proxy
      Statement under the caption “Director Compensation and Stock Ownership
      Guidelines,” and is incorporated herein by reference.





**ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED**


**STOCKHOLDER
      MATTERS.**





The
      information required by this Item 12 will be set forth in the 2007 Proxy
      Statement under the caption “Common Stock Ownership of Certain Beneficial Owners
      and Management,” and is incorporated herein by reference.





The
      information required by this Item 12 will be set forth in the 2007 Proxy
      Statement under the caption “Executive Compensation-Equity Compensation Plan
      Information,” and is incorporated herein by reference.




**ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.**





The
      information required by this Item 13 will be set forth in the 2007 Proxy
      Statement under the caption “Certain Relationships and Related Transactions, and
      Director Independence,” and is incorporated herein by reference.





**ITEM
      14. PRINCIPAL ACCOUNTING FEES AND SERVICES.**





The
      information required by this Item 14 will be set forth in the 2007 Proxy
      Statement under the caption “Principal Accountant Fees and Services,” and is
      incorporated herein by reference.





22


**PART
      IV**





**ITEM
      15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.**


(a)


(1)
              
              *Financial
                  Statements:*
              Page
                  Number From
                This
                    Form 10- KIndependent
                  auditor's report
              F-1Balance
                  Sheets - March 31, 2007 and 2006
              F-2Statements
                  of Operations - years ended
              F-3March
                  31, 2007, 2006 and 2005Statements
                  of Changes in Stockholders' Equity and
                  Comprehensive Income
              F-4years
                  ended March 31, 2007, 2006 and 2005Statements
                  of Cash Flows - years ended
              F-5
                  - F-6March
                  31, 2007, 2006 and 2005Notes
                  to Financial Statements
              F-7
                  - F-19(2)
              
              *Financial
                  Statement Schedules:*Schedule
                  II - Valuation and Qualifying Accounts
              F-20Schedules
                  not listed above have been omitted as either
                not
                  applicable, immaterial or disclosed in the Financial
                Statements
                  or notes thereto.(3)
              
              *Exhibits:*A
                  list of exhibits filed or furnished with this report on Form 10-
                  K
                (or
                  incorporated by reference to exhibits previously filed or furnished
                  by the
                  Company) is provided in the Exhibit Index on
                pages
                  25-26 of this report.




23





**SIGNATURES**





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





**COMMAND
      SECURITY CORPORATION**





Date:
      June 27, 2007




*By:*
            */s/
                Barry I. Regenstein**Barry
                I. Regenstein*
              *President
                and*
              *Chief
                Financial Officer*





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated:




Signature
              
              Title
              
              Date/s/Bruce
                  Galloway
              
              Co-Chairman
                  of the Board
              
              June27,2007Bruce
                  Galloway/s/Peter
                  Kikis
              
              Co-Chairman
                  of the Board
              
              June27,2007Peter
                  Kikis/s/Barry
                  I. Regenstein
              
              Chief
                  Financial Officer
              
              June27,2007Barry
                  I. Regenstein/s/Martin
                  C. Blake, Jr.
              
              Director
              
              June27,2007Martin
                  C. Blake, Jr./s/Robert
                  S. Ellin
              
              Director
              
              June27,2007Robert
                  S. Ellin/s/Thomas
                  Kikis
              
              Director
              
              June27,2007Thomas
                  Kikis/s/Martin
                  Wade, III
              
              Director
              
              June27,2007Martin
                  Wade, III




24


COMMAND
      SECURITY CORPORATION


EXHIBIT
      INDEX


ExhibitNumber
                ExhibitDescription3.1
                
                Amended
                    & Restated Articles
                
                Incorporated
                    by reference to Exhibit of Incorporation 3.3 of the form 10-K
                    for the
                    fiscal year ended March 31, 1993 (the"1993 10-K").3.2
                
                By-Laws
                
                Incorporated
                  by
                  reference to Exhibit 3.3 of the Form 10-K for the fiscal year ended
                  March
                  31, 1991 (the "1991 10-K").3.3
                
                Amendments
                    to By-Laws
                
                Incorporated
                    by reference to Exhibit 3.1 of the Form 8-K filed September 20,
                    2006.3.4
                
                Certificate
                    of Amendment of
                  Certificate
                    of Incorporation
                
                Incorporated
                    by reference to Exhibit 3.4 of the Eighth Amendment to the Registration
                    Statement filed on Form S-1, File No. 33-75336 (the
                    "S-1").4.1
                
                Specimen
                    Stock Certificate
                
                Incorporated
                    by reference to Exhibit 4.A to Amendment #1 to Registrant's Registration
                    Statement on Form S-18, file number 33, 35007-NY (the "S-18").4.2
                
                Specimen
                    Series A Preferred Stock Certificate
                
                Incorporated
                    by reference to Exhibit 4.2 of the Third Amendment to the S-1.10.1
                
                Purchase
                    and Sale Agreement dated
                  February
                    24, 1996, for the acquisition
                  of
                    United Security Group Inc.
                
                Incorporated
                    by reference to Exhibit 2.1 of the Form 8-K filed March 23, 1996.10.2
                
                CIT
                    Group/Business Credit, Inc. Financing
                  Agreement
                    dated December 12, 2003
                
                Incorporated
                    by reference to Exhibit 10.41 of the Form 10-K for the fiscal
                    year ended
                    March 31, 2004 filed on July 14, 2004.10.3
                
                Amended
                    and Restated Financing Agreement with CIT Group/Business Credit,
                    Inc.
                    dated March 21, 2006
                
                Incorporated
                    by reference to Exhibit 10.4 of the Form 8-K filed March 21,
                    2006.10.4
                
                Consulting
                    Agreement with Giuliani Security & Safety LLC dated January 9,
                    2006
                
                Incorporated
                    by reference to Exhibit 10.3 of the Form 8-K filed January 9,
                    2006.10.5
                
                Consulting
                    Agreement with Jericho State Capital Consulting LLC dated February
                    3,
                    2006
                
                Incorporated
                    by reference to Exhibit 10.4 of the Form 8-K filed February 3,
                    2006.10.6
                
                First
                    Amendment and Consent to Amended and Restated Financing Agreement
                    with CIT
                    Group/Business Credit, Inc. dated June 13, 2006
                
                Incorporated
                    by preference to Exhibit 10.5 of the Form 8-K filed June 13,
                    2006.10.7
                
                Agreement
                    for Purchase and Sale of Assets dated June13, 2006, for the acquisition
                    of
                    Sterling Protective Group, Inc.
                
                Incorporated
                    by reference to Exhibit 10.6 of the Form 8-K filed June 13, 2006.10.8
                
                Second
                    Amendment to the Amended and Restated Financing Agreement with
                    CIT
                    Group/Business Credit, Inc. dated September 30, 2006
                
                Incorporated
                    by reference to Exhibit 10.7 of the Form 10-Q filed February
                    13, 2007.10.9
                
                Third
                    Amendment to Amended and Restated Financing Agreement with CIT
                    Group/Business Credit, Inc. Inc. dated April 12, 2007
                
                Incorporated
                    by reference to Exhibit 10.1 of the Form 8-K filed April 12,
                    2007.10.10
                
                Stock
                    Purchase Agreement dated April 12, 2007, for the acquisition
                    of Brown
                    Security Industries, Inc.
                
                Incorporated
                    by reference to Exhibit 10.2 of the Form 8-K filed April 12,
                    2007.10.11
                
                Amended
                    and Restated Plan of Merger dated April 12, 2007, for the acquisition
                    of
                    Brown Security Indus- tries, Inc.
                
                Incorporated
                    by reference to Exhibit 10.3 of the Form 8-K filed April 12,
                    2007.11
                
                Computation
                    of Loss Per Share of Common Stock
                
                Incorporated
                    by reference to Note 11 of the Financial Statements.14
                
                Command
                    Code of Ethics
                
                Incorporated
                    by reference to Exhibit 14 of the Form 10-K for the fiscal year
                    ended
                    March 31, 2004 filed on July 14, 2004.23.1
                
                Auditor
                    Consent
                
                Exhibit
                    23.1 attached hereto.31.1
                
                Certifications
                    Pursuant to
                  Rule
                    13(a)-14(a)/15(d)-14(a)
                
                Exhibit
                    31.1 attached hereto.31.2
                
                Certifications
                    Pursuant to
                  Rule
                    13(a)-14(a)/15(d)-14(a)
                
                Exhibit
                    31.2 attached hereto.32.1
                
                Section
                    1350 Certifications
                
                Exhibit
                    32.1 attached hereto.
  25
 32.2
                Section
                    1350 Certifications
                
                Exhibit
                    32.2 attached hereto.99.1
                Reliance
                    Warrant
                
                Incorporated
                    by reference to Exhibit 99.14 of the Form 8-K filed September
                    27, 2000.99.2
                Registration
                    Rights Agreement
                
                Incorporated
                    by reference to Exhibit 99.22 of the Form 8-K filed September
                    27, 2000.99.3
                Audit
                    Committee of the Board of Directors Charter and Powers
                
                Incorporated
                    by reference to Exhibit 99.23 of the Form 10-K for the fiscal
                    year ended
                    March 31, 2001 filed on July 3, 2001.99.4
                2000
                    Stock Option Plan
                
                Incorporated
                    by reference to Exhibit 99.25 of the Form 10-K for the fiscal
                    year ended
                    March 31, 2001 filed on July 3, 2001.99.5
                2005
                    Stock Incentive Plan
                
                Incorporated
                    by reference to Exhibit 99.5 of the Form 10-K for the fiscal
                    year ended
                    March 31, 2006 filed on June 28, 2006.99.6
                Blake
                    Warrant
                
                Incorporated
                    by reference to Exhibit 99.27 of the Form 10-K for the fiscal
                    year ended
                    March 31, 2001 filed on July 3, 2001.99.7
                Barry
                    I. Regenstein Employment Agreement
                
                Incorporated
                    by reference to Exhibit 10.1 of the Form 8-K/A filed on August
                    27, 2004.99.8
                Marc
                    W. Brown Employment Agreement
                
                Incorporated
                    by reference to Exhibit 10.4 of the Form 8-K filed on April 12,
                    2007.


26






Independent
      Auditor's Report


on
      the
      Financial Statements





To
      the
      Board of Directors


and
      Stockholders of


Command
      Security Corporation





We
      have
      audited the accompanying balance sheets of Command Security Corporation as
      of
      March 31, 2007 and 2006, and the related statements of operations, changes
      in
      stockholders' equity and
      comprehensive incomeand cash flows for each of the three years in the
      period ended March 31, 2007. Our audits also included the financial statement
      schedule II - Valuation and Qualifying Accounts. These financial statements
      and
      the schedule are the responsibility of the Company's management. Our
      responsibility is to express an opinion on these financial statements and the
      schedule 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 audit 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 audit 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 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 financial statements referred to above present fairly, in all
      material respects, the financial position of Command Security Corporation as
      of
      March 31, 2007 and 2006, and the results of its operations and its cash flows
      for each of the three fiscal years ended March 31, 2007, 2006 and 2005 in
      conformity with accounting principles generally accepted in the United States
      of
      America. Also, in our opinion, the related financial statement schedule, when
      considered in relation to the basic financial statements taken as a whole,
      presents fairly, in all material respects, the information set forth therein.




/s/
      D'Arcangelo & Co., LLP




June
      27,
      2007


Poughkeepsie,
      New York





Command
        Security Corporation
 Balance
        Sheets
 March
        31,
        2007 and 2006
  2007
                
                2006ASSETSCurrent
                    assets:Cash
                    and cash equivalents
                
                $
                220,040
                
                $
                32,243Accounts
                    receivable from security services customers, less allowance
                    fordoubtful
                    accounts of $624,808 and $252,689, respectively
                
                
                17,978,737
                
                
                13,103,581Accounts
                    receivable from administrative service client customers,
                    lessallowance
                    for doubtful accounts of $206,589 and $80,203,
                    respectively
                
                
                --
                
                
                700,519Prepaid
                    expenses
                
                
                556,953
                
                
                721,451Other
                    current assets
                
                
                3,428,626
                
                
                2,291,135Total
                    current assets
                
                
                22,184,356
                
                
                16,848,929Furniture
                    and equipment at cost, net
                
                
                529,042
                
                
                405,179Intangible
                    assets, net
                
                
                782,621
                
                
                79,450Restricted
                    cash
                
                
                78,126
                
                
                74,447Other
                    assets
                
                
                1,755,432
                
                
                705,294Total
                    assets
                
                $
                25,329,577
                
                $
                18,113,299LIABILITIES
                    AND STOCKHOLDERS' EQUITYCurrent
                    liabilities:Checks
                    issued in advance of deposits
                
                $
                1,760,155
                
                $
                1,828,802Current
                    maturities of long-term debt
                
                
                247,054
                
                
                52,614Current
                    maturities of obligations under capital leases
                
                
                16,774
                
                
                38,680Short-term
                    borrowings
                
                
                8,487,065
                
                
                3,383,740Accounts
                    payable
                
                
                639,783
                
                
                939,526Due
                    to service companies
                
                
                --
                
                
                101,391Accrued
                    expenses and other liabilities
                
                
                4,519,862
                
                
                3,666,431Total
                    current liabilities
                
                
                15,670,693
                
                
                10,011,184Insurance
                    reserves
                
                
                539,503
                
                
                420,781Long-term
                    debt, due after one year
                
                
                5,902
                
                
                27,957Obligations
                    under capital leases, due after one year
                
                
                9,643
                
                
                28,680Total
                    liabilities
                
                
                16,225,741
                
                
                10,488,602Commitments
                    and contingencies (Notes 15, 16 and 17)Stockholders'
                    equity:Preferred
                    stock, convertible Series A,$.0001
                    par value per share, 1,000,000shares
                    authorized
                
                
                --
                
                
                --Common
                    stock, $.0001 par value per share, 20,000,000 sharesauthorized,
                    10,137,970 shares issued andoutstanding
                
                
                1,014
                
                
                1,014Additional
                    paid-in capital
                
                
                13,889,861
                
                
                13,663,311Accumulated
                    deficit
                
                
                (4,799,589
                )
                
                (6,039,628
                )Accumulated
                    other comprehensive income
                
                
                12,550
                
                
                --Total
                    stockholders' equity
                
                
                9,103,836
                
                
                7,624,697Total
                    liabilities and stockholders' equity
                
                $
                25,329,577
                
                $
                18,113,299
  See
        accompanying notes and auditor's report


F-2


Command
      Security Corporation


Statements
      of Operations


Years
      Ended March 31, 2007, 2006 and 2005


2007
              
              2006
              
              2005Revenues
              
              $
              93,822,546
              
              $
              85,208,615
              
              $
              79,654,744Cost
                  of revenues
              
              
              80,157,314
              
              
              73,788,256
              
              
              69,132,218Gross
                  profit
              
              
              13,665,232
              
              
              11,420,359
              
              
              10,522,526Operating
                  expensesGeneral
                  and administrative expenses
              
              
              12,315,745
              
              
              10,254,032
              
              
              10,590,778Provision
                  for doubtful accounts and notes
              
              
              268,118
              
              
              1,162,173
              
              
              277,205Bad
                  debt recoveries
              
              
              (53,229
              )
              
              (3,991
              )
              
              (55,974
              )12,530,634
              
              
              11,412,214
              
              
              10,812,009Operating
                  income (loss)
              
              
              1,134,598
              
              
              8,145
              
              
              (289,483
              )Other
                  income (expenses)Interest
                  income
              
              
              226,057
              
              
              238,887
              
              
              96,731Interest
                  expense
              
              
              (567,765
              )
              
              (432,159
              )
              
              (460,105
              )Gain
                  (loss) on equipment dispositions
              
              
              (2,851
              )
              
              19,137
              
              
              (4,848
              )(344,559
              )
              
              (174,135
              )
              
              (368,222
              )Income
                  (loss) before income tax benefit
              
              
              790,039
              
              
              (165,990
              )
              
              (657,705
              )Income
                  tax benefit
              
              
              450,000
              
              
              66,395
              
              
              267,450Net
                  income (loss)
              
              
              1,240,039
              
              
              (99,595
              )
              
              (390,255
              )Preferred
                  stock dividends
              
              
              --
              
              
              --
              
              
              (38,413
              )Net
                  income (loss) applicable to common stockholders
              
              $
              1,240,039
              
              $
              (99,595
              )
              $
              (428,668
              )Income
                  (loss) per share of common stockBasic
              
              $
              .12
              
              $
              (.01
              )
              $
              (.06
              )Diluted
              
              $
              .12
              
              $
              (.01
              )
              $
              n/aWeighted
                  average number of commonshares
                  outstandingBasic
              
              
              10,137,970
              
              
              8,834,952
              
              
              7,302,738Diluted
              
              
              10,620,756
              
              
              9,646,915
              
              
              7,862,786




See
      accompanying notes and auditor's report




F-3
 
 Command
          Security Corporation
 Statements
          of Changes in Stockholders' Equity and Comprehensive Income
 Years
          Ended March 31, 2007, 2006 and 2005
  AccumulatedOtherPreferred
                
                Common
                
                Paid-In
                
                Accumulated
                
                ComprehensiveStock
                
                Stock
                
                Capital
                
                Deficit
                
                Income
                
                TotalBalance
                    at March 31, 2004
                
                $
                2,033,682
                
                $
                629
                
                $
                8,009,175
                
                $
                (5,549,778
                )
                $
                --
                
                $
                4,493,708Preferred
                    stock dividends
                
                
                
                
                
                
                
                
                (38,413
                )
                
                
                
                
                
                
                
                (38,413
                )Preferred
                    stock conversion
                
                
                (2,033,682
                )
                
                123
                
                
                2,033,559
                
                
                
                
                
                
                
                
                --Warrants
                    exercised
                
                
                
                
                
                26
                
                
                237,861
                
                
                
                
                
                
                
                
                237,887Stock
                    compensation cost
                
                
                
                
                
                
                
                
                106,400
                
                
                
                
                
                
                
                
                106,400Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                (390,255
                )
                
                
                
                
                (390,255
                )Balance
                    at March 31, 2005
                
                
                --
                
                
                778
                
                
                10,348,582
                
                
                (5,940,033
                )
                
                --
                
                
                4,409,327Warrants
                    exercised
                
                
                
                
                
                236
                
                
                2,917,379
                
                
                
                
                
                
                
                
                2,917,615Stock
                    compensation cost
                
                
                
                
                
                
                
                
                397,350
                
                
                
                
                
                
                
                
                397,350Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                (99,595
                )
                
                
                
                
                (99,595
                )Balance
                    at March 31, 2006
                
                
                --
                
                
                1,014
                
                
                13,663,311
                
                
                (6,039,628
                )
                
                --
                
                
                7,624,697Other
                    comprehensive income (a)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                12,550
                
                
                12,550Stock
                    compensation cost
                
                
                
                
                
                
                
                
                226,550
                
                
                
                
                
                
                
                
                226,550Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                1,240,039
                
                
                
                
                
                1,240,039Balance
                    at March 31, 2007
                
                $
                --
                
                $
                1,014
                
                $
                13,889,861
                
                $
                (4,799,589
                )
                $
                12,550
                
                $
                9,103,836
  (a)
                    – Represents unrealized gain on marketable
                    security.
  See
          accompanying notes and auditor's report
  F-4
 Command
            Security Corporation
 Statements
            of Cash Flows
 Years
            Ended March 31, 2007, 2006 and 2005
  INCREASE
            (DECREASE) IN CASH AND CASH EQUIVALENTS
 2007
                    
                    2006
                    
                    2005OPERATING
                        ACTIVITIESNet
                        income (loss)
                    
                    $
                    1,240,039
                    
                    $
                    (99,595
                    )
                    $
                    (390,255
                    )Adjustments
                        to reconcile net income (loss) to netcash
                        provided by operating activities:Depreciation
                        and amortization
                    
                    
                    315,222
                    
                    
                    296,797
                    
                    
                    396,471Stock
                        based compensation costs
                    
                    
                    226,550
                    
                    
                    397,350
                    
                    
                    106,400Provision
                        for doubtful accounts andnotes
                        receivable, net of recoveries
                    
                    
                    214,888
                    
                    
                    1,158,182
                    
                    
                    221,231(Gain)
                        loss on equipment dispositions
                    
                    
                    2,851
                    
                    
                    (19,137
                    )
                    
                    4,848Deferred
                        income taxes
                    
                    
                    (450,000
                    )
                    
                    (66,395
                    )
                    
                    (267,450
                    )Insurance
                        reserves
                    
                    
                    237,439
                    
                    
                    (10,279
                    )
                    
                    (21,805
                    )Changes
                        in operating assets and liabilities:Accounts
                        receivable
                    
                    
                    (4,389,524
                    )
                    
                    (3,332,443
                    )
                    
                    6,192,186Prepaid
                        expenses
                    
                    
                    164,496
                    
                    
                    173,489
                    
                    
                    1,073,142Other
                        receivables
                    
                    
                    (1,253,293
                    )
                    
                    (1,827,741
                    )
                    
                    (49,434
                    )Other
                        assets
                    
                    
                    (643,438
                    )
                    
                    (90,357
                    )
                    
                    1,287,716Accounts
                        payable and other current liabilities
                    
                    
                    434,971
                    
                    
                    (1,462,575
                    )
                    
                    (315,956
                    )Due
                        to administrative service clients
                    
                    
                    (101,391
                    )
                    
                    (58,724
                    )
                    
                    (88,090
                    )Net
                        cash (used in) provided by operating activities
                    
                    
                    (4,001,190
                    )
                    
                    (4,941,428
                    )
                    
                    8,149,004INVESTING
                        ACTIVITIESPurchases
                        of equipment
                    
                    
                    (344,986
                    )
                    
                    (74,780
                    )
                    
                    (55,113
                    )Proceeds
                        from equipment dispositions
                    
                    
                    2,050
                    
                    
                    10,595
                    
                    
                    20,850Acquisition
                        of businesses
                    
                    
                    (412,500
                    )
                    
                    --
                    
                    
                    --Issuance
                        of note to administrative service client
                    
                    
                    --
                    
                    
                    (125,000
                    )
                    
                    --Principal
                        collections on notes receivable
                    
                    
                    115,803
                    
                    
                    9,197
                    
                    
                    70,900Net
                        cash (used in) provided by investing activities
                    
                    
                    (639,633
                    )
                    
                    (179,988
                    )
                    
                    36,637FINANCING
                        ACTIVITIESNet
                        advances (repayments) on line-of-credit
                    
                    
                    5,116,687
                    
                    
                    (1,151,976
                    )
                    
                    (4,275,669
                    )Increase
                        (decrease) in checks issued in advance of deposits
                    
                    
                    (68,647
                    )
                    
                    1,333,553
                    
                    
                    (71,362
                    )Proceeds
                        from warrant exercises
                    
                    
                    --
                    
                    
                    2,917,615
                    
                    
                    237,887Principal
                        payments on other borrowings
                    
                    
                    (178,477
                    )
                    
                    (419,855
                    )
                    
                    (1,430,391
                    )Principal
                        payments on capital lease obligations
                    
                    
                    (40,943
                    )
                    
                    (36,728
                    )
                    
                    (66,270
                    )Payment
                        of preferred stock dividends
                    
                    
                    --
                    
                    
                    --
                    
                    
                    (79,087
                    )Net
                        cash provided by (used in) financing activities
                    
                    
                    4,828,620
                    
                    
                    2,642,609
                    
                    
                    (5,684,892
                    )Net
                        change in cash and cash equivalents
                    
                    
                    187,797
                    
                    
                    (2,478,807
                    )
                    
                    2,500,749Cash
                        and cash equivalents, beginning of year
                    
                    
                    32,243
                    
                    
                    2,511,050
                    
                    
                    10,301Cash
                        and cash equivalents, end of year
                    
                    $
                    220,040
                    
                    $
                    32,243
                    
                    $
                    2,511,050
 See
              accompanying notes and auditor's report
   F-5
  Command
            Security Corporation Statements of Cash Flows, Continued Years Ended
            March 31,
            2007, 2006 and 2005
  1.
            SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
  Cash
            paid
            during the years for:
 2007
                    
                    2006
                    
                    2005Interest
                    
                    $
                    527,024
                    
                    $
                    440,696
                    
                    $
                    470,595Income
                        Taxes
                    
                    
                    208,223
                    
                    
                    22,634
                    
                    
                    45,328
  2.
            SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
  For
            the
            fiscal years ended March 31, 2006 and 2005, the Company purchased transportation
            equipment with direct installment and lease financing of $86,259 and
            $47,270,
            respectively. These amounts have been excluded from the purchases of
            equipment
            and proceeds from long-term debt on the statements of cash flows presented.
  The
            Company may obtain short-term financing to meet its insurance needs.
            For the
            fiscal years ended March 31, 2006 and 2005, $106,895 and $924,733, respectively,
            were borrowed for this purpose. These borrowings have been excluded from
            the
            statements of cash flows presented.
  During
            the year ended March 31, 2005, the holder of 12,325.35 shares of the
            Company’s
            Series A convertible preferred stock converted such shares into 1,232,535
            shares
            of common stock. The decrease in preferred stock of $2,033,682 and increase
            to
            common stock of $123 and additional paid-in capital of $2,033,559 has
            been
            excluded from the statements of cash flows presented.
  During
            the year ended March 31, 2007, the Company acquired a security services
            business
            for a purchase price of $750,000. At the closing, the Company paid $412,500
            of
            the purchase price in cash and issued a note payable in the amount of
            $337,500
            for the remaining balance of the purchase price. This note payable amount
            has
            been excluded from acquisition of business and proceeds from long-term
            debt on
            the condensed statements of cash flows.
  See
            accompanying notes and auditor's report




F-6


Command
      Security Corporation


Notes
      to
      Financial Statements


March
      31,
      2007, 2006 and 2005





1.
      Business Description and Summary of Accounting Policies





The
      following is a description of the principal business activities and significant
      accounting policies employed by Command Security Corporation.





Principal
      business activities





Command
      Security Corporation (the “Company”) is a uniformed security officer service
      company operating in Connecticut, California, Delaware, Florida, Illinois,
      Maine, Maryland, Massachusetts, Nevada, New Jersey, New York, Oregon,
      Pennsylvania and Washington. In addition, the Company also provides other
      security officer companies (administrative service clients) and police
      departments in various states with administrative services, such as billing,
      collection and payroll, for a percentage of the related gross revenue.





Estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management 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 financial statements, and revenue and expenses during the years reported.
      Estimates are used when accounting for certain items such as allowances for
      doubtful accounts, depreciation and amortization, income tax assets and
      insurance reserves. Estimates are based on historical experience, where
      applicable or other assumptions that management believes are reasonable under
      the circumstances. Due to the inherent uncertainty involved in making estimates,
      actual results may differ from those estimates under different assumptions
      or
      conditions.





Revenue
      recognition





The
      Company records revenues as services are provided to its customers. Revenues
      consist primarily of aviation and security services that are typically billed
      at
      hourly rates. These rates may vary depending on base, overtime and holiday
      time
      worked. Revenues for administrative services provided to other security officer
      companies are calculated as a percentage of the administrative service client's
      revenues and are recognized when billings for the related security officer
      services are generated.





Cash
      and
      cash equivalents





The
      Company defines cash and cash equivalents as operating cash (non-restricted)
      and
      highly liquid investments with maturities of ninety (90) days or less at the
      date of purchase. The carrying amounts of our cash equivalents approximate
      their
      fair values.





Investments





We
      account for our investments in marketable securities under the provisions of
      Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for
      Certain Investments in Debt and Equity Securities.” Other investments in
      marketable equity are classified as available-for-sale and reported in the
      balance sheet at fair value, with changes in fair value reported in accumulated
      other comprehensive income.




Furniture
      and equipment





Furniture
      and equipment are stated at cost. Depreciation is generally recorded using
      the
      straight-line method over estimated useful lives of the equipment ranging from
      three to seven years.





Intangible
      assets





Intangible
      assets are stated at cost and consist primarily of customer lists and borrowing
      costs that are being amortized on a straight-line basis over three to ten years.
      The life assigned to customer lists acquired is based on management's estimate
      of the attrition rate. The attrition rate is estimated based on historical
      contract longevity and management's operating experience. We test for impairment
      annually or when events and circumstances warrant such a review, if sooner.
      Any
      potential impairment is evaluated based on anticipated undiscounted future
      cash
      flows and actual customer attrition in accordance with SFAS No. 144.





Advertising
      costs





The
      Company expenses advertising costs as incurred. Amounts incurred for recruitment
      and general business advertising were $87,375, $62,750 and $37,375 for the
      fiscal years ended March 31, 2007, 2006 and 2005, respectively.




F-7




Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





Trade
      receivables





The
      Company periodically evaluates the requirement for providing for billing
      adjustments and/or credit losses on its accounts receivable. The Company
      provides for billing adjustments where management determines that there is
      a
      likelihood of a significant adjustment for disputed billings. Criteria used
      by
      management to evaluate the adequacy of the allowance for doubtful accounts
      include, among others, the creditworthiness of the customer, current trends,
      prior payment performance, the age of the receivables and the Company's overall
      historical loss experience. Individual accounts are charged off against the
      allowance as management deems them as uncollectible.





Insurance
      reserves





General
      liability estimated accrued liabilities are calculated on an undiscounted basis
      based on actual claim data and estimates of incurred but not reported claims
      developed utilizing historical claim trends. Projected settlements and incurred
      but not reported claims are estimated based on pending claims, historical trends
      and data.





Workers’
      compensation annual premiums are based on the incurred losses as determined
      at
      the end of the coverage period, subject to minimum and maximum premium.
      Estimated accrued liabilities are based on the Company’s historical loss
      experience and the ratio of claims paid to the Company’s historical payout
      profiles.





Income
      taxes





Income
      taxes are based on income (loss) for financial reporting purposes and reflect
      a
      current tax liability (asset) for the estimated taxes payable (recoverable)
      in
      the current year tax return and changes in deferred taxes. Deferred tax assets
      or liabilities are determined based on differences between financial reporting
      and tax bases of assets and liabilities and are measured using enacted tax
      laws
      and rates. A valuation allowance is provided on deferred tax assets if it is
      determined that it is more likely than not that the asset will not be
      realized.





Income
      (loss) per common share





Under
      the
      requirements of SFAS No. 128, "Earnings Per Share," the dilutive effect of
      potential common shares, if any, is excluded from the calculation for basic
      earnings per share. Diluted earnings per share are presented for the fiscal
      years ended March 31, 2007 and 2006 because of the effect the assumed issuance
      of common shares would have if the outstanding stock options and warrants were
      exercised.





Accounting
      for stock options





In
      December 2002 the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      148, (“SFAS 148”), "Accounting for Stock-Based Compensation-Transition and
      Disclosure", an amendment of SFAS No. 123, (“SFAS 123”), “Accounting for
      Stock-Based Compensation” to provide alternative methods of transition for a
      voluntary change to the fair value based method of accounting for stock-based
      compensation. Since SFAS 148 was adopted during fiscal year ended March 31,
      2003, the Company could elect to adopt any of the three transitional recognition
      provisions. The Company has chosen to adopt the prospective method of accounting
      for stock-based compensation. The adoption of SFAS 148 resulted in a non-cash
      charge of $19,600 for stock compensation cost for the three months ended June
      30, 2005.





In
      December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based
      Payment” (“SFAS 123R”), which replaces SFAS 123. SFAS 123R requires all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the financial statements based on their fair values at
      grant
      date and the recognition of the related expense over the period in which the
      share-based compensation vest. The Company was required to adopt the provisions
      of SFAS 123R effective July 1, 2005 and use the modified-prospective transition
      method. Under the modified-prospective method, the Company recognizes
      compensation expense in the financial statements issued subsequent to the date
      of adoption for all share-based payments granted, modified or settled after
      July
      1, 2005. The adoption of SFAS 123R resulted in a non-cash charge of $226,550
      and
      $377,750 for stock based compensation for the year ended March 31, 2007 and
      nine
      months ended March 31, 2006, respectively. Such non-cash charge would have
      been
      the same under the provisions of SFAS 148.




Fair
      Value




The
      fair
      value of the Company's long-term debt is based on the borrowing rates currently
      available to the Company for loans with similar terms and average maturities.
      At
      March 31, 2007 and 2006, the fair value of long-term debt approximates its
      carrying amount.







F-8


Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





2.
      Furniture and Equipment





Furniture
      and equipment at March 31, 2007 and 2006 consist of the following:




2007
              
              2006Transportation
                  equipment
              
              $
              600,859
              
              $
              682,088Security
                  equipment
              
              
              579,033
              
              
              512,337Office
                  furniture and equipment
              
              
              1,551,686
              
              
              1,274,9162,731,578
              
              
              2,469,341Accumulated
                  depreciation
              
              
              (2,202,536
              )
              
              (2,064,162
              )Total
              
              $
              529,042
              
              $
              405,179




Depreciation
      expense for the fiscal years ended March 31, 2007, 2006 and 2005, was $216,222,
      $192,075 and $301,150, respectively, and includes amortization of assets
      purchased under capital lease arrangements in the amounts of $35,408, $35,751
      and $93,086 for each of the respective years then ended (see Note 16).


3.
      Intangible Assets





Intangible
      assets at March 31, 2007 and 2006 consist of the following:


2007
              
              2006Customer
                  list
              
              $
              831,248
              
              $
              30,000Borrowing
                  cost
              
              
              290,163
              
              
              289,240Goodwill
              
              
              20,402
              
              
              20,4021,141,813
              
              
              339,642Accumulated
                  amortization
              
              
              (359,192
              )
              
              (260,192
              )Total
              
              $
              782,621
              
              $
              79,450




Amortization
      expense for the fiscal years ended March 31, 2007, 2006 and 2005, was $99,000,
      $104,722 and $95,321, respectively. Amortization expense for the years ending
      March 31, 2008 and 2009 for the intangible assets noted above will be $105,827
      and $80,125, respectively.





For
      the
      fiscal years ended March 31, 2007 and 2006, respectively, the balance of the
      intangible assets represents the value of goodwill in the amount of $20,402
      that
      is not subject to amortization and net borrowing costs in the amount of $25,702
      and $59,048, respectively, which is subject to amortization on a straight line
      basis over the life of the Company’s financing agreement (see Note
      7).





4.
      Restricted Cash





Restricted
      cash represents deposits for the benefit of the Company's insurance carrier
      as
      collateral for workers' compensation claims.






F-9


Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





5.
      Other
      Assets





Other
      assets at March 31, 2007 and 2006 consist of the following:


2007
              
              2006Workers’
                  compensation insurance
              
              $
              3,249,549
              
              $
              2,135,460Note
                  receivable
              
              
              --
              
              
              115,803Other
                  receivables
              
              
              138,187
              
              
              215,558Security
                  deposits
              
              
              210,184
              
              
              195,499Deferred
                  tax asset
              
              
              1,358,845
              
              
              333,845Other
              
              
              227,293
              
              
              2645,184,058
              
              
              2,996,429Current
                  portion
              
              
              (3,428,626
              )
              
              (2,291,135
              )Total
                  non-current portion
              
              $
              1,755,432
              
              $
              705,294




6.
      Accrued Expenses and Other Liabilities




Accrued
      expenses and other liabilities at March 31, 2007 and 2006 consist of the
      following:


2007
              
              2006Payroll
                  and related expenses
              
              $
              3,367,775
              
              $
              2,408,927Customer
                  prepayments, net
              
              
              --
              
              
              811,256Taxes
                  and fees payable
              
              
              800,687
              
              
              317,097Accrued
                  interest payable
              
              
              71,143
              
              
              24,415Other
              
              
              280,257
              
              
              104,736Total
              
              $
              4,519,862
              
              $
              3,666,431




7.
      Short-Term Borrowings





Short-term
      borrowings at March 31, 2007 and 2006 consist of the following:


2007
              
              2006Line
                  of credit
              
              $
              8,487,065
              
              $
              3,370,379Various
                  insurancefinancing
                  arrangements,interest
                  at 6.36%
              
              
              --
              
              
              13,361Total
              
              $
              8,487,065
              
              $
              3,383,740




Until
      March 21, 2006, we were parties to a financing agreement (the “Agreement”) with
      CIT Group/Business Credit, Inc. ("CIT") that had a term of three years ending
      December 12, 2006 and provided for borrowings in an amount of up to 85% of
      the
      Company’s eligible accounts receivable, as defined in the Agreement, but in no
      event more than $15,000,000. The Agreement also provided for advances against
      unbilled revenue (primarily monthly invoiced accounts) although this benefit
      is
      offset by a reserve against all outstanding payroll checks. The revolving loan
      bore interest at the prime rate, as defined, plus 1.25% per annum on the greater
      of: (i) $5,000,000 or (ii) the average of the net balances owed by the Company
      to CIT in the loan account at the close of each day during such month. Costs
      to
      close the loan totaled $279,963 and are being amortized over the three year
      life
      of the Agreement.




F-10




Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





On
      March
      22, 2006, the Company entered into an Amended and Restated Financing Agreement
      with CIT (the “Amended Agreement”), that provides for borrowings as noted above,
      but in no event more that $12,000,000. The Amended Agreement provides for a
      letter of credit sub-line in an aggregate amount of up to $1,500,000. Letters
      of
      credit are subject to a two percent (2%) per annum fee on the face amount of
      each letter of credit. The Amended Agreement provides that interest will be
      calculated on the outstanding principal balance of the revolving loans at the
      prime rate, as defined, plus .25% if EBITDA, as defined, is equal to or less
      than $500,000 for the most recently completed fiscal quarter; otherwise, at
      the
      prime rate, as defined. For LIBOR loans interest will be calculated on the
      outstanding principal balance of the LIBOR loans at the LIBOR rate, as defined,
      plus 2.75% if EBITDA, as defined, is equal to or less than $500,000 for the
      most
      recently completed fiscal quarter; otherwise, at the LIBOR rate, as defined,
      plus 2.50%. As of March 31, 2007, the interest rate was 8.25% per annum.




At
      March
      31, 2007, the Company had borrowed $8,417,065 and had a $70,000 letter of credit
      outstanding representing approximately 87% of its maximum borrowing capacity
      based on the definition of “eligible accounts receivable” under the terms of the
      Amended Agreement. However, as the business grows and produces new receivables,
      up to $3,512,935 could additionally be available to borrow under the Amended
      Agreement.





The
      Company relies on its revolving loan from CIT that contains a fixed charge
      covenant and various other financial and non-financial covenants. If the Company
      breaches a covenant, CIT has the right to call the line unless CIT waives the
      breach. For the fiscal year ended March 31, 2007, the Company was in compliance
      with all covenants under the agreement.





8.
      Long-Term Debt





Long-term
      debt at March 31, 2007 and 2006 consist of the following:


2007
              
              2006Promissory
                  note due atJune
                  13 and December 13, 2007with
                  interest at 7.75%
              
              
              225,000
              
              
              --Various
                  installment loansdue
                  at various dates through March2009,
                  with interest ranging from8.24%
                  to 10.25% (a)
              
              $
              27,956
              
              $
              80,571252,956
              
              
              80,571Current
                  maturities
              
              
              (247,054
              )
              
              (52,614
              )Total
              
              $
              5,902
              
              $
              27,957




(a)
      Payable to General Motors Acceptance Corporation and Ford Motor Credit
      Corporation. The notes are collateralized by automobiles.





The
      aggregate amount of required principal payments of long-term debt is as follows:


Year
                  ending:
              
              
              March
                  31,2008
              
              $
              247,054March
                    31,2009
              
              
              5,902Total
              
              
              
              
              $
              252,956




9.
      Preferred Stock





The
      Board
      of Directors has been authorized to issue preferred stock in series and to
      fix
      the number, designation, relative rights, preferences and limitations of each
      series of such preferred stock. Of the 1,000,000 shares authorized for issuance,
      12,325 had been designated as Series A Convertible Preferred Stock ("Series
      A").
      The Series A shareholders were entitled to receive annual dividends equal to
      8%
      of the liquidation value of their shares, payable quarterly in cash. Upon
      liquidation or redemption the Series A shareholders were entitled to $165 per
      share or $2,033,682. As of June 25, 2004, the preferred stock was converted
      into
      1,232,535 shares of the Company’s common stock.




F-11


Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





10.
      Net
      Income (Loss) per Share





The
      following is a reconciliation of the numerators and the denominators of the
      basic and diluted per-share computations for net income (loss) for the fiscal
      years ended March 31, 2007, 2006 and 2005:


Income
                  (Loss)
              
              Shares
              
              Per-Share(Numerator)
              
              (Denominator)
              
              AmountYear
                  ended March 31, 2007Basic
                  EPS
              
              $
              1,240,039
              
              
              10,137,970
              
              $
              .12Options
                  issued February 2001,August
                  2004, May 2005,September
                  2005, February 2006,September
                  2006 and October 2006
              
              
              
              
              
              482,786Diluted
                  EPS
              
              $
              1,240,039
              
              
              10,620,756
              
              $
              .12Year
                  ended March 31, 2006Basic
                  EPS
              
              $
              (99,595
              )
              
              8,834,952
              
              $
              (.01
              )Effect
                  of dilutive shares:Options
                  issued November 2000,February
                  2001, August 2004, May 2005September
                  2005 and February 2006
              
              
              
              
              
              811,963Diluted
                  EPS
              
              $
              (99,595
              )
              
              9,646,915
              
              $
              (.01
              )Year
                  ended March 31, 2005Basic
                  EPS
              
              $
              (428,668
              )
              
              7,302,738
              
              $
              (.06
              )Effect
                  of dilutive shares:Options
                  issued November 2000,February
                  2001, March 2002 and August 2004
              
              
              
              
              
              560,048Diluted
                  EPS
              
              $
              (428,668
              )
              
              7,862,786
              
              $
              n/a




11.
      Retirement Plans





In
      November 1999, the Company adopted a qualified retirement plan providing for
      elective employee deferrals and discretionary employer contributions to
      non-highly compensated participants. During the fiscal year ended March 31,
      2007, the plan was revised to allow for employer matching of elective deferrals,
      only for certain employees working under a specific customer contract, as
      defined. For the fiscal year ended March 31, 2007, discretionary contributions
      in the amount of $2,168 were paid. No discretionary amounts were accrued or
      paid
      for the fiscal years ended March 31, 2006 and 2005.





12.
      Concentrations of Credit Risk





Geographic
      concentrations of credit risk with respect to trade receivables are primarily
      in
      California with 32% and 28% and in the New York Metropolitan area with 42%
      and
      32% of total receivables as of March 31, 2007 and 2006, respectively. The
      remaining trade receivables consist of a large number of customers dispersed
      across many different geographic regions. During the fiscal years ended March
      31, 2007, 2006 and 2005, the Company generated 66%, 65% and 63%, respectively,
      of its revenue from aviation and related services. Trade receivables due from
      the commercial airline industry comprised 67% and 38% of net receivables as
      of
      March 31, 2007 and 2006, respectively. The Company's remaining customers are
      not
      concentrated in any specific industry.





The
      Company maintains its cash accounts in bank deposit accounts, which at times
      may
      exceed federally insured limits. The Company has not experienced any losses
      in
      such accounts. Company management believes they are not exposed to any
      significant credit risk.





13.
      Significant Customers





The
      Company operates as a provider of security officer services to a wide range
      of
      industries which the Company has categorized into three groups; security officer
      services, aviation services and support services. The latter includes revenues
      from administrative service agreements and back office support to police
      departments.




F-12




Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





Net
      revenues for the groups noted above were as follows for the three years ended
      March 31:




2007
            
            2006
            
            2005Security
                Officer Services
            
            $
            31,413,964
            
            $
            29,269,512
            
            $
            28,858,519Aviation
                Services
            
            
            62,086,936
            
            
            55,588,468
            
            
            50,466,240Support
                Services
            
            
            321,646
            
            
            350,635
            
            
            329,985Total
            
            $
            93,822,546
            
            $
            85,208,615
            
            $
            79,654,744





For
      the
      fiscal years ended March 31, 2007 and 2006, one airline customer accounted
      for
      approximately $14,700,000 and $14,309,000, respectively, of the Company’s total
      revenue.





14.
      Insurance Reserves





The
      Company has an insurance policy covering workers’ compensation claims in states
      that the Company performs services. Estimated accrued liabilities are based
      on
      the Company’s historical loss experience and the ratio of claims paid to the
      Company’s historical payout profiles. Charges for estimated workers’
compensation related losses incurred and included in cost of sales were
      $2,042,618, $2,881,041 and $3,257,608, for the fiscal years ended March 31,
      2007, 2006 and 2005, respectively.





The
      nature of the Company’s business also subjects it to claims or litigation
      alleging that it is liable for damages as a result of the conduct of its
      employees or others. The Company insures against such claims and suits through
      general liability policies with third-party insurance companies. Such policies
      have limits of $5,000,000 per occurrence. Effective October 1, 2006, the policy
      limit was increased to $7,000,000 per occurrence with an additional excess
      umbrella policy of $5,000,000. On the aviation related business, as of October
      1, 2004, the Company acquired a policy with a $30,000,000 limit per occurrence.
      Effective as of October 1, 2006, the Company retains the risk for the first
      $25,000 per occurrence on the non-aviation related policy that includes airport
      wheelchair and electric cart operations and $5,000 on the aviation related
      policy except for $25,000 for damage to aircraft and $100,000 for skycap
      operations. Estimated accrued liabilities are based on specific reserves in
      connection with existing claims as determined by third party risk management
      consultants and actuarial factors and the timing of reported claims. These
      are
      all factored into estimated losses incurred but not yet reported to the
      Company.





Cumulative
      amounts estimated to be payable by the Company with respect to pending and
      potential claims for all years in which the Company is liable under its general
      liability retention and workers’ compensation policies have been accrued as
      liabilities. Such accrued liabilities are necessarily based on estimates; thus,
      the Company’s ultimate liability may exceed or be less than the amounts accrued.
      The methods of making such estimates and establishing the resultant accrued
      liability are reviewed continually and any adjustments resulting there from
      are
      reflected in current results of operations.





15.
      Contingencies





The
      nature of the Company’s business is such that there is a significant volume of
      routine claims and lawsuits that are issued against it, the vast majority of
      which never lead to substantial damages being awarded. The Company maintains
      general liability and workers’ compensation insurance coverage that it believes
      is appropriate to the relevant level of risk and potential liability. Some
      of
      the claims brought against the Company could result in significant payments;
      however, the exposure to the Company under general liability is limited to
      the
      first $25,000 per occurrence on the non-aviation, airport wheelchair and
      electric cart operations related claims and $5,000 per occurrence on the
      aviation related claims except $25,000 for damage to aircraft and $100,000
      for
      skycap operations. Any punitive damage award would not be covered by the general
      liability insurance policy. The only other potential impact would be on future
      premiums, which may be adversely affected by an unfavorable claims
      history.





In
      addition to such cases, the Company has been named as a defendant in several
      uninsured employment related claims that are currently before various courts,
      the Equal Employment Opportunities Commission or various state and local
      agencies. The Company has instituted policies to minimize these occurrences
      and
      monitor those that do occur. At this time the Company is unable to determine
      the
      impact on the financial position and results of operations that these claims
      may
      have, should the investigations conclude that they are valid.





The
      Company has employment agreements with its President and its Chief Operating
      Officer (“COO”). The agreement with the President is for a three year period
      expiring September 7, 2007. Commencing on September 7, 2007, and on the first
      day of each one-year anniversary thereafter, the agreement shall automatically
      be extended for one additional year unless either party shall have given notice
      to the other party, at least 60 days prior to such anniversary that it does
      not
      wish to extend the term of the agreement . The
      terms
      of the agreement call for severance payments and specified benefits of
      approximately $315,000 depending upon the reason for termination. The agreement
      with the COO is for a three year period that was extended to March 31, 2007. The
      terms of this agreement call for severance payments and specified benefits
      of
      approximately $285,000 depending upon the reason for termination.




F-13




Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





16.
      Lease
      Commitments





The
      Company is obligated under various operating lease agreements for office space,
      equipment and auto rentals. Rent expense under operating lease agreements
      approximated $1,148,894, $962,687 and $952,166, for the fiscal years ended
      March
      31, 2007, 2006 and 2005, respectively.





The
      Company leases certain equipment and vehicles under agreements that are
      classified as capital leases. Most equipment leases have purchase options at
      the
      end of the original lease term. Cost and related accumulated depreciation of
      leased capital assets included in furniture and equipment at March 31, 2007
      are
      $718,257 and $664,138 and at March 31, 2006 are $718,257 and $628,730,
      respectively.





The
      future minimum payments under long-term non-cancelable capital and operating
      lease agreements are as follows:


Capital
              
              OperatingLeases
              
              LeasesYear
                  ending:
              
              
              March
                  31, 2008
              
              $
              18,688
              
              $
              989,542March
                  31, 2009
              
              
              10,116
              
              
              637,260March
                  31, 2010
              
              
              --
              
              
              396,738March
                  31, 2011
              
              
              --
              
              
              274,557March
                  31, 2012
              
              
              --
              
              
              189,091Later
                  years
              
              
              --
              
              
              20028,804
              
              
              2,487,388Amounts
                  representing interest
              
              (2,387
              )
              
              --Total
              
              
              
              
              $
              26,417
              
              $
              2,487,388


17.
        Other
        Commitments
  On
        March
        31, 2004, the Company settled a dispute with a uniform cleaning service that
        calls for the Company to pay $1,756 per week for 344 weeks or a total amount
        of
        $604,133 ending in fiscal 2011. The expense recorded in connection with weekly
        payments under this agreement amounted to $93,079, $93,079 and $87,800 for
        the
        fiscal years ended March 31, 2007, 2006 and 2005, respectively.
  The
        required future minimum payments under the agreement are as follows:
 Year
                    ending:
                
                
                March
                    31, 2008
                
                $
                91,322March
                    31, 2009
                
                
                91,322March
                    31, 2010
                
                
                91,322March
                    31, 2011
                
                
                56,209Total
                
                
                
                
                $
                330,175


18.
      Stock
      Option Plan and Warrants





In
      November 2000, the Company's Board of Directors and stockholders approved the
      adoption of a qualified stock option plan. Under the stock option plan,
      substantially all employees are eligible to receive options to purchase up
      to an
      aggregate of 500,000 shares at an exercise price that cannot be less than the
      fair market value of the shares on the date the options are granted. In February
      2001, August 2004 and May 2005, options to purchase 225,000, 200,000 and 40,000
      shares, respectively, of common stock were issued and in April 2002, August
      2003, April 2004 and January 2007, options to purchase 50,000, 20,000, 75,000
      and 25,000 shares, respectively, were cancelled due to terminations of
      employment. During fiscal 2006, the Company received proceeds of $45,000 in
      connection with the exercise of stock options to purchase 60,000 shares of
      the
      Company’s common stock at an exercise price of $.75 per share. The outstanding
      options are exercisable at any time before January 31, 2011, August 29, 2014
      and
      May 23, 2015 at $.75, $1.35 and $1.49 per share with respect to the February
      2001, August 2004 and May 2005 issuances, respectively.






F-14


Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





In
      September 2005, the Company’s Board of Directors and stockholders approved the
      adoption of a qualified stock incentive plan. Under the stock incentive plan,
      substantially all employees of and consultants to, the Company, are eligible
      to
      receive options to purchase up to an aggregate of 1,000,000 shares of the
      Company’s common stock at an exercise price that cannot be less than the fair
      market value of the shares on the date the options are granted. In September
      2006 and 2005, options to purchase 80,000 shares of the Company’s common stock
      were issued. The outstanding options are exercisable at any time before
      September 19, 2016 at $2.67 per share and September 21, 2015 at $2.05 per share,
      respectively.





In
      February and October 2006, the Company granted consultants warrants to purchase
      an aggregate of 350,000 and 100,000 shares of the Company’s common stock at
      exercise prices of $2.00 and $2.70 per share, respectively. The outstanding
      warrants are exercisable at any time before February 2, 2009 and September
      30,
      2009, respectively.





On
      May
      21, 2004, GCM Securities Partners, LLC (“GCM”) purchased from Reliance Security
      Group, plc (“Reliance”) securities that included: (i) a warrant to purchase
      150,000 shares of the Company’s common stock at an exercise price of $1.03125
      per share and (ii) a warrant to acquire 2,298,092 shares of the Company’s common
      stock at an exercise price of $1.25 per share. In November 2004, the Company
      received proceeds of $154,687 in connection with the exercise of the warrant
      to
      purchase 150,000 shares of the Company’s common stock. During fiscal 2006, the
      Company received proceeds of $2,872,615 in connection with the warrant to
      purchase 2,298,092 shares of the Company’s common stock.





On
      August
      30, 2004 (the “Effective Date”), the Company issued stock options to its
      President and former Chief Operating Officer (the “Executive”) to purchase
      500,000 shares of the Company’s common stock at an exercise price of $1.35 per
      share. The options vest, and may be exercised by the Executive with respect
      to
      200,000 shares on the Effective Date and commencing one year after the Effective
      Date, 12,500 shares per month through August 2007.





In
      March
      2002, the Company issued warrants for 10,000 shares of common stock to each
      of
      three of the Company's directors at an exercise price of $.82 per share, the
      fair market value at the time of the grant. In February 2005, the Company
      received proceeds of $8,200 in connection with the exercise of warrants to
      purchase 10,000 shares of the Company’s common stock. The remaining warrants
      expired on February 28, 2005.





In
      March
      2002, the Company issued warrants for 100,000 shares of common stock to
      individuals associated with a consulting agreement at an exercise price of
      $.75.
      During the fiscal year ended March 31, 2005, the Company received proceeds
      of
      $75,000 in connection with the exercises of warrants to purchase 100,000 shares
      of the Company’s common stock.





Certain
      of the option and warrant agreements contain anti-dilution adjustment clauses.





The
      following is a summary of activity related to all Company stock option and
      warrant arrangements:




Options
              
              WarrantsExercise
                Price
              
              Number
                  of
                Shares
              
              Exercise
                Price
              
              Number
                  of
                SharesOutstanding
                  at March 31, 2004
              
              $
              .75
              
              
              
              
              
              
              
              
              155,000
              
              $
              .75
              
              
              -
              
              $
              1.25
              
              
              2,782,577Issued
              
              
              1.35
              
              
              
              
              
              
              
              
              700,000Exercised
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              .75
              
              
              -
              
              
              1.03
              
              
              (260,000
              )Forfeited
              
              
              .75
              
              
              
              
              
              
              
              
              (75,000
              )
              
              1.25
              
              
              
              
              
              
              
              
              (204,485
              )Expired
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              .82
              
              
              
              
              
              
              
              
              (20,000
              )Outstanding
                  at March 31, 2005
              
              
              75
              
              
              -
              
              
              1.35
              
              
              780,000
              
              
              1.25
              
              
              
              
              
              
              
              
              2,298,092Issued
              
              
              1.49
              
              
              -
              
              
              2.05
              
              
              120,000
              
              
              2.00
              
              
              
              
              
              
              
              
              350,000Exercised
              
              
              .75
              
              
              
              
              
              
              
              
              (60,000
              )
              
              1.25
              
              
              
              
              
              
              
              
              (2,298,092
              )Outstanding
                  at March 31, 2006
              
              
              .75
              
              
              -
              
              
              2.05
              
              
              840,000
              
              
              2.00
              
              
              
              
              
              
              
              
              350,000Issued
              
              
              2.67
              
              
              
              
              
              
              
              
              80,000
              
              
              2.70
              
              
              
              
              
              
              
              
              100,000Forfeited
              
              
              1.49
              
              
              
              
              
              
              
              
              (25,000
              )Outstanding
                  at March 31, 2007
              
              $
              .75
              
              
              -
              
              $
              2.67
              
              
              895,000
              
              $
              2.00
              
              
              -
              
              
              2.70
              
              
              450,000





F-15




Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005




At
      March
      31, 2007 there were 895,000 and 450,000 options and warrants outstanding,
      respectively, exercisable at prices ranging from $.75 to $2.70, and 2,390,000
      shares reserved for issuance under all stock arrangements.





Significant
      option and warrant groups outstanding at March 31, 2007 and the related weighted
      average exercise price and life information are as follows:




Weighted
              
              WeightedOptions/
              
              Options/
              
              Average
              
              AverageRange
                  of
              
              Warrants
              
              Warrants
              
              Exercise
              
              RemainingExercise
                  Price
              
              Outstanding
              
              Exercisable
              
              Price
              
              Life
                  (years)$.75
              
              
              -
              
              $
              2.67
              
              
              895,000
              
              
              807,500
              
              $
              1.52
              
              
              7.632.00
              
              
              -
              
              
              2.70
              
              
              450,000
              
              
              450,000
              
              
              2.16
              
              
              1.98$.75
              
              
              -
              
              $
              2.70
              
              
              1,345,000
              
              
              1,257,500
              
              
              1.73
              
              
              5.74


As
      discussed in Note 1, the Company adopted the provisions of SFAS 148 for the
      fiscal year ended March 31, 2003. Beginning April 1, 2002, the Company adopted
      the fair value recognition provisions of SFAS 123, "Accounting for Stock-Based
      Compensation", prospectively to all employee awards granted, modified or settled
      after April 1, 2002. For the year ended March 31, 2005, the fair value of stock
      options granted is estimated on the date of the grant using the Black-Scholes
      option pricing model and amortized ratably to expense over the options’ vesting
      periods. Because the estimated value is determined as of the date of grant,
      the
      actual value ultimately realized by the employee may be significantly different.





The
      weighted average estimated values of stock options granted during fiscal 2007,
      2006 and 2005 were $.88, $.75 and $.38, respectively. The weighted average
      assumptions used in the Black-Scholes option-pricing model were as
      follows:


2007
              
              2006
              
              2005Risk-free
                  interest rate
              
              
              3.97
              %
              
              3.64
              %
              
              3.64
              %Years
                  until exercise
              
              
              3.00
              
              
              3.00
              
              
              3.00Volatility
              
              
              41.4
              %
              
              42.9
              %
              
              42.9
              %Dividend
                  yield
              
              
              0.00
              %
              
              0.00
              %
              
              0.00
              %Termination
                  rate
              
              
              n/a
              
              
              n/a
              
              
              n/a




In
      December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based
      Payment” (“SFAS 123R”), which replaces SFAS 123. SFAS 123R requires all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the financial statements based on their fair values at
      grant
      date and the recognition of the related expense over the period in which the
      share-based compensation vest. The Company was required to adopt the provisions
      of SFAS 123R effective July 1, 2005 and use the modified-prospective transition
      method. Under the modified-prospective method, the Company recognizes
      compensation expense in the financial statements issued subsequent to the date
      of adoption for all share-based payments granted, modified or settled after
      July
      1, 2005. The adoption of SFAS 123R resulted in a non-cash charge of $226,550
      and
      $377,750 for stock based compensation for the year ended March 31, 2007 and
      nine
      months ended March 31, 2006, respectively. Such non-cash charge would have
      been
      the same under the provisions of SFAS 148.





The
      Company recorded total stock based compensation costs of $226,550, $397,350
      and
      $106,400 for the fiscal years ended March 31, 2007, 2006 and 2005, respectively.




F-16




Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





19.
      Income Taxes





Income
      tax benefit (expense) for the fiscal years ended March 31 consists of the
      following:


2007
              
              2006
              
              2005Current:Federal
              
              $
              (375,000
              )
              $
              --
              
              $
              --State and local
              
              
              (200,000
              )
              
              --
              
              
              --(575,000
              )
              
              --
              
              
              --Deferred:Federal
              
              
              730,000
              
              
              51,545
              
              
              207,875State and local
              
              
              295,000
              
              
              14,850
              
              
              59,5751,025,000
              
              
              66,395
              
              
              267,450Income
                  tax benefit (expense)
              
              $
              450,000
              
              $
              66,395
              
              $
              267,450


The
      differences (expressed as a percentage of pretax income) between the statutory
      federal income tax rate and the effective income tax rate as reflected in the
      accompanying statements of operations are as follows:




2007
              
              2006
              
              2005Statutory
                  federal income tax rate
              
              
              34.0
              
              
              34.0
              
              
              34.0State
                  and local income taxes
              
              
              9.0
              
              
              9.0
              
              
              9.8Valuation
                  allowance and reserves
              
              
              (51.4
              )
              
              9.3
              
              
              1.8Permanent
                  differences
              
              
              9.7
              
              
              (12.3
              )
              
              (4.9Utilization
                  of net operating loss carryforwards
              
              
              (52.7
              )
              
              --
              
              
              --Effective tax rate
              
              
              (51.4
              )%
              
              40.0
              %
              
              40.7


The
      significant components of deferred tax assets and liabilities as of March 31,
      2007 and 2006 are as follows:


2007
              
              2006Current
                  deferred tax assets:Accounts receivable
              
              $
              357,501
              
              $
              59,291Accrued expenses
              
              
              106,207
              
              
              106,207Contingency reserves
              
              
              4,300
              
              
              55,900468,008
              
              
              221,398Valuation
                  allowance
              
              
              --
              
              
              (189,048
              )Net current deferred tax assets
              
              $
              468,008
              
              $
              32,350Non-current
                  deferred tax assets (liabilities):Equipment
              
              $
              (55,830
              )
              $
              (70,393
              )Intangible assets
              
              
              400,449
              
              
              503,711Self-insurance
              
              
              231,986
              
              
              180,937Workers compensation reserve
              
              
              1,108,879
              
              
              459,016Net operating loss carryover
              
              
              --
              
              
              688,654Income tax credits
              
              
              --
              
              
              84,790Employee stock compensation
              
              
              314,029
              
              
              216,6141,999,513
              
              
              2,063,329Valuation
                  allowance
              
              
              (1,108,676
              )
              
              (1,761,834
              )Net
                  non-current deferred tax assets
              
              
              890,837
              
              
              301,495Total deferred tax assets
              
              $
              1,358,845
              
              $
              333,845




The
      valuation allowance decreased by $842,205 and $18,294 during the fiscal years
      ended March 31, 2007 and 2006, respectively, and increased by $16,986 during
      the
      year ended March 31, 2005. The Company has determined based on its expectations
      for the future that it is more likely than not that future taxable income will
      be sufficient to utilize fully the net deferred tax assets at March 31, 2007
      and
      2006. Federal net operating loss carryforwards were fully utilized during the
      year ended March 31, 2007.




F-17




Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





20.
      Related Party Transactions





In
      addition to an annual directors fee of $10,000 effective September 2004 and
      payment of fees for attending board meetings in the amount of $1,000, for each
      meeting attended, for the fiscal year ended March 31, 2005, various former
      directors received fees for their services on various committees of the Company.
      The expenses paid in connection with services rendered for committees by such
      former directors amounted to $33,253 for the fiscal year ended March 31,
      2005.





21.
      Subsequent Events





On
      April
      12, 2007, the Company entered into an Amendment to its Financing Agreement
      (the
“Financing Agreement”) with its current lender, The CIT Group/Business Credit,
      Inc. (the “Amendment”) in connection with the closing of the transactions (the
“Transactions”) under the Stock Purchase Agreement and the Merger Agreement
      described below. Pursuant to the Amendment, the aggregate line of credit under
      the Financing Agreement was increased from $12.0 to $16.0 million, and the
      Company was provided with a $2.4 million acquisition advance to fund the cash
      requirements of the Transactions. The Amendment also provides for an extension
      of the maturity date of the Financing Agreement to December 12, 2008, and for
      reductions in interest rates, fees and availability reserves and an increase
      in
      the letter of credit sub-line to an aggregate amount of up to $3.0 million.
      Costs to close the Amendment totaled $125,000 payable $45,000 at closing,
      $40,000 six months after closing and $40,000 twelve months after closing. Such
      costs are being amortized over the remaining life of the Financing
      Agreement.





On
      April
      12, 2007, the Company entered into the Amended and Restated Stock Purchase
      Agreement among the Company, Brown Security Industries, Inc., a California
      Corporation, (“BSI”), and Hal Brown and Marc Brown (collectively, the
“Shareholders”), individually and as the Trustees of the Rodgers Police Patrol,
      Inc./Strategic Security Services, Inc. Employee Stock Ownership Plan and Trust
      Agreement (the “ESOP”) (the “Stock Purchase Agreement”), pursuant to which the
      Company purchased (the “Stock Purchase”) from the ESOP 30% of the issued and
      outstanding shares of common stock (the “Shares”) of BSI for a purchase price
      (the “Purchase Price”) of (i) $900,000 plus (ii) 30% of BSI’s consolidated
      Tangible Net Worth (as defined in the Stock Purchase Agreement), subject to
      adjustment as provided in the Stock Purchase Agreement, and in each case paid
      or
      payable in cash. The closing of the Stock Purchase occurred immediately prior
      to
      the closing of the Merger described below.





On
      April
      12, 2007, the Company entered into the Amended and Restated Agreement and Plan
      of Merger by and among the Company, Command Security Services, Inc., a New
      York
      corporation that is a wholly-owned subsidiary of the Company (“CSS”), BSI, and
      the Shareholders (the “Merger Agreement”), pursuant to which BSI merged with and
      into CSS (the “Merger”), and BSI’s wholly-owned subsidiaries Rodgers Police
      Patrol, Inc. and Strategic Security Services, Inc. became wholly-owned
      subsidiaries of CSS. The closing of the Merger was completed immediately after
      the closing of the Stock Purchase described above.




Pursuant
      to the Merger Agreement, the Company issued to the Shareholders an aggregate
      of
      (i) $2,100,000 plus (ii) 70% of BSI’s consolidated Tangible Net
      Worth (as
      defined in the Merger Agreement ),
      subject to adjustment as provided in the Merger Agreement (such consideration
      is
      referred to herein as the “Merger Consideration”). The Company paid 25% of the
      Merger Consideration in cash and 75% of the Merger Consideration by the delivery
      of shares of the Company’s common stock, valued at a price per share of $2.906,
      representing the average closing price of the Company’s common stock on the OTC
      Bulletin Board for the five consecutive trading days immediately preceding
      the
      date that the Merger Agreement was initially executed and delivered by the
      parties thereto.




F-18


Command
      Security Corporation


Notes
      to
      Financial Statements, Continued March 31, 2007, 2006 and 2005





22.
      Quarterly Results (unaudited)





Summary
      data relating to the results of operations for each quarter for the fiscal
      years
      ended March 31, 2007 and 2006 follows:


Three
                  Months EndedJune
                  30
              
              Sept.
                  30
              
              Dec.
                  31
              
              March
                  31Fiscal
                  year 2007Security
                  officer service revenue
              
              $
              22,210,245
              
              $
              23,822,667
              
              $
              24,002,844
              
              $
              23,465,144Administrative
                  service revenue
              
              
              95,649
              
              
              88,021
              
              
              89,923
              
              
              48,053Total revenue
              
              
              22,305,894
              
              
              23,910,688
              
              
              24,092,767
              
              
              23,513,197Gross
                  profit
              
              
              3,223,570
              
              
              3,426,577
              
              
              3,809,192
              
              
              3,205,893Net
                  income
              
              
              204,325
              
              
              174,788
              
              
              225,341
              
              
              635,585Net
                  incomeper
                  common share (basic)
              
              
              0.02
              
              
              0.02
              
              
              0.02
              
              
              0.06per
                  common share (diluted)
              
              
              0.02
              
              
              0.02
              
              
              0.02
              
              
              0.06Fiscal
                  year 2006Security
                  officer service revenue
              
              
              20,816,042
              
              
              21,844,720
              
              
              21,316,977
              
              
              20,880,241Administrative
                  service revenue
              
              
              92,595
              
              
              88,127
              
              
              86,587
              
              
              83,326Total revenue
              
              
              20,908,637
              
              
              21,932,847
              
              
              21,403,564
              
              
              20,963,567Gross
                  profit
              
              
              2,722,081
              
              
              3,139,834
              
              
              2,952,171
              
              
              2,606,273Net
                  income (loss)
              
              
              250,182
              
              
              (278,474
              )
              
              301,147
              
              
              (372,450
              )Net
                  income (loss)per
                  common share (basic)
              
              
              0.03
              
              
              (0.03
              )
              
              0.03
              
              
              (0.04
              )per
                  common share (diluted)
              
              
              0.03
              
              
              n/a
              
              
              0.03
              
              
              (0.04
              )


The
      second quarter 2006 includes an additional provision for bad debts of $850,000
      related to the filing by Delta Air Lines and Northwest Airlines of voluntary
      petitions for reorganization under Chapter 11 of the U.S. Bankruptcy
      Code.




The
      fourth quarter 2006 loss includes: (i) approximately $560,000 of professional
      fees related to the Company entering into a consulting agreement with Giuliani
      Security & Safety LLC, a leading security consulting firm and (ii) a
      non-cash charge for recognition of stock-based compensation cost in the amount
      of $174,620 (net of tax benefit).


F-19




Schedule
      II






COMMAND
      SECURITY CORPORATION




SCHEDULE
      OF VALUATION AND QUALIFYING ACCOUNTS


AgainstAdditions
              
              Amounts(Reductions)
              
              Due
                  toBalance
                  at
              
              Charged
                  or
              
              Administrative
              
              Charged
              
              Deductions
              
              BalanceBeginning
              
              Credited
                  to
              
              Service
              
              to
                  Other
              
              from
              
              at
                  End ofof
                  Period
              
              Expenses
              
              Clients
              
              Accounts
              
              Reserve
              
              PeriodYear
                  ended March 31, 2007:Deducted
                  from asset accounts:Allowance
                  fordoubtful
                  accountsreceivable
                  - currentmaturities
              
              $
              332,892
              
              $
              214,889
              
              $
              126,386
              
              $
              187,979
              
              $
              (30,749
              )
              $
              831,397Year
                  ended March 31, 2006:Deducted
                  from asset accounts:Allowance
                  fordoubtful
                  accountsreceivable
                  - currentmaturities
              
              
              301,465
              
              
              1,158,182
              
              
              53,960
              
              
              (16,901
              )
              
              (1,163,814
              )
              
              332,892Year
                  ended March 31, 2005:Deducted
                  from asset accounts:Allowance
                  fordoubtful
                  accountsreceivable
                  - currentmaturities
              
              
              361,865
              
              
              221,231
              
              
              (52,800
              )
              
              (17,185
              )
              
              (211,646
              )
              
              301,465Allowance
                  forbilling
                  adjustments
              
              
              965,373
              
              
              
              
              
              
              
              
              (965,373
              )
              
              
              
              
              --




See
      auditor's report




**End
      of Filing**




F-20