FORM 10-K/A


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
      EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2000

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from ________ to ______

                         Commission File Number 0-18684

                          COMMAND SECURITY CORPORATION

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             (Exact name of registrant as specified in its charter)

           New York                                        14-1626307

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(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification No.)

Lexington Park, Lagrangeville, New York                      12540

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(Address of Principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code:  (914) 454-3703

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

Securities registered pursuant to Section 12(g) of the Act:

     Common Stock

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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. Yes |X| No |_|

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 registrant's knowledge, in definite proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K |_|

     As of June 27, 2000, the aggregate market value of the voting stock held
by non-affiliates of the registrant, based on the last sales price of $0.72
on that date, was approximately $3,274,699.

     As of June 16, 2000, the registrant had issued and outstanding 6,287,343
shares of common stock.

<PAGE>


The following reflects certain amendments to Items 1,3,7,7A, 10, 11, 12, 13
and the Financial Statements in order to make the presentation therein more
clear to the reader.


                                     PART I

                                ITEM 1. BUSINESS


     Command Security Corporation ("Company") is a corporation formed under
the laws of the State of New York on May 9, 1980. It principally provides
uniformed security services from its eighteen operating offices in New York,
Massachusetts, New Jersey, Illinois, California, Pennsylvania, Connecticut,
Florida and Georgia to commercial, financial, industrial, aviation and
governmental clients in the United States. Security services represented
approximately 98% (or $59 million) of the Company's revenue for the fiscal
year ended March 2000. Security services include providing uniformed guards
for access control, theft prevention, surveillance, vehicular and foot patrol
and crowd control. Approximately 1% (or $.6_million of the Company's revenue
for the fiscal year ended March 2000) was generated from administrative
service agreements (formerly referred to as "security service agreements" or
"service company agreements") with other security guard companies (formerly
referred to as "service company clients"). Administrative service agreements
are contracts with other security guard companies which provide security
guard services to their clients. The administrative services provided by the
Company include (i) scheduling, billing, collection and payroll and (ii)
accounts receivable financing and insurance resources.


         The Company employs approximately 73 employees indirectly
attributable to guard services including supervisors and dispatchers, another
approximately 87 administrative employees, including the executive staff, and
approximately 2,640 hourly guards. As of March 31, 2000, the Company did not
have any administrative service agreements whereby it was the employer of
record for Internal Revenue Service reporting purposes.
[/R]

     Management believes there is heightened attention to security matters
due to the ongoing threat of criminal and terrorist activities. As a result
of such attention, management further believes that the urban commercial
centers served by the Company provide an opportunity for increased market
participation and growth.


     From 1983, when William C. Vassell, the Company's Chairman of the Board
acquired control, to June 1990, the Company expanded its business through
internal sales efforts and by acquisitions of the customer lists of smaller
security firms in markets the Company was already serving. In July 1990, the
Company implemented a program to provide back office services to other
security guard companies (administrative service clients).

         The Company provides its security services to a wide range of
industries which the Company has categorized into three groups. The first
includes aviation and airport related clients to which the Company provides
boarding security and baggage handling services in accordance with Air
Transportation Association and Federal Aviation Administration standards. The
second group includes industrial and commercial clients such as retail
chains, construction sites and health care institutions. The third group
includes governmental and quasi-governmental clients such as cities and
statewide institutions.

         In 1990, the Company began offering administrative service
agreements to other security guard companies. Pursuant to written
"administrative service agreements", the Company provides computerized
scheduling and information system and programs, as well as accounts
receivable financing and insurance resources. Accounts receivable financing
is secured by the administrative service company's clients accounts
receivable, customer lists, contracts, all other assets and the personal
guarantee of the owner(s) of the administrative service company. The Company
charges a fee equal to a percentage of the administrative service Company
client's revenue or gross profits. Administrative service clients are
classified into two categories: the employer of record and non-employer of
record. The security guards of an employer of record client are employed by
the Company and receive W2 forms at year end with the Company's EIN number.
This is similar to an employee leasing arrangement. GAAP principals are
similar for both employer of record and non-employer of record categories:
neither the sales revenue generated by the administrative service client nor
the associated expenses are accounted for within the Company's operations.
Financed receivables are included in the Company's accounts receivable
figures. Administrative service revenue is shown as a separate revenue line
item in the Company's Statement of Operations.


     In 1998, the Company began developing and implementing a national
network of independent security guard companies to service clients with ATM
sites throughout the United States. The Company offers these services in 47
states, and Canada through approximately 291 affiliates and believes this is
a growing niche business.

Operations

     As a licensed watchguard and patrol agency, the Company furnishes guards
to its security service customers to protect people or property and to
prevent the theft of property. In this regard, the Company principally
conducts business by providing guards and other personnel who are, depending
on the particular requirements of the customer, uniformed or plainclothed,
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 guards maintain contact with headquarters or
supervisors via car radio or hand-held radios. In addition to the more
traditional tasks associated with access control and theft prevention, guards
respond to emergency situations and report to appropriate authorities for
fires, natural disasters, work accidents and medical crises. The Company also
provides private investigation services.

     The Company provides a variety of uniformed services for domestic and
international air carriers including pre-board passenger screeners,
checkpoint security supervisors, wheelchair escorts, skycaps, baggage
handlers and uniformed guards for cargo security areas.

     The Company provides guard services to many of its industrial and
commercial customers on a 24-hour basis, 365 days per year. For these
customers, guards 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 remaining customers
include retail establishments, hospitals, governmental units and promoters of
special events. The services provided to these customers may require armed as
well as unarmed guards. 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.

     Under the law of negligence, the Company can be liable for acts or
omissions of its agents or employees performed or occurring in the course of
their employment. The nature of some of the services provided by the Company
(eg. crowd control and armed guard services) potentially exposes it to risks
of liability for employee conduct. The Company currently maintains general
liability insurance in the amount of $1.0 million per occurrence and umbrella
liability insurance in the amount of $50 million per occurrence and $50
million in the aggregate, which it believes is suitable and at a level
customary for the industry for a business of its size.

     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 needed changes to
existing security programs or services. Surveys typically include an

<PAGE>

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 determined by the customer.

     In order to provide a high level of service without incurring large
overhead expenses, the Company establishes offices close to its customers and
delegates responsibility and decision making to its local managers. The
Company emphasizes the role of its managers by assigning to each one
responsibility for both sales and service. The Company believes that in most
situations the combination of both sales and service responsibilities in a
single individual results in better supervision and quality control and
greater responsiveness to customer concerns.


     The Company generally renders its security guard services pursuant to a
standard form security services agreement which specifies the personnel
and/or equipment to be provided by the Company at designated locations and
the rates therefor, 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 each customer site, paying all guards and providing
uniforms, equipment, instruction, supervision, fringe benefits, bonding and
workers' compensation insurance. These security services agreements also
provide customers with flexibility by permitting reduction or expansion of
the guard 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 one year after the
termination of the engagement. Each security services agreement may be
terminated by the customer, typically with no prior notice or short notice
(usually 30 days). In addition, the Company may terminate an agreement
immediately upon default by the customer in payment of monies due thereunder
or if there is filed by or against the customer a bankruptcy petition or if
any other act of bankruptcy occurs.


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

Employee Recruitment and Training

     The Company believes that the quality of its guards 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 and internal growth.

     The Company's policy requires that all selected applicants for Company
guard 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 and, where permitted,
uses pre-employment polygraph examinations. Personnel are selected based upon
physical fitness, maturity, experience, personality, stability and
eliability. Medical examinations and substance abuse testing may also be

<PAGE>

performed. Prerequisites for all Company guards include a good command of the
English language and the ability to communicate well and write a
comprehensive and complete report. 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. The Company's training programs utilize current
curricula and audio-visual materials. Pre-assignment training explains the
duties and powers of a security guard, 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.

     Command 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

     British Air accounted for approximately $6,027,000 or 10% of the
Company's gross revenue in the fiscal year ended March 31, 2000. During
fiscal 1999 and 1998 there was no individual client accounting for 10% or
more of revenue.

Competition

     Competition in the security service business is intense. It is based
primarily on price and the quality of service provided, the scope of services
performed, name recognition and the extent and quality of security guard
supervision, recruiting and training. As the Company has expanded its
operations it has had to compete more frequently against larger national
companies, such as Pinkerton's, Inc., The Wackenhut Corporation, Burns
International Security Services, Inc. and Wells Fargo Guard Services, which
generally have substantially greater financial resources, personnel and
facilities than the Company. These competitors also offer a range of security
and investigative services which 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 which 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 industry.

Government Regulation

     The Company is subject to city, county and state firearm and
occupational licensing laws that apply to security guards and private
investigators. In addition, many states have laws requiring training and
registration of security guards, 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 guards or investigators 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.

<PAGE>

     The Federal Aviation Administration has recently proposed new rules for
certification of screening companies including the Company's Aviation
Safeguard Division. The proposed rule has two objectives: procedures for
certification of screening companies used by airlines and airport authorities
as well as other requirements to enhance airport screening such as training
and testing requirements. Implementing these changes will increase the
Company's expenditures and require a higher technical staffing level. The
Company is expected to pass these costs to the air carriers through pricing
amendments.

Employees


         The Company employs approximately 73 employees indirectly
attributable to guard services including supervisors and dispatchers, another
approximately 87 administrative employees including the executive staff, and
approximately 2,640 hourly guards. As of March 31, 2000, the Company did not
have any administrative service agreements whereby it was the employer of
record for Internal Revenue Service reporting purposes.


     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 guard industry is characterized by high turnover, the Company
believes its experience compares favorably with that of the industry. The
Company has not experienced any material difficulty in employing suitable
numbers of qualified security guards, although, when labor has been in short
supply, it has been required to pay higher wages and incur overtime charges.

     Approximately 58% of the Company's employees hired for guard service
customers do not belong to a labor union. The Company's New York City
employees, and its employees at Los Angeles International Airport, who
together represent approximately 42% of the Company's employees for guard
service customers, work under collective bargaining agreements with the
following unions: Allied International Union; and Special & Superior Officers
Benevolent Association. Most of the Company's New York City and Chicago
competitors also are unionized. The Company has experienced no work stoppages
attributable to labor disputes. The Company believes that its relations with
its employees are satisfactory. Guards 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 premises.

Service Marks

     The Company believes itself to be the owner of the service marks
"Command Security Corporation", "CSC" and "CSC Plus" design for security
guard, detective, private investigation services and security consulting
services. On February 22, 1994, the service mark assignment was recorded with
the U.S. Patent and Trademark Office, Registration No. 1,823,346. The Prior
registration number was No. 1,662,089.


     The Company also believes itself to be the owner of 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. On
May 23, 1995 the trademark was registered with the U.S. Patent and Trademark
Office, Registration No. 1894956. In addition, the Company believes itself to
be the owner of the service marks "STAIRS" and "Smart Guard." The respective
registration dates and numbers are September 15, 1992; No. 1,715,363 and
December 19, 1992; No. 1,742,892.


                               ITEM 2. PROPERTIES

     As of March 31, 2000, the Company owned and used in connection with its
business approximately 76 vehicles.

<PAGE>

     As of March 31, 2000, the Company did not own any real property. It
occupies executive offices at Route 55, Lexington Park, Lagrangeville, New
York, of approximately 6,600 square feet with a base annual rental of
$102,300 under a five year lease expiring September 30, 2003. The Company

also occupies the following offices:

                                                       Square       Base Annual
Location                               When Opened     Footage      Rent

--------                               -----------     -------      -----------

Los Angeles International               8/15/96          647        $17,236
  Airport
380 World Way, Box N-28
Los Angeles, CA

5801 E. Slauson Avenue                  11/9/94        1,689        $22,295
Suite G-160
Los Angeles, CA

1651 E. Fourth Street                   8/10/99          762        $11,724
Suite 144
Santa Ana, CA

7841 Balboa Ave.                         2/8/00          395        $ 6,000
San Diego, CA

8939 S. Sepulveda Blvd.                  3/1/00        1,422        $22,188
Suite #201
Los Angeles, CA

1450 Barnum Avenue                       2/1/98        2,300        $19,558
Suite 105
Bridgeport, CT

15 Lewis Street, Suite 207
Hartford, CT                             5/1/92        1,075        $13,320

2777 Summer Street                      3/13/95         1515        $30,300
Stamford, CT

8181 North West 36th St.                 6/1/98          300        $11,700
Unit 21A
Miami, FL

800 Virginia Avenue                      8/1/97          400        $ 7,881
Suite 53
Fort Pierce, FL

3500 North  State Road                   5/1/97          300        $ 7,447
#200D
Lauderdale Lakes, FL

10105 West Sample Rd.                    6/1/99          400        $ 4,200
Coral Springs, FL

Miami Int'l. Airport                     7/1/98          130        $ 9,210
Miami, FL

<PAGE>

954 South Main Street                    5/1/98          900        $ 9,375
Suite 120
Conyers, GA

10 West 35th Street                      3/1/99        1,059        $17,791
Suite 11F3-4
Chicago, IL

Cummings Park                           3/15/99          198        $ 3,663
S-224
Woburn, MA

The Poughkeepsie Plaza Mall
Poughkeepsie, NY                         9/1/83          920        $12,000

331 Park Avenue South
10th Floor
New York, NY                            11/1/91        3,400        $60,300

331 Park Avenue South                    2/1/93        3,400        $60,300
11th Floor
New York, NY

300 Hamilton Avenue
Suite 300
White Plains, NY                        8/15/96        1,538        $22,301

505 Main Street
Suite #2
Williamsville, NY                        5/1/93          680        $ 5,700

JFK International Airport                4/1/97        1,700        $67,200
175-01 Rockaway Boulevard
Jamaica, NY

1237 Central Avenue                    10/19/93          400        $ 4,800
Suite 201
Albany, NY

2144 Doubleday Avenue                    4/1/93          800        $12,840
Ballston Spa, NY

52 Oswego Rd.                            6/1/98          120        $ 1,500
Baldwinsville, NY

3366 Parke Avenue                        3/1/00        1,000        $12,000
Office #210
Wantagh, NY

55 Park Avenue                           5/1/98          300        $ 7,200
Apartment 1NW
New York, NY

2222 Morris Avenue                       2/1/98        2,250        $23,100
Union, NJ

124 Chestnut Street, Suite 5           11/25/96          500        $ 8,460
Philadelphia, PA

RR4, Box 8269                            2/1/98                     $ 4,800
Milford, PA

<PAGE>

613 West Hartford St.                    6/1/00         1200        $14,400
2nd Floor
Milford, PA

     The Company believes its properties are adequate for its current needs.

                          ITEM 3. LEGAL PROCEEDINGS

     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. See "EXHIBITS, FINANCIAL
STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K."

     On or about December 4, 1997, an outside shareholder and four of the
Company's directors (Sands, P. Kikis, Saunders, and T. Kikis) commenced an
action in the Supreme Court of the State of New York, County of New York
(Index No. 606166/97) against the other four directors (Vassell, Robinett,
Nekos and Miller), the Company's outside corporate and securities counsel and
the Company itself in a lawsuit characterized as a derivative action. The
claims against the Company's outside corporate and securities counsel have
since been dismissed. The complaint alleges that one or more of the
defendant-directors engaged in improper activities, including ultra-vires
acts, breach of fiduciary duty, fraud against the Company, constructive fraud
and waste of corporate assets. These charges are based upon claims that the
defendant-directors concealed information from the plaintiff-directors
regarding the Company's earnings, lacked power to enter into an employment
agreement on behalf of the Company with Mr. Robinett, and entered into
administrative service agreements with financially unstable companies without
performing due diligence. The plaintiffs further allege that the Company has
failed to appoint a replacement to the office of president and that the
directors have entered into a shareholder agreement which is violative of
public policy. Plaintiffs seek the award of money damages in an amount which
is "not less than" $11 million from the individual defendants, a declaratory
judgment that the shareholder agreement is void, an order for an accounting,
certain other injunctive relief and attorneys' fees and disbursements.

     The Company has interposed an answer denying the allegations contained
in the complaint. The individual defendants have stated that they believe the
allegations are completely without merit and intend to vigorously defend
against each and every claim. The Company's Certificate of Incorporation and
the Business Corporation Law of New York provide for indemnification of
officers and directors with respect to damages and legal fees incurred in
connection with lawsuits against them arising by reason of serving the
Company. Due to the fact that certain members of the board have chosen to
participate as plaintiffs in this lawsuit, the Company's insurance carrier
has reserved its rights with respect to the defense and indemnity of Command
based on a claimed exclusion from coverage. To date, the Company has not been
notified of declination of coverage. The Company may have a claim against its
carrier based on the carrier's failure to timely disclaim coverage. The
defendant-directors intend to seek indemnification, and have received
advancements of legal fees incurred in connection with their defense, from

<PAGE>

the Company. Through March 31, 2000, the Company has expended and charged
earnings with approximately $204,000 in legal fees (none during the year
ended March 31, 2000) in defense of this matter on its own behalf as well as
on behalf of the defendant officers and directors. In addition, the Company
has expended $100,000 for legal fees on behalf of the plaintiff directors in
December, 1998, and in March, 1999, accrued a $92,000 contingency for legal
fees incurred by one of the defendants, where Management has determined that
indemnification by the Company is probable. On or about March 25, 1998, the
plaintiffs filed a motion for the appointment of a temporary receiver. On
June 5, 1998, the Court ordered the appointment of a temporary receiver, but
prior to the order taking effect, the parties agreed to a stipulation
pursuant to which Franklyn H. Snitow, Esq., was appointed acting President
and Chief Executive Officer and acting ninth Board member during the pendency
of the defendants' appeal to the Appellate Division of the decision to
appoint a receiver. Based on the stipulation, the defendants' request to the
Appellate Division for a stay pending the appeal of the order appointing the
receiver was granted. At a duly convened meeting of the board of directors on
June 22, 1998, the board voted unanimously to elect Mr. Snitow as an acting
director and to appoint him acting president and chief executive officer
pending the outcome of the appeal. On January 12, 1999, the Appellate
Division dismissed the appeal and modified the lower court's order to
continue Mr. Snitow's authority to discharge his responsibilities as Acting
President, Chief Executive Officer and Director pending the underlying
litigation. Mr. Snitow is a partner in the law firm of Snitow & Cunningham,
LLP, located in New York, New York.

     The Company is unable to reasonably estimate the potential continued
impact on the Company's financial condition and results of operations from
this lawsuit. The parties are currently in agreement that future proceedings
will be held in abeyance while management is exploring alternate ways to
settle the litigation.

     In May, 1996, a complaint was filed in Queens County Civil Court by
three former employees alleging emotional distress, anguish, mental distress
and injury to their professional reputation due to retaliatory discharge and
related matters. Plaintiffs each seek $2 million for compensatory damages and
$2 million in punitive damages in addition to payment of overtime wages of
$25,000. The Company's customer, also a defendant and a former employer, has
engaged counsel representing all defendants. On November 27, 1998, the Kings
County Supreme Court ruled on a motion dismissing three counts concerning
contractual allegations but allowed the remaining nine counts to proceed to
findings. At this time the Company is unable to estimate the possible loss,
if any, that may be incurred as a result of this action. The ultimate outcome
may or may not have a material impact on the Company's financial position or
results of operations.

     The Company has been named as a defendant in several other employment
related claims, including claims of sexual harassment by current and former
employees, some of which are currently under investigation by the New York
State Division of Human Rights. 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 investigation conclude that they are valid.

     In August, 1997, a complaint was filed in Los Angeles County Superior
Court by six former employees alleging discrimination, wrongful termination,
breach of employment contract and intentional infliction of emotional
distress. The complaint alleges that plaintiffs have suffered damages in
excess of $1 million. After filing the complaint, the plaintiffs, through
counsel, agreed to submit the dispute to binding arbitration and a request
for dismissal, without prejudice, was filed with the Court. At this time the
Company is unable to estimate the possible loss, if any, that may be incurred
as a result of such arbitration. The ultimate outcome of such arbitration may

<PAGE>

or may not have a material impact on the Company's financial position or
results of operations.

     In August of 1998, the Company was informed that the US Department of
Transportation, the Federal Aviation Authority and the United States
Attorneys' Office for the Southern District of Florida were conducting a
criminal investigation of certain activities at the Miami office of its
Aviation Safeguards Division. The investigation concerned the official
certifications of employee background investigations made by the Company's
Aviation Safeguards division through its branch manager. Indications are that
the background investigations were not properly conducted and hence the
certifications were false and in violation of United States Code and
regulations. The Company has cooperated fully with the investigation and is
taking steps to ensure future compliance in all areas covered by the
investigation. The Company's local counsel has completed negotiations with
the United States Attorney's office whereby the proposed pleas and settlement
were accepted by the United States Attorney's office and approved by the
Court. As a result of this settlement, in March, 2000, the Company paid
$35,400 and has accrued an additional $75,000, payable in three equal
installments during the year ending March 31, 2001.

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

     The Company held its Annual Meeting of Shareholders on March 14, 2000.
Five of the Company's Directors were elected to two year terms at the Annual
Meeting of Shareholders. The following sets forth the number of votes cast
for or withheld from each of the five directors.

Name                                For                       Withheld

Franklyn H. Snitow                  4,084,100                 172,346
William C. Vassell                  4,084,400                 172,046
Gordon Robinett                     4,012,921                 243,525
Gregory Miller                      4,012,621                 243,825
Peter J. Nekos                      4,084,800                 171,646

     The following Directors continued in their term of office until the
Company's next Annual Meeting of Shareholders: Peter T. Kikis, Steven B.
Sands, Lloyd H. Saunders, III, and Thomas P. Kikis.

     The only other item of business of the Company's Annual Meeting of
Shareholders was to ratify the selection of D'Arcangelo & Co., LLP to serve
as the Company's auditors for the fiscal year ending March 31, 2000. The
proposal was passed by the following vote: For - 4,226,949, Against - 11,470,
Abstain - 19,027.

                                   PART II

         ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
                             STOCKHOLDER MATTERS

     Since July 10, 1995 the Company's common stock has been traded on the
over-the-counter NASDAQ SmallCap market under the symbol "CMMD." For several
years prior to that time the Company's common stock was traded on the NASDAQ
National Market.

     The following table sets forth, for the calendar periods indicated, the

<PAGE>

high and low sales price for the Common Stock as reported by the NASDAQ Stock
Market, Inc. for each full quarterly period within the two most recent fiscal
years.

<TABLE>
<CAPTION>

             Period<F1>                                       Last Sales Price
             ---------                                        ------------------------

             <S>                                              <C>                <C>

             1999                                             High               Low

             --------------                                   -----              -----
             First Quarter                                    1.312              0.812
             Second Quarter                                   0.968              0.625
             Third Quarter                                    1.281              0.625
             Fourth Quarter                                   1.812              0.937

             2000                                             High               Low

             --------------                                   -----              -----
             First Quarter                                    1.437              0.937
             Second Quarter                                   1.093              0.687
             Third Quarter                                    1.125              0.625
             Fourth Quarter                                   1.375              0.718

<FN>

<F1> Reflects fiscal years ended March 31 of the year indicated.

</FN>

</TABLE>

     The above quotations do not include retail mark-ups, mark-downs or
commissions and represent prices between dealers and not necessarily actual
transactions. The past performance of the Company's securities is not
necessarily indicative of future performance.

As of June 16, 2000 there were approximately 209 holders of record of the
Company's common stock. Management believes there are approximately 1,369
beneficial holders of the Company's common stock.

     The last sales price of the Company's common stock on June 27, 2000, was
$0.72.

     The Company has never paid cash dividends on its common stock. Payment
of dividends, if any, will be within the discretion of the Company's Board of
Directors and will depend, among other factors, on approval of its principle
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, in part, the development of its
business.

         On May 31, 2000, the Company was informed that its common stock was
not in compliance with the minimum bid price requirements for continued
listing on The Nasdaq Small Cap Market. If the Company is unable to
demonstrate compliance with the minimum bid price requirements on or before
August 29, 2000, its common stock will be delisted at the opening of business
on August 31, 2000. The Company's management fully recognizes the importance
to its shareholders of continued listing on The Nasdaq Small Cap Market. The
Company intends to take actions to comply with the listing requirements and
thereby retain its listing on The Nasdaq Small Cap Market.

<PAGE>

                         COMMAND SECURITY CORPORATION

                       ITEM 6. SELECTED FINANCIAL DATA

The financial data included in this table have been derived from the
financial statements as of and for the years ended March 31, 2000, 1999,
1998, 1997, and 1996, which have been audited by independent certified public
accountants. The information should be read in conjunction with "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
with the financial statements and related notes included in the Report.

<TABLE>
<CAPTION>

                                                                           Statement of Operations Data
                                                                               Years Ended March 31,

                                                        2000           1999            1998
1997           1996

<S>                                                     <C>            <C>             <C>             <C>           <C>
Revenue (excluding administrative service revenue)      $59,245,927    $57,642,041     $51,796,882     $49,237,418   $54,995,444

Gross profit                                            $10,002,866    $ 9,716,418     $ 7,340,096     $ 8,443,578   $ 8,496,499
Administrative service revenue                          $   554,196    $   913,498     $ 1,450,592     $ 1,471,313   $ 1,519,803
Operating profit/(loss)                                 $   330,705    $   877,434     $(2,915,001)    $ 1,267,805   $ 1,250,713
Net income/(loss)                                       $  (309,710)   $   (15,399)    $(4,013,890)    $   450,030   $   511,650
Income/(loss) per common share                          $      (.07)   $      (.02)    $      (.62)    $       .05   $       .06
Weighted average number of common shares outstanding      6,535,581      6,658,143       6,689,352       6,955,548     6,663,986

                                                                          Balance Sheet Data as of March 31,

                                                        2000           1999            1998            1997           1996

Working capital/(deficiency)                            $   749,710    $   200,236     $(1,122,869)    $ 1,413,212    $   218,968
Total assets                                            $15,347,971    $16,187,980     $17,697,259     $23,188,576    $22,384,414

Short-term debt<F1>                                     $ 7,716,870    $ 7,557,957     $ 7,994,445     $ 8,817,997    $ 8,506,911
Long-term debt<F2>                                      $   587,637    $   471,701     $   531,323     $ 1,284,423    $ 1,194,505
Redeemable convertible preferred stock                  $        -0-   $        -0-    $        -0-    $ 1,743,555    $ 1,614,525
Stockholders' equity                                    $ 2,191,291    $ 3,119,075     $ 3,134,474     $ 5,731,180    $ 5,189,226

<FN>

<F1> The Company's short-term debt includes the current maturities of
     long-term debt, obligations under capital leases, and short-term
     borrowings. See Notes 6, 8 and 14 of "Notes to Financial Statements"

<F2> The Company's long-term debt includes the long-term portion of
     obligations under capital leases.

</FN>
</TABLE>

<PAGE>

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

Management's Discussion and Analysis should be read in conjunction with the
Financial Statements and Notes to Financial Statements.

The following can be interpreted as including forward looking statements
under the Private Securities Litigation Reform Act of 1995. Such statements
are typically identified by the words "intends", "plans", "efforts",
"anticipates", "believes", "expects", or words of similar import. Various
important factors that could cause actual results to differ materially from
those expressed in the forward looking statements are identified below and
may vary significantly 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. Actual future results may differ materially from those suggested in
the following statements.

For the fiscal year ended March 31,2000, the Company's operations resulted in
a net loss of $309,710 after the loss of $738,117 in connection with Tower
Air, Inc. Chapter 11 bankruptcy filing compared to a loss of $15,399 for the
fiscal year ended March 31, 1999. In addition, as of March 31, 2000, the
Company had positive working capital of $749,710 compared to positive working
capital of $200,236 as of March 31, 1999.

On November 30, 1998, the Company announced that it was engaging in
discussions concerning the possible sale of the Company. Senior management
representatives continued meeting with interested parties through August of
1999. These discussions did not lead to any agreements with respect to a sale
of the Company.


The Company's press release of November 30, 1998 also referenced open market
purchases of the Company's stock to be made by two members of the Company's
Board of Directors Messrs. Peters T. Kikis and William C. Vassell. As of
January 19, 1999, a total of 32,000 shares have been purchased by Messrs.
Peter T. Kikis and William C. Vassell. These Directors are part of the
management group which, as of approximately January 19, 1999, became engaged
in discussions concerning the possible sale of the Company. They may
therefore have possessed non-public information which rendered inappropriate
their continued purchases of the Company's stock.


Results of Operations

Fiscal Year ended March 31, 2000 Compared with March 31, 1999


During the fiscal year ended March 31, 2000, revenue increased by $1,603,886
to $59,245,927 from $57,642,041 for the fiscal year ended March 31, 1999. The
major components of this increase are: approximately $4,830,000 from
additional accounts within the commercial airline industry; $580,000 of
additional non-recurring revenue consisting of approximately $790,000 in
fiscal 2000 due to the liquidation of a long haul trucking concern while
fiscal 1999 had $210,000 non-recurring revenue due to the Goodwill Games;
approximately $764,000 increase in revenue from the servicing of new ATM
sites through the network of independent security guard companies and
approximately $463,000 due to rate increases. The above increases were
partially offset by approximately $5,033,000 of contract cancellations and
terminations net of new contract starts from general commercial accounts
especially in New York City, Long Island and California representing 73% of
lost revenue. Management believes that the net increase is not necessarily
indicative of a trend and, due to the competitive nature of the business,
there can be no assurance that future net increases can be obtained at
acceptable margins to offset lost accounts.


<PAGE>

Gross profit increased by $286,448 to $10,002,866 or 16.88% of revenue for
the fiscal year ended March 31, 2000, compared to $9,716,418 or 16.86% of
revenue for the fiscal year ended March 31, 1999. Gross profit increased by
approximately $433,748 as a result of revenue growth mentioned above.
However, this increase is offset by an increase in cost of sales of $147,300,
the major components of which consist of: accruals regarding disputed Company
charges with an administrative service client of $310,000 (see Note 13 to the
Financial Statements), an increase in uniform expense of $161,600 partially
due to new start-ups, car depreciation and expenses of $148,000 due to
increase in number of vehicles servicing customers and inflationary fuel
prices, increase in worker's compensation estimated losses of $119,300,
insurance cost increase of $101,100 and various losses incurred at client
premises of $67,000 offset by $546,500 decrease in labor costs due to
termination of lower margin accounts and new and temporary business at
improved margins, $125,000 reduction in general liability self-insurance
reserves provisions, $62,600 decrease in union benefit costs due to
recognition withdrawal by a service union and $25,600 decrease in payroll
related taxes due to more favorable unemployment insurance rates and increase
in usage of subcontractors.


The Company insures against general liability claims and lawsuits through a
general liability insurance policy with a third-party insurance carrier. The
policy has a limit of $1,000,000 per occurrence while the Company retains the
risk for the first $50,000 for each occurrence and an additional limit of
$10,000,000 in the aggregate. The Company has an excess general liability
insurance policy covering an additional $50,000,000 in the aggregate
($30,000,000 prior to October 1, 1999). The general liability self-insurance
reserve is based on existing claims, actuarial computations and the timing of
reported claims which are all factored to estimate losses incurred but not
yet reported to the Company. At this time, it is not known if the decrease
will continue in future periods.


The Company has a worker's compensation insurance policy where the premium is
based on incurred losses as determined at the end of coverage period plus the
basic insurance amounts. The worker's compensation basic premium is
determined by the insurance carrier and includes its overhead costs and
insurance premium. The insurance premium portion is insurance coverage for
Company annual losses in excess of $1,875,000 for both policy years October
1, 1998 through September 30, 1999 and October 1, 1999 through September 30,
2000, plus losses exceeding the $500,000 limit for one occurrence.

Management expects margins to stabilize at between 16.5% and 18% of revenue
as long as the economy remains strong. Should a recession develop, margins
will trend lower due to, among other things, increased competition for
accounts and potentially higher employment costs.


The Company provides payroll and billing services and accounts receivable
financing through contracts with administrative service clients for a
percentage of the revenue or gross profit generated from their business. The
Company owns the accounts receivable and, depending on the individual
contract, may be the employer of record of the guards who provide the
services to the customers of the administrative service client. Whenever
contracted as the employer of record, the legal liability for tax
withholdings including FICA and unemployment insurance taxes is borne by the
Company. Additionally, the Company is

<PAGE>

responsible for worker's compensation and general liability claims for
damages which result from the employees' conduct and/or negligence. The
administrative service client manages its internal operations including sales
and marketing of its guard contracts. The caption "Administrative Service
Revenue" represents the income earned on the Administrative Service
Agreements as well as income earned on back-office support to police
departments for off-duty police services. Administrative Service revenue
decreased by $359,302 to $554,196 for the fiscal year ended March 31, 2000,
compared to $913,498 for the fiscal year ended March 31, 1999. The decrease
is due to the termination of two administrative service agreements during the
quarter ended June 30, 1999 and the renegotiation of one contract in August,
1998 from an "employer of record" administrative service contract to a "non
employer of record" contract expiring in February, 2001 at a lower service
rate ($282,581 in fiscal 2000 and $272,580 in fiscal 1999). By mutual
consent, this contract was terminated in May, 2000 as part of the final
settlement regarding disputed Company charges (see Note 13 to Financial
Statements) and consequently administrative service revenue in fiscal 2001
will decrease by approximately $260,000. As a result, revenue from employer
of record contracts decreased to $33,892, or 4% of total administrative
service revenue for the year ended March 31, 2000, compared to $446,828, or
49% of administrative service revenue for the year ended March 31, 1999.
Costs associated with the administrative service revenue are primarily
clerical and administrative in nature and are not readily segregated from the
Company's total general and administrative costs. Although there are
potential new administrative service clients, the Company did not sign any
new administrative service agreements in this fiscal year. The Company
currently services one administrative service client. Additionally, the
Company services one police department in connection with off-duty police
support.


General and administrative expenses decreased by $190,003 to $8,187,675 in
the fiscal year ended March 31, 2000, from $8,377,678 in the fiscal year
ended March 31, 1999. The major area of reduction is professional fees
($644,300) primarily due to legal fees expended in fiscal 1999 in connection
with the derivative action disclosed in footnote 13 to the Financial
Statements and "Legal Proceedings", above, as well as legal and
compliance-related consulting fees incurred in connection with the Miami
airport employee background verification matter also disclosed in footnote 13
to the Financial Statements. The reduction was primarily offset by increases
in office and administrative salaries of $268,900 due to expansion in Florida
and corporate administration after the reduction of $154,000 for a stock
compensation settlement related credit, recruitment advertising of $80,600
due to a tightened labor market and increase in new business, $23,000
increase in health insurance costs due to the termination of partially
self-insured health insurance program and other costs of approximately
$83,000.

Amortization of intangibles decreased by $104,239 to $1,176,448 for the
fiscal year ended March 31, 2000 from $1,280,687 for the fiscal year ended
March 31, 1999. This decrease is primarily due to intangible assets from the
United Securities Group Inc. and Madison Detective Services, Inc.
acquisitions being fully amortized. Amortization charges are expected to be
significantly lower in fiscal 2001 and thereafter as additional purchased
customer lists become fully amortized.

The provisions for bad debts increased by $602,021 to $969,937 for the fiscal
year ended March 31, 2000, from $367,916 for the fiscal year ended March 31,
1999. The Chapter 11 bankruptcy filing of Tower Air, Inc., the Company's
second largest customer, on February 29, 2000, resulted in an increase of
$738,117 in the provision for bad debts. This provision represents the
Company's total exposure in connection with Tower Air, Inc. and the total
loss amount is deemed unrecoverable.

<PAGE>


Excluding the loss on Tower Air, bad debt expense has decreased $136,100 due
to improved collection procedures reducing the occurrence of additional past
due receivables. The Company periodically evaluates the requirement for
providing for credit losses on its accounts receivables. Criteria used by
management to evaluate the adequacy of the allowance for doubtful accounts
include, among others, the creditworthiness of the customer, prior payment
performance, the age of the receivables and the Company's overall historical
loss experience. It is not known if bad debts will decrease in future
periods.


Bad debt recoveries decreased by $209,467 to $106,578 for the fiscal year
ended March 31, 2000 from $316,045 for the fiscal year ended March 31, 1999.
This decrease is principally due to a $250,000 unusual bad debt recovery in
fiscal 1999 from a former administrative service client in Texas.

The Company has settled various labor claims in fiscal 1999 for lower amounts
than the $174,000 loss contingencies accrued in fiscal 1998. No similar labor
claims requiring loss accruals were presented to the Company in both fiscal
1999 and fiscal 2000.

The Company recorded a loss on the value of intangible assets of $58,646 for
the fiscal year ended March 31, 1999 due to management's re-evaluation of the
business retained in New Jersey from the Pro-Tech Security Services, Inc.
acquisition. There was no similar loss in fiscal 2000.

Interest income increased by $21,317 to $172,533 for the fiscal year ended
March 31, 2000 compared to $151,216 for the fiscal year ended March 31, 1999.
This increase resulted from the collection of interest from a non-employer of
record administrative service client that prior to August 1998 was contracted
by the Company as an employer of record administrative service client where
interest fee structure is excluded from the contract. Interest income in
fiscal 2001 is expected to decrease by approximately $78,000 as a result of
the termination of the above administrative service client in May, 2000 (see
note 13 of Financial Statement).

Interest expense decreased by $143,358 to $848,860 for the fiscal year ended
March 31, 2000 compared to $992,218 for the fiscal year ended March 31, 1999.
This decrease is due primarily to reductions in current maturity of long-term
debt with final payment of the Deltec loan arrangement in March 31,1999, and
reduced usage of the revolving loan arrangement with CIT Group/Business
Credit, Inc. while the prime rate increased 125 basis points from 7.75% on
April 1, 1999 to 9.00% at the end of the fiscal 2000. It is not known if
interest expense will continue to decrease in future periods in light of
potential business growth and continued upward pressure by the Federal
Reserve Board on interest rates.

Gain on equipment dispositions represents proceeds of older vehicles sold or
retired from service in excess of book value. Other income of $35,000 for the
fiscal year ended March 31, 2000 represents an administrative service client
termination fee recognized by the Company for terminating an employer of
record agreement prior to its October 2000 expiration. Such termination fees
are not expected to recur in future periods.

Management expects the Company to be profitable during the immediate fiscal
year ending March 31, 2001 in part due to reduced amortization

<PAGE>

charges (see footnote 4 to the Company's Financial Statements) and
improvements in management and procedural controls. The Company's performance
will be dependent on its ability to continue to reduce corporate overhead
costs, reduce customer collection risk, develop new higher margin product
lines and to obtain profitability for under-performing branches through the
implementation of an internal regional sale force. Management regularly
evaluates the feasibility of consolidating and/or selling existing branch
offices, with emphasis on those offices generating losses prior to the
allocation of corporate overhead.

Fiscal Year ended March 31, 1999 Compared with March 31, 1998

o    For the fiscal year ended March 31, 1999, the Company's operations
     resulted in a net loss of $15,399 after charges for amortization of
     intangibles of $1,280,687 and prior to preferred stock dividends,
     compared to a loss of $4,013,890 for the fiscal year ended March 31,
     1998. In addition, as of March 31, 1999, the Company had positive
     working capital of $200,236 and cash of $122,470, compared to a working
     capital deficit of $1,122,869 and cash overdraft of $449,895 as of March
     31, 1998. As a result, the Company's public accounting firm has removed
     the "going concern" modification which was included in the prior year's
     audit report. The improved operating results were due to a combination
     of (i) increased sales, improved operating expense controls, reduced bad
     debt expense and recovery of previously reserved receivables in fiscal
     1999 and (ii) charges in fiscal 1998 in connection with the Chapter 7
     bankruptcy filing of GFM Bayview (a former administrative service
     client), charges for impairment of long-lived assets in California and
     Illinois, high labor related claims and an increase in the valuation
     allowance for deferred tax assets. These items are more fully described
     below.


During the fiscal year ended March 31, 1999, revenue increased by $5,845,159
to $57,642,041 from $51,796,882 for the fiscal year ended March 31, 1998. The
major components of this increase were: approximately $2,435,000 increase
primarily due to the additional sales impact in fiscal 1999 for accounts
acquired as a result of four acquisitions completed within different periods
in fiscal 1998; approximately $2,850,000 increase due to new security guard
contract starts net of contract cancellations; approximately $350,000
increase due to rate increases and approximately $210,000 of non-recurring
revenue due to the Goodwill Games.


Gross profit increased by $2,376,322 to $9,716,418 or 16.9% of revenue for
the fiscal year ended March 31, 1999, compared to $7,340,096 or 14.2% of
revenue for the fiscal year ended March 31, 1998. The gross profit increase
resulted from reduction in the self-insurance reserve for general liability
claims of $392,000, reduction in unemployment costs of $378,000, uniform
costs of $277,000, workers' compensation losses of $100,000, auto expense of
$99,000, indirect payroll costs of $93,000, security supplies and other costs
of $128,000, and an approximately $828,000 increase attributed to sales
growth. The Company insures against general liability claims and lawsuits
through a general

<PAGE>

liability insurance policy with a third-party insurance carrier. The policy
had a limit of $1,000,000 per occurrence while the Company retained the risk
for the first $50,000 for each occurrence and an additional limit of
$10,000,000 in the aggregate. The Company had an excess general liability
insurance policy covering an additional $30,000,000 in the aggregate. The
general liability self-insurance reserve was based on existing claims,
actuarial computations and the timing of reported claims which are all
factored to estimate losses incurred but not yet reported to the Company.


Administrative Service revenue decreased by $537,094 to $913,498 for the
fiscal year ended March 31, 1999, compared to $1,450,592 for the fiscal year
ended March 31, 1998. The decrease was due to the termination of the GFM
Bayview administrative service agreement (revenue from GFM prior to filing
Chapter 7 bankruptcy on August 28, 1997 was $89,464), the termination of
three other administrative service contracts ($175,050) and the renegotiation
of a contract for a large "employer of record" administrative service
agreement client effective August, 1998, as a "non employer of record"
contract at a lower service charge ($272,580). As a result, revenue from
employer of record contracts decreased to $446,828, or 49% of total
administrative service revenue for the year ended March 31, 1999, compared to
$1,074,431, or 74% of administrative service revenue for the year ended March
31, 1998. Costs associated with the administrative service revenue are
primarily clerical and administrative in nature and are not readily
segregated from the Company's total general and administrative costs. The
Company serviced four administrative service clients during fiscal 1999 and
did not sign any new administrative service agreements. No contracts were
scheduled to expire during fiscal 2000, however, one contract with annualized
administrative service revenue of $165,000 terminated as the result of the
sale of the business of this administrative service client.


General and administrative expenses increased by $628,952 to $8,377,678 in
the fiscal year ended March 31, 1999, from $7,748,726 in the fiscal year
ended March 31, 1998. The major areas of increase were administrative
salaries ($470,000) and professional fees ($337,000); offset by a reduction
in health insurance ($144,000) due to unusually high claims in fiscal year
ended March 31, 1998. Office and administrative salaries increases are due to
additional staffing in the Company's corporate and branch offices as a result
of adding branches in Georgia, Florida and Pennsylvania, as well as general
merit and cost of living increases. The increase in professional fees was
primarily due to legal fees expended in connection with the derivative action
disclosed in footnote 13 to the financial statements and "Legal Proceedings",
above, as well as legal and compliance-related consulting fees incurred in
connection with the Miami airport employee background verification matter
also disclosed in footnote 13 to the financial statements.

Amortization of intangibles decreased by $371,202 to $1,280,687 for the
fiscal year ended March 31, 1999 from $1,651,889 for the fiscal year ended
March 31, 1998. This decrease was primarily due to the write-down in the
fiscal year ended March 31, 1998, of intangible assets which was the result
of management's re-evaluation of the business retained from certain prior
acquisitions as well as some intangibles from prior acquisitions being fully
amortized.


The provisions for bad debts decreased by $1,083,235 to $367,916 for the
fiscal year ended March 31, 1999, from $1,451,151 for the fiscal year ended
March 31, 1998. The decrease was primarily due to the Chapter 7 bankruptcy
filing of GFM Bayview, an administrative service client, in August, 1997. The
Company periodically evaluates the requirement for providing for credit
losses on its accounts receivables. Criteria used by management to evaluate
the adequacy of the allowance for doubtful accounts include, among others,
the creditworthiness of the customer, prior payment performance, the age of
the receivables and the Company's overall historical loss experience.

<PAGE>

Bad debt recoveries increased by $70,452 to $316,045 for the fiscal year
ended March 31, 1999 from $245,593 for the fiscal year ended March 31, 1998.
This increase was primarily due to a significant bad debt recovery from Guard
Services of Amarillo, Inc., a former administrative service client in Texas.


The decrease in labor claims contingencies and settlements was primarily due
to a labor claim settlement in fiscal 1998 which resulted from a default
judgment against the Company in the amount of $314,377 entered in the Eastern
District Court of New York in favor of a guard who alleged unjust
termination. The claim was settled for $180,000. In addition, the Company
accrued $174,000 for loss contingencies in connection with certain labor
claims in fiscal 1998. Some of these claims were settled for lower amounts in
fiscal 1999. No similar claims were presented to the Company in fiscal 1999.

The Company recorded a loss on the value of intangible assets of $58,646 for
the fiscal year ended March 31, 1999 due to management's re-evaluation of the
business retained in New Jersey from the Pro-Tech Security Services, Inc.
acquisition. This compared to the loss on the value of intangible assets of
$745,516 for fiscal year ended March 31, 1998, primarily with respect to
business retained from the ISS International Service System, Inc. acquisition
in Illinois ($246,288) and California ($319,963), as well as several smaller
acquisitions in Illinois ($179,265).

Interest income decreased by $78,277 to $151,216 for the fiscal year ended
March 31, 1999 compared to $229,493 for the fiscal year ended March 31, 1998
primarily due to the lower number of active administrative service clients
and the Chapter 7 bankruptcy of GFM Bayview, a former administrative service
client. Interest expense decreased by $77,005 to $992,218 for the fiscal year
ended March 31, 1999 compared to $1,069,223 for the fiscal year ended March
31, 1998. This decrease was due primarily to reductions in long-term debt.

Loss on equipment dispositions primarily represents older vehicles sold or
retired from service. Other income of $35,000 for the fiscal year ended March
31, 1998 represents a fee earned by the Company for its assistance in a
financial transaction involving one of its administrative service clients.

Liquidity and Capital Resources


The Company pays its guard employees and those of its Administrative Service
clients on a weekly basis, while its customers and the customers of
administrative service clients pay for the services of such employees
generally within 60 days after billing by the Company. In order to fund the
Company's payroll and operations, on February 24, 1995, the Company entered
into a commercial revolving loan arrangement with CIT Group/Credit Finance
(CIT).

This agreement was amended as of January 30, 1997 to provide for an initial
two year renewal to February 23, 1999 and automatic two year renewal terms
thereafter as well as other changes in terms and conditions. Under this
agreement, borrowings may be made in an amount up to 85% (previously 82.5%)
of eligible accounts receivable, but in no event more than $10,000,000. The
amendment also provides for a term loan in the amount of $500,000 to be
repaid in equal monthly installments over five years. Outstanding balances
under the revolving loan and the term loan bear interest at a per annum rate
of 1 and 1/2% (previously 2% on the revolving loan) in excess of the "prime
rate" and are collateralized by a pledge of the Company's accounts receivable
and other assets.


At March 31, 2000, the Company had borrowed $7,156,761 representing virtually
100% of its maximum borrowing capacity based on the definition of "eligible
accounts receivable" under the terms of the revolving loan agreement.
Generally the Company borrows a high percentage of its available borrowing,
which can fluctuate materially from day to day due to changes in the status
of the factors used to determine availability (such as billing, payments and
aging of accounts receivable).

Long term debt (including current maturities) was reduced by $197,547 to
$720,279 at March 31, 2000 from $917,826 at March 31, 1999. $108,000 of this
reduction represents payments of unsecured notes to Capital Resource Company
which were assumed in connection with the purchase of certain guard accounts
in March, 1996, the foreclosure on two administrative service companies in
July and December 1997 and the bankruptcy of a former administrative service
client in August, 1997. $100,000 of the reduction represents payments of the
term loan to CIT and $45,000 represents final payment to Gordon Robinett, a
Director and former Treasurer of the Company, under a note issued in
consideration of his covenant not to compete. Offsetting these reductions is
an increase of $55,000 in collateralized notes payable to General Motors
Acceptance Corporation and Ford Motor Corporation.

The Company's capital lease obligations have increased by $275,733, net of
$82,486 in repayments during the year ended March 31,2000. This increase is
primarily due to the upgrade of the Company's computer system in order to
enhance communications, data utilization and to maintain a leadership role in
security guard software. Management expects to have the new system fully
operational during the latter half of 2000. Total required principal payments
on long term debt and capital lease obligations for the year ending March 31,
2001 are approximately $488,600 compared to $637,200 for the year ended March
31, 2000.

On or about December 4, 1997, an outside shareholder and four of the
Company's directors (Sands, P. Kikis, Saunders, and T. Kikis) commenced an
action in the Supreme Court of the State of New York, County of New York
(Index No. 606166/97) against the other four directors (Vassell, Robinett,
Nekos and Miller), the Company's outside corporate and securities counsel and
the Company itself in a lawsuit characterized as a derivative action. The
claims against the Company's outside corporate and securities counsel have
since been dismissed. The complaint alleges that one or more of the
defendant-directors engaged in improper activities, including ultra-vires
acts, breach of fiduciary duty, fraud

<PAGE>

against the Company, constructive fraud, waste of corporate assets and
concealment of information from the plaintiff-directors regarding the
Company's earnings, lacked power to enter into an employment agreement on
behalf of the Company with Mr. Robinett, and entered into service contracts
with financially unstable companies without performing due diligence. The
complaint further alleged that the Company failed to appoint a replacement to
the office of president and that the directors entered into a shareholder
agreement which was violative of public policy. Plaintiffs seek the award of
money damages in an amount which is "not less than" $11 million from the
individual defendants, a declaratory judgment that the shareholder agreement
is void, an order for an accounting, certain other injunctive relief and
attorneys' fees and disbursements.

The Company has interposed an answer denying the allegations contained in the
complaint. The individual defendants have stated that they believe the
allegations are completely without merit and intend to vigorously defend
against each and every claim. The Company's Certificate of Incorporation and
the Business Corporation Law of New York provide for indemnification of
officers and directors with respect to damages and legal fees incurred in
connection with lawsuits against them arising by reason of serving the
Company. Due to the fact that certain members of the board have chosen to
participate as plaintiffs in this lawsuit, the Company's carrier has reserved
its right with respect to the defense and indemnity of the Company based on a
claimed exclusion from coverage. To date, the Company has not been notified
of declination of coverage. The Company may have a claim against its carrier
based on the carrier's failure to timely disclaim coverage. The
defendant-directors intend to seek indemnification, and have received
advancements of legal fees incurred in connection with their defense, from
the Company. Through March 31, 2000, the Company has expended approximately
$204,000 in legal fees (none during the year ended March 31, 2000) in defense
of this matter on its own behalf as well as on behalf of the defendant
officers and directors. In addition, the Company has expended $100,000 for
legal fees on behalf of the plaintiff directors in December, 1998, and
accrued a $92,000 contingency for legal fees incurred by one of the
defendants, where Management has determined that indemnification by the
Company is probable.


On or about March 25, 1998, the plaintiffs filed a motion for the appointment
of a temporary receiver. On June 5, 1998, the Court ordered the appointment
of a temporary receiver, but prior to the order taking effect, the parties
agreed to a stipulation pursuant to which Franklyn H. Snitow, Esq., was
appointed acting President and Chief Executive Officer and acting ninth Board
member during the pendency of the defendants' appeal to the Appellate
Division of the decision to appoint a receiver. Based on the stipulation, the
defendants' request to the Appellate Division for a stay pending the appeal
of the order appointing the receiver was granted. At a duly convened meeting
of the board of directors on June 22, 1998, the board voted unanimously to
elect Mr. Snitow as an acting director and to appoint him acting president
and chief executive officer pending the outcome of the appeal. On January 12,
1999, the Appellate Division dismissed the appeal and modified the lower
court's order to continue Mr. Snitow's authority to discharge his
responsibilities as Acting President, Chief Executive Officer and Director
pending the underlying litigation. The Company is unable to reasonably
estimate the potential continued impact

<PAGE>

on the Company's financial condition and results of operations from this
lawsuit.


In August of 1998, the Company was informed that the U.S. Department of
Transportation, the Federal Aviation Administration and the United States
Attorneys' Office for the Southern District of Florida were conducting a
criminal investigation of certain activities at the Miami office of its
Aviation Safeguards Division. The investigation concerns the official
certifications of employee background investigations made by Aviation
Safeguards through its branch manager. Indications are that the background
investigations were not properly conducted and hence the certifications were
false and in violation of United States Code and regulations. The Company has
cooperated fully with the investigation and is taking steps to ensure future
compliance in all areas covered by the investigation. The Company's local
counsel has completed negotiations with the United States Attorneys' Office
whereby the proposed pleas and settlement were accepted by the United States
Attorney's office and approved by the Court. As result of this settlement, in
March, 2000, the Company paid $35,400 and has accrued an additional $75,000,
payable in three equal installments during the year ending March 31, 2001.
These amounts are not covered by insurance.

The Company's operations for the fiscal year ended March 31, 2000 resulted in
an operating profit of $330,705, a decrease of $546,729 compared to $877,434
for the fiscal year ended March 31, 1999 primarily due to the loss incurred
from the Tower Air, Inc. Chapter 11 bankruptcy filing as well as $310,000
accrual over disputed Company charges with an administrative service client.
Even though management believes that recovery of the Tower Air receivable is
unlikely, the Company has been able to increase its working capital by
$549,474 to $749,710 as of March 31, 2000 compared to positive working
capital of $200,236 as of March 31, 1999. The Company experienced a book
overdraft (defined as checks drawn in advance of future deposits) of $184,722
at March 31, 2000, compared to positive book balance of $122,470 at March 31,
1999. Cash balances can fluctuate materially from day to day depending on
such factors as collections, timing of billing and payroll. The Company
anticipates continued improvements in working capital with better operating
results and reductions in long-term debt service requirements.

In October, 1999 and November, 1999, the Company's Board of Directors
authorized the purchase of up to 200,000 shares of its common stock through
December 31, 1999. In January, 2000 the Board further authorized the purchase
of 75,000 additional shares on the open market. Through March 31, 2000, the
Company purchased the total currently authorized amount of 220,800 shares for
$226,202.

The Company finances vehicle purchases typically over three years and
insurance through short-term borrowings. The Company has no additional lines
of credit other than discussed herein and has no other present material
commitments for capital expenditures.

The Company expended $30,540 in connection with outside consultants for
services related to Year 2000 issues. All such expenditures have been charged
in the Company's financial statements as expense. The Company was not
required to purchase computer equipment to replace non-compliant systems. The
Company has not tracked internal labor costs because the Company believes
these costs to be immaterial. The only

<PAGE>

Year 2000 problem encountered was within a financial program residing only on
the Company's headquarters mainframe system and was insignificant.
Subsequently, no other problems were encountered with regard to Year 2000
issues.

On May 31, 2000, the Company received notice from the Nasdaq Stock Market
stating that the Company was not in compliance with Nasdaq listing
requirements because its stock had not complied with the minimum bid price
required of $1.00. If at anytime before August 29, 2000, the bid price of the
Company's Common Stock is at least $1.00 for a minimum of 10 consecutive
trading days, Nasdaq Staff will then determine whether the Company is in
compliance with the Nasdaq's minimum listing requirements. If the Company is
unable to demonstrate compliance, management believes that the Company would
then be listed on the OTC-Bulletin Board.

Cautionary Statement

As provided for under the Private Securities Litigation Reform Act of 1995,
the Company wishes to caution shareholders and investors that the following
important factors, among others, could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements in this
report.

1.       The Company's assumptions regarding projected results depend largely
         upon the Company's ability to retain substantially all of the
         Company's current clients. Retention is affected by several factors
         including but not limited to the quality of the services provided by
         the Company, the quality and pricing of comparable services offered
         by competitors, continuity of management and continuity of
         non-management personnel. There are several major national
         competitors with resources far greater than those of the Company
         which therefore have the ability to provide service, cost and
         compensation incentives to clients and employees which could result
         in the loss of such clients and/or employees.

2.       The Company's ability to realize its projections will be largely
         dependent upon its ability to maintain margins, which in turn will
         be determined in large part by management's control over 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 expense, fees incurred in connection with extraordinary
         business transactions, inflation, labor unrest, increased payroll
         and related costs.

3.       Although management currently has no reasonable basis of information
         upon which to conclude that any significant administrative service
         client or security guard customers will default in payment for the
         services rendered by the Company, any such default by a significant
         client due to bankruptcy or otherwise, would have a material adverse
         impact on the Company's liquidity, results of operations and
         financial condition.

<PAGE>

Additional detailed information concerning a number of factors that could
cause actual results to differ materially from the information contained
herein is readily available in the Company's most recent reports on Forms
10-K, 10-Q and 8-K and its current registration statement on Form S-3 and any
amendments thereto (all as filed with the Securities and Exchange Commission
from time to time).

<PAGE>

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

     During the fiscal year ended March 31, 2000, 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 and term loan with CIT Group/Finance, Inc. Based on
the Company's interest rate at March 31, 2000, and average outstanding
balances during the fiscal year then ended, a 1% change in the prime lending
rate would impact the Company's financial position and results of operations
by approximately $77,000 over the next fiscal year.


     ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See ITEM 14, "EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT

SCHEDULES, AND REPORTS ON FORM 8-K."

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

None.

                                   PART III

         ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     On or about December 4, 1997, an outside shareholder and four of the
Company's directors commenced an action against the other four directors, the
Company's outside corporate and securities counsel and the Company itself in
a lawsuit characterized as a derivative action. Please refer to Item 3, Legal
Proceedings, above, for a more complete description of this action. The
Company's by-laws provide for a two-class Board of Directors. The first class
consists of directors Steven B. Sands, Peter T. Kikis, Lloyd H. Saunders, III
and Thomas P. Kikis. The second class consists of Franklyn H. Snitow, William
C. Vassell, Gordon Robinett, Peter J. Nekos and Gregory J. Miller. The terms
of the directors in the first class will expire at the annual meeting of
shareholders in 2000 or until their successors have been elected and
qualified. The terms of the directors in the second class will expire at the
annual meeting of shareholders in 2001 or until their successors are elected
and qualified. Although Mr. Snitow's term is controlled by the Company's
Bylaws, the directors have agreed that in conformance with the Appellate
Division's modification of the lower Court's order, Mr. Snitow will continue
in office and be renominated through the duration of the lawsuit referred to
above. He will also continue in office as Acting President and Chief
Executive Officer. Each director's term, with the exception of Mr. Snitow, is
for two years. A classified board makes it more difficult for shareholders to
change the majority of directors. Depending on the number of people in each
class it could take two (2) annual meetings to replace a majority of the
Board. This provision is applicable to every election of directors after the
initial classification.

     Each member of the Board, with the exception of Mr. Snitow, has entered
into a Shareholder Voting Agreement dated March 8, 1995, which was finally
revised on March 24, 1995, and thereafter amended on June 2, 1995 and again
on September 22, 1997. It provides that each person then on the Board and a
party to the agreement will (i) vote all shares beneficially owned by him
(his "Shares") for the election to directorships of each of the other members
of the Board, (ii) refrain from voting any of his Shares for any action that
would result in the increase or decrease of the number of positions on the
Board or for the removal, without cause, of any member of the Board, and
(iii) in the event of death, resignation or removal of any director, vote all
of his Shares in favor of the election of the person designated as

<PAGE>

replacement in accordance with the Shareholders Voting Agreement. The
validity of this Shareholder Voting Agreement is being litigated as part of
the lawsuit discussed in Item 3, Legal Proceedings.

     The provisions of the Agreement will make it more difficult for
Shareholders to replace the current directors. The Agreement provides that it
will remain in effect so long as the parties thereto continue to hold Shares.

     Simultaneously with the execution of the Shareholders Voting Agreement,
all of the persons then on the Board signed a Unanimous Written Consent which
provides for them to designate certain members of the Board as replacements
for any current director upon death, resignation, removal or inability to
serve. Messrs. Vassell, Nekos, Miller and Robinett were given the authority
to nominate their replacements; Messrs. Thomas Kikis, Sands and Saunders were
given the authority to nominate their replacements; and Mr. Peter Kikis was
given the authority to nominate his replacement. The Board members agreed
that their respective nominees of any replacements could be provided at a
later date.

     The following table provides information concerning each person who was
an executive officer or director of the Company as of March 31, 2000.

Name                         Age      Title
----------------------       ---      -------------------------------------
Franklyn H. Snitow           52       Acting President, CEO and Director

William C. Vassell           41       Chairman of the Board

Gordon Robinett              64       Vice Chairman of the Board

Gregory J. Miller            40       Director

Peter J. Nekos               72       Director

Peter T. Kikis               76       Director

Steven B. Sands              40       Director

Lloyd H. Saunders, III       45       Director

Thomas P. Kikis              38       Director

Eugene U. McDonald           50       Sr. Vice President--Operations

Nathan Nelson                51       Chief Financial Officer and Executive
                                      Vice President

Debra M. Miller              44       Secretary

     Franklyn H. Snitow was elected Acting President, Chief Executive Officer
and Director by the Board at a meeting conducted on June 22, 1998. As
disclosed under Item 3, Legal Proceedings, above, Mr. Snitow's election was
the result of a stipulation entered into by the other eight members of the
Board of Directors pursuant to the derivative action commenced on or about
December 4, 1997. On January 12, 1999, the Appellate Division modified the
lower Court's order to continue Mr. Snitow's authority to discharge his
responsibilities as Acting President, Chief Executive Officer and Director
pending the underlying litigation. From 1993 through 1998, Mr. Snitow was a

<PAGE>

partner in the law firm of Snitow & Pauley. On July 1, 1998 he became a
partner in the law firm of Snitow & Cunningham, LLP. Mr. Snitow is being
compensated at the rate of $300 per hour for services rendered to the
Company. He is reimbursed for any expenses incurred in connection with the
rendering of such services and is authorized to engage the services of others
at the expense of the Company to assist in performance of his duties and
responsibilities. Mr. Snitow will be indemnified by the Company pursuant to
an Indemnification Agreement to the extent permitted in accordance with New
York law, the Company's Certificate of Incorporation and its Bylaws. Mr.
Snitow has been a director of Tofutti Brands, Inc. since 1990. Mr. Snitow
obtained a Bachelor of Arts Degree from American University in 1967 and a
Juris Doctor Degree from New York Law School in 1970.

     William C. Vassell has been Chairman of the Board since 1983. Mr.
Vassell had been Chairman of the Board, President and Chief Executive Officer
of the Company since 1983, when the Company repurchased the remaining 50% of
its then-outstanding common stock (he became a 50% owner of the Company in
1980). In connection with the Company's acquisition of United Security Group,
Inc. , Mr. Vassell resigned from the offices of President and Chief Executive
Officer on February 24, 1995, and retained his position as Chairman of the
Board. He has been a director of the Company since 1980, and has been a
member of the Executive Committee since March 1995. Mr. Vassell is active in
various industry and trade associations. He twice was Chairman of the
Mid-Hudson Chapter of the American Society for Industrial Security (the
nationally recognized security association), and he is a Certified Protection
Professional within the Society. He is also a director of the Associated
Licensed Detectives of New York State and a member of the Committee of
National Security Companies.

     Gordon Robinett was appointed Vice Chairman of the Board of Directors on
February 24, 1995. He served as Treasurer of the Company from May, 1990 until
August 1, 1996 when Mr. Robinett and the Company agreed to mutually terminate
his employment. In August, 1997, Mr. Robinett was engaged as Acting Treasurer
until a replacement for the Company's former Chief Financial Officer, H.
Richard Dickinson was approved by the Board. On July 1, 1999, Mr. Robinett
resigned as Acting Treasurer in conjunction with the Board's approval of
Nathan Nelson as the Company's new Chief Financial Officer and Executive Vice
President. Mr. Robinett has been a director since 1990. From May 1989 to
April 1990, he was a consultant to Uniforce Temporary Personnel, Inc., a
publicly held national temporary personnel agency, and managed his personal
investments. From 1968 to April 1989, he was employed by Uniforce, initially
as Controller and thereafter as Vice President of Finance, Secretary and
Treasurer, and he continues to serve as a member of its Board of Directors.
Mr. Robinett also is currently a director of Comforce Corporation.

     Peter T. Kikis became a director of the Company on February 24, 1995 in
connection with the acquisition of United Security Group, Inc.. He has also
served as Chairman of the Company's Executive Committee of the Board of
Directors since March, 1995. He is a director of Deltec International S.A.,
the parent of Deltec Development Corporation, the former subordinated debt
lender to the Company. Since 1950, Mr. Kikis has been the President and a
principal in Spencer Management Company, a real estate development and
management company in New York, New York. From 1972 to 1992, Mr. Kikis was
Chairman of the Board of Directors and a principal of McRoberts Protective
Agency, a New York based provider of security guard services. Mr. Kikis is
the father of Thomas P. Kikis who is also a director of the Company.

     Gregory James Miller has been a director of the Company since September
1992. Since 1987 he has served as General Counsel for Goldline Connectors,
Inc., a Connecticut-based electronics manufacturer, and sits on its board of

<PAGE>

directors. Mr. Miller also serves "of counsel" to Benenson & Kates, in New
York, handling labor law and contract negotiations for security guard
clients, and has handled various legal matters for the Company since 1985.
Mr. Miller is currently employed by Goldline Connectors, Inc. He has a
Bachelors Degree from Kalamazoo College, and a Juris Doctor Degree from New
York Law School, where he was an Editor of the Journal of Human Rights. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."

     Peter J. Nekos has been a director of the Company since March 1991. Mr.
Nekos is a certified public accountant. From July 1984 to June 1986 he was a
partner of Nekos & Kilduff, an accounting firm located in New Rochelle, New
York. He operated his own accounting firm in Mamaroneck, New York from July
1986 until September 1996. At present he operates in Valhalla, New York.

     Steven B. Sands was appointed to the Board on March 30, 1994, in
accordance with the provisions of the Company's agreement with Sands Brothers
executed in connection with the Company's 1993 Private Placement. Mr. Sands
is Chairman of the Board of Sands Brothers & Co., Ltd., a Delaware
corporation registered as a broker-dealer. Mr. Sands also has interests in
certain entities which own the Company's stock. These entities include Katie
and Adam Bridge Partners, L.P.; Owl-1 Partners, L.P.; Jenna Partners, L.P.;
Jenna Partners II, L.P.; and Lily Capital Appreciation Partners, L.P. Mr.
Sands is also currently on the board of directors of the following
publicly-traded companies: The Village Green Bookstore, Inc.; and
Semi-Conductor Packaging Materials, Inc.

     Lloyd H. Saunders, III, became a director of the Company on February 24,
1995, in connection with the acquisition of United Security Group, Inc.. He
is a managing director at Sands Brothers and has been so since 1991. From
1989 to 1990, he was a private investor and from 1986 to 1988 he was the
Director of Corporate Finance for Whale Securities, New York, New York.

     Thomas P. Kikis became a Director of the Company on September 22, 1997
in accordance with the terms of the Shareholders Voting Agreement entered
into by the Directors of the Company as of March 8, 1995. For the last seven
years, Mr. Kikis' principal occupation has been president of Kikis Asset
Management located in New York, New York. In September, 1998, he formed
Arcadia Securities, LLC, a New York registered broker-dealer. Mr. Kikis is
the son of Mr. Peter T. Kikis who is also a director of the Company.

      Eugene U. McDonald has more than 27 years of experience in the security
business. He joined the Company in October of 1992 as Vice President of
Corporate Services, and in 1995, he took over the position of Senior Vice
President-Operations. Mr. McDonald has held senior management positions with
Globe Security (1973-1990) and Burns International Security Services
(1990-1992). He has extensive direct personal experience with the handling of
specialized security personnel for cleared facilities as evidenced by his
duties as Group Vice President of Energy Services for Globe Security. He is
active in the American Nuclear Society, Institute of Nuclear Materials
Management, American Society for Industrial Security and the Connecticut
Police Chiefs Association.

     Nathan Nelson was appointed Chief Financial Officer and Executive Vice
President of the Company in July 1999. Before joining the Company, Mr. Nelson
was the Chief Financial Officer and Treasurer of Tower Air, Inc. From 1993 to
1998, Mr. Nelson was the Chief Financial Officer for the Amana Tool
Corporation. From 1992 to 1993, Mr. Nelson was the Chief Financial Officer
and a director for American Dream Airlines. Prior to that, Mr. Nelson was the

<PAGE>

Treasurer of Trump Shuttle, Inc. from 1989 through 1992. Mr. Nelson is not
presently a director of any publicly-held companies.

      Debra Miller has been employed by the Company since September 1983,
initially as Office Manager and, since March 1986, as Corporate Secretary.

           SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Each director and executive officer of the Company who is subject to
Section 16 of the Securities Exchange Act of 1934, and each other person who
beneficially owns more than 10% of the Company's common stock, is required by
Section 16(a) of that Act to report to the Securities and Exchange Commission
by a specified date his or her ownership of and transactions in the Company's
common stock. Copies of such reports on Forms 3, 4, and 5 must also be
provided to the Company. Based solely on a review of Forms 3, 4 and 5 and any
amendments thereto, and written representations to the Company with respect
to the fiscal year ended March 31, 2000, the Company is not aware of any
person who, at any time during the fiscal year ended March 31, 2000, was a
director, officer or beneficial owner of more than ten percent (10%) of the
Company's common stock and who failed to file reports required by Section
16(a) of the Securities Exchange Act of 1934, as amended, during the fiscal
year ended March 31, 2000, except that: (i) Mr. Sands has not filed a Form 5
for the fiscal year ended March 31, 2000, and the Company has not received a
written representation from Mr. Sands that a Form 5 is not required; and (ii)
Debra Miller was two days late in filing a Form 4.

                       ITEM 11. EXECUTIVE COMPENSATION

     The following table sets forth for the fiscal year ended March 31, 2000,
all plan and non-plan compensation paid to, earned by, or awarded to William
C. Vassell, Chairman of the Board, Nathan Nelson, Chief Financial Officer and
Executive Vice President, Franklyn H. Snitow, Acting President and Chief
Executive Officer, Gordon Robinett, Vice Chairman of the Board, Eugene U.
McDonald, Senior Vice President -- Operations, and Martin Blake,
Vice-President -- Aviation. No other executive officer of the Company
received total annual salary and bonus in excess of $100,000 for the fiscal
year ended March 31, 2000, and, therefore, compensation for such other
executive officers is not disclosed.

<TABLE>

                          SUMMARY COMPENSATION TABLE

                   FOR THE FISCAL YEAR ENDED March 31, 2000

<CAPTION>

                                       Annual Compensation                               Long-Term  Compensation
                                                                                          Shares
                              Fiscal Year                  Other Annual                   Underlying
Name and Principal            Ended                        Salary                         Warrants    Shares Underlying
Position                      March 31    Annual Salary    Compensation        Bonus      Granted     Repriced Warrants
--------                      --------    -------------    ------------        -----      --------    -----------------

<S>                           <C>         <C>              <C>                 <C>        <C>         <C>
Franklyn H. Snitow<F5>
Acting President and
Chief Executive Officer

                              1999        $      0                <F2>               0    0                 0
                              2000        $      0                <F2>               0    0                 0

William C. Vassell<F1>
Chairman of the Board

<PAGE>

                              1998        $174,579                <F2>               0    0                 0
                              1999        $175,000                <F2>               0    0                 0
                              2000        $153,846                <F2>               0    0                 0

Nathan Nelson
Chief Financial Officer and
Executive Vice President

                              2000        $103,384                <F2>               0    0                 0

Gordon Robinett
Vice Chairman
of the Board

                              1998        $ 36,923         $52,500<F2><F4>           0    0           227,500<F3>
                              1999        $ 60,000         $37,500<F2><F4>           0    0                 0
                              2000        $ 42,692         $22,500<F2><F4>           0    0                 0

Eugene U. McDonald
Senior Vice President -
Operations

                              1998        $125,794                <F2>         $18,000    0                 0
                              1999        $112,116                <F2>          20,000    0                 0
                              2000        $131,000                <F2>          11,297    0                 0

Martin Blake
Vice President-

 - Aviation                   1998        $100,000                <F2>         $15,000    0                 0
                              1999        $114,539                <F2>         $62,991    0                 0
                              2000        $116,074                <F2>         $12,900    0                 0

<FN>

<F1> As of June 20, 2000, Mr. Vassell held a total of 1,030,000 shares of the
     Company's common stock.

<F2> All perquisites and other personal benefits, securities or property do
     not exceed either $50,000, or 10% of the total annual salary and bonus
     of the executive officer. All perquisites and other personal benefits,
     securities or property are properly indicated in the "Other Annual
     Salary Compensation" column, as they all fit into the categories set
     forth in Item 402 of Regulation S-K.

<F3> Includes repricing of the: 107,500 shares issued on January 19, 1991,
     with exercise price at market value of $5.00, reduced to market value of
     $3.25 as of August 16, 1993 and reduced on July 15, 1996 to $2.50;
     60,000 shares issued on April 8, 1991, with exercise price at market
     value of $3.375, reduced to market value of $3.25 as of August 16, 1993
     and reduced on July 5, 1996 to $2.50; and 60,000 shares issued on May
     15, 1992, with exercise price at market value of $3.88, reduced to
     market value of $3.25 as of August 16, 1993 and reduced on July 15, 1996
     to $2.50.

<F4> Mr. Robinett received $22,500 under his termination agreement during the
     fiscal year ended March 31, 2000.

<PAGE>

<F5> Mr. Snitow is not compensated as an officer of the Company, however, Mr.
     Snitow's law firm has been paid legal fees of $45,662 during the fiscal
     year ending March 31, 2000. During the fiscal year ending March 31,
     1999, Mr. Snitow's law firm received $72,500.

</FN>
</TABLE>

Stock Options/Warrants

     The Company did not grant any stock options or warrants during the
fiscal year ending March 31, 2000 to the Company's chief executive officer or
to any of the Company's executive officers whose total annual salary and
bonus exceeded $100,000. There were no tandem or free standing stock
appreciation rights granted to any person during the fiscal year ending March
31, 2000.

Compensation Committee Interlocks and Insider Participation in Compensation
Decisions

     The Company's Compensation Committee is intended to make all
recommendations to the Board related to compensation issues with respect to
executive officers. It is comprised of William C. Vassell, Peter T. Kikis and
Steven B. Sands. While Mr. Vassell will participate in decisions relating to
compensation for executive officers, he will not vote on matters relating to
his own compensation. Likewise, none of the directors or executive officers
serve on the compensation committee of any other entity with the exception of
Gorden Robinett, who serves on the compensation committee of Uniforce
Temporary Personnel, Inc. None of the other members of the Company's Board of
Directors is an officer, director or employee of Uniforce Temporary
Personnel, Inc.

     On February 24, 1995 in connection with the acquisition of United
Security Group, Inc., the Company entered into a subordinated loan agreement
with Deltec Development Corporation, a subsidiary of Deltec International
S.A. Peter T. Kikis, a director of the Company, is a director of Deltec
International S.A. The original principal balance of the loan was $1,500,000
payable over four years at 14% interest. This loan has been satisfied. The
$1.5 million of subordinated secured indebtedness was repaid in full on or
about March 1, 1999.

     Steven B. Sands is Chairman of Sands Brothers & Co., Ltd. ("Sands
Brothers") a broker-dealer and investment banking firm with which the Company
has entered into numerous agreements. Sands Brothers was engaged as private
placement agent in connection with the Company's 1993 and 1995 private
placements. All agreements which the Company entered into with Sands Brothers
are no longer operative, and are of no force and effect, with the exception
of the Shareholder Voting Agreement dated March 8, 1995, as amended
(described in Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.)

Employment Agreements and Warrants and Termination of Employment and Change of
Control Agreements.

     The Company has entered into an agreement pursuant to an engagement
letter and an indemnification agreement with Mr. Snitow. In accordance with
the engagement letter, Mr. Snitow shall be compensated at the rate of $300.00
per hour, plus reimburseable expenses, based on his hourly billing to the
Company. The indemnification agreement between the Company and Mr. Snitow
provides for the maximum indemnification permitted under New York law, and
the Company's Certificate of Incorporation and By-Laws. The inclusion of the
foregoing information is intended to comply with Section 725(d) of the New
York Business Corporation Law.

<PAGE>

     The Company has entered into employment agreements with Messrs. Vassell
and Robinett. These agreements were amended in April of 1991 and were amended
and restated in June of 1991. In September 1992, the terms of these
agreements were extended for two years to July 19, 1996, and were further
amended as of February 24, 1995, to extend the terms to July 19, 2000. Mr.
Robinett's employment agreement terminated on July 19, 1996. Following the
resignation in August of 1997 of H. Richard Dickinson, the Company's former
Chief Financial Officer and Executive Vice President, Mr. Robinett was
engaged on a per diem proration of his prior employment agreement to
temporarily perform the functions of Mr. Dickinson until a replacement was
approved by the Board. Mr. Robinett worked an average of three days per week
and was compensated therefor at the rate of $385 per day. On July 1, 1999 Mr.
Robinett resigned as Acting Treasurer in conjunction with the Board's
approval of Nathan Nelson as the Company's new Chief Financial Officer and
Executive Vice President. See Item 13. "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."

     Pursuant to his employment agreement, as amended as of February 24,
1995, Mr. Vassell serves as Chairman of the Board of the Company and received
an annual salary of $175,000 in fiscal years ended March 31, 1998 and March
31, 1999. The Board has determined that as of April 1, 1999, Mr. Vassell's
salary shall be $150,000 annually. Mr. Vassell is also entitled to an annual
bonus equal to 5% of the Company's pre-tax profit for each fiscal year
exclusive of (a) capital gains and losses; (b) the annual bonus; and (c)
federal state and local income and franchise taxes for that year ("Pre-Tax
Operating Profit") from $.5 million to $1.0 million, and 2% of all Pre-Tax
Operating Profit in excess of $1.0 million. Mr. Vassell is provided with the
use of a Company-owned automobile and reimbursement for automobile insurance
and operating expenses. Also pursuant to the employment agreement, Mr.
Vassell was awarded a warrant to purchase 175,000 shares of Common Stock at a
price of $3.375 per share, exercisable on or after March 31, 1992. The
warrant expired in April, 1998. Mr. Vassell also received a warrant to
purchase 125,000 shares of Common Stock at a price of $3.25 per share,
exercisable on or after May 15, 1992. This warrant expired in May, 1999.

     Mr. Robinett's former employment agreement provided a non-qualified,
non-forfeitable five-year stock option to purchase 107,500 shares at a price
of $5.00 per share, a warrant to Purchase 60,000 shares at a price of $3.375
per share and a five-year warrant to purchase 75,000 shares at a price of
$6.00 per share. The 75,000 share warrant was canceled as a result of certain
financial goals not being met for the fiscal year ended March 31, 1992.

     In May, 1992 in recognition of sales and profit achievements for fiscal
year 1992, the Board of Directors issued to Mr. Vassell a five-year warrant
to purchase 125,000 shares at an exercise price of $3.88 per share and issued
to Mr. Robinett a five-year warrant to purchase 60,000 shares at an exercise
price of $3.88 per share. Also in May 1992, as an incentive for outside
directors, the Board of Directors issued to Peter J. Nekos a five-year
warrant to purchase 10,000 shares at an exercise price of $3.88 per share.
The exercise price of the foregoing warrants was the market value on the date
of grant. Mr. Vassell's five-year warrant to purchase 125,000 shares expired
in May, 1999. Mr. Nekos' five-year warrant to purchase 10,000 shares expired
in May, 1999.

     In recognition of certain voluntary salary reductions by Messrs. Vassell
and Robinett during 1993, and the contributions of Mr. Nekos, the Board of
Directors authorized the extension of Mr. Robinett's option and all of
Messrs. Vassell's, Robinett's and Nekos' outstanding warrants by two years
and the adjustment of the exercise prices under all of their warrants and
options to $3.25, the fair market value of the Company's stock as of August
16, 1993 (the date of the extension).

<PAGE>

     In September of 1992, the Company entered into a Compensation
Continuation Agreement with Mr. Vassell in consideration of his agreement to
extend the term of his employment for two years. This Agreement provides
that, if, within specified periods of a Change of Control of the Company (as
defined in the Agreement) Mr. Vassell's employment is terminated by the
Company without Cause (as defined in said Agreement), or if Mr. Vassell
terminates his employment for Good Reason (as defined in the Agreement), Mr.
Vassell will be paid 2.99 times the greater of his annual compensation as in
effect on the date of the Agreement or the highest annual compensation for
any of the three years preceding the termination. All awards previously
granted under any performance incentive plan, the actual payment of which may
be deferred, will be vested as a result of the Change of Control and all
options and warrants held by Mr. Vassell will become immediately exercisable.
Currently, the aggregate amount payable to Mr. Vassell upon his termination
in the event of a change in control would be 2.99 times his total
compensation of approximately $150,000 for the fiscal year ended March 31,
2000, or approximately $450,000.

     Other than pursuant to the Employment Agreement and the Compensation
Continuation Agreement for Mr. Vassell (see "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS"), there is no compensation plan or arrangement for the
benefit of any person named in the Summary Compensation Table that would
result from the resignation, retirement or other termination of such person's
employment.

     Other than the compensation described above, there are no long-term
incentive plans for the persons named in the Summary Compensation Table. In
November, 1999, the Company adopted a qualified retirement plan which was
effective for the calendar year 1999, which provided for elective employee
deferrals and discretionary employer contributions to non highly compensated
participants. The plan does not allow for employer matching of elective
deferrals. For the period ended March 31, 2000, no discretionary amounts have
been accrued or paid.

Board of Directors Compensation

     No executive officer receives any additional compensation for serving as
a director, except in the case of Mr. Snitow who is compensated at the rate
of $300 per hour in accordance with the engagement letter referenced above in
this Item 11. Directors who are not employees of the Company, and excluding
Mr. Snitow, receive a meeting fee of $1,000 for each meeting attended, and
all directors are reimbursed for expenses incurred in attending Board
meetings. With the exception of Gregory J. Miller and Peter T. Kikis, no
other directors who are not also executive officers received any plan or
non-plan compensation from the Company during the last three fiscal years.


     During the fiscal years 1999 and 1998, Mr. Miller performed
miscellaneous legal services on behalf of the Company and was compensated
therefor in an amount of approximately $2,400 and $6,200, respectively.


     On April 30, 1997, the Board voted to pay Mr. Peter Kikis $2,500 per
month starting as of April 1, 1996 in recognition of his successfully
negotiating certain matters on the Company's behalf and for his continuing
contributions to the Company, particularly in his capacity as chairman of the
Executive Committee of the Board of Directors.

     In May 1992, as an incentive for outside directors, the Board of
Directors issued to Peter J. Nekos a five-year warrant to purchase 10,000
shares at an initial exercise price of $3.88 per share, the market value on
the date of grant. In recognition of Mr. Nekos' contributions to the Company,
in August 1993 the Board of Directors authorized the extension of Mr. Nekos'
outstanding warrants by two years and reduced the purchase price to $3.25 per
share, the fair market value on the date of the extension. These warrants
expired in May, 1999. In October 1996 the Board of Directors granted Messrs.
Nekos and Miller five-year warrants for 10,000 shares with a purchase price
of $1.875 per share, the fair market value at the time of issuance. On that
same date the Board granted to Mr. Peter Kikis a warrant for 150,000 shares,
also with a purchase price of $1.875 per share, the fair market value at the
time of issuance.

<PAGE>

     In January 2000, the Board granted to Mr. Peter Kikis a warrant to
purchase 150,000 shares of common stock at a purchase price of $1.03125 per
share, the fair market value at the time of issuance.

Limited Directors' Liability

     Pursuant to the New York Business Corporation Law, the Company's
certificate of incorporation, as amended, eliminates to the fullest extent of
such Law the liability of the Company's Directors, acting in such capacity,
for monetary damages if they should fail through negligence or gross
negligence to satisfy their duty of exercising proper business judgment in
discharging their duties, but not for acts or omissions in bad faith, or
involving intentional misconduct or amounting to a knowing violation of law
or under other limited circumstances.

                    ITEM 12. SECURITY OWNERSHIP OF CERTAIN
                       BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding the number
and percentage of common stock (being the Company's only voting securities)
beneficially owned by (i) each person who owns of record (or is known by the
Company to own beneficially) 5% or more of the Company's common stock or as
to which he has the right to acquire within 60 days of June 20, 2000, (ii)
each director and executive officer and (iii) all of said beneficial owners,
officers and directors as a group, as of June 20, 2000. Except as indicated
below, the address for each director and executive officer is the Company's
principal office at Lexington Park, Route 55, Lagrangeville, New York 12540.

     Other than as set forth in the following table or pursuant to the
Shareholders Voting Agreement, the Company is not aware of any person
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) who owns more than 5% of the common stock of
the Company.

<TABLE>
<CAPTION>

                          Amount and
                          Nature of
                          Beneficial

Name                      Ownership<F1>               Percent of Class<F8>
----------------------    -------------               --------------------

<S>                       <C>                         <C>
William C. Vassell        1,030,000                   16.4%

Steven B. Sands/            949,912<F2>               13.4%
Sands Brothers &
Co., Ltd.
101 Park Avenue
New York, NY

Franklyn H. Snitow                0                   <F9>

Gordon Robinett             262,500<F3>                4.0%

Peter T. Kikis              641,832<F4>                9.6%

Peter Nekos                  12,500<F5>               <F9>

<PAGE>

Debra Miller                    100<F6>               <F9>

Lloyd H. Saunders, III          500                   <F9>

Gregory J. Miller            10,000<F6>               <F9>

Thomas P. Kikis           1,007,548<F7>               14.9%

Eugene U. McDonald            1,250                   <F9>

Nathan Nelson                     0                   <F9>

All Officers and          3,274,310                   41.9%
Directors as a Group               <F2><F3><F4>
(12 Persons)                       <F5><F6><F7><F8>

<FN>

<F1> The Company has been advised that all individuals listed above, except
     Steven B. Sands (see Note (2), below) and Peter T. Kikis (see Note (4),
     and (8) below) have the sole power to vote and dispose of the number of
     shares set forth opposite their names. According to the most recent
     Schedule 13D filed on their behalf, Steven B. Sands and Martin S. Sands
     share both voting and dispositive power over the shares set forth next
     to Steven Sands' name. Peter T. Kikis shares voting and dispositive
     power over his shares with Thomas P. Kikis. Thomas P. Kikis exercises
     voting and dispositive power over all shares held by Kikis Asset
     Management Corporation (KAMC)

<F2> Includes 924,412 shares (824,412 shares of which are issuable upon
     conversion of shares of the Company's Series A Preferred Stock) owned by
     Katie and Adam Bridge Partners, L.P. Mr. Sands may be deemed to control
     the corporate general partner of this entity. Also includes 25,000
     shares owned by Owl-Partners, L.P. Mr. Sands may be deemed to control
     the corporate general partner of this entity. Does not include 192,550
     shares owned by partnerships in which an affiliate of Sands Brothers &
     Co., Ltd., other than Mr. Sands, may be deemed to be the beneficial
     owner. Mr. Sands is the Co-Chairman and Chief Executive Officer of Sands
     Brothers & Co., Ltd. On March 30, 1994, Mr. Sands was elected to the
     Company's Board. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
     The above information was provided to the Company by Mr. Sands.

<F3> Includes 107,500 shares underlying presently exercisable non-qualified
     stock options and 120,000 shares underlying warrants that are currently
     exercisable.

<F4> Includes 300,000 shares underlying warrants currently exercisable,
     108,832 shares issuable upon conversion of Series A Preferred Stock.

<F5> Includes 10,000 shares underlying options currently exercisable.

<F6> Includes 10,000 shares underlying warrants currently exercisable.

<F7> A Schedule 13D filed by Thomas P. Kikis, Kikis Asset Management
     Corporation ("KAMC") and Arcadia Securities, LLC ("Arcadia"), filed on
     or about January 31, 2000, indicates that these shares are beneficially
     owned by KAMC and Arcadia as follows: KAMC, 801,248 shares; Arcadia,
     206,300 shares. Of the 801,248 shares held by KAMC on behalf of its
     clients, 641,832 shares are beneficially owned by Peter T. Kikis,
     including 300,000 shares issuable upon the exercise of warrants and
     108,832 shares issuable upon the conversion of Series A Preferred Stock.
     KMAC also holds 144,416 shares on behalf of Thomas P. Kikis, including
     54,416 shares issuable upon the conversion of Series A Preferred Stock.
     KAMC, as investment advisor to its advisory clients, has sole voting
     power and dispositive power over 801,248 shares. Arcadia, as a
     broker-dealer to its brokerage clients, has sole voting power and
     dispositive power over 206,300 shares.

<PAGE>

<F8> Percent of class for each shareholder is calculated as if all options
     and warrants included in the table for such shareholder are outstanding.
     The number of outstanding shares of common stock is 6,287,343. The
     percent of class for all executive officers and directors as a group is
     calculated as if all options and warrants held by any shareholders
     included in the group are outstanding. The denominator for the group
     calculation is 7,822,503.

<F9> Less than 1 percent.

</FN>
</TABLE>

                       ITEM 13. CERTAIN RELATIONSHIPS AND
                              RELATED TRANSACTIONS

     A description of the engagement letter and indemnification agreement
between the Company and Franklyn H. Snitow, Acting President, Chief Executive
Officer and director of the Company is found in Item 11 herein.

     The Company and its Board of Directors (except Mr. Snitow) are party to
a legal proceeding characterized as a derivative action. See "Item 3. LEGAL
PROCEEDINGS." Certain indemnification rights are afforded these parties under
the Company's Certificate of Incorporation and the Business Corporation Law
of New York. Due to the fact that certain members of the board have chosen to
participate as plaintiffs in this lawsuit, the Company may not have coverage
under its officers and directors liability insurance policy. The
defendant-directors intend to seek indemnification, and have received
advancements of legal fees incurred in connection with their defense, from
the Company. Through March 31, 2000, the Company has expensed and charged
earnings with approximately $204,000 in legal fees (none during the year
ended March 31, 2000) in defense of this matter on its own behalf as well as
on behalf of the defendant officers and directors. In addition, the Company
has expended $100,000 for legal fees on behalf of the plaintiff directors in
December, 1998, and accrued a $92,000 contingency for legal fees incurred by
one of the defendants, where Management has determined that indemnification
by the Company is probable.

     Gregory J. Miller has been a director of the Company since 1992. Mr.
Miller is general counsel for Goldline Connectors, Inc. and has rendered
legal services to the Company during his tenure as a director. Mr. Miller has
rendered legal services in connection with various litigation and contractual
matters during the last three fiscal years. During the last three fiscal
years, payments to Mr. Miller for legal services were minimal. In the fiscal
year ended March 31, 2000, there were no payments for legal fees to Mr.
Miller, however, it is expected that Mr. Miller will continue to render
minimal legal services to the Company from time to time. Management believes
that the terms of the various transactions between the Company and Mr. Miller
were as favorable as those which might have been obtained from an
unaffiliated party.

     Peter T. Kikis became a director of the Company on February 24, 1995, in
connection with the acquisition of United Security Group, Inc.. Mr. Kikis is
a director of Deltec International, S.A., of which Deltec Development
Corporation ("Deltec"), the former lender of the Company's $1.5 million
subordinated secured indebtedness obtained in connection with the United
Security Group, Inc. acquisition, is an indirect, wholly-owned subsidiary.
The terms of the loan agreement provide for interest at the rate of 14% per
annum and 16 equal quarterly payments of principal. The $1.5 million of
subordinated secured indebtedness was repaid in full on or about March 1,
1999.

<PAGE>

     Deltec received a financing fee of $180,000 in connection with the loan
to help defray certain costs, including legals fees, associated with the
transaction. Deltec also purchased 3,000 shares of the Company's Series A
Convertible Preferred Stock at $165 per share. Management believes that the
terms of the various transactions between the Company and Deltec were as
favorable as those which might have been obtained from an unaffiliated party.

     Gordon Robinett, a member of the Company's Board of Directors and former
Treasurer, entered into a Covenant Not to Compete with the Company on July
23, 1996 in connection with his termination of employment with the Company.
Under that agreement, the Company is to make periodic payments to Mr.
Robinett over four years totalling $180,000, the exercise price of Mr.
Robinett's options and warrants was reduced to $2.50, and an expiration date
was fixed at July 19, 2000. In return, Mr. Robinett is prohibited from
directly or indirectly competing with the Company until July 19, 2000. In
August of 1997, Mr. Robinett was engaged by the Company on a per diem
proration of his prior employment agreement to temporarily perform the
functions of Mr. Dickinson until a replacement was approved by the Board. Mr.
Robinett worked an average of three days per week and was compensated
therefor at the rate of $385 per day. On July 1, 1999, this arrangement
terminated and Mr. Robinett resigned as Acting Treasurer in conjunction with
the Board's approval of Nathan Nelson as the Company's new Chief Financial
Officer and Executive Vice President.

<PAGE>

                                   PART IV

         ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
                      SCHEDULES AND REPORTS ON FORM 8-K

(A)(1) Financial statements filed as part of this report:

                                                                     Page No.
                                                                     --------

         Independent auditor's report                                F-1

         Balance sheets - March 31, 2000 and 1999                    F-2

         Statements of operations - years ended
           March 31, 2000, 1999 and 1998                             F-3

         Statements of changes in stockholders' equity -
           years ended March 31, 2000, 1999 and 1998                 F-4

         Statements of cash flows - years ended
           March 31, 2000, 1999 and 1998                             F-5 - F-6

         Notes to financial statements                               F-7 - F-22

   (2) Financial statement schedule filed as part of this report:

         Valuation and qualifying accounts - years ended
           March 31, 2000, 1999 and 1998                             F-23

All other schedules are omitted since the required information is not present
or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.

<PAGE>

3.1    Amended & Restated Articles     Incorporated by reference to Exhibit
       of Incorporation                3.3 of the form 10-K for the fiscal year
                                       ending 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 3.3
                                       of the Form 10-K/A for the fiscal year
                                       ended March 31, 1994 (the "1994 10-K/A")

3.4    Certificate of Amendment of     Incorporated by reference to Exhibit 3.4
       Certificate of                  of the Eighth Amendment to the

       Incorporation                   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    Reclassified as Exhibit
       10.37

4.3    Reclassified as Exhibit
       10.38

4.4    Reclassified as Exhibit
       10.39

4.5    Reclassified as Exhibit
       10.40

4.6    Warrant (50,000) to the CIT     Incorporated by reference to Exhibit 4.2
       Group/Credit Finance            of the Form 8-K filed on March 13, 1996.

4.7    Specimen Series A Preferred     Incorporated by reference to Exhibit 4.2
       Stock Certificate               of the Third Amendment to the S-1.

10.1   Form of Amendment to
       Employment Agreement for        Incorporated by reference to Exhibit
       William C. Vassell dated        10.1 of the 10-K for the fiscal year
       April 8, 1991                   ended March 31, 1992 (the "1992 10-K")

10.2   Amended and Restated
       Employment Agreement for        Incorporated by reference to Exhibit
       William C. Vassell dated        10.3 of the 1992 10-K
       June 18, 1991

10.3   Amendment #1 to Amended &       Incorporated by reference to Exhibit
       Restated Employment             10.5 to the 1993 10-K
       Agreement for William C.
       Vassell dated September
       25, 1992

<PAGE>

10.4   Form of Amendment to            Incorporated by reference to Exhibit
       Employment Agreement for        10.2 of the 1992 10-K

       Gordon Robinett dated
       April 8, 1991

10.5   Amended and Restated            Incorporated by reference to Exhibit
       Employment Agreement for        10.4 of the 1992 10-K
       Gordon Robinett dated
       June 18, 1991

10.6   Amendment #1 to Amended         Incorporated by reference to Exhibit &
       Restated Employment             10.6 of the 1993 10-K Agreement
       for Gordon Robinett             dated September 25, 1992

10.7   Form of Warrant Agreement       Incorporated by reference to Exhibit
       and Warrant for William C.      10.3 of the 1991 10-K
       Vassell (175,000 shares)
       and Gordon Robinett
       (60,000 shares)

10.8   Form of Warrant Agreement       Incorporated by reference to Exhibit
       dated May 15, 1992              10.7 to the 1992 10-K
       for William C. Vassell
       (125,000 shares), Gordon
       Robinett (60,000 shares)
       and Peter J. Nekos (10,000
       shares)

10.9   Compensation Continuation       Incorporated by reference to Exhibit
       Agreement for William           10.9 of the 1993 10-K
       C. Vassell dated September
       25, 1992

10.10  Consulting Agreement with       Incorporated by reference to Exhibit
       Robert Ellin dated              10.10 of the 1992 10-K
       December 2, 1992

10.11  Warrant Agreement for           Incorporated by reference to Exhibit
       William C. Vassell              10.16 of the Form 10-K for fiscal year
       (500,000)                       ended March 31, 1994 (the "1994 10-K")

10.12  Franchise Offering              Incorporated by reference to Exhibit
       Prospectus dated                10.11 of the 1993 10-K
       December 1, 1992

10.13  Warrant Agreement and           Incorporated by reference to Exhibit 4.B
       Warrant for Stuart James        of S-18
       Company, Inc.

10.14  Form of Second Amendment to     Incorporated by reference to Exhibit
       May 15, 1992 Warrant            10.13 in 1994 10-K
       Agreement and Warrant
       Certificate for William
       C. Vassell and Gordon Robinett

<PAGE>

10.15  Form of Third Amendment to      Incorporated by reference to Exhibit
       April 8, 1991 Warrant           10.14 in the 1994 10-K
       Agreement and Warrant
       Certificate for William C.
       Vassell and Gordon Robinett

10.16  Form of Third Amendment to      Incorporated by reference to Exhibit
       May 15, 1992 Warrant Agreement  10.15 in the 1994 10-K
       and Warrant Certificate for
       William C. Vassell and Gordon
       Robinett

10.17  Placement Agent Agreement       Incorporated
                                       by reference to Exhibit 1.1 of the
                                       Form 8-K filed October 17, 1993

10.18  Registration Agreement          Incorporated by
                                       reference to Exhibit 4.1 to the Form
                                       8-K filed October 17, 1993

10.19  Form of Warrant for Private     Incorporated by reference to Exhibit
       Placement                       4.2 to the Form 8-K filed October 27,

                                       1993

10.20  Warrant Agreement               Incorporated by reference to Exhibit
       (Placement Agreement)           4.3 to the Form 8-K filed October 27,
                                       1993

10.21  William C. Vassell Indemnity    Incorporated by reference to Exhibit
       Agreement                       10.17 of the 1994 10-K

10.22  Plan of Acquisition,            Incorporated by reference to Exhibit
       Reorganization, Liquidation     2 of the Form 8-K filed October 27, 1993
       or Succession of ISS
       International Service Systems,
       Inc.

10.23  Amendment to ISS Purchase       Incorporated by reference to Exhibit
       Agreement                       10.23 of the 1994 10-K/A

10.24  Plan of Acquisition,            Incorporated by reference to Exhibit
       Reorganization, Liquidation     2 of the Form 8-K filed November 12,
       or Succession of Madison        1993

10.25  Purchase and Sale Agreement     Incorporated by reference to Exhibit
       dated February 24, 1996, for    2.1 of the Form 8-K filed March 24, 1996
       the acquisition of United
       Security Group Inc.

10.26  Placement Agent Agreement       Incorporated by reference to Exhibit
       dated February 24, 1996,        10.26 to the Third Amendment to the
       between the Company and         Form S-1.
       Sands Brothers & Co., Ltd.
       with Amendment as of
       March 24, 1996

10.27  Shareholders Voting Agreement   Incorporated by reference to Exhibit
       dated March 8, 1996, by all     10.27 of the Third Amendment to the S-1
       directors in their capacities
       as Shareholders

<PAGE>

10.28  Amendment No. 2 to Amended and  Incorporated by reference to Exhibit
       Restated Employment Agreement   10.28 of the Third Amendment to the S-1
       for William C. Vassell dated
       February 24, 1996

10.29  Amendment No. 2 to Amended and  Incorporated by reference to Exhibit
       Restated Employment Agreement   10.29 of the Third Amendment to the S-1
       for Gordon Robinett dated
       February 24, 1996

10.31  Form of Warrant (250,000) to    Incorporated by reference to Exhibit
       Sands Brothers & Co., Ltd.      10.31 of the Third Amendment to the S-1

10.32  Warrant Reduction Agreement     Incorporated by reference to Exhibit
       (275,000) William C. Vassell    10.32 of the Third Amendment to the S-1

10.34  Loan and Security Agreement     Incorporated by reference to Exhibit
       with CIT Group/Credit Finance,  4.7 of the Third Amendment to the S-1
       Inc.

10.35  Term Loan Agreement with        Incorporated by reference to Exhibit
       Deltec Development Corp.        4.8 of the Third Amendment to the S-1

10.36  Promissory Note to William C.   Incorporated by reference to Exhibit
       Vassell ($85,000) dated August  10.36 of the form 10-K for the
       22, 1994                        fiscal year ending March 31, 1995 (the
                                       "1995 10-K")

10.37  Notes Payable - ISS             Incorporated by reference as Exhibit
                                       4.2 to the 1994 10-K/A

10.38  Bank Note - September 1, 1992   Incorporated by reference as Exhibit
       maturity                        4.2 to the l994 l0-K/A

10.39  Bank Note - November 1, 1997    Incorporated by reference as Exhibit
       maturity                        4.4 of the 1994 10-K/A

10.40  Mehlich Notes                   Incorporated by reference as Exhibit
                                       4.5 of the 1994 10-K/A

11.00  Computation of Income Per       Incorporated by reference to Exhibit
       Share of Common Stock           11 annexed to Financial Statements.

27.00  Financial Data Schedule         E-1

99.2   Placement Agent Agreement       Incorporated by reference to Exhibit
       dated February 24, 1995         1.1 to the Form 8-K/A dated February
                                       24, 1995

99.3   Amendment to Exhibit C to the   Incorporated by reference to Exhibit
       Placement Agent Agreement       1.2 to the Form 8-K dated March 24, 1995
       dated March 24, 1995

99.4   Agreement with John B.          Incorporated by reference to Exhibit
       Goldsborough                    99.3 to the Fourth Amendment to the S-1

99.5   Warrant Standstill Agreement    Incorporated by reference to Exhibit
       from William C. Vassell         99.4 to the Fourth Amendment to the S-1

<PAGE>

99.6   Shareholders Voting Agreement   Incorporated by reference to Exhibit
       dated March 8, 1995             99 to the Form 8-K dated March 24, 1995

99.7   Letter to Company from          Incorporated by reference to Exhibit
       D'Arcangelo & Co. L.L.P.        99.7 to the Form 8-K dated February 9,
       dated February 28, 1994.        1996

99.8   Letter to Company from          Incorporated by reference to Exhibit
       Coopers & Lybrand L.L.P.        99.8 to the Form 8-K dated February 9,
       dated February 7, 1996          1996.
       confirming  termination
       of engagement.

99.9   Letter to Company from          Incorporated by reference to Exhibit
       Coopers & Lybrand,L.L.P.        99.9 to the Form 8-K dated February 9,
       dated February 9, 1996.         1996.

99.10  Letter (revised) to Commission  Incorporated by reference to Exhibit
       from Coopers & Lybrand L.L.P.   99.10 to the Form 8-K/A filed March 11,
       dated March 8, 1996.            1996.

99.11  Press Release dated June 25,    Incorporated by reference to Exhibit
       1997 re: FYE 1997 results       99.11 to the 1997 10-K.

99.12  Press Release dated June 29,    Incorporated by reference to Exhibit
       1999                            99.12 to the 10-K fye March 31, 1999.

 (b)   Reports on Form 8-K

        (i) Report on Form 8-K dated April 16, 1996 Item 7 (c) - Exhibit
            Press release dated April 15, 1996

       (ii) Report on Form 8-K dated September 10, 1996 Item 7(c) - Exhibits
            Press release dated August 19, 1996 Press release dated September
            05, 1996 Press release dated September 09, 1996

      (iii) Report on Form 8-K dated September 26, 1996 Item 7(c) - Exhibit
            Press release dated September 17, 1996

       (iv) Report on Form 8-K dated November 13, 1996 Item 7(c) - Exhibits
            Press release dated October 23, 1996 Press release dated November
            06, 1996

        (v) Report on Form 8-K dated November 19, 1996 Item 7(c) - Exhibit
            Press release dated November 13, 1996

       (vi) Report on Form 8-K dated February 14, 1997 Item 7(c) - Exhibits
            Press release dated February 07, 1997 Press release dated
            February 10, 1997

      (vii) Report on Form 8-K dated August 15, 1997 Item 7(c) - Exhibits
            Press release dated August 11, 1997

     (viii) Report on Form 8-K dated September 11, 1997 Item 7(c) - Exhibits
            Press release dated September 10, 1997

       (ix) Report on Form 8-K dated November 19, 1997 Item 7(c) - Exhibits
            Press release dated November 19, 1997

<PAGE>

        (x) Report on Form 8-K dated December 18, 1997 Item 5

       (xi) Report on Form 8-K dated July 8, 1998 (item 7(c) - Exhibits Press
            Release dated July 7, 1998.

      (xii) Report on Form 8-K dated July 29, 1998 Item 7(c) - Exhibits Press
            Release dated July 17, 1998.

     (xiii) Report on Form 8-K dated September 15, 1998 Item 7(c) Press
            release dated August 17, 1998.

      (xiv) Report on Form 8-K dated December 1, 1998 Item 7(c) Press release
            dated November 30, 1998.

       (xv) Report on Form 8-K dated July 1, 1999 Item 7(c) Press release
            dated July 20, 1999.

      (xvi) Report on Form 8-K dated August 24, 1999 Item 7(c) Press release
            dated August 27, 1999.

     (xvii) Report on Form 8-K dated October 6, 1999 Item 7(c) Press release
            dated October 6, 1999 and October 12, 1999.

    (xviii) Report on Form 8-K dated November 1, 1999 Item 7(c) Press release
            dated November 1, 1999.

     (xix)  Report on Form 8-K dated November 11, 1999 Item 7(c) Press
            release dated November 11, 1999.

      (xx)  Report on Form 8-K dated February 15, 2000 Item 7(c) Press
            release dated February 15, 2000.

      (xxi) Report on Form 8-K dated March 3, 2000 Item 7(c) Press release
            dated March 3, 2000.

<PAGE>

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, 2000 and 1999, and the related statements of
operations, changes in stockholders' equity and cash flows for each of the
three years in the period ended March 31, 2000. Our audits also included the
financial statement schedule listed in the index at Item 14(a). 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes 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, 2000 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended March 31, 2000, in
conformity with generally accepted accounting principles. 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 9, 2000, except for Note 25, as to which the date is September 6, 2000
Poughkeepsie, New York

                                                                           F-1

<PAGE>

Command Security Corporation

Balance Sheets
March 31, 2000 and 1999

<TABLE>
                                    ASSETS

<CAPTION>
                                                                             2000           1999
<S>                                                                          <C>            <C>
Current assets:
  Cash and cash equivalents                                                  $       -0-    $   122,470
  Accounts receivable from guard service customers, less allowance for
    doubtful accounts of $1,258,187 and $492,372, respectively                10,018,827      8,693,441
  Accounts receivable from administrative service client customers, less
    allowance for doubtful accounts of $30,059 and $208,953, respectively      1,892,657      2,767,439
  Prepaid expenses                                                               491,969        396,227
  Other receivables, less allowance for doubtful accounts
    of $987,192 in 1999                                                           94,607         53,381
                                                                             -----------    -----------
      Total current assets                                                    12,498,060     12,032,958

Furniture and equipment at cost, net                                           1,340,331      1,031,042
Intangible assets, net                                                           460,063      1,606,511
Restricted cash                                                                  799,993      1,091,527
Other assets                                                                     249,524        425,942
                                                                             -----------    -----------
    Total assets                                                             $15,347,971    $16,187,980
                                                                             ===========    ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Cash overdraft                                                             $   184,772    $       -0-
  Current maturities of long-term debt                                           410,603        492,677
  Current maturities of obligations under capital leases                         113,752         69,428
  Short-term borrowings                                                        7,192,515      6,995,852
  Accounts payable and accrued expenses                                        3,328,028      3,707,162
  Preferred dividends payable                                                     40,674            -0-
  Due to administrative service clients                                          478,006        567,603
                                                                             -----------    -----------
      Total current liabilities                                               11,748,350     11,832,722

Self-insurance reserves                                                          820,693        764,482
Long-term debt, net                                                              309,676        425,149
Obligations under capital leases, net                                            277,961         46,552
                                                                             -----------    -----------
                                                                              13,156,680     13,068,905

Commitments and contingencies (Notes 13 and 14)

Stockholders' equity:
  Preferred stock, convertible Series A, $.0001 par value per share,
    1,000,000 shares authorized, 12,325 shares
    issued and outstanding, liquidation value of $2,033,682                    2,033,682      2,033,682
  Common stock, $.0001 par value per share, 20,000,000 shares
    authorized, issued 6,508,143 and 6,658,143, respectively                         651            666
  Paid-in capital                                                              8,886,140      9,277,997
  Accumulated Deficit                                                         (8,502,980)    (8,193,270)
                                                                             -----------    -----------
                                                                               2,417,493      3,119,075
  Common stock in treasury, at cost, 220,800 shares in 2000                     (226,202)           -0-
                                                                             -----------    -----------

                                                                               2,191,291      3,119,075
                                                                             -----------    -----------

  Total liabilities and stockholders' equity                                 $15,347,971    $16,187,980
                                                                             ===========    ===========

</TABLE>

See accompanying notes and auditor's report

                                                                           F-2

<PAGE>

Command Security Corporation

Statements of Operations
Years Ended March 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                     2000                1999                1998

<S>                                                  <C>                 <C>                 <C>
Guard service revenue                                $59,245,927         $57,642,041         $51,796,882
Cost of guard service revenue                         49,243,061          47,925,623          44,456,786
                                                     -----------         -----------         -----------

      Gross profit                                    10,002,866           9,716,418           7,340,096

Administrative service revenue                           554,196             913,498           1,450,592
                                                     -----------         -----------         -----------
                                                      10,557,062          10,629,916           8,790,688
                                                     -----------         -----------         -----------
Operating expenses:

  General and administrative expenses                  8,187,675           8,377,678           7,748,726
  Amortization of intangibles                          1,176,448           1,280,687           1,651,889
  Provision for doubtful accounts and notes              969,937             367,916           1,451,151
  Bad debt recoveries                                   (106,578)           (316,045)           (245,593)
  Labor claims contingencies and settlements              (1,125)            (16,400)            354,000
  Loss on value of intangible assets                         -0-              58,646             745,516
                                                     -----------         -----------         -----------

                                                      10,226,357           9,752,482          11,705,689
                                                     -----------         -----------         -----------

      Operating income/(loss)                            330,705             877,434          (2,915,001)
                                                     -----------         -----------         -----------

Other income/(expense)
  Interest income                                        172,533             151,216             229,493
  Interest expense                                      (848,860)           (992,218)         (1,069,223)
  Gain/(loss) on equipment dispositions                      912             (51,831)            (34,324)
  Other income                                            35,000                 -0-              35,000
                                                     -----------         -----------         -----------

                                                        (640,415)           (892,833)           (839,054)
                                                     -----------         -----------         -----------

      Loss before
        income tax expense                              (309,710)            (15,399)         (3,754,055)

Income tax expense                                           -0-                 -0-            (259,835)
                                                     -----------         -----------         -----------

      Net loss                                          (309,710)            (15,399)         (4,013,890)

Preferred stock dividends                               (177,851)           (150,643)           (139,484)
                                                     -----------         -----------         -----------

Net loss applicable to common stockholders           $  (487,561)        $  (166,042)        $(4,153,374)
                                                     ===========         ===========         ===========

Loss per share of common stock                       $      (.07)        $      (.02)        $      (.62)
                                                     ===========         ===========         ===========

Weighted average number of common
  shares outstanding                                   6,535,581           6,658,143           6,689,352
                                                     ===========         ===========         ===========

</TABLE>

See accompanying notes and auditor's report

                                                                           F-3

<PAGE>

Command Security Corporation

Statements of Changes in Stockholders' Equity
Years Ended March 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                                        Common
                                    Preferred           Common      Paid-In          Accumulated        Stock In
                                    Stock               Stock       Capital          Deficit            Treasury       Total
                                    ----------          ------      ----------       -----------        ---------      ----------

<S>                                 <C>                 <C>         <C>              <C>                <C>            <C>
Balance at March 31, 1997           $      -0-          $ 842       $9,897,319       $(4,163,981)       $  (3,000)     $5,731,180

Common stock issued                                         5           54,008                                             54,013

Return of escrowed
  common stock
    o Note collateral                                     (35)              35                                                -0-
    o Retention adjustment                                (11)        (294,394)                                          (294,405)

Cash paid in lieu of
  compensatory stock warrants                                          (85,979)                                           (85,979)

Transfer of
  preferred stock                    1,813,297                                                                          1,813,297

Preferred stock dividends               69,742                        (139,484)                                           (69,742)

Net loss                                                                              (4,013,890)                      (4,013,890)
                                    ----------          -----       ----------       -----------        ---------      ----------

Balance at March 31, 1998            1,883,039            801        9,431,505        (8,177,871)          (3,000)      3,134,474

Retirement of common
  stock in treasury                                      (135)          (2,865)                             3,000             -0-

Preferred stock dividends              150,643                        (150,643)                                               -0-

Net loss                                                                                 (15,399)                         (15,399)
                                    ----------          -----       ----------       -----------        ---------      ----------

Balance at March 31, 1999            2,033,682            666        9,277,997        (8,193,270)             -0-       3,119,075

Return of escrowed
  common stock                                            (15)        (214,006)                                          (214,021)

Purchase of treasury stock                                                                               (226,202)       (226,202)

Preferred stock dividends                                             (177,851)                                          (177,851)

Net loss                                                                                (309,710)                        (309,710)
                                    ----------          -----       ----------       -----------        ---------      ----------

Balance at March 31, 2000           $2,033,682          $ 651       $8,886,140       $(8,502,980)       $(226,202)     $2,191,291
                                    ==========          =====       ==========       ===========        =========      ==========

</TABLE>

See accompanying notes and auditor's report

                                                                           F-4

<PAGE>

Command Security Corporation

Statements of Cash Flows
Years Ended March 31, 2000, 1999 and 1998

<TABLE>
               INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

<CAPTION>
                                                            2000                1999                1998
<S>                                                         <C>                 <C>                 <C>
OPERATING ACTIVITIES
  Net loss                                                  $  (309,710)        $   (15,399)        $(4,013,890)
    Adjustments to reconcile net loss to net
    cash provided by operating activities:
      Depreciation and amortization                           1,695,458           1,720,197           2,038,794
      Provision for doubtful accounts and
        notes receivable, net of recoveries                     863,359              51,871           1,451,151
      (Gain)/loss on equipment dispositions                        (912)             51,831              34,324
      Loss on value of intangible assets                            -0-              58,646             745,516
      Deferred income taxes                                         -0-                 -0-             259,835
      Self-insurance reserves                                   448,291             572,833             900,128
      Stock compensation settlement                            (154,021)                -0-                 -0-
      Changes in operating assets and liabilities:
        Accounts receivable, current and long-term           (1,313,963)           (322,530)            780,602
        Prepaid expenses                                        215,285             460,896             880,665
        Other receivables                                       (41,226)             38,995             (88,574)
        Other assets                                            279,569             (71,944)           (244,246)
        Accounts payable and accrued expenses                  (831,214)         (1,005,756)            124,665
        Due to administrative service clients                   (89,597)            105,971              28,495
                                                            -----------         -----------         -----------
          Net cash provided by
            operating activities                                761,319           1,645,611           2,897,465
                                                            -----------         -----------         -----------

INVESTING ACTIVITIES
  Purchase of equipment                                        (158,168)           (101,372)           (153,298)
  Purchase of intangible assets                                 (12,000)            (45,735)           (116,521)
  Proceeds from equipment dispositions                           24,041               2,278              27,122
  Issuance of notes by administrative service clients               -0-              (5,000)                -0-
  Principal collections on notes receivable                         -0-              62,394             113,828
                                                            -----------         -----------         -----------
          Net cash used in investing activities                (146,127)            (87,435)           (128,869)
                                                            -----------         -----------         -----------

FINANCING ACTIVITIES
  Net borrowings/(payments) on line of credit                   212,878             326,955            (533,908)
  Repayments on other short and long-term debt                 (689,447)         (1,237,369)         (1,763,505)
  Repayments on capital lease obligations                       (82,486)            (75,397)            (81,455)
  Cash paid in lieu of compensatory stock warrants                  -0-                 -0-             (85,979)
  Cash overdraft                                                184,772            (449,895)           (303,749)
  Purchase of treasury stock                                   (226,202)                -0-                 -0-
  Payment of preferred stock dividends                         (137,177)                -0-                 -0-
                                                            -----------         -----------         -----------
          Net cash used in financing activities                (737,662)         (1,435,706)         (2,768,596)
                                                            -----------         -----------         -----------

Net increase/(decrease) in cash and cash equivalents           (122,470)            122,470                 -0-

Cash and cash equivalents, beginning of year                    122,470                 -0-                 -0-
                                                            -----------         -----------         -----------

Cash and cash equivalents, end of year                      $       -0-         $   122,470         $       -0-
                                                            ===========         ===========         ===========

</TABLE>

See accompanying notes and auditor's report

                                                                           F-5

<PAGE>

Command Security Corporation

Statements of Cash Flows, Continued
Years Ended March 31, 2000, 1999 and 1998

1. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Cash paid during the period for:
                                  2000           1999           1998

Interest                          $848,860       $997,779       $1,100,903
Income Taxes                           -0-            -0-              -0-

2. SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES

For the years ended March 31, 2000, 1999 and 1998, the Company purchased
equipment with direct installment and lease financing of $701,662, $247,043,
and $365,825, respectively. These amounts have been excluded from the
statements of cash flows.

The Company generally obtains short-term financing to meet its insurance
needs. For the years ended March 31, 2000, 1999 and 1998, $122,644 and
$107,099, and $133,055, respectively, have been borrowed for this purpose.
These borrowings have been excluded from the statements of cash flows.

For the years ended March 31, 1999 and 1998, the Company accrued accumulated
dividends of $150,643 and $139,484 and issued 913 and 845 additional shares
of its Series A convertible preferred stock to its preferred stockholders.
These charges to paid-in capital and credits to preferred stock have been
excluded from the statements of cash flows.

In December, 1999, the Company entered into an agreement modifying a stock
compensation arrangement entered into in November, 1993, and canceling
150,000 shares of the Company's common stock held in escrow. The resultant
charges to common stock and paid-in capital and credits to accrued expenses
have been excluded from the statement of cash flows.

In August, 1999, the Company purchased certain guard service accounts and
related equipment and supplies for a total consideration of $30,000. The
Company paid $12,000 and issued a note for $18,000. The non-cash portion has
been excluded from the purchase of accounts and issuance of notes in the
statement of cash flows.

In June, 1998, the Company purchased certain guard service accounts and
related equipment and supplies for a total consideration of $222,098. The
Company paid $55,525 and issued two notes for $55,525 and $111,049,
respectively. The second note was subsequently reduced by $31,015 as a
retention adjustment. The non-cash portions have been excluded from the
purchase of accounts and issuance of notes in the statement of cash flows.

In March, 1998, the Company settled the retention adjustment in connection
with the sale of certain customer lists originally closed in December, 1996.
The resultant charge to deferred income of $103,989 and credits to notes
receivable and accrued expenses of $63,159 and $40,830, respectively, have
been excluded from the statement of cash flows.

During the year ended March 31, 1998, the Company settled various retention
issues related to customer list purchased with the issuance of the Company's
common stock. The resultant net charge to equity and credit to intangible
assets of $240,392 have been excluded from the statement of cash flows.

During the year ended March 31, 1998, the Company acquired certain guard
service accounts from three former administrative service clients in
settlement of outstanding advances and the assumption of certain loan
guarantees. Debt assumed of $150,006 and net advances of $94,655 have been
excluded from the purchase of intangible assets in the statement of cash
flows.

In June, 1997, the Company purchased certain guard service accounts for a
total consideration of $144,684. The Company paid $56,717, issued a note for
$56,717 and entered into an agreement for consulting services for $31,250 to
effect the transition of the accounts. The non-cash portions have been
excluded from the purchase of accounts and issuance of notes in the statement
of cash flows.

See accompanying notes and auditor's report

                                                                           F-6

<PAGE>

Command Security Corporation

Notes to Financial Statements
March 31, 2000, 1999 and 1998

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 guard
service company operating in New York, Connecticut, California, Florida,
Georgia, Illinois and New Jersey. In addition, the Company also provides
other security guard companies (administrative service clients) in various
states with administrative services, such as billing, collection and payroll,
for a percentage of the related gross revenue or gross profit.

Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles 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
the reported amounts of revenue and expenses during the reporting period.
Such estimates include provisions for uncollectible accounts and notes
receivable, recoverability and attrition rates of purchased customer lists,
and reserves for general liability and workers' compensation claims. Actual
results could differ from those estimates.

Revenue recognition

The Company records revenue as services are provided to its customers and to
its administrative service clients. Revenue consists primarily of security
guard 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 guard companies are based on a
percentage of the administrative service client's revenue or gross profit and
are recognized as billings for the related guard services are generated.
Costs associated with the Company's guard service revenue consist of direct
and indirect payroll and related expenses, subcontract costs, vehicle and
other costs directly related to the guard service revenue generated. Costs
related to the administrative service revenue are primarily clerical and
administrative in nature and are not readily segregated from the Company's
total general and administrative costs.

In December, 1999, the Staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
Financial Statements". Management believes that the Company's practices and
policies are in compliance with SAB 101.

Cash and cash equivalents

For purposes of the cash flows statements, the Company defines cash and cash
equivalents as cash and investments with maturities of three months or less.

Furniture and equipment

Furniture and equipment are stated at cost. Depreciation is accumulated using
the straight-line method over the 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
which are being amortized on a straight-line basis over five 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. Any possible impairment is
evaluated annually based on anticipated undiscounted future cash flows and
actual customer attrition in accordance with the provisions of SFAS 121.

                                                                           F-7

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

1. Business Description and Summary of Accounting Policies, continued

Advertising costs

The Company expenses advertising costs as incurred. Amounts incurred for
recruitment and general business advertising were $214,142, $133,553, and
$129,400 for the years ended March 31, 2000, 1999 and 1998, respectively.

Reserve for doubtful accounts

The Company periodically evaluates the requirement for providing for credit
losses on its accounts receivables. Criteria used by management to evaluate
the adequacy of the allowance for doubtful accounts include, among others,
the creditworthiness of the customer, prior payment performance, the age of
the receivables and the Company's overall historical loss experience.

Income/(loss) per common share

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 (SFAS 128), "Earnings Per Share," which is required to be adopted for
periods ending after December 15, 1997. Under the new requirements for
calculating basic earnings per share, the dilutive effect of potential common
shares, if any, is excluded. No diluted earnings per share are presented
because the effect of assumed issuance of common shares in connection with
warrants and stock options outstanding and preferred stock conversions was
antidilutive. The implementation of SFAS 128 had no effect on the calculation
of the Company's earnings per share for the years ended March 31, 2000, 1999
and 1998.

Accounting for stock options

During the year ended March 31, 1998, the Company adopted the Financial
Accounting Standards Board Statement No. 123 (SFAS 123), "Accounting for
Stock Based Compensation." SFAS 123 provides companies with a choice to
follow the provisions of SFAS 123 in the determination of stock-based
compensation expenses or to continue with the provisions of APB 25,
"Accounting for Stock Issued to Employees." The Company will continue to
follow APB 25 and will provide pro forma disclosures as required by SFAS 123.
SFAS 123 did not have an impact on the Company's financial condition or
results of operations for the periods presented. Stock- based compensation
issued to non employees are accounted for based on the fair value and nature
of goods and/or services received.

2. Continuity of Operations

The Company's financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of
business. The Company's operations resulted in a net loss of $309,710,
$15,399 and $4,013,890 for the years ended March 31, 2000, 1999 and 1998,
respectively, and a working capital deficit at March 31, 1998, of $1,122,869.
As of March 31, 1998, the Company was not in compliance with certain of its
debt covenants and, as described in Notes 13 and 18, there is litigation and
a contingency for which the outcomes are uncertain. As a result, the
independent auditor's report on the March 31, 1998, financial statements was
modified, indicating that these factors raised substantial doubt about the
Company's ability to continue as a going concern for a reasonable period of
time. The Company's viability as a going concern is dependent on its ability
to achieve profitability from its operations, to generate sufficient working
capital to meet its obligations as they become due, the forbearance of its
lenders and its ability to resolve the litigation and contingency.

                                                                           F-8

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

2. Continuity of Operations, continued

As of March 31, 2000 and 1999, the Company had positive working capital of
$749,710 and $200,236, respectively, and its operations resulted in
significantly reduced net losses of $309,710 and $15,399 for the years ended
March 31, 2000 and 1999, respectively, compared to a loss of $4,013,890 for
the year ended March 31, 1998. These improved results are due, in part, to
significant charges in fiscal 1998 in connection with the Chapter 7
bankruptcy filing of a former administrative service client, charges for
impairment of long-lived assets, unusually high labor claims and
self-insurance claims which did not recur in fiscal 2000 or 1999, as well as
management's development and implementation in fiscal 1999 of a national
network of independent security guard companies to service clients with sites
throughout the United States. The implementation of this network has
increased its ability to compete against larger national companies and
increased its profit margins. In addition, the Company has implemented a plan
to actively seek rate increases from its existing clients and to sign new
contracts in existing markets. Furthermore, it has implemented a centralized
purchasing function in order to better control operating costs and
implemented a centralized, pro-active credit management and collection policy
which has significantly reduced bad debt expense and led to the recovery of
receivables previously reserved.

Management expects a continued favorable financial impact from the above
mentioned strategies as well as improved cash flow as a result of the
repayment in full of certain acquisition indebtedness in February, 1999.
Furthermore, subsequent to March 31, 1998, the Company obtained a waiver from
its principal lender, CIT Group/Business Credit, Inc., in connection with its
non-compliance with certain non-financial covenants and management is of the
opinion that the probability that contractual termination of its lending
arrangement diminishes with improvements in operating results and working
capital and that the probability of claims in connection with certain
restatements and a resultant negative impact on operations and financial
condition diminishes with time.

3. Furniture and Equipment

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

                                   2000                   1999

Transportation equipment           $ 1,394,723            $ 1,142,334
Security equipment                     594,563                537,658
Office furniture and equipment       1,987,073              1,560,805
                                   -----------            -----------
                                     3,976,359              3,240,797
Accumulated depreciation            (2,636,028)            (2,209,755)
                                   -----------            -----------

                                   $ 1,340,331            $ 1,031,042
                                   ===========            ===========

Depreciation expense for the years ended March 31, 2000, 1999 and 1998 was
$519,010, $439,510, and $386,905, respectively, and includes amortization of
assets purchased under capital lease arrangements (see Note 14).

4. Intangible Assets

Intangible assets at March 31, consist of the following:

                                   2000                   1999

Customer lists                     $ 3,675,390            $ 5,657,732
Borrowing costs                         50,000                 50,000
Covenant not to compete                180,000                180,000
Goodwill                                34,007                 34,007
                                   -----------            -----------
                                     3,939,397              5,921,739
Accumulated amortization            (3,479,334)            (4,315,228)
                                   -----------            -----------

                                   $   460,063            $ 1,606,511
                                   ===========            ===========

                                                                           F-9

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

4. Intangible Assets, continued

Amortization expense for the years ended March 31, 2000, 1999 and 1998, was
$1,176,448, $1,280,687, and $1,651,889, respectively. During the year ended
March 31, 2000, the Company removed fully amortized customer lists with an
initial cost of $2,012,342 from its accounts. Approximately 83% of the
Company's remaining customer lists will become fully amortized during the
year ending March 31, 2001. During the years ended March 31, 1999 and 1998,
the Company removed customer lists of $83,780 and $1,743,880 and related
accumulated amortization of $25,134 and $998,364, respectively, from its
accounts and recognized impairment losses of $58,646 and $745,516,
respectively, on its purchased customer lists due to lack of retention in
some of its branches. Management believed that the future expected cash flows
would not be sufficient to recover the remaining unamortized costs associated
with these lists.

5. Restricted Cash

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

6. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at March 31, consist of the following:

                                               2000              1999

Trade accounts payable                         $  669,552        $  701,296
Payroll and related expenses                    1,526,877         2,027,968
Insurance                                         594,608           456,705
Sales tax                                          70,189            73,997
Accrued professional fees                         152,000           152,000
Accrued loss contingencies and settlements         75,000           160,000
Liabilities assumed in acquisitions                79,000            29,578
Other                                             160,802           105,618
                                               ----------        ----------

                                               $3,328,028        $3,707,162
                                               ==========        ==========

As of March 31, 2000 and 1999, the Company has accrued $75,000 and $160,000,
respectively, for loss contingencies and settlements in connection with
certain legal proceedings and labor claims where either a monetary settlement
has been reached or management has determined that it is probable that a
liability has been incurred.

                                                                          F-10

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

7. Short-Term Borrowings

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

                                             2000             1999

Bank line of credit                          $7,156,761       $6,943,883
Various insurance financing arrangements,
  interest ranging from 7.72% to 11.27%          35,754           35,630
Other obligations                                   -0-           16,339
                                             ----------       ----------

                                             $7,192,515       $6,995,852
                                             ==========       ==========

In February, 1995, the Company entered into an agreement with CIT
Group/Business Credit, Inc. ("CIT") under a revolving loan and security
agreement. The agreement, as amended on January 30, 1997, provides for a
discretionary line of credit of up to 85% of eligible accounts receivable, as
defined, but in no event in excess of $10,000,000. At March 31, 2000, the
Company had used $7,156,761 of this line, representing virtually 100% of its
maximum borrowing capacity. Interest is payable monthly at 1.5% over prime,
or 10.5% at March 31, 2000. The line is collateralized by customer accounts
receivable and substantially all other assets of the Company. The agreement
will currently expire in February, 2001, and provides for automatic two year
renewal terms.

8. Long-Term Debt

Long-term debt at March 31, consists of the following:

                                                   2000             1999

Gordon Robinett (Director), due October, 1999,
no interest, collateralized by related covenant    $     -0-        $  45,000

Capital Resource Company, (two notes and four
notes) due October, 2000 and June, 2001,
interest at 14%, unsecured                            57,674          166,017

Various installment loans due at various dates
through February, 2003, with interest ranging
from 3.9% to 12.25% (a)                              470,938          415,142

CIT Group/Business Credit, Inc., due February
1, 2002 interest at prime plus 1.5%, currently
 10.5% (b)                                           191,667          291,667
                                                   ---------        ---------
                                                     720,279          917,826
Current maturities                                  (410,603)        (492,677)
                                                   ---------        ---------

                                                   $ 309,676        $ 425,149
                                                   =========        =========

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

(b)  The term loan from CIT Group/Business Credit, Inc., payable in monthly
     installments of $8,333 plus interest at prime plus 1.5% per annum, is
     collateralized with security pledged under the revolving loan and
     security agreement (see Note 7).

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

Year ending: March 31, 2001      $410,603
             March 31, 2002       248,129
             March 31, 2003        61,547
                                 --------

                                 $720,279

                                                                         F-11

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

9. Stockholders' Equity

Changes in the number of equity shares of the Company's preferred and common
stock for the years ended March 31, 2000, 1999 and 1998, are as follows:

                                          Preferred    Common        Treasury
                                          Stock        Stock         Stock
                                          ---------    ---------     ----------

Balance at March 31, 1997                    -0-       8,424,332      1,355,400

Transfer of preferred stock               10,567

Preferred stock dividend shares issued       845

Common stock issued                                       57,447

Return of escrowed common stock
 o Note collateral                                                     (350,911)
 o Retention adjustment                                 (117,325)
                                          ------       ---------     ----------

Balance at March 31, 1998                 11,412       8,013,543      1,355,400

Preferred stock dividend shares issued       913

Retirement of common
  stock in treasury                                   (1,355,400)    (1,355,400)
                                          ------      ----------     ----------

Balance at March 31, 1999                 12,325       6,658,143            -0-

Return of excrowed common stock                         (150,000)

Purchase of treasury stock                                              220,800

Balance at March 31, 2000                 12,325       6,508,143        220,800
                                          ======       =========     ==========

10. Concentration of Risk

Geographic concentrations of credit risk with respect to trade receivables
are primarily in the New York Metropolitan area consisting of 45% and 41% of
total receivables as of March 31, 2000 and 1999, respectively. The remaining
trade receivables consist of a large number of customers dispersed across
many different geographic regions. During the years ended March 31, 2000,
1999 and 1998, the Company generated 38%, 31% and 31%, respectively, of its
revenue from the commercial airline industry. The Company's remaining
customers are not concentrated in any specific industry.

During the years ended March 31, 2000, 1999 and 1998, 56%, 53% and 52% of
administrative service revenue, respectively, was earned from one
administrative service client. The contract with this administrative service
client terminated in May, 2000.

The Company maintains its cash accounts in commercial banks. Accounts at each
bank are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to
$100,000. At March 31, 2000, bank balances exceeded insured balances by
approximately $1,600,000.

11. Significant Customers

During the year ended March 31, 2000, one customer accounted for
approximately $6,027,000, or 10%, of revenue. During the years ended March
31, 1999 and 1998, no customers accounted for 10% or more of revenue.

                                                                          F-12

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

12. Self-Insurance

For the years from March 1, 1997 to February 29, 2000, the Company provided a
partially self-insured health insurance program to all eligible
administrative personnel. There is a maximum loss of $30,000 per year per
employee and an aggregate amount per year, based on the number of
participants, that the Company can be responsible for. A stop-loss insurance
policy covers all claims in excess of the above amounts. As of March 1, 2000,
the Company is providing traditional fully insured coverage to its employees.
The previous partially self-insured plan provides for a three month extension
of benefit period following termination to provide for claim submission of
losses incurred prior to the terminations date. Claims submitted during the
benefit extension period, net of refunds of previously paid claims in excess
of the self-insured limits, were negligible. Amounts accrued for health
insurance under the partially self-insured plan and included in general and
administrative expenses were $326,817, $328,938 and $324,752 for the policy
years ended February 29, 2000, and February 28, 1999 and 1998, respectively,
and are based on the maximum aggregate for each year presented.

The Company has an insurance policy covering workers' compensation claims in
most states that the Company performs services. Annual premiums are based on
incurred losses as determined at the end of the coverage period, subject to a
minimum and maximum premium. Estimated accrued liabilities are based on the
Company's historical loss experience and the ratio of claims paid to industry
payout profiles. Charges for estimated workers' compensation related losses
incurred and included in cost of sales were $1,083,817, $1,137,375 and
$1,176,128 for the years ended March 31, 2000, 1999 and 1998, 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 $1,000,000 per occurrence and $10,000,000 in the
aggregate. In addition, the Company has obtained an excess general liability
insurance policy that covers claims for an additional $50,000,000 in the
aggregate ($30,000,000 prior to October 1, 1999). The Company retains the
risk for the first $50,000 per occurrence. Charges for general liability
self-insurance expense of $448,291, $572,833, and $900,128, are included in
cost of sales for the years ended March 31, 2000, 1999 and 1998,
respectively. Estimated accrued liabilities are based on specific reserves in
connection with existing claims as determined by third party risk management
consultants and actuarial factors to provide for estimated losses incurred
but not yet reported.

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 health, general liability risk 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 therefrom are reflected in current
earnings.

13. Contingent Liabilities

The Company has guaranteed three installment loans extended to two
administrative service clients and one customer list purchaser, respectively,
by Capital Resources Company. The total outstanding balance of such loans as
of March 31, 2000, was approximately $276,800. The notes mature between
September, 2000, and November, 2001, and are guaranteed by customer lists.

In May, 1996, a complaint was filed in Queens County Civil Court by three
former employees alleging emotional distress, anguish, mental distress and
injury to their professional reputation due to retaliatory discharge and
related matters. Plaintiffs each seek $2 million for compensatory damages and
$2 million in punitive damages in addition to payment of overtime wages of
$25,000. The Company's customer, also a defendant and a former employer, has
engaged counsel representing all defendants. On November 27, 1998, the Kings
County Supreme Court ruled on a motion dismissing three counts concerning
contractual allegations but allowed the remaining nine counts to proceed to
findings. At this time the Company is unable to estimate the possible loss,
if any, that may be incurred as a result of this action. The ultimate outcome
may or may not have a material impact on the Company's financial position or
results of operations.

                                                                          F-13

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

13. Contingent Liabilities, continued

In August, 1997, a complaint was filed in Los Angeles County Superior Court
by six former employees alleging discrimination, wrongful termination, breach
of employment contract and intentional infliction of emotional distress. The
complaint alleges that plaintiffs have suffered damages in excess of $1
million. After filing the complaint, the plaintiffs, through counsel, agreed
to submit the dispute to binding arbitration and a request for dismissal,
without prejudice, was filed with the Court. At this time the Company is
unable to estimate the possible loss, if any, that may be incurred as a
result of such arbitration. The ultimate outcome of such arbitration may or
may not have a material impact on the Company's financial position or results
of operations.

The Company has been named as a defendant in several other employment related
claims, including claims of sexual harassment by current and former
employees, some of which are currently under investigation by the New York
State Division of Human Rights. 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 investigation conclude that they are valid.

The Company was in negotiation with a client concerning disputed Company
charges. Subsequent to March, 31, 2000, the Company reached an agreement
whereby it has accrued $310,000 in order to retain good client relations and
to avoid litigation costs in connection with this matter. These costs have
been included in cost of sales for the year ended March 31, 2000.

The Private Placement Memorandum issued in connection with the Company's 1993
Private Placement and the interim financial reports for the first three
quarters in the fiscal years ended March 31, 1994 and 1995, filed by the
Company contained financial information which has since been restated to
correct the accounting for advances to administrative service clients as well
as union and insurance accruals. A legal action has been filed against the
Company and is described in greater detail below. It includes claims based on
the restatements. It is possible that other purchasers of Units pursuant to
the 1993 offering and the purchasers of shares in connection with the
offerings that were consummated in February, 1995, may make further claims
against the Company, alleging, as the basis, among other possible claims the
above-mentioned restatements.

On or about December 4, 1997, an outside shareholder and four of the
Company's directors (Sands, P. Kikis, Saunders and T. Kikis) commenced an
action in the Supreme Court of the State of New York, County of New York
(Index No. 606166/97) against the other four directors (Vassell, Robinett,
Nekos and Miller), the Company's outside corporate and securities counsel and
the Company itself in a lawsuit characterized as a derivative action. (The
claims against the Company's outside corporate and securities counsel have
since been dismissed.) The complaint alleges that one or more of the
defendant-directors engaged in improper activities, including ultra-vires
acts, breach of fiduciary duty, fraud against the Company, constructive fraud
and waste of corporate assets. These charges are based upon claims that the
defendant-directors concealed information from the plaintiff-directors
regarding the Company's earnings, lacked power to enter into an employment
agreement on behalf of the Company with Mr. Robinett, and entered into
administrative service agreements with financially unstable companies without
performing due diligence. The plaintiffs further allege that the Company has
failed to appoint a replacement to the office of president and that the
directors have entered into a shareholder agreement which is violative of
public policy. Plaintiffs seek the award of money damages in an amount which
is "not less than" $11 million from the individual defendants, a declaratory
judgment that the shareholder agreement is void, an order for an accounting,
certain other injunctive relief and attorneys' fees and disbursements.

The Company has interposed an answer denying the allegations contained in the
complaint. The individual defendants have stated that they believe the
allegations are completely without merit and intend to vigorously defend
against each and every claim. The Company's Certificate of Incorporation and
the Business Corporation Law of New York provide for indemnification of
officers and directors with respect to damages and legal fees incurred in
connection with lawsuits against them arising by reason of serving the
Company. Due to the fact that certain members of the board have chosen to
participate as plaintiffs in this lawsuit, the Company's carrier has reserved
its rights with respect to the defense and indemnity of the Company based on
a claimed exclusion from coverage. To date, the Company has not been notified
of declination of coverage. The Company may have a claim against its carrier
based on the carrier's failure to timely disclaim coverage. The
defendant-directors intend to seek indemnification, and have received
advancements of legal fees incurred in connection with their defense, from
the Company. Through March 31, 2000, the Company has expended and charged
earnings with approximately $204,000 in legal fees (none during the year
ended March 31, 2000) in defense of this matter on its own behalf as well as
on behalf of the defendant officers and directors. In addition, the Company
has expended $100,000 for legal fees on behalf of the plaintiff directors in
December, 1998, and accrued a $92,000 contingency for legal fees incurred by
one of the defendants, where management has determined that indemnification
by the Company is probable. On or about March 25, 1998, the plaintiffs filed
a motion for the

                                                                         F-14

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

13. Contingent Liabilities, continued

appointment of a temporary receiver. On June 5, 1998, the Court ordered the
appointment of a temporary receiver, but prior to the order taking effect,
the parties agreed to a stipulation pursuant to which Franklyn H. Snitow,
Esq., was appointed acting President and Chief Executive Officer and acting
ninth board member during the pendency of the defendants' appeal to the
Appellate Division of the decision to appoint a receiver. Based on the
stipulation, the defendants' request to the Appellate Division for a stay
pending the appeal of the order appointing the receiver was granted. On
January 12, 1999, the Appellate Division dismissed the appeal and modified
the lower court's order to continue Mr. Snitow's authority to discharge his
responsibilities as Acting President, Chief Executive Officer and Director
pending the underlying litigation. The Company is unable to reasonably
estimate the potential impact on the Company's financial condition and
results of operations from this lawsuit.

In August of 1998, the Company was informed that the US Department of
Transportation, the Federal Aviation Authority and the United States
Attorneys' Office for the Southern District of Florida were conducting a
criminal investigation of certain activities at the Miami office of its
Aviation Safeguards Division. The investigation concerned the official
certifications of employee background investigations made by the Company's
Aviation Safeguards division through its branch manager. Indications are that
the background investigations were not properly conducted and hence the
certifications were false and in violation of United States Code and
Regulations. The Company has cooperated fully with the investigation and is
taking steps to ensure future compliance in all areas covered by the
investigation. The Company's local counsel has completed negotiations with
the United States Attorney's office whereby the proposed pleas and settlement
were accepted by the United States Attorney's office and approved by the
Court. As a result of this settlement, in March, 2000, the Company paid
$35,400 and has accrued an additional $75,000, payable in three equal
installments during the year ending March 31, 2001.

14. 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 $564,900, $569,200, and $605,000, for the years ended
March 31, 2000, 1999 and 1998, respectively.

The Company leases certain equipment and vehicles under agreements which 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,
2000, are $730,163 and $246,852 and at March 31, 1999, $381,320 and $178,259,
respectively.

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

                                             Capital         Operating
                                             Leases          Leases
                                             --------        ---------

Year ending: March 31, 2001                  $157,714        $311,487
             March 31, 2002                   137,114         252,361
             March 31, 2003                   107,485         157,692
             March 31, 2004                    55,227          85,032
             March 31, 2005                    36,866          23,304
                                             --------        --------
                                              494,406        $829,876
                                                             ========
             Amounts representing interest    102,693
                                             --------
                                             $391,713
                                             ========

15. Stock Option Plan and Warrants

In May, 1990, the Company's Board of Directors and stockholders approved the
adoption of a qualified stock option plan. Under the option plan,
substantially all employees are eligible to receive options to purchase up to
an aggregate of 107,500 shares at an exercise price which cannot be less than
the fair market value of the shares on the date the options are granted.

                                                                          F-15

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

15. Stock Option Plan and Warrants, continued

The Company issued warrants to its former Treasurer to purchase 107,500
shares of its common stock at an exercise price of $5 per share. In July,
1996, the exercise price of these warrants was adjusted to $2.50 and the
expiration date extended to July, 2000.

On April 8, 1991, as amended on June 18, 1991, the Board of Directors
approved the issuance to each of the Company's President (now Chairman of the
Board) and former Treasurer, for $100, a five-year warrant to purchase
175,000 and 60,000 shares of common stock, respectively, at an exercise price
of $3.375 per share, the market value at the time of the grant. The warrants
vested on March 31, 1992. The exercise price was adjusted to $3.25, fair
value on date of adjustment, and the expiration date extended to April, 1998,
during fiscal 1994. The warrant extended to the Chairman of the Board expired
in April, 1998. The exercise price for the warrant extended to the former
Treasurer was adjusted again in July, 1996, to $2.50 per share and the
expiration date extended to July, 2000.

In May 1992, the Board of Directors approved the issuance to the Company's
Chairman, former Treasurer and Board member a five year warrant to purchase
125,000, 60,000 and 10,000 shares of common stock, respectively, at an
exercise price of $3.88 per share, the fair market value at the time of the
grant. The exercise price was adjusted to $3.25, the fair value on date of
adjustment, and the expiration date extended to May, 1999, during fiscal
1994. The exercise price for the warrant extended to the former Treasurer was
adjusted again in July, 1996, to $2.50 per share and the expiration date
extended to July, 2000. The warrants issued to the Chairman and Board member
expired in May, 1999.

Pursuant to the 1993 Private Placement (see Note 18), the Company issued Unit
Warrants to purchase an aggregate of up to 800,000 shares to investors and
warrants to purchase 160,000 shares to the placement agent. Each Unit Warrant
represents the right to purchase one-half of a share at a price of $4.50 per
full share. The placement agent warrants are exercisable at $2.50 per share.
The Company had the right to redeem the Unit Warrants at $0.10 per warrant at
any time after April 27, 1994, if, at any time, the mean of the closing
market price quotations for the shares over 20 consecutive trading days is at
least $6.00 or the closing market price quotations for the shares is at least
$6.00 for 10 consecutive trading days. During the fiscal year ended March 31,
1995, the exercise price of the Unit Warrants was adjusted to $3.50 per full
share, the fair value on the date of adjustment. The options expired in
October, 1997.

The Company entered into a consulting agreement dated November 1, 1993, under
which the Company agreed to issue stock or warrants in exchange for
consulting services. The aggregate value of such stock or warrants to be
granted will not exceed $300,000. The Company has fully expensed the
consulting fee by October, 1994. During the fiscal year ended March 31, 1994,
the Company issued warrants for 200,000 shares and in July, 1994 issued
additional warrants for 100,000 shares. The warrants expired in July, 1997,
however, the Company had reserved 150,000 shares of common stock to provide
the consultant with up to $300,000 of compensation. During the year ended
March 31, 1999, $85,979 has been paid in cash, reducing the stock to be
released to a value not to exceed $214,021. In December, 1999, the Company
entered into an agreement to pay an additional $60,000 to the consultant as
full settlement of any and all claims of the consultant in connection with
this agreement. Consequently, the 150,000 shares of the Company's common
stock held in escrow were canceled.

On December 16, 1993, the Company granted to the Chairman of the Board a
five-year warrant for 500,000 shares of common stock at an exercise price of
$3.75, the fair value at time of grant, for services rendered in connection
with the ISS acquisition. On March 31, 1995, the Chairman relinquished and
waived his right to purchase 275,000 shares underlying this warrant. The
warrant for the remaining 225,000 shares expired in December, 1998.

On September 12, 1994, the Company entered into a consulting agreement with a
firm owned by a member of the Company's Board of Directors to provide
stockholder relations for a term of one year. In conjunction with this
agreement, the Company issued certain employees of this firm warrants to
purchase up to 100,000 shares of common stock, exercisable through September
30, 1997, at exercise prices of $3.00 per share. All of the warrants expired
during the year ended March 31, 1998.

On September 28, 1994, the Company issued a warrant for 25,000 shares of
common stock exercisable at $3.63 per share in connection with the signing of
a non-employer of record administrative service agreement to provide
scheduling, payroll, billing and receivable financing services for an
independent security guard service company. The warrant expired in October,
1997.

                                                                          F-16

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

15. Stock Option Plan and Warrants, continued

On February 24, 1995, the Company issued warrants for 250,000 shares of
common stock to a firm owned by a member of the Company's Board of Directors
and warrants for 50,000 shares of common stock to a lender who provides the
Company's working capital line of credit, respectively, in connection with
the financing for the acquisitions of the security guard business of United
Security Group Inc. The warrants issued to the firm expired in February,
1998. The warrants issued to the lender are exercisable at $2.10 per share
and expire in February 2001.

On October 4, 1996, the Company issued warrants for 35,000, 150,000, 10,000
and 10,000 shares of common stock to the Company's then Chief Financial
Officer and three Board members, respectively. The warrants are exercisable
at $1.875 and expire on September 30, 2001.

On November 25, 1996, warrants to purchase 50,000 shares of common stock were
subscribed to for $500 by the Company's public relations firm. The warrants
are exercisable at $2.25 per share and expire in November, 2001.

On November 11, 1999, the Company authorized the issuance of warrants to
purchase 150,000 of common stock to a Board member in recognition of services
to the Company, at an exercise price of $1.031 per share, the fair market
value at the time of the grant. The warrants expire in November, 2004.

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                     Warrants
                   ------------------------    ---------------------------
                   Exercise       Number of    Exercise         Number of
                   Price          Shares       Price            Shares
                   -------------  ---------    --------------   ----------

Outstanding at
  March 31, 1997   $2.25 - $2.50   160,000     $1.87  - $3.75    2,530,000

Expired                                         1.87  -  2.25   (1,570,000)
                   -------------  -------      --------------   ----------

Outstanding at
  March 31, 1998    2.25 - 2.50    160,000      1.87  -  3.75      960,000

Expired                                         3.25  -  3.75     (400,000)
                   -------------  --------     --------------   ----------

Outstanding at
  March 31, 1999    2.25 -  2.50   160,000      1.87  -  3.25      560,000

Issued                                                  1.031      150,000
Expired                     2.25   (52,500)              3.25     (135,000)
                   -------------  --------     --------------   ----------

Outstanding at
  March 31, 2000   $        2.50   107,500     $1.031 - $2.50      575,000
                   =============  ========     ==============   ==========

At March 31, 2000, there were 107,500 and 575,000 options and warrants
outstanding, respectively, exercisable at prices ranging from $1.031 to
$2.50, and 730,000 shares reserved for issuance under all stock arrangements.

                                                                          F-17

<PAGE>

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

15. Stock Option Plan and Warrants, continued

Significant option and warrant groups outstanding at March 31, 2000, and the
related weighted average exercise price and life information are as follows:

                                               Weighted    Weighted
                  Options/      Options/       Average     Average
Range of          Warrants      Warrants       Exercise    Remaining
Exercise Price    Outstanding   Exercisable    Price       Life (years)
--------------    -----------   -----------    --------    ------------

         $1.031   150,000       150,000        $1.031      4.62
          1.875   205,000       205,000         1.875      1.50
2.10  to   2.50   327,500       327,500         2.401       .69
                  -------       -------

1.031 to   2.50   682,500       682,500         1.942      1.41
                  =======       =======

As disclosed in Note 1, the Company continues to follow the provisions of APB
25, "Accounting for Stock Issued to Employees," when determining the value of
stock based compensation. Accordingly, no compensation expense has been
recognized for its stock based compensation. If the Company had used the fair
value method of accounting for stock based compensation, there would have
been no effect on the net income or loss of the Company for the years ended
March 31, 2000, 1999 or 1998. The impact of the fair value method takes into
account options and warrants granted since April 1, 1995. The weighted fair
value of options and warrants granted during the year ended March 31, 2000,
was $.10 per equivalent share. There were no options or warrants issued
during the years ended March 31, 1999 or 1998. For the year ended March 31,
2000, the fair value was estimated using the exercise price on the date of
the grant and the following assumptions: risk free interest rate of 5.35%,
volatility of 62.49% and a dividend yield of 0.00%.

16. Income Taxes

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

                                       2000       1999      1998
Current:
  Federal                              $-0-       $-0-      $    -0-
  State and local                       -0-        -0-           -0-
                                       ----       ----      --------
                                         -0-        -0-          -0-

Deferred:
  Federal                               -0-        -0-       181,283
  State and local                       -0-        -0-        78,552
                                       -----      ----      --------
                                        -0-        -0-       259,835

    Income tax expense/(benefit)       $-0-       $-0-      $259,835
                                       ====       ====      ========

The deferred tax expense for March, 1998, represents an increase in the
beginning-of-year valuation allowance for deferred tax assets.

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:

                                     2000        1999       1998

Statutory federal income tax rate     34.0        34.0       34.0
State and local income taxes,
  net of federal benefit               9.8         9.8        9.8
Valuation allowance and reserves     (38.4)      (20.7)     (50.7)
Permanent differences                 (5.4)      (23.1)      (0.5)
                                     -----       -----      -----
Effective tax rate                     0.0%        0.0%      (7.4)%
                                     =====       =====      =====

                                                                          F-18

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

16. Income Taxes, continued

The significant components of deferred tax assets and liabilities as of March
31, 2000 and 1999, are as follows:

                                                  2000           1999
Current deferred tax assets:
  Accounts receivable                             $    72,507    $   124,114
  Accrued expenses                                    139,424        297,289
                                                  -----------    -----------
                                                      211,931        421,403

  Valuation allowance                                (211,931)      (421,403)
                                                  -----------    -----------

    Net current deferred tax asset                $       -0-    $       -0-
                                                  ===========    ===========

Non-current deferred tax assets/(liabilities):
  Equipment                                       $   (48,811)   $   (80,086)
  Intangible assets                                   982,898      1,131,567
  Self-insurance                                      352,898        328,727
  Net operating loss carryover                      2,192,112      1,835,867
                                                  -----------    -----------
                                                    3,479,097      3,216,075

  Valuation allowance                              (3,479,097)    (3,216,075)
                                                  -----------    -----------

    Net non-current deferred tax asset            $       -0-    $       -0-
                                                  ===========    ===========

The valuation allowance increased by $53,550, 14,962 and $1,874,080 during
the years ended March 31, 2000, 1999 and 1998, respectively. Federal and
State net operating loss carry-overs were approximately $4,818,000 and
$5,203,000, respectively, at March 31, 2000. They begin to expire in 2010.

17. Administrative Service Agreements

The Company has entered into agreements with various security guard companies
(administrative service clients) whereby the Company administers the billing,
collection and payroll functions and the administrative service clients
administer the operations of the respective guard contracts. Under these
arrangements, the Company receives title to all the receivables generated and
is obligated to pay the administrative service clients' guards and related
expenses. The transfer of receivables are accounted for as a sale/purchase in
accordance with SFAS No. 125, relating to transfers and servicing of
financial assets. Under some arrangements the Company may for Internal
Revenue reporting, workers compensation, general liability and disability
insurance coverage purposes become the employer of record for all applicable
guard personnel. Where the Company provides insurance resources, such costs
are allocated to the administrative service clients based on payroll. All
contracts contain renewal provisions based on the volume of business
generated by the respective service companies. Although title to the
receivables generated belong to the Company, the rights to service the guard
contracts are retained by the service company.

The Company records the billings for administrative service clients contracts
in accounts receivable with a corresponding liability, "due to administrative
service clients," net of the Company's administrative fees and payroll and
related expenses paid by the Company, at the time the services are provided
to the administrative service clients' customers. Receivables not collected
are charged back to the administrative service clients generally after 90
days. The administrative fees charged to the administrative service clients,
which are based on either a percentage of guard revenue or gross profit, are
recognized as "administrative service revenue" on the Company's statements of
operations.

The Company had extended various operating loans to these service companies.
Interest charged varied between 2% above the prime lending rate of the Chase
Manhattan Bank and 14% per annum. As of March 31, 2000, the Company did not
have any performing outstanding loan balances, however, the Company has
guaranteed bank loans to certain administrative service clients (see Note 13).

                                                                          F-19

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

17. Administrative Service Agreements, continued

The following is a summary of the administrative service clients' activities
for the years ended March 31, 2000, 1999 and 1998, respectively, the
components of which have been excluded from the Company's financial
statements:

<TABLE>
<CAPTION>
<S>                                                       <C>          <C>            <C>
                                                          2000         1999           1998
Employer of record administrative service revenue
  Administrative service clients' guard service revenue   $ 566,190    $ 7,528,163    $ 17,913,206
  Cost of revenue                                          (444,664)    (5,612,727)    (13,286,869)
                                                          ---------    -----------    ------------
  Gross profit                                              121,526      1,915,436       4,626,337
  Administrative service clients' share of gross profit     (87,634)    (1,468,608)     (3,551,906)
                                                          ---------    -----------    ------------
                                                             33,892        446,828       1,074,431
Non employer of record administrative service revenue       520,304        466,670         376,161
                                                          ---------    -----------    ------------

  Administrative service revenue                          $ 554,196    $   913,498    $  1,450,592
                                                          =========    ===========    ============

</TABLE>

18. Private Placements

During January and February, 1995, the Company completed several private
equity offerings including the issuance of 9,061 shares of convertible
preferred stock with a liquidation value of $165 per share for a total of
$1,495,065 (each share of preferred stock is convertible into 100 shares of
the Company's common stock, provides a yield of 8% per annum and, as of
March, 1998, was redeemable upon certain future financing events); 950,002
shares of common stock for a total of $1,377,500 pursuant to an offering
exempt from registration under Regulation D; and 1,137,506 shares of common
stock for a total of $1,287,174 pursuant to various offerings exempt from
registration under Regulation S promulgated under the Securities Act of 1933.
In addition, the Company issued warrants to purchase 250,000 shares to the
placement agent which have since expired. Proceeds to the Company, net of
placement agent fees of $356,000 and offering costs of $281,397, amounted to
$3,522,342.

In October, 1993, the Company completed a private placement of 1,600,000
units, at $2.50 per unit, each consisting of one share of the Company's
common stock and one three year redeemable warrant to purchase one-half
common share. In addition, the Company issued warrants to purchase 160,000
shares to the placement agent. Both warrants have since expired. Proceeds to
the Company, net of placement agent fees of $520,000 and offering costs of
$156,926, amounted to $3,323,074. The Company was obligated to register the
shares issued in connection with this offering by February, 1994, and
attempted to do so. The registration, however, was not completed until
November, 1995, and in December, 1994, the Company authorized the issuance of
an additional 400,000 shares to the initial investors in accordance with the
provisions of the private placement agreement.

In connection with the above private placement offerings, the Company has
certain risks that are described in Note 13.

19. 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 have been designated as Series A Convertible
Preferred Stock ("Series A").

The Series A shareholders are entitled to receive annual dividends equal to
8% of the liquidation value of their shares, payable by the issuance of
additional Series A stock until such time as all amounts due on the Deltec
debt have been paid in full and then in cash thereafter. The $1.5 million
Deltec indebtedness was repaid in full in February, 1999. During the years
ended March 31, 1999 and 1998, 913 and 845 Series A shares have been issued,
representing dividends accrued through February 24, 1999 and 1998,
respectively. Accrued dividends at March 31, 2000, were $40,674. Upon
liquidation or redemption the Series A shareholders are entitled to $165 per
share.

                                                                          F-20

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

19. Preferred Stock, continued

Any holder of Series A shares may at any time convert their shares into
common stock of the Company at a conversion ratio of 100 shares of common
stock for each share of Series A stock.

The Company was obligated to redeem any unconverted Series A shares at such
time as the Deltec debt is paid in full. However, no redemption was required
until all outstanding warrants issued in the Company's October 1993 private
placement were exercised. All such warrants expired in October, 1997, and the
Company is no longer obligated to redeem the Series A preferred stock.
Consequently, the preferred stock has been transferred and included with
stockholders' equity on the balance sheets as of March 31, 2000 and 1999.

20. Fair Value

The fair value of the Company's long-term notes receivable is based on the
current rates offered by the Company for notes of the same remaining
maturities. 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, 2000 and 1999, the fair value of
long-term notes receivable and long-term debt approximates their carrying
amounts.

21. Related Party Transactions

The Company's former general counsel is also a member of the Board of
Directors. Legal fees paid amounted to $2,394 and $6,238 for the years ended
March 31, 1999 and 1998, respectively. No legal fees were paid to this Board
member during the year ended March 31, 2000.

A director of Deltec International SA, the parent of Deltec Development
Corporation, the former subordinated debt lender to the Company, is also a
member of the Board of Directors of the Company. Interest paid in connection
with the Deltec debt amounted to $32,813, and $85,312 for the years ended
March 31, 1999 and 1998, respectively. The debt was paid in full in February,
1999. Expenses of $20,800, $20,800 and $28,100 were paid on behalf of this
director as compensation for services rendered for the years ended March 31,
2000, 1999 and 1998, respectively.

22. 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. The plan does not allow for employer
matching of elective deferrals. For the period ended March 31, 2000, no
discretionary amounts have been accrued or paid.

23. Operating Licenses

The Company is subject to regulation and licensing by various state
government agencies. The Chairman of the Company currently holds virtually
all of the required state operating licenses. In the event the Company were
to lose the services of the Chairman, an officer of the Company would have to
obtain the necessary licenses, or the Company would have to hire someone who
holds the required licenses for the Company to continue to conduct its
business.

24. Acquisitions

During fiscal years 1999 and 1998, the Company acquired several security
guard businesses, principally customer lists, for an aggregate final cost of
approximately $181,000 and $378,000, respectively, payable in cash and notes.
The Company accounted for these acquisitions using the purchase method. The
financial statements include the operations of these businesses from the
respective acquisition dates. The customer lists are being amortized over a
five year period, the estimated economic lives of the lists.

                                                                          F-21

<PAGE>

Command Security Corporation

Notes to Financial Statements, Continued
March 31, 2000, 1999 and 1998

25. Revisions

The Company has modified its financial statements for the year ended March
31, 2000, to provide for additional disclosure in connection with its
accounting policies for revenue recognition and reserves for doubtful
accounts (see Note 1), the basis for providing self-insurance reserves (see
Note 12), and its accounting for administrative service client contracts (see
Note 17). These revisions had no impact on the Company's financial condition
or results of operations for the year ended March 31, 2000.

                                                                          F-22
<PAGE>

<TABLE>
                         COMMAND SECURITY CORPORATION

                SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

<CAPTION>
                                                               Against
                                                               Amounts                                    Uncollectible
                                       Balance at   Charged to Due to           Charged                   Accounts       Balance
                                       Beginning    Costs and  Administrative   to Other                  Written        at End of
                                       of Period    Expenses   Service Clients  Accounts      Recoveries  Off            Period
                                       ----------   ---------- ---------------  --------      ----------  -------------  ----------
<S>                                    <C>          <C>        <C>              <C>           <C>         <C>            <C>
Year ended March 31, 2000:
  Deducted from asset accounts:
  Allowance for doubtful accounts
    receivable - current maturities    $  701,325   $969,937   $                $106,972<F1>  $ 71,970    $418,018       $1,288,246

  Allowance for doubtful notes
    receivable - current maturities       267,790                                 34,408        34,608     267,590              -0-

  Allowance for other doubtful
    receivables - current maturities      987,192                                                          987,192              -0-

  Allowance for doubtful notes and
    long-term receivables,
    net of current maturities                 -0-                                                                               -0-

Year ended March 31, 1999:
  Deducted from asset accounts:
  Allowance for doubtful accounts
    receivable - current maturities    $  716,347   $309,348   $(36,143)        $             $           $288,227       $  701,325

  Allowance for doubtful notes
    receivable - current maturities       273,715                88,447                         60,448      33,924          267,790

  Allowance for other doubtful
    receivables - current maturities    1,024,319     58,568    (88,447)         250,000<F2>   255,597       1,651          987,192

  Allowance for doubtful notes
    and long-term receivables,
    net of current maturities                 -0-                                                                               -0-

Year ended March 31, 1998:
  Deducted from asset accounts:
  Allowance for doubtful accounts
    receivable - current maturities    $  619,621   $376,404   $119,847         $             $  5,837    $393,688       $  716,347

  Allowance for doubtful notes
    receivable - current maturities       450,653    180,360                      37,867<F3>     1,978     393,187          273,715

  Allowance for other doubtful
    receivables - current maturities      104,138    837,129      7,000          196,829<F3>     7,000     113,777        1,024,319

  Allowance for doubtful notes and
    long-term receivables,
    net of current maturities             785,360     57,258                                   230,778      611,840             -0-

<FN>
----------------------
<F1> Represents sales tax refund claims ($85,823) and expense accrual
     reduction ($21,149).

<F2> Represents cash received for item previously removed from accounts.

<F3> Represents deferred revenue reduction related to non-performing
     receivable.

</FN>

</TABLE>
                                                                          F-23

<PAGE>

                                  SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                                  COMMAND SECURITY CORPORATION

                                  By:/s/ Franklyn H. Snitow

                                  -------------------------------------
                                  Franklyn H. Snitow

                 Acting President and Chief Executive Officer

Date:  June 28, 2000

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.

/s/ Franklyn H. Snitow        Director, Acting President         June 28, 2000
----------------------------- and Chief Executive Officer
Franklyn H. Snitow

/s/ William C. Vassell        Chairman of the                    June 28, 20000
----------------------------- Board and Director
William C. Vassell

/s/ Nathan Nelson             Chief Financial Officer            June 28, 2000
----------------------------- and Executive Vice President
Nathan Nelson

                              Vice Chairman of the               June __, 2000
----------------------------- Board and Director
Gordon Robinett

/s/ Peter T. Kikis            Director                           June 28, 2000
-----------------------------
Peter T. Kikis

/s/ Peter J. Nekos            Director                           June 28, 2000
-----------------------------
Peter J. Nekos

                              Director                           June __, 2000

-----------------------------
Gregory J. Miller

                              Director                           June __, 2000

-----------------------------
Steven B. Sands

                              Director                           June __, 2000

-----------------------------
Lloyd H. Saunders, III

/s/ Thomas P. Kikis           Director                           June 28, 2000
-----------------------------

Thomas P. Kikis