Command Security Corporation provides uniformed security services from its eighteen operating offices in New York Massachusetts New Jersey Illinois California Pennsylvania Connecticut Florida and Georgia to commercial financial industrial aviation and governmental clients in the United States Canada and the UK. They provide its security services to a wide range of industries which are categorized into three groups - guard services aviation services and support services. Command Security Corp. has a market cap of $35 million; its shares were traded at around $3.24 with a P/E ratio of 29.4 and P/S ratio of 0.3.
Highlight of Business Operations:In December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values at grant date and the recognition of the related expense over the period in which the share-based compensation vests. We were required to adopt the provisions of SFAS No. 123R effective July 1, 2005 and use the modified-prospective transition method. Under the modified-prospective method, we recognize compensation expense in our financial statements issued subsequent to the date of adoption for all share-based payments granted, modified or settled after July 1, 2005. The adoption of SFAS No. 123R resulted in non-cash charges of $31,763 and $6,250 for stock compensation cost for the three months ended June 30, 2009 and 2008, respectively. Such non-cash charges would have been the same under the provisions of SFAS No. 148.
Our revenues increased $3,118,928, or 9.8%, for the three months ended June 30, 2009 compared with the corresponding period of the prior year. The increase in revenues for the three months ended June 30, 2009 was due mainly to: (i) the commencement of security services during the first quarter of fiscal 2010 under a new contract to provide such services to a major transportation company at approximately 120 locations in twenty-one states throughout the eastern and western regions of the United States that generated additional aggregate revenues of approximately $3,400,000; (ii) expansion of security services provided to new and existing customers, including several of the nation s largest banks, a large grocery market distribution center in California, a company that provides merchandising and distribution services to a major grocery retailer in New Jersey, a world leader in electronic design automation and a worldwide innovative technology company resulting in additional aggregate revenues of approximately $1,500,000; and (iii) the acquisition of security services businesses in Florida in September 2008 that generated aggregate revenues of approximately $750,000. The increase in revenues was partially offset by: (i) the loss of revenues associated with skycap, wheelchair and cargo services previously provided to Delta Air Lines (“Delta”) at John F. Kennedy International Airport (“JFK”) of approximately $450,000; (ii) reduced demand for our services from several of our airline customers, which resulted in reductions of service hours that we provided to such carriers aggregating revenues of approximately $1,300,000; and (iii) reductions in service hours for several of our security services customers which we believe is principally attributable to current economic conditions affecting their businesses.
On February 12, 2009, we entered into a new $20,000,000 credit facility with Wells Fargo (the “Credit Agreement”). This new credit facility, which matures in February 2012, contains customary affirmative and negative covenants, including, among other things, covenants requiring us to maintain certain financial ratios. This new facility replaced our existing $16,000,000 revolving credit facility with CIT Group/Business Credit, Inc., and was used to refinance outstanding indebtedness under that facility, to pay fees and expenses in connection therewith and, thereafter, for working capital (including acquisitions), letters of credit and other general corporate purposes.
At June 30, 2009, we had borrowed $2,037,122 in revolving loans, $9,500,000 in LIBOR loans and had $147,000 letters of credit outstanding representing approximately 67% of the maximum borrowing capacity under the Credit Agreement based on our “eligible accounts receivable” (as defined under the Credit Agreement) as of such date.
Working capital increased by $347,229 to $7,453,273 as of June 30, 2009, from $7,106,044 as of March 31, 2009.
As described above on February 12, 2009, we entered into a new $20,000,000 Credit Agreement with Wells Fargo. As of the close of business on August 7, 2009, our cash availability was approximately $4,115,000, 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 our existing funds, cash generated from operations, and existing sources of and access to financing are adequate to satisfy our working capital, capital expenditure and debt service requirements for the foreseeable future, barring any increase in reserves imposed by Wells Fargo. 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 our credit facilities or otherwise. As of the date of this quarterly report and for the past several months, the financial markets generally, and the credit markets in particular, are and have been experiencing substantial turbulence and turmoil, and extreme volatility, both in the United States and, increasingly, in other markets worldwide. The current market situation has resulted generally in substantial reductions in available loans to a broad spectrum of businesses, increased scrutiny by lenders of the credit-worthiness of borrowers, more restrictive covenants imposed by lenders upon borrowers under credit and similar agreements and, in some cases, increased interest rates under commercial and other loans. If we require 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.
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