10-K

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, 2017

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: 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.)
512 Herndon Parkway, Suite A, Herndon, VA (Address of principal executive offices)	20170 (Zip Code)

Registrant’s telephone number, including area code: (703) 464-4735

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

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	NYSE MKT

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 [  ] 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 [  ] 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 [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes [X] No [  ]

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 “large accelerated filer”, “accelerated filer” and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]	Non-accelerated filer [  ]	Smaller reporting company [X]
			Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

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

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant was $19,989,841 as of September 30, 2016. The closing price of the registrant’s common stock on September 30, 2016, as reported on the NYSE MKT, was $2.73 per share.

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.

There were 9,848,186 outstanding shares of the registrant’s common stock as of May 31, 2017.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement relating to the registrant’s 2017 Annual Meeting of Shareholders to be filed hereafter are incorporated by reference into Part III of this Annual Report on Form 10-K.

Command Security Corporation

Annual Report on Form 10-K

For the Fiscal Year Ended March 31, 2017

Table of Contents

	Page
PART I	3
Item 1. Business	3
Item 1A. Risk Factors	5
Item 1B. Unresolved Staff Comments	12
Item 2. Properties	12
Item 3. Legal Proceedings	14
Item 4. Mine Safety Disclosures	14
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	15
Item 6. Selected Financial Data	16
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	26
Item 8. Consolidated Financial Statements and Supplementary Data	26
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	26
Item 9A. Controls and Procedures	26
Item 9B. Other Information	26
PART III
Item 10. Directors, Executive Officers and Corporate Governance	27
Item 11. Executive Compensation	27
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	27
Item 13. Certain Relationships and Related Transactions, and Director Independence	27
Item 14. Principal Accounting Fees and Services	27
PART IV
Item 15. Exhibits, Financial Statement Schedule	28
Signatures	29

2

PART I

ITEM 1. BUSINESS.

General

Command Security Corporation (the “Company,” or “we”) was incorporated in New York in 1980 and principally provides uniformed security officers and aviation security services to commercial, financial, industrial, aviation and governmental customers throughout the United States. We provide our security services to our customers through Command Security, our security division, and our aviation security services through our Aviation Safeguards division.

Command Security provides security services to governmental, quasi-governmental and financial institutions, healthcare facilities, colleges and universities, residential communities, commercial real estate, industrial, distribution, logistics and retail customers. Our security services include providing armed and unarmed uniformed security personnel for access control, loss prevention, mobile patrols, traffic control, security console/system operators and fire safety directors, as well as providing personnel for reception, concierge and front desk/doorman operations. The security services division generated approximately $103.6 million, or 64% of our total revenues for the fiscal year ended March 31, 2017.

Aviation Safeguards provides aviation security and passenger assistance services to approximately 80 domestic and international airlines, airports, airport authorities and the general aviation community at approximately nine international airports. Our aviation security division provides a variety of uniformed services for domestic and international air carriers, including security for airlines, aircraft, passengers and cargo, baggage screening, wheelchair escort services, special escort services and skycap services. The aviation services division generated approximately $58.6 million, or 36% of our total revenues for the fiscal year ended March 31, 2017.

In June 2016, the Company commenced work on the U.S. Postal Service (“USPS”) contract that had been delayed for over 15 months due to legal protests challenging the original award decision. This marks the start of a federal government line of business which eventually could include the Department of Homeland Security/Transportation Security Administration Screening Services Indefinite Delivery Indefinite Quantity contract award, Departments of Defense, Justice and State.

In 2014, the Company made a 20% minority investment in Ocean Protection Services LLC, a Delaware limited liability company (“OPS LLC”), who holds a 30% interest in an entity that specializes in maritime security, risk management and risk analysis. The Company purchased 2,000 Class A Common Units of OPS LLC for a purchase price of $2.125 million and funded the purchase price through borrowings under the Company’s existing line of credit. The excess of the carrying value of the Company’s investment in OPS LLC and the Company’s proportionate share of the net assets of OPS Acquisitions Ltd. (“OPSA”) and OPS LLC is largely attributable to goodwill. Since the Company’s initial investment, there have been no additional capital contributions made or distributions received.

In September 2016, the majority owner of OPS LLC consented to a restructuring transaction wherein 70% of its investment in OPSA was transferred to a group comprising former management and owners of OPS LLC and the holder of the debt of OPSA. Also pursuant to this transaction, the majority owner of OPS LLC transferred its 80% interest in OPS LLC to the Company for no consideration resulting in OPS LLC becoming a wholly-owned subsidiary of the Company.

Operations

As a licensed security company, our security services division deploys security officers to protect people and property; prevent the theft of property; and deter, observe, detect and report security threats for our customers. We conduct our security services principally by providing security officers and other personnel who are, depending on the particular customer requirements, uniformed or plain-clothed, armed or unarmed. Based on the customer requirements and/or our internal threat assessment, our security officers patrol in marked vehicles with radio communications; stand duty on the customer premises at stationary posts such as points of access, reception areas or surveillance monitors, and/or conduct foot patrols around the customer perimeter and other high-value areas. 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 loss prevention, our security officers respond to and report emergency situations such as fires, natural disasters, work accidents and medical crises to the appropriate authorities. We provide security officer services to many of our customers, 24-hours per day and 365 days per year. Our security officers are deployed to provide facility security, access control, personnel security checks, traffic and parking control and to protect against fire, theft, sabotage and safety hazards. We also provide specialized vehicle patrol and inspection services as well as technical products such as access control, video monitoring and other devices through distribution arrangements. Our aviation services division provides a variety of uniformed personnel for security including aircraft and cargo security, access control, wheelchair and passenger escorts, skycaps and baggage handlers for domestic and international air carriers. Since September 11, 2001, the Department of Homeland Security and the Transportation Security Administration have implemented numerous security measures that affect airline operations, including expanded cargo and baggage screening, and may implement additional measures in the future. Additional measures taken to enhance either passenger or cargo security procedures in the future may increase the airline industry’s demand for third party services provided by us.

To better integrate and manage our business, our operations are divided into General Security, Aviation Services and National Accounts. Each of these divisions is managed by a vice president/program manager who is responsible for developing and executing our business plan based on the demand, needs and competition in each of our specific markets. The division vice presidents and program managers are assisted by district managers who are responsible for local implementation of policies and procedures. While each divisional business plan is based on our overall corporate strategy, the primary mission of our divisional vice presidents is to staff, train and deploy their teams to provide the necessary physical security and customer service solutions in a responsive fashion consistent with customer service expectations. They also are expected to manage the growth and profitability of their division’s operations. We have approximately 23 offices and operate directly or through subcontractors throughout the United States, including in California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin. We frequently establish offices close to our customers and delegate responsibility to our local managers to satisfy customer expectations. Our managers maintain ongoing relationships and contact with our customers in order to promptly and effectively anticipate and respond to the needs of customers and security officers. Our managers play an important role in maintaining service quality and assisting with sales and marketing efforts. Our sales and marketing efforts focus on customers located primarily in urban centers and other concentrated business districts in major metropolitan areas and select suburban areas with a high density of businesses.

3

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 one or more designated locations and the applicable payment rates, which typically are hourly rates per person. Our rates vary depending on whether our services are provided during normal business hours, overtime or during holidays, as well as the length of time for which we are being engaged. Our security services incorporate certain management functions, including threat assessments, personnel scheduling, compensation, outfitting, equipment, training and supervision. These security services agreements also provide our customers with flexibility by permitting reductions or expansions of the security force on relatively short notice by our customers. We are responsible for preventing the interruption of security services as a consequence of illness, vacations or resignations of our security officers.

To determine whether adequate security requirements have been established prior to commencing service for a customer, we conduct a threat assessment of the customer’s site and prepare recommended changes to existing customer security programs or services. While we prepare site assessments and issue recommendations, the security plan and coverage levels are ultimately determined by our customers.

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 across the country and between our personnel and our customers and suppliers. Based on the level of contracted services, we use sophisticated electronic security and access control equipment, including computerized systems, video surveillance equipment and electronic accountability technology to monitor and log security officer patrols and generate user-friendly reports for customer and internal use.

We use technology to support efficiency, accuracy, and dependability in our administrative functions including finance and accounting. In addition, labor and operations management services such as scheduling, reporting, payroll, billing and training management are integrated through a third party vendor software platform.

Employee Recruitment and Training

We believe that the high quality of our security officers is essential to our ability to offer effective and reliable services to our customers. We encourage the retention of our security officers and seek to control our operating costs through effective management of the hiring process, including extensive candidate screening, training and development. We require all 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 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, among others. We frequently conduct medical examinations and substance abuse testing on potential candidates, subject to applicable laws and regulations. Our security officers and other personnel supplied to our customers are employees of our company, even though they may be stationed regularly at our customer’s facilities.

We are committed to providing staff that not only meet all state and federal requirements for training, but also our own rigorous standards in specialized areas including: terrorism response, CPR, first-aid, fire safety, crowd and riot control, media interaction, public relations, crisis management and emergency situations. Additionally, we provide our employees with site-specific training to meet the needs of individual industries, facilities and customers.

We are an equal opportunity employer and make all employment-related decisions without regard to race, creed, color, national origin, sex, age, disability, marital status or sexual orientation.

Significant Customers

We rely on a limited number of customers for a significant portion of our revenues. In the fiscal year ended March 31, 2017, the Company had six customers, who represented approximately 52% of the Company’s total revenue in the aggregate. Two of these customers each represented 13% of total revenue. These customers include one domestic and one international airline, the U.S. Postal Service (“USPS”), a transportation company, an online retailer and web services provider and a northeast U.S. based healthcare facility. While the Company’s cost structure is highly variable and largely identifiable to the delivery of services for any specific contract, a loss of business with one or more of these customers could have a material adverse effect on our business, financial condition and results of operation.

See “Notes to Financial Statements—Note 11 Concentrations of Credit Risk and Significant Customer.”

Competition

The contract security officer segment of the security services business is highly competitive, 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 retaining our business, containing payroll costs and avoiding undue insurance exposure. To meet these goals, we strive to successfully manage our human resource needs through manpower planning, quality control and risk management, while focusing on financial management and effective sales and marketing strategies.

Although most of our contracts may be terminated by us or by our customers at our or their discretion, we minimize customer attrition by adhering to basic performance standards in meeting essential customer requirements.

4

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, the extent and quality of security officer supervision and the ability to handle multiple worksites on a nationwide basis. It has become more common for our customers to select security service providers through competitive bid processes intended to procure quality services at lower prices. Some of our competitors may be willing to provide services at lower prices, accept a lower profit margin, or expend more capital in order to obtain or retain business. As we have expanded our operations, we have had to compete more frequently against larger national companies, such as Securitas North America, G4S Secure Solutions (USA) and Allied Universal, 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 offer to our customers and that may have better knowledge of the local conditions in their regions and increased local visibility, which may provide such companies with a competitive edge. Our management believes that we have been able to successfully compete on the basis of the quality of our services, our professional relationships and our reputation. Particularly with respect to certain of our markets, management believes we enjoy a favorable competitive position because of our emphasis on responsive customer service, supervision and training. However, 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. See “Risk Factors—Competition.”

Government Regulation

We are subject to a large number of city, county and state firearm, occupational licensing laws and regulations and prevailing wage requirements that apply to many of our employees including 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. As required, we are licensed to provide private security services in each of the states in which we do business. We may incur penalties and fines as the result of our failure to comply with these laws and regulations including licensing irregularities or the misconduct of security officers from time to time in the ordinary course of our business. However, our management believes we are in material compliance with all applicable laws and regulations. See “Risk Factors—Regulation.”

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. As of March 31, 2017, we had approximately 5,200 total employees including 4,300 full-time employees, the majority of whom are hourly service workers, and approximately 225 of whom serve as managers, administrative employees and executives in our 23 offices nationwide.

Approximately 59% of our workforce is not subject to collective bargaining agreements. The remaining 41% of our workforce, 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 International and LaGuardia airports are subject to collective bargaining agreements. Three of the agreements, covering approximately 19% of our employees, expired on October 31, 2016, February 28, 2017 and March 31, 2017. We are currently involved in negotiations to renew the expired agreements. One other collective bargaining agreement, covering approximately 2% of our employees, is set to expire in June 2017. The remaining seven agreements, covering approximately 21% of our employees, are set to expire in September 2018 and thereafter.

We have employment agreements with certain of our officers and key employees with varying terms. The agreements generally provide for annual salaries and for salary continuation for a specified number of months under certain circumstances, including a change in control of the Company.

Intellectual Property

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

In July 2016, we were granted word mark/service mark protection by the United States Patent and Trademark Office for “CommandTrack” and “CommandTrack-Air,” which encompass tracking of security officers and personnel, as well as location and monitoring services for small vehicles such as carts and wheelchairs.

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 and adversely affect our business, financial condition and 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 and operating results.

Workers’ Compensation and General Liability Claims

Ongoing insurance and claims expenses could significantly affect our earnings. We can provide no assurance that costs associated with workers’ compensation claims will not increase in the future. In addition, we may not be successful in our efforts to mitigate future increases in workers’ compensation costs or limit the frequency or severity of our workers’ compensation claims, which could cause further increases in our workers’ compensation costs. Future increases in workers’ compensation costs, if incurred, could have a material adverse effect on our business, financial condition, and results of operations.

5

Loss of Customers

Our success depends in part upon retaining our large security and aviation services customers. See “Business—Significant 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 security services and airline customers, some of which have in the past and may in the future experience 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.

Our standard customer contract may be terminated by either us or our customer on 30 to 90 days written notice at any time. In addition, we serve certain customers under month-to-month extensions of these written contracts. If we are not able to maintain our existing security service contracts or obtain additional security service contracts, our business, financial condition and results of operations will be adversely affected.

Significant Customers

We rely on a limited number of customers for a significant portion of our revenues. In the fiscal year ended March 31, 2017, the Company had six customers, who represented approximately 52% of the Company’s total revenue in the aggregate. Two of these customers each represented 13% of total revenue. These customers include one domestic and one international airline, USPS, a transportation company, an online retailer and web services provider and a northeast U.S. based healthcare facility. While the Company’s cost structure is highly variable and largely identifiable to the delivery of services for any specific contract, a loss of business with one or more of these customers could have a material adverse effect on our business, financial condition and results of operations.

Acquisitions

Part of our growth strategy involves seeking to acquire other successful 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.

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 cannot assure you that we will be able to complete 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.

We May Not Be Able to Direct the Business of Ocean Protection Services, Ltd.

Through our wholly-owned subsidiary, OPS LLC, we have a 30% minority interest in OPSA, the parent company of Ocean Protection Services, Ltd. (“OPS Ltd.”), the operating company of OPSA. Although we are able to exercise some influence over OPS Ltd., we do not control OPS Ltd. and, therefore, do not have the ability to direct OPS Ltd.’s business plan, assure quality control, or set the timing and pace of development. OPS Ltd. is controlled by our partner, whose interests may not be aligned with ours or who may not share our goals for the business. Should we disagree with their direction for OPS Ltd., we may not have the ability to change the course of OPS Ltd.’s business.

We are Subject to Risks Associated with our Foreign Investment.

OPS Ltd. is located in the United Kingdom. As a result, OPSA is subject to the risks inherent in doing business in the global market. These risks include, but are not limited to, adverse changes in economic and political conditions, fluctuation in exchange rates, compliance with labor laws and other foreign governmental laws and regulations, natural disasters, acts of war and terrorism, and other external factors over which we have no control. Because we hold a minority interest in OPSA, we do not have complete oversight of its foreign operations and any deviation therein from our standard of services could draw negative publicity for us and our brand.

6

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 continue to 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 borrowings under 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.

Credit and Security Agreement

Our Credit and Security Agreement contains covenants that impose operating and financial restrictions on us, which may prevent us from capitalizing on business opportunities and taking certain corporate actions. These restrictions may limit our ability to:

● guarantee additional indebtedness;

● pay dividends and make distributions;

● make certain investments;

● repurchase stock;

● incur liens;

● transfer or sell assets;

● enter into sale and leaseback transactions;

● merge or consolidate; and

● engage in a materially different line of business.

The limits set forth in these covenants may adversely affect our ability to finance future operations or capital needs.

Competition

Our assumptions regarding future operating 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. The contract security officer industry is intensely competitive. 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. We also compete with smaller local and regional companies whose familiarity with local markets gives them a competitive advantage. There can be no assurance that we will continue to retain customer accounts at historic levels in an increasingly competitive market. In addition, there can be no assurance that we will be able to acquire new customer accounts and retain existing customer accounts on terms as favorable as those previously available, and if we are unable to do so our profitability will be adversely affected.

Cost Management

Our largest expenses are for payroll and related taxes and employee benefits. Most of our service contracts provide for fixed hourly billing rates, and some of our service contracts provide for payments of either fixed fees or fees that increase by only small amounts during the terms of such service contracts. 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, due to inflation, collective bargaining or other causes, including increases beyond our control in minimum or other regulated wage rates or statutory payroll taxes, 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.

Our ability to realize financial expectations will be largely dependent upon management’s 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.

The Litigation Environment in Which we Operate Poses a Significant Risk to our Business.

We are involved in a number of lawsuits  related to employment issues. Judges and juries in the State of California have recently demonstrated a willingness to grant large verdicts to plaintiffs in connection with employment related cases. We use appropriate means to contest litigation threatened or filed against us, however, the litigation environment in the State of California poses a significant business risk.

7

The Cost and Exposure of Being a Public Company is Proportionately High for Small Companies like us and May Put us at a Competitive Disadvantage.

The rules and regulations promulgated by the Securities and Exchange Commission increase the scope, complexity, and cost of our corporate governance, reporting and disclosure practices. The necessary compliance costs, including costs related to internal controls and management’s assessment of the effectiveness of internal controls, are proportionately higher for a company of our size. Additionally, the disclosures we make can represent a significant proportion of our business and such disclosure can put us at a competitive disadvantage to our competitors who do not make comparable disclosures.

Indemnification Obligations

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, we could incur substantial liabilities that would have a material adverse effect on our business, financial condition and results of operations.

8

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.

Professional Reputation

We depend to a large extent on our relationships with our customers and our reputation for quality contract security services. Our customers’ expectations and perception of the quality of our services are in large part determined by the satisfaction they derive from contact with our managers. A well-publicized security incident or breach at one or more of our customers’ locations could result in a negative perception of our services, damage to our reputation and the loss of existing or potential customers, which could have a material adverse effect on 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 or bases could reduce our after-tax results from affected jurisdictions in which we operate.

While the Company may benefit on a prospective net income basis from any decrease in corporate tax rates, certain proposals currently being discussed could result in a material decrease in the value of the Company’s deferred tax assets, which would also result in a material reduction to the Company’s net income during the period in which the change is enacted.

Collective Bargaining Agreements with Employees

Approximately 59% of our workforce is not subject to a collective bargaining agreement. The remaining 41% of our workforce, 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 International and LaGuardia airports are subject to collective bargaining agreements. Three of the agreements, covering approximately 19% of our employees, expired on October 31, 2016, February 28, 2017 and March 31, 2017. We are currently involved in negotiations to renew the expired agreements. One other collective bargaining agreement, covering approximately 2% of our employees, is set to expire in June 2017. The remaining seven agreements are set to expire in September 2018 and thereafter. If we are unable to renew such agreements on satisfactory terms, our labor costs could increase, which would negatively affect our business, financial condition and results of operations.

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 adversely affect our business, financial condition and results of operations.

Collection of Accounts Receivable

We extend credit to our customers primarily through the use of weekly or monthly billings generally due within 30 to 60 days of the invoice date. Any default in the payment of accounts receivable 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. See “Notes to Financial Statements—Note 11 Concentrations of Credit Risk and Significant Customer.”

Loss of Key Management Personnel

Our success depends to a significant extent upon the continuing efforts and abilities of our key executive officers and senior management personnel. 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 key executives or senior 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 beneficially own shares representing approximately 37% of the outstanding common stock. Further, as of March 31, 2017, based on public filings, there are three other shareholders that combined own 35%  of the Company’s outstanding shares. 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. This beneficial ownership and potential effective control on all matters relating to our business and operations could eliminate the possibility of other shareholders obtaining the necessary shareholder vote to affect any change in the course of our business if they disagree with these significant shareholders.

9

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 our 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; any loss by us of a major customer; additions or departures of key management or other personnel; future sales 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; volume fluctuations; changes in market valuations of other companies that operate in our business markets or industry sector; and general market and economic conditions. Accordingly, market fluctuations, as well as general economic, political and market conditions such as recessions and interest rate changes, may negatively impact the market price of our common stock.

10

Our common stock trades on the NYSE MKT and has low trading volumes compared to other companies traded on the NYSE MKT. Securities with low trading volumes are subject to greater volatility in price. We cannot predict how our common stock will trade in the future or the effect that trading volumes will have on our common stock price.

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 across 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

We are subject to a large number of city, county and state occupational licensing laws and regulations that apply to security officers. Any liability we may have from our failure to comply with these regulations may materially and adversely affect our business by restricting our operations and subjecting us to potential penalties. If the current regulation and federalization of pre-board screening and documentation verification services provided by us to airline customers 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, we are subject to, among other laws and regulations, comprehensive U.S. occupational health and safety laws and regulations. Such laws and regulations may become more stringent and result in necessary modifications to our current practices and facilities. Any or all of these laws and regulations could force us to incur additional costs that could adversely affect our business, financial condition and results of operations.

Our operations at certain domestic airport locations are subject to audits by the relevant state or local government authorities, in connection with their evaluation of whether certain of our sales and services at such airports are subject to a regulatory fee. In the event of a dispute with any such regulatory authority, we could be subject to claims for fees, including penalties and interest, which could adversely affect our business, financial condition and results of operations.

In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law in the U.S. This legislation expanded the availability of health care coverage for many uninsured individuals and in some cases expanded coverage for those already insured. In light of the change in presidential administrations, in areas where the Secretary of Health and Human Services has discretion to modify legislation, we expect a different coverage and enforcement regimen, to the extent permitted by law. These differences in enforcement and coverage are unclear at this time, as are the financial implications of whatever changes may be implemented. New legislation or changes in existing legislation could cause us to incur additional healthcare and other costs. The costs of these provisions are expected to be funded by a variety of taxes, fees and penalties. Some of the taxes and fees, as well as certain health care changes required by these acts, have resulted, directly or indirectly, in increased health care costs for us. We cannot quantify the extent of any long-term impact from the legislation or any potential changes to the legislation. There is no assurance that we will be able to absorb and/or pass through the costs of complying with such legislation in a manner that will not adversely impact our results of operations.

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 interpreted.

Economic Downturn

During economic declines, some decisions to implement security programs and install systems may be deferred or cancelled. In other cases, customers may increase their purchases of security systems because they fear more inventory shrinkage and theft will occur due to increasing economic need. We are not able to accurately predict to what extent an economic slowdown will affect the demand for our services. If demand for our services decreases, our business, financial condition and results of operations will be adversely affected.

11

Catastrophic Events

We are exposed to potential claims resulting from the occurrence of 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 $1.0 million per occurrence for non-aviation related business (with additional first and second layer excess liability policies of $5.0 million and $10.0 million, respectively) and $30.0 million per occurrence for aviation related business. We retain the risk for the first $25,000 of general liability non-aviation related operations. The Aviation related deductible is $5,000 per occurrence, with the exception of $50,000 for airport wheelchair and electric cart operations, $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 and the insurance industry, share the risk of loss from future “acts of terrorism,” as defined in such Act. We currently maintain additional insurance coverage for losses arising from “acts of terrorism” under our non-aviation related business policy. In addition, terrorist attacks could have a material adverse impact on us by increasing our insurance premium costs, making adequate insurance coverage unavailable or by requiring us to incur additional personnel costs as a result of compliance with expanded security rules and regulations.

Strategic Initiatives

Any strategic initiatives that we may undertake may not achieve the benefits anticipated and could result in additional unanticipated costs, which could have a material adverse effect on our business, financial condition, cash flows, or results of operations. We regularly evaluate our existing operations, service capacity and business efficiencies and, as a result of such evaluations, we may undertake strategic initiatives within our businesses, including the recently completed consolidation of corporate offices and streamlining of our management structure. These strategic initiatives may not result in improvements in future financial performance. If we are unable to realize the benefits of any strategic initiatives or appropriately structure our businesses to meet market conditions, the strategic initiatives could have a material adverse effect on our business, financial condition, cash flows, or results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

As of March 31, 2017, we did not own any real property. We occupy executive offices at 512 Herndon Parkway, Herndon, VA 20170, consisting of approximately 13,000 square feet. We also lease office space at the following locations under long-term operating or short-term month-to-month leases:

12

1903 South Congress Avenue	1767 Morris Avenue
Suite 150	Suite 101, First Floor
Boynton, FL	Union, NJ
5805 Blue Lagoon Drive	100 Wells Street
Suite  110	#2AB
Miami, FL	Hartford, CT
8929 South Sepulveda Boulevard	80-02 Kew Gardens Road
Suite 300	Suite 401
Los Angeles, CA	Kew Gardens, NY
409 Camino Del Rio South	17 Battery Place
Suite 100	Suite 223
San Diego, CA	New York, NY
Los Angeles World Airports	2400 Herodian Way
Terminal 2 & Tom Bradley International Terminal	Suite 152
Los Angeles, CA	Smyrna, GA 30080
890 Hillview Court, Suite 100	Suite 208-L Wilson Building
Milpitas, CA 95035	3511 Silverside Road, Concord Plaza
	Wilmington, DE
1630 S. Sunkist Street
Unit O	669 Elmwood Avenue
Anaheim, CA	Suite B-4
	Providence, RI
Pittsburgh International Airport
1000 Airport Boulevard	LaGuardia Airport
Ticketing Level of the Landside Terminal Building	United Hangar #2
Pittsburgh, PA	Rooms 328
	Flushing, NY
Two International Plaza
Suite 242	9730 South Western Avenue
Philadelphia, PA	Evergreen Plaza Shopping Center
	Suite 640
780 Elkridge Landing Road	Evergreen Park, IL
Suite 220
Linthicum Heights, MD	Baltimore-Washington International Airport
	Baltimore, MD
21 Cummings Park
Suite 224	1458 Main Street
Woburn, MA	Buffalo, NY 14209

13

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

ITEM 3. LEGAL PROCEEDINGS.

We are party to a variety of legal proceedings arising out of the conduct of our business. While the results of these proceedings cannot be predicted with certainty, management believes that, except as described below, the final outcome of these proceedings will not have a material effect on our business.

The nature of our business is such that there is a significant volume of routine claims and lawsuits that are made against us, the vast majority of which never lead 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 that we face, relating to these matters. Some of the claims brought against us could result in significant payments; however, the exposure to us under general liability non-aviation related operations is limited to the first $25,000 per occurrence. The aviation related deductible is $5,000 per occurrence, with the exception of $50,000 for airport wheelchair and electric cart operations, $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 March 2012, the California Service Employees Health and Welfare Trust Fund filed a suit in U.S. District Court for the Northern District of California against the Company seeking to maintain the payment of monthly health insurance contributions, which were stopped by the Company following the termination of the collective bargaining agreement. Venue was subsequently transferred to the U.S. District Court for the Central District of California. On July 31, 2014 the Court denied the plaintiffs’ motion for summary judgment and granted partial summary judgment in favor of the Company. While the parties stipulated to a proposed judgment, the plaintiffs’ appealed the judgment before the Judge had issued a final Order, pending the outcome of the companion case filed in July 2012. In that case, the Service Employee International Union (SEIU) filed a lawsuit in U.S. District Court for the Northern District of California against the Company seeking the restoration of the collective bargaining agreement between SEIU and the Company following a majority vote of Aviation Safeguards employees in December 2011 to withdraw recognition of the union. On February 20, 2014, the U.S. District Court, Central District of California, ruled in favor of the Company and granted our motion for summary judgment in full, denied the plaintiffs’ motion for summary judgment and terminated the case. The plaintiffs filed their Notice of Appeal to the U.S. Court of Appeals for the Ninth Circuit on March 18, 2014 and both parties have subsequently filed appellate briefs. Oral arguments were held in March 2016 in the Ninth Circuit Court of Appeals.

On September 14, 2016, the U.S. Court of Appeals issued its Opinion which overturned the lower Court rulings. In the interim, the Company and the plaintiffs engaged in settlement discussions and successfully negotiated settlement in June 2017, subject to final court approval. The settlement, among other things, includes cash payments aggregating $249,000 to the Trust Fund, the SEIU, and the three claimants. In addition, as part of this settlement the Company has agreed to increase hourly pay rates to a defined group of employees for a period over the earlier of the next five years or, their remaining period of employment with the Company.

ITEM 4. MINE SAFETY DISCLOSURES.

None.

14

PART II

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

Common Stock Trading Information

Shares of our common stock trade on the NYSE MKT, an exchange regulated market, 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 reflected on the NYSE MKT for each full quarterly period within the two most recent fiscal years.

	Common stock market price
Last Sales Price Period (1)	Low		High
2017
First Quarter	$	2.15	$	5.73
Second Quarter		2.58		4.15
Third Quarter		2.49		3.40
Fourth Quarter		2.41		3.18
2016
First Quarter	$	1.85	$	3.08
Second Quarter		1.34		2.10
Third Quarter		1.76		2.83
Fourth Quarter		1.92		2.61

(1) Reflects fiscal years ended March 31, 2017 and 2016 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 May 16, 2017 there were approximately 1,300 holders of our common stock.

For certain information regarding our equity compensation plans, see “Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

Dividends

To date, we have neither declared nor paid any cash dividends on shares of 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 the approval of our principal lender, our earnings and 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, to finance our business operations and any growth in our business.

Common Stock Repurchases

On December 8, 2011, the Company’s Board of Directors authorized a stock repurchase program that initially allowed us to repurchase up to $2,000,000 of our common stock on the open market. In November 2012, the Company’s Board of Directors authorized an increase of up to $4,000,000 of our common stock to be repurchased. To date, the Company has repurchased $3,058,873 of the $4,000,000 authorized under the stock repurchase program. The ability of the Company to repurchase shares under the stock repurchase program is subject to the approval of Wells Fargo under the Credit Agreement. Common stock repurchases are recorded as treasury stock, at cost. The program does not have a prescribed expiration date. See “Notes to Financial Statements—Note 17 Issuer Purchases of Equity Securities.” No shares were purchased during the fiscal years ended March 31, 2017 and March 31, 2016.

15

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

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

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

FORWARD- LOOKING STATEMENTS

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. You can identify these statements by forward-looking words such as “may,” “expect,” “anticipate,” “contemplate,” “believe,” “estimate,” “intends,” and “continue” or similar words. You should read statements that contain these words carefully because they:

● discuss future expectations;

● contain projections of future results of operations or financial condition; and

● state other “forward-looking” information.

Such forward-looking statements by their nature involve a degree of risk and uncertainty. We caution you to not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We further caution you 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 general economic conditions in the United States and abroad;

● changes in the financial condition of our customers;

● legislation or regulatory environments, requirements or changes adversely affecting our business or the businesses in which our customers are engaged;

● cancellations and non-renewals of existing contracts;

● 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;

● changes in interest rates;

● compliance with our loan covenants;

● changing interpretations of GAAP;

● the general volatility of the market price of our securities;

● the availability of qualified personnel;

● 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.

16

All forward-looking statements included herein attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We have based the forward-looking statements included in this Annual Report on information available to us on the date of this Annual Report and, except to the extent required by applicable laws and regulations, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we make directly to you or through reports that we in the future may file with the Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors including, but not limited to, those presented under “Risk Factors” included in Item 1A and elsewhere in this Annual Report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES.

Critical accounting policies are defined as those most important to the portrayal of a company’s financial condition and results and that require the most difficult, subjective or complex judgments. 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 at the date of the financial statements, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. The estimates that we make include 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. We have identified the policies described below as our critical accounting policies. Due to the inherent uncertainty involved in making estimates, actual results may differ from those estimates under different assumptions or conditions. See “Notes to Consolidated Financial Statements—Note 1 Business Description and Summary of Accounting Policies.”

Revenue Recognition

We record revenues as services are provided to our customers. Revenues relate primarily to the provision 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 is reported net of applicable taxes.

Accounts Receivable

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 to be uncollectible.

Minority Investment in Unconsolidated Affiliate

The Company including its consolidated subsidiary, OPS LLC, uses the equity method to account for its investment in OPSA. Equity method investments are recorded at original cost and adjusted periodically to recognize: (i) our proportionate share of investees’ net income or losses after the date of the investment; (ii) additional contributions made or distributions received; and (iii) impairment losses resulting from adjustments to net realizable value. The Company reviews its investment accounted for under the equity method of accounting for impairment whenever events or changes in circumstances indicate a loss in the value of the investment may be other than temporary.

Intangible Assets

Intangible assets are stated at cost and consist primarily of customer lists that are being amortized on a straight-line basis over ten years and goodwill, which is reviewed annually for impairment. The life assigned to customer lists acquired is based on management’s estimate of our expected customer 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 earlier. Any potential impairment is evaluated based on anticipated undiscounted future cash flows and actual customer attrition in accordance with FASB ASC 360, Property, Plant and Equipment.

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 related data.

Workers’ compensation annual costs are comprised of premiums as well as incurred losses as determined at the end of the coverage period, subject to minimum and maximum amounts. Workers’ compensation insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported as provided by a third party. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claim. We believe our estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities. The Company continually monitors changes in claim type and incident and evaluates the workers’ compensation insurance accrual, making necessary adjustments based on the evaluation of these qualitative data points.

17

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 basis 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. In the event that interest and/or penalties are assessed in connection with our tax filings, interest will be recorded as interest expense and penalties as selling, general and administrative expense.

Stock Based Compensation

FASB ASC 718, Stock Compensation , 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 use the modified-prospective transition method. Under the modified-prospective transition 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. Non-cash charges of approximately $18,000 and $104,000 for stock based compensation have been recorded for the fiscal years ended March 31, 2017 and 2016, respectively.

Reclassifications

Certain amounts previously reported for prior periods have been reclassified to conform to the current year presentation in the accompanying consolidated financial statements. Such reclassifications had no effect on the results of operations or shareholders’ equity as previously recorded.

OVERVIEW

We principally provide uniformed security officers and aviation services to commercial, residential, financial, industrial, aviation and governmental customers through approximately 23 offices 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. We use a sophisticated software system that integrates scheduling, payroll and billing functions, giving customers the benefit of customized programs using the personnel best suited to the job.

Renewing and extending existing contracts and obtaining new contracts are crucial to our ability to generate revenues, earnings and cash flow. In addition, our growth strategy involves the acquisition and integration of complementary businesses in order to increase our scale within certain geographical areas, increase our market share in the markets in which we operate, gain market share in the markets in which we do not currently operate and improve our profitability. We intend to pursue suitable acquisition opportunities for contract security officer businesses. We frequently evaluate acquisition opportunities and, at any given time, may be in various stages of due diligence or preliminary discussions with respect to a number of potential acquisitions. However, we cannot assure you that we will identify any suitable acquisition candidates or, if identified, that we will be able to complete the acquisition of such candidates on favorable terms or at all.

The global security industry has grown largely due to an increasing fear of crime and terrorism. In the United States, the demand for security-related products and central station monitoring services also has grown steadily. We believe that there is continued heightened attention to and demand for security due to worldwide events, and the ensuing threat, or perceived threat, of criminal and terrorist activities. For these reasons, we expect that security will continue to be a key area of focus both domestically in the United States and abroad.

Demand for security officer services is dependent upon a number of factors, including, among other things, demographic trends, general economic variables such as growth in the gross domestic product, unemployment rates, consumer spending levels, perceived and actual crime rates, government legislation, terrorism sensitivity, war/external conflicts and technology.

18

RESULTS OF OPERATIONS

Revenues

Our revenues increased by $29.1 million, or 21.8%, to $162.2 million for the fiscal year ended March 31, 2017, from $133.1 million in the prior year. The increase in revenues for the fiscal year ended March 31, 2017 was due mainly to the commencement of work under the contracts with the USPS in June 2016 and a large online retailer in April 2016. In addition, revenues from a major transportation company increased by approximately $2.5 million, revenues from New York based healthcare facilities increased by approximately $1.0 million and revenues from financial and banking institutions increased by approximately $0.4 million. These increases were partially offset by reductions in revenues of approximately $2.5 million from temporary airport construction related services, approximately $2.4 million from residential and retail customers and approximately $1.6 million from California based technology companies.

Workers’ Compensation 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 revenues were $3.1 million and $4.6 million for the fiscal years ended March 31, 2017 and 2016, respectively. The decrease in workers’ compensation expense is primarily due to the absence of cost increases experienced on certain legacy claims during the fiscal year ended March 31, 2016 and a lower quantity and lower average value of actual incurred claims for the two most recent policy years ending October 31, 2016.

We believe our estimates of future liability are reasonable based upon our methodology; however, changes in regulations, health care costs, accident frequency and severity and other factors could materially affect the estimates of these liabilities. The Company continually monitors changes in claim type and incident and evaluates the workers’ compensation insurance accrual, making necessary adjustments based on the evaluation of these qualitative data points.

Gross Profit

Our gross profit increased by $3.4 million, or 22.6%, to $18.3 million (11.3% of revenues), for the fiscal year ended March 31, 2017, from $14.9 million (11.2% of revenues) for the fiscal year ended March 31, 2016. The increase in gross profit was due mainly to the commencement of work under the contracts with the USPS and the large online retailer, a decrease in workers’ compensation expense of approximately $1.5 million, an increase in gross profit from New York based healthcare facilities, equipment sales, and financial institutions. These increases were partially offset by a decrease in profits following the decline in revenues from temporary airport construction related services, various residential and retail customers, and California based technology companies.

19

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. Our insurance coverage limits are currently $1.0 million per occurrence for non-aviation related business (with additional first and second layer excess liability policies of $5.0 million and $10.0 million, respectively) and $30.0 million per occurrence for aviation related business. We retain the risk for the first $25,000 of general liability non-aviation related operations. The Aviation related deductible is $5,000 per occurrence, with the exception of $50,000 for airport wheelchair and electric cart operations, $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.

General and Administrative Expenses

Our general and administrative expenses decreased by $0.4 million, or 2.0%, to $18.3 million (11.3% of revenues) for the fiscal year ended March 31, 2017, from $18.7 million (14.0% of revenues) for the fiscal year ended March 31, 2016. The decrease in general and administrative expenses for the fiscal year ended March 31, 2017 was attributable primarily to lower legal expenses, labor settlement costs, depreciation and amortization. These decreases were partly offset by the commencement of work under the contracts with the USPS in June 2016 and a large online retailer in April 2016, higher overall employee compensation and benefits, information technology and communications fees.

Provision for Doubtful Accounts

The provision for doubtful accounts for the year ended March 31, 2017, net of recoveries, decreased by $0.6 million to net recoveries of $0.1 million as compared with $0.4 million of net expense in the corresponding period of the prior year. The decrease in the net provision for doubtful accounts for the year ended March 31, 2017 was driven primarily by recovery of approximately $112,000 of specific accounts previously deemed uncollectible and a reduction in past due accounts.

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 decrease during the fiscal year ended March 31, 2017 compared with the same period of the prior year is necessarily indicative of a trend.

20

Interest Expense

Interest expense for the fiscal year ended March 31, 2017 increased by $145,250 to $306,124 from $160,874 in the fiscal year ended March 31, 2016. The increase in interest expense for the year ended March 31, 2017 was primarily due to higher average outstanding borrowings under our credit agreement with Wells Fargo, described below, and slightly higher interest rates.

Equity Earnings (Loss) in Minority Investment of Unconsolidated Affiliate

The Company uses the equity method to account for its investment in OPSA. The Company’s proportionate share of net income (loss) for the fiscal years ended March 31, 2017 and 2016 was $(82,000) and $65,291, respectively. Equity method investments are recorded at original cost and adjusted periodically to recognize: (i) our proportionate share of investees’ net income or losses after the date of the investment; (ii) additional contributions made or distributions received; and (iii) impairment losses resulting from adjustments to net realizable value. The Company reviews its investment accounted for under the equity method of accounting for impairment whenever events or changes in circumstances indicate a loss in the value of the investment may be other than temporary.

During the past three fiscal years ended December 31, 2016, OPSA has experienced a decline in revenues and net income from continuing operations. Specifically, for the year ended December 31, 2016, revenues declined 29% from the year ended December 31, 2015, and revenues for the year ended December 31, 2015 declined 16% from the year ended December 31, 2014. For the same periods gross profits declined by 32% and 10%, respectively, and net income from continuing operations declined from $1.6 million for the year ended December 31, 2014 to $1.1 million for the year ended December 31, 2015 to a net loss from continuing operations of $.4 million for the year ended December 31, 2016. During the three years ended December 31, 2016, gross profits as a percent of revenues were 31.4%, 32.8% and 30.6%, respectively.

During the past three years the decline in revenues has been driven by several factors including an overall reduction in world-wide shipping activity, reduced demand for security personnel as a result of declines in attempted and successful piracy attacks, lower insurance rates and lower oil prices allowing operators the option of longer routes through lower risk areas further leading to a decline in demand for security services. The maturing of this industry has also led to price competition further compressing revenues and margins.

The decline in revenues and certain increased operating costs has resulted in net operating losses for the year ending March 31, 2017, and accordingly, the Company has recorded its proportionate share of these losses totaling $82,000.

The above-mentioned long-term decline in revenues has resulted in a significant reduction in liquidity which has more recently led to the inability of OPSA to remain current in its obligations under its senior debt. In light of the above-mentioned factors the Company has performed an assessment of the fair value of its 30% investment in OPSA and has determined that the book value of investment exceeded its fair value and further concluded that this decline in value was other than temporary. The company based its assessment, in part on the calculations reported by a valuation consultant retained by OPSA The consultant’s valuation was based on the net present value of estimated future cash flows developed from forecasts provided by OPSA to the valuation consultant. Accordingly, the Company has recorded a $2.1 million non-cash charge during the quarter ended March 31, 2017 in order to reflect the fair value of the Company’s investment in OPSA of $.5 million. This charge was reported as an impairment of an equity method investment in the consolidated statements of operations.

Provision for (Benefit from) Income Taxes

The benefit from income taxes decreased by $1.6 million to a net tax benefit of $56,000 for the fiscal year ended March 31, 2017 compared with a net tax benefit of $1.6 million in the fiscal year ended March 31, 2016. The decrease was primarily due to higher pre-tax earnings and the allowance for the deferred tax asset related to the impairment in our equity method investment. The Company’s effective income tax rate decreased by 35.8% to 2.4% for the fiscal year ended March 31, 2017 from 38.2% for the fiscal year ended March 31, 2016. Pretax loss decreased by $1.9 million to a pretax loss of $2.4 million in the fiscal year ended March 31, 2017 from a pretax loss of $4.3 million in the fiscal year ended March 31, 2016. 

Earnings (Loss)

Our net loss for the fiscal year ended March 31, 2017 was $2.3 million as compared with net loss of $2.7 million for the fiscal year ended March 31, 2016. The decrease in net loss was primarily related to the aforementioned increase in gross profits, increased bad debt recoveries and a decrease in general and administrative expenses, partly offset by the impairment of the minority investment in OPS LLC and lower equity earnings in the minority investment in OPS LLC.

21

LIQUIDITY AND CAPITAL RESOURCES

We pay approximately 81% of our employees on a bi-weekly basis with the remaining employees being paid on a weekly basis, while customers pay for services generally within 60 days from the invoice date. We maintain a commercial revolving loan arrangement, currently with Wells Fargo Bank, National Association (“Wells Fargo”). We fund our payroll and operations primarily through borrowings under our $27.5 million credit facility with Wells Fargo (as amended, the “Credit Agreement”), described below under “Short Term Borrowings.”

We principally use short-term borrowings under our Credit Agreement to fund our accounts receivable. Our short-term borrowings have supported the accounts receivable associated with our organic growth. We intend to continue to use short-term borrowings to support our working capital requirements.

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 alternative or additional financing to maintain and expand our existing operations through the sale of our securities, an increase in the amount of available borrowings under our Credit Agreement, obtaining additional financing from other financial institutions 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.

Short-Term Borrowings

On February 12, 2009, we entered into a $20.0 million credit facility (the “Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”). This credit facility, which was most recently amended in March 2017 (see below) and matures March 31, 2020, contains customary affirmative and negative covenants, including, among other things, covenants requiring us to maintain certain financial ratios and is collateralized by customer accounts receivable and certain other assets of the Company as defined in the Credit Agreement.

The Credit Agreement provides for a letter of credit sub-line in an aggregate amount of up to $1.5 million. The Credit Agreement also provides for interest to be calculated on the outstanding principal balance of the revolving loans at the prime rate (as defined in the Credit Agreement) plus 1.50%. For LIBOR loans, interest will be calculated on the outstanding principal balance of the LIBOR loans at the LIBOR rate (as defined in the Credit Agreement) plus 1.75%.

On October 12, 2016, we entered into a seventh amendment (the “Seventh Amendment” to our Credit Agreement). The Seventh Amendment extended the Credit Agreement from October 16, 2016 to March 31, 2017 and amended the terms of the “Minimum Excess Availability” covenant.

On March 30, 2017, we entered into an eighth amendment (the “Eighth Amendment”) to our Credit Agreement. The Eighth Amendment extended the Credit Agreement from March 31, 2017 to March 31, 2020, increased the revolving line of credit from $20.0 million to $27.5 million, amended the terms of the “Minimum Excess Availability” covenant and redefined the term “Borrowing Base”.

Under the Credit Agreement, as of March 31, 2017, the interest rate was 2.75% for LIBOR loans and 3.00% for revolving loans. At March 31, 2017, we had approximately $1.0 million of cash on hand. We also had $8.0 million in LIBOR loans outstanding, $4.2 million of revolving loans outstanding and $0.5 million outstanding under our letters of credit sub-line under the Credit Agreement, representing 72.4% of the maximum borrowing capacity under the Credit Agreement based on our “eligible accounts receivable” (as defined in the Credit Agreement) as of such date.

We rely on our revolving loan from Wells Fargo which contains a fixed charge covenant and various other financial and non-financial covenants. If we breach a covenant, Wells Fargo has the right to immediately request the repayment in full of all borrowings under the Credit Agreement, unless Wells Fargo waives the breach. For the fiscal year ended March 31, 2017, we were in compliance with all covenants under the Credit Agreement.

Cash Flows

The following table summarizes our cash flow activity for the fiscal years ended March 31, 2017 and 2016:

	2017			2016
Net cash used in operating activities	$	(5,868,913	)	$	(1,276,588	)
Net cash used in investing activities		(10,394	)		(56,117	)
Net cash provided by financing activities		5,434,744			383,720

22

Investments and Capital Expenditures

We have no material commitments for investments and capital expenditures at this time.

Financing

The Company uses borrowings under its Credit Agreement to meet its working capital needs and may obtain short-term financing to meet its insurance needs. See “Short Term Borrowings” above.

Working Capital

Our working capital decreased by $0.2 million or 1.8%, to $10.5 million as of March 31, 2017, from $10.7 million as of March 31, 2016.

There were checks issued in advance of deposits (defined as checks drawn in advance of future deposits) of $0.6 million as of March 31, 2017, compared with $0.5 million at March 31, 2016. 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.

23

OUTLOOK

Strategic Initiatives

During the last few years the Company has pursued several initiatives to improve our competitive and strategic position. Significant progress has been made in rebuilding and strengthening our management team and improving the efficiency and functional effectiveness of our organization, systems and processes. Following a lengthy formal protest process, the Company re-entered the U.S. federal government market with the U.S. Postal Service (USPS) by commencing work in June 2016. Also consistent with the Company’s initiative to compete for larger contract opportunities, the Company commenced work on a new multi-state security services contract with a large on-line retailer in April 2016 in the Southeast region and in June 2017 will commence work with this customer in the Northeast/Mid-west region of the country. The Company also recently announced a new contract to provide physical security for data centers for the web services segment of the major on-line retailer which will further add new opportunities with the growth of data centers across multiple segments.

With a stronger foundation and a more effective organization, the Company is currently engaged in a corporate-wide campaign with four basic focus areas:

● Improved performance through better systems, procedures and training;

● Profitable top line revenue growth through identification of larger bid and proposal opportunities including new Federal and/or international opportunities and potential acquisitions;

● Dedicated marketing and sales efforts in specific industry sectors that complement our core capabilities, geography and operational expertise; and,

● Attention to details and discipline that will drive operating efficiencies, and enhance enterprise value.

These strategic initiatives may result in future costs related to new business development expenses, severance and other employee-related matters, litigation risks and expenses, and other costs. At this time we are unable to determine the scope of these potential costs.

Financial Results

Our future revenues will largely depend on our ability to gain additional business from new and existing customers in our security officer and aviation services divisions at acceptable margins, while minimizing terminations of contracts with existing customers. We continue to pursue complementary acquisition opportunities to leverage our management structure and deliver accretive earnings with acceptable collection terms. Our focus on larger, long term contract opportunities provides another path to add significant additional revenue similar to that of the U.S. Postal Service contract, the recently announced TSA Indefinite Delivery Indefinite Quantity Award, and other commercial and federal contract opportunities. 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. Our current focus is on increasing our revenues, as our sales and marketing team and branch managers’ work to develop new business and retain profitable contracts. However, several of our airline and security services customers have reduced capacity within their systems, which typically results in reductions of service hours provided by us to such customers. Also, intense competition from other security services companies impacts our ability to gain or maintain sales, gross margins and/or employees. During recent years, the Department of Homeland Security and the Transportation Security Administration have implemented numerous security measures that affect airline operations, including expanded cargo and baggage screening, and are likely to implement additional measures in the future. Additional measures taken to enhance either passenger or cargo security procedures in the future may increase the airline industry’s demand for third party services provided by us. Additionally, our aviation services division is continually subject to such government regulation, which has adversely affected us in the past with the federalization of the pre-board screening services and the document verification process at several of our domestic airport locations.

Our gross profit margin increased during the fiscal year ended March 31, 2017 to 11.3% of revenues, compared with 11.2% for fiscal 2016. We expect gross profit to remain under pressure due primarily to continued price competition, including competition from companies that have substantially greater financial and other resources than we have. However, we expect these effects will be moderated by continued operational efficiencies resulting from better management and leveraging of our cost structures, workflow process efficiencies associated with our integrated financial software system and higher contributions from our continuing new business development.

In the fiscal year ended March 31, 2017, the Company had six customers that represented approximately 52% of the Company’s total revenue in the aggregate. Two of these customers each represented 13% of total revenue. These customers include one domestic and one international airline, the U.S. Postal Service, a transportation company, an online retailer and web services provider and a northeast U.S. based healthcare facility. While the Company’s cost structure is highly variable and largely identifiable to the delivery of services for any specific contract, a loss of business with one or more of these customers could have a material adverse effect on our business, financial condition and results of operation.

For the fiscal year ended March 31, 2017, our security services division generated approximately $103.6 million or 64% of our total revenues and our aviation services division generated approximately $58.6 million or 36% of our total revenues.

24

As noted earlier, on February 12, 2009, we entered into a $20.0 million credit facility with Wells Fargo, as described above, which was recently increased to $27.5 million in March 2017. As of the close of business on June 1, 2017, our cash availability plus cash on hand is approximately $6.4 million, which we believe is sufficient to meet our needs for the foreseeable future barring any increase in reserves imposed by Wells Fargo. We believe that existing funds, cash generated from operations, and existing sources of and access to financing are adequate to satisfy our working capital, planned capital expenditures and debt service requirements for the foreseeable future, barring any increase in reserves imposed by Wells Fargo. However, we cannot assure you that this will continue to be the case, and we may be required to obtain alternative or additional financing to maintain and expand our existing operations through the sale of our securities, an increase in the amount of available borrowings under our Credit Agreement, obtaining additional financing from other financial institutions or otherwise. The financial markets generally, and the credit markets in particular, continue to be volatile, both in the United States and 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 alternative or 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.

25

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

Not applicable.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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

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

None.

ITEM 9A. CONTROLS AND PROCEDURES.

(a) Evaluation of 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” (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of March 31, 2017 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 Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

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.

(b) Management’s Report on 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 Rules 13a-15(f) and 15d-15(f) of the Exchange Act.
	Under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2017 based on the framework in Internal Control—Integrated Framework issued in 2013 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, 2017 and for the period then ended.
	This Annual Report does not include an attestation report of our registered independent 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 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 2017 that materially affected or is reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B.  OTHER INFORMATION.

None.

26

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 2017 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, 2017 (the “2017 Proxy Statement”) under the captions “Proposal One: Election of Directors,” “Information Concerning Executive Officers,” and “Board Meetings and Committees,” and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this Item 11 will be set forth in the 2017 Proxy Statement  under the captions “Executive Compensation” and “Compensation Discussion and Analysis,” 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 2017 Proxy Statement under the captions “Security 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 2017 Proxy Statement under the captions “Certain Relationships and Related Transactions” and “Board Meetings and Committees,” 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 2017 Proxy Statement under the caption “Proposal Two: Ratification of Appointment of Independent Registered Public Accountants,” and is incorporated herein by reference.

27

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE.

(a)
			Page Number from this Form 10-K
	(1)	Financial Statements:
		Report of Independent Registered Public Accounting Firm	F-1
		Consolidated Balance Sheets - March 31, 2017 and 2016	F-2
		Consolidated Statements of Operations - years ended March 31, 2017 and 2016	F-3
		Consolidated Statements of Changes in Stockholders’ Equity - years ended March 31, 2017 and 2016	F-4
		Consolidated Statements of Cash Flows - years ended March 31, 2017 and 2016	F-5
		Notes to Consolidated Financial Statements	F-7
	(2)	Financial Statement Schedule:
		Schedule II - Valuation and Qualifying Accounts	F-25

	Schedules not listed above have been omitted as not applicable, immaterial or disclosed in the Consolidated 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 of this report.

28

SIGNATURES

Pursuant to the requirements Section 13 or 15(d) 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 19, 2017
	By:	/s/ Craig P. Coy
		Craig P. Coy
		Chief Executive Officer

KNOWN BY ALL PERSONS BY THESE PRESENTS, that the individuals whose signatures appear below hereby constitute and appoint Craig P. Coy and N. Paul Brost, and each of them severally, as his or her true and lawful attorneys-in-fact and agents with full power of substitution and re-substitution for him or her and in his or her name, place and stead in any and all capacities to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do or perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or of his substitute or substitutes, may lawfully do to cause to be done by virtue hereof. 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/ Thomas P. Kikis	Chairman of the Board	June 19, 2017
Thomas P. Kikis
/s/ Craig P. Coy	Director and Chief Executive Officer	June 19, 2017
Craig P. Coy	(Principal Executive Officer)
/s/ N. Paul Brost	Chief Financial Officer	June 19, 2017
N. Paul Brost	(Principal Accounting Officer)
/s/ James P. Heffernan	Director	June 19, 2017
James P. Heffernan
/s/ Janet L. Steinmayer	Director	June 19, 2017
Janet L. Steinmayer
/s/ Mark Sullivan	Director	June 19, 2017
Mark Sullivan
/s/ Jerry L. Johnson	Director	June 19, 2017
Jerry L. Johnson

29

COMMAND SECURITY CORPORATION

EXHIBIT INDEX

Exhibit No.	Exhibit Description
3.1	Amended and Restated Articles of Incorporation	Incorporated by reference to Exhibit of Incorporation 3.3 of the Form 10-K for the fiscal year ended March 31, 1993.
3.2	By-Laws, as amended	Incorporated by reference to Exhibit 3.1 on Form 8-K filed September 25, 2013.
3.4	Certificate of Amendment of Certificate of Incorporation	Incorporated by reference to Exhibit 3.4 on Form 10-K for the fiscal year ended March 31, 2010.
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.
4.2	Specimen Series A Preferred Stock Certificate	Incorporated by reference to Exhibit 4.2 of Registration Statement on Form S-1 filed October 27, 1993.
10.1	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.
10.2	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.
10.3	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.
10.4	Wells Fargo Business Credit, Credit and Security Agreement dated February 12, 2009	Incorporated by reference to Exhibit 10.1 of the Form 10-Q filed February 17, 2009.
10.5	Second Amendment to Wells Fargo Business Credit and Security Agreement dated as of October 18, 2011	Incorporated by reference to Exhibit 10.1 of the Form 8-K filed October 18, 2011.
*10.6	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 July 3, 2001.
*10.7	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 June 28, 2006.
*10.8	2009 Omnibus Equity Incentive Plan	Incorporated by reference to Exhibit A of the 2009 Proxy Statement filed July 29, 2009.
*10.9	Craig P. Coy Employment Agreement	Incorporated by reference to Exhibit 10.13 of the Form 10-K for the fiscal year ended March 31, 2012.
*10.10	Scott Landry Employment Offer Letter dated October 1, 2012	Incorporated by reference to Exhibit 10.1 of the Form 8-K filed October 4, 2012.
10.11	Third Amendment to Credit and Security Agreement dated as of November 6, 2012, between Command Security Corporation and Wells Fargo Bank, National Association	Incorporated by reference to Exhibit 10.1 of the Form 8-K filed November 8, 2012.
*10.12	N. Paul Brost Employment Offer Letter dated January 11, 2013	Incorporated by reference to Exhibit 10.1 of the Form 8-K filed January 17, 2013.
*10.13	Coy Employment Agreement Extension dated December 23, 2014	Incorporated by reference to Exhibit 10.1 of the Form 8-K filed December 29, 2014
10.14	Award of the U.S. Postal Service contract No. 2BEMPS-15-B-0029 under Solicitation No. 2B-14-A-0078	Filed herewith.
10.15	Fifth Amendment to Credit and Security Agreement dated as of November 13, 2015, between Command Security Corporation and Wells Fargo Bank, National Association	Incorporated by reference to Exhibit 10.1 of the Form 10-Q filed November 16, 2015
10.16	Sixth Amendment to Credit and Security Agreement dated as of February 12, 2016, between Command Security Corporation and Wells Fargo Bank, National Association	Incorporated by reference to Exhibit 10.1 of the Form 10-Q filed February 16, 2016
10.17	Seventh Amendment to Credit and Security Agreement dated as of October 12, 2016, between Command Security Corporation and Wells Fargo Bank, National Association	Incorporated by reference to exhibit 10.1 of the Form 8-K filed October 17, 2016
10.18	Eighth Amendment to Credit and Security Agreement dated as of March 30, 2017, between Command Security Corporation and Wells Fargo Bank, National Association	Incorporated by reference to Exhibit 10.1 of the Form 8-K filed April 5, 2017
11.1	Computation of Income (Loss) Per Share of Common Stock	Incorporated by reference to Note 9 of the Consolidated Financial Statements filed with this Annual Report on Form 10-K.
31.1	Certifications Pursuant to Rule 13(a)-14(a)/15(d)-14(a)	Filed herewith.
31.2	Certifications Pursuant to Rule 13(a)-14(a)/15(d)-14(a)	Filed herewith.
32.1	Section 1350 Certifications	Filed herewith.
32.2	Section 1350 Certifications	Filed herewith.
99.1	Press Release dated June 19, 2017 announcing March 31, 2017 fourth quarter and fiscal year results	Filed herewith.
101.INS	XBRL Instance Document	Filed herewith.
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith.

* Management contract or compensatory plan or arrangement.

30

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, 2017 and 2016, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended March 31, 2017. Our audits of the basic consolidated financial statements included the financial statement schedule II – Valuation and Qualifying Accounts. Command Security Corporation’s management is responsible for these financial statements and financial statement schedule. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Command Security Corporation as of March 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2017, 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 consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

	/s/ D’Arcangelo & Co., LLP
June 19, 2017
Poughkeepsie, New York

F-1

Command Security Corporation

Consolidated Balance Sheets

March 31, 2017 and 2016

	March 31, 2017			March 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	1,042,291		$	1,486,854
Accounts receivable, net of allowance for doubtful accounts accounts of $542,489 and $650,226, respectively		29,189,233			21,890,623
Prepaid expenses		1,784,990			1,853,464
Other assets		3,991,584			2,184,465
Total current assets		36,008,098			27,415,406
Furniture and equipment at cost, net		146,345			258,157
Other assets:
Intangible assets, net		1,028,582			1,364,966
Minority investment in unconsolidated affiliate		513,291			2,695,291
Other assets		4,083,534			4,412,042
Total other assets		5,625,407			8,472,299
Total assets	$	41,779,850		$	36,145,862
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Checks issued in advance of deposits	$	583,201		$	471,939
Short-term borrowings		12,228,679			7,011,743
Accounts payable		1,215,591			945,711
Accrued expenses and other liabilities		11,503,474			8,321,297
Total current liabilities		25,530,945			16,750,690
Insurance reserves		366,323			612,462
Other non-current liabilities		-			700,000
Total liabilities		25,897,268			18,063,152
Commitments and contingencies (Notes 13 and 14)
Stockholders’ equity:
Preferred stock, convertible Series A, $.0001 par value		-			-
Common stock, $.0001 par value per share, 50,000,000 shares authorized, 11,600,386 and 9,848,186 shares issued and outstanding, respectively, at March 31, 2017 and 11,544,818 and 9,792,618 shares issued and outstanding, respectively, at March 31, 2016		1,160			1,155
Treasury stock, at cost, 1,752,200 shares		(2,885,579	)		(2,885,579	)
Additional paid-in capital		18,535,051			18,410,595
Accumulated earnings		231,950			2,556,539
Total stockholders’ equity		15,882,582			18,082,710
Total liabilities and stockholders’ equity	$	41,779,850		$	36,145,862

See accompanying Notes to Consolidated Financial Statements

F-2

Command Security Corporation

Consolidated Statements of Operations

Years Ended March 31, 2017 and 2016

	2017			2016
Revenues	$	162,179,249		$	133,101,689
Cost of revenues		143,910,434			118,200,363
Gross profit		18,268,815			14,901,326
Operating expenses
General and administrative		18,299,827			18,675,314
Provision for doubtful accounts, net		(138,547	)		426,752
		18,161,280			19,102,066
Operating income (loss)		107,535			(4,200,740	)
Other expenses
Interest expense		(306,124	)		(160,874	)
Loss before income taxes and equity earnings (loss) in minority investment of unconsolidated affiliate		(198,589	)		(4,361,614	)
Equity earnings (loss) in minority investment of unconsolidated affiliate		(82,000	)		65,291
Impairment of equity method minority investment of unconsolidated affiliate		(2,100,000	)		-
Loss before income taxes		(2,380,589	)		(4,296,323	)
Benefit from income taxes		(56,000	)		(1,640,000	)
Net loss	$	(2,324,589	)	$	(2,656,323	)
Loss per share of common stock
Basic	$	(0.24	)	$	(0.27	)
Diluted	$	(0.24	)	$	(0.27	)
Weighted average number of common shares outstanding
Basic		9,824,763			9,771,578
Diluted		9,824,763			9,771,578

See accompanying Notes to Consolidated Financial Statements

F-3

Command Security Corporation

Consolidated Statements of Changes in Stockholders’ Equity

Years Ended March 31, 2017 and 2016

	Preferred Stock		Common Stock		Treasury Stock			Additional Paid In Capital			Accumulated Earnings			Total
Balance at March 31,  2015		-		1,149		(2,885,579	)		18,245,747			5,212,862			20,574,179
Options exercised, net				6					75,089						75,095
Repurchase of stock options									(14,034	)					(14,034	)
Stock compensation cost									103,793						103,793
Net loss												(2,656,323	)		(2,656,323	)
Balance at March 31,  2016		-		1,155		(2,885,579	)		18,410,595			2,556,539			18,082,710
Options exercised, net				5					95,964						95,969
Stock based compensation tax benefits									10,577						10,577
Stock compensation cost									17,915						17,915
Net loss												(2,324,589	)		(2,324,589	)
Balance at March 31, 2017	$	-	$	1,160	$	(2,885,579	)	$	18,535,051		$	231,950		$	15,882,582

See accompanying Notes to Consolidated Financial Statements

F-4

Command Security Corporation

Consolidated Statements of Cash Flows

Years Ended March 31, 2017 and 2016 

	2017			2016
Cash flows from operating activities:
Net loss	$	(2,324,589	)	$	(2,656,323	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		458,590			577,025
Provision for doubtful accounts, net		(138,547	)		426,752
Equity (earnings) loss in minority investment of unconsolidated affiliate		82,000			(65,291	)
Impairment of equity method minority investment of unconsolidated affiliate		2,100,000			-
Rent expense		24,298			(15,036	)
Gain on asset dispositions		-			3,632
Stock based compensation costs		17,915			103,793
Insurance reserves		(246,139	)		27,893
Deferred income taxes		37,689			(1,913,562	)
Changes in operating assets and liabilities:
Accounts receivable		(7,160,063	)		(605,339	)
Prepaid expenses		68,474			(200,060	)
Other assets		(1,516,300	)		1,325,267
Change in accounts payable and other liabilities		3,427,759			1,014,661
Change in other long term liabilities		(700,000	)		700,000
Net cash used in operating activities		(5,868,913	)		(1,276,588	)
Cash flows from investing activities:
Purchases of equipment		(10,394	)		(58,532	)
Proceeds from equipment dispositions		-			2,415
Net cash used in investing activities		(10,394	)		(56,117	)
Cash flows from financing activities:
Net advances on short-term borrowings		5,216,936			1,011,743
Change in checks issued in advance of deposits		111,262			(689,084	)
Repurchase of stock options		-			(14,034	)
Proceeds from option exercises, net		106,546			75,095
Net cash provided by financing activities		5,434,744			383,720
Net change in cash and cash equivalents		(444,563	)		(948,985	)
Cash and cash equivalents, beginning of period		1,486,854			2,435,839
Cash and cash equivalents, end of period	$	1,042,291		$	1,486,854

See accompanying Notes to Consolidated Financial Statements

F-5

Command Security Corporation

Consolidated Statements of Cash Flows, Continued

Years Ended March 31, 2017 and 2016

1. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Cash paid during the years for:

	2017		2016
Interest	$	297,373	$	152,486
Income taxes		10,180		535,616

See accompanying Notes to Consolidated Financial Statements

F-6

Command Security Corporation

Notes to Consolidated Financial Statements

March 31, 2017 and 2016

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. In this discussion, the words “Company”, “we”, “our” and “us” refer to Command Security Corporation.

Principal Business Activities

We are a security services company which principally provides uniformed security officers and aviation security services to commercial, financial, industrial, aviation and governmental customers throughout the United States. We provide our security services to our customers through Command Security, our security division, and our aviation security services through our Aviation Safeguards division. The Company has operations in California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin.

Principles of Consolidation

The consolidated financial statements include the accounts of Command Security Corporation and its consolidated subsidiary. All intercompany balances and transactions are eliminated upon consolidation.

Use of 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 at the date of the financial statements, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. The estimates that we make include 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 our management believes are reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, our actual results may differ from those estimates under different assumptions or conditions.

Revenue Recognition

We record revenue as services are provided to our customers. Revenue relates primarily to the provision 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 is reported net of applicable taxes.

Cash and Cash Equivalents

We define 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.

Accounts Receivable

We periodically evaluate the requirement for providing for billing adjustments and/or reflect the extent to which we will be able to collect 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 to be uncollectible.

Minority Investment in Unconsolidated Affiliate

The Company including its consolidated subsidiary, OPS LLC, uses the equity method to account for its investment in OPSA. Equity method investments are recorded at original cost and adjusted periodically to recognize: (i) our proportionate share of investees’ net income or losses after the date of the investment; (ii) additional contributions made or distributions received; and (iii) impairment losses resulting from adjustments to net realizable value. The Company reviews its investment accounted for under the equity method of accounting for impairment whenever events or changes in circumstances indicate a loss in the value of the investment may be other than temporary.

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.

F-7

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

Intangible Assets

Intangible assets are stated at cost and consist primarily of customer lists that are being amortized on a straight-line basis over a period of ten years, and goodwill, which is reviewed annually for impairment. The life assigned to customer lists acquired is based on management’s estimate of our expected customer 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 earlier. Any potential impairment is evaluated based on anticipated undiscounted future cash flows and actual customer attrition in accordance with FASB ASC 360, Property, Plant and Equipment.

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 related data.

Workers’ compensation annual costs are comprised of premiums as well as incurred losses as determined at the end of the coverage period, subject to minimum and maximum amounts. Workers’ compensation insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported as provided by a third party. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claim. We believe our estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities. The Company continually monitors changes in claim type and incident and evaluates the workers’ compensation insurance accrual, making necessary adjustments based on the evaluation of these qualitative data points.

The Company is self-insured up to certain stop loss amounts for worker’s compensation claims. The Company has purchased stop loss coverage that insures individual claims that exceed $500,000. Additionally, the Company has purchased stop loss coverage that insures claims in the aggregate that exceed $6.5 million and $6.2 million for the policy years ended September 30, 2017 and 2016 respectively.

The Company’s workers’ compensation insurance premiums (including loss fund deposits, surcharges, assessments, broker’s fees and excluding loss fund handling charges) were $3.27 million and $3.25 million for the policy years ended September 30, 2017 and 2016, respectively. Related loss handling charges for the policy year ended September 30, 2017 as of March 31, 2017 were approximately $40,000, as compared with loss handling charges of approximately $45,000 for the full policy year ended September 30, 2016. Since October 1, 2015, the Company has utilized the services of a third party administrator to manage workers’ compensation claims.

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.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. In the event that interest and/or penalties are assessed in connection with our tax filings, interest will be recorded as interest expense and penalties as selling, general and administrative expense. We did not have any unrecognized tax benefits as of March 31, 2017 and 2016.

Income (Loss) per Share

Under the requirements of FASB ASC 260, 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, 2017 and 2016 because of the effect the assumed issuance of common shares would have if the outstanding stock options were exercised.

F-8

For the fiscal years ended March 31, 2017 and 2016, the Company reported net loss and, accordingly, potential common shares that would cause dilution, such as employee stock options, have been excluded from the diluted share count because their inclusion would have been anti-dilutive.

Stock-Based Compensation

FASB ASC 718, Stock Compensation, 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 use the modified-prospective transition method. Under the modified-prospective transition 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.

Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, prepaid expenses, checks issued in advance of deposits, accounts payable and accrued expenses are reasonable estimates of the fair values because of their short-term maturity. The fair value of the Company’s debt is based on the borrowing rates currently available to the Company for loans and leases with similar terms and average maturities.

F-9

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability between a willing buyer and seller in an orderly transaction, it establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

● Level 1, defined as observable inputs such as quoted prices in active markets for identical assets;

● Level 2, defined as observable inputs other than Level 1 prices such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

● Level 3, defined as unobservable inputs in which little or no market data exists; therefore requiring an entity to develop its own assumptions.

Reclassifications

Certain amounts previously reported for prior periods have been reclassified to conform to the current year presentation in the accompanying consolidated financial statements. Such reclassifications had no effect on the results of operations or shareholders’ equity as previously recorded.

Recent Accounting Pronouncements

In May 2014, the FASB and the International Accounting Standards Board (IASB) issued, ASU 2014-09 (Topic 606) Revenue from Contracts with Customers. The guidance substantially converges final standards on revenue recognition between the FASB and IASB providing a framework on addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles. In July 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”, which deferred the effective date of ASU No. 2014-09 by one year, making it effective for the Company’s fiscal year ending March 31, 2019. Subsequently, the FASB also issued a series of amendments to the new revenue standards. The new revenue standards may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The new revenue standards are not expected to have a material impact on the amount and timing of revenue recognized in the Company’s consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. ASU 2015-17 simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities to be classified as non-current on the balance sheet. ASU 2015-17 is effective for the Company’s fiscal year ending March 31, 2018. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. Other than the reclassification of the current deferred tax asset to long term assets, the adoption of this guidance is not expected to have a material impact on the Company’s financial position, results of operations, or cash flows.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which requires lessees to recognize a lease liability and a right-to-use asset on the balance sheet for all leases, except certain short-term leases. ASU 2016-02 is effective beginning with the Company’s fiscal year ending March 31, 2020, with early adoption permitted, and must be implemented using a modified retrospective approach for all leases existing at, or entered into after the beginning of the earliest comparative period that is presented in the financial statements. The Company is currently evaluating the impact of ASU 2016-02 on its consolidated financial statements. The adoption of this guidance is expected to result in a significant increase in assets and liabilities on the Company’s consolidated balance sheet, with no material impact on the consolidated statements of operations. However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date.

In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”, which simplifies accounting and presentation of share-based payments, primarily relating to the recognition and classification of excess tax benefits, accounting for forfeitures and tax withholding requirements. ASU 2016-09 is effective beginning with the Company’s fiscal year ending March 31, 2018, with early adoption permitted. Currently, excess tax benefits or deficiencies from the Company’s equity awards are recorded as additional paid-in capital in its balance sheets. Upon adoption, the Company will record any excess tax benefits or deficiencies from its equity awards in its consolidated statements of operations in the reporting periods in which the benefit or deficiency is realized. As a result, subsequent to adoption the Company’s income tax expense and associated effective tax rate will be impacted by fluctuations in stock price between the grant dates and exercise dates of equity awards.

In August 2016, the FASB issued new guidance on cash flow statement presentation ASU 2016-15, Statement of Cash Flows (Topic 230); Classification of Certain Cash Receipts and Cash Payments. This ASU addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new guidance is effective beginning with the Company’s fiscal year ending March 31, 2019, with early adoption permitted. The adoption of ASU 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements.

F-10

In January 2017, the FASB issued ASU 2017-04 “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for annual or any interim goodwill tests in fiscal years beginning after December 15, 2019. The adoption is not expected to have a material impact on the consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09 (ASU 2017-09), “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting”. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The adoption of ASU 2017-09 which will become effective for annual periods beginning after December 15, 2017 is not expected to have a material impact on the Company’s consolidated financial statements.

2. Furniture and Equipment

Furniture and equipment at March 31, 2017 and 2016 consist of the following:

	2017			2016
Transportation equipment	$	232,954		$	232,954
Security equipment		1,347,003			1,347,003
Office furniture and equipment		2,785,052			2,774,658
		4,365,009			4,354,615
Accumulated depreciation		(4,218,664	)		(4,096,458	)
Total	$	146,345		$	258,157

Depreciation expense for the fiscal years ended March 31, 2017 and 2016 was $122,206 and $178,186, respectively.

F-11

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

3. Intangible Assets

Intangible assets at March 31, 2017 and 2016 consist of the following:

	2017			2016
Customer Lists	$	4,274,915		$	4,274,915
Goodwill		895,258			895,258
		5,170,173			5,170,173
Accumulated amortization		(4,141,591	)		(3,805,207	)
Total	$	1,028,582		$	1,364,966

Included in intangible assets for the fiscal years ended March 31, 2017 and 2016 is goodwill of $895,258 that is not subject to amortization. Amortization expense for the fiscal years ended March 31, 2017 and 2016 was $336,384 and $398,839, respectively. Amortization expense for the years ending March 31, 2018 and 2019 for the intangible assets noted above will be $106,680 and $26,644 respectively.

4. Minority Investment in Unconsolidated Affiliate

In 2014, the Company made a 20% minority investment in Ocean Protection Services LLC, a Delaware limited liability company (“OPS LLC”), who holds a 30% interest in an entity that specializes in maritime security, risk management and risk analysis. The Company purchased 2,000 Class A Common Units of OPS LLC for a purchase price of $2.125 million and funded the purchase price through borrowings under the Company’s existing line of credit. The excess of the carrying value of the Company’s investment in OPS LLC and the Company’s proportionate share of the net assets of OPSA and OPS LLC is largely attributable to goodwill. Since the Company’s initial investment, there have been no additional capital contributions made or distributions received.

In September 2016, the majority owner of OPS LLC consented to a restructuring transaction pursuant to which the majority owner of OPS LLC transferred its 80% interest in OPS LLC to the Company for no consideration resulting in OPS LLC becoming a wholly-owned subsidiary of the Company.

During the past three fiscal years ended December 31, 2016, OPSA has experienced a decline in revenues and net income from continuing operations. Specifically, for the year ended December 31, 2016, revenues declined 29% from the year ended December 31, 2015, and revenues for the year ended December 31, 2015 declined 16% from the year ended December 31, 2014. For the same periods gross profits declined by 32% and 10%, respectively, and net income from continuing operations declined from $1.6 million for the year ended December 31, 2014 to $1.1 million for the year ended December 31, 2015 to a net loss from continuing operations of $.4 million for the year ended December 31, 2016. During the three years ended December 31, 2016, gross profit as a percent of revenues were 31.4%, 32.8% and 30.6%, respectively.

During the past three years the decline in revenues has been driven by several factors including an overall reduction in world-wide shipping activity, reduced demand for security personnel as a result of declines in attempted and successful piracy attacks, lower insurance rates and lower oil prices allowing operators the option of longer routes through lower risk areas further leading to a decline in demand for security services. The maturing of this industry has also led to price competition further compressing revenues and margins.

The decline in revenues and certain increased operating costs has resulted in net operating losses for the year ending March 31, 2017, and accordingly, the Company has recorded its proportionate share of these losses totaling $82,000.

The above-mentioned long-term decline in revenues has resulted in a significant reduction in liquidity which has more recently led to the inability of OPSA to remain current in its obligations under its senior debt. In light of the above-mentioned factors the Company has performed an assessment of the fair value of its 30% investment in OPSA and has determined that the book value of investment exceeded its fair value and further concluded that this decline in value was other than temporary. The company based its assessment, in part on the calculations reported by a valuation consultant retained by OPSA. The consultant’s valuation was based on the net present value of estimated future cash flows developed from forecasts provided by OPSA to the valuation consultant. Accordingly, the Company has recorded a $2.1 million non-cash charge during the quarter ended March 31, 2017 in order to reflect the fair value of the Company’s investment in OPSA of $.5 million. This charge was reported as an impairment of an equity method investment in the consolidated statements of operations.

F-12

Our investment in OPSA which is included in minority investment in unconsolidated affiliate in our balance sheet consists of the following:

	March 31, 2017			March 31, 2016
Capital contributions	$	2,125,000		$	2,125,000
Cumulative share of income		488,291			570,291
Impairment of equity method investment		(2,100,000	)		-
Investment balance	$	513,291		$	2,695,291

The following summarizes the combined assets, liabilities and equity, and combined results of operations of our equity method investment in OPSA as of December 31, 2016 and December 31, 2015:

	December 31, 2016		December 31, 2015
Current assets	$	1,492,360	$	2,415,252
Goodwill		9,941,946		10,441,941
Other non-current assets		97,340		236,066
Total assets	$	11,531,646	$	13,093,259
Current liabilities	$	6,411,313	$	4,349,785
Non-current liabilities		1,430,819		4,459,298
Shareholders’ equity		3,689,514		4,284,176
Total liabilities and shareholders’ equity	$	11,531,646	$	13,093,259

Condensed consolidated statement of operations for the year ended December 31, 2016 and December 31, 2015:

	2016			2015
Net operating revenues	$	8,948,531		$	12,571,572
Gross profit	$	2,812,742		$	4,117,222
Operating expenses	$	1,985,822		$	2,638,364
Net income (loss) from continuing operations	$	(368,194	)	$	1,086,486

5. Fair Value Measurements

The Company is required to measure certain assets such as goodwill; intangibles, not subject to amortization; and long-lived assets with carrying values which may be in excess of their implied fair value or not fully recoverable based upon estimated future cash flows on a non-recurring basis.

Asset groups containing values measured, and presented on a non-recurring fair value basis at March 31, 2017 are as follows:

Description	Value		Level 3		Impairment
Equity Method Investment	$	513,291	$	513,291	$	2,100,000

The significant inputs used in the fair value measurements for Level 3 assets measured at fair value on a non-recurring basis are disclosed in Note 4.

F-13

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

6. Other Assets

Other assets at March 31, 2017 and 2016 consist of the following:

	March 31, 2017			March 31, 2016
Workers’ compensation insurance	$	2,804,341		$	1,258,066
Other receivables		16,831			44,958
Security deposits		138,171			140,019
Deferred tax asset		5,115,775			5,153,464
		8,075,118			6,596,507
Current portion		(3,991,584	)		(2,184,465	)
Total non-current portion	$	4,083,534		$	4,412,042

The other asset workers’ compensation insurance represents the net amount of the payments made to cover the workers’ compensation insurance premium against the actual premium due as well as the difference in the amount deposited to the loss fund less the estimated workers’ compensation claims and reserves related to the historical loss claims as well as the estimates related to the incurred but not reported claims. There is no offsetting claim liability reported as the Company has determined that there is a sufficient amount deposited into the loss funds to cover the estimated claims reserve as well as the estimate related to the incurred but not reported claims.

7. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at March 31, 2017 and 2016 consist of the following:

	March 31, 2017		March 31, 2016
Payroll and related expenses	$	8,076,807	$	5,530,554
Taxes and fees payable		325,763		320,333
Accrued interest payable		13,508		4,756
Other		3,087,396		2,465,654
Total	$	11,503,474	$	8,321,297

8. Borrowings

Short-term borrowings at March 31, 2017 and 2016 consist of the following:

	March 31, 2017		March 31, 2016
Line of credit	$	12,228,679	$	7,011,743

On February 12, 2009, we entered into a $20.0 million, credit facility (the “Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”) which was most recently amended in March 2017 (see below), matures in March 2020, contains customary affirmative and negative covenants, including, among other things, covenants requiring us to maintain certain financial ratios and is collateralized by customer accounts receivable and certain other assets of the Company as defined in the Credit Agreement.

F-14

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

The Credit Agreement provides for a letter of credit sub-line in an aggregate amount of up to $1.5 million. The Credit Agreement also provides for interest to be calculated on the outstanding principal balance of the revolving loans at the prime rate (as defined in the Credit Agreement) plus 1.50%. For LIBOR loans, interest will be calculated on the outstanding principal balance of the LIBOR loans at the LIBOR rate (as defined in the Credit Agreement) plus 1.75%.

On November 13, 2015, we entered into a fifth amendment (the “Fifth Amendment”) to our Credit Agreement. The Fifth Amendment amended a financial covenant of the Credit Agreement to allow for certain legal settlement costs associated with the Company’s settlement of a class action lawsuit (Leal v. Command Security Corporation).

On March 30, 2017, we entered into an eighth amendment (the “Eighth Amendment”) to our Credit Agreement). The Eighth Amendment extended the Credit Agreement from March 31, 2017 to March 31, 2020, increased the revolving line of credit from $20.0 million to $27.5 million, amended the terms of the “Minimum Excess Availability” covenant and redefined the term “Borrowing Base”.

Under the Credit Agreement, as of March 31, 2017, the interest rate was 2.75% for LIBOR loans and 3.00% for revolving loans. At March 31, 2017, we had approximately $1.0 million of cash on hand. We also had $8.0 million in LIBOR loans outstanding, $4.2 million of revolving loans outstanding and $0.5 million outstanding under our letters of credit sub-line under the Credit Agreement, representing 72.4% of the maximum borrowing capacity under the Credit Agreement based on our “eligible accounts receivable” (as defined in the Credit Agreement) as of such date.

9. Income (Loss) per Share

FASB ASC 718, Stock Compensation, 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 use the modified-prospective transition method. Under the modified-prospective transition 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. Non-cash charges of approximately $18,000 and $104,000 for stock based compensation have been recorded for the years ended March 31, 2017 and 2016, respectively.

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, 2017 and 2016:

	Loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
Year ended March 31, 2017
Basic and diluted EPS	$	(2,324,589	)		9,824,763	$	(0.24	)
Year ended March 31, 2016
Basic and diluted EPS	$	(2,656,323	)		9,771,578	$	(0.27	)

For the fiscal years ended March 31, 2017 and 2016, the Company reported net loss and, accordingly, potential common shares that would cause dilution, such as employee stock options, have been excluded from the diluted share count because their inclusion would have been anti-dilutive. For the fiscal years ended March 31, 2017 and 2016, the fully diluted shares would have been 10,216,594 and 10,020,208, respectively.

F-15

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

10. Retirement Plans

In November 1999, we adopted a qualified retirement plan providing for elective employee deferrals and discretionary employer contributions to non-highly compensated participants. The plan allows for employer contributions for certain employees working under specific customer contracts, as defined. Our expense under this plan for the fiscal years ended March 31, 2017 and 2016 was approximately $640,000 and $218,000, respectively.

11. Concentrations of Credit Risk and Significant Customers

Geographic concentrations of credit risk with respect to trade receivables are primarily in the New York Metropolitan area with approximately 30% and 43% of total receivables as of March 31, 2017 and 2016, and in California with approximately 14% and 30% of total receivables as of March 31, 2017 and 2016, 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, 2017 and 2016 we generated 36% and 45%, respectively, of our revenue from aviation and related services. Accounts receivable due from the commercial airline industry comprised 21% and 55% of net receivables as of March 31, 2017 and 2016. Our remaining customers are not concentrated in any specific industry. In the fiscal year ended March 31, 2017, the Company had six customers, who represented approximately 52% of the Company’s total revenue in the aggregate. Two of these customers each represented 13% of total revenue. These customers include one domestic and one international airline, the U.S. Postal Service, a transportation company, an online retailer and web services provider and a northeast U.S. based healthcare facility. While the Company’s cost structure is highly variable and largely identifiable to the delivery of services for any specific contract, a loss of business with one or more of these customers could have a material adverse effect on our business, financial condition and results of operation.In the fiscal year ended March 31, 2016, the Company had six customers who represented approximately 45% of the Company’s total revenue in the aggregate, with two of those customers representing 14% and 13% of total revenue, respectively. These customers included one domestic and one international airline, a major transportation company, a northeast U.S. based healthcare facility and two airline consortiums. We maintain our cash in bank deposit accounts, which at times may exceed federally insured limits. We have not experienced any losses in such accounts. Company management believes the risk of loss associated with these accounts to be remote.

12. Insurance Reserves

We have an insurance policy covering workers’ compensation claims in states where 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 $3.1 million and $4.6 million, for the fiscal years ended March 31, 2017 and 2016, 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.

Our insurance coverage limits are currently $1.0 million per occurrence for non-aviation related business (with additional first and second layer excess liability policies of $5.0 million and $10.0 million, respectively) and $30.0 million per occurrence for aviation related business. We retain the risk for the first $25,000 of general liability non-aviation related operations. The aviation related deductible is $5,000 per occurrence, with the exception of $50,000 for airport wheelchair and electric cart operations, $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; accordingly, 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 our current results of operations.

F-16

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

13. Contingencies

The nature of our business is such that there is a significant volume of routine claims and lawsuits that are made against us, the vast majority of which never lead 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 that we face relating to these matters. Some of the claims brought against us could result in significant payments; however, the exposure to us under general liability non-aviation related operations is limited to the first $25,000 per occurrence. The aviation related deductible is $5,000 per occurrence, with the exception of $50,000 for airport wheelchair and electric cart operations, $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 March 2012, the California Service Employees Health and Welfare Trust Fund filed a suit in U.S. District Court for the Northern District of California against the Company seeking to maintain the payment of monthly health insurance contributions, which were stopped by the Company following the termination of the collective bargaining agreement. Venue was subsequently transferred to the U.S. District Court for the Central District of California. On July 31, 2014 the Court denied the plaintiffs’ motion for summary judgment and granted partial summary judgment in favor of the Company. While the parties stipulated to a proposed judgment, the plaintiffs’ appealed the judgment before the Judge had issued a final Order, pending the outcome of the companion case filed in July 2012. In that case, the Service Employee International Union (SEIU) filed a lawsuit in U.S. District Court for the Northern District of California against the Company seeking the restoration of the collective bargaining agreement between SEIU and the Company following a majority vote of Aviation Safeguards employees in December 2011 to withdraw recognition of the union. On February 20, 2014, the U.S. District Court, Central District of California, ruled in favor of the Company and granted our motion for summary judgment in full, denied the plaintiffs’ motion for summary judgment and terminated the case. The plaintiffs filed their Notice of Appeal to the U.S. Court of Appeals for the Ninth Circuit on March 18, 2014 and both parties have subsequently filed appellate briefs. Oral arguments were held in March 2016 in the Ninth Circuit Court of Appeals.

On September 14, 2016, the U.S. Court of Appeals issued its Opinion which overturned the lower Court rulings. In the interim, the Company and the plaintiffs engaged in settlement discussions and successfully negotiated settlement in June 2017, subject to final court approval. The settlement, among other things, includes cash payments aggregating $249,000 to the Trust Fund, the SEIU, and the three claimants. In addition, as part of this settlement the Company has agreed to increase hourly pay rates to a defined group of employees for a period over the earlier of the next five years or, their remaining period of employment with the Company.

On April 29, 2014, the California Superior Court granted a plaintiff’s motion (Leal v. Command Security Corporation) to certify a class consisting of all persons who were employed by the Company in a non-exempt security officer position within the State of California at any time since May 2, 2007 through the date of trial who agreed to and signed an on-duty meal period agreement at the time of their employment. The case is a certified class action involving allegations that the Company violated certain California state laws relating to on-duty meal and rest breaks. The parties agreed to a settlement, which was approved by the Court in November 2016. Our first payment in the amount of $725,704 was made on December 13, 2016. Our second and final payment of the same amount is due no later than December 31, 2017. The $51,408 increase in the total settlement amount was recorded in the quarter ended December 31, 2016.

In addition to such cases, we have been named as a defendant in several uninsured employment related claims that are pending 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.

We have employment agreements with certain of our officers and key employees with varying terms. The agreements generally provide for annual salaries and for salary continuation for a specified number of months under certain circumstances, including a change in control of the Company.

Approximately 59% of our workforce is not subject to a labor union. The remaining 41% of our workforce, 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 International and LaGuardia airports either subject to collective bargaining agreements or a recognition agreement with SEIU 32BJ. Three of the agreements, covering approximately 19% of our employees, expired on October 31, 2016, February 28, 2017 and March 31, 2017. We are currently involved in negotiations to renew the expired agreements. One other collective bargaining agreement, covering approximately 2% of our employees, is set to expire in June 2017. The remaining seven agreements are set to expire in September 2018 and thereafter.

F-17

14. Commitments

Leases

We are obligated under various operating lease agreements for office space, equipment and auto rentals. Rent expense under operating lease agreements approximated $2.5 million and $2.4 million, for the fiscal years ended March 31, 2017 and 2016, respectively.

There are no future minimum payments under long-term non-cancelable capital lease agreements. The future minimum payments under long-term non-cancelable operating lease agreements are as follows:

	Operating
	Leases
Year ending: March 31, 2018	$	1,416,000
March 31, 2019		1,130,000
March 31, 2020		737,000
March 31, 2021		539,000
March 31, 2022		524,000
Thereafter		988,000
Total	$	5,334,000

15. Stock Option Plans 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 May 2010, options to purchase 205,000 shares of the Company’s common stock were issued. No options may be granted under this plan after 2010. During the fiscal year ended March 31, 2017, 4,200 options were forfeited. During the fiscal years ended March 31, 2017 and 2016, no options were exercised under this plan. The remaining 51,400 outstanding options are exercisable at any time before May 26, 2020 at $2.40 per share.

F-18

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

In September 2005, the Company’s Board of Directors and stockholders approved the adoption of a qualified stock incentive plan. Under the stock incentive plan, substantially all employees of and consultants to, the Company, are eligible to receive options to purchase up to an aggregate of 1,000,000 shares of the Company’s common stock at an exercise price that cannot be less than the fair market value of the shares on the date the options are granted. In September and April 2007, options to purchase 80,000 and 65,000 shares of the Company’s common stock were issued. No options may be granted under this plan after July 29, 2015. During the fiscal year ended March 31, 2016, the company received proceeds of approximately $75,000 in connection with the exercise of stock options to purchase 61,054 shares of the Company’s common stock at an exercise price of $1.23. During the fiscal year ended March 31, 2017, the company received proceeds of approximately $27,000 in connection with the exercise of stock options to purchase 10,000 shares of the Company’s common stock at an exercise price of $2.67 per share. The vested outstanding options are exercisable as follows:

Options Outstanding		Exercise Price		Expiration Date
	15,000		3.00	April 11, 2017
	10,000		3.19	September 19, 2017
	13,753		3.36	September 17, 2018
	500,000		3.37	September 28, 2018
	14,233		3.08	December 30, 2018

In September 2009, 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 2,250,000 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 April, May, July and October 2010, options to purchase 116,283, 120,000, 31,624 and 74,616 shares of the Company’s common stock were issued, respectively. In March, June and September 2011, options to purchase 169,683, 109,553 and 120,000 shares of the Company’s common stock were issued. In January, April, August and November 2012, options to purchase 928,817 shares of the Company’s common stock were issued. In June and July 2013, options to purchase 120,000 shares of the Company’s common stock were issued. In July and December 2014, options to purchase 370,000 shares of the Company’s common stock were issued. During the fiscal year ended March 31, 2015, the Company received proceeds of $28,587 in connection with the exercise of stock options to purchase 17,867 shares of the Company’s common stock at an exercise price of $1.60 per share. During the fiscal year ended March 31, 2017, the Company received proceeds of approximately $69,000 in connection with the exercise of stock options to purchase 45,568 shares of the Company’s common stock at an exercise price of $1.52 per share. The vested outstanding options are exercisable as follows:

Options Outstanding		Exercise Price		Expiration Date
	18,425	$	3.08	December 30, 2018
	35,000		2.40	May 26, 2020
	50,000		2.01	October 20, 2020
	50,000		1.50	June 8, 2021
	95,000		1.42	September 12, 2021
	240,000		1.64	January 2, 2022
	180,000		2.30	January 2, 2022
	180,000		3.00	January 2, 2022
	95,000		1.28	April 4, 2022
	113,922		1.52	November 26, 2022
	165,000		1.91	January 16, 2023
	70,000		1.61	June 2, 2023
	50,000		1.43	July 21, 2023
	120,000		1.80	July 16, 2024
	120,000		3.25	December 15, 2024
	30,000		1.92	December 15, 2024
	100,000		1.79	December 22, 2024
	16,500		1.65	August 16, 2025
	3,360		2.66	March 6, 2027

F-19

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

A summary of activity related to all Company stock option activity for the years ended March 31, 2017 and 2016, is as follows:

	Options
	Exercise		Number of
	Price		Shares
Outstanding at March 31, 2015	$	1.21 - 3.37		2,481,208
Issued	$	1.65		50,000
Exercised	$	1.23		(61,054	)
Repurchased	$	1.52		(28,643	)
Forfeited	$	1.21 - 2.40		(15,010	)
Outstanding at March 31, 2016	$	1.28 - 3.37		2,426,501
Issued	$	2.66		50,000
Exercised	$	1.52 - 2.67		(55,568	)
Forfeited	$	2.40		(4,200	)
Outstanding at March 31, 2017	$	1.28 - 3.37		2,416,733

At March 31, 2017 there were 2,336,233 options outstanding and exercisable at prices ranging from $1.28 to $3.37 and 2,563,898 shares reserved for issuance under all stock arrangements. At March 31, 2017, there was $70,350 of total unrecognized compensation expense from stock-based compensation granted under the plans, which is related to non-vested options. The compensation expense is expected to be recognized over a weighted average vesting period of approximately 12 months.

Significant option groups outstanding and exercisable at March 31, 2017 and the related weighted average exercise price and life information are as follows:

						Weighted
						Average
Range of		Options		Options		Exercise		Remaining
Exercise Price		Outstanding		Exercisable		Price		Life (years)
$	1.28 - $3.37		2,416,733		2,336,233	$	2.33		4.5

The total intrinsic value of options outstanding as of March 31, 2017 was approximately $1,143,546.

F-20

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

The weighted average estimated value of stock options granted during fiscal 2017 was $1.30. The weighted average estimated value of stock options granted during fiscal 2016 was $0.46. The weighted average assumptions used in the Black-Scholes option-pricing model were as follows:

	2017			2016
Risk-free interest rate		2.02	%		1.37	%
Years until exercise		5.00			5.00
Volatility		55.3	%		28.7	%
Dividend yield		0.00	%		0.00	%
Termination rate		n/a			n/a

FASB ASC 718, Stock Compensation , 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 uses the modified-prospective transition method. Under the modified-prospective method, the Company recognizes compensation expense in the financial statements for all share-based payments granted, modified or settled.

The Company recorded total stock based compensation costs of $17,915 and $103,793 for the fiscal years ended March 31, 2017 and 2016, respectively.

16. Income Taxes

Net provision for (benefit from) income taxes for the fiscal years ended March 31 consists of the following:

	2017			2016
Current:
Federal	$	(70,267	)	$	182,479
State and local		(23,422	)		91,083
		(93,689	)		273,562
Deferred:
Federal		(52,132	)		(1,560,459	)
State and local		89,821			(353,103	)
		37,689			(1,913,562	)
Net provision for (benefit from) income taxes	$	(56,000	)	$	(1,640,000	)

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

	2017			2016
Statutory federal income tax rate		34.0	%		34.0	%
State and local income taxes		6.8	%		7.3	%
Permanent differences		(5.0	)%		(2.9	)%
Minority investment in unconsolidated affiliate		(35.1	)%		1.1	%
Other		1.7	%		(1.3	)%
Effective tax rate		2.4	%		38.2	%

F-21

The Company is unable to determine if the earnings from the minority investment in the unconsolidated affiliate are permanently invested outside of the United States. Therefore, the Company has recognized income taxes and the related foreign tax credits on the foreign operations of these earnings. The earnings on the foreign operations of the minority investment in the unconsolidated affiliate will become taxable in the United States only to the extent that distributions are received by the Company.

The permanent differences in our reconciliation of the effective tax rate for the years ended March 31, 2017 and 2016 are as follows:

	2017				2016
Amortization of Customer Lists	$	219,696	(3.8	)%	$	219,471	(2.1	)%
Other non-deductible expenses		73,361	(1.2	)%		75,879	(0.8	)%
Total	$	293,057	(5.0	)%	$	295,350	(2.9	)%

The permanent difference for amortization of customer lists arose through the acquisition of a business structured as a stock purchase. The Company amortizes the value of these customer lists for financial statement purposes, but is not allowed to deduct amortization of the customer lists for tax purposes. Other nondeductible expenses include meals, entertainment and penalties.

During the year ended March 31, 2017, the Company recorded a $2.1 million impairment charge in connection with its investment in OPSA. Any capital loss when and if the investment is sold is not expected to be deductible because the Company does not expect to have capital gains to utilize the capital loss if ultimately recognized.

F-22

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

The significant components of deferred tax assets and liabilities as of March 31, 2017 and 2016 are as follows:

	2017			2016
Current deferred tax assets:
Accrued expenses	$	651,793		$	324,338
Litigation settlement		297,295			288,820
Accounts receivable		221,325			268,283
Net current deferred tax assets	$	1,170,413		$	881,441
Non-current deferred tax assets (liabilities):
Workers’ compensation reserve	$	3,022,916		$	3,083,094
Employee stock compensation		439,805			444,842
Intangible assets		307,268			325,532
Litigation settlement		-			288,820
Insurance reserves		149,453			252,702
Accrued expenses		70,050			66,230
Capital loss carry-forward		-			54,672
Impairment of minority investment in unconsolidated affiliate		856,758			(93,400	)
Equipment		(44,130	)		(95,797	)
Net non-current deferred tax assets	$	4,802,120		$	4,326,695
Allowance for deferred tax asset related to capital loss carry-forward		-			(54,672	)
Allowance for deferred tax asset related to minority investment in unconsolidated affiliate		(856,758	)		-
Total deferred tax assets	$	5,115,775		$	5,153,464

As of March 31, 2016, we had fully reserved for a capital loss carry-forward in the amount of $132,500 which did not reverse before the carry-forward expired unused in fiscal 2017.

As of March 31, 2017, we have fully reserved for a deferred tax asset in the amount of $856,758 related to impairment of our minority investment in an unconsolidated affiliate.

Fiscal years 2014 through 2017 remain subject to examination by federal and state taxing authorities with certain states having open tax years beginning in fiscal 2013.

17. Issuer Purchases of Equity Securities

Under active stock repurchase programs, we may repurchase up to $4,000,000 of our common stock on the open market. Common stock repurchases are recorded as treasury stock, at cost. Shares repurchased during December 2011 have been retired. Shares repurchased during February 2012 and December 2012 are being held in treasury. The program does not have a prescribed expiration date.

F-23

During the fiscal years ended March 31, 2017 and 2016 the Company did not repurchase any shares under these programs. The number and average price of shares purchased to date under these programs is as set forth in the table below:

					Total Amount Purchased		Maximum Amount that
	Total Number				as part of Publicly		may yet be Purchased
Period	of Shares Purchased		Average Price Paid Per Share		Announced Program		under the Program
December 8 - 16, 2011		136,600	$	1.52	$	208,363	$	1,791,637
February 13 - 21, 2012		1,075,000	$	1.64	$	1,975,353	$	24,647
December 1 - 31, 2012		677,200	$	1.60	$	3,058,873	$	941,127
		1,888,800	$	1.62

F-24

Command Security Corporation

Notes to Consolidated Financial Statements, Continued March 31, 2017 and 2016

Schedule II

COMMAND SECURITY CORPORATION

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

	Balance at Beginning		Additions (Reductions) Charged or Credited to			Additions to/(Deductions from)			Balance at End of
	of Period		Expenses			Reserve			Period
Year ended March 31, 2017:
Deducted from asset accounts:
Allowance for doubtful accounts receivable - current maturities	$	650,226	$	(138,547	)	$	30,810		$	542,489
Year ended March 31, 2016:
Deducted from asset accounts:
Allowance for doubtful accounts receivable - current maturities	$	614,105	$	426,752		$	(390,631	)	$	650,226

See Report of Independent Registered Public Accounting Firm

End of Filing

F-25

EX-31.1

Exhibit 31.1

Certification (pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended)

I, Craig P. Coy, certify that:

1. I have reviewed this annual report on Form 10-K for the period ended March 31, 2017 of Command Security Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 19, 2017

By:	/s/ Craig P. Coy
	Craig P. Coy
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification (pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended)

I, N. Paul Brost, certify that:

1. I have reviewed this report on Form 10-K for the period ended March 31, 2017 of Command Security Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 19, 2017

By:	/s/ N. Paul Brost
	N. Paul Brost
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U. S. C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each undersigned officer certifies to the best of his knowledge based on a review of the annual report on Form 10-K for the period ended March 31, 2017 of Command Security Corporation (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: June 19, 2017

By:	/s/ Craig P. Coy
	Craig P. Coy
	Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U. S. C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each undersigned officer certifies to the best of his knowledge based on a review of the annual report on Form 10-K for the period ended March 31, 2017 of Command Security Corporation (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: June 19, 2017

By:	/s/ N. Paul Brost
	N. Paul Brost
	Chief Financial Officer
	(Principal Financial Officer)

EX-99.1

Company Contact:

N. Paul Brost

Chief Financial Officer

Command Security Corporation

703-464-4735

COMMAND SECURITY CORPORATION REPORTS FINANCIAL RESULTS

FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 31, 2017

Herndon, VA***June 19, 2017***Command Security Corporation (NYSE MKT: MOC) today reported its financial results for its fiscal year ended March 31, 2017.

Revenues for the three months ended March 31, 2017 increased by $9.3 million or 29.6% to $40.8 million as compared with $31.4 million for the three months ended March 31, 2016. Gross profit for the three months ended March 31, 2017 was $3.9 million (9.5% of revenues) compared with $2.1 million (6.8% of revenues) for the three months ended March 31, 2016. Operating loss for the three months ended March 31, 2017 was $0.9 million (2.1% of revenues) compared with operating loss of $2.1 million (6.7% of revenues) for the three months ended March 31, 2016. Net loss for the three months ended March 31, 2017, including the $2.1 million after-tax, non-cash impairment charge was $2.7 million, or $0.28 per basic and diluted share outstanding, compared with net loss of $1.4 million, or $0.14 per basic and diluted share outstanding for the three months ended March 31, 2016.

Revenues for the fiscal year ended March 31, 2017 increased by $29.1 million or 21.8% to $162.2 million as compared with $133.1 million for the fiscal year ended March 31, 2016. Gross profit for the fiscal year ended March 31, 2017 was $18.3 million (11.3% of revenues) compared with $14.9 million (11.2% of revenues) for the fiscal year ended March 31, 2016. Operating income for the fiscal year ended March 31, 2017 was $0.1 million (0.1% of revenues) compared with an operating loss of $4.2 million (3.2% of revenues) for the fiscal year ended March 31, 2016. Net loss for the fiscal year ended March 31, 2017, including the $2.1 million after-tax, non-cash impairment charge, was $2.3 million, or $0.24 per basic and diluted share outstanding, compared with a net loss of $2.7 million, or $0.27 per basic and diluted share outstanding for the fiscal year ended March 31, 2016.

The increases in revenues for the three months and fiscal year ended March 31, 2017, as compared with the corresponding periods of the prior year were primarily driven by the commencement of work under the contracts with the U.S. Postal Service (“USPS”) in June 2016 and under a new multi-state security services contract with a large online retailer in April 2016. In addition, revenues from a major transportation company, New York based healthcare facilities, and financial institutions increased. These increases were partly offset by reductions in revenues from temporary airport construction related services, residential and retail customers and California based technology companies.

The increase in gross profits for the three months ended March 31, 2017, as compared with the corresponding period of the prior year was primarily the result of a $0.9 million reduction in workers’ compensation expense and the commencement of work on the above-mentioned new contracts with the USPS and the large online retailer. In addition, gross profits increased as a result of the increased revenues from certain New York based healthcare facilities, equipment sales and financial institutions. These increases were partly offset by increasing labor costs in certain markets, the effect of reductions in temporary airport construction related security services, reductions in revenues from various residential and retail customers and California based technology companies.

The increase in gross profits for the fiscal year ended March 31, 2017, as compared with the corresponding period of the prior year was the result of a $1.5 million reduction in workers’ compensation expense and the commencement of work on the above-mentioned new contracts with the USPS and the large online retailer. The decrease in workers’ compensation costs was primarily driven by improved claims management processes during the past two and one-half policy years partly offset by increases in certain legacy claims from the 2013 policy year. In addition, gross profits increased at certain New York based healthcare facilities, equipment sales, and financial institutions. These increases were partly offset by reductions in temporary airport construction related security services, various residential and retail customers and California based technology companies.

While revenues increased nearly 30% for the three months ended March 31, 2017, general and administrative expenses increased by 13.4% or $0.6 million, to $4.8 million (11.9% of revenues) as compared to $4.3 million (13.6% of revenues) in the corresponding period of the prior year. The increase in general and administrative expenses was driven primarily by higher employee compensation and related costs. While we were otherwise able to leverage our existing cost structure with relatively small increases in employee compensation and benefit costs, we incurred increased information technology and communications costs in support of the increased revenues.

Similarly, while revenues increased nearly 22% for the fiscal year ended March 31, 2017, general and administrative expenses decreased by 2.0% or $0.4 million, to $18.3 million (11.3% of revenues) as compared to $18.7 million (14.0% of revenues) for the corresponding period of the prior year. The decrease in general and administrative expenses was driven primarily by lower legal and labor settlement costs, partly offset by higher employee compensation and related costs. As noted above, the offsetting increases were in support of the increased revenues.

The increase in net loss for the three months ended March 31, 2017, as compared with the corresponding period of the prior year was due mainly to the $2.1 million after tax, non-cash impairment charge related to the Company’s minority investment in OPS Acquisitions Limited and Ocean Protection Services Limited (“OPS”) and the above-mentioned increase in employee compensation and related expenses incurred in support of new revenue growth, partly offset by increases in gross profits including the reduction in worker’s compensation expense.

The decrease in net loss for the fiscal year ended March 31, 2017 as compared with the corresponding period of the prior year was due mainly to the increase in operating income as noted above including the reduction in workers’ compensation expense and legal and labor settlement related costs, partly offset by the above-mentioned non-cash impairment charge, increases in certain general and administrative costs incurred in support of new revenue growth and a reduction in the Company’s equity earnings from our minority investment in OPS.

Craig P. Coy, Chief Executive Officer of Command Security, said, “We continue to make great progress on a number of initiatives and this year was no different. In general, the industry is seeing significant changes as consolidation continues. This is providing many new opportunities for the Company as the big three or four security companies work to integrate and consolidate their brick and mortar operations while seeking to provide consistent service to their customers. We are adapting to a technology based service delivery model which focuses more attention on the customer. With this approach we have successfully added new large contracts with high quality companies that value service and results. The new contracts in FY2017 added approximately 1,060 additional officers while the new contracts recently awarded will further add approximately 1,065 new officers during June and July 2017. Another important matter is currently being resolved in the on-going California union litigation in which we have reached a settlement to dismiss all claims against the Company. In addition, our management team is improving our capabilities to meet recruiting challenges as the labor market tightens with lower unemployment and increasing wage pressures. Along with the deployment of enhanced operational technologies we are improving our scheduling and workforce productivity abilities. Despite the on-going challenges, we are well positioned to offer higher quality and more efficient services to customers who need to ensure they are Securing All They Value!”

Non-Cash Impairment Charge

During the past three fiscal years ended December 31, 2016, OPS has experienced a decline in revenues and net income from continuing operations. The decline in revenues has been driven by several factors including an overall reduction in world-wide shipping activity, reduced demand for security personnel as a result of declines in attempted and successful piracy attacks, lower insurance rates and lower oil prices allowing operators the option of longer routes through lower risk areas further leading to a decline in demand for security services. The maturing of this industry has also led to price competition further compressing revenues and margins.

The decline in revenues has resulted in net operating losses for the year ending March 31, 2017, and accordingly, the Company has recorded its proportionate share of these losses totaling $82,000.

The above-mentioned long-term decline in revenues has resulted in a significant reduction in liquidity which has more recently led to the inability of OPS to remain current in its obligations under its senior debt. In light of the above-mentioned factors the Company has performed an assessment of the fair value of its 30% investment in OPS and has determined that the book value of the investment exceeded its fair value and further concluded that this decline in value was other than temporary. Accordingly, the Company has recorded a $2.1 million non-cash charge during the quarter ended March 31, 2017 in order to reflect the fair value of the Company’s investment in OPS of $.5 million. This charge was reported as an impairment of an equity method investment in the consolidated statements of operations.

Subsequent Event

In June 2017, the Company, the California Service Employees Health and Welfare Trust Fund and the United Service Workers West, SEIU (USWW) successfully negotiated a settlement of the two lawsuits against the Company. The settlement, among other things includes cash payments to the Trust Fund, the SEIU, and the three claimants aggregating approximately $250,000 which will lead to the dismissal of all claims against the Company. Sufficient reserves to cover the cost of the settlement were recorded in the year ended March 31, 2017.

About Command Security Corporation

Command Security Corporation and its Aviation Safeguards division provide uniformed security officers and aviation security services to commercial, financial, industrial, aviation and governmental customers throughout the United States. As our credo states “Securing All You Value,” we safeguard against theft, fraud, fire, intrusion, vandalism and the many other threats that our customers are facing today. By partnering with each customer, we design programs customized to meet their specific security needs and address their particular concerns. We bring years of expertise, including sophisticated systems for hiring, training, supervision and oversight, backed by cutting-edge technology, to every situation that our customers face involving security. Our mission is to enable our customers to operate their businesses without disruption or loss, and to create safe environments for their employees. For more information concerning our company, please refer to our website at www.commandsecurity.com.

Forward-Looking Statements

This announcement by Command Security Corporation (referred to herein as the “Company”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and within the meaning of the Private Securities Litigation Reform Act of 1995 about the Company that are based on management’s assumptions, expectations and projections about the Company. Such forward-looking statements by their nature involve a degree of risk and uncertainty. The Company cautions that actual results of the Company could differ materially from those projected in the forward-looking statements as a result of various factors, including but not limited to the factors described under the heading “Risk Factors” in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended March 31, 2017 filed with the Securities and Exchange Commission, and such other risks disclosed from time to time in the Company’s periodic and other reports filed with the Securities and Exchange Commission. You should consider the areas of risk described above in connection with any forward-looking statements that may be made by the Company. The Company undertakes 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 the Company makes 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, which are publicly available at the Securities and Exchange Commission’s website at www.sec.gov/edgar.shtml.

COMMAND SECURITY CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

	Three Months Ended						Twelve Months Ended
	March 31,						March 31,
Income Statement Highlights	(Unaudited)
	2017			2016			2017			2016
Revenues	$	40,764,522		$	31,449,329		$	162,179,249		$	133,101,689
Gross profit		3,853,858			2,135,422			18,268,815			14,901,326
General and administrative		4,834,618			4,263,772			18,299,827			18,675,314
Operating income (loss)		(871,666	)		(2,097,773	)		107,535			(4,200,740	)
Equity earnings/(loss) in minority investment of unconsolidated affiliate		(25,000	)		(46,709	)		(82,000	)		65,291
Impairment of equity method minority investment of unconsolidated affiliate		(2,100,000	)		-			(2,100,000	)		-
Benefit from income taxes		(369,000	)		(830,000	)		(56,000	)		(1,640,000	)
Net loss		(2,714,959	)		(1,355,119	)		(2,324,589	)		(2,656,323	)
Net loss per common share:
Basic		(0.28	)		(0.14	)		(0.24	)		(0.27	)
Diluted		(0.28	)		(0.14	)		(0.24	)		(0.27	)
Weighted average number of common shares outstanding:
Basic		9,848,186			9,792,618			9,824,763			9,771,578
Diluted		9,848,186			9,792,618			9,824,763			9,771,578

COMMAND SECURITY CORPORATION

CONDENSED BALANCE SHEETS

Balance Sheet Highlights	March 31, 2017		March 31, 2016
Cash and cash equivalents	$	1,042,291	$	1,486,854
Accounts receivable, net		29,189,233		21,890,623
Total current assets		36,008,098		27,415,406
Total assets		41,779,850		36,145,862
Short-term debt		12,228,679		7,011,743
Total current liabilities		25,530,945		16,750,690
Total liabilities		25,897,268		18,063,152
Stockholders’ equity		15,882,582		18,082,710
Total liabilities and stockholders’ equity	$	41,779,850	$	36,145,862

XML

Document and Entity Information - USD ($)	12 Months Ended
	Mar. 31, 2017	May 31, 2017	Sep. 30, 2016
Document And Entity Information
Entity Registrant Name	COMMAND SECURITY CORP
Entity Central Index Key	0000864509
Document Type	10-K
Document Period End Date	Mar. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filer	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 19,989,841
Entity Common Stock, Shares Outstanding		9,848,186
Trading Symbol	MOC
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2017

XML

Consolidated Balance Sheets - USD ($)	Mar. 31, 2017	Mar. 31, 2016
Current assets:
Cash and cash equivalents	$ 1,042,291	$ 1,486,854
Accounts receivable, net of allowance for doubtful accounts accounts of $542,489 and $650,226, respectively	29,189,233	21,890,623
Prepaid expenses	1,784,990	1,853,464
Other assets	3,991,584	2,184,465
Total current assets	36,008,098	27,415,406
Furniture and equipment at cost, net	146,345	258,157
Other assets:
Intangible assets, net	1,028,582	1,364,966
Minority investment in unconsolidated affiliate	513,291	2,695,291
Other assets	4,083,534	4,412,042
Total other assets	5,625,407	8,472,299
Total assets	41,779,850	36,145,862
Current liabilities:
Checks issued in advance of deposits	583,201	471,939
Short-term borrowings	12,228,679	7,011,743
Accounts payable	1,215,591	945,711
Accrued expenses and other liabilities	11,503,474	8,321,297
Total current liabilities	25,530,945	16,750,690
Insurance reserves	366,323	612,462
Other non-current liabilities		700,000
Total liabilities	25,897,268	18,063,152
Commitments and contingencies (Notes 13 and 14)
Stockholders' equity:
Preferred stock, convertible Series A, $.0001 par value
Common stock, $.0001 par value per share, 50,000,000 shares authorized, 11,600,386 and 9,848,186 shares issued and outstanding, respectively, at March 31, 2017 and 11,544,818 and 9,792,618 shares issued and outstanding, respectively, at March 31, 2016	1,160	1,155
Treasury stock, at cost, 1,752,200 shares	(2,885,579)	(2,885,579)
Additional paid-in capital	18,535,051	18,410,595
Accumulated earnings	231,950	2,556,539
Total stockholders' equity	15,882,582	18,082,710
Total liabilities and stockholders' equity	$ 41,779,850	$ 36,145,862

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2017	Mar. 31, 2016
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable net	$ 542,489	$ 650,226
Preferred stock, Series A, par value per share	$ .0001	$ .0001
Common stock, par or stated value per share	$ .0001	$ .0001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	11,600,386	11,544,818
Common stock, shares outstanding	9,848,186	9,792,618
Treasury stock, shares	1,752,200	1,752,200

XML

Consolidated Statements of Operations - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Statement [Abstract]
Revenues	$ 162,179,249	$ 133,101,689
Cost of revenues	143,910,434	118,200,363
Gross profit	18,268,815	14,901,326
Operating expenses
General and administrative	18,299,827	18,675,314
Provision for doubtful accounts, net	(138,547)	426,752
Total operating expenses	18,161,280	19,102,066
Operating income (loss)	107,535	(4,200,740)
Other expenses
Interest expense	(306,124)	(160,874)
Loss before income taxes and equity earnings (loss) in minority investment of unconsolidated affiliate	(198,589)	(4,361,614)
Equity earnings (loss) in minority investment of unconsolidated affiliate	(82,000)	65,291
Impairment of equity method minority investment of unconsolidated affiliate	(2,100,000)
Loss before income taxes	(2,380,589)	(4,296,323)
Benefit from income taxes	(56,000)	(1,640,000)
Net loss	$ (2,324,589)	$ (2,656,323)
Loss per share of common stock
Basic	$ (0.24)	$ (0.27)
Diluted	$ (0.24)	$ (0.27)
Weighted average number of common shares outstanding
Basic	9,824,763	9,771,578
Diluted	9,824,763	9,771,578

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($)	Preferred Stock [Member]	Common Stock [Member]	Treasury Stock [Member]	Additional Paid In Capital [Member]	Accumulated Earnings [Member]	Total
Balance at Mar. 31, 2015		$ 1,149	$ (2,885,579)	$ 18,245,747	$ 5,212,862	$ 20,574,179
Options exercised, net		6		75,089		75,095
Repurchase of stock options				(14,034)		(14,034)
Stock compensation cost				103,793		103,793
Stock based compensation tax benefits
Net loss					(2,656,323)	(2,656,323)
Balance at Mar. 31, 2016		1,155	(2,885,579)	18,410,595	2,556,539	18,082,710
Options exercised, net		5		95,964		95,969
Repurchase of stock options
Stock compensation cost				17,915		17,915
Stock based compensation tax benefits				10,577		10,577
Net loss					(2,324,589)	(2,324,589)
Balance at Mar. 31, 2017		$ 1,160	$ (2,885,579)	$ 18,535,051	$ 231,950	$ 15,882,582

XML

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net loss	$ (2,324,589)	$ (2,656,323)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	458,590	577,025
Provision for doubtful accounts, net	(138,547)	426,752
Equity (earnings) loss in minority investment of unconsolidated affiliate	82,000	(65,291)
Impairment of equity method minority investment of unconsolidated affiliate	2,100,000
Rent expense	24,298	(15,036)
Gain on asset dispositions		3,632
Stock based compensation costs	17,915	103,793
Insurance reserves	(246,139)	27,893
Deferred income taxes	37,689	(1,913,562)
Changes in operating assets and liabilities:
Accounts receivable	(7,160,063)	(605,339)
Prepaid expenses	68,474	(200,060)
Other assets	(1,516,300)	1,325,267
Change in accounts payable and other liabilities	3,427,759	1,014,661
Change in other long term liabilities	(700,000)	700,000
Net cash used in operating activities	(5,868,913)	(1,276,588)
Cash flows from investing activities:
Purchases of equipment	(10,394)	(58,532)
Proceeds from equipment dispositions		2,415
Net cash used in investing activities	(10,394)	(56,117)
Cash flows from financing activities:
Net advances on short-term borrowings	5,216,936	1,011,743
Change in checks issued in advance of deposits	111,262	(689,084)
Repurchase of stock options		(14,034)
Proceeds from option exercises, net	106,546	75,095
Net cash provided by financing activities	5,434,744	383,720
Net change in cash and cash equivalents	(444,563)	(948,985)
Cash and cash equivalents, beginning of period	1,486,854	2,435,839
Cash and cash equivalents, end of period	1,042,291	1,486,854
Cash paid during the years for:
Interest	297,373	152,486
Income taxes	$ 10,180	$ 535,616

XML

Business Description and Summary of Accounting Policies

12 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business Description and Summary of Accounting Policies

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. In this discussion, the words “Company”, “we”, “our” and “us” refer to Command Security Corporation.

Principal Business Activities

We are a security services company which principally provides uniformed security officers and aviation security services to commercial, financial, industrial, aviation and governmental customers throughout the United States. We provide our security services to our customers through Command Security, our security division, and our aviation security services through our Aviation Safeguards division. The Company has operations in California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin.

Principles of Consolidation

The consolidated financial statements include the accounts of Command Security Corporation and its consolidated subsidiary. All intercompany balances and transactions are eliminated upon consolidation.

Use of 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 at the date of the financial statements, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. The estimates that we make include 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 our management believes are reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, our actual results may differ from those estimates under different assumptions or conditions.

Revenue Recognition

We record revenue as services are provided to our customers. Revenue relates primarily to the provision 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 is reported net of applicable taxes.

Cash and Cash Equivalents

We define 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.

Accounts Receivable

We periodically evaluate the requirement for providing for billing adjustments and/or reflect the extent to which we will be able to collect 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 to be uncollectible.

Minority Investment in Unconsolidated Affiliate

The Company including its consolidated subsidiary, OPS LLC, uses the equity method to account for its investment in OPSA. Equity method investments are recorded at original cost and adjusted periodically to recognize: (i) our proportionate share of investees’ net income or losses after the date of the investment; (ii) additional contributions made or distributions received; and (iii) impairment losses resulting from adjustments to net realizable value. The Company reviews its investment accounted for under the equity method of accounting for impairment whenever events or changes in circumstances indicate a loss in the value of the investment may be other than temporary.

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 that are being amortized on a straight-line basis over a period of ten years, and goodwill, which is reviewed annually for impairment. The life assigned to customer lists acquired is based on management’s estimate of our expected customer 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 earlier. Any potential impairment is evaluated based on anticipated undiscounted future cash flows and actual customer attrition in accordance with FASB ASC 360, Property, Plant and Equipment.

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 related data.

Workers’ compensation annual costs are comprised of premiums as well as incurred losses as determined at the end of the coverage period, subject to minimum and maximum amounts. Workers’ compensation insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported as provided by a third party. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claim. We believe our estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities. The Company continually monitors changes in claim type and incident and evaluates the workers’ compensation insurance accrual, making necessary adjustments based on the evaluation of these qualitative data points.

The Company is self-insured up to certain stop loss amounts for worker’s compensation claims. The Company has purchased stop loss coverage that insures individual claims that exceed $500,000. Additionally, the Company has purchased stop loss coverage that insures claims in the aggregate that exceed $6.5 million and $6.2 million for the policy years ended September 30, 2017 and 2016 respectively.

The Company’s workers’ compensation insurance premiums (including loss fund deposits, surcharges, assessments, broker’s fees and excluding loss fund handling charges) were $3.27 million and $3.25 million for the policy years ended September 30, 2017 and 2016, respectively. Related loss handling charges for the policy year ended September 30, 2017 as of March 31, 2017 were approximately $40,000, as compared with loss handling charges of approximately $45,000 for the full policy year ended September 30, 2016. Since October 1, 2015, the Company has utilized the services of a third party administrator to manage workers’ compensation claims.

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.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. In the event that interest and/or penalties are assessed in connection with our tax filings, interest will be recorded as interest expense and penalties as selling, general and administrative expense. We did not have any unrecognized tax benefits as of March 31, 2017 and 2016.

Income (Loss) per Share

Under the requirements of FASB ASC 260, 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, 2017 and 2016 because of the effect the assumed issuance of common shares would have if the outstanding stock options were exercised. 

For the fiscal years ended March 31, 2017 and 2016, the Company reported net loss and, accordingly, potential common shares that would cause dilution, such as employee stock options, have been excluded from the diluted share count because their inclusion would have been anti-dilutive.

Stock-Based Compensation

FASB ASC 718, Stock Compensation, 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 use the modified-prospective transition method. Under the modified-prospective transition 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.

Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, prepaid expenses, checks issued in advance of deposits, accounts payable and accrued expenses are reasonable estimates of the fair values because of their short-term maturity. The fair value of the Company’s debt is based on the borrowing rates currently available to the Company for loans and leases with similar terms and average maturities.  

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability between a willing buyer and seller in an orderly transaction, it establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

● Level 1, defined as observable inputs such as quoted prices in active markets for identical assets;

● Level 2, defined as observable inputs other than Level 1 prices such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

● Level 3, defined as unobservable inputs in which little or no market data exists; therefore requiring an entity to develop its own assumptions.

Reclassifications

Certain amounts previously reported for prior periods have been reclassified to conform to the current year presentation in the accompanying consolidated financial statements. Such reclassifications had no effect on the results of operations or shareholders’ equity as previously recorded.

Recent Accounting Pronouncements

In May 2014, the FASB and the International Accounting Standards Board (IASB) issued, ASU 2014-09 (Topic 606) Revenue from Contracts with Customers. The guidance substantially converges final standards on revenue recognition between the FASB and IASB providing a framework on addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles. In July 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”, which deferred the effective date of ASU No. 2014-09 by one year, making it effective for the Company’s fiscal year ending March 31, 2019. Subsequently, the FASB also issued a series of amendments to the new revenue standards. The new revenue standards may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The new revenue standards are not expected to have a material impact on the amount and timing of revenue recognized in the Company’s consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. ASU 2015-17 simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities to be classified as non-current on the balance sheet. ASU 2015-17 is effective for the Company’s fiscal year ending March 31, 2018. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. Other than the reclassification of the current deferred tax asset to long term assets, the adoption of this guidance is not expected to have a material impact on the Company’s financial position, results of operations, or cash flows.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which requires lessees to recognize a lease liability and a right-to-use asset on the balance sheet for all leases, except certain short-term leases. ASU 2016-02 is effective beginning with the Company’s fiscal year ending March 31, 2020, with early adoption permitted, and must be implemented using a modified retrospective approach for all leases existing at, or entered into after the beginning of the earliest comparative period that is presented in the financial statements. The Company is currently evaluating the impact of ASU 2016-02 on its consolidated financial statements. The adoption of this guidance is expected to result in a significant increase in assets and liabilities on the Company’s consolidated balance sheet, with no material impact on the consolidated statements of operations. However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date.

In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”, which simplifies accounting and presentation of share-based payments, primarily relating to the recognition and classification of excess tax benefits, accounting for forfeitures and tax withholding requirements. ASU 2016-09 is effective beginning with the Company’s fiscal year ending March 31, 2018, with early adoption permitted. Currently, excess tax benefits or deficiencies from the Company’s equity awards are recorded as additional paid-in capital in its balance sheets. Upon adoption, the Company will record any excess tax benefits or deficiencies from its equity awards in its consolidated statements of operations in the reporting periods in which the benefit or deficiency is realized. As a result, subsequent to adoption the Company’s income tax expense and associated effective tax rate will be impacted by fluctuations in stock price between the grant dates and exercise dates of equity awards.

In August 2016, the FASB issued new guidance on cash flow statement presentation ASU 2016-15, Statement of Cash Flows (Topic 230); Classification of Certain Cash Receipts and Cash Payments. This ASU addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new guidance is effective beginning with the Company’s fiscal year ending March 31, 2019, with early adoption permitted. The adoption of ASU 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements. 

In January 2017, the FASB issued ASU 2017-04 “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for annual or any interim goodwill tests in fiscal years beginning after December 15, 2019. The adoption is not expected to have a material impact on the consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09 (ASU 2017-09), “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting”. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The adoption of ASU 2017-09 which will become effective for annual periods beginning after December 15, 2017 is not expected to have a material impact on the Company’s consolidated financial statements.

XML

Furniture and Equipment

12 Months Ended

Mar. 31, 2017

Property, Plant and Equipment [Abstract]

Furniture and Equipment

2. Furniture and Equipment

Furniture and equipment at March 31, 2017 and 2016 consist of the following:

	2017			2016
Transportation equipment	$	232,954		$	232,954
Security equipment		1,347,003			1,347,003
Office furniture and equipment		2,785,052			2,774,658
		4,365,009			4,354,615
Accumulated depreciation		(4,218,664	)		(4,096,458	)
Total	$	146,345		$	258,157

Depreciation expense for the fiscal years ended March 31, 2017 and 2016 was $122,206 and $178,186, respectively.

XML

Intangible Assets

12 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

3. Intangible Assets

Intangible assets at March 31, 2017 and 2016 consist of the following:

	2017			2016
Customer Lists	$	4,274,915		$	4,274,915
Goodwill		895,258			895,258
		5,170,173			5,170,173
Accumulated amortization		(4,141,591	)		(3,805,207	)
Total	$	1,028,582		$	1,364,966

Included in intangible assets for the fiscal years ended March 31, 2017 and 2016 is goodwill of $895,258 that is not subject to amortization. Amortization expense for the fiscal years ended March 31, 2017 and 2016 was $336,384 and $398,839, respectively. Amortization expense for the years ending March 31, 2018 and 2019 for the intangible assets noted above will be $106,680 and $26,644 respectively.

XML

Minority Investment in Unconsolidated Affiliate

12 Months Ended

Mar. 31, 2017

Equity Method Investments and Joint Ventures [Abstract]

Minority Investment in Unconsolidated Affiliate

4. Minority Investment in Unconsolidated Affiliate

In 2014, the Company made a 20% minority investment in Ocean Protection Services LLC, a Delaware limited liability company (“OPS LLC”), who holds a 30% interest in an entity that specializes in maritime security, risk management and risk analysis. The Company purchased 2,000 Class A Common Units of OPS LLC for a purchase price of $2.125 million and funded the purchase price through borrowings under the Company’s existing line of credit. The excess of the carrying value of the Company’s investment in OPS LLC and the Company’s proportionate share of the net assets of OPSA and OPS LLC is largely attributable to goodwill. Since the Company’s initial investment, there have been no additional capital contributions made or distributions received.

In September 2016, the majority owner of OPS LLC consented to a restructuring transaction pursuant to which the majority owner of OPS LLC transferred its 80% interest in OPS LLC to the Company for no consideration resulting in OPS LLC becoming a wholly-owned subsidiary of the Company.

During the past three fiscal years ended December 31, 2016, OPSA has experienced a decline in revenues and net income from continuing operations. Specifically, for the year ended December 31, 2016, revenues declined 29% from the year ended December 31, 2015, and revenues for the year ended December 31, 2015 declined 16% from the year ended December 31, 2014. For the same periods gross profits declined by 32% and 10%, respectively, and net income from continuing operations declined from $1.6 million for the year ended December 31, 2014 to $1.1 million for the year ended December 31, 2015 to a net loss from continuing operations of $.4 million for the year ended December 31, 2016. During the three years ended December 31, 2016, gross profit as a percent of revenues were 31.4%, 32.8% and 30.6%, respectively.

During the past three years the decline in revenues has been driven by several factors including an overall reduction in world-wide shipping activity, reduced demand for security personnel as a result of declines in attempted and successful piracy attacks, lower insurance rates and lower oil prices allowing operators the option of longer routes through lower risk areas further leading to a decline in demand for security services. The maturing of this industry has also led to price competition further compressing revenues and margins.

The decline in revenues and certain increased operating costs has resulted in net operating losses for the year ending March 31, 2017, and accordingly, the Company has recorded its proportionate share of these losses totaling $82,000.

The above-mentioned long-term decline in revenues has resulted in a significant reduction in liquidity which has more recently led to the inability of OPSA to remain current in its obligations under its senior debt. In light of the above-mentioned factors the Company has performed an assessment of the fair value of its 30% investment in OPSA and has determined that the book value of investment exceeded its fair value and further concluded that this decline in value was other than temporary. The company based its assessment, in part on the calculations reported by a valuation consultant retained by OPSA. The consultant’s valuation was based on the net present value of estimated future cash flows developed from forecasts provided by OPSA to the valuation consultant. Accordingly, the Company has recorded a $2.1 million non-cash charge during the quarter ended March 31, 2017 in order to reflect the fair value of the Company’s investment in OPSA of $.5 million. This charge was reported as an impairment of an equity method investment in the consolidated statements of operations.

Our investment in OPSA which is included in minority investment in unconsolidated affiliate in our balance sheet consists of the following:

	March 31, 2017			March 31, 2016
Capital contributions	$	2,125,000		$	2,125,000
Cumulative share of income		488,291			570,291
Impairment of equity method investment		(2,100,000	)		-
Investment balance	$	513,291		$	2,695,291

The following summarizes the combined assets, liabilities and equity, and combined results of operations of our equity method investment in OPSA as of December 31, 2016 and December 31, 2015:

	December 31, 2016		December 31, 2015
Current assets	$	1,492,360	$	2,415,252
Goodwill		9,941,946		10,441,941
Other non-current assets		97,340		236,066
Total assets	$	11,531,646	$	13,093,259
Current liabilities	$	6,411,313	$	4,349,785
Non-current liabilities		1,430,819		4,459,298
Shareholders’ equity		3,689,514		4,284,176
Total liabilities and shareholders’ equity	$	11,531,646	$	13,093,259

Condensed consolidated statement of operations for the year ended December 31, 2016 and December 31, 2015:

	2016			2015
Net operating revenues	$	8,948,531		$	12,571,572
Gross profit	$	2,812,742		$	4,117,222
Operating expenses	$	1,985,822		$	2,638,364
Net income (loss) from continuing operations	$	(368,194	)	$	1,086,486

XML

Fair Value Measurements

12 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. Fair Value Measurements

The Company is required to measure certain assets such as goodwill; intangibles, not subject to amortization; and long-lived assets with carrying values which may be in excess of their implied fair value or not fully recoverable based upon estimated future cash flows on a non-recurring basis.

Asset groups containing values measured, and presented on a non-recurring fair value basis at March 31, 2017 are as follows:

Description	Value		Level 3		Impairment
Equity Method Investment	$	513,291	$	513,291	$	2,100,000

The significant inputs used in the fair value measurements for Level 3 assets measured at fair value on a non-recurring basis are disclosed in Note 4.

XML

Other Assets

12 Months Ended

Mar. 31, 2017

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets

6. Other Assets

Other assets at March 31, 2017 and 2016 consist of the following:

	March 31, 2017			March 31, 2016
Workers’ compensation insurance	$	2,804,341		$	1,258,066
Other receivables		16,831			44,958
Security deposits		138,171			140,019
Deferred tax asset		5,115,775			5,153,464
		8,075,118			6,596,507
Current portion		(3,991,584	)		(2,184,465	)
Total non-current portion	$	4,083,534		$	4,412,042

The other asset workers’ compensation insurance represents the net amount of the payments made to cover the workers’ compensation insurance premium against the actual premium due as well as the difference in the amount deposited to the loss fund less the estimated workers’ compensation claims and reserves related to the historical loss claims as well as the estimates related to the incurred but not reported claims. There is no offsetting claim liability reported as the Company has determined that there is a sufficient amount deposited into the loss funds to cover the estimated claims reserve as well as the estimate related to the incurred but not reported claims.

XML

Accrued Expenses and Other Liabilities

12 Months Ended

Mar. 31, 2017

Payables and Accruals [Abstract]

Accrued Expenses and Other Liabilities

7. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at March 31, 2017 and 2016 consist of the following:

	March 31, 2017		March 31, 2016
Payroll and related expenses	$	8,076,807	$	5,530,554
Taxes and fees payable		325,763		320,333
Accrued interest payable		13,508		4,756
Other		3,087,396		2,465,654
Total	$	11,503,474	$	8,321,297

XML

Borrowings

12 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Borrowings

8. Borrowings

Short-term borrowings at March 31, 2017 and 2016 consist of the following:

	March 31, 2017		March 31, 2016
Line of credit	$	12,228,679	$	7,011,743

On February 12, 2009, we entered into a $20.0 million, credit facility (the “Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”) which was most recently amended in March 2017 (see below), matures in March 2020, contains customary affirmative and negative covenants, including, among other things, covenants requiring us to maintain certain financial ratios and is collateralized by customer accounts receivable and certain other assets of the Company as defined in the Credit Agreement.

The Credit Agreement provides for a letter of credit sub-line in an aggregate amount of up to $1.5 million. The Credit Agreement also provides for interest to be calculated on the outstanding principal balance of the revolving loans at the prime rate (as defined in the Credit Agreement) plus 1.50%. For LIBOR loans, interest will be calculated on the outstanding principal balance of the LIBOR loans at the LIBOR rate (as defined in the Credit Agreement) plus 1.75%.

On November 13, 2015, we entered into a fifth amendment (the “Fifth Amendment”) to our Credit Agreement. The Fifth Amendment amended a financial covenant of the Credit Agreement to allow for certain legal settlement costs associated with the Company’s settlement of a class action lawsuit (Leal v. Command Security Corporation).

On March 30, 2017, we entered into an eighth amendment (the “Eighth Amendment”) to our Credit Agreement). The Eighth Amendment extended the Credit Agreement from March 31, 2017 to March 31, 2020, increased the revolving line of credit from $20.0 million to $27.5 million, amended the terms of the “Minimum Excess Availability” covenant and redefined the term “Borrowing Base”.

Under the Credit Agreement, as of March 31, 2017, the interest rate was 2.75% for LIBOR loans and 3.00% for revolving loans. At March 31, 2017, we had approximately $1.0 million of cash on hand. We also had $8.0 million in LIBOR loans outstanding, $4.2 million of revolving loans outstanding and $0.5 million outstanding under our letters of credit sub-line under the Credit Agreement, representing 72.4% of the maximum borrowing capacity under the Credit Agreement based on our “eligible accounts receivable” (as defined in the Credit Agreement) as of such date.

XML

Income (Loss) Per Share

12 Months Ended

Mar. 31, 2017

Loss per share of common stock

Income (Loss) Per Share

9. Income (Loss) per Share

FASB ASC 718, Stock Compensation, 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 use the modified-prospective transition method. Under the modified-prospective transition 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. Non-cash charges of approximately $18,000 and $104,000 for stock based compensation have been recorded for the years ended March 31, 2017 and 2016, respectively.

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, 2017 and 2016:

	Loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
Year ended March 31, 2017
Basic and diluted EPS	$	(2,324,589	)		9,824,763	$	(0.24	)
Year ended March 31, 2016
Basic and diluted EPS	$	(2,656,323	)		9,771,578	$	(0.27	)

For the fiscal years ended March 31, 2017 and 2016, the Company reported net loss and, accordingly, potential common shares that would cause dilution, such as employee stock options, have been excluded from the diluted share count because their inclusion would have been anti-dilutive. For the fiscal years ended March 31, 2017 and 2016, the fully diluted shares would have been 10,216,594 and 10,020,208, respectively.

XML

Retirement Plans

12 Months Ended

Mar. 31, 2017

Retirement Benefits [Abstract]

Retirement Plans

10. Retirement Plans 

In November 1999, we adopted a qualified retirement plan providing for elective employee deferrals and discretionary employer contributions to non-highly compensated participants. The plan allows for employer contributions for certain employees working under specific customer contracts, as defined. Our expense under this plan for the fiscal years ended March 31, 2017 and 2016 was approximately $640,000 and $218,000, respectively.

XML

Concentrations of Credit Risk and Significant Customers

12 Months Ended

Mar. 31, 2017

Risks and Uncertainties [Abstract]

Concentrations of Credit Risk and Significant Customers

11. Concentrations of Credit Risk and Significant Customers

Geographic concentrations of credit risk with respect to trade receivables are primarily in the New York Metropolitan area with approximately 30% and 43% of total receivables as of March 31, 2017 and 2016, and in California with approximately 14% and 30% of total receivables as of March 31, 2017 and 2016, 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, 2017 and 2016 we generated 36% and 45%, respectively, of our revenue from aviation and related services. Accounts receivable due from the commercial airline industry comprised 21% and 55% of net receivables as of March 31, 2017 and 2016. Our remaining customers are not concentrated in any specific industry. In the fiscal year ended March 31, 2017, the Company had six customers, who represented approximately 52% of the Company’s total revenue in the aggregate. Two of these customers each represented 13% of total revenue. These customers include one domestic and one international airline, the U.S. Postal Service, a transportation company, an online retailer and web services provider and a northeast U.S. based healthcare facility. While the Company’s cost structure is highly variable and largely identifiable to the delivery of services for any specific contract, a loss of business with one or more of these customers could have a material adverse effect on our business, financial condition and results of operation.In the fiscal year ended March 31, 2016, the Company had six customers who represented approximately 45% of the Company’s total revenue in the aggregate, with two of those customers representing 14% and 13% of total revenue, respectively. These customers included one domestic and one international airline, a major transportation company, a northeast U.S. based healthcare facility and two airline consortiums. We maintain our cash in bank deposit accounts, which at times may exceed federally insured limits. We have not experienced any losses in such accounts. Company management believes the risk of loss associated with these accounts to be remote.

XML

Insurance Reserves

12 Months Ended

Mar. 31, 2017

Insurance [Abstract]

Insurance Reserves

12. Insurance Reserves

We have an insurance policy covering workers’ compensation claims in states where 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 $3.1 million and $4.6 million, for the fiscal years ended March 31, 2017 and 2016, 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.

Our insurance coverage limits are currently $1.0 million per occurrence for non-aviation related business (with additional first and second layer excess liability policies of $5.0 million and $10.0 million, respectively) and $30.0 million per occurrence for aviation related business. We retain the risk for the first $25,000 of general liability non-aviation related operations. The aviation related deductible is $5,000 per occurrence, with the exception of $50,000 for airport wheelchair and electric cart operations, $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; accordingly, 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 our current results of operations.

XML

Contingencies

12 Months Ended

Mar. 31, 2017

Loss Contingency [Abstract]

Contingencies

13. Contingencies

The nature of our business is such that there is a significant volume of routine claims and lawsuits that are made against us, the vast majority of which never lead 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 that we face relating to these matters. Some of the claims brought against us could result in significant payments; however, the exposure to us under general liability non-aviation related operations is limited to the first $25,000 per occurrence. The aviation related deductible is $5,000 per occurrence, with the exception of $50,000 for airport wheelchair and electric cart operations, $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 March 2012, the California Service Employees Health and Welfare Trust Fund filed a suit in U.S. District Court for the Northern District of California against the Company seeking to maintain the payment of monthly health insurance contributions, which were stopped by the Company following the termination of the collective bargaining agreement. Venue was subsequently transferred to the U.S. District Court for the Central District of California. On July 31, 2014 the Court denied the plaintiffs’ motion for summary judgment and granted partial summary judgment in favor of the Company. While the parties stipulated to a proposed judgment, the plaintiffs’ appealed the judgment before the Judge had issued a final Order, pending the outcome of the companion case filed in July 2012. In that case, the Service Employee International Union (SEIU) filed a lawsuit in U.S. District Court for the Northern District of California against the Company seeking the restoration of the collective bargaining agreement between SEIU and the Company following a majority vote of Aviation Safeguards employees in December 2011 to withdraw recognition of the union. On February 20, 2014, the U.S. District Court, Central District of California, ruled in favor of the Company and granted our motion for summary judgment in full, denied the plaintiffs’ motion for summary judgment and terminated the case. The plaintiffs filed their Notice of Appeal to the U.S. Court of Appeals for the Ninth Circuit on March 18, 2014 and both parties have subsequently filed appellate briefs. Oral arguments were held in March 2016 in the Ninth Circuit Court of Appeals.

On September 14, 2016, the U.S. Court of Appeals issued its Opinion which overturned the lower Court rulings. In the interim, the Company and the plaintiffs engaged in settlement discussions and successfully negotiated settlement in June 2017, subject to final court approval. The settlement, among other things, includes cash payments aggregating $249,000 to the Trust Fund, the SEIU, and the three claimants. In addition, as part of this settlement the Company has agreed to increase hourly pay rates to a defined group of employees for a period over the earlier of the next five years or, their remaining period of employment with the Company.

On April 29, 2014, the California Superior Court granted a plaintiff’s motion (Leal v. Command Security Corporation) to certify a class consisting of all persons who were employed by the Company in a non-exempt security officer position within the State of California at any time since May 2, 2007 through the date of trial who agreed to and signed an on-duty meal period agreement at the time of their employment. The case is a certified class action involving allegations that the Company violated certain California state laws relating to on-duty meal and rest breaks. The parties agreed to a settlement, which was approved by the Court in November 2016. Our first payment in the amount of $725,704 was made on December 13, 2016. Our second and final payment of the same amount is due no later than December 31, 2017. The $51,408 increase in the total settlement amount was recorded in the quarter ended December 31, 2016.

In addition to such cases, we have been named as a defendant in several uninsured employment related claims that are pending 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.

We have employment agreements with certain of our officers and key employees with varying terms. The agreements generally provide for annual salaries and for salary continuation for a specified number of months under certain circumstances, including a change in control of the Company.

Approximately 59% of our workforce is not subject to a labor union. The remaining 41% of our workforce, 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 International and LaGuardia airports either subject to collective bargaining agreements or a recognition agreement with SEIU 32BJ. Three of the agreements, covering approximately 19% of our employees, expired on October 31, 2016, February 28, 2017 and March 31, 2017. We are currently involved in negotiations to renew the expired agreements. One other collective bargaining agreement, covering approximately 2% of our employees, is set to expire in June 2017. The remaining seven agreements are set to expire in September 2018 and thereafter.

XML

Commitments

12 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments

14. Commitments

Leases

We are obligated under various operating lease agreements for office space, equipment and auto rentals. Rent expense under operating lease agreements approximated $2.5 million and $2.4 million, for the fiscal years ended March 31, 2017 and 2016, respectively.

There are no future minimum payments under long-term non-cancelable capital lease agreements. The future minimum payments under long-term non-cancelable operating lease agreements are as follows:

	Operating
	Leases
Year ending: March 31, 2018	$	1,416,000
March 31, 2019		1,130,000
March 31, 2020		737,000
March 31, 2021		539,000
March 31, 2022		524,000
Thereafter		988,000
Total	$	5,334,000

XML

Stock Option Plans and Warrants

12 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Option Plans and Warrants

15. Stock Option Plans 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 May 2010, options to purchase 205,000 shares of the Company’s common stock were issued. No options may be granted under this plan after 2010. During the fiscal year ended March 31, 2017, 4,200 options were forfeited. During the fiscal years ended March 31, 2017 and 2016, no options were exercised under this plan. The remaining 51,400 outstanding options are exercisable at any time before May 26, 2020 at $2.40 per share.

In September 2005, the Company’s Board of Directors and stockholders approved the adoption of a qualified stock incentive plan. Under the stock incentive plan, substantially all employees of and consultants to, the Company, are eligible to receive options to purchase up to an aggregate of 1,000,000 shares of the Company’s common stock at an exercise price that cannot be less than the fair market value of the shares on the date the options are granted. In September and April 2007, options to purchase 80,000 and 65,000 shares of the Company’s common stock were issued. No options may be granted under this plan after July 29, 2015. During the fiscal year ended March 31, 2016, the company received proceeds of approximately $75,000 in connection with the exercise of stock options to purchase 61,054 shares of the Company’s common stock at an exercise price of $1.23. During the fiscal year ended March 31, 2017, the company received proceeds of approximately $27,000 in connection with the exercise of stock options to purchase 10,000 shares of the Company’s common stock at an exercise price of $2.67 per share. The vested outstanding options are exercisable as follows:

Options Outstanding		Exercise Price		Expiration Date
	15,000		3.00	April 11, 2017
	10,000		3.19	September 19, 2017
	13,753		3.36	September 17, 2018
	500,000		3.37	September 28, 2018
	14,233		3.08	December 30, 2018

In September 2009, 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 2,250,000 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 April, May, July and October 2010, options to purchase 116,283, 120,000, 31,624 and 74,616 shares of the Company’s common stock were issued, respectively. In March, June and September 2011, options to purchase 169,683, 109,553 and 120,000 shares of the Company’s common stock were issued. In January, April, August and November 2012, options to purchase 928,817 shares of the Company’s common stock were issued. In June and July 2013, options to purchase 120,000 shares of the Company’s common stock were issued. In July and December 2014, options to purchase 370,000 shares of the Company’s common stock were issued. During the fiscal year ended March 31, 2015, the Company received proceeds of $28,587 in connection with the exercise of stock options to purchase 17,867 shares of the Company’s common stock at an exercise price of $1.60 per share. During the fiscal year ended March 31, 2017, the Company received proceeds of approximately $69,000 in connection with the exercise of stock options to purchase 45,568 shares of the Company’s common stock at an exercise price of $1.52 per share. The vested outstanding options are exercisable as follows:

Options Outstanding		Exercise Price		Expiration Date
	18,425	$	3.08	December 30, 2018
	35,000		2.40	May 26, 2020
	50,000		2.01	October 20, 2020
	50,000		1.50	June 8, 2021
	95,000		1.42	September 12, 2021
	240,000		1.64	January 2, 2022
	180,000		2.30	January 2, 2022
	180,000		3.00	January 2, 2022
	95,000		1.28	April 4, 2022
	113,922		1.52	November 26, 2022
	165,000		1.91	January 16, 2023
	70,000		1.61	June 2, 2023
	50,000		1.43	July 21, 2023
	120,000		1.80	July 16, 2024
	120,000		3.25	December 15, 2024
	30,000		1.92	December 15, 2024
	100,000		1.79	December 22, 2024
	16,500		1.65	August 16, 2025
	3,360		2.66	March 6, 2027

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

A summary of activity related to all Company stock option activity for the years ended March 31, 2017 and 2016, is as follows:

	Options
	Exercise		Number of
	Price		Shares
Outstanding at March 31, 2015	$	1.21 - 3.37		2,481,208
Issued	$	1.65		50,000
Exercised	$	1.23		(61,054	)
Repurchased	$	1.52		(28,643	)
Forfeited	$	1.21 - 2.40		(15,010	)
Outstanding at March 31, 2016	$	1.28 - 3.37		2,426,501
Issued	$	2.66		50,000
Exercised	$	1.52 - 2.67		(55,568	)
Forfeited	$	2.40		(4,200	)
Outstanding at March 31, 2017	$	1.28 - 3.37		2,416,733

At March 31, 2017 there were 2,336,233 options outstanding and exercisable at prices ranging from $1.28 to $3.37 and 2,563,898 shares reserved for issuance under all stock arrangements. At March 31, 2017, there was $70,350 of total unrecognized compensation expense from stock-based compensation granted under the plans, which is related to non-vested options. The compensation expense is expected to be recognized over a weighted average vesting period of approximately 12 months.

Significant option groups outstanding and exercisable at March 31, 2017 and the related weighted average exercise price and life information are as follows:

						Weighted
						Average
Range of		Options		Options		Exercise		Remaining
Exercise Price		Outstanding		Exercisable		Price		Life (years)
$	1.28 - $3.37		2,416,733		2,336,233	$	2.33		4.5

The total intrinsic value of options outstanding as of March 31, 2017 was approximately $1,143,546.

The weighted average estimated value of stock options granted during fiscal 2017 was $1.30. The weighted average estimated value of stock options granted during fiscal 2016 was $0.46. The weighted average assumptions used in the Black-Scholes option-pricing model were as follows:

	2017			2016
Risk-free interest rate		2.02	%		1.37	%
Years until exercise		5.00			5.00
Volatility		55.3	%		28.7	%
Dividend yield		0.00	%		0.00	%
Termination rate		n/a			n/a

FASB ASC 718, Stock Compensation , 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 uses the modified-prospective transition method. Under the modified-prospective method, the Company recognizes compensation expense in the financial statements for all share-based payments granted, modified or settled.

The Company recorded total stock based compensation costs of $17,915 and $103,793 for the fiscal years ended March 31, 2017 and 2016, respectively.

XML

Income Taxes

12 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

Net provision for (benefit from) income taxes for the fiscal years ended March 31 consists of the following:

	2017			2016
Current:
Federal	$	(70,267	)	$	182,479
State and local		(23,422	)		91,083
		(93,689	)		273,562
Deferred:
Federal		(52,132	)		(1,560,459	)
State and local		89,821			(353,103	)
		37,689			(1,913,562	)
Net provision for (benefit from) income taxes	$	(56,000	)	$	(1,640,000	)

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

	2017			2016
Statutory federal income tax rate		34.0	%		34.0	%
State and local income taxes		6.8	%		7.3	%
Permanent differences		(5.0	)%		(2.9	)%
Minority investment in unconsolidated affiliate		(35.1	)%		1.1	%
Other		1.7	%		(1.3	)%
Effective tax rate		2.4	%		38.2	%

The Company is unable to determine if the earnings from the minority investment in the unconsolidated affiliate are permanently invested outside of the United States. Therefore, the Company has recognized income taxes and the related foreign tax credits on the foreign operations of these earnings. The earnings on the foreign operations of the minority investment in the unconsolidated affiliate will become taxable in the United States only to the extent that distributions are received by the Company.

The permanent differences in our reconciliation of the effective tax rate for the years ended March 31, 2017 and 2016 are as follows:

	2017				2016
Amortization of Customer Lists	$	219,696	(3.8	)%	$	219,471	(2.1	)%
Other non-deductible expenses		73,361	(1.2	)%		75,879	(0.8	)%
Total	$	293,057	(5.0	)%	$	295,350	(2.9	)%

The permanent difference for amortization of customer lists arose through the acquisition of a business structured as a stock purchase. The Company amortizes the value of these customer lists for financial statement purposes, but is not allowed to deduct amortization of the customer lists for tax purposes. Other nondeductible expenses include meals, entertainment and penalties.

During the year ended March 31, 2017, the Company recorded a $2.1 million impairment charge in connection with its investment in OPSA. Any capital loss when and if the investment is sold is not expected to be deductible because the Company does not expect to have capital gains to utilize the capital loss if ultimately recognized.

The significant components of deferred tax assets and liabilities as of March 31, 2017 and 2016 are as follows:

	2017			2016
Current deferred tax assets:
Accrued expenses	$	651,793		$	324,338
Litigation settlement		297,295			288,820
Accounts receivable		221,325			268,283
Net current deferred tax assets	$	1,170,413		$	881,441
Non-current deferred tax assets (liabilities):
Workers’ compensation reserve	$	3,022,916		$	3,083,094
Employee stock compensation		439,805			444,842
Intangible assets		307,268			325,532
Litigation settlement		-			288,820
Insurance reserves		149,453			252,702
Accrued expenses		70,050			66,230
Capital loss carry-forward		-			54,672
Impairment of minority investment in unconsolidated affiliate		856,758			(93,400	)
Equipment		(44,130	)		(95,797	)
Net non-current deferred tax assets	$	4,802,120		$	4,326,695
Allowance for deferred tax asset related to capital loss carry-forward		-			(54,672	)
Allowance for deferred tax asset related to minority investment in unconsolidated affiliate		(856,758	)		-
Total deferred tax assets	$	5,115,775		$	5,153,464

As of March 31, 2016, we had fully reserved for a capital loss carry-forward in the amount of $132,500 which did not reverse before the carry-forward expired unused in fiscal 2017.

As of March 31, 2017, we have fully reserved for a deferred tax asset in the amount of $856,758 related to impairment of our minority investment in an unconsolidated affiliate.

Fiscal years 2014 through 2017 remain subject to examination by federal and state taxing authorities with certain states having open tax years beginning in fiscal 2013.

XML

Issuer Purchases of Equity Securities

12 Months Ended

Mar. 31, 2017

Equity [Abstract]

Issuer Purchases of Equity Securities

17. Issuer Purchases of Equity Securities

Under active stock repurchase programs, we may repurchase up to $4,000,000 of our common stock on the open market. Common stock repurchases are recorded as treasury stock, at cost. Shares repurchased during December 2011 have been retired. Shares repurchased during February 2012 and December 2012 are being held in treasury. The program does not have a prescribed expiration date.

During the fiscal years ended March 31, 2017 and 2016 the Company did not repurchase any shares under these programs. The number and average price of shares purchased to date under these programs is as set forth in the table below:

					Total Amount Purchased		Maximum Amount that
	Total Number				as part of Publicly		may yet be Purchased
Period	of Shares Purchased		Average Price Paid Per Share		Announced Program		under the Program
December 8 - 16, 2011		136,600	$	1.52	$	208,363	$	1,791,637
February 13 - 21, 2012		1,075,000	$	1.64	$	1,975,353	$	24,647
December 1 - 31, 2012		677,200	$	1.60	$	3,058,873	$	941,127
		1,888,800	$	1.62

XML

Schedule II Schedule of Valuation and Qualifying Accounts

12 Months Ended

Mar. 31, 2017

Valuation and Qualifying Accounts [Abstract]

Schedule II Schedule of Valuation and Qualifying Accounts

Schedule II

COMMAND SECURITY CORPORATION

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

	Balance at Beginning		Additions (Reductions) Charged or Credited to			Additions to/(Deductions from)			Balance at End of
	of Period		Expenses			Reserve			Period
Year ended March 31, 2017:
Deducted from asset accounts:
Allowance for doubtful accounts receivable - current maturities	$	650,226	$	(138,547	)	$	30,810		$	542,489
Year ended March 31, 2016:
Deducted from asset accounts:
Allowance for doubtful accounts receivable - current maturities	$	614,105	$	426,752		$	(390,631	)	$	650,226

XML

Business Description and Summary of Accounting Policies (Policies)

12 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Principal Business Activities

Principal Business Activities

We are a security services company which principally provides uniformed security officers and aviation security services to commercial, financial, industrial, aviation and governmental customers throughout the United States. We provide our security services to our customers through Command Security, our security division, and our aviation security services through our Aviation Safeguards division. The Company has operations in California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Command Security Corporation and its consolidated subsidiary. All intercompany balances and transactions are eliminated upon consolidation.

Use of Estimates

Use of 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 at the date of the financial statements, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. The estimates that we make include 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 our management believes are reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, our actual results may differ from those estimates under different assumptions or conditions.

Revenue Recognition

Revenue Recognition

We record revenue as services are provided to our customers. Revenue relates primarily to the provision 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 is reported net of applicable taxes.

Cash and Cash Equivalents

Cash and Cash Equivalents

We define 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.

Accounts Receivable

Accounts Receivable

We periodically evaluate the requirement for providing for billing adjustments and/or reflect the extent to which we will be able to collect 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 to be uncollectible.

Minority Investment in Unconsolidated Affiliate

Minority Investment in Unconsolidated Affiliate

The Company including its consolidated subsidiary, OPS LLC, uses the equity method to account for its investment in OPSA. Equity method investments are recorded at original cost and adjusted periodically to recognize: (i) our proportionate share of investees’ net income or losses after the date of the investment; (ii) additional contributions made or distributions received; and (iii) impairment losses resulting from adjustments to net realizable value. The Company reviews its investment accounted for under the equity method of accounting for impairment whenever events or changes in circumstances indicate a loss in the value of the investment may be other than temporary.

Furniture and Equipment

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

Intangible assets are stated at cost and consist primarily of customer lists that are being amortized on a straight-line basis over a period of ten years, and goodwill, which is reviewed annually for impairment. The life assigned to customer lists acquired is based on management’s estimate of our expected customer 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 earlier. Any potential impairment is evaluated based on anticipated undiscounted future cash flows and actual customer attrition in accordance with FASB ASC 360, Property, Plant and Equipment.

Insurance Reserves

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 related data.

Workers’ compensation annual costs are comprised of premiums as well as incurred losses as determined at the end of the coverage period, subject to minimum and maximum amounts. Workers’ compensation insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported as provided by a third party. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claim. We believe our estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities. The Company continually monitors changes in claim type and incident and evaluates the workers’ compensation insurance accrual, making necessary adjustments based on the evaluation of these qualitative data points.

The Company is self-insured up to certain stop loss amounts for worker’s compensation claims. The Company has purchased stop loss coverage that insures individual claims that exceed $500,000. Additionally, the Company has purchased stop loss coverage that insures claims in the aggregate that exceed $6.5 million and $6.2 million for the policy years ended September 30, 2017 and 2016 respectively.

The Company’s workers’ compensation insurance premiums (including loss fund deposits, surcharges, assessments, broker’s fees and excluding loss fund handling charges) were $3.27 million and $3.25 million for the policy years ended September 30, 2017 and 2016, respectively. Related loss handling charges for the policy year ended September 30, 2017 as of March 31, 2017 were approximately $40,000, as compared with loss handling charges of approximately $45,000 for the full policy year ended September 30, 2016. Since October 1, 2015, the Company has utilized the services of a third party administrator to manage workers’ compensation claims.

Income Taxes

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.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. In the event that interest and/or penalties are assessed in connection with our tax filings, interest will be recorded as interest expense and penalties as selling, general and administrative expense. We did not have any unrecognized tax benefits as of March 31, 2017 and 2016.

Income (Loss) Per Share

Income (Loss) per Share

Under the requirements of FASB ASC 260, 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, 2017 and 2016 because of the effect the assumed issuance of common shares would have if the outstanding stock options were exercised.

For the fiscal years ended March 31, 2017 and 2016, the Company reported net loss and, accordingly, potential common shares that would cause dilution, such as employee stock options, have been excluded from the diluted share count because their inclusion would have been anti-dilutive.

Stock-Based Compensation

Stock-Based Compensation

FASB ASC 718, Stock Compensation, 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 use the modified-prospective transition method. Under the modified-prospective transition 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.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, prepaid expenses, checks issued in advance of deposits, accounts payable and accrued expenses are reasonable estimates of the fair values because of their short-term maturity. The fair value of the Company’s debt is based on the borrowing rates currently available to the Company for loans and leases with similar terms and average maturities.

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability between a willing buyer and seller in an orderly transaction, it establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

● Level 1, defined as observable inputs such as quoted prices in active markets for identical assets;

● Level 2, defined as observable inputs other than Level 1 prices such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

● Level 3, defined as unobservable inputs in which little or no market data exists; therefore requiring an entity to develop its own assumptions.

Reclassifications

Reclassifications

Certain amounts previously reported for prior periods have been reclassified to conform to the current year presentation in the accompanying consolidated financial statements. Such reclassifications had no effect on the results of operations or shareholders’ equity as previously recorded.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB and the International Accounting Standards Board (IASB) issued, ASU 2014-09 (Topic 606) Revenue from Contracts with Customers. The guidance substantially converges final standards on revenue recognition between the FASB and IASB providing a framework on addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles. In July 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”, which deferred the effective date of ASU No. 2014-09 by one year, making it effective for the Company’s fiscal year ending March 31, 2019. Subsequently, the FASB also issued a series of amendments to the new revenue standards. The new revenue standards may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The new revenue standards are not expected to have a material impact on the amount and timing of revenue recognized in the Company’s consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. ASU 2015-17 simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities to be classified as non-current on the balance sheet. ASU 2015-17 is effective for the Company’s fiscal year ending March 31, 2018. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. Other than the reclassification of the current deferred tax asset to long term assets, the adoption of this guidance is not expected to have a material impact on the Company’s financial position, results of operations, or cash flows.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which requires lessees to recognize a lease liability and a right-to-use asset on the balance sheet for all leases, except certain short-term leases. ASU 2016-02 is effective beginning with the Company’s fiscal year ending March 31, 2020, with early adoption permitted, and must be implemented using a modified retrospective approach for all leases existing at, or entered into after the beginning of the earliest comparative period that is presented in the financial statements. The Company is currently evaluating the impact of ASU 2016-02 on its consolidated financial statements. The adoption of this guidance is expected to result in a significant increase in assets and liabilities on the Company’s consolidated balance sheet, with no material impact on the consolidated statements of operations. However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date.

In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”, which simplifies accounting and presentation of share-based payments, primarily relating to the recognition and classification of excess tax benefits, accounting for forfeitures and tax withholding requirements. ASU 2016-09 is effective beginning with the Company’s fiscal year ending March 31, 2018, with early adoption permitted. Currently, excess tax benefits or deficiencies from the Company’s equity awards are recorded as additional paid-in capital in its balance sheets. Upon adoption, the Company will record any excess tax benefits or deficiencies from its equity awards in its consolidated statements of operations in the reporting periods in which the benefit or deficiency is realized. As a result, subsequent to adoption the Company’s income tax expense and associated effective tax rate will be impacted by fluctuations in stock price between the grant dates and exercise dates of equity awards.

In August 2016, the FASB issued new guidance on cash flow statement presentation ASU 2016-15, Statement of Cash Flows (Topic 230); Classification of Certain Cash Receipts and Cash Payments. This ASU addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new guidance is effective beginning with the Company’s fiscal year ending March 31, 2019, with early adoption permitted. The adoption of ASU 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04 “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for annual or any interim goodwill tests in fiscal years beginning after December 15, 2019. The adoption is not expected to have a material impact on the consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09 (ASU 2017-09), “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting”. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The adoption of ASU 2017-09 which will become effective for annual periods beginning after December 15, 2017 is not expected to have a material impact on the Company’s consolidated financial statements.

XML

Furniture and Equipment (Tables)

12 Months Ended

Mar. 31, 2017

Property, Plant and Equipment [Abstract]

Schedule of Furniture and Equipment

Furniture and equipment at March 31, 2017 and 2016 consist of the following:

	2017			2016
Transportation equipment	$	232,954		$	232,954
Security equipment		1,347,003			1,347,003
Office furniture and equipment		2,785,052			2,774,658
		4,365,009			4,354,615
Accumulated depreciation		(4,218,664	)		(4,096,458	)
Total	$	146,345		$	258,157

XML

Intangible Assets (Tables)

12 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

Intangible assets at March 31, 2017 and 2016 consist of the following:

	2017			2016
Customer Lists	$	4,274,915		$	4,274,915
Goodwill		895,258			895,258
		5,170,173			5,170,173
Accumulated amortization		(4,141,591	)		(3,805,207	)
Total	$	1,028,582		$	1,364,966

XML

Minority Investment in Unconsolidated Affiliate (Tables)

12 Months Ended

Mar. 31, 2017

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Investment

Our investment in OPSA which is included in minority investment in unconsolidated affiliate in our balance sheet consists of the following:

	March 31, 2017			March 31, 2016
Capital contributions	$	2,125,000		$	2,125,000
Cumulative share of income		488,291			570,291
Impairment of equity method investment		(2,100,000	)		-
Investment balance	$	513,291		$	2,695,291

Schedule of Summarized Financial Information

The following summarizes the combined assets, liabilities and equity, and combined results of operations of our equity method investment in OPSA as of December 31, 2016 and December 31, 2015:

	December 31, 2016		December 31, 2015
Current assets	$	1,492,360	$	2,415,252
Goodwill		9,941,946		10,441,941
Other non-current assets		97,340		236,066
Total assets	$	11,531,646	$	13,093,259
Current liabilities	$	6,411,313	$	4,349,785
Non-current liabilities		1,430,819		4,459,298
Shareholders’ equity		3,689,514		4,284,176
Total liabilities and shareholders’ equity	$	11,531,646	$	13,093,259

Condensed consolidated statement of operations for the year ended December 31, 2016 and December 31, 2015:

	2016			2015
Net operating revenues	$	8,948,531		$	12,571,572
Gross profit	$	2,812,742		$	4,117,222
Operating expenses	$	1,985,822		$	2,638,364
Net income (loss) from continuing operations	$	(368,194	)	$	1,086,486

XML

Fair Value Measurements (Tables)

12 Months Ended

Mar. 31, 2017

Fair Value Measurements Tables

Fair Value, Assets Measured On Recurring and Nonrecurring Basis

Asset groups containing values measured, and presented on a non-recurring fair value basis at March 31, 2017 are as follows:

Description	Value		Level 3		Impairment
Equity Method Investment	$	513,291	$	513,291	$	2,100,000

XML

Other Assets (Tables)

12 Months Ended

Mar. 31, 2017

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Other Assets

Other assets at March 31, 2017 and 2016 consist of the following:

	March 31, 2017			March 31, 2016
Workers’ compensation insurance	$	2,804,341		$	1,258,066
Other receivables		16,831			44,958
Security deposits		138,171			140,019
Deferred tax asset		5,115,775			5,153,464
		8,075,118			6,596,507
Current portion		(3,991,584	)		(2,184,465	)
Total non-current portion	$	4,083,534		$	4,412,042

XML

Accrued Expenses and Other Liabilities (Tables)

12 Months Ended

Mar. 31, 2017

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities

Accrued expenses and other liabilities at March 31, 2017 and 2016 consist of the following:

	March 31, 2017		March 31, 2016
Payroll and related expenses	$	8,076,807	$	5,530,554
Taxes and fees payable		325,763		320,333
Accrued interest payable		13,508		4,756
Other		3,087,396		2,465,654
Total	$	11,503,474	$	8,321,297

XML

Borrowings (Tables)

12 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Schedule of Short-term Borrowings

Short-term borrowings at March 31, 2017 and 2016 consist of the following:

	March 31, 2017		March 31, 2016
Line of credit	$	12,228,679	$	7,011,743

XML

Income (Loss) Per Share (Tables)

12 Months Ended

Mar. 31, 2017

Loss per share of common stock

Schedule of Income (Loss) Per Share, Basic and Diluted

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, 2017 and 2016:

	Loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
Year ended March 31, 2017
Basic and diluted EPS	$	(2,324,589	)		9,824,763	$	(0.24	)
Year ended March 31, 2016
Basic and diluted EPS	$	(2,656,323	)		9,771,578	$	(0.27	)

XML

Commitments (Tables)

12 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

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

	Operating
	Leases
Year ending: March 31, 2018	$	1,416,000
March 31, 2019		1,130,000
March 31, 2020		737,000
March 31, 2021		539,000
March 31, 2022		524,000
Thereafter		988,000
Total	$	5,334,000

XML

Stock Option Plans and Warrants (Tables)

12 Months Ended

Mar. 31, 2017

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary of Stock Option Activity

A summary of activity related to all Company stock option activity for the years ended March 31, 2017 and 2016, is as follows:

	Options
	Exercise		Number of
	Price		Shares
Outstanding at March 31, 2015	$	1.21 - 3.37		2,481,208
Issued	$	1.65		50,000
Exercised	$	1.23		(61,054	)
Repurchased	$	1.52		(28,643	)
Forfeited	$	1.21 - 2.40		(15,010	)
Outstanding at March 31, 2016	$	1.28 - 3.37		2,426,501
Issued	$	2.66		50,000
Exercised	$	1.52 - 2.67		(55,568	)
Forfeited	$	2.40		(4,200	)
Outstanding at March 31, 2017	$	1.28 - 3.37		2,416,733

Summary of Options Outstanding and Exercisable

Significant option groups outstanding and exercisable at March 31, 2017 and the related weighted average exercise price and life information are as follows:

						Weighted
						Average
Range of		Options		Options		Exercise		Remaining
Exercise Price		Outstanding		Exercisable		Price		Life (years)
$	1.28 - $3.37		2,416,733		2,336,233	$	2.33		4.5

Summary of Option Fair Value Assumptions

The weighted average assumptions used in the Black-Scholes option-pricing model were as follows:

	2017			2016
Risk-free interest rate		2.02	%		1.37	%
Years until exercise		5.00			5.00
Volatility		55.3	%		28.7	%
Dividend yield		0.00	%		0.00	%
Termination rate		n/a			n/a

Plan One [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Vested Outstanding Options Exercisable

The vested outstanding options are exercisable as follows:

Options Outstanding		Exercise Price		Expiration Date
	15,000		3.00	April 11, 2017
	10,000		3.19	September 19, 2017
	13,753		3.36	September 17, 2018
	500,000		3.37	September 28, 2018
	14,233		3.08	December 30, 2018

Plan Two [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Vested Outstanding Options Exercisable

The vested outstanding options are exercisable as follows:

Options Outstanding		Exercise Price		Expiration Date
	18,425	$	3.08	December 30, 2018
	35,000		2.40	May 26, 2020
	50,000		2.01	October 20, 2020
	50,000		1.50	June 8, 2021
	95,000		1.42	September 12, 2021
	240,000		1.64	January 2, 2022
	180,000		2.30	January 2, 2022
	180,000		3.00	January 2, 2022
	95,000		1.28	April 4, 2022
	113,922		1.52	November 26, 2022
	165,000		1.91	January 16, 2023
	70,000		1.61	June 2, 2023
	50,000		1.43	July 21, 2023
	120,000		1.80	July 16, 2024
	120,000		3.25	December 15, 2024
	30,000		1.92	December 15, 2024
	100,000		1.79	December 22, 2024
	16,500		1.65	August 16, 2025
	3,360		2.66	March 6, 2027

XML

Income Taxes (Tables)

12 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit)

Net provision for (benefit from) income taxes for the fiscal years ended March 31 consists of the following:

	2017			2016
Current:
Federal	$	(70,267	)	$	182,479
State and local		(23,422	)		91,083
		(93,689	)		273,562
Deferred:
Federal		(52,132	)		(1,560,459	)
State and local		89,821			(353,103	)
		37,689			(1,913,562	)
Net provision for (benefit from) income taxes	$	(56,000	)	$	(1,640,000	)

Schedule of Effective Income Tax Rate Reconciliation

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

	2017			2016
Statutory federal income tax rate		34.0	%		34.0	%
State and local income taxes		6.8	%		7.3	%
Permanent differences		(5.0	)%		(2.9	)%
Minority investment in unconsolidated affiliate		(35.1	)%		1.1	%
Other		1.7	%		(1.3	)%
Effective tax rate		2.4	%		38.2	%

Schedule of Income Tax Reconciliation Permanent Differences

The permanent differences in our reconciliation of the effective tax rate for the years ended March 31, 2017 and 2016 are as follows:

	2017				2016
Amortization of Customer Lists	$	219,696	(3.8	)%	$	219,471	(2.1	)%
Other non-deductible expenses		73,361	(1.2	)%		75,879	(0.8	)%
Total	$	293,057	(5.0	)%	$	295,350	(2.9	)%

Schedule of Deferred Tax Assets and Liabilities

The significant components of deferred tax assets and liabilities as of March 31, 2017 and 2016 are as follows:

	2017			2016
Current deferred tax assets:
Accrued expenses	$	651,793		$	324,338
Litigation settlement		297,295			288,820
Accounts receivable		221,325			268,283
Net current deferred tax assets	$	1,170,413		$	881,441
Non-current deferred tax assets (liabilities):
Workers’ compensation reserve	$	3,022,916		$	3,083,094
Employee stock compensation		439,805			444,842
Intangible assets		307,268			325,532
Litigation settlement		-			288,820
Insurance reserves		149,453			252,702
Accrued expenses		70,050			66,230
Capital loss carry-forward		-			54,672
Impairment of minority investment in unconsolidated affiliate		856,758			(93,400	)
Equipment		(44,130	)		(95,797	)
Net non-current deferred tax assets	$	4,802,120		$	4,326,695
Allowance for deferred tax asset related to capital loss carry-forward		-			(54,672	)
Allowance for deferred tax asset related to minority investment in unconsolidated affiliate		(856,758	)		-
Total deferred tax assets	$	5,115,775		$	5,153,464

XML

Issuer Purchases of Equity Securities (Tables)

12 Months Ended

Mar. 31, 2017

Equity [Abstract]

Class of Treasury Stock

The number and average price of shares purchased to date under these programs is as set forth in the table below:

					Total Amount Purchased		Maximum Amount that
	Total Number				as part of Publicly		may yet be Purchased
Period	of Shares Purchased		Average Price Paid Per Share		Announced Program		under the Program
December 8 - 16, 2011		136,600	$	1.52	$	208,363	$	1,791,637
February 13 - 21, 2012		1,075,000	$	1.64	$	1,975,353	$	24,647
December 1 - 31, 2012		677,200	$	1.60	$	3,058,873	$	941,127
		1,888,800	$	1.62

XML

Business Description and Summary of Accounting Policies (Details Narrative) - USD ($)	12 Months Ended
	Mar. 31, 2017	Sep. 30, 2016	Mar. 31, 2016
Finite-lived intangible asset, useful life	10 years
Workers compensation stop loss insurance		$ 3,250,000
General insurance expense	$ 40,000	$ 45,000
Income tax likelihood percentage, description	greater than 50% likely of being realized.
Unrecognized tax benefits
Individual Claims [Member]
Workers compensation stop loss insurance	500,000
Aggregate Claims [Member]
Workers compensation stop loss insurance	6,500,000		$ 6,200,000
September 30, 2017 [Member]
Workers compensation stop loss insurance	$ 3,270,000
Minimum [Member]
Furniture and equipment, useful life	3 years
Maximum [Member]
Furniture and equipment, useful life	7 years

XML

Furniture and Equipment (Details Narrative) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Furniture And Equipment Details Narrative
Depreciation expense	$ 122,206	$ 178,186

XML

Furniture and Equipment - Schedule of Furniture and Equipment (Details) - USD ($)	Mar. 31, 2017	Mar. 31, 2016
Property, plant and equipment, gross, total	$ 4,365,009	$ 4,354,615
Accumulated depreciation	(4,218,664)	(4,096,458)
Property, plant and equipment, net, total	146,345	258,157
Transportation Equipment [Member]
Property, plant and equipment, gross, total	232,954	232,954
Security Equipment [Member]
Property, plant and equipment, gross, total	1,347,003	1,347,003
Office Furniture and Equipment [Member]
Property, plant and equipment, gross, total	$ 2,785,052	$ 2,774,658

XML

Intangible Assets (Details Narrative) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 895,258	$ 895,258
Amortization expense	336,384	$ 398,839
Goodwill and intangible assets amortization next twelve months	106,680
Goodwill and intangible assets amortization expense year two	$ 26,644

XML

Intangible Assets - Schedule of Intangible Assets (Details) - USD ($)	Mar. 31, 2017	Mar. 31, 2016
Intangible Assets - Schedule Of Intangible Assets Details
Customer Lists	$ 4,274,915	$ 4,274,915
Goodwill	895,258	895,258
Intangible Assets Gross	5,170,173	5,170,173
Accumulated amortization	(4,141,591)	(3,805,207)
Total	$ 1,028,582	$ 1,364,966

XML

Minority Investment in Unconsolidated Affiliate (Details Narrative) - USD ($)	1 Months Ended	12 Months Ended
	Mar. 31, 2014	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Sep. 21, 2016	Mar. 31, 2015
Equity method investment, ownership percentage	30.00%
Equity method investments		$ 513,291		$ 2,695,291				$ 2,125,000
Equity method investment, summarized financial information, percentage of decrease in revenue			29.00%		16.00%
Equity method investment, summarized financial information, percentage of decrease in gross profit			32.00%		10.00%
Net income from continuing operations			$ 400,000		$ 1,100,000	$ 1,600,000
Equity method investment, summarized financial information, percentage of gross profit on revenues			31.40%		32.80%	30.60%
Loss from equity method investments		$ 82,000		$ (65,291)
Fair value of investment, percentage		30.00%
Non-cash charge		$ 2,100,000
OPSA Ltd [Member]
Fair value of investment, value		$ 500,000
OPSA Ltd [Member]
Equity method investment, ownership percentage	20.00%
Equity method investment ownership transfer, percentage							80.00%
OPSA Ltd [Member] | Class A Common Units [Member]
Stock issued during period, shares, acquisitions	2,000
Equity method investments	$ 2,125,000

XML

Minority Investment in Unconsolidated Affiliate - Schedule of Investment (Details) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Equity Method Investments and Joint Ventures [Abstract]
Capital contributions	$ 2,695,291	$ 2,125,000
Cumulative share of income	88,291	570,291
Impairment of equity method investment	(2,100,000)
Investment balance	$ 513,291	$ 2,695,291

XML

Minority Investment in Unconsolidated Affiliate - Schedule of Summarized Financial Information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Equity Method Investments and Joint Ventures [Abstract]
Current assets	$ 1,492,360	$ 2,415,252
Goodwill	9,941,946	10,441,941
Other non-current assets	97,340	236,066
Total assets	11,531,646	13,093,259
Current liabilities	6,411,313	4,349,785
Non-current liabilities	1,430,819	4,459,298
Shareholders' equity	3,689,514	4,284,176
Total liabilities and shareholders' equity	11,531,646	13,093,259
Net operating revenues	8,948,531	12,571,572
Gross profit	2,812,742	4,117,222
Operating expenses	1,985,822	2,638,364
Net income (loss) from continuing operations	$ (368,194)	$ 1,086,486

XML

Fair Value Measurements - Fair Value, Assets Measured On Recurring and Nonrecurring Basis (Details)	12 Months Ended
	Mar. 31, 2017 USD ($)
Equity method investment	$ 513,291
Impairment	2,100,000
Fair Value, Inputs, Level 3 [Member]
Equity method investment	$ 513,291

XML

Other Assets - Schedule of Other Assets (Details) - USD ($)	Mar. 31, 2017	Mar. 31, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Workers' compensation insurance	$ 2,804,341	$ 1,258,066
Other receivables	16,831	44,958
Security deposits	138,171	140,019
Deferred tax asset	5,115,775	5,153,464
Other assets, total	8,075,118	6,596,507
Current portion	(3,991,584)	(2,184,465)
Total non-current portion	$ 4,083,534	$ 4,412,042

XML

Accrued Expenses and Other Liabilities - Schedule of Accounts Payable and Accrued Liabilities (Details) - USD ($)	Mar. 31, 2017	Mar. 31, 2016
Payables and Accruals [Abstract]
Payroll and related expenses	$ 8,076,807	$ 5,530,554
Taxes and fees payable	325,763	320,333
Accrued interest payable	13,508	4,756
Other	3,087,396	2,465,654
Total	$ 11,503,474	$ 8,321,297

XML

Borrowings (Details Narrative) - USD ($)	Feb. 12, 2009	Mar. 31, 2017	Mar. 30, 2017	Mar. 31, 2016	Mar. 31, 2015
Short-term Debt [Line Items]
Revolving line of credit		$ 12,228,679		$ 7,011,743
Cash and cash equivalents, at carrying value, total		1,042,291		$ 1,486,854	$ 2,435,839
Revolving Credit Facility [Member]
Short-term Debt [Line Items]
Debt instrument, basis spread on variable rate	1.50%
Revolving line of credit		$ 4,200,000
Debt instrument, interest rate, stated percentage		3.00%
Wells Fargo Credit Agreement [Member]
Short-term Debt [Line Items]
Line of credit facility, maximum borrowing capacity	$ 20,000,000
Debt instrument, maturity date	Mar. 31, 2020
Wells Fargo Credit Agreement [Member] | Minimum [Member]
Short-term Debt [Line Items]
Revolving line of credit			$ 20,000,000
Wells Fargo Credit Agreement [Member] | Maximum [Member]
Short-term Debt [Line Items]
Revolving line of credit			$ 27,500,000
Letter Of Credit Sub Line [Member]
Short-term Debt [Line Items]
Line of credit facility, maximum borrowing capacity	$ 1,500,000
Revolving line of credit		$ 500,000
London Interbank Offered Rate Loans [Member]
Short-term Debt [Line Items]
Debt instrument, basis spread on variable rate	1.75%
Revolving line of credit		$ 8,000,000
Debt instrument, interest rate, stated percentage		2.75%
Credit Agreement [Member]
Short-term Debt [Line Items]
Debt instrument, interest rate, stated percentage		72.40%

XML

Borrowings - Schedule of Short-term Borrowings (Details) - USD ($)	Mar. 31, 2017	Mar. 31, 2016
Debt Disclosure [Abstract]
Line of credit	$ 12,228,679	$ 7,011,743

XML

Income (Loss) per Share (Details Narrative) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Loss per share of common stock
Stock based compensation	$ 18,000	$ 104,000
Antidilutive securities excluded from computation of earnings per share, amount	10,216,594	10,020,208

XML

Income (Loss) per Share - Schedule of Income (Loss) Per Share, Basic and Diluted (Details) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Loss per share of common stock
Basic and diluted EPS Loss	$ (2,324,589)	$ (2,656,323)
Basic and diluted EPS, Shares	9,824,763	9,771,578
Basic and diluted EPS, Per share	$ (0.24)	$ (0.27)

XML

Retirement Plans (Details Narrative) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Retirement Benefits [Abstract]
Defined contribution plan, cost recognized	$ 640,000	$ 218,000

XML

Concentrations of Credit Risk and Significant Customers (Details Narrative)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Accounts Receivable [Member] | Commercial and Industrial Sector [Member]
Concentration risk, percentage	21.00%	55.00%
Accounts Receivable [Member] | New York [Member]
Concentration risk, percentage	30.00%	43.00%
Accounts Receivable [Member] | California [Member]
Concentration risk, percentage	14.00%	30.00%
Sales Revenue, Services, Net [Member]
Concentration risk, percentage	36.00%	45.00%
Sales Revenue, Net [Member] | Six Customers [Member]
Concentration risk, percentage	52.00%	45.00%
Sales Revenue, Net [Member] | Two Customers [Member]
Concentration risk, percentage	13.00%
Sales Revenue, Net [Member] | Customer 1 [Member]
Concentration risk, percentage		14.00%
Sales Revenue, Net [Member] | Customer 2 [Member]
Concentration risk, percentage		13.00%

XML

Insurance Reserves (Details Narrative) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Segment Reporting Information [Line Items]
Workers' compensation liabilities	$ 3,100,000	$ 4,600,000
Non Aviation Related Business [Member]
Segment Reporting Information [Line Items]
Insurance policy coverage per occurrence	1,000,000
Umbrella insurance policy coverage per occurrence	5,000,000
Excess liability insurance policy coverage per occurrence	10,000,000
Self insured amount per occurrence	25,000
Aviation Related Business [Member]
Segment Reporting Information [Line Items]
Insurance policy coverage per occurrence	30,000,000
Self insured amount per occurrence	5,000
Airport Wheelchair and Electric Cart Operations [Member]
Segment Reporting Information [Line Items]
Self insured amount per occurrence	50,000
Aircraft Operations [Member]
Segment Reporting Information [Line Items]
Self insured amount per occurrence	25,000
Skycap Operations [Member]
Segment Reporting Information [Line Items]
Self insured amount per occurrence	$ 100,000

XML

Contingencies (Details Narrative) - USD ($)			3 Months Ended	12 Months Ended
	Dec. 13, 2016	Sep. 14, 2016	Dec. 31, 2016	Mar. 31, 2017
Payment of litigation settlement	$ 725,704	$ 249,000
Increase of litigation settlement amount			$ 51,408
Six Agreement [Member]
Agrrement expiry date description				The remaining six agreements are set to expire in September 2018 and thereafter.
Employees [Member] | Three Agreement [Member]
Concentration risk, percentage				19.00%
Agrrement expiry date description				expired October 31, 2016, February 28, 2017 and March 31, 2017
Employees [Member] | One Agreement [Member]
Concentration risk, percentage				2.00%
Agreement expiry date				Jun. 30, 2016
Labor Force Concentration Risk [Member] | Workforce Not Subject to Collective Bargaining Arrangements [Member]
Concentration risk, percentage				59.00%
Labor Force Concentration Risk [Member] | Workforce Subject to Collective Bargaining Arrangements [Member]
Concentration risk, percentage				41.00%
Non Aviation Related Business [Member]
Self insured amount per occurrence				$ 25,000
Aviation Related Business [Member]
Self insured amount per occurrence				5,000
Airport Wheelchair and Electric Cart Operations [Member]
Self insured amount per occurrence				50,000
Aircraft Operations [Member]
Self insured amount per occurrence				25,000
Skycap Operations [Member]
Self insured amount per occurrence				$ 100,000

XML

Commitments (Details Narrative) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Operating leases, rent expense	$ 2,500,000	$ 2,400,000

XML

Commitments - Schedule of Future Minimum Rental Payments for Operating Leases (Details)	Mar. 31, 2017 USD ($)
Commitments and Contingencies Disclosure [Abstract]
March 31, 2018	$ 1,416,000
March 31, 2019	1,130,000
March 31, 2020	737,000
March 31, 2021	539,000
March 31, 2022	524,000
Thereafter	988,000
Total	$ 5,334,000

XML

Stock Option Plans and Warrants (Details Narrative) - USD ($)	1 Months Ended																	12 Months Ended
	Dec. 31, 2014	Jul. 31, 2014	Jul. 31, 2013	Jun. 30, 2013	Nov. 30, 2012	Aug. 31, 2012	Apr. 30, 2012	Jan. 31, 2012	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Oct. 31, 2010	Jul. 31, 2010	May 31, 2010	Apr. 30, 2010	Sep. 30, 2007	Apr. 30, 2007	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2015	Sep. 30, 2009	Sep. 30, 2005	Nov. 30, 2000
Number of option to purchase shares of common stock issued																		50,000	50,000
Number of stock option shares forfeited																		4,200	15,010
Remaining exercisable stock option																		2,416,733	2,426,501	2,481,208
Stock option exercised																		55,568	61,054
Proceeds from stock options exercised																		$ 106,546	$ 75,095
Options outstanding exercisable																		2,336,233
Range of Exercise Price, minimum																		$ 1.28
Range of Exercise Price, maximum																		$ 3.37
Number of shares reserved for future issuance																		2,563,898
Unrecognized compensation expense																		$ 70,350
unrecognized compensation expense from weighted average vesting period																		12 months
Total intrinsic value of option outstanding																		$ 1,143,546
Weighted average fair value of stock options granted																		$ 1.30	$ 0.46
Share-based compensation, total																		$ 17,915	$ 103,793
2000 Qualified Stock Option Plan [Member]
Number of option to purchase shares of stock																							500,000
Number of option to purchase shares of common stock issued														205,000
Number of stock option shares forfeited																		4,200
Remaining exercisable stock option																		51,400
Share based compensation shares authorized under stock option plans defined exercise price																		$ 2.40
2005 Qualified Stock Incentive Plan [Member]
Number of option to purchase shares of stock																						1,000,000
Number of option to purchase shares of common stock issued																80,000	65,000
Stock option exercised																		10,000	61,054
Proceeds from stock options exercised																		$ 27,000	$ 75,000
Deferred compensation arrangement with individual, exercise price																		$ 2.67	$ 1.23
2009 Qualified Stock Incentive Plan [Member]
Number of option to purchase shares of stock																					2,250,000
Number of option to purchase shares of common stock issued	370,000	370,000	120,000	120,000	928,817	928,817	928,817	928,817	120,000	109,553	169,683	74,616	31,624	120,000	116,283
Stock option exercised																		45,568		17,867
Proceeds from stock options exercised																		$ 69,000		$ 28,587
Deferred compensation arrangement with individual, exercise price																		$ 1.52		$ 1.60

XML

Stock Option Plans and Warrants - Schedule of Vested Outstanding Options Exercisable (Details)	12 Months Ended
	Mar. 31, 2017 $ / shares shares
Plan One [Member] | Exercise Price One [Member]
Options Outstanding | shares	15,000
Exercise Price | $ / shares	$ 3.00
Expiration Date	Apr. 11, 2017
Plan One [Member] | Exercise Price Two [Member]
Options Outstanding | shares	10,000
Exercise Price | $ / shares	$ 3.19
Expiration Date	Sep. 19, 2017
Plan One [Member] | Exercise Price Three [Member]
Options Outstanding | shares	13,753
Exercise Price | $ / shares	$ 3.36
Expiration Date	Sep. 17, 2018
Plan One [Member] | Exercise Price Four [Member]
Options Outstanding | shares	500,000
Exercise Price | $ / shares	$ 3.37
Expiration Date	Sep. 28, 2018
Plan One [Member] | Exercise Price Five [Member]
Options Outstanding | shares	14,233
Exercise Price | $ / shares	$ 3.08
Expiration Date	Dec. 30, 2018
Plan Two [Member] | Exercise Price One [Member]
Options Outstanding | shares	18,425
Exercise Price | $ / shares	$ 3.08
Expiration Date	Dec. 30, 2018
Plan Two [Member] | Exercise Price Two [Member]
Options Outstanding | shares	35,000
Exercise Price | $ / shares	$ 2.40
Expiration Date	May 26, 2020
Plan Two [Member] | Exercise Price Three [Member]
Options Outstanding | shares	50,000
Exercise Price | $ / shares	$ 2.01
Expiration Date	Oct. 20, 2020
Plan Two [Member] | Exercise Price Four [Member]
Options Outstanding | shares	50,000
Exercise Price | $ / shares	$ 1.50
Expiration Date	Jun. 08, 2021
Plan Two [Member] | Exercise Price Five [Member]
Options Outstanding | shares	95,000
Exercise Price | $ / shares	$ 1.42
Expiration Date	Sep. 12, 2021
Plan Two [Member] | Exercise Price Six [Member]
Options Outstanding | shares	240,000
Exercise Price | $ / shares	$ 1.64
Expiration Date	Jan. 02, 2022
Plan Two [Member] | Exercise Price Seven [Member]
Options Outstanding | shares	180,000
Exercise Price | $ / shares	$ 2.30
Expiration Date	Jan. 02, 2022
Plan Two [Member] | Exercise Price Eight [Member]
Options Outstanding | shares	180,000
Exercise Price | $ / shares	$ 3.00
Expiration Date	Jan. 02, 2022
Plan Two [Member] | Exercise Price Nine [Member]
Options Outstanding | shares	95,000
Exercise Price | $ / shares	$ 1.28
Expiration Date	Apr. 04, 2022
Plan Two [Member] | Exercise Price Ten [Member]
Options Outstanding | shares	113,922
Exercise Price | $ / shares	$ 1.52
Expiration Date	Nov. 26, 2022
Plan Two [Member] | Exercise Price Eleven [Member]
Options Outstanding | shares	165,000
Exercise Price | $ / shares	$ 1.91
Expiration Date	Jan. 16, 2023
Plan Two [Member] | Exercise Price Twelve [Member]
Options Outstanding | shares	70,000
Exercise Price | $ / shares	$ 1.61
Expiration Date	Jun. 02, 2023
Plan Two [Member] | Exercise Price Thirteen [Member]
Options Outstanding | shares	50,000
Exercise Price | $ / shares	$ 1.43
Expiration Date	Jul. 21, 2023
Plan Two [Member] | Exercise Price Fourteen [Member]
Options Outstanding | shares	120,000
Exercise Price | $ / shares	$ 1.80
Expiration Date	Jul. 16, 2024
Plan Two [Member] | Exercise Price Fifteen [Member]
Options Outstanding | shares	120,000
Exercise Price | $ / shares	$ 3.25
Expiration Date	Dec. 15, 2024
Plan Two [Member] | Exercise Price Sixteen [Member]
Options Outstanding | shares	30,000
Exercise Price | $ / shares	$ 1.92
Expiration Date	Dec. 15, 2024
Plan Two [Member] | Exercise Price Seventeen [Member]
Options Outstanding | shares	100,000
Exercise Price | $ / shares	$ 1.79
Expiration Date	Dec. 22, 2024
Plan Two [Member] | Exercise Price Eighteen [Member]
Options Outstanding | shares	16,500
Exercise Price | $ / shares	$ 1.65
Expiration Date	Aug. 16, 2025
Plan Two [Member] | Exercise Price Nineteen [Member]
Options Outstanding | shares	3,360
Exercise Price | $ / shares	$ 2.66
Expiration Date	Mar. 06, 2027

XML

Stock Option Plans and Warrants - Summary of Stock Option Activity (Details) - $ / shares	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Exercise Price, Issued	$ 2.66	$ 1.65
Exercise Price, Exercised		1.23
Exercise Price, Repurchased		$ 1.52
Exercise Price, Forfeited	$ 2.40
Number of Shares Outstanding Opening Balance	2,426,501	2,481,208
Number of Shares, Issued	50,000	50,000
Number of Shares, Exercised	(55,568)	(61,054)
Number of Shares, Repurchased		(28,643)
Number of Shares, Forfeited	(4,200)	(15,010)
Number of Shares Outstanding Ending Balance	2,416,733	2,426,501
Minimum [Member]
Exercise Price Outstanding Opening Balance	$ 1.28	$ 1.21
Exercise Price, Exercised	1.52
Exercise Price, Forfeited		1.21
Exercise Price Outstanding Ending Balance	1.28	1.28
Maximum [Member]
Exercise Price Outstanding Opening Balance	3.37	3.37
Exercise Price, Exercised	2.67
Exercise Price, Forfeited		2.40
Exercise Price Outstanding Ending Balance	$ 3.37	$ 3.37

XML

Stock Option Plans and Warrants - Summary of Options Outstanding and Exercisable (Details)	12 Months Ended
	Mar. 31, 2017 $ / shares shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Range of Exercise Price, minimum	$ 1.28
Range of Exercise Price, maximum	$ 3.37
Options Outstanding | shares	2,416,733
Weighted Average Options Exercisable | shares	2,336,233
Weighted Average Exercise Price	$ 2.33
Remaining Life (years)	4 years 6 months

XML

Stock Option Plans and Warrants - Summary of Option Fair Value Assumptions (Details)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Risk-free interest rate	2.02%	1.37%
Years until exercise	5 years	5 years
Volatility	55.30%	28.70%
Dividend yield	0.00%	0.00%
Termination rate	0.00%	0.00%

XML

Income Taxes (Details Narrative) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Capital loss carryforward		$ 132,500
Operating loss carryforward expiration		2017
Minority investment in unconsolidated affiliate	$ 856,758	$ (93,400)
Income tax examination, year under examination	2013
Impairment of investment	$ 2,100,000
Minimum [Member]
Income tax examination, year under examination	2014
Maximum [Member]
Income tax examination, year under examination	2017

XML

Income Taxes - Schedule of Components of Income Tax Expense (Benefit) (Details) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Current: Federal	$ (70,267)	$ 182,479
Current: State and local	(23,422)	91,083
Total	(93,689)	273,562
Deferred: Federal	(52,132)	(1,560,459)
Deferred: State and local	89,821	(353,103)
Total	37,689	(1,913,562)
Net provision for (benefit from) income taxes	$ (56,000)	$ (1,640,000)

XML

Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Statutory federal income tax rate	34.00%	34.00%
State and local income taxes	6.80%	7.30%
Permanent differences	(5.00%)	(2.90%)
Minority investment in unconsolidated affiliate	(35.10%)	1.10%
Other	1.70%	(1.30%)
Effective tax rate	2.40%	38.20%

XML

Income Taxes - Schedule of Income Tax Reconciliation Permanent Differences (Details) - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Amortization of Customer Lists, Amount	$ 219,696	$ 219,471
Other non-deductible expenses, amount	73,361	75,879
Total	$ 293,057	$ 295,350
Amortization of Customer Lists, Percentage	(3.80%)	(2.10%)
Other non-deductible expenses, percentage	(1.20%)	(0.80%)
Total	(5.00%)	(2.90%)

XML

Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($)	Mar. 31, 2017	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Accrued expenses	$ 651,793	$ 324,338
Litigation settlement	297,295	288,820
Accounts receivable	221,325	268,283
Net current deferred tax assets	1,170,413	881,441
Workers' compensation reserve	3,022,916	3,083,094
Employee stock compensation	439,805	444,842
Intangible assets	307,268	325,532
Litigation settlement		288,820
Insurance reserves	149,453	252,702
Accrued expenses	70,050	66,230
Capital loss carry-forward		54,672
Impairment of minority investment in unconsolidated affiliate	856,758	(93,400)
Equipment	(44,130)	(95,797)
Net non-current deferred tax assets	4,802,120	4,326,695
Allowance for deferred tax asset related to capital loss carry-forward		(54,672)
Allowance for deferred tax asset related to minority investment in unconsolidated affiliate	(856,758)
Total deferred tax assets	$ 5,115,775	$ 5,153,464

XML

Issuer Purchases of Equity Securities (Details Narrative)	Mar. 31, 2017 USD ($)
Equity [Abstract]
Maximum stock repurchase program authorized	$ 4,000,000

XML

Issuer Purchases of Equity Securities - Class of Treasury Stock (Details) - USD ($)			1 Months Ended	12 Months Ended
	Feb. 21, 2012	Dec. 16, 2011	Dec. 31, 2012	Mar. 31, 2017
Equity [Abstract]
Total Number of Shares Purchased	1,075,000	136,600	677,200	1,888,800
Average Price Paid Per Share	$ 1.64	$ 1.52	$ 1.60	$ 1.62
Total Amount Purchased as part of Publicly Announced Program	$ 1,975,353	$ 208,363	$ 3,058,873
Maximum Amount that may yet be Purchased under the Program	$ 24,647	$ 1,791,637	$ 941,127

XML

Schedule II Schedule of Valuation and Qualifying Accounts (Details) - Allowance for Doubtful Accounts, Current [Member] - USD ($)	12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Balance at Beginning of Period	$ 650,226	$ 614,105
Additions (Reductions) Charged or Credited to Expenses	(138,547)	426,752
Additions to/(Deductions from) Reserve	30,810	(390,631)
Balance at End of Period	$ 542,489	$ 650,226