Command Security Corp. has a market cap of $27.5 million; its shares were traded at around $2.53 with a P/E ratio of 36.1 and P/S ratio of 0.2.
Highlight of Business Operations:In December 2004, the FASB issued FASB ASC 718, Stock Compensation. FASB ASC 718 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 FASB ASC 718 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 FASB ASC 718 resulted in non-cash charges of $110,540 and $108,366 for stock compensation cost for the nine months ended December 31, 2009 and 2008, respectively.
Our revenues increased $4,832,195 and $11,719,854, or 14.8% and 11.9%, for the three and nine months ended December 31, 2009, respectively, compared with the corresponding periods of the prior year. The increase in revenues for the three and nine months ended December 31, 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 $6,800,000 and $16,700,000, respectively; (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, a worldwide innovative technology company and a major New York City based hospital resulting in additional aggregate revenues of approximately $1,500,000 and $4,400,000, respectively; and (iii) the acquisition of two security services businesses in Florida in September 2008 that generated higher revenues of approximately $1,300,000 for the nine months ended December 31, 2009. The increase in our revenues was partially offset by: (i) the loss of revenues associated with skycap, wheelchair, cargo, security and baggage handling services previously provided to Delta Air Lines (“Delta”) at John F. Kennedy International Airport (“JFK”) of approximately $1,900,000 and $3,700,000, respectively; (ii) reduced demand for our services from several of our airline customers that we believe is primarily related to trends in the aviation industry toward reduced capacity, which resulted in reductions of service hours that we provided to such carriers and a corresponding reduction of revenues from such carriers or an aggregate of approximately $500,000 and $3,500,000, respectively; 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.
Our general and administrative expenses decreased by $46,102, or 1.1%, for the three months ended December 31, 2009 and increased by $907,866, or 8.0%, for the nine months ended December 31, 2009 compared with the corresponding periods of the prior year. The decrease in general and administrative expenses for the three months ended December 31, 2009 resulted mainly from the absence of an employment related claim which was settled in the prior year period partially offset by the increases noted below. The increase in general and administrative expenses for the nine months ended December 31, 2009 resulted primarily from higher: (i) administrative payroll and related costs of approximately $650,000 associated primarily with expanded operations, including the acquisitions in Florida and new contract awards noted above, additional investment in our corporate staff including the hiring of our Chief Executive Officer; (ii) facility and related office costs; (iii) insurance related costs and (iv) amortization costs associated with the acquisitions in Florida in September 2008, noted above.
At December 31, 2009, we had borrowed $360,766 in revolving loans, $10,500,000 in LIBOR loans and had $175,665 letters of credit outstanding representing approximately 63% 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 $2,061,198 to $9,167,242 as of December 31, 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 February 5, 2010, our cash availability was approximately $5,500,000, 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. 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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