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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______
FORM 10-Q
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
_____________
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ____________________
Commission file number 0-18684
_______
Command Security Corporation
____________________________________________________________________________
(Exact name of registrant as specified in its charter)
New York 14-1626307
_________________________________ ____________________________________
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Lexington Park, LaGrangeville, New York 12540
_______________________________________ _________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (845) 454-3703
______________
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___
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practical date: 7,519,878 (as of August 6, 2004).
COMMAND SECURITY CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Statements of Operations -
three months ended June 30, 2004
and 2003 (unaudited) 3
Condensed Balance Sheets -
June 30, 2004 and March 31, 2004
(unaudited) 4
Condensed Statements of Stockholders' Equity -
three months ended June 30, 2004 and 2003
(unaudited) 5
Condensed Statements of Cash Flows -
three months ended June 30, 2004 and 2003
(unaudited) 6 - 7
Notes to Condensed Financial Statements 8 - 11
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 12 - 21
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 21
Item 4. Controls and Procedures 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures
Exhibit 31.1 Certification of William C. Vassell 23
Exhibit 31.2 Certification of Gordon Robinett 24
Exhibit 32.1 ss.1350 Certification of William C. Vassell 25
Exhibit 32.2 ss.1350 Certification of Gordon Robinett 26
Exhibit 99.1 Press Release 27
2
COMMAND SECURITY CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
------------------------------
June, 30 June, 30
2004 2003
----------- -----------
Revenue $19,168,747 $16,573,825
Cost of revenue 16,696,267 13,829,347
----------- -----------
Gross profit 2,472,480 2,744,478
----------- -----------
Operating expenses
General and administrative expenses 2,864,948 2,722,866
Provision for doubtful accounts (48,151) 72,012
----------- -----------
2,816,797 2,794,878
----------- -----------
Operating loss (344,317) (50,400)
Interest income 18,686 22,624
Interest expense (116,817) (116,767)
Equipment dispositions 2,400 9,566
----------- -----------
Loss before income taxes (440,048) (134,977)
Provision for income taxes 0 0
----------- -----------
Net loss (440,048) (134,977)
Preferred stock dividends (38,413) (40,674)
----------- -----------
Net loss applicable to common stockholders $ (478,461) $ (175,651)
=========== ===========
Net loss per common share
Basic $ (0.08) $ (0.03)
=========== ===========
Diluted n/a n/a
Weighted average number
of common shares outstanding
Basic 6,368,609 6,287,343
=========== ===========
Diluted n/a n/a
See accompanying notes to condensed financial statements.
3
COMMAND SECURITY CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
June 30, March 31,
2004 2004
----------- -----------
ASSETS
Current assets:
Accounts receivable, net of allowance for
doubtful accounts of $197,207 and $361,865, respectively $13,006,668 $16,078,250
Accounts receivable, net of allowance for
billing adjustments of $965,374 0 1,965,006
Prepaid expenses 565,380 936,454
Other receivables 358,437 369,058
----------- -----------
Total current assets 13,930,485 19,348,768
----------- -----------
Furniture and equipment at cost, net 600,077 645,592
----------- -----------
Other assets:
Intangible assets, net 245,386 270,217
Restricted cash 107,892 107,676
Other receivables 1,237,463 1,252,993
Other assets 287,509 291,862
----------- -----------
Total other assets 1,878,250 1,922,748
----------- -----------
Total assets $16,408,812 $21,917,108
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 1,401,816 $ 556,310
Current maturities of long-term debt 359,392 361,540
Current maturities of obligations under capital leases 51,382 66,270
Short-term borrowings 3,868,666 9,091,628
Accounts payable 736,099 771,042
Due to service companies 280,245 248,205
Preferred dividends payable 79,087 40,674
Accrued payroll and other expenses 5,075,214 5,664,021
----------- -----------
Total current liabilities 11,851,901 16,799,690
Self-insurance reserves 397,784 402,290
Long-term debt, due after one year 84,120 153,882
Obligations under capital leases, due after one year 59,760 67,538
----------- -----------
Total liabilities 12,393,565 17,423,400
----------- -----------
Stockholders' equity:
Preferred stock, Series A, $.0001 par value 0 2,033,682
Common stock, $.0001 par value 752 629
Additional paid-in capital 10,004,321 8,009,175
Accumulated deficit (5,989,826) (5,549,778)
----------- -----------
Total stockholders' equity 4,015,247 4,493,708
----------- -----------
Total liabilities and stockholders' equity $16,408,812 $21,917,108
=========== ===========
See accompanying notes to condensed financial statements.
4
COMMAND SECURITY CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Additional
Preferred Common Paid-In Retained
Stock Stock Capital Deficit
---------- ------ ----------- -----------
Balance at March 31, 2003 $2,033,682 $ 629 $ 8,171,870 $(5,239,370)
Preferred stock dividends (40,674)
Net loss - three months ended
June 30, 2003 (134,977)
---------- ------ ----------- -----------
Balance at June 30, 2003 2,033,682 629 8,131,196 (5,374,347)
Preferred stock dividends (122,021)
Net loss - nine months ended
March 31, 2004 (175,431)
---------- ------ ----------- -----------
Balance at March 31, 2004 2,033,682 629 8,009,175 (5,549,778)
Preferred stock dividends (38,413)
Preferred stock conversion (2,033,682) 123 2,033,559
Net loss - three months ended
June 30, 2004 (440,048)
---------- ------ ----------- -----------
Balance at June 30, 2004 $ 0 $ 752 $10,004,321 $(5,989,826)
========== ====== =========== ===========
See accompanying notes to condensed financial statements.
5
COMMAND SECURITY CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
----------------------------------
June, 30 June, 30
2004 2003
----------- -----------
Cash flow from operating activities:
Net loss $ (440,048) $ (134,977)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 109,974 137,416
Provision for doubtful accounts (48,151) 72,012
Gain on equipment dispositions (2,400) (9,566)
Self-insurance reserves 25,727 (21,659)
Decrease in receivables, prepaid expenses
and other current assets 5,471,202 2,787,982
Decrease in accounts payable and other current liabilities (621,943) (733,260)
----------- -----------
Net cash provided by operating activities 4,494,361 2,097,948
----------- -----------
Cash flows from investing activities:
Purchases of equipment (13,629) (6,428)
Proceeds from sale of equipment 2,400 12,364
Decrease in intangible assets 0 1,975
Principal collections on notes receivable 14,900 12,483
----------- -----------
Net cash provided by investing activities 3,671 20,394
----------- -----------
Cash flows from financing activities:
Net repayments on line-of-credit (4,929,358) (1,747,146)
Increase/(decrease) in cash overdrafts 845,506 (23,568)
Principal payments on other borrowings (391,514) (290,672)
Principal payments on capital lease obligations (22,666) (16,282)
Payment of preferred stock dividends 0 (40,674)
----------- -----------
Net cash used in financing activities (4,498,032) (2,118,342)
----------- -----------
Net change in cash and cash equivalents 0 0
Cash and cash equivalents, at beginning of period 0 0
----------- -----------
Cash and cash equivalents, at end of period $ 0 $ 0
=========== ===========
See accompanying notes to condensed financial statements
(Continued)
6
COMMAND SECURITY CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Supplemental Disclosures of Cash Flow Information
Cash paid during the three months ended June 30 for:
2004 2003
-------- --------
Interest $133,913 $122,504
Income taxes 39,234 159,154
Supplemental Schedule of Non-Cash Investing and Financing Activities
For the three months ended June 30, 2004, the Company purchased
transportation equipment with direct installment financing of $26,000. This
amount has been excluded from the purchases of equipment and proceeds from
long-term debt on the statements of cash flows.
During the three months ended June 30, 2004, the Company converted 12,325.35
shares of preferred stock into 1,232,535 of common stock. The debit to
preferred stock of $2,033,682 and credit to common stock of $123 and
additional paid-in capital of $2,033,559 have been excluded in the statements
of cash flows.
For the three months ended June 30, 2004 and 2003, the Company accrued
dividends of $38,413 and $40,674, respectively, on its Series A convertible
preferred stock. These charges to additional paid-in capital and credits to
dividends payable have been excluded in the statements of cash flows.
See accompanying notes to condensed financial statements.
7
COMMAND SECURITY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The unaudited financial statements presented herein have been prepared
in accordance with the instructions to Form 10-Q and do not include all of
the information and note disclosures required by generally accepted
accounting principles. These statements should be read in conjunction with
the financial statements and notes thereto included in the Company's
financial statements for the year ended March 31, 2004.
The financial statements for the interim periods shown in this report
are not necessarily indicative of results to be expected for the fiscal year.
In the opinion of management, the information contained herein reflects all
adjustments necessary to summarize fairly the results of operations,
financial position, stockholders' equity and cash flows at June 30, 2004, and
for the period then ended. All such adjustments are of a normal recurring
nature.
1.) Short-Term Notes Payable:
In December 2003, the Company entered into a three year agreement with
CIT Group/Business Credit, Inc. ("CIT") under a loan and security
agreement (the "agreement"), providing for a line of credit of up to 85%
of eligible accounts receivable, as defined in the agreement, but in no
event in excess of $15 million. At June 30, 2004, the Company had used
$3,868,666 of this line, representing approximately 49% of its maximum
borrowing capacity. Interest is payable at prime plus 1.25% (5.25% at
June 30, 2004). The line is collateralized by customer accounts
receivable and substantially all other assets of the Company.
The Company relies on its revolving loan from CIT for its operating and
working capital. The loan contains a fixed charge covenant and various
other financial and non-financial covenants. The Company was not in
compliance with the fixed charge covenant as of June 30, 2004.
Subsequent to the end of the quarter the Company obtained a waiver from
CIT for this violation. The non-financial covenants give CIT the right
to call the line if a change in control of the Company occurs, if
Reliance Security Group, plc sells any shares without prior written
consent from CIT or if the current Chairman of the Board/President/Chief
Executive Officer does not remain actively engaged in the management of
the Company. To date, consent from CIT with regard to the sale of the
Reliance stock to GCM has not been obtained.
2.) Net Income/(Loss) per Common Share:
Under the requirements of Financial Accounting Standards Board Statement
No. 128 (SFAS 128), "Earnings Per Share," the dilutive effect of
potential common shares, if any, is excluded from the calculation for
basic earnings per share. No diluted earnings per share are presented
for the three months ended June 30, 2004 and 2003, because the effect of
assumed issuance of common shares in connection with warrants and stock
options outstanding and for the quarter ended June 30, 2004 preferred
stock conversions was antidilutive.
For the quarter ended June 30, 2004, the basic weighted average number
of common shares outstanding include the weighted average of 6,287,343
shares of common stock outstanding through June 24, 2004 and 7,519,878
shares of common stock outstanding as of June 25, 2004 through June 30,
2004. The additional 1,232,535 shares of outstanding common stock are
from the conversion of preferred stock into common stock as of June 25,
2004.
(Continued)
8
COMMAND SECURITY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
3.) Preferred Stock
The Company had issued and outstanding 12,325.35 shares of Series A
Preferred Stock. The Series A shareholders are entitled to receive
annual dividends equal to 8% of the liquidation value of their shares,
payable quarterly. Upon liquidation or redemption the Series A
shareholders are entitled to $165 per share, or $2,033,682.
Additionally, any holder of Series A shares may, subject to certain
limitations under the law, at any time convert their shares into common
stock of the Company at a conversion ratio of 100 shares of common stock
for each share of Series A stock. On June 25, 2004, the preferred stock
was converted into common stock. As of June 30, 2004 and 2003, the
Company owed its preferred stockholders $79,087 and $81,349,
respectively, representing dividends accrued for the respective March
and June quarters.
4.) Self-Insurance
The Company has an insurance policy covering workers' compensation
claims in most states that the Company performs services. Annual
premiums are based on incurred losses as determined at the end of the
coverage period, subject to a minimum and maximum premium. Estimated
accrued liabilities are based on the Company's historical loss
experience and the ratio of claims paid to the Company's historical
payout profiles. Charges for estimated workers' compensation related
losses incurred and included in cost of sales were $883,703 and
$586,682, for the three months ended June 30, 2004 and 2003,
respectively.
The nature of the Company's business also subjects it to claims or
litigation alleging that it is liable for damages as a result of the
conduct of its employees or others. The Company insures against such
claims and suits through general liability policies with third-party
insurance companies. Such policies have limits of $5,000,000 per
occurrence and $10,000,000 in the aggregate (reduced to $5,000,000 as of
October 1, 2002) on a per project basis. On the aviation related
business, as of October 1, 2002, the Company acquired a policy with a
$25,000,000 limit per occurrence. Prior to December 1, 2001, the Company
had limits of $1,000,000 per occurrence and $10,000,000 in the
aggregate. Prior to October 1, 2001, the Company also had coverage under
an excess general liability insurance policy that covered claims for an
additional $50,000,000 in the aggregate. The impact of the September 11
tragedy meant that this umbrella coverage was no longer available to the
Company at an acceptable premium at the time of policy renewal (October
1, 2001). This coverage has become more affordable. As of October 1,
2003, the Company has an excess general liability insurance policy that
covers aviation claims for an additional $25,000,000 in the aggregate.
The Company retains the risk for the first $25,000 per occurrence on the
non-aviation related policy and $5,000 on the aviation related policy
except $25,000 for damaged aircraft ($50,000 for claims based on losses
incurred prior to October 1, 2000). Charges for general liability
self-insurance expense of $244,822 and $193,375, are included in cost of
sales for the three months ended June 30, 2004 and 2003, respectively.
Estimated accrued liabilities are based on specific reserves in
connection with existing claims as determined by third party risk
management consultants and actuarial factors and the timing of reported
claims. These are all factored into estimated losses incurred but not
yet reported to the Company.
Cumulative amounts estimated to be payable by the Company with respect
to pending and potential claims for all years in which the Company is
liable under its general liability risk retention and workers'
compensation policies have been accrued as liabilities. Such accrued
liabilities are necessarily based on estimates; thus, the Company's
ultimate liability may exceed or be less than the amounts accrued. The
methods of making such estimates and establishing the resultant accrued
liability are reviewed continually and any adjustments resulting
therefrom are reflected in current earnings.
(Continued)
9
COMMAND SECURITY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
5.) Contingent Liabilities:
The nature of the Company's business is such that there is a significant
volume of routine claims and lawsuits that are issued against it, the
vast majority of which never lead to substantial damages being awarded.
The Company maintains general liability, casualty and worker's
compensation insurance coverage that it believes is appropriate to the
relevant level of risk and potential liability. Some of the claims
brought against the Company could result in significant payments,
however, the exposure to the Company under general liability is limited
to the first $25,000 per occurrence on the non-aviation related claims
and $10,000 per occurrence on the aviation related claims. 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 effected by a poor claims history.
In addition to such cases, the Company has been named as a defendant in
several uninsured employment related claims which are currently before
various courts, the EEOC or various state and local agencies. The
Company has instituted policies to minimize these occurrences and
monitor those that do occur. At this time the Company is unable to
determine the impact on the financial position and results of operation
that these claims may have, should the investigations conclude that they
are valid.
The Company has an employment agreement with William C. Vassell, its
Chairman of the Board, President and Chief Executive Officer (CEO). Mr.
Vassell has been notified by the Board that his Employment Agreement
will not be extended on the anniversary of the effective date in
November 2004. Based on the advice of Company Counsel, Mr. Vassell's
employment period, as defined in his Employment Agreement dated
September 12, 2000, shall continue until November 2006. If he is
terminated by the Company's Board prior to November 2006, other than for
"cause" (as defined in the Employment Agreement), the Employment
Agreement provides for the payment of severance pay in a lump sum equal
to his base salary (currently at $250,000) multiplied by a fraction, the
denominator of which is 365 and the numerator of which is the number of
days between the date of such termination and November 2006.
Accordingly, a termination of Mr. Vassell in the near future could cause
the Company to incur a charge of approximately $600,000 (based on 28
months remaining in the Employment Period as of June 30, 2004). Counsel
to GCM (see Outlook - Change of Control) has indicated its disagreement
with the calculation of Mr. Vassell's termination compensation and
believes Mr. Vassell would be entitled to a lesser amount.
The Company also has an employment agreement with its Vice-President of
Aviation, Martin Blake. This agreement is for a three year period
expiring March 2006. It provides for severance payments and specified
benefits in the approximate range of $175,000 - $200,000 depending upon
the date of termination.
An audit of the Company's FAA contract for the pre-board screening
services was completed during December 2002. Based on initial audit
findings of the Defense Contract Audit Agency (DCAA), the FAA had
indicated that approximately $5.2 million of billing was not supported
by the Company's accounting records and consequently the FAA held back
$2.9 million of payment on final invoices until the audit was resolved.
The Company continued negotiations with the Defense Contract Management
Agency (DCMA) over the disputed billings on the FAA contract for
pre-board screening services. Steps were taken to ensure the Company
achieved a fair and equitable solution to the claim for costs incurred.
This included retaining a firm of lawyers based in Washington to
consider the options. They retained a firm of accountants who had
experience in dealing with the DCMA. During the quarter ended June 30,
2004, the Company reached an agreement with FAA/DCMA for a total
contract price of $32.9 million. This compared to original billings of
$33.8 million and thus resulted in a difference of approximately $1.0
million. Since the company had already reserved $1.0 million, no
additional adjustments were required. On June 14, 2004, the Company
collected $1,965,000 from the DCMA in settlement of this dispute.
(Continued)
10
COMMAND SECURITY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
5.) Contingent Liabilities (continued):
The Company was subject to an audit by the New York State Attorney
General's office relative to the provision of services to New York State
under the Office of General Services (OGS) requirements. A settlement
was reached with the Attorney General's Office resulting in a total
penalty of $600,000, with $73,000 to be paid over a three month period
and a note provision in the amount of $527,000 to be paid with
twenty-one monthly payments of approximately $27,000 including interest
at 9%, commencing December 1, 2003.
Balance of page intentionally left blank
11
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Management's Discussion and Analysis should be read in conjunction with
the Company's financial statements and the related notes thereto.
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 2. The actual results may vary significantly based on a number
of factors including, but not limited to, availability of labor, marketing
success, competitive conditions and the change in economic conditions of the
various markets the Company serves. Actual future results may differ
materially from any suggested in the following statements.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, expenses and related disclosure of contingent assets
and liabilities. We believe the following critical accounting policies affect
our more significant judgments and estimates used in the preparation of our
financial statements. Actual results may differ from these estimates under
different assumptions and conditions.
Revenue Recognition
The Company records revenue as services are provided to its customers.
Revenue consists primarily of security guard services which are typically
billed at hourly rates. These rates may vary depending on base, overtime and
holiday time worked. Costs associated with the Company's guard service
revenue consist of direct and indirect payroll and related expenses,
subcontractor costs, vehicle and other costs directly related to the guard
service revenue generated.
Reserve for Doubtful Accounts
The Company periodically evaluates the requirement for providing for
credit losses on its accounts receivables. Criteria used by management to
evaluate the adequacy of the allowance for doubtful accounts include, among
others, the creditworthiness of the customer, prior payment performance, the
age of the receivables and the Company's overall historical loss experience.
Individual accounts are charged off as management deems them as
uncollectible.
Prepaid Expenses
A significant new contract commenced in August 2003. Due to the size of
the costs relating to this contract (uniforms, radios, etc), $264,781 was
capitalized and is being charged to earnings over its estimated useful life
of 12 months. The expenses reported amounted to $66,195 for the quarter ended
June 30, 2004.
12
Results of Operations
Revenue
Revenue increased by $2,594,922 from $16,573,825 for the quarter ended June
30, 2003 to $19,168,747 for the quarter ended June 30, 2004. The increase was
primarily due to an increase of approximately $2,457,000 in our Aviation
Division from a contract which began August 2003 and additional services
required by the airline industry. The Guard Division had an incremental
increase of approximately $140,000.
Gross Profit
Gross Profit decreased by $271,998 to $2,472,480 (12.9% of revenue) for
the quarter ended June 30, 2004 from $2,744,478 (16.56% of revenue) for the
quarter ended June 30, 2003.
Gross profit in the Aviation Division decreased from 15.31% of revenue in
quarter ended June 30, 2003 to 12.63% of revenue in the quarter ended June
30, 2004. This percentage decrease is primarily due to increased direct
payroll reflecting the higher cost of providing qualified and experienced
personnel due to the effect of the general economic improvement in most areas
of the country. Other contributing factors in the decrease in gross profit
were higher sales discounts established with an aviation customer to receive
earlier payment of accounts receivable and higher payroll taxes due to the
termination and layoff of personnel in 2003 as a result of the federalization
of pre-board screening services in November, 2002.
Gross profit in the Guard Division decreased from 16.75% of revenue for the
quarter ended June 30, 2003 to 14.26% of revenue for the quarter ended June
30, 2004.The percentage decrease is primarily due to the same factors which
caused the decline in the Aviation Division; the added competition for
qualified and experienced personnel and higher overall payroll taxes and
insurance costs.
General and Administrative Expenses
General and Administrative expenses increased by $142,082 but decreased as a
percent of revenue from $2,722,866 (16.43% of revenue) for quarter ended June
30, 2003 to $2,864,948 (14.95% of revenue). The dollar increase was primarily
due to increased professional fees relating to the ongoing dispute between
GCM Security Partners, LLC and the Company.
Provision for Doubtful Accounts
The provision for doubtful accounts decreased by $120,163, resulting in a
credit of $48,151 for the quarter ended June 30, 2004 compared to a charge of
$72,012 for the same quarter in 2003. The reduction in the provision is
primarily due to the accelerated collection of the accounts receivable that
were outstanding more than 90 days.
The Company periodically evaluates the requirement for providing for credit
losses on its accounts receivable. Criteria used by management to evaluate
the adequacy of the allowance for doubtful accounts include, among others,
the creditworthiness of the customer, prior payment performance, the age of
the receivables and the Company's overall historical loss experience. It is
not known if bad debts will increase in future periods nor is it believed by
management that the current decrease is necessarily indicative of a trend.
13
Interest Income
Interest Income decreased by $3,938 to $18,686 for the quarter ended June 30,
2004 from $22,624 in the quarter ended June 30, 2003 due to lower financing
income from our service agreement clients.
Interest Expense
Interest expense at $116,817 for quarter ended June 30, 2004 was virtually
the same as the $116,767 charge for the quarter ended June 30, 2003. The
interest expense did not rise in conjunction with the increase in revenue due
to the accelerated collection of the accounts receivable.
Equipment Dispositions
The gain on equipment disposition of $2,400 in the quarter ended June 30,
2004 compares to a gain of $9,566 in the quarter ended June 30, 2003.
Equipment dispositions are a result of vehicles, office equipment and
security equipment sold at prices above or below book value.
Liquidity and Capital Resources
We pay our guard employees and those of our administrative service clients on
a weekly basis, while our customers and the customers of administrative
service clients pay for the services of such employees generally within 65
days after billing by the Company. In order to fund our payroll and
operations, we maintain a commercial revolving loan arrangement, currently
with CIT Group/Business Credit, Inc. ("CIT").
CIT Revolving Loan
The CIT loan agreement is for 3 years ending December 12, 2006 and provides
for borrowings in an amount up to 85% of the Company's eligible accounts
receivable, but in no event more than $15,000,000. The loan also provides for
advances against unbilled revenue (primarily monthly invoiced accounts)
although this benefit is offset by a reserve against all outstanding payroll
checks. The revolving loan bears interest at prime plus 1.25%. Costs to close
the loan totaled $317,463 and are being amortized over its term.
At June 30, 2004, we had borrowed $3,868,666 representing approximately 49%
of our maximum borrowing capacity based on the definition of "eligible
accounts receivable" under the terms of the loan and security agreement.
The Company relies heavily on its revolving loan from CIT which contains a
fixed charge covenant and various other financial and non-financial
covenants. If the Company breaches a covenant, CIT has the right to call the
line unless CIT waives the breach. For the quarter ended June 30, 2004, the
Company was not in compliance with the fixed charge covenant. Subsequent to
the quarter-end however, the Company obtained a waiver from CIT for this
violation. Additionally, the loan agreement contains certain non-financial
covenants, including a prohibition against an unapproved change in control of
the Company and an unapproved sale by Reliance Security Group plc of its
shares. Non-financial covenants also include the termination of William
Vassell as Chairman of the Board and Chief Executive Officer or his no longer
remaining actively engaged in the management of the Company. GCM's purchase
of the Reliance shares (see Part II, Item 1 - Legal Proceedings) has resulted
in violation of the first two CIT covenants referenced above and to date the
Company has not obtained a waiver from CIT for these violations. If the
Company terminates Mr. Vassell, as has been requested by GCM or removes him
as Chairman of the Board or Chief Executive Officer, CIT will have the option
to call the line. The Company agreed to give GCM limited access to CIT for
purposes of discussing GCM's proposals for the management and financing of
Command. Accordingly, GCM met with CIT to discuss these issues and CIT
indicated that they will take no action on the loan pending future
operational results, the potential for additional equity investment in the
Company provided by GCM and general developments with regard to GCM's
ownership.
14
Other Credit
The Company signed a note in connection with the OGS settlement in the amount
of $527,000. The note calls for twenty-one monthly payments in the amount of
$27,217 including interest at 9% per annum. The payments commenced December
1, 2003 and are expected to be financed with cash flows from continuing
operations.
On March 31, 2004, the Company settled a dispute with a uniform cleaning
service which calls for the Company to pay $1,756.20 per week for 344 weeks
or a total amount of $604,133 ending in 2011 for the use and cleaning of the
uniforms.
We finance vehicle purchases typically over three years and insurance through
short-term borrowings. The Company has no additional lines of credit other
than discussed herein and has no present material commitments for capital
expenditures.
Working Capital
Working capital decreased by $470,494 to $2,078,584 as of June 30, 2004, from
$2,549,078 as of March 31, 2004 primarily due to end of quarter timing
factors for accrued payroll, increased accruals for unemployment taxes due to
the federalization of pre-board screening at the airlines and increased
insurance accruals for worker's compensation claims.
We experienced a cash overdraft (defined as checks drawn in advance of future
deposits) of $1,401,816 as of June 30, 2004, compared to $556,310 at March
31, 2004. 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.
Outlook
This section, Management's Discussion and Analysis of Results of Operations
and Financial Condition, contains a number of forward-looking statements, all
of which are based upon the expectations of current management. Since
management is expected to change as of or shortly after the August 27, 2004
shareholder meeting for the election of directors, current management can
express no expectation as to what new management might do. Actual results may
differ materially and are qualified by the section below entitled "Forward
Looking Statements".
Change of Control
On May 21, 2004, GCM Security Partners, LLC ("GCM") purchased from Reliance
Security Group plc ("Reliance") the following securities: (i) 1,617,339
shares of the Company's common stock, (ii) 12,325.35 shares of the Company's
Series A Preferred Stock (which are convertible into 1,232,535 shares of the
Company's common stock), (iii) a warrant to acquire 150,000 shares of the
Company's common stock at an exercise price of $1.03125 per share and (iv) a
warrant to acquire 2,298,092 shares of the Company's common stock at an
exercise price of $1.25 per share. As reported by GCM Managing Member Bruce
Galloway in a 13D/A filed June 8, 2004, these securities were purchased for a
total payment of $2,850,000 in immediately available funds from working
capital of GCM.
15
At the time of the purchase by GCM, Command President and CEO, William C.
Vassell, had already initiated legal action in the United States District
Court, Southern District of New York (Case No. 04 CIV. 2657 (CM) ECF CASE)
seeking a determination that Mr. Vassell's right of first refusal under the
Shareholders Agreement between Reliance, Mr. Vassell and Command (filed as
Exhibit 99.19 of the form 8-K filed September 2000 and incorporated herein by
reference) was violated by Reliance in its offering (and subsequent sale) of
the securities to GCM. On June 18, 2004, the United States District Court
Judge rejected all of Mr. Vassell's claims, awarded summary judgment
declaring GCM the lawful owner of the Command securities purchased from
Reliance and ordered that Mr. Vassell and Command be preliminarily and
permanently restrained from interfering with the registration of the
securities in GCM's name or the exercise by GCM of any rights as the new
owner of the securities. Mr. Vassell has filed an appeal in the
above-litigation matter and his counsel has informed the Company that it is
now his belief that the appeal will not be decided prior to the August 27,
2004 shareholder meeting. In the meantime, both Mr. Vassell and Command are
required to honor the Court's decision.
The terms as directors for Messrs. Vassell, Miller and Nekos expire as
of the August 27, 2004 annual meeting. In addition, director Painter, whose
term will also expire as of that meeting, has declined nomination for
reelection. Accordingly, at the annual meeting, shareholders are being asked
to vote for directors to fill these four (4) positions.
GCM has converted its Series A Preferred Stock into common stock.
Consequently, GCM's common stock holdings post-conversion total 2,849,874
shares or 37.9%. Assuming the exercise of the warrants referenced above,
these securities represent approximately 53.1% of the outstanding shares of
common stock in Command. In addition, Bruce Galloway, a principal in GCM
Security Partners, LLC, has filed various amendments to his Schedule 13D
indicating that he has obtained proxies covering and/or otherwise has voting
control, directly or indirectly, over 50.4% of the currently outstanding
shares of the Company's common stock. As such, Mr. Galloway and/or GCM have
the voting power to determine the outcome of the election of directors at the
upcoming shareholders meeting. Accordingly, it is expected that the GCM
nominees, Messrs. Galloway, Ellin, Kikis and Wade, will be elected. It is
expected that Messrs. French, Simon and Halder will resign from the Board at
or shortly following the shareholders meeting. In accordance with the
Company's bylaws, the Board will vote for their replacements who will serve
the balance of their respective terms which expire at the shareholders'
annual meeting in 2005. The selection of directors to fill the vacancies
created by such resignations is uncertain at this time.
The GCM warrants have not been presented for exercise and management has been
advised by counsel that the exercise of such warrants would probably be
subject to the prohibition in Article NINTH of the Company's Amended and
Restated Certificate of Incorporation. Counsel has also advised that GCM and
its related parties would be limited in their right to engage in certain
transactions with the Company including (i) investments by GCM or its related
parties in the Company and (ii) business combinations between the Company and
any companies in which GCM or its related parties have an interest. These
restrictions are believed to exist based on the provisions in Article NINTH
which limit the ability of a party to engage in "business combinations" of
the Company with a "related person" absent (i) the approval of the holders of
not less than eighty percent (80%) of the outstanding shares of common stock
of the Company or (ii) compliance with certain other fair price provisions
which are communicated to all shareholders by way of a proxy.
Anti-Takeover Provisions
Pursuant to a motion brought by GCM before the United States District
Court asking the court to clarify an earlier decision with respect to the
securities purchased by GCM from Reliance, the court decided that the
Company's anti-takeover language in Article NINTH of its Certificate of
Incorporation constituted an express election by Command not be governed by
New York Business Corporation Law ss.912. Section 912 provides broader
anti-takeover protection than Article NINTH of the Company's Certificate of
Incorporation. For example, outside counsel has advised the Corporation that
the better interpretation of ss.912 would be that the conversion by GCM of
the preferred stock into common would have been a prohibited transaction. The
court has determined that Article NINTH does not contain such a prohibition.
The Company's Board of Directors has determined not to appeal the decision of
the United States District Court with respect to the applicability of the
ss.912 anti-takeover provisions to the Company. Notwithstanding the
inapplicability of ss.912, the Company's Certificate of Incorporation at
Article NINTH continues to provide substantial anti-takeover protection which
may impact the ability of GCM to engage in certain "business combinations"
without the super majority approvals referenced above.
16
Financial Results
Overall, we are currently expecting a similar pre-tax loss in the second
quarter of 2004/05 as in the current quarter due to the higher payroll cost
of providing qualified and experienced personnel because of the general
economic improvement, the adverse impact of higher State Unemployment
Insurance (SUI) (resulting from the federalization of airport screening and
Command's consequential termination of its screening employees) and higher
worker compensation insurance costs. We continue to seek new private and
government contract gains in the Guard and Aviation divisions.
Future revenue will be largely dependent upon our ability to gain additional
revenue in the Guard and Aviation divisions at acceptable margins while
minimizing terminations of existing clients. The revenue of the Guard
division has stabilized over recent months after a reduction over the past
few years as we cancelled contracts with unacceptable margins. Our current
focus is on increasing revenue while branch manager's work to sell new
business and retain good contracts. The airline industry continues to
increase its demand for our services. Our estimate for annualized revenue for
fiscal year 2004/05 over the prior fiscal year calls for a modest increase of
$2 to $5 million, totaling $77 to $80 million.
We expect that new management will continue our attempts to secure contracts
from the Department of Homeland Security and other government departments. We
started submitting bids in 2003/04, but the equity ownership in Command by
Reliance Security Group, plc, as a non-U.S. entity, precluded our ability to
receive any contract awards. Management believes the acquisition of Reliance
ownership by GCM has eliminated this problem. We believe this to be an area
of tremendous opportunity over the next few years, given the heightened focus
on security in the US.
Unfortunately our margins continue to suffer from the adverse impact of the
discount to Delta Airlines for prompt payment of accounts receivable as well
as state unemployment insurance ("SUI") rates as a result of layoffs due to
the federalization of pre-board screening and our increased worker's
compensation insurance experience rating as a result of a serious injury to
an employee in Miami. Our gross profit margin decreased to 12.9% of revenue
for the quarter ended June 30, 2004 compared to an average gross profit
margin of 14.5% for fiscal year ended March 31, 2004 and gross profit margins
are expected to average between 12.7% and 13.0% of revenue for fiscal year
2005. We expect an improvement in margins after the quarter ended March 31,
2005 when we should receive more favorable SUI and worker's compensation
experience ratings.
A cost reduction program was begun in June 2003 which reduced our general and
administrative expenses for the remainder of the 2003/04 fiscal year. Cost
reductions are being implemented as we find them. However, costs associated
with the change of control will have an adverse impact on the quarter ending
September 30, 2004.
The aviation division represents 62% of the Company's total revenue and Delta
Airlines, with annual billings of approximately $12 million, is the largest
customer of the aviation division at approximately 25% of the aviation
division and 16% of our total revenue. In recent months, most of the airlines
have enjoyed a resurgence of business with passenger carry miles during the
high travel months of July, August and September expected to equal or exceed
pre-September 11, 2001 levels. However, profitability remains a major problem
for the large, traditional carriers, including Delta. Delta has recently
indicated that filing for Chapter 11 bankruptcy may have to be an option if
sufficient cost cuts are not otherwise obtained. The threat of such filing
remains high. In the event of a bankruptcy filing by Delta, management would
expect an adverse impact on earnings of between $1.0 and $3.0 million.
However, due to the existing limitations under the CIT credit line, discussed
below, the Company's borrowing against the Delta receivables is already
curtailed. Therefore, the impact on the Company's immediate liquidity would
be expected to be in the range of approximately $500,000. In the event of a
bankruptcy by another airline, earnings would be adversely affected to the
extent of the receivable from such airline. Liquidity would also be affected,
but to a similarly limited extent due to the existing limitations under the
CIT credit line.
17
Our accounts receivable lender, CIT, is very concerned about a Delta
bankruptcy, so to reduce their exposure to a possible bankruptcy, we proposed
an accelerated payment plan and Delta accepted a 3% cash discount on invoices
paid by them within 30 days of billing receipt. The 3% discount has
negatively impacted our gross profit and earnings. In the event of a Delta
bankruptcy, payments received in the 90 days prior to Delta's filing for
bankruptcy may be considered preferential payments under the federal
bankruptcy rules and a demand could be made on the Company to return some or
all of the payments made by Delta within such 90-day period.
CIT has established a Delta specific reserve of all Delta accounts receivable
in excess of $500,000. This reserve will be reduced to zero by December,
2004 and can impose but has not yet imposed, an additional general airline
reserve of $1 million thereby reducing our current cash availability for
borrowing by approximately $1,500,000. As of the close of business, August
13, 2004, our cash availability was $1,928,216 which is adequate to meet our
needs to the end of the current quarter barring increased reserves imposed by
CIT and unforeseen negative occurrences. The Delta receivable as of August
13, 2004 was approximately $1,485,000.
Management is currently evaluating and expects new management to evaluate
potential additional sources of capital to strengthen the Company's balance
sheet and improve cash availability.
Mr. Vassell has been notified by the Board that his Employment Agreement will
not be extended on the anniversary of the effective date in November 2004.
Based on the advice of Company Counsel, Mr. Vassell's employment period, as
defined in his Employment Agreement dated September 12, 2000, shall continue
until November 2006. If he is terminated by the Company's Board prior to
November 2006, other than for "cause" (as defined in the Employment
Agreement), the Employment Agreement provides for the payment of severance
pay in a lump sum equal to his base salary (currently at $250,000) multiplied
by a fraction, the denominator of which is 365 and the numerator of which is
the number of days between the date of such termination and November 2006.
Accordingly, a termination of Mr. Vassell in the near future could cause the
Company to incur a charge of approximately $600,000 (based on 28 months
remaining in the Employment Period as of June 30, 2004). Counsel to GCM has
indicated its disagreement with the calculation of Mr. Vassell's termination
compensation and believes Mr. Vassell would be entitled to a lesser amount.
In addition, Mr. Vassell would be entitled to participate in certain
incentive compensation for the year of termination and health benefits. For
one year following his termination, Mr. Vassell would not be permitted
(except under limited circumstances) to solicit for employment certain
employees of the Company, to solicit any customer to purchase services
offered by the Company, or to provide any customer services offered by the
Company.
GCM has indicated that whether or not Mr. Vassell is terminated it would like
the Board to engage Mr. Barry Regenstein as the Company's Chief Operating
Officer. No replacement for Mr. Vassell, in his position as CEO, has been
proposed by GCM. GCM has indicated that it would take action to appoint Mr.
Bruce Galloway as Chairman of the Board. The Company's legal counsel has
expressed their belief that, absent a written waiver from Mr. Vassell, both
the appointment of a COO and/or the removal of Mr. Vassell as Chairman of the
Board would likely result in a constructive discharge under the employment
agreement and subject the Company to the severance charge described above.
18
Reliance's sale of its ownership in the Company to the GCM group makes the
Company eligible to bid on the federal government's Homeland Security
contracts for the provision of security services in the airline, marine port
and other vital industry areas. No such contracts have, to management's
knowledge, been awarded to date. However, the Company is actively pursuing
these possibilities.
Forward Looking Statements
Certain of the statements contained in this Management's Discussion and
Analysis of Financial Condition and Results of Operations section of the Form
10Q and in particular those under the heading "Outlook," contain
forward-looking statements. These are based on current expectations,
estimates, forecasts and projections about the industry in which the Company
operates, management's beliefs, and assumptions made by management. In
addition, other written or oral statements that constitute forward-looking
statements may be made by or on behalf of the Company. While we believe these
statements are accurate, our business is dependent upon general economic
conditions and various conditions specific to our industry. Future trends and
these factors could cause actual results to differ materially from the
forward-looking statements that have been made. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Therefore, the actual outcomes and
results may differ materially from what is expressed or forecast in such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
As provided for under the Private Securities Litigation Reform Act of
1995, the Company wishes to caution shareholders and investors that the
following important factors, among others, could cause the Company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the Company's forward-looking statements in
this report.
Consequences of Change in Control
According to the ninth amendment to Schedule 13D filed by Mr. Bruce Galloway
and GCM Security Partners, LLC ("GCM") on August 6, 2004, GCM has voting
control over 3,789,874 voting shares in Command. This represents
approximately 50.4% of all outstanding voting shares. Although GCM owns
warrants exercisable for an additional 2,448,092 voting shares, GCM has not
attempted to exercise these warrants to date and they may be subject to
restrictions imposed by Article Ninth of Command's Articles of Incorporation
GCM is expected to win control of the Company's board of directors at the
Annual Shareholder's meeting scheduled for August 27, 2004. It is expected
that the directors nominated to the board by Reliance will resign at or
shortly after the meeting and GCM will appoint replacement directors and
control the entire board. With control of the board, GCM will have the power,
and has stated its intention to terminate Mr. Vassell as President and CEO
and to appoint Mr. Barry Regenstein Chief Operating Officer and Mr. Bruce
Galloway as Chairman as per the second amended Schedule 13D filed May 26,
2004. Neither Mr. Galloway nor Mr. Regenstein have experience in the security
guard business. Mr. Regenstein does have experience in the airline services
industry having formerly been Senior Vice President and Chief Financial
Officer of GlobeGround North America (previously Hudson General Corporation)
a company offering airline ramp services, cargo handling, airline refueling,
and winter-related services to airlines.
It is not possible for management to currently assess whether GCM's
acquisition of Command shares will result in positive or negative effects on
the Company, its minority shareholders, its employees, its customers, its
financial condition or its results of operations.
19
The current uncertainties with regard to management and control of the
company arise from the litigation between Mr. Vassell, Reliance, GCM and
Command (as referenced in Part II, Item 1 below). Shareholders are directed
to the proxy filed August 6, 2004 by the Company for a detailed discussion of
these proceedings.
CIT Default/Airline Industry Concerns/Potential for Insolvency
In the event CIT terminates the Company's revolving loan (see, Liquidity and
Capital Resources - CIT Revolving Loan, above) the Company's access to
working capital would be eliminated and would likely result in the Company's
insolvency. Several of the Company's aviation clients filed for bankruptcy
protection during fiscal year 2003. The aviation industry continues to
struggle with various challenges including the cost of security and higher
fuel prices. Additional bankruptcy filings by aviation and non-aviation
clients would have a material adverse impact on the Company's liquidity,
results of operations and financial condition. The threat of a bankruptcy
filing by Delta Airlines remains high. Certain consequences of such a filing
are discussed above in the "Outlook" section.
Increased Legal Expense
Due to the legal proceedings between Mr. Vassell, Reliance, GCM and the
Company (as referenced in Part II, Item 1 below), it is expected that the
Company will incur higher than usual costs for the quarter ending September
30, 2004, including, but not limited to those associated with the defense of
legal actions against it by Mr. Vassell and GCM, the possible advancement
and/or indemnification of legal costs to directors Nekos and Miller in
connection with the claims against them by GCM and increased costs associated
with the preparation of S.E.C. filings.
Regulation
The Company's management assumes that the current regulation and
federalization of pre-board screening services provided by the Company will
not be expanded into other areas such as general security and baggage
handling at aviation facilities. Such increased regulation or federalization
would have a material adverse impact on the Company's results of operations
and financial condition.
Competition
The Company's assumptions regarding projected results depend largely upon the
Company's ability to retain substantially all of the Company's current
clients. Retention is affected by several factors including but not limited
to, regulatory limitations, the quality of the services provided by the
Company, the quality and pricing of comparable services offered by
competitors, continuity of Management and continuity of non-management
personnel. There are several major national competitors with resources far
greater than those of the Company which, therefore, have the ability to
provide service, cost and compensation incentives to clients and employees
which could result in a loss of such clients and/or employees.
Cost Management
The Company's ability to realize expectations will be largely dependent upon
the new management and its ability to maintain margins, which in turn will be
determined in large part by management's control over costs and increased
pressure on its customers to cut their costs. To a significant extent,
certain costs are not within the control of management and margins may be
adversely affected by such items as litigation expenses, fees incurred in
connection with extraordinary business transactions, inflation, labor unrest,
increased payroll and related costs.
20
Collection of Accounts Receivable
Management has no definite basis to believe that default in payment of
accounts receivable by the Company's security guard customers or
administrative service clients will occur. However, the aviation industry in
general and Delta Airlines, in particular, with an account receivable to the
Company of about $1.4 million, pose a high degree of risk. Any such default
by one or more significant clients due to bankruptcy or otherwise, would have
a material adverse impact on the Company's liquidity, results of operations,
and financial condition.
Catastrophic Events
The Company is exposed to potential claims for catastrophic events, such as a
hijacked airplane, based upon allegations that the Company failed to perform
its services in accordance with contractual or industry standards. The
Company's insurance coverage limits are currently $5 million per occurrence
for guard services and $25 million in the aviation division. As of October 1,
2003, the Company has an excess general liability insurance policy that
covers aviation claims for an additional $25 million in the aggregate. The
Company retains the risk for the first $25,000 per claim on the non-aviation
related policy and $5,000 on the aviation related policy (except $25,000 for
damaged aircraft).
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk in connection with changes in
interest rates, primarily in connection with outstanding balances under its
revolving line of credit with CIT Group/Business Credit, Inc. Based on the
Company's interest rate at June 30, 2004 and average outstanding balances
during the three months then ended, a 1% change in the prime lending rate
would impact the Company's financial position and results of operations by
approximately $18,000 over the next three months.
Item 4. Controls and Procedures
As required by Rule 13a-15 under the Exchange Act and as of the fiscal
quarter ended June 30, 2004, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures. Disclosure controls and procedures are controls and
other procedures that are designed to ensure that information required to be
disclosed by the Company in the reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Company in the reports it files or submits under the
Exchange Act is accumulated and communicated to the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure.
This evaluation was carried out under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer. Based upon that evaluation,
the Company's Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective. The
evaluation concluded further that during the quarter ended June 30, 2004,
there were no changes in the Company's internal control over financial
reporting or in other factors that have, or are reasonably likely to,
materially affect said control.
21
PART II. Other Information
Item 1. Legal Proceedings
Reference is made to paragraph titled "Change of Control and Legal
Proceedings Under Proposal 1" of the Company's proxy filed on August 6, 2004.
Item 6. Exhibits and Reports on Form 8-K
(1) Exhibits
Exhibit 31.1 Certification of William C. Vassell pursuant to Rule
13(a) - 14(a)/15(d) - 14(a) of the Securities Exchange Act of 1934.
Exhibit 31.2 Certification of Gordon Robinett pursuant to Rule
13(a) - 14(a)/15(d) - 14(a) of the Securities Exchange Act of 1934
filed herewith.
Exhibit 32.1 Certification of William C. Vassell pursuant to 18
U.S.C Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
Exhibit 32.2 Certification of Gordon Robinett pursuant to 18 U.S.C
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, filed herewith.
Exhibit 99.1 Press Release
(2) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMAND SECURITY CORPORATION
Date: August 20, 2004
By: /s/ William C. Vassell
----------------------------------------------
William C. Vassell, Chairman, President & CEO
By: /s/ Gordon Robinett
----------------------------------------------
Gordon Robinett, Chief Financial Officer
22