**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-K**




**x
      ANNUAL REPORT PURSUANT
      TO SECTION 13 OR 15(d) OF** **THE SECURITIES EXCHANGE ACT OF 1934**


For
      the
      fiscal year ended March 31, 2008


or




**o
      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: 001-33525




**Command
      Security Corporation**


(Exact
      name of registrant as specified in its charter)





**New
                York**
            **14-1626307***(State
                or other jurisdiction of incorporation or
                organization)*
            *(I.R.S.
                Employer Identification No.)***Lexington
                Park, Lagrangeville, New York 12540***(Address
                of principal executive
                offices)*





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




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




Title
                of each class
            
            Name
                of each exchange on which registeredCommon
                Stock, par value $0.0001 per share
            
            American
                Stock Exchange





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




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o No x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes o No x




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No o




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
      be contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K. x




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “accelerated filer,” “large accelerated filer” and smaller
      reporting company in Rule 12b-2 of the Exchange Act.




Large
                accelerated filer o
            Accelerated
                filer o
            Non-accelerated
                filer x
            Smaller
                reporting company o




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





The
      aggregate market value of the registrant’s voting and non-voting common equity
      held by non-affiliates of the registrant was $15,839,647 as of June 19,
      2008.




There
      were 10,757,216 outstanding shares of the registrant’s common stock as of June
      19, 2008.




In
      determining the market value of the voting or non-voting common equity held
      by
      non-affiliates of the registrant, securities of the registrant beneficially
      owned by the directors and officers of the registrant have been excluded. This
      determination of affiliate status is not necessarily a conclusive determination
      for any other purpose.




DOCUMENTS
      INCORPORATED BY REFERENCE




Certain
      information required by Items 10, 11, 12, 13 and 14 of Form 10-K is incorporated
      by reference into Part III hereof from the registrant’s proxy statement relating
      to the registrant’s 2008 Annual Meeting of Shareholders, which is expected to be
      filed with the Securities and Exchange Commission (the “SEC”) within 120 days of
      the close of the registrant’s fiscal year ended March 31, 2008.










**Command
      Security Corporation**


**Annual
      Report on Form 10-K**


**For
      the Fiscal Year Ended March 31, 2008**




**Table
      of Contents**




**Page****PART
                I****1.**
            **Business**
            
            **1
                - 4****1A.**
            **Risk
                Factors**
            
            **4
                - 7****1B.**
            **Unresolved
                Staff Comments**
            
            **7****2.**
            **Properties**
            
            **7
                - 10****3.**
            **Legal
                Proceedings**
            
            **10****4.**
            **Submission
                of Matters to a Vote of Security Holders**
            
            **10****PART
                II****5.**
            **Market
                for the Registrant's Common Equity, Related Stockholder Matters and
                Issuer
                Purchases of Equity Securities**
            
            **11
                - 12****6.**
            **Selected
                Financial Data**
            
            **13****7.**
            **Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations**
            
            **13
                - 22****7A.**
            **Quantitative
                and Qualitative Disclosures About Market Risk**
            
            **22****8.**
            **Financial
                Statements and Supplementary Data**
            
            **22****9.**
            **Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure**
            
            **22****9A.**
            **Controls
                and Procedures**
            
            **23****9B.**
            **Other
                Information**
            
            **23****PART
                III****10.**
            **Directors,
                Executive Officers and Corporate Governance**
            
            **24****11.**
            **Executive
                Compensation**
            
            **24****12.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters**
            
            **24****13.**
            **Certain
                Relationships and Related Transactions, and Director
                Independence**
            
            **24****14.**
            **Principal
                Accounting Fees and Services**
            
            **24****PART
                IV****15.**
            **Exhibits,
                Financial Statement Schedules**
            
            **25**










**PART
      I**




**ITEM
      1. BUSINESS.**





**General**





Command
      Security Corporation (the “Company,” or “we”) principally provides uniformed
      security officers, aviation security services and support security services
      to
      commercial, financial, industrial, aviation and governmental customers
      throughout the United States. We provide our security services to our customers
      through our security services division, our aviation services division and
      our
      support services division.





We
      provide security officer services to governmental, quasi-governmental, health,
      educational and financial institutions, residential and commercial property
      management companies, and industrial, distribution, logistics and retail
      customers through our security services division. Our security officer services
      include providing armed and unarmed uniformed security personnel for access
      control, mobile patrols, traffic control, security console/system operators,
      fire safety directors, communication, reception, concierge and front
      desk/doorman operations. Our security services division generated approximately
      $45.6 million, or 38.2% of our revenues for our fiscal year ended March 31,
      2008.





We
      provide aviation security services to airlines, airports, airport authorities
      and the general aviation community through our aviation services division.
      Our
      aviation security services include providing a variety of uniformed services
      for
      domestic and international air carriers, including aircraft security, access
      control, wheelchair escorts, skycaps, baggage handlers and uniformed security
      officers for cargo security areas. Our aviation services division generated
      approximately $73.6 million, or 61.7% of our revenues for our fiscal year ended
      March 31, 2008.





We
      provide support services to security services firms and police departments
      through our support services division. Our support services include providing
      services to security services firms under administrative service agreements
      and
      back office support services to three police departments. Support services
      generated approximately $0.2 million, or 0.1% of our revenues for our fiscal
      year ended March 31, 2008.





**Operations**





We
      conduct our operations through more than 30 of our offices located in
      California, Connecticut, Delaware, Florida, Illinois, Maine, Maryland,
      Massachusetts, Nevada, New Jersey, New York, Oregon, Pennsylvania, Texas and
      Washington. As a licensed watch guard and patrol agency, our security services
      division provides security officers to our customers to protect people and
      property and to prevent the theft of property. We principally conduct our
      security services business by providing security officers and other personnel
      who are, depending on the particular requirements of the customer, uniformed
      or
      plain-clothed, armed or unarmed, and who patrol in marked radio cars or stand
      duty on the premises at stationary posts such as fire stations, reception areas
      or video monitors. Our security officers maintain contact with their
      headquarters or supervisors via car radio, hand-held radios or cell phones.
      In
      addition to the more traditional tasks associated with access control and theft
      prevention, our security officers respond to emergency situations and report
      fires, natural disasters, work accidents and medical crises to the appropriate
      authorities. We provide security officer services to many of our industrial,
      commercial and residential property management customers on a 24-hour basis,
      365
      days per year. For these customers, security officers are on hand to provide
      plant security, access control, personnel security checks and traffic and
      parking control and to protect against fire, theft, sabotage and safety hazards.
      Our remaining customers include retail establishments, hospitals and
      governmental units. The services provided to these customers may require armed
      as well as unarmed security officers. We also provide specialized vehicle patrol
      and inspection services. During the past ten months, our security services
      division has been successful in obtaining new security services contracts for
      one of the world’s largest banking and financial services organizations, several
      major medical centers, a large grocery market distribution center and a
      distribution center for a leading national retailer of home textiles, housewares
      and home accessories.





Our
      aviation services division provides a variety of uniformed services for domestic
      and international air carriers, including aircraft security, access control,
      wheelchair escorts, skycaps, baggage handlers and uniformed security officers
      for cargo security areas. Recently, our aviation services division has been
      successful in obtaining a new service contract for multiple locations of one
      of
      the world’s largest shipping companies that commenced in August 2007 and
      continued during our third and fourth quarters of fiscal 2008.









The
      nature of our business subjects us to claims and litigation alleging that we
      are
      liable for damages as a result of the conduct of our employees or other persons
      for whom third parties have claimed we are responsible. We insure against such
      claims and litigation through general liability policies with third-party
      insurance companies. These policies have limits of $5,000,000 per occurrence.
      Effective October 1, 2006, the policy limit was increased to $7,000,000 per
      occurrence with an additional excess umbrella policy of $5,000,000. For our
      aviation services business, since October 1, 2004, we have had an insurance
      policy with a $30,000,000 limit per occurrence. Since October 1, 2006, we have
      agreed to retain the risk for the first $25,000 per occurrence on the
      non-aviation related policy that includes airport wheelchair and electric cart
      operations and $5,000 on the aviation-related policy, except for $25,000 for
      damage to aircraft and $100,000 for skycap operations.





To
      ensure
      that adequate protection requirements have been established prior to commencing
      service to a customer, we evaluate the customer's site and prepare a
      recommendation for any required changes to existing security programs or
      services. Surveys typically include an examination and evaluation of perimeter
      controls, lighting, personnel and vehicle identification and control, visitor
      controls, electronic alarm reporting systems, safety and emergency procedures,
      key controls and security force manning levels. While we prepare surveys and
      issue recommendations, the security plan and coverage requirements are
      ultimately determined by our customers.





To
      provide a high level of service, we frequently establish offices close to our
      customers and delegate responsibility and decision-making authority to our
      local
      managers. Our managers each play an important role with us and our customers,
      as
      highlighted by their responsibility for both service quality and assisting
      with
      sales and marketing efforts. We believe that, in most situations, providing
      a
      single individual with responsibility for service quality results in better
      supervision, quality control and greater responsiveness to customer needs.





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





Technology
      underpins our efficiency, accuracy and dependability. We are increasingly
      dependent on information technology networks and systems to process, transmit
      and store electronic information. In particular, we depend on our information
      technology infrastructure for electronic communications among our locations
      around the country and between our personnel and our customers and
      suppliers.





We
      use
      the latest electronic security and access control equipment, including modern
      computerized watchkey systems and sophisticated video surveillance equipment.
      Electronic accountability technology logs officer patrols and generates
      user-friendly reports for customer and internal use.





We
      use
      state-of-the-art technology for our operational needs, and to support
      efficiency, accuracy, and dependability of our general and administrative needs
      and functions. Scheduling, payroll and billing are integrated through a third
      party vendor software platform. This software platform is used to provide
      financial, labor and operations management products.





**Employee
      Recruitment and Training**





We
      believe that the quality of our security officers is essential to our ability
      to
      offer effective and reliable services to our customers. We require all selected
      applicants for security officer positions to undergo a detailed pre-employment
      interview and a background investigation covering such areas as past employment,
      education, military service, medical history and, subject to applicable state
      laws, criminal and other background searches. Employees are selected based
      on a
      number of criteria, including physical fitness, maturity, experience,
      personality, perceived stability and reliability. We frequently conduct medical
      examinations and substance abuse testing on potential candidates. Our security
      officers and other personnel supplied to our customers are our employees, even
      though they may be stationed regularly at our customer’s facilities.





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





We
      treat
      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.





2





**Significant
      Customers**





For
      the
      fiscal year ended March 31, 2008, Delta Airlines (“Delta”) accounted for
      approximately $18,100,000, or 15%, of our total revenues. See “Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations—Liquidity and Capital Resources—Financing.”





Several
      of our aviation customers filed for protection from creditors under applicable
      bankruptcy and similar laws during the past three fiscal years. The aviation
      industry continues to face various financial and other challenges, including
      the
      cost of security and higher fuel prices. Additional bankruptcy filings by
      aviation and non-aviation customers could have a material adverse impact on
      our
      liquidity, results of operations and financial condition.





**Competition**





The
      security services business is labor intensive and substantially affected by
      the
      cost of labor and by the availability of qualified personnel. Our ability to
      provide the required number of competent, trained personnel in a timely manner
      is critical to retain our business, contain payroll costs and avoid undue
      insurance exposure. To satisfy these requirements, we need to successfully
      manage human resources, manpower planning, quality control, risk management,
      general and financial management and sales and marketing.





Although
      contracts provide for termination, it is both destabilizing and expensive to
      a
      customer’s security profile to cancel and change contractors and, in general, a
      difficult decision to make. However, we believe that quality of service is
      the
      most important factor to our customers. While all security service companies
      experience customer attrition, we believe that we can minimize customer
      attrition by adhering to basic performance standards in meeting these essential
      customer requirements. We have traditionally been successful in renegotiating
      existing contracts.





Competition
      in the security service business is intense. We believe that a customer’s
      selection of a company to provide security services is based primarily on price,
      quality of services provided, scope of services performed, name recognition,
      recruiting, training and the extent and quality of security officer supervision.
      As we have expanded our operations, we have had to compete more frequently
      against larger national companies, such as Securitas North America, the
      Wackenhut Corporation, AlliedBarton Security and Guardsmark, LLC, all which
      have
      substantially greater financial and other resources, personnel and facilities
      than us. These competitors also offer a range of security and investigative
      services that are at least as extensive as, and directly competitive with,
      the
      services that we offer. In addition, we compete with many regional and local
      organizations that offer substantially all of the services that we provide.
      Although our management believes that, particularly with respect to certain
      of
      our markets, we enjoy a favorable competitive position because of our emphasis
      on customer service, supervision and training and are able to compete on the
      basis of the quality of our service, personal relationships with customers
      and
      reputation, we cannot assure you that we will be able to continue to effectively
      compete with other companies, particularly those having greater financial and
      other resources, personnel and facilities.





**Government
      Regulation**





We
      are
      subject to local and state firearm and occupational licensing laws that apply
      to
      security officers and private investigators. In addition, many states have
      laws
      requiring training and registration of security officers, regulating the use
      of
      badges and uniforms, prescribing the use of identification cards or badges,
      and
      imposing minimum bond, surety or insurance standards. We are subject to
      penalties and fines for licensing irregularities or the misconduct of our
      security officers. However, our management believes we are in material
      compliance with all applicable laws and regulations.





**Employees**





Our
      business is labor intensive and is consequently affected by the availability
      of
      qualified personnel and the cost of labor. Although the security services
      industry is characterized by high turnover, we have not experienced any material
      difficulty in hiring qualified security officers. In some cases, when labor
      has
      been in short supply, we have been required to pay higher wages and/or incur
      overtime charges. We have approximately 4,500 employees, the majority of whom
      are hourly service workers, and approximately 240 of whom serve as managers,
      administrative employees and executives.





Approximately
      54% of our employees do not belong to a labor union. The balance of our
      employees are members of labor unions including, in particular, a number of
      employees based in our New York City security services office and at our airport
      offices at John F. Kennedy, La Guardia and Los Angeles airports. Our unionized
      employees work under collective bargaining agreements with the following unions:
      Allied International Union, Allied Services Division of the Transportation
      Communications International Union and Special & Superior Officers
      Benevolent Association. Many of our competitor’s employees in Los Angeles and
      New York City are also unionized. We have experienced no work stoppage
      attributable to labor disputes. We believe that our relations with our employees
      are satisfactory. The security officers and other personnel that we provide
      to
      our customers are Company employees, even though they may be stationed regularly
      at our customer's facilities.





**Service
      Marks**





We
      believe that we own the service marks “Command Security Corporation,” “CSC” and
“CSC Plus” design for security officer, detective, private investigation
      services and security consulting services.




3




We
      also
      believe that we own the trademark “Smartwheel” for the computer program we use
      in dispatching and tracking small vehicles, such as carts and wheelchairs at
      transportation terminals. This trademark was acquired as part our acquisition
      of
      United Security Group, Inc. We also believe that we own the service marks
“STAIRS” and “Smart Guard.”





**ITEM
      1A. RISK FACTORS.**





In
      addition to the other information set forth in this Annual Report on Form 10-K,
      you should carefully consider the following factors that could materially affect
      our business, financial condition or future operating results. The risks
      described below are not the only risks facing our Company. Additional risks
      and
      uncertainties not currently known to us or that we currently deem to be
      immaterial also may materially adversely affect our business, financial
      condition or operating results.





**Airline
      Industry Concerns**





Several
      of our aviation customers filed for protection from their creditors under
      applicable bankruptcy and similar laws during our past three fiscal years.
      The
      aviation industry continues to face various financial and other challenges,
      including the cost of security and higher fuel prices. Additional bankruptcy
      filings by aviation and non-aviation customers could have a material adverse
      impact on our liquidity, results of operations and financial condition.





**Acquisitions**





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





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





·
            dilutive
                issuances of equity securities;


·
            incurrence
                of additional debt and contingent
                liabilities;


·
            increased
                amortization expenses related to intangible
                assets;


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


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





We
      currently have no commitments or agreements with respect to any acquisition.
      Further, we cannot assure you that we will be able to complete additional
      acquisitions that we believe are necessary to complement our growth strategy
      on
      acceptable terms, or at all. Further, if we do not successfully integrate the
      operations of any companies that we have acquired or subsequently acquire,
      we
      may not achieve the potential benefits of such acquisitions.





**Additional
      Financing**





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





**Competition**





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




4


**Service
      Contracts**





Our
      largest expenses are for payroll and related taxes and employee benefits. Most
      of our service contracts provide for fixed hourly billing rates. Competitive
      pressures in the security and aviation services industries may prevent us from
      increasing our hourly billing rates on contract anniversary or renewal dates.
      Our profitability will be adversely affected if we are compelled to increase
      the
      wages, salaries and related benefits of our employees in amounts that exceed
      the
      amount that we can pass on to our customers through increased billing rates
      charged under our service contracts.





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





**Staffing**





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





**Changes
      in Accounting Standards and Taxation Requirements**





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





**Collective
      Bargaining Agreements and Organized Labor Action**





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





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





**Cost
      Management**





Our
      ability to realize expectations will be largely dependent upon management and
      our ability to maintain or increase gross margins, which in turn will be
      determined in large part by management's ability to control our expenses.
      However, to a significant extent, certain costs are not within the control
      of
      management, and margins may be adversely affected by a number of items,
      including litigation expenses, fees incurred in connection with extraordinary
      business transactions, inflation, labor unrest, increased payroll and related
      costs. Our business, financial condition and results of operations will be
      adversely affected if the costs associated with these items are greater than
      we
      anticipate.





**Collection
      of Accounts Receivable**





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





**Loss
      of Large Customers**





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




5




**Loss
      of Key Management Personnel**





Our
      success depends to a significant extent upon the talents and efforts of our
      key
      management personnel, several of whom have been with our company or have worked
      in our industry for decades. We have programs in place that have been designed
      to motivate, reward and retain such employees, including cash bonus and equity
      incentive plans. The loss or unavailability of any such management personnel,
      due to retirement, resignation or otherwise could have a material adverse effect
      on our business, financial condition and results of operations if we are unable
      to attract and retain highly qualified replacement personnel on a timely basis,
      or at all.





**Concentration
      of Stock Ownership**





Although
      none of our directors and officers has any agreement relating to the manner
      in
      which they will vote their shares of our common stock, such parties together
      own
      shares representing approximately 51% of the combined voting power of our
      outstanding common stock. The concentration of ownership among these
      shareholders could give them the power to influence the outcome of substantially
      all matters subject to a vote of our shareholders, including mergers,
      consolidations and the sale of all or substantially all of our assets. Such
      decisions may conflict with the interests of our other
      shareholders.





**Stock
      Price Volatility**





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





**Information
      Systems/Technology**





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





Changes
      in technologies that provide alternatives to security officer services or that
      decrease the number of security officers required to effectively perform their
      services may decrease our customers’ demand for our security officer services.
      In addition, if such technologies become available generally for use in the
      industry, these technologies may be proprietary in nature and not be available
      for use by us in servicing our customers. Even if these technologies are
      available for use by us, we may not be able to successfully integrate such
      technologies into our business or we may be less successful in doing so than
      our
      competitors or new entrants in the industry. A decrease in the demand for our
      security officer services or our inability to effectively utilize such
      technologies may adversely affect our business, financial condition and results
      of operations.





**Regulation**





If
      the
      current regulation and federalization of pre-board screening services provided
      by us is expanded into other areas such as general security and baggage handling
      at aviation facilities, our business, financial condition and results of
      operations could be materially adversely affected. In addition, our current
      and
      future operations may be subject to additional regulation as a result of, among
      other factors, new statutes and regulations and changes in the manner in which
      existing statutes and regulations are or may be interpreted.





**Catastrophic
      Events**





We
      are
      exposed to potential claims for catastrophic events, such as acts of terrorism,
      or based upon allegations that we failed to perform our services in accordance
      with contractual or industry standards. Our insurance coverage limits are
      currently $5,000,000 and $30,000,000 per occurrence for guard and aviation
      services, respectively. Effective October 1, 2006, the policy limit for guard
      services was increased to $7,000,000 per occurrence with an additional excess
      umbrella policy of $5,000,000. **** We
      retain
      the risk for the first $25,000 per occurrence on the non-aviation related policy
      that includes airport wheelchair and electric cart operations and $5,000 on
      the
      aviation related policy (except $25,000 for damage to aircraft and $100,000
      for
      skycap operations). The Terrorism Risk Insurance Act of 2002 established a
      program within the United States Department of the Treasury, under which the
      federal government shares, with the insurance industry, the risk of loss from
      future “acts of terrorism,” as defined in the Act. We do not currently maintain
      additional insurance coverage for losses arising from “acts of terrorism.” In
      addition, terrorist attacks could have a material impact on us by increasing
      our
      insurance premium costs or making adequate insurance coverage
      unavailable.




6




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





None.




**ITEM
      2. PROPERTIES.**





As
      of
      March 31, 2008, we did not own any real property. We occupy executive offices
      at
      Route 55, Lexington Park, Lagrangeville, New York, consisting of approximately
      6,600 square feet with a base annual rental of $105,600 under a five-year lease
      expiring September 30, 2010. We also lease the following offices:


**Location**48521
                Warm Springs BoulevardSuite
                301-302Fremont,
                CA8939
                S. Sepulveda BoulevardSuites
                201 & 208Los
                Angeles, CALos
                Angeles International AirportTom
                Bradley Terminal380
                World Way, Suite 4121Los
                Angeles, CA2230
                S. Fairview AvenueSanta
                Ana, CA3180
                University Avenue, Suite 100San
                Diego, CANorman
                Y. Mineta San Jose Int’l Airport1661
                Airport BoulevardSan
                Jose, CASan
                Jose Int'l. Airport1400
                Coleman AvenueSuites
                D24 & D25Santa
                Clara, CA2194
                Edison AvenueSuite
                1San
                Leandro, CA100
                Wells Street#2ABHartford,
                CT




7




2777
                Summer StreetSuite
                208AStamford,
                CTSuite
                208 Wilson Building3511
                Silverside RoadConcord
                PlazaWilmington,
                DE4901
                N.W. 17th WaySuite
                505Ft.
                Lauderdale, FL800
                Virginia AvenueSuite
                53Ft.
                Pierce, FL5775
                Blue Lagoon DriveSuite
                310Miami,
                FL9730
                South Western AvenueEvergreen
                Plaza Shopping CenterEvergreen
                Park, ILPortland
                International Airport1001
                Westbrook StreetPortland,
                ME780
                Elkridge Landing RoadSuite
                220Linthicum
                Heights, MD21
                Cummings ParkSuite
                224Woburn,
                MA186
                Stafford StreetSpringfield,
                MA1601
                & 1605 Main StreetSpringfield,
                MA1280
                Route 463rdFloorParsippany,
                NJ2204
                Morris AvenueSuite
                302, 3rdFloorUnion,
                NJ




8




52
                Oswego StreetBaldwinsville,
                NY2144
                Doubleday AvenueBallston
                Spa, NY4099
                Genesee StreetCheektowaga,
                NYLaguardia
                Int'l. AirportUnited
                Hangar #2, Rooms 328 & 329Flushing,
                NYJFK
                International Airport175-01
                Rockaway BoulevardJamaica,
                NY17
                Battery PlaceSuite
                223New
                York, NY720
                Fifth Avenue10thFloorNew
                York, NY22
                IBM RoadSuite
                105Poughkeepsie,
                NYTwo
                Gannett DriveSuite
                208White
                Plains, NYPortland
                International Airport700
                NE Airport WaySuite
                D2404Portland,
                OR29
                Bala AvenueSuite
                118Bala
                Cynwyd, PAInternational
                Plaza 2Suite
                242Philadelphia,
                PA




9




Pittsburgh
                International AirportTicketing
                Level of the Landside Terminal BuildingPittsburgh,
                PA1250
                Capital of Texas Highway SouthBuilding
                III, Suite 400Austin,
                TXSeattle-Tacoma
                Int’l. AirportMain
                Terminal Building Ticketing LevelRoom
                MT3469BSeattle,
                WA





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





**ITEM
      3. LEGAL PROCEEDINGS.**





Except
      as
      described below, we are not a party to any material pending legal proceedings,
      other than ordinary routine litigation incidental to our business.





The
      nature of our business subjects us to claims or litigation alleging that we
      are
      liable for damages as a result of the conduct of our employees or others. Except
      for such litigation incidental to our business and other claims or actions
      that
      are not material, there are no pending legal proceedings to which we are a
      party
      or to which any of our property is subject.





The
      nature of our business is such that there is a significant volume of routine
      claims and lawsuits against us, the vast majority of which have never led to
      the
      award of substantial damages. We maintain general liability and workers’
compensation insurance coverage that we believe is appropriate to the relevant
      level of risk and potential liability. Some of the claims brought against us
      could result in significant payments; however, the exposure to us for general
      liability claims is limited to the first $25,000 per occurrence on the
      non-aviation and airport wheelchair and electric cart operations related claims
      and $5,000 per occurrence on the aviation related claims, except $25,000 for
      damage to aircraft and $100,000 for skycap operations. Any punitive damage
      award
      would not be covered by our general liability insurance policy. Also, the
      premiums we pay under our insurance policies may be adversely affected by an
      unfavorable claims history.





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





No
      matters were submitted to a vote of our security holders during the last quarter
      of our fiscal year ended March 31, 2008.




10




**PART
      II**





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




Our
      common stock was quoted on the OTC Bulletin Board Service until June 7, 2007
      under the symbol “CMMD.OB.” On June 8, 2007, our shares of common stock began
      trading on the American Stock Exchange (the “AMEX”) under the ticker symbol
“MOC.”





The
      following table sets forth, for the calendar periods indicated, the high and
      low
      sales price for our common stock as reported by the OTC Bulletin Board Service
      (until June 7, 2007) and AMEX (since June 8, 2007), for each full quarterly
      period within the two most recent fiscal years.





Common stock market priceLast Sales Price Period (1)
            
            High
            
            Low2008First
                Quarter
            
            $
            3.25
            
            $
            2.70Second
                Quarter
            
            
            3.40
            
            
            2.55Third
                Quarter
            
            
            3.60
            
            
            2.70Fourth
                Quarter
            
            
            4.43
            
            
            3.352007First
                Quarter
            
            $
            2.68
            
            $
            2.20Second
                Quarter
            
            
            2.80
            
            
            2.20Third
                Quarter
            
            
            2.90
            
            
            2.40Fourth
                Quarter
            
            
            3.40
            
            
            2.65











(1)
      Reflects fiscal years ended March 31, 2008 and 2007 as indicated.





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





As
      of
      June 20, 2008 there were approximately 1,000 holders of our common
      stock.





We
      have
      never paid cash dividends on our common stock. Payment of dividends on our
      common stock, if any, will be within the discretion of our Board of Directors
      and will depend, among other factors, on approval of our principal lender,
      earnings, capital requirements and our operating and financial condition. At
      present, our anticipated capital requirements and growth plans are such that
      we
      intend to follow a policy of retaining earnings, if any, in order to finance
      our
      business operations and any growth in our business.




11




The
      graph
      below compares the cumulative total shareholder return on common shares with
      the
      cumulative total return of (1) the Nasdaq Stock Market Index (U.S.) (the “Nasdaq
      Index”) and (2) an index of publicly traded companies with a Standard Industrial
      Classification Code (“SIC Code”) of between 7380 and 7389 (the “SIC Code
      Index”). This graph assumes that $100 was invested in each of (A) shares of our
      common stock, (B) the Nasdaq Index and (C) the SIC Code Index on March 31,
      2003
      and reflects the return through March 31, 2008 and assumes the reinvestment
      of
      dividends, if any. The comparisons in the graph below are based on historical
      data and are not indicative of, or intended to forecast, possible future
      performance of our Common Stock.





Command Security Corporation graph





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





12





**ITEM
      6. SELECTED FINANCIAL DATA.**





The
      financial data included in the table below has been derived from our financial
      statements as of and for the fiscal years ended March 31, 2008, 2007, 2006,
      2005
      and 2004, which have been audited by independent certified public accountants.
      This information should be read in conjunction with “Item 7. Management’s
      Discussion and Analysis of Financial Condition and Results of Operations” and
      with the financial statements and related notes included in the Annual
      Repor t
      on Form
      10-K. The dollar amounts presented below in this Item 6 are in thousands of
      dollars, except for weighted average number of common shares and per share
      data.


Statements
                  of Operations DataYears
                  Ended March 31,2008
              
              2007
              
              2006
              
              2005
              
              2004Revenue
              
              
              119,404
              
              
              93,823
              
              
              85,209
              
              
              79,655
              
              
              75,905Gross
                  profit
              
              
              16,242
              
              
              13,665
              
              
              11,420
              
              
              10,523
              
              
              10,960Operating
                  income (loss)
              
              
              2,969
              
              
              1,135
              
              
              8
              
              
              (289
              )
              
              195Net
                  income (loss)
              
              
              2,474
              
              
              1,240
              
              
              (100
              )
              
              (390
              )
              
              (310
              )Income
                  (loss) per common share
              
              
              .23
              
              
              .12
              
              
              (.01
              )
              
              (.06
              )
              
              (.08
              )Weighted
                  average number of common shares
              
              
              10,733,797
              
              
              10,137,970
              
              
              8,834,952
              
              
              7,302,738
              
              
              6,287,343


Balance
                Sheet Data At March 31,2008
            
            2007
            
            2006
            
            2005
            
            2004Working
                capital
            
            
            6,097
            
            
            6,514
            
            
            6,838
            
            
            3,679
            
            
            2,549Total
                assets
            
            
            32,786
            
            
            25,330
            
            
            18,113
            
            
            16,511
            
            
            21,927Short-term
                debt (1)
            
            
            8,775
            
            
            8,751
            
            
            3,475
            
            
            4,866
            
            
            9,519Long-term
                debt (2)
            
            
            18
            
            
            16
            
            
            57
            
            
            81
            
            
            221Stockholders'
                equity
            
            
            13,360
            
            
            9,104
            
            
            7,625
            
            
            4,409
            
            
            4,494





(1)
            Our
                short-term debt includes the current maturities of long-term debt,
                obligations under capital leases and short term borrowings. See Notes
                7, 8
                and 16, “Short-Term Borrowings”, “Long-Term Debt” and “Lease Commitments”,
                respectively, to the financial statements for further
                discussion.(2)
            Our
                long-term debt includes the long-term portion of obligations under
                capital
                leases.





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





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





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




13




**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES.**





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





**Principles
      of Consolidation**





The
      accompanying consolidated financial statements include our accounts and accounts
      of our wholly-owned domestic subsidiaries. All significant intercompany accounts
      and transactions have been eliminated in our consolidated financial
      statements.





**Estimates**





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





**Revenue
      Recognition**





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





**Trade
      Receivables**





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





**Intangible
      Assets**





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





**Insurance
      Reserves**





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





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




14


**Income
      Taxes**





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





**Accounting
      for Stock Options**





In
      December 2002 the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      148, (“SFAS 148”), "Accounting for Stock-Based Compensation-Transition and
      Disclosure", an amendment of SFAS No. 123, (“SFAS 123”), “Accounting for
      Stock-Based Compensation” to provide alternative methods of transition for a
      voluntary change to the fair value based method of accounting for stock-based
      compensation. Since SFAS 148 was adopted during fiscal year ended March 31,
      2003, we could elect to adopt any of the three transitional recognition
      provisions. We adopted the prospective method of accounting for stock-based
      compensation.





In
      December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based
      Payment” (“SFAS 123R”), which replaced SFAS 123. SFAS 123R requires all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the financial statements based on their fair values at
      grant
      date and the recognition of the related expense over the period in which the
      share-based compensation vests. We were required to adopt the provisions of
      SFAS
      123R effective July 1, 2005 and use the modified-prospective transition method.
      Under the modified-prospective method, we recognize compensation expense in
      our
      financial statements issued subsequent to the date of adoption for all
      share-based payments granted, modified or settled after July 1, 2005. The
      adoption of SFAS 123R resulted in a non-cash charge of $239,900, $226,550 and
      $377,750 for stock based compensation for the years ended March 31, 2008 and
      2007 and nine months ended March 31, 2006, respectively. Such non-cash charge
      would have been the same under the provisions of SFAS 148.





**OVERVIEW**





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





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




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





**RESULTS
      OF OPERATIONS**





**Earnings**





We
      reported net income for the fiscal year ended March 31, 2008 of $2,473,585.
      The
      net income primarily resulted from: (i) the continuing growth and expansion
      of
      our aviation and security services divisions including the acquisitions of
      security services businesses in California and Maryland; (ii) lower workers’
compensation insurance costs reflecting our ongoing commitment to implement
      loss
      prevention practices in the workplace, provide safety training to our employees
      and reduce the frequency and severity of job-related claims incurred; (iii)
      greater leveraging of our general and administrative expenses; (iv) a recovery
      related primarily to the stock that we received under our claim associated
      with
      the bankruptcy filing of Northwest Airlines and (v) an income tax benefit
      associated with the recognition of deferred tax assets. Partially offsetting
      the
      net income were: (i) higher labor ratio margins for both our aviation and
      security services divisions due mainly to increases in wages, salaries and
      related taxes and benefits of our employees at rates in excess of the amount
      that we are willing to pass on to our customers through increased billing rates
      charged under our service contracts; (ii) the loss of document verification
      services to the Transportation Security Administration (“TSA”), as discussed
      below; (iii) increased overhead costs at John F. Kennedy International Airport
      (“JFK”) resulting from a shortage of manpower needed to meet increased demand
      for services; and (iv) additional investment in our sales and marketing group.





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




15




**Revenues**





Revenues
      for the fiscal year ended March 31, 2008 increased by $25,581,319, or 27.3%,
      to
      $119,403,865 from $93,822,546 in fiscal year 2007. The increase resulted
      primarily from: (i) incremental revenues of approximately $11,395,000 associated
      with the acquisitions of security services businesses in California and Maryland
      in April 2007 and January 2008, respectively; (ii) approximately $9,172,000
      from
      new and existing airline customers at our terminal operations in Los Angeles
      and
      John F. Kennedy International Airports; (iii) approximately $2,473,000 due
      mainly to expanded services with an existing major medical center, a new
      contract to provide security services to a New York based metropolitan hospital
      center and the expansion of domestic services with a major international
      commercial bank; (iv) approximately $1,072,000 from expanded services at San
      Jose International Airport in California and LaGuardia Airport in New York;
      (v)
      approximately $1,300,000 due to new contracts that commenced during fiscal
      2007
      with groups of airlines at new airport locations in Oakland, California and
      Seattle, Washington; and (vi) expanded security services to new customers in
      the
      New England region. These increases in revenues were partially offset by: (i)
      the loss of revenues at seven domestic airport locations of approximately
      $2,000,000 due to a change in government regulations that requires the TSA
      to
      provide certain document verification services that we formerly provided at
      these airports and (ii) the termination in fiscal 2007 of a short-term contract
      to provide security services to a national insurance company at multiple
      domestic locations, which generated revenues of approximately $840,000 in the
      prior year.





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





**Gross
      Profit**





Our
      gross
      profit for the fiscal year ended March 31, 2008 increased by $2,577,045, or
      18.9%, to $16,242,277 (13.6% of revenues) from $13,665,232 (14.6% of revenues)
      for fiscal 2007. The increase resulted primarily from: (i) our acquisitions
      of
      security services businesses in California and Maryland; (ii) expanded aviations
      services at the airports described above, with the exception of JFK (see below);
      (iii) lower workers’ compensation costs. The increase in our gross profit was
      partially offset by: (i) higher labor ratio margins for both our aviation and
      security services divisions due mainly to increases in wages, salaries and
      related taxes and benefits of our employees at rates in excess of the amount
      that we are willing to pass on to our customers through increased billing rates
      charged under our service contracts; (ii) the loss of the TSA document
      verification services, as described above; (iii) higher overhead costs at JFK
      resulting from a shortage of manpower needed to meet increased demand for
      services; (iv) the absence of a short-term contract to provide security services
      to a national insurance company at multiple domestic locations; and (v) the
      loss
      of service fees under our service agreement contracts that were discontinued
      during fiscal 2007.





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





We
      have
      an insurance policy covering workers’ compensation claims in States in which we
      perform services. Estimated accrued liabilities are based on our historical
      loss
      experience and the ratio of claims paid to our historical payout profiles.
      Charges for estimated workers’ compensation related losses incurred and included
      in cost of sales were $1,609,009, $2,042,618 and $2,881,041, for the fiscal
      years ended March 31, 2008, 2007 and 2006, respectively.





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




16


**General
      and Administrative Expenses**





General
      and administrative expenses increased by $1,109,417 to $13,425,162 (11.2% of
      revenues) for the fiscal year ended March 31, 2008 from $12,315,745 (13.1%
      of
      revenues) in fiscal 2007. The increase resulted primarily from: (i) higher
      administrative payroll costs associated mainly with expanded operations,
      including the acquisitions noted above, and additional investment in our sales
      and marketing group; (ii) professional and related fees principally associated
      with settlement of employment related claims; (iii) facility costs; (iv)
      amortization costs associated with the acquisitions noted above; (v) stock
      compensation costs; and (vi) expenses associated with our (A) reporting,
      compliance and other obligations under applicable securities laws, (B)
      advertising and promotion including our participation in an annual security
      industry conference program and (C) the initial listing of our common shares
      on
      the American Stock Exchange. The increases in our general and administrative
      expenses were partially offset by lower professional fees of approximately
      $1,646,000 related primarily to the expiration in December 2006 of our
      consulting agreement with Giuliani Security & Safety LLC.





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





**Provision
      for Doubtful Accounts**





The
      provision for doubtful accounts increased by $91,557 to $359,675 for the fiscal
      year ended March 31, 2008 compared with $268,118 in fiscal 2007. The increase
      was due mainly to the timing and amounts of uncollectible accounts charged
      and/or credited to expense between the current and prior year
      periods.





The
      provision for doubtful accounts decreased by $894,055 to $268,118 for the fiscal
      year ended March 31, 2007 compared with $1,162,173 in fiscal 2006. The decrease
      was due mainly to the absence of an additional provision for bad debts of
      $850,000 in fiscal 2006 related to the filing by Delta Air Lines and Northwest
      Airlines of voluntary petitions for reorganization under Chapter 11 of the
      U.S.
      Bankruptcy Code.





We
      periodically evaluate the requirement for providing for billing adjustments
      and/or credit losses on our accounts receivable. We provide for billing
      adjustments where our management determines that there is a likelihood of a
      significant adjustment for disputed billings. Criteria used by management to
      evaluate the adequacy of the allowance for doubtful accounts include, among
      others, the creditworthiness of the customer, current trends, prior payment
      performance, the age of the receivables and our overall historical loss
      experience. Individual accounts are charged off against the allowance as
      management deems them as uncollectible. We do not know if bad debts will
      increase in future periods nor does our management believe that the increase
      during the fiscal year ended March 31, 2008 compared with the same period of
      the
      prior year is necessarily indicative of a trend.





**Bad
      Debt Recoveries**





Bad
      debt
      recoveries increased for the fiscal year ended March 31, 2008 by $458,364 to
      $511,593 from $53,229 in fiscal year 2007 as a result of a recovery of
      approximately $412,000 related primarily to the stock that we received under
      our
      claim related to the bankruptcy filing of Northwest Airlines.





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





**Interest
      Income**





Interest
      income for the fiscal year ended March 31, 2008 principally represents interest
      earned on: (i) cash balances and (ii) trust funds for potential future workers’
compensation claims. Interest income in fiscal 2008 decreased as a result of
      the
      loss of financing income from our service agreement contracts which were
      discontinued during fiscal 2007 and lower trust fund balances due to favorable
      trending for potential future workers’ compensation claims.





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




17




**Interest
      Expense**





Interest
      expense for the fiscal year ended March 31, 2008 increased by $215,904 to
      $783,669 from $567,765 in fiscal year 2007. The increase is due mainly to higher
      average outstanding borrowings under our commercial revolving loan agreement,
      partially offset by lower weighted average interest rates.





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





**Equipment
      Dispositions**





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





The
      $3,040 gain on equipment dispositions for the fiscal year ended March 31, 2008
      was primarily due to the disposition of Company vehicles at amounts in excess
      of
      their respective book values.





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





**Sale
      of Investments**





The
      $50,007 gain on sale of investments for the fiscal year ended March 31, 2008
      represents proceeds in excess of carrying amount for the sale of stock received
      under our claim related to the bankruptcy filing of United
      Airlines.





**Income
      Tax Benefit**





Income
      tax benefit for the fiscal year ended March 31, 2008 decreased $290,000 to
      $160,000 from $450,000 in fiscal year 2007 due mainly to an increase in our
      pre-tax earnings which were offset by recognition of our deferred tax assets.
      We
      have determined based on our expectations for the future that it is more likely
      than not that future taxable income will be sufficient to utilize fully the
      net
      deferred tax assets at March 31, 2008 and 2007.





Income
      tax benefit for the fiscal year ended March 31, 2007 increased $383,605 to
      $450,000 from $66,395 in fiscal year 2006 due primarily to our recognition
      of a
      portion of our deferred tax assets.




18


**LIQUIDITY
      AND CAPITAL RESOURCES**





We
      pay
      employees and administrative service customers on a weekly basis, while
      customers pay for services generally within 60 days after billing by us. In
      order to fund our payroll and operations, we maintain a commercial revolving
      loan arrangement, currently with CIT Group/Business Credit, Inc. (“CIT”).





Our
      principal use of short-term borrowings is for carrying accounts receivable.
      Our
      short-term borrowings have supported the increase in accounts receivable
      associated with: (i) our ongoing expansion and organic growth; (ii) the October
      1, 2006 change in a majority of Delta Airline’s billing and payment terms from
      monthly invoices prepaid in advance to weekly invoices due in thirty (30) days;
      and (iii) our acquisitions of Expert Security Services, Inc. and Brown Security
      Industries, Inc. on January 1, 2008 and April 12, 2007, respectively (see Note
      9). We will continue to use our short-term borrowings to support our working
      capital requirements.





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





**CIT
      Revolving Loan**





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




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




On
      April
      12, 2007, we entered into an amendment to the Amended and Restated Agreement
      (“the Amended Agreement”). Pursuant to the Amended Agreement, the aggregate line
      of credit was increased from $12,000,000 to $16,000,000, and we were provided
      with a $2,400,000 acquisition advance to fund the cash requirements associated
      with the acquisition of a security services business (see Note 9) The Amended
      Agreement also provides for an extension of the maturity date of the Amended
      Agreement to December 12, 2008, and for reductions in fees and availability
      reserves and an increase in the letter of credit sub-line to an aggregate amount
      of up to $3,000,000. The Amended Agreement provides that interest will be
      calculated on the outstanding principal balance of the revolving loans at the
      prime rate, (as defined in the Amended Agreement), less .25% and for LIBOR
      loans, interest will be calculated on the outstanding principal balance of
      the
      LIBOR loans at the LIBOR rate, (as defined in the Amended Agreement), plus
      2.0%.





As
      of
      March 31, 2008, the interest rates were 5.00% and 5.10% for revolving and LIBOR
      loans, respectively. Closing costs for the Amended Agreement totaled $158,472,
      including $125,000 payable to the lender, with $45,000 due at closing, $40,000
      due six months after closing and $40,000 due twelve months after closing, and
      $33,472 in legal costs incurred in connection with the transaction. Such costs
      are being amortized over the remaining life of the Amended Agreement.





At
      March
      31, 2008, we had borrowed $2,752,433 in revolving loans, $6,000,000 in LIBOR
      loans and had a $70,000 letter of credit outstanding representing approximately
      72% of the maximum borrowing capacity under the Amended Agreement based on
      our
“eligible accounts receivable” (as defined under the Amended Agreement) as of
      such date. However, as our business grows and produces new receivables (as
      to
      which no assurance can be given), up to an additional $7,177,567 could be
      available to borrow under the Amended Agreement.





We
      rely
      on our revolving loan from CIT which contains a fixed charge covenant and
      various other financial and non-financial covenants. If we breach a covenant,
      CIT has the right to immediately request the repayment in full of all borrowings
      under the Amended Agreement, unless CIT waives the breach. For the fiscal year
      ended March 31, 2008, we were in compliance with all covenants under the Amended
      Agreement.




19




**Cash
      Flows**





The
      following table summarizes our cash flow activity for the fiscal years ended
      March 31, 2008, 2007 and 2006:





**2008**
            
            **2007**
            
            **2006**Net
                cash provided by (used in) operating activities
            
            $
            2,145,225
            
            $
            (4,001,190
            )
            $
            (4,941,428
            )Net
                cash used in investing activities
            
            
            (2,277,876
            )
            
            (639,633
            )
            
            (179,988
            )Net
                cash provided by financing activities
            
            
            59,393
            
            
            4,828,620
            
            
            2,642,609





**Investing**





We
      finance vehicle purchases typically over three years and insurance through
      short-term borrowings. We have no present material commitments for capital
      expenditures.





**Financing**





During
      the fiscal year ended March 31, 2008, we increased our short-term borrowings
      principally to support higher accounts receivable associated with: (i) our
      ongoing expansion and organic growth; (ii) the October 1, 2006 change in a
      majority of Delta Airline’s billing and payment terms from monthly invoices
      prepaid in advance to weekly invoices due in thirty (30) days; and (iii) our
      acquisitions of Expert Security Services, Inc. and Brown Security Industries,
      Inc. on January 1, 2008 and April 12, 2007, respectively (see Note
      9).





**Working
      Capital**





Working
      capital decreased by $416,627 to $6,097,036 as of March 31, 2008, from
      $6,513,663 as of March 31, 2007.





We
      experienced checks issued in advance of deposits (defined as checks drawn in
      advance of future deposits) of $1,962,314 as of March 31, 2008, compared with
      $1,760,155 at March 31, 2007. Cash balances and book overdrafts can fluctuate
      materially from day to day depending on such factors as collections, timing
      of
      billing and payroll dates, and are covered via advances from the revolving
      loan
      as checks are presented for payment.





**Off-Balance
      Sheet Arrangements**





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





**Contractual
      Obligations**





The
      impact that our contractual obligations as of March 31, 2008 are expected to
      have on our liquidity and cash flow in future periods is as
      follows:





**Payments
                Due by Period****Total**
            
            **Less than 1 Year**
            
            **1-3 Years**
            
            **3-5 Years**
            
            **More than 5**
              **Years**Long-term
                debt obligations
            
            $
            5,901
            
            $
            5,901
            
            $
            —
            
            $
            —
            
            $
            —Capital
                lease obligations
            
            
            34,688
            
            
            17,100
            
            
            17,588
            
            
            —
            
            
            —Operating
                lease obligations
            
            
            2,710,018
            
            
            1,202,453
            
            
            1,287,697
            
            
            219,868
            
            
            —Purchase
                obligations (1)
            
            
            238,853
            
            
            91,322
            
            
            147,531
            
            
            —
            
            
            —Total
            
            $
            2,989,460
            
            $
            1,316,776
            
            $
            1,452,816
            
            $
            219,868
            
            $
            —





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





**OUTLOOK**





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




20




**Financial
      Results**





Future
      revenue will be largely dependent upon our ability to gain additional revenues
      in the security and aviation services divisions at acceptable margins while
      minimizing terminations of contracts with existing customers. The revenues
      of
      our security services division has stabilized and has started to experience
      both
      organic and transactional growth over recent months after a reduction over
      the
      past few years as contracts with unacceptable margins were cancelled. Our
      current focus is on increasing revenue while our marketing and sales team and
      branch managers work to sell new business and retain profitable contracts. The
      airline industry continues to increase its demand for services provided by us.
      However, our aviation services division is continually subject to government
      regulation, which has adversely affected us in the past with the federalization
      of the pre-board screening services and most recently with the ongoing
      federalization of the document verification process at several of our domestic
      airport locations.





Our
      gross
      profit margin decreased during the fiscal year ended March 31, 2008 to 13.6%
      of
      revenues compared with 14.6% for the fiscal year ended March 31, 2007. The
      decrease resulted primarily from: (i) higher labor ratio margins for both our
      aviation and security services divisions due mainly to increases in wages,
      salaries and related taxes and benefits of our employees at rates in excess
      of
      the amount that we are willing to pass on to our customers through increased
      billing rates charged under our service contracts; (ii) the loss of document
      verification services to the TSA, as previously discussed; (iii) increased
      overhead costs at JFK resulting from a shortage of manpower needed to meet
      increased demand for services; (iv) the absence of a short-term contract to
      provide security services to a national insurance company at multiple domestic
      locations in the current year period; and (v) the loss of service fees
      associated with our service agreement contracts that were discontinued during
      the fiscal year ended March 31, 2007. Partially offsetting these decreases
      were
      savings achieved through lower workers’ compensation expenses reflecting our
      on-going commitment to implement loss prevention practices in the workplace,
      provide safety training to our employees and reduce the frequency and severity
      of job-related claims incurred. We are actively pursuing recouping the
      aforementioned higher labor and related costs; however, competitive pressures
      in
      the security and aviation services industries may prevent us from increasing
      our
      hourly billing rates on contract anniversary or renewal dates. We expect our
      gross profit margins to average between 13.5% and 14.5% of revenue for fiscal
      year 2009 based on current business conditions. Management expects gross profit
      to remain under pressure due primarily to continued price competition. However,
      management expects these effects to be moderated by continued operational
      efficiencies resulting from better management of our cost structures, improved
      workers’ compensation experience ratings, workflow process efficiencies
      associated with our newly integrated financial software system and higher
      contributions from our continuing new business development.





Our
      cost
      reduction program is expected to reduce certain of our operating and general
      and
      administrative expenses in future periods. Additional cost reduction
      opportunities are being pursued as they are determined.





The
      aviation services division represents approximately 62% of our total revenues
      and Delta, at annual billings of approximately $18,100,000, is the largest
      customer of our aviation division representing, on an annual basis,
      approximately 25% of the revenues from our aviation services division and 15%
      of
      our total revenues. Due to the existing limitations under the Amended Agreement
      with CIT, we are limited to borrowing against Delta’s accounts receivable of up
      to (but not exceeding) approximately $2,060,000, so long as such accounts do
      not
      remain unpaid for more than sixty (60) days from the invoice date. In the event
      of a bankruptcy by another airline customer(s), our earnings and liquidity
      could
      be adversely affected to the extent of the accounts receivable with such
      airline(s), as well as from lost future revenues if such airline(s) cease
      operations or reduce their requirements from us.





As
      of the
      close of business on June 19, 2008, our cash availability was approximately
      $6,100,000, which is believed to be sufficient to meet our needs for the
      foreseeable future barring any increase in reserves imposed by CIT. We believe
      that existing funds, cash generated from operations, and existing sources of
      and
      access to financing are adequate to satisfy our working capital, capital
      expenditure and debt service requirements for the foreseeable future, barring
      any increase in reserves imposed by CIT. However, we cannot assure you that
      this
      will be the case, and we may be required to obtain additional financing to
      maintain and expand our existing operations through the sale of our securities,
      an increase in available borrowings under our existing or new credit facilities
      or otherwise. We believe that existing funds, cash generated from operations,
      and existing sources of and access to financing are adequate to satisfy our
      working capital, capital expenditure and debt service requirements for the
      foreseeable future. As of the date of this quarterly report and for the past
      several months, the financial markets generally, and the credit markets in
      particular, are and have been experiencing substantial turbulence and turmoil,
      and extreme volatility, both in the United States and, increasingly, in other
      markets worldwide. The current market situation has resulted generally in
      substantial reductions in available loans to a broad spectrum of businesses,
      increased scrutiny by lenders of the credit-worthiness of borrowers, more
      restrictive covenants imposed by lenders upon borrowers under credit and similar
      agreements and, in some cases, increased interest rates under commercial and
      other loans. If we require additional financing at this or any other time,
      we
      cannot assure you that such financing will be available upon commercially
      acceptable terms or at all. If we fail to obtain additional financing when
      and
      if required by us, our business, financial condition and results of operations
      would be materially adversely affected.




21





**SAFE
      HARBOR STATEMENT**





This
      section, Management's Discussion and Analysis of Financial Condition and Results
      of Operations, other sections of this Annual Report on Form 10-K and other
      reports and verbal statements made by our representatives from time to time
      may
      contain forward-looking statements that are based on our assumptions,
      expectations and projections about us and the security industry. These include
      statements regarding our expectations about revenues, our liquidity, or expenses
      and our continued growth, among others. Such forward-looking statements by
      their
      nature involve a degree of risk and uncertainty. We caution that a variety
      of
      factors, including but not limited to the factors described under Item 1A,
“Risk
      Factors” and the following, could cause business conditions and our results to
      differ materially from what is contained in forward-looking
      statements:





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


·  changes
      in the financial condition of our customers;


·  changes
      in regulatory environment;


·  contract
      cancellations;


·  changes
      in our estimates of costs;


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


·  outcomes
      of pending and future litigation;


·  increasing
      competition by other companies;


·  compliance
      with our loan covenants;


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


·  changes
      in estimates used in our critical accounting policies.





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





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





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





During
      the fiscal year ended March 31, 2008, we did not hold a portfolio of securities
      instruments for either trading or speculative purposes. Periodically, we hold
      securities instruments for other than trading purposes. Due to the short-term
      nature of our investments, we believe that we have no material exposure to
      changes in the fair value as a result of market fluctuations.





We
      are
      exposed to market risk in connection with changes in interest rates, primarily
      in connection with outstanding balances under our revolving line of credit
      with
      CIT, which was entered into for purposes other than trading purposes. Based
      on
      our average outstanding balances during the fiscal year ended March 31, 2008,
      a
      1% change in the prime lending rate could impact our financial position and
      results of operations by approximately $110,000 over the next fiscal year.
      For
      additional information on the revolving line of credit with CIT, see
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations—Liquidity and Capital Resources.”





Reference
      is made to Item 7 of Part II of this Form 10-K Annual Report, “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations—Forward
      Looking Statements.”





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





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





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





None.




22




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





(i)
            Disclosure
                Controls and Procedures





We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our principal executive officer and principal
      financial officer, regarding the effectiveness of the design and operation
      of
      our disclosure controls and procedures. Based upon this evaluation, our
      principal executive officer and principal financial officer concluded that
      our
      disclosure controls and procedures as of the end of the period covered by this
      report have been designed and are functioning effectively to provide reasonable
      assurance that the information required to be disclosed by us in reports filed
      under the Securities Exchange Act of 1934 is recorded, processed, summarized
      and
      reported within the time periods specified in the SEC’s rules and forms.





We
      believe that a controls system, no matter how well designed and operated, cannot
      provide absolute assurance that the objectives of the controls system are met,
      and no evaluation of controls can provide absolute assurance that all control
      issues and instances of fraud, if any, within a company have been detected.





(ii)
            Internal
                Control Over Financial Reporting





(a)
            Our
                management is responsible for establishing and maintaining adequate
                internal control over financial reporting, as such term is defined
                in
                Exchange Act Rules 13a-15(f) and
                15d-15(f).





Under
      the
      supervision and with the participation of our management, we conducted an
      evaluation of the effectiveness of our internal control over financial reporting
      based on the framework in *Internal
      Control—Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission. Based
      on our evaluation our management concluded that our internal control over
      financial reporting was effective as of March 31, 2008 and for the period then
      ended.





This
      Annual Report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the Securities and Exchange
      Commission that permit us to provide only management’s report in this Annual
      Report.





(b)
            There
                has been no change in our internal control over financial reporting
                identified in an evaluation thereof that occurred during the fourth
                quarter of fiscal 2008 that materially affected or is reasonably
                likely to
                materially affect our internal control over financial
                reporting.




**ITEM
      9b. OTHER INFORMATION.**





None.




23




**PART
      III**





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





The
      information required by this Item 10 will be set forth in our Proxy Statement
      for our 2008 Annual Meeting of Stockholders which is expected to be filed with
      the SEC within 120 days of the close of the our fiscal year ended March 31,
      2008
      (the “2008 Proxy Statement”) under the caption “Directors, Executive Officers
      and Corporate Governance,” and is incorporated herein by reference.





**ITEM
      11. EXECUTIVE COMPENSATION.**





The
      information required by this Item 11 will be set forth in the 2008 Proxy
      Statement under the captions “Executive Compensation” and “Director Compensation
      and Stock Ownership Guidelines,” and is incorporated herein by reference.





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


The
        information required by this Item 12 will be set forth in the 2008 Proxy
        Statement under the captions “Common Stock Ownership of Certain Beneficial
        Owners and Management” and “Executive Compensation-Equity Compensation Plan
        Information,” and is incorporated herein by reference.




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





The
      information required by this Item 13 will be set forth in the 2008 Proxy
      Statement under the captions “Certain Relationships and Related Transactions”
and “Director Independence,” and is incorporated herein by
      reference.





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





The
      information required by this Item 14 will be set forth in the 2008 Proxy
      Statement under the caption “Principal Accountant Fees and Services,” and is
      incorporated herein by reference.




24




**PART
      IV**





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





(a)Page Number FromThis Form 10-K(1)
            *Consolidated
                Financial Statements:*Report
                of Independent Registered Public Accounting Firm
            
            F-1Consolidated
                Balance Sheets - March 31, 2008 and 2007
            
            F-2Consolidated
                Statements of Operations - years ended March 31, 2008, 2007 and
                2006
            
            F-3Consolidated
                Statements of Changes in Stockholders' Equity and Comprehensive Income
                years ended March 31, 2008, 2007 and 2006
            
            F-4Consolidated
                Statements of Cash Flows - years ended March 31, 2008, 2007 and
                2006
            
            F-5
                - F-6Notes
                to Consolidated Financial Statements
            
            F-7
                - F-18(2)
            *Financial
                Statement Schedules:*Schedule
                II - Valuation and Qualifying Accounts
            
            F-19Schedules
                not listed above have been omitted as either not applicable, immaterial
                or
                disclosed in the Financial Statements or notes thereto.(3)
            *Exhibits:*A
                list of exhibits filed or furnished with this report on Form 10-K
                (or
                incorporated by reference to exhibits previously filed or furnished
                by us)
                is provided in the Exhibit Index on pages 27-28 of this
                report.





25


Report
        of
        Independent Registered


Public
      Accounting Firm





To
      the
      Board of Directors


and
      Stockholders of


Command
      Security Corporation





We
      have
      audited the accompanying consolidated balance sheets of Command Security
      Corporation as of March 31, 2008 and 2007, and the related consolidated
      statements of operations, changes in stockholders' equity and comprehensive
      income and cash flows for each of the years in the three-year period ended
      March
      31, 2008. Our audits also included the financial statement schedule II -
      Valuation and Qualifying Accounts. Command Security Corporation’s management is
      responsible for these consolidated financial statements and the schedule. Our
      responsibility is to express an opinion on these consolidated financial
      statements and the schedule based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements, assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Command Security Corporation
      as of March 31, 2008 and 2007, and the results of its operations and its cash
      flows for each of the years in the three-year period ended March 31, 2008,
      in
      conformity with accounting principles generally accepted in the United States
      of
      America. Also, in our opinion, the related financial statement schedule, when
      considered in relation to the basic financial statements taken as a whole,
      presents fairly, in all material respects, the information set forth
      therein.





*/s/
                D'Arcangelo & Co., LLP*






June
      27,
      2008


Poughkeepsie,
      New York




F-1


Command
        Security Corporation
 Consolidated
        Balance Sheets
 March
        31,
        2008 and 2007
 
 2008
              
              2007ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              146,782
              
              $
              220,040Accounts
                  receivable from security services customers, less allowance for
                  doubtful
                  accounts of $1,020,442 and $831,397, respectively
              
              
              20,097,835
              
              
              17,978,737Prepaid
                  expenses
              
              
              2,680,751
              
              
              556,953Other
                  current assets
              
              
              1,910,163
              
              
              3,428,626Total
                  current assets
              
              
              24,835,531
              
              
              22,184,356Furniture
                  and equipment at cost, net
              
              
              559,665
              
              
              529,042Intangible
                  assets, net
              
              
              4,049,273
              
              
              782,621Restricted
                  cash
              
              
              302,736
              
              
              78,126Other
                  assets
              
              
              3,039,244
              
              
              1,755,432Total
                  assets
              
              $
              32,786,449
              
              $
              25,329,577LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilities:Checks
                  issued in advance of deposits
              
              $
              1,962,314
              
              $
              1,760,155Current
                  maturities of long-term debt
              
              
              5,901
              
              
              247,054Current
                  maturities of obligations under capital leases
              
              
              17,100
              
              
              16,774Short-term
                  borrowings
              
              
              8,752,433
              
              
              8,487,065Accounts
                  payable
              
              
              1,025,963
              
              
              639,783Accrued
                  expenses and other liabilities
              
              
              6,974,784
              
              
              4,519,862Total
                  current liabilities
              
              
              18,738,495
              
              
              15,670,693Insurance
                  reserves
              
              
              670,617
              
              
              539,503Long-term
                  debt, due after one year
              
              
              —
              
              
              5,902Obligations
                  under capital leases, due after one year
              
              
              17,588
              
              
              9,643Total
                  liabilities
              
              
              19,426,700
              
              
              16,225,741Commitments
                  and contingencies (Notes 15, 16 and 17)Stockholders'
                  equity:Preferred
                  stock, convertible Series A, $.0001 par value per share, 1,000,000
                  shares
                  authorized
              
              
              —
              
              
              —Common
                    stock, $.0001 par value per share, 20,000,000 shares authorized,
                    10,757,216 shares issued andoutstanding
              
              
              1,076
              
              
              1,014Additional
                  paid-in capital
              
              
              15,924,947
              
              
              13,889,861Accumulated
                  deficit
              
              
              (2,326,004
              )
              
              (4,799,589
              )Accumulated
                  other comprehensive income
              
              
              (240,270
              )
              
              12,550Total
                  stockholders' equity
              
              
              13,359,749
              
              
              9,103,836Total
                  liabilities and stockholders' equity
              
              $
              32,786,449
              
              $
              25,329,577
 
 See
        accompanying notes and auditor's report
  F-2
  Command
        Security Corporation
 Consolidated
        Statements of Operations
 Years
        Ended March 31, 2008, 2007 and 2006
 
 2008
              
              2007
              
              2006Revenues
              
              $
              119,403,865
              
              $
              93,822,546
              
              $
              85,208,615Cost
                  of revenues
              
              
              103,161,588
              
              
              80,157,314
              
              
              73,788,256Gross
                  profit
              
              
              16,242,277
              
              
              13,665,232
              
              
              11,420,359Operating
                  expensesGeneral
                  and administrative expenses
              
              
              13,425,162
              
              
              12,315,745
              
              
              10,254,032Provision
                  for doubtful accounts and notes
              
              
              359,675
              
              
              268,118
              
              
              1,162,173Bad
                  debt recoveries
              
              
              (511,593
              )
              
              (53,229
              )
              
              (3,991
              )13,273,244
              
              
              12,530,634
              
              
              11,412,214Operating
                  income
              
              
              2,969,033
              
              
              1,134,598
              
              
              8,145Other
                  income (expenses)Interest
                  income
              
              
              75,174
              
              
              226,057
              
              
              238,887Interest
                  expense
              
              
              (783,669
              )
              
              (567,765
              )
              
              (432,159
              )Gain
                  (loss) on equipment dispositions
              
              
              3,040
              
              
              (2,851
              )
              
              19,137Gain
                  on sale of investments
              
              
              50,007
              
              
              —
              
              
              —(655,448
              )
              
              (344,559
              )
              
              (174,135
              )Income
                  (loss) before benefit for income taxes
              
              
              2,313,585
              
              
              790,039
              
              
              (165,990
              )Benefit
                  for income taxes
              
              
              160,000
              
              
              450,000
              
              
              66,395Net
                  income (loss)
              
              $
              2,473,585
              
              $
              1,240,039
              
              $
              (99,595
              )Income
                  (loss) per share of common stockBasic
              
              $
              .23
              
              $
              .12
              
              $
              (.01
              )Diluted
              
              $
              .22
              
              $
              .12
              
              $
              (.01
              )Weighted
                  average number of commonshares
                  outstandingBasic
              
              
              10,733,797
              
              
              10,137,970
              
              
              8,834,952Diluted
              
              
              11,383,985
              
              
              10,620,756
              
              
              9,646,915
 
 See
        accompanying notes and auditor's report
  F-3
  Command
        Security Corporation
 Consolidated
        Statements of Changes in Stockholders' Equity and Comprehensive
        Income
 Years
        Ended March 31, 2008, 2007 and 2006
 
 Preferred
                Stock
              
              Common
                Stock
              
              Paid-In
                Capital
              
              Accumulated
                Deficit
              
              Accumulated
                Other
                Comprehensive
                Income
              
              TotalBalance
                  at March 31, 2005
              
              $
              —
              
              $
              778
              
              $
              10,348,582
              
              $
              (5,940,033
              )
              $
              —
              
              $
              4,409,327Warrants
                  exercised
              
              
              
              
              
              236
              
              
              2,917,379
              
              
              
              
              
              
              
              
              2,917,615Stock
                  compensation cost
              
              
              
              
              
              
              
              
              397,350
              
              
              
              
              
              
              
              
              397,350Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              (99,595
              )
              
              
              
              
              (99,595
              )Balance
                  at March 31, 2006
              
              
              —
              
              
              1,014
              
              
              13,663,311
              
              
              (6,039,628
              )
              
              —
              
              
              7,624,697Other
                  comprehensive income (a)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              12,550
              
              
              12,550Stock
                  compensation cost
              
              
              
              
              
              
              
              
              226,550
              
              
              
              
              
              
              
              
              226,550Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              1,240,039
              
              
              
              
              
              1,240,039Balance
                  at March 31, 2007
              
              
              —
              
              
              1,014
              
              
              13,889,861
              
              
              (4,799,589
              )
              
              12,550
              
              
              9,103,836Issuance
                  of 614,246 shares for Acquisition
              
              
              
              
              
              61
              
              
              1,784,939
              
              
              
              
              
              
              
              
              1,785,000Options
                  exercised
              
              
              
              
              
              1
              
              
              10,247
              
              
              
              
              
              
              
              
              10,248Stock
                  compensation cost
              
              
              
              
              
              
              
              
              239,900
              
              
              
              
              
              
              
              
              239,900Other
                  comprehensive income (a)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (252,820
              )
              
              (252,820
              )Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              2,473,585
              
              
              
              
              
              2,473,585Balance
                  at March 31, 2008
              
              $
              —
              
              $
              1,076
              
              $
              15,924,947
              
              $
              (2,326,004
              )
              $
              (240,270
              )
              $
              13,359,749
 
 (a) –
        Represents unrealized gain (loss) on marketable securities .
  See
        accompanying notes and auditor's report
  F-4
 
 Command
        Security Corporation
 Consolidated
        Statements of Cash Flows
 Years
        Ended March 31, 2008, 2007 and 2006
 
 INCREASE
        (DECREASE) IN CASH AND CASH EQUIVALENTS
 
 2008
              
              2007
              
              2006OPERATING
                  ACTIVITIESNet
                  income (loss)
              
              $
              2,473,585
              
              $
              1,240,039
              
              $
              (99,595
              )Adjustments
                  to reconcile net income (loss) to net cash provided by (used in)
                  operating
                  activities:Depreciation
                  and amortization
              
              
              697,334
              
              
              315,222
              
              
              296,797Stock
                  based compensation costs
              
              
              239,900
              
              
              226,550
              
              
              397,350Provision
                  for doubtful accounts and notes receivable, net of
                  recoveries
              
              
              (151,918
              )
              
              214,888
              
              
              1,158,182(Gain)
                  loss on equipment dispositions
              
              
              (3,040
              )
              
              2,851
              
              
              (19,137
              )Gain
                  on sale of investments
              
              
              (50,007
              )
              
              —
              
              
              —Deferred
                  income taxes
              
              
              (1,246,408
              )
              
              (450,000
              )
              
              (66,395
              )Insurance
                  reserves
              
              
              131,114
              
              
              237,439
              
              
              (10,279
              )Changes
                  in operating assets and liabilities:Restricted
                  cash
              
              
              (224,610
              )
              
              —
              
              
              —Accounts
                  receivable
              
              
              (2,379,431
              )
              
              (4,389,524
              )
              
              (3,332,443
              )Prepaid
                  expenses
              
              
              (2,123,798
              )
              
              164,496
              
              
              173,489Other
                  receivables
              
              
              347,786
              
              
              (1,253,293
              )
              
              (1,827,741
              )Other
                  assets
              
              
              1,593,616
              
              
              (643,438
              )
              
              (90,357
              )Accounts
                  payable and other current liabilities
              
              
              2,841,102
              
              
              434,971
              
              
              (1,462,575
              )Due
                  to administrative service clients
              
              
              —
              
              
              (101,391
              )
              
              (58,724
              )Net
                  cash provided by (used in) operating activities
              
              
              2,145,225
              
              
              (4,001,190
              )
              
              (4,941,428
              )INVESTING
                  ACTIVITIESPurchases
                  of equipment
              
              
              (169,337
              )
              
              (344,986
              )
              
              (74,780
              )Proceeds
                  from equipment dispositions
              
              
              3,040
              
              
              2,050
              
              
              10,595Acquisition
                  of businesses
              
              
              (2,260,675
              )
              
              (412,500
              )
              
              —Proceeds
                  from sale of investments
              
              
              149,096
              
              
              —
              
              
              —Issuance
                  of note to administrative service client
              
              
              —
              
              
              —
              
              
              (125,000
              )Principal
                  collections on notes receivable
              
              
              —
              
              
              115,803
              
              
              9,197Net
                  cash used in investing activities
              
              
              (2,277,876
              )
              
              (639,633
              )
              
              (179,988
              )FINANCING
                  ACTIVITIESNet
                  advances (repayments) on line-of-credit
              
              
              265,368
              
              
              5,116,687
              
              
              (1,151,976
              )Increase
                  (decrease) in checks issued in advance of deposits
              
              
              202,159
              
              
              (68,647
              )
              
              1,333,553Proceeds
                  from option and warrant exercises
              
              
              10,247
              
              
              —
              
              
              2,917,615Principal
                  payments on other borrowings
              
              
              (247,055
              )
              
              (178,477
              )
              
              (419,855
              )Principal
                  payments on capital lease obligations
              
              
              (17,854
              )
              
              (40,943
              )
              
              (36,728
              )Debt
                  issuance costs
              
              
              (153,472
              )
              
              —
              
              
              —Net
                  cash provided by financing activities
              
              
              59,393
              
              
              4,828,620
              
              
              2,642,609Net
                  change in cash and cash equivalents
              
              
              (73,258
              )
              
              187,797
              
              
              (2,478,807
              )Cash
                  and cash equivalents, beginning of year
              
              
              220,040
              
              
              32,243
              
              
              2,511,050Cash
                  and cash equivalents, end of year
              
              $
              146,782
              
              $
              220,040
              
              $
              32,243
 
 See
        accompanying notes and auditor's report
  F-5





Command
      Security Corporation


Consolidated
      Statements of Cash Flows, Continued


Years
      Ended March 31, 2008, 2007 and 2006





1.
      SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION





Cash
      paid
      during the years for:





2008
            
            2007
            
            2006Interest
            
            $
            803,521
            
            $
            527,024
            
            $
            440,696Income
                Taxes
            
            
            1,747,299
            
            
            208,223
            
            
            22,634





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





During
      the fiscal year ended March 31, 2008, we acquired a security services business
      for a purchase price of $3,400,000. At the closing, we paid $1,615,000 of the
      purchase price in cash and issued 614,246 shares of our common stock, valued
      at
      an aggregate amount of $1,785,000 for the remaining balance of the purchase
      price. The issuance of these shares of our common stock has been excluded from
      investing and financing activities on the consolidated statements of cash flows
      presented.





During
      the fiscal year ended March 31, 2008, we received available-for-sale securities
      principally in connection with our claim related to the bankruptcy filing of
      Northwest Airlines in the amount of $412,252 which is included as a bad debt
      recovery in the accompanying consolidated statements of operations. This amount
      has been excluded from investing activities on the consolidated statements
      of
      cash flows presented.





For
      the
      fiscal years ended March 31, 2008 and 2006, we purchased transportation
      equipment with direct installment and lease financing of $26,165 and $86,259,
      respectively. These amounts have been excluded from investing and financing
      activities on the consolidated statements of cash flows presented.





During
      the fiscal year ended March 31, 2007, we acquired a security services business
      for a purchase price of $750,000. At the closing, we paid $412,500 of the
      purchase price in cash and issued a note payable in the amount of $337,500
      for
      the remaining balance of the purchase price. This note payable amount has been
      excluded from investing activities on the consolidated statements of cash flows
      presented.





The
      Company may obtain short-term financing to meet its insurance needs. For the
      fiscal year ended March 31, 2006, $106,895 was borrowed for this purpose. This
      borrowing has been excluded from the consolidated statements of cash flows
      presented.





See
      accompanying notes and auditor's report


F-6




Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements


March
      31,
      2008, 2007 and 2006





1.
      Business Description and Summary of Accounting Policies





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





Principal
      business activities





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





Principles
      of consolidation





The
      accompanying consolidated financial statements include the accounts of the
      Company and our wholly-owned subsidiaries. All significant intercompany accounts
      and transactions have been eliminated in our consolidated financial
      statements.





Estimates





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





Revenue
      recognition





The
      Company records revenues as services are provided to its customers. Revenues
      consist primarily of aviation and security services, 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 police departments
      are calculated as a percentage of the administrative service client's revenue
      and are recognized when billings for the related security services are
      generated.





Cash
      and
      cash equivalents





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





Investments





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




Furniture
      and equipment





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





Intangible
      assets





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


F-7


Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and 2006





Advertising
      costs





The
      Company expenses advertising costs as incurred. Amounts incurred for recruitment
      and general business advertising were $218,852, $87,375 and $62,750 for the
      fiscal years ended March 31, 2008, 2007 and 2006, respectively.





Trade
      receivables





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





Insurance
      reserves





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





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





Income
      taxes





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





Income
      (loss) per common share





Under
      the
      requirements of SFAS No. 128, "Earnings Per Share," the dilutive effect of
      potential common shares, if any, is excluded from the calculation for basic
      earnings per share. Diluted earnings per share are presented for the fiscal
      years ended March 31, 2008, 2007 and 2006 because of the effect the assumed
      issuance of common shares would have if the outstanding stock options and
      warrants were exercised.





Accounting
      for stock options





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





In
      December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based
      Payment” (“SFAS 123R”), which replaces SFAS 123. SFAS 123R requires all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the financial statements based on their fair values at
      grant
      date and the recognition of the related expense over the period in which the
      share-based compensation vests. We were required to adopt the provisions of
      SFAS
      123R effective July 1, 2005 and use the modified-prospective transition method.
      Under the modified-prospective method, we recognize compensation expense in
      our
      financial statements issued subsequent to the date of adoption for all
      share-based payments granted, modified or settled after July 1, 2005. The
      adoption of SFAS 123R resulted in a non-cash charge of $239,900, $226,550 and
      $377,750 for stock based compensation for the years ended March 31, 2008 and
      2007 and nine months ended March 31, 2006, respectively. Such non-cash charge
      would have been the same under the provisions of SFAS 148.




Fair
      Value





The
      fair
      value of the Company's long-term debt is based on the borrowing rates currently
      available to the Company for loans with similar terms and average maturities.
      At
      March 31, 2008 and 2007, the fair value of long-term debt approximates its
      carrying amount.


F-8





Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and
      2006





2.
      Furniture and Equipment





Furniture
      and equipment at March 31, 2008 and 2007 consist of the following:





2008
            
            2007Transportation
                equipment
            
            $
            670,076
            
            $
            600,859Security
                equipment
            
            
            652,309
            
            
            579,033Office
                furniture and equipment
            
            
            1,781,510
            
            
            1,551,6863,103,895
            
            
            2,731,578Accumulated
                depreciation
            
            
            (2,544,230
            )
            
            (2,202,536
            )Total
            
            $
            559,665
            
            $
            529,042





Depreciation
      expense for the fiscal years ended March 31, 2008, 2007 and 2006, was $291,482,
      $216,222 and $192,075, respectively, and includes amortization of assets
      purchased under capital lease arrangements in the amounts of $31,340, $35,408
      and $35,751 for each of the respective years then ended (see Note
      16).





3.
      Intangible Assets





Intangible
      assets at March 31, 2008 and 2007 consist of the following:





2008
            
            2007Customer
                list
            
            $
            3,450,423
            
            $
            831,248Borrowing
                cost
            
            
            443,635
            
            
            290,163Goodwill
            
            
            895,258
            
            
            20,402Non-compete
                covenant
            
            
            25,000
            
            
            —4,814,316
            
            
            1,141,813Accumulated
                amortization
            
            
            (765,043
            )
            
            (359,192
            )Total
            
            $
            4,049,273
            
            $
            782,621





Amortization
      expense for the fiscal years ended March 31, 2008, 2007 and 2006, was $405,852,
      $99,000 and $104,722, respectively. Amortization expense for the years ending
      March 31, 2009, 2010, 2011, 2012 and 2013 for the intangible assets noted above
      will be $417,819, $349,443, $347,360, $341,110 and $341,110, respectively.





Included
      in intangible assets for the fiscal years ended March 31, 2008 and 2007 is
      goodwill of $895,258 and $20,402, respectively, that is not subject to
      amortization and net borrowing costs of $68,376 and $25,702, respectively,
      which
      are subject to amortization on a straight line basis over the life of the
      Company’s financing agreement (see Note 7).





4.
      Restricted Cash





Restricted
      cash represents deposits for the benefit of the Company's insurance carrier
      as
      collateral for workers' compensation claims and a portion of the Brown
      acquisition consideration which is being held pending finalization of any
      potential downward purchase price adjustment.


F-9


Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and
      2006





5.
      Other
      Assets





Other
      assets at March 31, 2008 and 2007 consist of the following:





2008
            
            2007Workers’
                compensation insurance
            
            $
            1,622,489
            
            $
            3,249,549Other
                receivables
            
            
            138,413
            
            
            138,187Security
                deposits
            
            
            247,122
            
            
            210,184Deferred
                tax asset
            
            
            2,605,253
            
            
            1,358,845Other
                (a)
            
            
            336,130
            
            
            227,2934,949,407
            
            
            5,184,058Current
                portion
            
            
            (1,910,163
            )
            
            (3,428,626
            )Total
                non-current portion
            
            $
            3,039,244
            
            $
            1,755,432





(a)
            The
                fair value of investments included in other assets at March 31, 2008
                is
                $172,245, resulting in an unrealized loss of $240,270. These securities
                have been in an unrealized loss position for less than twelve
                months.




6.
      Accrued Expenses and Other Liabilities





Accrued
      expenses and other liabilities at March 31, 2008 and 2007 consist of the
      following:





2008
            
            2007Payroll
                and related expenses
            
            $
            4,048,102
            
            $
            3,367,775Taxes
                and fees payable
            
            
            2,139,846
            
            
            800,687Accrued
                interest payable
            
            
            46,659
            
            
            71,143Other
            
            
            740,177
            
            
            280,257Total
            
            $
            6,974,784
            
            $
            4,519,862





7.
      Short-Term Borrowings





Short-term
      borrowings at March 31, 2008 and 2007 consist of the following:





2008
            
            2007Line
                of credit
            
            $
            8,752,433
            
            $
            8,487,065Total
            
            $
            8,752,433
            
            $
            8,487,065





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





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


F-10





Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and
      2006





On
      April
      12, 2007, we entered into an amendment to the Amended and Restated Agreement
      (“the Amended Agreement”). Pursuant to the Amended Agreement, the aggregate line
      of credit was increased from $12,000,000 to $16,000,000, and we were provided
      with a $2,400,000 acquisition advance to fund the cash requirements associated
      with the acquisition of a security services business (see Note 9). The Amended
      Agreement also provides for an extension of the maturity date to December 12,
      2008, and for reductions in fees and availability reserves and an increase
      in
      the letter of credit sub-line to an aggregate amount of up to $3,000,000. The
      Amended Agreement provides that interest will be calculated on the outstanding
      principal balance of the revolving loans at the prime rate (as defined in the
      Amended Agreement), less .25% and for LIBOR loans, interest will be calculated
      on the outstanding principal balance of the LIBOR loans at the LIBOR rate (as
      defined in the Amended Agreement), plus 2.0%.





As
      of
      March 31, 2008, the interest rates were 5.00% and 5.10% for revolving and LIBOR
      loans, respectively. Closing costs for the Amended Agreement totaled $158,472,
      including $125,000 payable to the lender, with $45,000 due at closing, $40,000
      due six months after closing and $40,000 due twelve months after closing, and
      $33,472 in legal costs incurred in connection with the transaction. Such costs
      are being amortized over the remaining life of the Amended Agreement.





At
      March
      31, 2008, we had borrowed $2,752,433 in revolving loans, $6,000,000 in LIBOR
      loans and had a $70,000 letter of credit outstanding representing approximately
      72% of the maximum borrowing capacity under the Amended Agreement based on
      our
“eligible accounts receivable” (as defined under the Amended Agreement) as of
      such date. However, as our business grows and produces new receivables (as
      to
      which no assurance can be given), up to an additional $7,177,567 could be
      available to borrow under the Amended Agreement.





We
      rely
      on our revolving loan from CIT which contains a fixed charge covenant and
      various other financial and non-financial covenants. If we breach a covenant,
      CIT has the right to immediately request the repayment in full of all borrowings
      under the Amended Agreement, unless CIT waives the breach. For the fiscal year
      ended March 31, 2008, we were in compliance with all covenants under the Amended
      Agreement.





8.
      Long-Term Debt





Long-term
      debt at March 31, 2008 and 2007 consist of the following:





2008
            
            2007Promissory
                note due atJune
                13 and December 13, 2007with
                interest at 7.75%
            
            
            —
            
            
            225,000Various
                installment loansdue
                at various dates through March2009,
                with interest ranging from8.24%
                to 10.25% (a)
            
            $
            5,901
            
            $
            27,9565,901
            
            
            252,956Current
                maturities
            
            
            (5,901
            )
            
            (247,054
            )Total
            
            $
            —
            
            $
            5,902





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





9.
      Acquisitions





(a)
            On
                April 12, 2007, we completed the acquisition of 100% of the security
                services business of California-based Brown Security Industries,
                Inc.,
                including its wholly-owned operating subsidiaries, Strategic Security
                Services, Inc. and Rodgers Police Patrol, Inc. (“Brown”). The purchase
                price for these companies was $3,000,000, plus an amount equal to
                their
                estimated consolidated tangible net worth (as defined in the purchase
                agreement) on the closing date of $400,000, subject to adjustment.
                The
                purchase price was comprised of $1,615,000 in cash and 614,246 shares
                of
                the our common stock, valued at an aggregate amount of $1,785,000,
                based
                on the average closing price of our common stock on the OTC Bulletin
                Board
                for the five consecutive trading days immediately prior to the date
                that
                the parties first entered into the definitive transaction documents.
                The
                residual amount of the purchase price, of approximately $875,000,
                in
                excess of certain operating assets and intangible assets was allocated
                to
                goodwill.


F-11


Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and
      2006





The
      acquisition of Brown is expected to continue to broaden our national network
      of
      office locations and expand our geographical reach as part of the Company’s
      ongoing efforts to accelerate growth and profitability. This transaction further
      enhances our position as a nationally recognized provider of security services
      in this growing market within the United States.





Activity
      related to the acquisition of Brown and its related subsidiaries included in
      the
      consolidated statements of income consisted of the following:





Three Months Ended
            
            Twelve Months EndedMarch 31,
            
            March 31,2008
            
            2008Revenues
            
            $
            2,688,180
            
            $
            10,903,293Net
                income
            
            
            118,542
            
            
            410,608Net
                income per common share:Basic
            
            $
            .01
            
            $
            .04Diluted
            
            $
            .01
            
            $
            .04





(b)  On
      January 7, 2008 we completed the acquisition of substantially all of the assets
      of Expert Security Services, Inc., a Maryland-based provider of guard and
      related security services (“ESS”). The purchase price for these assets was
      $437,000, subject to adjustment based on the achievement or failure to achieve
      certain revenue targets, as specified in accordance with the terms, and subject
      to the conditions, of that certain Asset Purchase Agreement dated as of January
      1, 2008, among the Company, ESS and the shareholders of ESS. We paid the entire
      purchase price in cash at the closing and no goodwill was recorded as part
      of
      this transaction.





10.
      Net
      Income (Loss) per Share





The
      following is a reconciliation of the numerators and the denominators of the
      basic and diluted per-share computations for net income (loss) for the fiscal
      years ended March 31, 2008, 2007 and 2006:





Income
                (Loss)
            
            Shares
            
            Per-Share(Numerator)
            
            (Denominator)
            
            AmountYear
                ended March 31, 2008Basic
                EPS
            
            $
            2,473,585
            
            
            10,733,797
            
            $
            .23Options
                issued February 2001,August
                2004, May 2005, September 2005,February
                2006, September 2006,October
                2006, April 2007,September
                2007 and January 2008
            
            
            
            
            
            650,188Diluted
                EPS
            
            $
            2,473,585
            
            
            11,383,985
            
            $
            .22Year
                ended March 31, 2007Basic
                EPS
            
            $
            1,240,039
            
            
            10,137,970
            
            $
            .12Effect
                of dilutive shares:Options
                issued February 2001,August
                2004, May 2005,September
                2005, February 2006,September
                2006 and October 2006
            
            
            
            
            
            482,786Diluted
                EPS
            
            $
            1,240,039
            
            
            10,620,756
            
            $
            .12Year
                ended March 31, 2006Basic
                EPS
            
            $
            (99,595
            )
            
            8,834,952
            
            $
            (.01
            )Effect
                of dilutive shares:Options
                issued November 2000,February
                2001, August 2004, May 2005,September
                2005 and February 2006
            
            
            
            
            
            811,963Diluted
                EPS
            
            $
            (99,595
            )
            
            9,646,915
            
            $
            (.01
            )


F-12







Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and
      2006





11.
      Retirement Plans





In
      November 1999, the Company adopted a qualified retirement plan providing for
      elective employee deferrals and discretionary employer contributions to
      non-highly compensated participants. During the fiscal year ended March 31,
      2007, the plan was revised to allow for employer matching of elective deferrals,
      only for certain employees working under a specific customer contract, as
      defined. For the fiscal year ended March 31, 2007, discretionary contributions
      in the amount of $2,168 were paid. No discretionary amounts were accrued or
      paid
      for the fiscal years ended March 31, 2008 and 2006.





12.
      Concentrations of Credit Risk





Geographic
      concentrations of credit risk with respect to trade receivables are primarily
      in
      California with 36% and 32% and in the New York Metropolitan area with 41%
      and
      42% of total receivables as of March 31, 2008 and 2007, respectively. The
      remaining trade receivables consist of a large number of customers dispersed
      across many different geographic regions. During the fiscal years ended March
      31, 2008, 2007 and 2006, the Company generated 62%, 66% and 65%, respectively,
      of its revenue from aviation and related services. Trade receivables due from
      the commercial airline industry comprised 57% and 67% of net receivables as
      of
      March 31, 2008 and 2007, respectively. The Company's remaining customers are
      not
      concentrated in any specific industry and no single customer accounts for more
      than 10% of accounts receivable.





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





13.
      Significant Customers





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





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




2008
            
            2007
            
            2006Security
                Officer Services
            
            $
            45,587,205
            
            $
            31,413,964
            
            $
            29,269,512Aviation
                Services
            
            
            73,617,327
            
            
            62,086,936
            
            
            55,588,468Support
                Services
            
            
            199,333
            
            
            321,646
            
            
            350,635Total
            
            $
            119,403,865
            
            $
            93,822,546
            
            $
            85,208,615





For
      the
      fiscal years ended March 31, 2008, 2007 and 2006, one airline customer accounted
      for approximately $18,117,000, $14,700,000 and $14,309,000, respectively, of
      the
      Company’s total revenue.





14.
      Insurance Reserves





We
      have
      an insurance policy covering workers’ compensation claims in states that we
      perform services. Estimated accrued liabilities are based on our historical
      loss
      experience and the ratio of claims paid to our historical payout profiles.
      Charges for estimated workers’ compensation related losses incurred and included
      in cost of sales were $1,609,009, $2,042,618 and $2,881,041, for the fiscal
      years ended March 31, 2008, 2007 and 2006, respectively.





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





Cumulative
      amounts estimated to be payable by us with respect to pending and potential
      claims for all years in which we are liable under our general liability
      retention and workers’ compensation policies have been accrued as liabilities.
      Such accrued liabilities are necessarily based on estimates; thus, our 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
      results of operations.


F-13


Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and
      2006





15.
      Contingencies





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





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





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





16.
      Lease
      Commitments





The
      Company is obligated under various operating lease agreements for office space,
      equipment and auto rentals. Rent expense under operating lease agreements
      approximated $1,526,789, $1,148,894 and $962,687, for the fiscal years ended
      March 31, 2008, 2007 and 2006, respectively.





The
      Company leases certain equipment and vehicles under agreements that are
      classified as capital leases. Most equipment leases have purchase options at
      the
      end of the original lease term. Cost and related accumulated depreciation of
      leased capital assets included in furniture and equipment at March 31, 2008
      are
      $701,985 and $679,206 and at March 31, 2007 are $718,257 and $664,138,
      respectively.





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





Capital
            
            OperatingLeases
            
            LeasesYear
                ending: March 31, 2009
            
            $
            17,573
            
            $
            1,202,453March
                31, 2010
            
            
            8,889
            
            
            796,332March
                31, 2011
            
            
            8,699
            
            
            491,364March
                31, 2012
            
            
            —
            
            
            213,161March
                31, 2013
            
            
            —
            
            
            6,70735,161
            
            
            2,710,017Amounts
                representing interest
            
            
            (473
            )
            
            —Total
            
            $
            34,688
            
            $
            2,710,017





17.
      Other
      Commitments





On
      March
      31, 2004, the Company settled a dispute with a uniform cleaning service that
      calls for the Company to pay $1,756 per week for 344 weeks or a total amount
      of
      $604,133 ending in fiscal 2011. The expense recorded in connection with weekly
      payments under this agreement amounted to $91,322, $93,079 and $93,079 for
      the
      fiscal years ended March 31, 2008, 2007 and 2006, respectively.


F-14





Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and
      2006





The
      required future minimum payments under the agreement are as follows:





Year
                ending: March 31,
                2009
            
            $
            91,322March
                31, 2010
            
            
            91,322March
                31, 2011
            
            
            56,209Total
            
            $
            238,853





18.
      Stock
      Option Plan and Warrants





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





In
      September 2005, the Company’s Board of Directors and stockholders approved the
      adoption of a qualified stock incentive plan. Under the stock incentive plan,
      substantially all employees of and consultants to, the Company, are eligible
      to
      receive options to purchase up to an aggregate of 1,000,000 shares of the
      Company’s common stock at an exercise price that cannot be less than the fair
      market value of the shares on the date the options are granted. In each of
      September 2007, 2006 and 2005, options to purchase 80,000 shares of the
      Company’s common stock were issued. The outstanding options are exercisable at
      any time before September 19, 2017 at $3.19 per share, September 19, 2016 at
      $2.67 per share and September 21, 2015 at $2.05 per share,
      respectively.





In
      February 2006, October 2006 and April 2007, the Company granted consultants
      warrants to purchase an aggregate of 350,000, 100,000 and 50,000 shares of
      the
      Company’s common stock at exercise prices of $2.00, $2.70 and $2.70 per share,
      respectively. The outstanding warrants are exercisable at any time before
      February 2, 2009, September 30, 2009 and March 31, 2010, respectively.





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





In
      April
      2007 and January 2008, we granted stock options in connection with employment
      agreements to purchase 65,000 and 25,000 shares of the Company’s common stock at
      exercise prices of $3.00 and $3.35 per share, respectively. The options vest
      with respect to one-twelfth (1/12) of the aggregate number of shares on the
      date
      of issuance and on the same date of each succeeding month. The vested
      outstanding options are exercisable at any time before April 11, 2017 and
      December 31, 2017, respectively.





On
      August
      30, 2004 (the “Effective Date”), the Company issued stock options to its
      President and former Chief Operating Officer (the “Executive”) to purchase
      500,000 shares of the Company’s common stock at an exercise price of $1.35 per
      share. The options vest, and may be exercised by the Executive with respect
      to
      200,000 shares on the Effective Date and commencing one year after the Effective
      Date, 12,500 shares per month through August 2007. The vested outstanding
      options are exercisable at any time before August 29, 2014.


F-15


Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and
      2006





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





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


Options
              
              WarrantsExercise
              
              Number
                  of
              
              Exercise
              
              Number
                  ofPrice
              
              Shares
              
              Price
              
              SharesOutstanding
                  at March 31, 2005
              
              $
              .75
                  - 1.35
              
              
              780,000
              
              $
              1.25
              
              
              2,298,092Issued
              
              
              1.49
                  - 2.05
              
              
              120,000
              
              
              2.00
              
              
              350,000Exercised
              
              
              .75
              
              
              (60,000
              )
              
              1.25
              
              
              (2,298,092
              )Outstanding
                  at March 31, 2006
              
              
              .75
                  - 2.05
              
              
              840,000
              
              
              2.00
              
              
              350,000Issued
              
              
              2.67
              
              
              80,000
              
              
              2.70
              
              
              100,000Forfeited
              
              
              1.49
              
              
              (25,000
              )Outstanding
                  at March 31, 2007
              
              
              .75
                  - 2.67
              
              
              895,000
              
              
              2.00
                  - 2.70
              
              
              450,000Issued
              
              
              3.00
                  -3.35
              
              
              170,000
              
              
              2.70
              
              
              50,000Exercised
              
              
              2.05
              
              
              (5,000)Outstanding
                  at March 31, 2008
              
              $
              .75
                  - $3.35
              
              
              1,060,000
              
              $
              2.00
                  - 2.70
              
              
              500,000




At
      March
      31, 2008 there were 1,060,000 and 500,000 options and warrants outstanding,
      respectively, exercisable at prices ranging from $.75 to $3.35, and 2,530,000
      shares reserved for issuance under all stock arrangements.





Significant
      option and warrant groups outstanding at March 31, 2008 and the related weighted
      average exercise price and life information are as follows:




Weighted
            
            WeightedOptions/
            
            Options/
            
            Average
            
            AverageRange
                of
            
            Warrants
            
            Warrants
            
            Exercise
            
            RemainingExercise
                Price
            
            Outstanding
            
            Exercisable
            
            Price
            
            Life (years)$.75
                - $3.35
            
            
            1,060,000
            
            
            1,041,250
            
            $
            1.78
            
            
            7.062.00
                - 2.70
            
            
            500,000
            
            
            500,000
            
            
            2.21
            
            
            1.09$.75
                - $3.35
            
            
            1,560,000
            
            
            1,541,250
            
            
            1.92
            
            
            5.14





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





The
      weighted average estimated values of stock options granted during fiscal 2008,
      2007 and 2006 were $.97, $.88 and $.75, respectively. The weighted average
      assumptions used in the Black-Scholes option-pricing model were as
      follows:




2008
            
            2007
            
            2006Risk-free
                interest rate
            
            
            3.94
            %
            
            3.97
            %
            
            3.64
            %Years
                until exercise
            
            
            3.00
            
            
            3.00
            
            
            3.00Volatility
            
            
            39.7
            %
            
            41.4
            %
            
            42.9
            %Dividend
                yield
            
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %Termination
                rate
            
            
            n/a
            
            
            n/a
            
            
            n/a


F-16


Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and
      2006





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





The
      Company recorded total stock based compensation costs of $239,900, $226,550
      and
      $397,350 for the fiscal years ended March 31, 2008, 2007 and 2006, respectively.




19.
      Income Taxes





Net
      income tax benefit for the fiscal years ended March 31 consists of the
      following:





2008
            
            2007
            
            2006Current:Federal
            
            $
            (810,000
            )
            $
            (375,000
            )
            $
            —State
                and local
            
            
            (265,000
            )
            
            (200,000
            )
            
            —(1,075,000
            )
            
            (575,000
            )
            
            —Deferred:Federal
            
            
            902,000
            
            
            730,000
            
            
            51,545State
                and local
            
            
            333,000
            
            
            295,000
            
            
            14,8501,235,000
            
            
            1,025,000
            
            
            66,395Net
                income tax benefit
            
            $
            160,000
            
            $
            450,000
            
            $
            66,395





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:





2008
            
            2007
            
            2006Statutory
                federal income tax rate
            
            
            34.0
            
            
            34.0
            
            
            34.0State
                and local income taxes, net of federal benefit
            
            
            7.0
            
            
            7.0
            
            
            7.0Valuation
                allowance and reserves
            
            
            (47.5
            )
            
            (49.4
            )
            
            11.3Permanent
                differences
            
            
            .7
            
            
            9.7
            
            
            (12.3
            )Utilization
                of net operating loss carryforwards
            
            
            (1.0
            )
            
            (52.7
            )
            
            —Effective
                tax rate
            
            
            (6.8
            )%
            
            (51.4
            )%
            
            40.0
            %





The
      significant components of deferred tax assets and liabilities as of March 31,
      2008 and 2007 are as follows:





2008
            
            2007Current
                deferred tax assets:Accounts
                receivable
            
            $
            349,957
            
            $
            357,501Accrued
                expenses
            
            
            127,707
            
            
            106,207Contingency
                reserves
            
            
            4,300
            
            
            4,300481,964
            
            
            468,008Valuation
                allowance
            
            
            —
            
            
            —Net
                current deferred tax assets
            
            $
            481,964
            
            $
            468,008Non-current
                deferred tax assets (liabilities):Equipment
            
            $
            (55,952
            )
            $
            (55,830
            )Intangible
                assets
            
            
            350,259
            
            
            400,449Self-insurance
            
            
            288,365
            
            
            231,986Workers
                compensation reserve
            
            
            1,124,807
            
            
            1,108,879Employee
                stock compensation
            
            
            415,810
            
            
            314,0292,123,289
            
            
            1,999,513Valuation
                allowance
            
            
            —
            
            
            (1,108,676
            )


F-17




Command
      Security Corporation


Notes
      to
      Consolidated Financial Statements, Continued March 31, 2008, 2007 and
      2006





Net
                non-current deferred tax assets
            
            
            2,123,289
            
            
            890,837Total
                deferred tax assets
            
            $
            2,605,253
            
            $
            1,358,845





The
      valuation allowance decreased by $1,108,676, $ 842,205 and $18,294 during the
      fiscal years ended March 31, 2008, 2007 and 2006, respectively. The Company
      has
      determined based on its expectations for the future that it is more likely
      than
      not that future taxable income will be sufficient to utilize fully the net
      deferred tax assets at March 31, 2008 and 2007. Federal and state net operating
      loss carryforwards utilized during the year ended March 31, 2008 were acquired
      via the acquisition of Brown Security Industries, Inc. in April 2007 (see Note
      9), as previously available federal net operating loss carryforwards were fully
      utilized during the year ended March 31, 2007.





20.
      Related Party Transactions





In
      addition to an annual directors fee of $10,000, directors receive payments
      of
      fees for attending board and certain committee meetings in the amount of $1,000,
      for each meeting attended.





21.
      Quarterly Results (unaudited)





Summary
      data relating to the results of operations for each quarter for the fiscal
      years
      ended March 31, 2008 and 2007 follows:





Three
                Months EndedJune 30
            
            Sept. 30
            
            Dec. 31
            
            March 31Fiscal
                year 2008Security
                officer service revenue
            
            $
            28,034,825
            
            $
            30,563,886
            
            $
            30,173,901
            
            $
            30,431,920Administrative
                service revenue
            
            
            49,063
            
            
            49,896
            
            
            51,427
            
            
            48,947Total
                revenue
            
            
            28,083,888
            
            
            30,613,782
            
            
            30,225,328
            
            
            30,480,867Gross
                profit
            
            
            3,577,637
            
            
            4,389,273
            
            
            4,151,730
            
            
            4,123,637Net
                income
            
            
            458,865
            
            
            555,818
            
            
            540,471
            
            
            918,431Net
                incomeper
                common share (basic)
            
            
            0.04
            
            
            0.05
            
            
            0.05
            
            
            0.09per
                common share (diluted)
            
            
            0.04
            
            
            0.05
            
            
            0.05
            
            
            0.08Fiscal
                year 2007Security
                officer service revenue
            
            
            22,210,245
            
            
            23,822,667
            
            
            24,002,844
            
            
            23,465,144Administrative
                service revenue
            
            
            95,649
            
            
            88,021
            
            
            89,923
            
            
            48,053Total
                revenue
            
            
            22,305,894
            
            
            23,910,688
            
            
            24,092,767
            
            
            23,513,197Gross
                profit
            
            
            3,223,570
            
            
            3,426,577
            
            
            3,809,192
            
            
            3,205,893Net
                income
            
            
            204,325
            
            
            174,788
            
            
            225,341
            
            
            635,585Net
                incomeper
                common share (basic)
            
            
            0.02
            
            
            0.02
            
            
            0.02
            
            
            0.06per
                common share (diluted)
            
            
            0.02
            
            
            0.02
            
            
            0.02
            
            
            0.06




F-18





Schedule
      II





COMMAND
      SECURITY CORPORATION





SCHEDULE
      OF VALUATION AND QUALIFYING ACCOUNTS





AgainstAdditions
            
            Amounts(Reductions)
            
            Due
                toBalance
                at
            
            Charged
                or
            
            Administrative
            
            Charged
            
            Deductions
            
            BalanceBeginning
            
            Credited
                to
            
            Service
            
            to
                Other
            
            from
            
            at
                End ofof
                Period
            
            Expenses
            
            Clients
            
            Accounts
            
            Reserve
            
            PeriodYear
                ended March 31, 2008:Deducted
                from asset accounts:Allowance
                for doubtful accounts receivable – current maturities
            
            $
            831,397
            
            $
            (151,918
            )
            $
            —
            
            $
            477,493
            
            $
            (136,530
            )
            $
            1,020,442Year
                ended March 31, 2007:Deducted
                from asset accounts:Allowance
                for doubtful accounts receivable – current maturities
            
            
            332,892
            
            
            214,889
            
            
            126,386
            
            
            187,979
            
            
            (30,749
            )
            
            831,397Year
                ended March 31, 2006:Deducted
                from asset accounts:Allowance
                for doubtful accounts receivable – current maturities
            
            
            301,465
            
            
            1,158,182
            
            
            53,960
            
            
            (16,901
            )
            
            (1,163,814
            )
            
            332,892





See
      auditor's report


F-19




**SIGNATURES**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this Annual Report to be signed on our behalf by the undersigned,
        thereunto duly authorized.
 
 **COMMAND
        SECURITY CORPORATION**
 
 Date:
        June 27, 2008
 By:
                  /s/ Barry I. RegensteinBarry
                  I. RegensteinPresident
                  andChief
                  Financial Officer
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, this report has
        been
        signed below by the following persons on behalf of the registrant and in
        the
        capacities and on the dates indicated:
 
 Signature
              
              Title
              
              Date/s/
                  Peter Kikis
                Peter
                  Kikis
              
              Chairman
                  of the Board
              
              June
                  27, 2008/s/
                  Barry I. Regenstein
                Barry
                  I. Regenstein
              
              Director,
                  President and
                Chief
                  Financial Officer
                (Principal
                  Executive Officer
                and
                  Principal Accounting Officer)
              
              June
                  27, 2008/s/
                  Martin C. Blake, Jr.
                Martin
                  C. Blake, Jr.
              
              Director
                  and Chief Operating Officer
              
              June
                  27, 2008/s/
                  Robert S. Ellin
                Robert
                  S. Ellin
              
              Director
              
              June
                  27, 2008/s/
                  Thomas Kikis
                Thomas
                  Kikis
              
              Director
              
              June
                  27, 2008/s/
                  Laurence A. Levy
                Laurence
                  A. Levy
              
              Director
              
              June
                  27, 2008
  26
  COMMAND
        SECURITY CORPORATION
 EXHIBIT
        INDEX
  Exhibit
                Number
              
              Exhibit
                  Description3.1
              
              Amended
                  & Restated Articles
              
              Incorporated
                  by reference to Exhibit of Incorporation 3.3 of the form 10-K for
                  the
                  fiscal year ended March 31, 1993 (the "1993 10-K").3.2
              
              By-Laws
              
              Incorporated
                  by reference to Exhibit 3.3 of the Form 10-K for the fiscal year
                  ended
                  March 31, 1991 (the "1991 10-K").3.3
              
              Amendments
                  to By-Laws
              
              Incorporated
                  by reference to Exhibit 3.1 of the Form 8-K filed September 20,
                  2006.3.4
              
              Certificate
                  of Amendment of Certificate of Incorporation
              
              Incorporated
                  by reference to Exhibit 3.4 of the Eighth Amendment to the Registration
                  Statement filed on Form S-1, File No. 33-75336 (the
                  "S-1").4.1
              
              Specimen
                  Stock Certificate
              
              Incorporated
                  by reference to Exhibit 4.A to Amendment #1 to Registrant's Registration
                  Statement on Form S-18, file number 33, 35007-NY (the
                  "S-18").4.2
              
              Specimen
                  Series A Preferred Stock Certificate
              
              Incorporated
                  by reference to Exhibit 4.2 of the Third Amendment to the
                  S-1.10.1
              
              Purchase
                  and Sale Agreement dated February 24, 1996, for the acquisition
                  of United
                  Security Group Inc.
              
              Incorporated
                  by reference to Exhibit 2.1 of the Form 8-K filed March 23,
                  1996.10.2
              
              CIT
                  Group/Business Credit, Inc. Financing Agreement dated December
                  12,
                  2003
              
              Incorporated
                  by reference to Exhibit 10.41 of the Form 10-K for the fiscal year
                  ended
                  March 31, 2004 filed on July 14, 2004.10.3
              
              Amended
                  and Restated Financing Agreement with CIT Group/Business Credit,
                  Inc.
                  dated March 21, 2006
              
              Incorporated
                  by reference to Exhibit 10.4 of the Form 8-K filed March 21,
                  2006.10.4
              
              Consulting
                  Agreement with Giuliani Security & Safety LLC dated January 9,
                  2006
              
              Incorporated
                  by reference to Exhibit 10.3 of the Form 8-K filed January 9,
                  2006.10.5
              
              Consulting
                  Agreement with Jericho State Capital Consulting LLC dated February
                  3,
                  2006
              
              Incorporated
                  by reference to Exhibit 10.4 of the Form 8-K filed February 3,
                  2006.10.6
              
              First
                  Amendment and Consent to Amended and Restated Financing Agreement
                  with CIT
                  Group/Business Credit, Inc. dated June 13, 2006
              
              Incorporated
                  by reference to Exhibit 10.5 of the Form 8-K filed June 13,
                  2006.10.7
              
              Agreement
                  for Purchase and Sale of Assets dated June 13, 2006, for the acquisition
                  of Sterling Protective Group, Inc.
              
              Incorporated
                  by reference to Exhibit 10.6 of the Form 8-K filed June 13,
                  2006.10.8
              
              Second
                  Amendment to the Amended and Restated Financing Agreement with
                  CIT
                  Group/Business Credit, Inc. dated September 30, 2006
              
              Incorporated
                  by reference to Exhibit 10.7 of the Form 10-Q filed February 13,
                  2007.10.9
              
              Third
                  Amendment to Amended and Restated Financing Agreement with CIT
                  Group/Business Credit, Inc. Inc. dated April 12, 2007
              
              Incorporated
                  by reference to Exhibit 10.1 of the Form 8-K filed April 12,
                  2007.10.10
              
              Stock
                  Purchase Agreement dated April 12, 2007, for the acquisition of
                  Brown
                  Security Industries, Inc.
              
              Incorporated
                  by reference to Exhibit 10.2 of the Form 8-K filed April 12,
                  2007.10.11
              
              Amended
                  and Restated Plan of Merger dated April 12, 2007, for the acquisition
                  of
                  Brown Security Industries, Inc.
              
              Incorporated
                  by reference to Exhibit 10.3 of the Form 8-K filed April 12,
                  2007.10.12
              
              Asset
                  Purchase Agreement dated January 1, 2008 for the acquisition of
                  Expert
                  Security Services, Inc.
              
              Incorporated
                  by reference to Exhibit 10.1 of the Form 8-K filed January 7,
                  2008.11
              
              Computation
                  of Income (Loss) Per Share of Common Stock
              
              Incorporated
                  by reference to Note 10 of the Financial Statements.14
              
              Command
                  Code of Ethics
              
              Exhibit
                  14 attached hereto.31.1
              
              Certifications
                  Pursuant to Rule 13(a)-14(a)/15(d)-14(a)
              
              Exhibit
                  31.1 attached hereto.31.2
              
              Certifications
                  Pursuant to Rule 13(a)-14(a)/15(d)-14(a)
              
              Exhibit
                  31.2 attached hereto.32.1
              
              Section
                  1350 Certifications
              
              Exhibit
                  32.1 attached hereto.
  27
  32.2
              
              Section
                  1350 Certifications
              
              Exhibit
                  32.2 attached hereto.99.1
              
              Reliance
                  Warrant
              
              Incorporated
                  by reference to Exhibit 99.14 of the Form 8-K filed September 27,
                  2000.99.2
              
              Registration
                  Rights Agreement
              
              Incorporated
                  by reference to Exhibit 99.22 of the Form 8-K filed September 27,
                  2000.99.3
              
              Audit
                  Committee of the Board of Directors Charter and Powers
              
              Exhibit
                  99.3 attached hereto.99.4
              
              2000
                  Stock Option Plan
              
              Incorporated
                  by reference to Exhibit 99.25 of the Form 10-K for the fiscal year
                  ended
                  March 31, 2001 filed on July 3, 2001.99.5
              
              2005
                  Stock Incentive Plan
              
              Incorporated
                  by reference to Exhibit 99.5 of the Form 10-K for the fiscal year
                  ended
                  March 31, 2006 filed on June 28, 2006.99.6
              
              Blake
                  Warrant
              
              Incorporated
                  by reference to Exhibit 99.27 of the Form 10-K for the fiscal year
                  ended
                  March 31, 2001 filed on July 3, 2001.99.7
              
              Barry
                  I. Regenstein Employment Agreement
              
              Incorporated
                  by reference to Exhibit 10.1 of the Form 8-K/A filed on August
                  27,
                  2004.99.8
              
              Marc
                  W. Brown Employment Agreement
              
              Incorporated
                  by reference to Exhibit 10.4 of the Form 8-K filed on April 12,
                  2007.
  28